<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-6(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/ 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:
<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 15, 1997, 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 25, 1997,
shall be entitled to notice of meeting and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Gordon J. Mau
Gordon J. Mau
Secretary
Honolulu, Hawaii
March 27, 1997
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 27, 1997, for use in connection with the Annual
Meeting of Shareholders of Hawaii National Bancshares, Inc. ("Bancshares") to be
held on Tuesday, April 15, 1997. Only those shareholders of record of Bancshares
issued and outstanding common stock at the close of business on March 25, 1997
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
1998 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, 1997. 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, 82, 1986 38,450(1) 5.4%
Chairman of the Board and
Chief Executive Officer of
Bancshares; Chairman of
the Board of HNB; Father of
Warren K. K. Luke.
Warren K. K.. Luke, 52, 1986 294,808(2) 41.5%
President and Director of
Bancshares; Vice Chairman,
President and Chief Executive
Officer of HNB; Son of K. J. Luke.
Gordon J. Mau, 50, 1990 74,462(3) 10.5%
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, 61, 1993 64,041(4) 9.0%
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, 72, 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 1,617 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 12,655 shares owned by Mr. Luke's wife, Carolyn Luke, over which
Mr. Luke exercises no voting or investment power; 4,344 shares held by Mr.
and Mrs. Luke as trustee for one of their children, over which Mrs. Luke
shares voting and investment power; 17,216 shares owned by one of Mr. and
Mrs. Luke's children who is economically dependent upon them; 82,619 shares
held by Mr. Luke as trustee for his nephews and nieces, over which he
exercises sole voting and investment power; and 98,025 shares held by Mr.
Luke as trustee for his sisters, over which he shares 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 711 shares owned by Mr. Mau's wife, Sharlene Mau, over which Mr.
Mau exercises no voting or investment power; 28,058 shares held by
3
<PAGE> 6
Mrs. Mau as trustee of the Sharlene Kam Sun Luke Mau Trust dated 12/13/93,
over which Mr. Mau exercises no voting or investment power; 9,696 shares
held by Mr. and Mrs. Mau, as trustees for their children, over which Mr.
Mau shares voting and investment power; and 20,315 shares owned by two of
Mr. and Mrs. Mau's children who are economically dependent upon them.
(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; and 16,021 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.
(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
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.
The Board of Directors of HNB meets monthly while the Board of Directors of
Bancshares meets periodically. Accordingly, there were five meetings of the
Board of Directors of Bancshares during 1996. All of the foregoing nominees
attended at least 75% of the meetings of the Board during 1996.
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 1996, determines
on behalf of the Board whether the performance and examination of the
independent public accounting firm and the internal HNB Audi-
4
<PAGE> 7
tor are satisfactory and adequate to meet the Board's supervisory
responsibility. 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 J. Mau.
The Executive Committee of HNB met two times during 1996. 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 four times during 1996. 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 S. 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
The following information regarding executive compensation is provided
consistent with the Securities and Exchange Commission's ("SEC") disclosure
requirements. These requirements 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, 1996, 1995 and 1994 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 1996 $152,526 $ 1,525 $ 4,200
Chairman of the Board and 1995 $152,670 $ 1,526 $ 4,200
Chief Executive Officer of 1994 $152,573 $ -- $ 15,285
Bancshares; Chairman of the
Board of HNB.
Warren K. K. Luke 1996 $228,681 $ 2,276 $ 7,500
President and Director of 1995 $203,401 $ 2,014 $ 7,750
Bancshares; Vice Chairman, 1994 $193,780 $ -- $ 7,500
President and Chief Executive
Officer of HNB.
Ernest T. Murata 1996 $169,507(1) $ 1,538 $ 6,018
Vice President, Treasurer 1995 $147,048 $ 6,456 $ 5,713
and Assistant Secretary of 1994 $139,801 $ -- $ 5,713
Bancshares; Executive Vice
President, Cashier and
Secretary of HNB.
</TABLE>
Notes:
