CPB INC (Form: 10-K, Received: 03/30/2001 13:49:51)

Receipt acknowledged:
CPB Inc.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Mark One

/x/	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2000

/ /	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 0-10777

CPB INC.
(Exact name of registrant as specified in its charter)

Hawaii (State or other jurisdiction of incorporation or organization)		99-0212597 (I.R.S. Employer Identification No.)
220 South King Street, Honolulu, Hawaii (Address of principal executive offices)		96813 (Zip Code)

Registrant's telephone number, including area code:
(808) 544-0500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class NONE				Name of each exchange on which registered NONE
Securities registered pursuant to Section 12(g) of the Act: Common Stock, No Par Value (Title of class) Preferred Share Purchase Rights (Title of class)

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 period 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 / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 or Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. [ ]

As of February 28, 2001, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $181,657,000.

As of February 28, 2001, the number of shares of common stock of the registrant outstanding was 8,470,668 shares.

The following documents are incorporated by reference herein:

Document Incorporated		Part of Form 10-K Into Which Incorporated
2000 Annual Report to Shareholders		Parts II and IV
Definitive Proxy Statement for the Annual Meeting of Shareholders which was filed within 120 days of the fiscal year ended December 31, 2000		Part III

PART I

ITEM 1. BUSINESS

General

CPB Inc. (the "Company"), a Hawaii corporation, is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "BHCA"). Pursuant to a Plan of Reorganization and Agreement of Merger, the Company was organized on February 1, 1982 to serve as a holding company for its subsidiary, Central Pacific Bank (the "Bank"). The Bank was incorporated in its present form in the State of Hawaii on March 16, 1982 in connection with the holding company reorganization, and its predecessor entity was incorporated in the State of Hawaii on January 15, 1954. The Bank's deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") up to applicable limits. The Bank is not a member of the Federal Reserve System.

The Bank owns 100% of the outstanding stock of CPB Properties, Inc. ("CPB Properties"), a company which is a general and managing partner and 50% owner of CKSS Associates ("CKSS"), a Hawaii limited partnership. CKSS owns the Central Pacific Plaza, the property in which the Company's and the Bank's headquarters and main office are located. CKSS also owns the Kaimuki Plaza, the property in which the Bank's Kaimuki branch office is located. In addition, CPB Properties owns, University Square, the building in which the Bank's Moiliili branch office is located. The Bank owns the property and buildings where its Hilo and Kailua-Kona branch offices are located and the building where its operations center facility is located. See " ITEM 2. PROPERTIES ."

The Bank also owns 99.8% and the Company owns 0.2% of the outstanding common stock of CPB Real Estate, Inc. ("CPBREI"), a real estate investment trust, which acquires, holds and manages stable, long-term real estate related assets including residential mortgage loans, commercial real estate loans and mortgage-backed securities. CPBREI, incorporated in March 1998, was established to provide the Company with an alternate means of raising capital and to enhance federal and state tax strategies. The impact of the tax strategies is discussed in Note 19 to the Company's Consolidated Financial Statements in the 2000 Annual Report. In November 1998, CPBREI issued 1,000 shares of Class A preferred stock to the Bank and certain employees of the Bank. At December 31, 2000, the Bank held 870 shares of CPBREI Class A preferred stock, and employees or former employees held 130 shares of CPBREI Class A preferred stock. In September 2000, CPBREI issued 100 shares of Class B preferred stock to the Bank and 92 shares of Class C preferred stock to the Bank.

The principal office of the Company is located at 220 South King Street, Honolulu, Hawaii 96813, and its telephone number is (808) 544-0500.

Banking Services

The Bank is a full-service commercial bank which currently has 24 banking offices and 76 ATMs located throughout the State of Hawaii. Its administrative and main office is located in Honolulu, and there are nineteen other branches on the island of Oahu. In addition, the Bank operates one branch on the island of Maui, one branch on the island of Kauai and two branches on the island of Hawaii.

Through its network of banking offices, the Bank emphasizes personalized services and offers a full range of banking services to small- and medium-sized businesses, professionals and individuals in Hawaii. The Bank offers a variety of deposit instruments. These include personal and business checking and savings accounts, including interest-bearing negotiable order of withdrawal ("NOW") accounts, money market accounts and time certificates of deposit.

Lending activities include granting of commercial, consumer and real estate loans. The Bank offers inventory and accounts receivable financing, furniture, fixture and equipment financing, short-term

operating loans, and commercial real estate and construction loans. Consumer loans include home equity lines of credit, loans for automobiles, home improvement and debt consolidation, personal and professional lines of credit and other installment and term loans for other personal needs.

The Bank offers credit cards and VISA CHECK CARD, a debit card service, and is a member of the Star and Plus ATM Networks. The Bank also offers an internet banking service through its website at cpbi.com as well as an Infoline service, providing telephonic account information and funds transfer services.

Other services designed to service the needs of businesses and individuals include investment and life insurance services, business PC banking, travelers' checks, safe deposit boxes, international banking services, night depository facilities and wire transfer services.

The Bank's Trust Division offers asset management and custody services for a variety of accounts including revocable and irrevocable trusts, agency accounts, guardianships of property, charitable remainder trusts and probates.

Market Area and Competition

The Bank competes in the financial services industry mainly targeting retail and small to mid-sized businesses. The market is highly competitive with five commercial banks, two savings and loans, several finance companies and numerous credit unions operating in the state of Hawaii. The two largest banks in the state have expanded their markets out-of-state through merger and acquisition activity.

Bancwest Corporation had $18.5 billion in assets at year-end 2000. First Hawaiian Bank, the Hawaii-based subsidiary bank, has approximately 26% of the deposits in the state of Hawaii.

Pacific Century Financial Corporation had $14.0 billion in total assets at year-end 2000. Bank of Hawaii, its largest subsidiary bank, maintains approximately 25% of the deposits in the state of Hawaii.

American Savings Bank, a subsidiary of Hawaiian Electric Industries, held $6.0 billion in assets at year end 2000. American Savings Bank has approximately 17% of the deposits in the state of Hawaii.

Based on total consolidated assets at December 31, 2000, the Company is the third largest bank holding company in the State of Hawaii and the Bank is the third largest commercial bank in the State of Hawaii maintaining approximately 6% of the deposit market share. With $1.8 billion in assets, the Bank is establishing its position in the market as a local community bank which is large enough to provide a wide range of banking services, yet small enough to deliver personalized service. In order to compete with the other financial services providers in the State of Hawaii, the Bank principally relies upon local promotional activities, personal relationships established by officers, directors and employees with its customers, and specialized services tailored to meet needs of the communities served. The Bank remains competitive with pricing and superior service levels. The Bank also has a strong capital base which can support expansion opportunities that may better serve the community.

The banking and financial services industry in the State of Hawaii generally, and in the Bank's target market areas, is highly competitive. The increasingly competitive environment is a result primarily of changes in regulation, changes in technology and product delivery systems, and the accelerating pace of consolidation among financial services providers. The Bank competes for loans, deposits and customers with other commercial banks, savings and loan associations, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market funds, credit unions and other nonbank financial service providers. Many of these competitors are much larger in total assets and capitalization, have greater access to capital markets and offer a broader range of financial services than the Bank. In addition, recent federal legislation may have the effect of further increasing the pace of consolidation within the financial services industry. See " ITEM 1. BUSINESS—Supervision and Regulation—Gramm-Leach-Bliley Act ."

Economic Conditions, Government Policies, Legislation and Regulation

The Company's profitability, like most financial institutions, is primarily dependent on interest rate differentials. In general, the difference between the interest rates paid by the Bank on interest-bearing liabilities, such as deposits and other borrowings, and the interest rates received by the Bank on its interest-earning assets, such as loans extended to its clients and securities held in its investment portfolio, comprise the major portion of the Company's earnings. These rates are highly sensitive to many factors that are beyond the control of the Company and the Bank, such as inflation, recession and unemployment, and the impact which future changes in domestic and foreign economic conditions might have on the Company and the Bank cannot be predicted.

The business of the Company is also influenced by the monetary and fiscal policies of the federal government and the policies of regulatory agencies, particularly the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). The Federal Reserve Board implements national monetary policies (with objectives such as curbing inflation and combating recession) through its open-market operations in U.S. Government securities by adjusting the required level of reserves for depository institutions subject to its reserve requirements, and by varying the target federal funds and discount rates applicable to borrowings by depository institutions. The actions of the Federal Reserve Board in these areas influence the growth of bank loans, investments and deposits and also affect interest rates earned on interest-earning assets and paid on interest-bearing liabilities. The nature of and impact on the Company and the Bank of any future changes in monetary and fiscal policies cannot be predicted.

From time to time, legislative acts, as well as regulations, are enacted and adopted which have the effect of increasing the cost of doing business, limiting or expanding permissible activities or affecting the competitive balance between banks and other financial services providers. Proposals to change the laws and regulations governing the operations and taxation of banks, bank holding companies, and other financial institutions and financial services providers are frequently made in the U.S. Congress, in the state legislatures and before various regulatory agencies. See " ITEM 1. BUSINESS—Supervision and Regulation ."

