<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:
[ ] 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 240.14a-11(c) or 240.14a-12
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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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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 21, 1998, 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, 1998,
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, 1998
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, 1998, for use in connection with the Annual
Meeting of Shareholders of Hawaii National Bancshares, Inc. ("Bancshares") to be
held on Tuesday, April 21, 1998. Only those shareholders of record of Bancshares
issued and outstanding common stock at the close of business on March 25, 1998
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,
facsimile, 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.
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<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 1999 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, 1998. 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, 83, 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, 53, 1986 296,278(2) 41.7%
President and Director of
Bancshares; Vice Chairman,
President and Chief Executive
Officer of HNB; Son of K. J. Luke.
Gordon J. Mau, 51, 1990 54,848(3) 7.7%
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>
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, 62, 1993 64,041(4) 9.0%
Director, Executive Vice
President and Assistant
Secretary, Lum Yip Kee, Ltd.
(Real Estate Investments);
Brother-in-law of Carolyn
Luke, wife of Warren K. K. Luke
Arthur S. K. Fong, 73, 1993 318(5) *
Partner, Fong & Fong, Attorneys
at Law
</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 resides with 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 363 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 12/13/93, over which
Mr. Mau exercises no voting or investment power; 9,696 shares held by Mr.
and Mrs. Mau, as trustees for their children,
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<PAGE> 6
over which Mr. Mau shares voting and investment power; 555 shares held in
trust for one of Mr. and Mrs. Mau's children, of which Mr. Mau has sole
voting and investment power over 116 shares, and Mrs. Mau has sole voting
and investment power over 439 shares; and 1,811 shares owned by one of Mr.
and Mrs. Mau's children who is 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 seven meetings of the
Board of Directors of Bancshares during 1997. All of the foregoing nominees
attended at least 75% of the meetings of the Board during 1997.
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 1997,
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
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<PAGE> 7
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 1997. 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 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. While there were two meetings of the CRA Committee in 1997, other
CRA matters were covered by the full Board. HNB received an "Outstanding" rating
for its examination from the Comptroller of the Currency which took place in
1997. 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, 1997, 1996 and 1995 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(1) Bonus Compensation(2)
------------------ ---- --------- ----- ---------------
<S> <C> <C> <C> <C>
K. J. Luke 1997 $156,393 $1,529 $ --
Chairman of the Board and 1996 $156,726 $1,525 $ --
Chief Executive Officer of 1995 $156,870 $1,526 $ --
Bancshares; Chairman of the
Board of HNB
Warren K. K. Luke 1997 $232,727 $2,283 $3,300
President and Director of 1996 $232,881 $2,276 $3,300
Bancshares; Vice Chairman, 1995 $207,851 $2,014 $3,300
President and Chief Executive
Officer of HNB
Ernest T. Murata 1997 $170,787(3) $1,615 $7,540
Vice President, Treasurer, 1996 $169,507(3) $1,538 $6,018
Assistant Secretary and 1995 $147,048 $6,456 $5,713
Chief Financial Officer of
Bancshares; Senior Executive
Vice President, Cashier and
Secretary of HNB
</TABLE>
Notes:
(1) Includes directors and committee fees for 1997, 1996 and 1995 of $3,450,
$4,200 and $4,200 for K.J. Luke, respectively, and $4,450, $4,200, and
$4,450, respectively, for Warren K. K. Luke.
(2) Other annual compensation consists of personal use of automobiles and direct
reimbursements. All of the amounts listed for Warren K. K. Luke in the table
above are for direct reimbursements. For Ernest T. Murata, personal use of
automobiles was $5,052, $4,032 and $3,828 for 1997, 1996 and 1995,
respectively. During the same years, direct reimbursements paid to him were
$2,488, $1,986 and $1,885, respectively.
(3) Includes an adjustment in vacation benefits in 1997 and 1996 of $9,316 and
$15,410, respectively, for Ernest T. Murata.
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.