(1) Includes an adjustment in vacation benefits in 1996 of $15,410 for Ernest
T. Murata.
(2) Other annual compensation for the years ended December 31, 1996, 1995, and
1994 consisted of the following:
<TABLE>
<CAPTION>
Director and Personal Use of Direct
Committee Fees Automobile Reimbursements Total
-------------- --------------- -------------- -----
<S> <C> <C> <C> <C> <C>
K. J. Luke 1996 $4,200 $ -- $ -- $ 4,200
1995 $4,200 $ -- $ -- $ 4,200
1994 $3,950 $7,595 $3,740 $ 15,285
Warren K. K. Luke 1996 $4,200 $ -- $3,300 $ 7,500
1995 $4,450 $ -- $3,300 $ 7,750
1994 $4,200 $ -- $3,300 $ 7,500
Ernest T. Murata 1996 $ -- $4,032 $1,986 $ 6,018
1995 $ -- $3,828 $1,885 $ 5,713
1994 $ -- $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, 1996, HNB's
Employees' Retirement Plan had 228 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 1996 HNB's contribution to the Retirement Plan
represented 6.37% 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>
$260,000 $31,414 $51,213 $71,602 $91,990 $112,379
240,000 31,414 51,213 71,602 91,990 112,379
220,000 29,751 48,204 67,206 86,209 105,211
200,000 27,651 44,404 61,656 78,909 96,161
180,000 25,551 40,604 56,106 71,609 87,111
160,000 23,451 36,804 50,556 64,309 78,061
</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, 1996, the credited years of service under the Plan for
Messrs. Warren K. K. Luke, and Ernest T. Murata were 24 and 34 years,
respectively. K. J. Luke, who has 36 years of credited service, is presently
receiving annual payments of $24,204 under the Plan.
7
<PAGE> 10
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 36 years, from its beginnings as a one bank office on King and Smith Streets
to the present day, as a full service bank with 12 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 1996, the Committee considered the above factors. It also
utilized a survey of salaries paid to CEOs of banks in Hawaii with assets
ranging between $770.5 million and $12.5 billion. The salaries paid to Messrs.
K. J. Luke and Warren K. K. Luke in 1996 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
8
<PAGE> 11
Proxy used in the performance graph to compare cumulative total return.
No incentive-driven compensation, such as stock options, stock appreciation
rights, restricted stock awards, or other types of payments were awarded in
1996.
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, 1991 and ending on December 31, 1996.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG HAWAII NATIONAL BANCSHARES, INC., NASDAQ INDEX
AND AN INDEX OF UNLISTED INDEPENDENT BANKS
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Bancshares 100.00 100.01 110.09 138.92 166.08 171.90
NASDAQ Index 100.00 116.38 133.60 130.59 184.67 227.16
Unlisted 100.00 102.52 127.23 124.51 155.28 210.03
Independent
Bank Proxy
</TABLE>
- ----------
*Assumes $100.00 invested on December 31, 1991 in Bancshares' stock,
NASDAQ Market Index and an Unlisted Independent Bank Proxy originally
compiled by Montgomery Securities and consisting of TriCo Bancshares,
Exchange Bank, Pacific Capital Corp., Mid-State Bank, Santa Barbara
Bancorp, Home Interstate Bancorp and Hawaii National Bancshares, Inc.
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 1996, 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. During 1996, HNB
sold loans amounting to $3,819,000, including a $2,673,000 impaired loan, to
K.J.L. Associates. No gain or loss was recognized on the sale of these loans
which were paid in full by year-end.
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
and loan sale transactions discussed above are as favorable to HNB as
10
<PAGE> 13
those which could have been obtainable in transactions with persons or companies
not affiliated with Bancshares or HNB.
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 1996, HNB paid an aggregate
premium of $200,076 to such firm. HNB plans to continue to utilize the agency
during 1997.
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,
1996, HNB and Loyalty Investments (an affiliate of Chairman of the Board, K. J.
Luke), each owned a 50% interest in CSI. 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 1996 were $729,000. The Board of
Directors of HNB believes that the data processing services provided by CSI were
on terms comparable with those that could have been obtained from unaffiliated
parties.
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, 1997. 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 86% of
the issued and outstanding shares of Bancshares stock as of January 31, 1997.
Bancshares knows of no other persons who, as of January 31, 1997, 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.
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<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 1,308 38,450(1) 5.4%
Officer and
Chairman of the
Board of
Bancshares;
Chairman of the
Board of HNB
Warren K. K. Luke President and 44,424 294,808(2) 41.5%
Director of
Bancshares;
Vice Chairman,
President and
Chief Executive
Officer of HNB
Loretta H. W. Principal 30,358 92,750(3) 13.0%
Yajima Shareholder,
daughter of K. J.
Luke and sister
of Warren K. K.
Luke
Gordon J. Mau Secretary and 15,682 74,462(4) 10.5%
Director of
Bancshares;
Assistant
Secretary and
Director of HNB
Sharlene K. S. Principal 28,769 107,137(5) 15.1%
Mau Shareholder,
daughter of K. J.
Luke and sister
of Warren K. K.
Luke
Janice M. T. Loo Principal 47,858 80,533(6) 11.3%
Shareholder,
daughter of K. J.
Luke and sister
of Warren K. K.