Supervision and Regulation

General

Bank holding companies and banks are highly regulated under both federal and state law. The Company is subject to regular examination, supervision and regulation by the Federal Reserve Board. The Company's securities are registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As such, the Company is subject to the information, proxy solicitation, insider trading and other requirements and restrictions of the Exchange Act. The Bank, as a Hawaii chartered bank, is subject to primary supervision, periodic examination and regulation by the Hawaii Commissioner of Financial Institutions ("Commissioner") and the Federal Deposit Insurance Corporation ("FDIC"). To a lesser extent, the Bank is also subject to certain regulations promulgated by the Federal Reserve Board. State and federal statutes and regulations relate to many aspects of the Bank's operations, including reserves against deposits, ownership of deposit accounts, interest rates payable on deposits, loans, investments, mergers and acquisitions, borrowings, dividends, locations of branch offices and capital requirements. Further, the Bank is required to maintain certain levels of capital. See " ITEM 1. BUSINESS—Supervision and Regulation—Capital Standards." These regulations are intended primarily for the protection of depositors and the deposit insurance fund and not for the benefit of shareholders of the Company. Set forth below is a summary description of the material laws and regulations which relate to the operations of the Company and the Bank. The description is qualified in its entirety by reference to the applicable laws and regulations.

Bank Holding Company Regulation

The Company, as a registered bank holding company, is subject to regulation under the BHCA and is required to file quarterly reports and such additional information as the Federal Reserve Board may require pursuant to the BHCA. The Federal Reserve Board may conduct examinations of the Company and its subsidiaries.

The Federal Reserve Board may require that the Company terminate an activity or terminate control of or liquidate or divest certain subsidiaries or affiliates when the Federal Reserve Board believes the activity or the control of the subsidiary or affiliate constitutes a significant risk to the financial safety, soundness or stability of any of its banking subsidiaries. The Federal Reserve Board also has the authority to regulate provisions of certain bank holding company debt, including authority to impose interest ceilings and reserve requirements on such debt. Under certain circumstances, the Company must file written notice and obtain approval from the Federal Reserve Board prior to purchasing or redeeming its equity securities.

It is the Federal Reserve Board's policy that in serving as a source of strength to its subsidiary banks, a bank holding company should be prepared to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. A bank holding company's failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the Federal Reserve Board to be an unsafe and unsound banking practice, or a violation of the Federal Reserve Board's regulations, or both.

Under the BHCA and regulations adopted by the Federal Reserve Board, a bank holding company and its nonbanking subsidiaries are prohibited from requiring certain tie-in arrangements in connection with any extension of credit, lease or sale of property or furnishing of services. Further, the Company is required by the Federal Reserve Board to maintain certain levels of capital. See " ITEM 1. BUSINESS—Supervision and Regulations—Capital Standards ."

The Company is required to obtain the prior approval of the Federal Reserve Board for the acquisition of more than 5% of the outstanding shares of any class of voting securities or substantially all of the assets of any bank or bank holding company. Prior approval of the Federal Reserve Board is also required for the merger or consolidation of the Company and another bank holding company.

The Company is prohibited by the BHCA, except in certain statutorily prescribed instances, from acquiring direct or indirect ownership or control of more than 5% of the outstanding voting shares of any company that is not a bank or bank holding company and from engaging directly or indirectly in activities other than those of banking, managing or controlling banks or furnishing services to its subsidiaries. Subject to the prior approval of the Federal Reserve Board, the Company may engage in any, or acquire shares of companies engaged in, activities that are deemed by the Federal Reserve Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.

Capital Standards

The Federal Reserve Board and the FDIC have adopted risk-based minimum capital guidelines intended to provide a measure of capital that reflects the degree of risk associated with a banking organization's operations for both transactions reported on the balance sheet as assets and transactions, such as letters of credit and recourse arrangements, which are recorded as off-balance sheet items. Under these guidelines, nominal dollar amounts of assets and credit equivalent amounts of off-balance sheet items are multiplied by one of several risk adjustment percentages, which range from 0% for

assets with low credit risk, such as certain U.S. Treasury securities, to 100% for assets with relatively high credit risk, such as commercial loans.

The federal banking agencies require a minimum ratio of qualifying total capital to risk-adjusted assets of 8% and a minimum ratio of Tier 1 capital to risk-adjusted assets of 4%. In addition to the risk-based guidelines, federal banking regulators require banking organizations to maintain a minimum amount of Tier 1 capital to total assets, referred to as the leverage ratio. For a banking organization rated in the highest of the five categories used by regulators to rate banking organizations, the minimum leverage ratio of Tier 1 capital to total assets must be 3%. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.

The following table presents the amounts of regulatory capital and the capital ratios for the Bank, compared to its minimum regulatory capital requirements as of December 31, 2000.

			As of December 31, 2000
	Actual Amount		Ratio		Required Amount		Ratio		Excess Amount		Ratio
			(Dollars in thousands)
Leverage ratio	$	136,563	7.77	%	$	70,269	>=4.00	%	$	66,294	3.77	%
Tier 1 risk-based ratio	$	136,563	9.38	%	$	58,237	>=4.00	%	$	78,326	5.38	%
Total risk-based ratio	$	154,817	10.63	%	$	116,476	>=8.00	%	$	38,342	2.63	%

The following table presents the amounts of regulatory capital and the capital ratios for the Company, compared to its minimum regulatory capital requirements as of December 31, 2000.

			As of December 31, 2000
	Actual Amount		Ratio		Required Amount		Ratio		Excess Amount		Ratio
			(Dollars in thousands)
Leverage ratio	$	140,222	7.97	%	$	70,362	>=4.00	%	$	69,860	3.97	%
Tier 1 risk-based ratio	$	140,222	9.63	%	$	58,215	>=4.00	%	$	82,007	5.63	%
Total risk-based ratio	$	158,469	10.89	%	$	116,431	>=8.00	%	$	42,038	2.89	%

Federal Deposit Insurance Corporation

The FDIC can take various action, if, as a result of an examination of the Bank, it should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of the Bank's operations are unsatisfactory or that the Bank or its management is violating or has violated any law or regulation. The FDIC has the authority to enjoin "unsafe or unsound" practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in capital, to restrict the growth of the Bank, to assess civil monetary penalties, to remove officers and directors, and ultimately to terminate the Bank's deposit insurance, which for a Hawaii chartered bank would result in a revocation of the Bank's charter.

Prompt Corrective Action and Other Enforcement Mechanisms

Federal banking agencies possess broad powers to take corrective and other supervisory action to resolve the problems of insured depository institutions, including but not limited to those institutions that fall below one or more prescribed minimum capital ratios. Each federal banking agency has

promulgated regulations defining the following five categories in which an insured depository institution will be placed, based on its capital ratios: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. At December 31, 2000, the Bank and the Company exceeded the required ratios for classification as "well capitalized."

An institution that, based upon its capital levels, is classified as well capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or an unsafe or unsound practice warrants such treatment. At each successive lower capital category, an insured depository institution is subject to more restrictions. The federal banking agencies, however, may not treat a significantly undercapitalized institution as critically undercapitalized unless its capital ratios actually warrant such treatment.

In addition to measures taken under the prompt corrective action provisions, commercial banking organizations may be subject to potential enforcement actions by the federal regulators for unsafe or unsound practices in conducting their businesses or for violations of any law, rule, regulation, or any condition imposed in writing by the agency or any written agreement with the agency.

Safety and Soundness Standards

The federal banking agencies have adopted guidelines designed to assist the federal banking agencies in identifying and addressing potential safety and soundness concerns before capital becomes impaired. The guidelines set forth operational and managerial standards relating to: (i) internal controls, information systems and internal audit systems, (ii) loan documentation, (iii) credit underwriting, (iv) asset growth, (v) earnings and (vi) compensation, fees and benefits.

In addition, the federal banking agencies have also adopted safety and soundness guidelines with respect to asset quality and earnings standards. Under these standards, an insured depository institution should: (i) conduct periodic asset quality reviews to identify problem assets, (ii) estimate the inherent losses in problem assets and establish reserves that are sufficient to absorb estimated losses, (iii) compare problem asset totals to capital, (iv) take appropriate corrective action to resolve problem assets, (v) consider the size and potential risks of material asset concentrations and (vi) provide periodic asset quality reports with adequate information for management and the board of directors to assess the level of asset risk. These guidelines also set forth standards for evaluating and monitoring earnings and for ensuring that earnings are sufficient for the maintenance of adequate capital and reserves.

Gramm-Leach-Bliley Act

The Gramm-Leach-Bliley Act, federal legislation which was approved in November 1999, went into effect on March 13, 2000. The general effect of the Gramm-Leach-Bliley Act is that it established a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers by revising and expanding the BHCA framework to permit a holding company system to engage in a full range of financial activities through a new entity known as a "Financial Holding Company." Generally, the Gramm-Leach-Bliley Act:

•: Repealed historical restrictions on, and eliminated many federal and state law barriers to, affiliations among banks, securities firms, insurance companies and other financial service providers;
•: Provides a uniform framework for the functional regulation of the activities of banks, savings institutions and their holding companies;
•: Broadened the activities that may be conducted by national banks, banking subsidiaries of bank holding companies and their financial subsidiaries;

•: Provides an enhanced framework for protecting the privacy of consumer information;
•: Adopted a number of provisions related to the capitalization, membership, corporate governance and other measures designed to modernize the Federal Home Loan Bank system;
•: Modified the laws governing the implementation of the Community Reinvestment Act, and
•: Addressed a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions.