6
<PAGE> 9
PENSION PLAN
HNB has a noncontributory pension plan. As of December 31, 1997, HNB's
Employees' Retirement Plan had 249 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 1997 HNB's contribution to the Retirement Plan
represented 5.64% of the total remuneration aid 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>
$280,000 $ 30,326 $ 49,535 $ 69,924 $ 90,312 $110,701
260,000 30,326 49,535 69,924 90,312 110,701
240,000 30,326 49,535 69,924 90,312 110,701
220,000 28,901 46,803 65,806 84,808 103,811
200,000 27,101 43,353 60,606 77,858 95,111
180,000 25,301 39,903 55,406 70,908 86,411
</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, 1997, the credited years of service under the Plan
for Messrs. Warren K. K. Luke and Ernest T. Murata were 25 and 35 years,
respectively. K. J. Luke, who has 37 years of credited service, is presently
receiving annual payments of $24,204 under the Plan.
HNB has 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
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<PAGE> 10
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 37 years, from its beginnings as a one bank office on King and Smith Streets
to the present day, as a full service bank with 13 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 1997, 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 million and $12.5 billion. The salaries paid to Messrs. K.
J. Luke and Warren K. K. Luke in 1997 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.
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<PAGE> 11
No incentive-driven compensation, such as stock options, stock
appreciation rights, restricted stock awards, or other types of payments were
awarded in 1997.
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, 1992 and ending on December 31, 1997.
Comparison of Five Year Cumulative Total Return*
Among Hawaii National Bancshares, Inc.,
NASDAQ Index and an index of Unlisted Independent Banks
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Bancshares 100.00 110.07 155.89 156.11 172.63 193.04
NASDAQ Index 100.00 114.80 112.21 158.70 195.19 239.53
Unlisted Independent Bank Proxy 100.00 124.10 121.45 151.46 204.87 351.06
</TABLE>
- ----------
* Assumes $100.00 invested on December 31, 1992 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, and Hawaii
National Bancshares, Inc. Total return assumes reinvestment of dividends.
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<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 1997, 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, 2024 with an option
to renew for fifteen years and requires fixed annual rents of $1,025,445 from
January 1, 1995 until December 31, 1997; $1,025,445 from January 1, 1998 until
December 31, 2000; and rent thereafter is to be fixed for each of the succeeding
3-year periods (including the option period) by agreement or, failing agreement,
by arbitration.
During 1997, HNB leased office, printing, supply and storage space for
its Airport Branch and general operations from Industrial Investors, Inc., an
affiliate of director Warren K. K. Luke. There were two leases, one for the
Airport Branch and adjacent printing and supply department for HNB and a second
for storage space for HNB. The first lease called for the payment of fixed
annual rents of $133,013 from January 1, 1993 until December 31, 1997; $147,508
from January 1, 1998 until December 31, 2002; and rent thereafter to be fixed
for the succeeding 10-year period by agreement, or failing agreement by
arbitration. The second lease called for fixed annual rents of $54,720 from
January 1, 1993 until December 31, 1997 and $60,480 from January 1, 1998 until
December 31, 2002. Effective February 1, 1998, in recognition of HNB's need for
less storage space, HNB canceled its existing lease and entered into a new lease
with Industrial Investors, Inc. , reducing the amount of storage space. The new
lease, which also will continue until December 31, 2002, will require fixed
annual rents of $27,360 (reduced from $60,480).
All of the lease and sublease payments described above are in addition
to insurance, taxes, maintenance, and utility payments. In addition, any rent
which is arbitrated shall in no event be less than the rent for the period
immediately preceding.
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<PAGE> 13
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.
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 a
director and principal shareholder of its parent company, 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 1997, HNB paid an aggregate
premium of $248,181 to such firm. HNB plans to continue to utilize the agency
during 1998.
Computer services were obtained from Computer Systems International
Ltd., ("CSI"), a company formed to provide data processing services to financial
institutions, including HNB. On August 31, 1997, CSI became wholly-owned by HNB
when CSI purchased into treasury stock the other 50% interest from Loyalty
Investments (an affiliate of Chairman of the Board, K.J. Luke). Effective
October 1, 1997, CSI's operations were merged into HNB and CSI was liquidated.