Luke
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
% of
Relationship Class
with Banc- Record Beneficially Beneficially
Name shares or HNB Ownership Owned Owned
- ---- ------------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Jeanette Lum Chun Principal 147(7) 183,227(7) 25.8%
Shareholder
Herbert Y. H. Principal 994(8) 48,814(8) 6.9%
Chinn Shareholder
Tan Tek Lum Principal 200 64,041(9) 9.0%
Shareholder and
Director of
Bancshares
and HNB
</TABLE>
- ----------
(1) Includes 1,617 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 12,655 shares owned by Mr. Luke's wife, Carolyn Luke, over which
Mr. Luke exercises no voting or investment power; 4,344 shares held by Mr.
and Mrs. Luke as trustee for one of their children, over which Mrs. Luke
shares voting and investment power; 17,216 shares owned by one of Mr. and
Mrs. Luke's children who is economically dependent upon them; 82,619 shares
held by Mr. Luke as trustee for his nephews and nieces, over which he
exercises sole voting and investment power; and 98,025 shares held by Mr.
Luke as trustee for his sisters, over which he shares 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 15,420 shares owned by Mrs. Yajima's husband, Tyler Yajima, over
which Mrs. Yajima exercises no voting or investment power; 14,297 shares
held by Mrs. Yajima as trustee for her children, over which Mr. Yajima
shares voting and investment power; and 32,675 shares held in trust for her
sister, Sharlene K.S. Mau, over which Mrs. Yajima shares voting and
investment power.
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<PAGE> 16
(4) Includes 711 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 12/31/93, over
which Mr. Mau exercises no voting or investment power; 9,696 shares held by
Mr. and Mrs. Mau, as trustees for their children, over which Mr. Mau shares
voting and investment power; and 20,315 shares owned by two of Mr. and Mrs.
Mau's children who are economically dependent upon them.
(5) Includes 1,317 shares owned by Mrs. Mau's husband, Gordon J. Mau, over
which Mrs. Mau exercises no voting or investment power; 14,365 shares held
by Mr. Mau as trustee of the Gordon J. Mau Trust dated 12/12/89, over which
Mrs. Mau exercises no voting or investment power; 9,696 shares held by Mr.
and Mrs. Mau, as trustees for their children, over which Mrs. Mau shares
voting and investment power; 20,315 shares owned by two of Mr. and Mrs.
Mau's children who are economically dependent upon them; and 32,675 shares
held in trust for her sister, Janice M.T. Loo, over which Mrs. Mau shares
voting and investment power.
(6) Includes 32,675 shares held in trust for her sister, Loretta H.W. Yajima,
over which Mrs. Loo shares voting and investment power.
(7) Includes 118 shares over which Mrs. Chun exercises sole voting and
investment power; 47,820 shares and 130,700 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.
(8) 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.
(9) 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; and 16,021 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.
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<PAGE> 17
DIRECTORS AND EXECUTIVE OFFICERS
As of January 31, 1997, 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 1,308 38,450(1) 5.4%
Warren K. K. Luke,
Executive Officer and Director 44,424 294,808(1) 41.5%
Ernest T. Murata,
Executive Officer 400 400 *
Gordon J. Mau, Director 15,682 74,462(1) 10.5%
Tan Tek Lum, Director 200 64,041(1) 9.0%
Arthur S. K. Fong, Director 318 318 *
Directors and Executive Officers
as a Group 62,332 472,479 66.5%
</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 9 to "Principal Shareholders" herein, respectively.
COMPLIANCE WITH SECTION 16(a) FILING REQUIREMENTS
Section 16(a) of the SEC Act of 1934, as amended, ("Section 16(a)") requires
that all executive officers and directors of Bancshares and all persons who
beneficially own more than 10% of Bancshares' common stock file reports with the
SEC with respect to beneficial ownership of Bancshares' securities. Bancshares
has adopted procedures to assist its directors and executive officers in
complying with Section 16(a) filings.
Based solely upon Bancshares' review of the copies of the filings which it
received with respect to the fiscal year ended December 31, 1996, or written
representations from certain reporting persons, Bancshares believes that all
reporting persons made all filings required by Section 16(a) on a timely basis.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Coopers and Lybrand L.L.P. performed the audit of the
consolidated financial statements for Bancshares and HNB for the year ended
December 31, 1996. The Board of Directors has appointed Coopers and
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<PAGE> 18
Lybrand L.L.P. 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 L.L.P. 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.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
The 1998 Annual Meeting of Shareholders will be held on or about April 14,
1998. Therefore, proposals of the shareholders intended to be presented at the
1998 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, 1997.
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
/s/ Gordon J. Mau
Gordon J. Mau
Secretary
Honolulu, Hawaii
March 27, 1997
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
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<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 25, 1997, 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 15, 1997 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: _____________________________, 1997
__________________________________________
(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
OWNERS MUST SIGN.