To become a "Financial Holding Company," the Company would file a declaration with the Federal Reserve Board, electing to engage in activities permissible for Financial Holding Companies and certifying that it is eligible to do so because all of its insured depository institution subsidiaries are well-capitalized and well-managed. See " ITEM 1. BUSINESS—Supervision and Regulations—Capital Standards ." In addition, the Federal Reserve Board must also determine that each insured depository institution subsidiary of the Company has at least a "satisfactory" Community Reinvestment Act rating. See " ITEM 1. BUSINESS—Supervision and Regulations—Community Reinvestment Act and Fair Lending Developments ." The Company currently meets the requirements to make an election to become a Financial Holding Company. Management of the Company has not determined at this time whether it will seek an election to become a Financial Holding Company. The Company is examining its strategic business plan to determine whether, based on market conditions, the relative financial conditions of the Company and its subsidiaries, regulatory capital requirements, general economic conditions, and other factors, the Company desires to utilize any of its expanded powers provided in the Gramm-Leach-Bliley Act.

The Company and the Bank do not believe that the Gramm-Leach-Bliley Act has nor will have a material adverse effect on their operations in the near-term. However, to the extent that it permits banks, securities firms, and insurance companies to affiliate, the financial services industry may experience further consolidation. The Gramm-Leach-Bliley Act is intended to grant to community banks certain powers as a matter of right that larger institutions have accumulated on an ad hoc basis. Nevertheless, it may have the result of increasing the amount of competition that the Company and the Bank face from larger institutions and other types of companies offering financial products, many of which may have substantially more financial resources than the Company and the Bank.

Bank Dividends

Dividends from the Bank constitute the principal source of income to the Company. The Company is a legal entity separate and distinct from the Bank. The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends to the Company. Under such restrictions, the amount available for payment of dividends to the Company by the Bank totaled $95.2 million at December 31, 2000. The Commissioner, the Federal Reserve Board and the FDIC have the authority to prohibit the Bank from paying dividends, depending upon the Bank's financial condition, if such payment is deemed to constitute an unsafe or unsound practice. Compliance with the capital standards set forth by the FDIC and the Federal Reserve Board or restrictions that are or may be imposed under the prompt corrective action provisions of federal law could limit the amount of dividends which the Bank or the Company may pay. The Commissioner may impose similar limitations on the conduct of Hawaii- chartered banks. See " ITEM 1. BUSINESS—Supervision and Regulation—Capital Standards " and " ITEM 1. BUSINESS—Supervision and Regulation—Prompt Corrective Regulatory Action and Other Enforcement Mechanisms " for further discussion of restrictions on capital distributions.

Restrictions Upon Affiliate Transactions

The Bank is subject to certain restrictions imposed by federal law on any extensions of credit to, or the issuance of a guarantee or letter of credit on behalf of, the Company or other affiliates, the

purchase of, or investments in, stock or other securities thereof, the taking of such securities as collateral for loans, and the purchase of assets of the Company or other affiliates. Such restrictions prevent the Company and such other affiliates from borrowing from the Bank unless the loans are secured by marketable obligations of designated amounts. Further, such secured loans and investments by the Bank to or in the Company or to or in any other affiliate are limited, individually, to 10.0% of the Bank's capital and surplus (as defined by federal regulations), and such secured loans and investments are limited, in the aggregate, to 20.0% of the Bank's capital and surplus (as defined by federal regulations). Hawaii law also imposes certain restrictions with respect to transactions involving the Company and other controlling persons of the Bank. Additional restrictions on transactions with affiliates may be imposed on the Bank under the prompt corrective action provisions of federal law. See " ITEM 1. BUSINESS—Supervision and Regulation—Prompt Corrective Action and Other Enforcement Mechanisms ."

Deposit Insurance

The Bank's deposit accounts are insured by the Bank Insurance Fund ("BIF"), as administered by the FDIC, up to the maximum permitted by law. Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC or the institution's primary regulator. In addition, an insured depository institution is prohibited from paying management fees to any controlling persons or, with certain limited exceptions, making capital distributions if after such transaction the institution would be undercapitalized.

The FDIC charges an annual assessment for the insurance of deposits, which as of December 31, 2000, ranged from 0 to 27 basis points per $100 of insured deposits, based on the risk a particular institution poses to its deposit insurance fund. The risk classification is based on an institution's capital group and supervisory subgroup assignment. Pursuant to the Economic Growth and Paperwork Reduction Act of 1996 (the "Paperwork Reduction Act"), at January 1, 1997, the Bank began paying, in addition to its normal deposit insurance premium as a member of the BIF, an amount equal to approximately 1.3 basis points per $100 of insured deposits toward the retirement of the Financing Corporation bonds ("Fico Bonds") issued in the 1980s to assist in the recovery of the savings and loan industry. Members of the Savings Association Insurance Fund ("SAIF"), by contrast, pay, in addition to their normal deposit insurance premium, approximately 6.4 basis points. Under the Paperwork Reduction Act, the FDIC is not permitted to establish SAIF assessment rates that are lower than comparable BIF assessment rates. Effective January 1, 2000, the rate paid to retire the Fico Bonds was 3 basis points for members of the BIF and the SAIF.

Interstate Banking and Branching

The BHCA permits bank holding companies from any state to acquire banks and bank holding companies located in any other state, subject to certain conditions, including certain nationwide- and state-imposed concentration limits. The Bank has the ability, subject to certain restrictions, to acquire by acquisition or merger, branches outside its home state. The establishment of new interstate branches is also possible in those states with laws that expressly permit it. Interstate branches are subject to certain laws of the states in which they are located. Competition may increase further as banks branch across state lines and enter new markets.

Community Reinvestment Act and Fair Lending Developments

The Bank is subject to certain fair lending requirements and reporting obligations involving home mortgage lending operations and the Community Reinvestment Act (the "CRA") activities. The CRA generally requires the federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low- and moderate-income neighborhoods. A bank may be subject to substantial penalties and corrective measures for a violation of certain fair lending laws. The federal banking agencies may take compliance with such laws and the CRA obligations into account when regulating and supervising other activities.

A bank's compliance with its CRA obligations is based on a performance-based evaluation system which bases the CRA ratings on an institution's lending service and investment performance. When a bank holding company applies for approval to acquire a bank or other bank holding company, the Federal Reserve Board will review the assessment of each subsidiary bank of the applicant bank holding company, and such records may be the basis for denying the application. Based on an examination conducted on July 12, 1999, the Bank was rated Satisfactory in complying with its CRA obligations.

Year 2000 Compliance

The Company successfully operated through year-end 2000 and into year 2001 with no significant problems or disruptions, and the Company will continue to monitor its systems, vendors and customers for potential Year 2000 compliance problems. While the Company has not experienced any adverse impact as a result of Year 2000 compliance problems to date, no assurance can be given that the Year 2000 problem will not have an adverse impact on the Company in the future.

Employees

At February 28, 2001, the Company employed 550 persons, 467 on a full-time basis and 83 on a part-time basis. Management of the Company believes that it has favorable employee relations. The Company is not a party to any collective bargaining agreement.

Selected Statistical Information

The following tables and data set forth, for the respective periods shown, selected statistical information relating to the Company and the Bank. These tables should be read in conjunction with the information contained in " ITEM 6 . SELECTED FINANCIAL DATA ," " ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ," and " ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ."

Loan Portfolio

Total loans increased to $1,291.2 million at December 31, 2000, compared with $1,170.5 million at the end of 1999, and $1,105.9 million at the end of 1998. Increases in loan volumes were recorded in all major loan categories.

The Bank emphasizes residential and commercial mortgage loans, business loans to professionals and middle-market companies and consumer loans. Its marketing strategy for generating new loans includes a business calling program which requires officers at all levels to make client development visits to local businesses each month. In addition, the Bank uses television, radio, print and direct mail marketing.

A significant portion of the Bank's loan portfolio is secured by real estate. Management believes that the Bank's underwriting guidelines, including collateral requirements, provide the Bank with protection against losses on delinquent loans. After ten years of little or no growth in the Hawaii economy, there are signs of improved economic activity. Consistent with these trends, delinquencies and charge-offs during 2000 decreased from the previous year. However, as signs of economic slowdown appear for the U.S. economy, Management is cautious in its growth expectation for the local economy in 2001 and a lack of significant improvement or a slowdown in the state's economy is likely to have a negative impact on the Company's growth and levels of nonperforming loans and related loan losses in the future. See " ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Provision and Allowance for Loan Losses," "Nonperforming Assets " and " Financial Condition ."

At December 31, 2000, the Bank did not have any concentration of loans in any industry classified under the Standard Industrial Code which exceeded 10% of the Bank's total loans.

The following table sets forth information regarding outstanding loans by categories as of the dates indicated.