Charges for data processing services provided by CSI during 1997, prior to CSI
becoming wholly-owned by HNB, amounted to $571,000. 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, 1998. 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, 1998.
Bancshares knows of no other persons who, as of January 31, 1998, 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.
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 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 45,894 296,278(2) 41.7%
Director of
Bancshares;
Vice Chairman,
President and
Chief Executive
Officer of HNB
Loretta H. W. Yajima Principal 30,358 92,750(3) 13.0%
Shareholder,
daughter of K. J.
Luke and sister
of Warren K. K.
Luke
Gordon J. Mau Secretary and 14,365 54,848(4) 7.7%
Director of
Bancshares;
Assistant
Secretary and
Director of HNB
Sharlene K. S. Mau Principal 28,421 87,523(5) 12.3%
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. Chinn Principal 994(8) 48,814(8) 6.9%
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 resides with 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.
13
<PAGE> 16
(4) Includes 363 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; 555 shares held in trust for one of Mr. and
Mrs. Mau's children, of which Mr. Mau has sole voting and investment power
over 116 shares, and Mrs. Mau has sole voting and investment power over 439
shares; and 1,811 shares owned by one of Mr. and Mrs. Mau's children who is
economically dependent upon them.
(5) Includes 14,365 shares held by Mrs. Mau's husband, Gordon J. 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; 555 shares held in trust for one of Mr. and Mrs. Mau's
children, of which Mrs. Mau has sole voting and investment power over 439
shares, and Mr. Mau has sole voting and investment power over 116 shares;
1,811 shares owned by one of Mr. and Mrs. Mau's children who is 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.
14
<PAGE> 17
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of December 31, 1997 with
respect to named executive officers who are not directors or nominees for
directors.
NAMED EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
SHARES OF BANCSHARES' % OF CLASS
COMMON STOCK BENEFICIALLY BENEFICIALLY
NAME AND AGE POSITION OWNED OWNED
<S> <C> <C> <C>
Ernest T. Murata, 64 Vice President, Treasurer, 400 *
Assistant Secretary and Chief
Financial Officer of Bancshares;
Senior Executive Vice President,
Cashier, Secretary and Chief
Financial Officer of HNB
All directors and executive officers
as a group (7 persons) 454,337 63.9%
</TABLE>
* Denotes ownership of less than 1%
EXECUTIVE OFFICERS
The following table sets forth information with respect to executive
officers, who are not directors or nominees for director of Bancshares or HNB,
and are not otherwise named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NAME AND AGE POSITION
- ------------ --------
<S> <C>
Denis C.H. Kam, 62 Executive Vice President and Senior Loan
Administrator of HNB; prior to 1997, served as
Senior Vice President in various administrative and
managerial capacities at Bank of Hawaii.
</TABLE>
COMPLIANCE WITH SECTION 16(a) FILING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
("Section 16(a)") requires that all executive officers and directors of
Bancshares and HNB and all persons who beneficially own more than 10% of
Bancshares' common stock file reports with the Securities and Exchange
Commission with respect to beneficial ownership of Bancshares's securities.
Bancshares has adopted procedures to assist its directors and executive officers
in complying with the 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, 1997, 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,
except that Denis C.H. Kam, who joined HNB as an Executive Vice President and
Senior Loan Administrator in March of 1997 and was appointed a Section 16
officer at such time, inadvertently neglected to file his initial beneficial
ownership statement on Form 3 in a timely manner. The Form 3 was subsequently
filed.
15
<PAGE> 18
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, 1997. The Board of Directors has appointed Coopers and 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 1999 Annual Meeting of Shareholders will be held on or about April
20, 1999. Therefore, proposals of the shareholders intended to be presented at
the 1999 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 16, 1998.
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, 1998
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 TO:
Mr. Ernest T. Murata
Vice President, Treasurer,
Assistant Secretary and Chief Financial Officer
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 25, 1998, 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 21, 1998 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: ___________________________, 1998
----------------------------------------
(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.