Table I. Loans by Categories

	December 31,
	2000		1999		1998		1997		1996
	(Dollars in thousands)
Commercial, financial and agricultural	$	233,482	$	186,960	$	189,796	$	146,779	$	141,735
Real estate—construction		72,079		45,388		61,375		45,082		43,520
Real estate—mortgage—residential		383,404		373,415		337,213		331,347		347,608
Real estate—mortgage—commercial		558,586		526,801		482,849		449,417		430,682
Consumer		43,639		37,912		34,679		68,398		78,431

Total loans		1,291,190		1,170,476		1,105,912		1,041,023		1,041,976
Allowance for loan losses		22,612		20,768		20,066		19,164		19,436

Net loans	$	1,268,578	$	1,149,708	$	1,085,846	$	1,021,859	$	1,022,540

Commercial, Financial and Agricultural. Loans in this category consist primarily of loans to small and middle-market businesses and professionals located in Hawaii. The Bank typically looks to the borrower's business as the principal source of repayment, although the Bank's underwriting policy generally requires additional sources of collateral, including real estate. Commercial loan volumes increased in 2000 to $233.5 million at December 31, 2000, from $187.0 million at year-end 1999, which was a slight decrease from the $189.8 million held at year-end 1998.

Real Estate—Construction. Real estate—construction loans increased to $72.1 million at year-end 2000, from $45.4 million at the end of 1999, which was a decrease from the prior year-end balance of $61.4 million in 1998. The majority of the construction loans provided by the Bank in this category were used for residential development projects. Each construction project is evaluated for economic viability, and maximum loan-to-value ratios of 80% on commercial projects and 85% on residential projects are generally required.

Real Estate—Mortgage—Residential. Residential mortgage loans of $383.4 million at year-end 2000 were comprised primarily of adjustable rate one-to-four family first mortgages. In general, the Bank requires a maximum loan-to-value ratio of 80%, although higher levels are permitted with accompanying mortgage insurance. The Bank emphasizes making residential mortgage loans for owner-occupied primary residences and does not actively seek to make loans for vacation condominiums or homes. The Bank has also limited growth of mortgages for high-end residences because of higher volatility in their values. In order to limit such growth and provide for adequate collateral, the Bank requires lower than normal loan-to-value ratios for loans secured by such homes. Mortgage loans held for sale at December 31, 2000 totaled $1.0 million. Home equity lines of credit of $73.5 million at December 31, 2000, with maximum loan-to-value ratios of 75%, were also included in residential mortgage loans.

Real Estate—Mortgage—Commercial. The major components of the Bank's portfolio of commercial mortgage loans at December 31, 2000 included $156.9 million for stores and offices, $254.3 million for warehouses and industrial buildings, and $112.6 million for apartment buildings with 5 or more units.

The following table sets forth certain information with respect to the composition of the Bank's Real Estate—Mortgage loan portfolio as of the dates indicated.

Table II. Mortgage Loan Portfolio Composition

		December 31,
		2000				1999				1998				1997				1996
		Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
		(Dollars in thousands)
Residential:
	1-4 units	$	349,076	37.1	%	$	364,465	40.5	%	$	322,920	39.4	%	$	323,283	41.4	%	$	341,890	43.9	%
	5 or more units		34,328	3.6			8,950	1.0			14,293	1.7			8,064	1.0			5,718	0.7
Commercial, industrial and other			555,586	59.3			526,801	58.5			482,849	58.9			449,417	57.6			430,682	55.4

Total		$	941,990	100.0	%	$	900,216	100.0	%	$	820,062	100.0	%	$	780,764	100.0	%	$	778,290	100.0	%

Consumer Loans. The following table sets forth the primary components of the Bank's Consumer loan portfolio as of the dates indicated.

Table III. Consumer Loan Portfolio Composition

	December 31,
	2000				1999				1998				1997				1996
	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
	(Dollars in thousands)
Automobile	$	22,852	52.4	%	$	19,462	51.3	%	$	20,214	58.3	%	$	25,874	37.8	%	$	35,424	45.2	%
Credit cards and other revolving credit plans		12,010	27.5			7,955	21.0			4,003	11.5			26,058	38.1			23,989	30.6
Other		8,777	20.1			10,495	27.7			10,462	30.2			16,466	24.1			19,018	24.2

Total	$	43,639	100.0	%	$	37,912	100.0	%	$	34,679	100.0	%	$	68,398	100.0	%	$	78,431	100.0	%

Automobile loans, comprised primarily of indirect dealer loans, totaled $22.9 million or 52.4% of the consumer loan portfolio in 2000. This figure includes $22.6 million in indirect automobile loans.

Credit cards and other revolving credit plans increased to $12.0 million at December 31, 2000, from $8.0 million at year-end 1999.

Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table sets forth the maturity distribution of the Bank's loan portfolio at December 31, 2000. The table excludes real estate loans (other than construction loans) and consumer loans.

Table IV. Maturity Distribution of Commercial and Construction Loans

	Maturing
	One year or less		Over one through five years		Over five years		Total
	(Dollars in thousands)
Commercial, financial and agricultural	$	89,256	$	85,058	$	59,168	$	233,482
Real estate—construction		29,579		13,385		29,115		72,079

Total	$	118,835	$	98,443	$	88,283	$	305,561

The following table sets forth the sensitivity of the amounts due after one year to changes in interest rates.

Table V. Maturity Distribution of Fixed and Variable Rate Loans

	Maturing
	Over one through five years		Over five years		Total
	(Dollars in thousands)
With fixed interest rates	$	27,607	$	20,327	$	47,934
With variable interest rates		70,836		67,956		138,084

Total	$	98,443	$	88,283	$	186,018

Allowance for Loan Losses

The allowance for loan losses is maintained at a level considered adequate to provide for potential losses on loans and other extensions of credit, including off-balance sheet credit exposures. The adequacy of the allowance for loan losses is based upon management's evaluation of the quality, character and inherent risks in the loan portfolio, current and projected economic conditions and past loan loss experience.

During 2000, $4.5 million was provided for loan losses compared to $3.7 million in 1999 and $6.6 million in 1998. In 2000, the Bank experienced net charge-offs of $2.7 million, compared with net charge-offs of $3.0 million in 1999 and $5.7 million in 1998. The allowance for loan losses at December 31, 2000 was $22.6 million, compared to $20.8 million at December 31, 1999 and $20.1 million at December 31, 1998. The ratio of the allowance for loan losses to total loans was 1.75%, 1.77% and 1.81% at December 31, 2000, 1999 and 1998, respectively.

Management believes that the allowance for loan losses at December 31, 2000 was adequate to absorb known and inherent risks in the portfolio. However, no assurance can be given that economic conditions which may adversely affect the Bank's service areas or other circumstances, such as material and sustained declines in real estate values, will not result in increased losses in the Bank's loan portfolio. See " ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Provision and Allowance for Loan Losses " and " Nonperforming Assets ."

The following table sets forth certain information with respect to the Bank's allowance for loan losses as of the dates or for the periods indicated.

Table VI. Allowance for Loan Losses

		Year Ended December 31,
		2000			1999			1998			1997			1996
		(Dollars in thousands)
Average amount of loans outstanding		$	1,223,648		$	1,153,623		$	1,071,350		$	1,044,538		$	1,010,255

Allowance for loan losses:
Balance at beginning of year		$	20,768		$	20,066		$	19,164		$	19,436		$	20,156

Charge-offs:
	Commercial, financial and agricultural		375			425			980			1,139			662
	Real estate—construction		—			—			—			—			—
	Real estate—mortgage—residential		913			1,268			1,993			786			786
	Real estate—mortgage—commercial		1,905			1,569			2,102			867			1,250
	Consumer		399			286			1,506			1,250			857

	Total		3,592			3,548			6,581			4,042			3,555
Recoveries:
	Commercial, financial and agricultural		123			65			213			34			108
	Real estate—construction		—			—			—			—			19
	Real estate—mortgage—residential		101			144			52			44			31
	Real estate—mortgage—commercial		518			120			410			—			—
	Consumer		194			221			208			192			177

	Total		936			550			883			270			335

Net loans charged off			2,656			2,998			5,698			3,772			3,220

Provision charged to operations			4,500			3,700			6,600			3,500			2,500

Balance at end of year		$	22,612		$	20,768		$	20,066		$	19,164		$	19,436

Ratios:
Allowance for loan losses to loans outstanding at end of year			1.75	%		1.77	%		1.81	%		1.84	%		1.87	%
Net loans charged off during year to average loans outstanding during year			0.22	%		0.26	%		0.53	%		0.36	%		0.32	%

The Bank's practice is to make specific allocations to specific loans and unspecified allocations to each loan category based on Management's risk assessment.

The following table sets forth the allocation of the allowance for loan losses by loan category as of the dates indicated.

Table VII. Allocation of Allowance for Loan Losses

	December 31,
	2000				1999				1998				1997				1996
	Allowance for loan losses		Percent of loans in each category to total loans		Allowance for loan losses		Percent of loans in each category to total loans		Allowance for loan losses		Percent of loans in each category to total loans		Allowance for loan losses		Percent of loans in each category to total loans		Allowance for loan losses		Percent of loans in each category to total loans
	(Dollars in thousands)
Commercial financial and agricultural	$	4,200	18.19	%	$	2,600	16.0	%	$	3,900	17.2	%	$	2,700	14.1	%	$	2,900	13.6	%
Real estate construction		700	5.6	%		100	3.9	%		100	5.5	%		100	4.3	%		100	4.2	%
Real estate mortgage—residential		2,800	29.7	%		2,700	31.9	%		2,700	30.5	%		2,400	31.9	%		1,700	33.4	%
Real estate mortgage commercial		8,900	43.3	%		7,000	45.0	%		7,100	43.7	%		6,700	43.1	%		9,300	41.3	%
Consumer		300	3.3	%		300	3.2	%		400	3.1	%		900	6.6	%		600	7.5	%
Unallocated		5,712	N/A			8,068	N/A			5,866	N/A			6,364	N/A			4,836	N/A

Total	$	22,612	100.0	%	$	20,768	100.0	%	$	20,066	100.0	%	$	19,164	100.0	%	$	19,436	100.0	%

Investment Portfolio

The following table sets forth the amounts and the distribution of investment securities held as of the dates indicated.

Table VIII. Distribution of Investment Securities

	December 31,
	2000				1999				1998
	Held to maturity (at amortized cost)		Available for sale (at estimated fair value)		Held to maturity (at amortized cost)		Available for sale (at estimated fair value)		Held to maturity (at amortized cost)		Available for sale (at estimated fair value)
	(Dollars in thousands)
U.S. Treasury and other U.S. Government agencies	$	40,227	$	244,472	$	48,733	$	173,415	$	67,304	$	208,641
States and political subdivisions		45,829		29,311		52,834		22,689		53,172		4,103
Other		—		24,780		—		23,999		—		18,216

Total investment securities	$	86,056	$	298,563	$	101,567	$	220,103	$	120,476	$	230,960

The Bank did not hold investments of any nonfederal issuer in amounts exceeding 10% of stockholders' equity at December 31, 2000. Except for loans disclosed in " ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Nonperforming Assets ," the Bank did not have any other nonperforming or potentially problem interest-bearing assets at December 31, 2000.

Maturity Distribution of Investment Portfolio

The following table sets forth the maturity distribution of the investment portfolio at December 31, 2000.

Table IX. Maturity Distribution of Investment Portfolio

Portfolio Type and Maturity Grouping		Book value		Weighted average yield(1)
		(Dollars in thousands)
Held-to-maturity portfolio:
U.S. Treasury and other U.S. Government agencies:
	Within one year	$	852	6.403	%
	After one but within five years		17,206	6.594	%
	After five but within ten years		15,495	6.509	%
	After ten years		6,673	7.101	%

	Total U.S. Treasury and other U.S. Government agencies		40,226	6.642	%

States and political subdivisions:
	Within one year		2,012	6.894	%
	After one but within five years		17,436	6.643	%
	After five but within ten years		19,348	6.374	%
	After ten years		7,034	8.832	%

	Total states and political subdivisions		45,830	6.877	%

	Total held-to-maturity portfolio	$	86,056	6.767	%

Available-for-sale portfolio:
U.S. Treasury and other U.S. Government agencies:
	Within one year	$	3,278	5.695	%
	After one but within five years		52,548	6.827	%
	After five but within ten years		74,846	6.767	%
	After ten years		113,799	7.008	%

	Total U.S. Treasury and other U.S. Government agencies		244,471	6.878	%

States and political subdivisions:
	Within one year		—	—
	After one but within five years		2,276	7.955	%
	After five but within ten years		9,109	7.035	%
	After ten years		17,926	8.285	%

	Total states and political subdivisions		9,311	7.871	%

Other:
	Within one year		—	—
	After one but within five years		—	—
	After five but within ten years		—	—
	After ten years		24,781	6.237	%

	Total other		24,781	6.237	%

Total available-for-sale portfolio		$	298,563	6.922	%

Total investment securities		$	384,619	6.887	%

(1): Weighted average yields are computed on an annual basis, and yields on tax-exempt obligations are computed on a taxable-equivalent basis using an assumed tax rate of 35%.

Deposits

The Bank competes for deposits in Hawaii principally by providing quality customer service at its branch offices. The Bank, over the years, has developed a relatively large and stable base of core deposits which consists of noninterest-bearing demand, interest-bearing demand and savings deposits and time deposits under $100,000. However, during 2000, the Bank experienced a decline in core deposits attributable to changing consumer behaviors and increased competition for deposits from other bank and non-bank financial services companies.

Total deposits at December 31, 2000, 1999 and 1998 were $1,363.1 million, $1,305.7 million and $1,269.1 million, respectively. Deposits increased by 4.4% in 2000 compared with a 2.9% growth rate in 1999. Interest-bearing deposits, excluding time deposits of $100,000 and over, decreased by 1.2% in 2000 compared with a 1.7% increase in 1999. Noninterest-bearing deposits decreased by 2.6% in 2000 compared with a 9.6% increase in 1999. The Bank's ratio of core deposits to total deposits was 69.3% at December 31, 2000, compared to 73.4% at year-end 1999 and 72.9% at year-end 1998. Meanwhile, time deposits of $100,000 and over increased steadily during the past several years to $418.4 million at year-end 2000 from $346.9 million at December 31, 1999, and $344.2 million at year-end 1998. See " ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Financial Condition. "

The following table sets forth information regarding the average deposits and the average rates paid for certain deposit categories for each of the years indicated. Average balances are computed using daily average balances.

Table X. Average Balances and Average Rates on Deposits

	Year Ended December 31,
	2000				1999				1998
	Average balance		Average rate paid		Average balance		Average rate paid		Average balance		Average rate paid
	(Dollars in thousands)
Noninterest-bearing demand deposits	$	186,557	—	%	$	177,841	—	%	$	162,625	—	%
Interest-bearing demand deposits		106,922	1.12	%		104,320	1.10	%		99,059	1.30	%
Savings and money market deposits		390,132	2.37	%		424,466	2.34	%		401,936	2.74	%
Time deposits		632,716	5.18	%		559,650	4.47	%		530,237	4.94	%

TOTAL	$	1,316,327	3.28	%	$	1,266,277	2.85	%	$	1,193,857	3.22	%

The remaining maturities of the certificates of deposit in denominations of $100,000 and over are set forth in the following table.

Table XI. Remaining Maturities of Large Certificates of Deposit

	December 31, 2000
	(Dollars in thousands)
Three months or less	$	181,766
Over three through six months		103,311
Over six through twelve months		118,901
Over twelve months		14,427

Total	$	418,405

ITEM 2. PROPERTIES

All Bank properties, except for the properties in which the Hilo, Kailua-Kona and Moiliili branches and the operations center are situated, are occupied under leases which expire on various dates through 2038, and, in most instances, include options to renew. These leases generally contain renewal options for periods ranging from 5 to 15 years. For the year ended December 31, 2000, net rent expense under these leases aggregated $4.4 million. For additional information relating to lease rental expense and commitments, see Note 17 to the Company's Consolidated Financial Statements in the 2000 Annual Report.

CPB Properties is a general partner and the managing partner with a 50% interest in CKSS. Other partners in CKSS are Kajima Development Corporation, a general partner, Sumitomo Corporation, a limited partner, and Sumitomo Corporation of America, a limited partner. CKSS was formed to develop, construct and lease a 22-story office building complex in the downtown financial district of Honolulu at the corner of King and Alakea Streets (the "Central Pacific Plaza"). The Company's and the Bank's headquarters are located in the Central Pacific Plaza. The Central Pacific Plaza contains approximately 235,000 square feet of rentable space of which approximately 73,000 square feet are occupied by the Company. CKSS carried the Central Pacific Plaza on its books at a net book value of $23.5 million as of December 31, 2000. To finance the building, CKSS entered into a loan agreement with The Sumitomo Bank, Limited ("Sumitomo") which is secured by a mortgage on the Central Pacific Plaza. The loan agreement, as amended, allows CKSS to borrow up to $12.5 million at 0.75% above LIBOR. As of December 31, 2000, the amount payable to Sumitomo under the loan agreement totaled $6.8 million, due on June 18, 2001.

In October 1992, CPB Properties, as lessor, entered into a lease agreement with CKSS for certain real property located in Kaimuki, Hawaii, effective from January 1, 1993 to December 31, 2047. Under the terms of the lease, CKSS would develop a 4-story office building (the "Kaimuki Plaza"). In November 1994, the Bank entered a 25-year lease agreement with CKSS to lease office space in the Kaimuki Plaza for its Kaimuki Branch. The lease is effective from November 1, 1994 through October 31, 2019. At December 31, 2000, CKSS carried the Kaimuki Plaza building complex at a net book value of $12.8 million. On April 30, 1993, CKSS entered into a building loan agreement with the Bank to borrow up to $12.2 million at 0.75% above LIBOR to finance the Kaimuki Plaza. At December 31, 2000, the Bank had advanced $8.3 million, due on August 10, 2001, pursuant to this loan agreement.

At December 31, 2000, an additional $0.1 million was payable to the Bank, at 0.75% above LIBOR, pursuant to a loan agreement secured by second mortgages on the Central Pacific and Kaimuki Plazas, which matures on April 10, 2001. The weighted average interest rate on all loans related to the Company's headquarters and Kaimuki Plaza at December 31, 2000 was 7.018%.

The Bank holds title to the land and building in which the Hilo and Kailua-Kona branch offices and operations center are situated. CPB Properties holds title to a portion of the land and the building in which the Moiliili branch office is situated.

ITEM 3. LEGAL PROCEEDINGS

The Company is a party to ordinary routine litigation incidental to its business, none of which is considered likely to have a materially adverse effect on the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to the Company's shareholders for a vote during the fourth quarter of 2000.

ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth, as of February 28, 2001, the executive officers of the Company, their positions, principal occupation during the past five years and ages. Each officer is appointed by the Board of Directors of the Company and serves at its pleasure.

Name and Position	Principal Occupation During Past Five Years	Age
Joichi Saito Chairman of the Board and Chief Executive Officer	Chairman of the Board and Chief Executive Officer of the Bank (1996-Present)	65
Naoaki Shibuya President	President and Chief Operating Officer of the Bank (1996-Present)	59
Austin Y. Imamura Vice President and Secretary	Executive Vice President and Secretary of the Bank (1991-Present)	54
Neal K. Kanda Vice President and Treasurer	Executive Vice President of the Bank (1996-Present); Executive Vice President and Controller of the Bank (1993-1996)	52

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

For information concerning the market for the Company's common stock and related shareholder matters, see "COMMON STOCK PRICE RANGE AND DIVIDENDS" contained in the 2000 Annual Report, which is incorporated herein by reference, and " ITEM 1. BUSINESS—Supervision and Regulation—Restrictions Upon Affiliate Transactions ."

In 2000, as part of the Company's stock repurchase program, the Company's board of directors authorized the repurchase and retirement of shares of the Company's common stock up to a total consideration of $25 million. During 1998 and 1999, the Company's board of directors approved stock repurchases up to $32 million. During 2000, 840,579 shares were repurchased for a total consideration of $20.9 million. For the past three years ended December 31, 2000, the Company has repurchased 2,207,127 shares for a total consideration of $47.4 million. On March 20, 2001, the Company repurchased 250,000 shares of its common stock from Sumitomo, a principal shareholder, for $6.8 million. This transaction reduced Sumitomo's common stock holdings to 211,750 shares, or approximately 2.57% of shares outstanding as of that date. Further results and discussion of the Company's stock repurchase program are discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" contained in the 2000 Annual Report, which is incorporated herein by reference.

ITEM 6. SELECTED FINANCIAL DATA

For selected financial data concerning the Company, see "SELECTED CONSOLIDATED FINANCIAL DATA" contained in the 2000 Annual Report, which is incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For Management's discussion and analysis of financial condition and results of operations, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" contained in the 2000 Annual Report, which is incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK

For quantitative and qualitative disclosures regarding market risk, see "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK," in the 2000 Annual Report, which is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

For financial statements of the Company, see "SUPPLEMENTARY FINANCIAL INFORMATION," and "CONSOLIDATED FINANCIAL STATEMENTS AND NOTES," including the INDEPENDENT AUDITOR'S REPORT" thereon, in the 2000 Annual Report, which is incorporated herein by reference. See " ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K " below for financial statements filed as a part of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Except as hereinafter noted, the information concerning directors and executive officers of the Company is incorporated by reference from the section entitled " ELECTION OF DIRECTORS " of the Company's Proxy Statement, which is filed as Exhibit No. 99 to this Annual Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

Information concerning executive compensation is incorporated by reference from the section entitled " ELECTION OF DIRECTORS—Compensation of Directors and Executive Officers " of the Company's Proxy Statement, which is filed as Exhibit No. 99 to this Annual Report on Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information concerning security ownership of certain beneficial owners and management is incorporated by reference from the sections entitled " INTRODUCTION—Principal Shareholders ," and " ELECTION OF DIRECTORS " of the Company's Proxy Statement, which is filed as Exhibit No. 99 to this Annual Report on Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information concerning certain relationships and related transactions is incorporated by reference from the section entitled " ELECTION OF DIRECTORS—Certain Transactions " of the Company's Proxy Statement, which is filed as Exhibit No. 99 to this Annual Report on Form 10-K.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a): 1. Financial Statements

The following financial statements included in the Company's 2000 Annual Report are incorporated herein by reference. Page number references are to page numbers in the 2000 Annual Report.

		Page
CPB Inc. and Subsidiary:
Independent Auditors' Report		47
Consolidated Balance Sheets at December 31, 2000 and 1999		22
Consolidated Statements of Income for the Years ended December 31, 2000, 1999 and 1998		23
Consolidated Statements of Changes in Stockholders' Equity and Comprehensive Income for the Years ended December 31, 2000, 1999 and 1998		24
Consolidated Statements of Cash Flows for the Years ended December 31, 2000, 1999 and 1998		25
Notes to Consolidated Financial Statements		26

(a): 2. All schedules required by this Item 14(a) 2. are omitted because they are not applicable, not material or because the information is included in the consolidated financial statements or the notes thereto.

(a): 3. Exhibits

Exhibit No.		Document
3.1		Restated Articles of Incorporation of CPB Inc., as amended(1)
3.2		Amended Bylaws of CPB Inc.(2)
10.1		Limited Partnership Agreement of CKSS Associates Limited Partnership dated July 10, 1981 and among CPB Properties, Inc., Kajima Hawaii Corporation, Sumitomo Corporation and Sumitomo Corporation of America(3)
10.2		CPB Inc. 1986 Stock Option Plan, as amended(4)(9)
10.3		Lease dated February 1, 1983 by and between CKSS Associates and Central Pacific Bank, as amended by First Amendment of Lease between CKSS Associates and Central Pacific Bank dated March 3, 1984, as amended by Second Amendment of Lease between CKSS Associates and Central Pacific Bank dated April 3, 1987, as amended by Third Amendment of Lease between CKSS Associates and Central Pacific Bank dated September 24, 1992(2)
10.4		Share Purchase Agreement dated as of November 20, 1986 by and among the Sumitomo Bank, Limited and CPB Inc.(2)
10.5		Split Dollar Life Insurance Plan(5)(9)
10.6		Common Stock Purchase Warrant issued December 16, 1996 to The Sumitomo Bank, Limited(6)
10.7		Form of Common Stock Purchase Warrant issued July 30, 1997 to the Sumitomo Bank, Limited(1)
10.8		Central Pacific Bank and Subsidiaries 2000 Annual Executive Incentive Plan(9)
10.9		Central Pacific Bank Supplemental Executive Retirement Plan(6)(9)
10.10		CPB Inc. 1997 Stock Option Plan(6)(9)
10.11		License and Service Agreement dated July 30, 1997 by and between Central Pacific Bank and Fiserv Solutions, Inc.(7)
10.12		CPB Inc. Directors Deferred Compensation Plan(9)
13		Annual Report to Shareholders for the year ended December 31, 2000 (parts not incorporated by reference are furnished for informational purposes and are not filed herewith)
21		Subsidiaries of CPB Inc.(1)
23		Consent of KPMG LLP
99		Proxy Statement for Annual Meeting of Shareholders to be held on April 24, 2001(8)

(1): Filed as Exhibit 3.1, 10.7 and 21 to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, filed with the Securities and Exchange Commission on March 30, 1998.
(2): Filed as Exhibits 3.2, 10.10 and 10.11 to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, filed with the Securities and Exchange Commission on March 17, 1994.

(3): Filed as Exhibit 10.7 to registrant's Registration Statement on Form S-14 (Registration No. 2-76608), filed with the Securities and Exchange Commission on March 23, 1982, which is incorporated herein by this reference.
(4): Filed as Exhibit 28.1 to registrant's Registration Statement on Form S-8 Registration No. 33-11462), filed with the Securities and Exchange Commission on January 22, 1987, which is incorporated herein by this reference.
(5): Filed as Exhibit 10.16 to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, filed with the Securities and Exchange Commission on March 27, 1992.
(6): Filed as Exhibit 10.6, 10.8 and 10.9 to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, filed with the Securities and Exchange Commission on March 28, 1997.
(7): Filed as Exhibit 10.11 to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, filed with the Securities and Exchange Commission on March 30, 1999.
(8): Filed with the Securities and Exchange Commission on March 19, 2001 and incorporated herein by reference.
(9): Denotes management contract or compensation plan or arrangement.
(b): The Company filed no reports on Form 8-K during the fourth quarter of 2000.
(c): The exhibits listed in Item 14(a)3. are incorporated herein by reference or attached hereto.
(d): All schedules required by this Item 14(d) are omitted because they are not applicable, not material or because the information is included in the consolidated financial statements or the notes thereto.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Dated: March 28, 2001		CPB INC. (REGISTRANT)
		/s/ JOICHI SAITO Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Signature	Title	Date

/s/ JOICHI SAITO Joichi Saito	Chairman of the Board and Chief Executive Officer (Principal Executive Officer), Director	March 28, 2001
/s/ NEAL K. KANDA Neal K. Kanda	Vice President, Treasurer (Principal Financial Officer Principal Accounting Officer),	March 28, 2001
/s/ PAUL DEVENS Paul Devens	Director	March 28, 2001
/s/ ALICE F. GUILD Alice F. Guild	Director	March 28, 2001
/s/ DENNIS I. HIROTA Dennis I. Hirota, Ph.D.	Director	March 28, 2001
/s/ CLAYTON K. HONBO Clayton K. Honbo	Director	March 28, 2001
/s/ STANLEY W. HONG Stanley W. Hong	Director	March 28, 2001

/s/ DANIEL M. NAGAMINE Daniel M. Nagamine	Director	March 28, 2001
Shunichi Okuyama	Director
/s/ NAOAKI SHIBUYA Naoaki Shibuya	President, Director	March 28, 2001

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PART I
Table I. Loans by Categories
Table II. Mortgage Loan Portfolio Composition
Table III. Consumer Loan Portfolio Composition
Table IV. Maturity Distribution of Commercial and Construction Loans
Table V. Maturity Distribution of Fixed and Variable Rate Loans
Table VI. Allowance for Loan Losses
Table VII. Allocation of Allowance for Loan Losses
Table VIII. Distribution of Investment Securities
Table IX. Maturity Distribution of Investment Portfolio
Table X. Average Balances and Average Rates on Deposits
Table XI. Remaining Maturities of Large Certificates of Deposit
PART II
PART III
PART IV
SIGNATURES

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Exhibit 10.8

Feb 2000

Central Pacific Bank and Subsidiary
2000 Annual Executive Incentive Plan

Purpose:

The purpose of this plan is to reinforce the mission and corporate goals of CPB Inc. and Central Pacific Bank (CPB). The plan is designed to help CPB attract, retain and motivate a talented executive team. This team's performance, both as a team and as individuals, contributes directly to serving CPB's customers and communities, sustaining CPB's strong financial performance, and adding value for the shareholders.

Definitions:

The following terms will have the indicated meanings throughout this document. Whenever appropriate, words used in the singular may include the plural and vice-versa.

"Plan" will be used throughout as a description of this particular incentive plan.

"Company" will be used throughout as Central Pacific Bank and its subsidiaries.

"Compensation Committee" will be used throughout as the Compensation Committee of the Board of Directors of the Company.

"CEO" will be used throughout as Chairman of the Board and Chief Executive Officer of CPB Inc.

"Participant" will be used throughout as the individual in a given position who is eligible to participate in this Plan.

"Base salary" will be used throughout as the base salary, excluding any other bonus, commission payments, or other extra cash compensation on an annualized basis, paid to the Participant on the last day of the calendar year. For example, a Participant who is paid a monthly salary of $10,000 as of the last day of the Plan year will have an annualized base salary of $120,000 for purposes of calculating any annual incentive payment.

Administration:

The Plan will be administered by the Compensation Committee, as ratified by the Board of Directors, who may delegate certain aspects of recordkeeping and administration to specified individuals, at their sole discretion. The Compensation Committee, or its specific delegates, is given full authority to develop such rules, regulations, record keeping procedures, and communications deemed necessary to administer the Plan and interpret its provisions. Any determination, decision, or action of the Compensation Committee (as ratified by the Board of Directors) in connection with this plan will be considered final and binding upon all Participants and any person validly claiming access to a potential award.

Payment of any award amounts will be made after audited financial statements are made available, but no later than April 1st of the year following the Plan year.

Participation:

Any full-time active employee of the Company who has been granted the corporate title of Senior Vice President or above (e.g., Executive Vice President, President) is eligible to participate in the plan. The CEO will present annually names, with position responsibility, to the Compensation Committee for approval and inclusion in the Plan. The Board will approve this Participant list no later than January 30 of the Plan year. Participants will be notified in writing no later than February 1 of the Plan year. This

communication will notify Participants of their participation and the target percentages of their incentive.

To be eligible, the employee must have been placed on full-time active status with the corporate title of Senior Vice President or above, no later than October 1 of the Plan year. Participants becoming eligible after January 1 of the Plan year will be eligible for consideration of payment, pro-rated by the first day of the month on which they met the eligibility requirements. For example, a Participant meeting eligibility requirements on April 1 of the Plan year will be eligible, once approved by the Compensation Committee, for consideration for ⁹ / 12 or ³ / 4 of the potential award. Any exception to these minimum eligibility requirements must be recommended by the CEO and approved by the Compensation Committee.

A participant must have received at least an "Accomplished" performance appraisal rating during the calendar year to be eligible for consideration for payment. Any exceptions from this provision must be recommended by the CEO and approved by the Compensation Committee, at their sole discretion.

All participants in this Plan will become ineligible for participation in any other CPB incentive bonus programs.

Funding:

The plan will be funded according to the success of CPB as measured by the following (a) Return on Equity (ROE), (b) Return on Assets (ROA) and (c) Efficiency Ratio. All three criteria are standard banking industry performance measurements.

Each measure will fund the total incentive pool as follows: (a) ROE will fund 50%, (b) ROA will fund 25% and (c) Efficiency Ratio will fund 25%. For each measure, performance below a defined measure will produce no incentive pool; e.g., for 2000 these values are 12.50% for ROE, 1.11% for ROA and 59% for Efficiency Ratio. Each measure will also have a maximum payout percentage; e.g., 150% of the target pool for ROE of 14.50%, 150% of the target pool for ROA of 1.20% and 150% of the target pool for Efficiency Ratio of 55%. The actual amount of the pool funded will be interpolated, using the determined scale values, between the minimum funded value of 25% of the pool and maximum of 150%.

The target amounts funded are calculated as the sum of each Participant's target incentive, expressed as a percentage of base salary, multiplied by that individual's base salary.

Total payout to all participants will be limited to twenty (20) percent of the increase in net operating income over the Plan year budget.

The funding of the pool is described graphically in the attached diagram.

Allocation of Awards:

The calculation of any actual awards will be based on each Participant's base salary, annualized, as of the last day of the calendar year (e.g., for this Plan, December 31 of Plan year).

The awards, expressed as a percentage of base salary, are shown, by corporate title, in the following table; e.g., a target incentive of 25% for Senior Vice President. These target awards will be adjusted by the percentage of the target pool that is funded through corporate performance. For example, if 75% of the pool were funded, the target award for Senior Vice Presidents would be 18.75%.

Actual Awards:

Actual awards will be calculated according to the mix of three performance elements shown in the following table: 1) corporate (ROE, ROA and Efficiency Ratio); 2) unit/production objectives; and 3) a discretionary amount.

The unit/production objectives will be agreed upon between each Participant and the immediate supervising Officer by January 30 of the Plan year. These objectives will emphasize those aspects of CPB's performance for which the Participant is held accountable. These objectives will be submitted to the CEO for review and thereafter reported to the Board of Directors for its approval and subsequent filing of the report.

Central Pacific Bank
Determining Payouts

Groups
Measures	CEO		COO		EVP/Group Manager		SVPs
Corporate	100	%	100	%	50	%	50	%
Unit/Production Objectives	0	%	0	%	25	%	30	%
Discretionary	0	%	0	%	25	%	20	%
Total	100	%	100	%	100	%	100	%
Targets as a % of Base Salary	30	%	30	%	30	%	25	%

The discretionary percentages will be recommended by the CEO to the Compensation Committee for approval. These percentages and amounts may be used to reward individual or team accomplishments not specifically measured by either corporate financial performance or specific individual objectives.

Termination of Employment:

The Participant must remain actively employed by the Company on the last day of the designated calendar year to be considered eligible for any potential payment under this Plan. The Compensation Committee, at their sole discretion must approve any exceptions to this provision.

Non-Transferability of Award:

An award, or potential award, granted under this Plan shall not be assignable or transferable by the Participant other than by will or the laws of descent and distribution.

No Right to Employment:

This Plan does not constitute a contract between the Company and its employees. Neither establishing this Plan or taking any action as a result of the Plan shall be construed as giving any employee the right to be retained by the Company for any period of time, or to be employed in any particular position, at any particular rate of pay, or to provide any other job-related benefits.

Amendment or Termination of Plan:

The Compensation Committee, with ratification from the Board of Directors, may from time to time or at any time amend or terminate the Plan at their sole discretion. Review and amendment of the Plan is expected annually when a new Plan document will be considered for establishment. Amendment or termination of the Plan is not expected within a Plan year, but that right is retained by the Compensation Committee.

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Central Pacific Bank and Subsidiary 2000 Annual Executive Incentive Plan
Central Pacific Bank Determining Payouts

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EXHIBIT 10.12

CPB INC.
DIRECTORS DEFERRED COMPENSATION PLAN

(Effective as of January 1, 2001)

CPB INC.
DIRECTORS DEFERRED COMPENSATION PLAN

Article 1. Purpose . This CPB Inc. Directors Deferred Compensation Plan ("Plan") is intended to advance the interests of CPB Inc. ("Company") by providing deferred compensation benefits to the non-employee members of the Board of Directors of the Company and Central Pacific Bank ("Bank") ("Directors") and thereby strengthen the ability of the Company and Bank to attract and retain valued Directors upon whose judgment, initiative, and efforts the successful conduct and development of the Company and Bank depend.

Article 2. Effective Date . This Plan shall become effective as of January 1, 2001 ("Effective Date"), upon adoption by the Board of Directors of the Company, and shall operate on the basis of the calendar year ("Plan Year").

Article 3. Eligibility . Any Director entitled to compensation by the Company or the Bank for service as a Director ("Eligible Director"), other than a Director who is also a salaried officer or employee of the Company or any of its subsidiaries, may elect to become a participant ("Participant") under the Plan by written notice to the Company.

Article 4. Election of Deferral . Each Participant may elect to defer the receipt of either all or a portion of his or her annual retainer fees or meeting fees which are earned for the Plan Year commencing after the date of the election ("Deferral Election"). The Deferral Election shall be in substantially the form attached hereto as "Exhibit A." The Deferral Election for a Plan Year shall be effective as of the first day of the Plan Year and shall be irrevocable as to the designated fees earned for the Plan Year and, further, such Deferral Election must be dated and filed with the Company prior to the first day of the Plan Year. In the case of an individual who becomes a Director after the Effective Date, such Director may make a Deferral Election within 30 days after becoming a Director, but such Deferral Election shall be effective only with respect to the Director's fees earned after the date the Deferral Election is executed and delivered to the Company. In the case of the first Plan Year beginning on the Effective Date, a Director may make a Deferral Election within 30 days after the adoption and execution of the Plan (or, if later, within 30 days after the Effective Date), but such Deferral Election shall be effective only with respect to the Director's fees earned after the date the Deferral Election is executed and delivered to the Company.

A Deferral Election for a Participant shall remain effective for each subsequent Plan Year unless the Participant terminates or modifies the Deferral Election. By written notice in the form of a revised Deferral Election delivered to the Company on or before any December 31, any Participant may elect to terminate or modify his or her Deferral Election with respect to fees earned for the next succeeding Plan Year commencing after the December 31. In such event, the amount accumulated pursuant to the Plan prior to the effective date of his or her termination election shall continue to be subject to the provisions of the Plan. A Participant who elects to terminate his or her participation shall be permitted to make a new Deferral Election effective no earlier than the beginning of the Plan Year following the Plan Year for which his or her Deferral Election is terminated.

Article 5. Deferred Compensation Account . A separate account shall be established and maintained on behalf of each Participant under the Plan ("Account"), which Account shall reflect the balance of the Deferral Election amounts credited to the Participant as provided in Article 4 above. The deferred fees of each Participant shall be credited to the Participant's Account as of the date on which such fees would be otherwise payable to the Participant. Pursuant to its responsibilities as described in Article 15, the Compensation Committee ("Committee") of the Company's Board of Directors shall maintain, or cause to be maintained, records, forms, and methods of accounting which appropriately reflect the balance of the Participant's Account.

For purposes of determining the value of the Participant's Account, the amount allocated to the Participant's Account shall be treated as if the investment of such amount were subject to the direction of the Participant, except that the Participant's investment options shall be limited to the investment funds offered by the Bank's Trust Division. Each Account shall be appropriately increased or decreased, as the case may be, to reflect the appreciation or depreciation in the value and the net income or loss attributable to the deemed investment, and the distributions and expenses that may be charged to the Account. The Participant agrees on behalf of himself or herself and any designated beneficiary to assume all risks and responsibilities for the value of his or her Account, and the Company shall not be liable for any deemed investment losses that may be incurred under the Account. The deemed investment described in this Article 5 shall be subject to the requirements of Articles 11 and 12 herein and shall be the basis upon which the Participant's Account shall be valued hereunder. The Participant shall have no direct ownership interest whatsoever in any assets representing such deemed investment, notwithstanding that the Company may set aside general funds of the Company in the form of the investment pursuant to Articles 11 and 12 herein. Pursuant to Articles 11 and 12, the Participant's Account is a general unfunded promise to pay, and the deemed investment provided herein serves exclusively as the means to measure the amount of the Participant's benefit.

Article 6. Vesting. Except as provided in Article 12, a Participant shall have a 100% vested and nonforfeitable interest in the balance of his or her Account.

Article 7. Distribution Due to Termination . In the event that a Participant terminates as a Director of the Company, the amount credited to the Account of the Participant shall be paid in cash to the Participant in the manner elected by the Participant. However, the Participant is limited to the following distribution options: (a) a single lump sum within ten years following such termination, or (b) annual installments over a period of years not exceeding ten years following such termination. To the extent consistent with these distribution options, the Participant may elect the distribution commencement date and the timing of distributions. Annual installment payments shall be determined by multiplying the Participant's Account by a fraction, the numerator of which is one and the denominator of which is the number of years remaining in the term. Each Participant shall file with the Company at the time of (and as part of) his or her Deferral Election an election regarding the method of distribution of his or her Account in the event of his or her termination from service as a Director of the Company. A Participant may modify his or her election as to the timing and form of distribution of the Account, except that no modification of distribution election shall be valid (and such distribution election shall be disregarded) to the extent that such modification applies to a distribution made on or before the last day of the Plan Year following the Plan Year in which modification is made. That is, a modification to a distribution election may apply only to a distribution occurring after the Plan Year following the Plan Year in which the modification is made.

Article 8. Distribution Due to Death. In the event of the death of an active Participant, or terminated Participant prior to expiration of the period during which his or her Account is payable, the balance of the Participant's Account shall be paid in cash in a single lump sum to his or her designated beneficiary. The Account shall be paid in full as soon as practicable following the Participant's death. The Participant's designated beneficiary shall be designated or changed by the Participant (without the consent of any prior beneficiary) through written notice in substantially the form attached hereto as "Exhibit B" delivered to the Company. If no such beneficiary is designated, or if no designated beneficiary survives the Participant, the amount payable due to the Participant's death shall be payable to the Participant's estate.

Article 9. Withdrawal for Unforeseeable Emergency . Upon application by a Participant and prior to the time that the Participant's Account is otherwise subject to distribution, the Committee may permit the Participant to withdraw all or a portion of the Participant's Account (but only that portion of the Account comprising the Deferral Election amounts, and not earnings credited on such amounts) due to an "Unforeseeable Emergency". For this purpose, an "Unforeseeable Emergency" shall mean a severe

financial hardship to the Participant resulting from a sudden and unexpected illness or accident of a Participant or of a dependent (within the meaning of Section 152(a) of the Internal Revenue Code of 1986, as amended ("Code")) of the Participant, loss of the Participant's property due to casualty or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant (but specifically not including the education of a dependent or the purchase of a residence). An Unforeseeable Emergency shall not exist if the hardship may be relieved as follows: (a) through reimbursement or compensation by insurance or otherwise; (b) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; or (c) by cessation of the Deferral Election under this Agreement. In the event that the Participant obtains a withdrawal of his or her Account due to an Unforeseeable Emergency, the Participant's then current Deferral Election shall terminate, and the Participant shall not be allowed to commence a subsequent Deferral Election earlier than 12 months following such withdrawal. In no event shall a withdrawal due to an Unforeseeable Emergency exceed the amount required to meet the given emergency plus any amounts necessary to pay any federal, state, or local taxes reasonably anticipated to result from the withdrawal. The allowance and manner of a withdrawal under this Article 9 shall be subject to the determination and approval of the Committee and shall require the Participant's written request on such forms as the Committee may prescribe.

Article 10. Incapacity . If the Committee finds that any person to whom payment is payable under this Plan is unable to care for his or her affairs because of illness or accident, or is a minor, any payment due (unless a prior claim for such payment has been made by a duly appointed guardian, committee, or other legal representative) may be paid to the spouse, a child, a parent, or a brother or sister, or to any person deemed by the Committee to have incurred expense for such person otherwise entitled to payment.

Article 11. Funding . The amounts payable under this Plan shall be paid from the general funds of the Company, as the Committee may determine, and a Participant shall have no right, title, or interest whatsoever in or to investments, if any, which the Company may make to aid it in meeting its obligations under this Plan. Title to and beneficial ownership of any such investments shall at all times remain in the Company. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and the Participant and any other person. To the extent that any person acquires a right to receive a payment from the Company under this Plan, such right shall be no greater than the right of any unsecured creditor.

The Company may, for administrative reasons, establish a "rabbi trust" in order to set aside general funds of the Company for purposes of satisfying Plan obligations. If such a trust arrangement is established, the arrangement shall be consistent with the preceding portion of this Article 11, and the arrangement shall be subject to the following conditions: (a) the establishment and maintenance of the trust shall not cause the Plan to be other than an "unfunded" plan for purposes of the Code, and Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (b) the Company shall be treated as the "grantor" of the trust for purposes of Code Section 677; and (c) the trust shall provide that its assets may be used to satisfy claims of the Company's general creditors in the event of insolvency and that the rights of such general creditors in such circumstances are enforceable under federal and state law.

Article 12. Legal Status . This Plan is intended to constitute a nonqualified deferred compensation plan not subject to the qualification requirements of Code Section 401(a) or ERISA. Specifically, prior to the actual payment of the amounts credited to an Account, there is no transfer of any assets to a Participant or for the benefit of the Participant under this Plan, and the Plan is intended to confer no current benefit that would be immediately taxable to the Participant under the constructive receipt rule or economic benefit doctrine under the tax laws. Further, this Plan is intended to benefit non-employee

Directors exclusively, and not employees of the Company, and is thereby not subject to the requirements of ERISA.

Article 13. Continued Service . Nothing contained in this Plan shall be construed as conferring upon a Participant the right to continue in the service of the Company as a Director or in any other capacity. Further, nothing contained in this Plan shall be deemed to create an obligation on the part of the Board to nominate any Director for reelection by the Company stockholders.

Article 14. Nonassignment . The interests of a Participant hereunder may not be sold, transferred, signed, pledged, or hypothecated. No Participant may borrow against his or her Account.

Article 15. Administration . The Plan shall be administered by the Compensation Committee of the Board of Directors. The Committee shall hold meetings at such times and places as they may determine, shall keep minutes of their meetings, and shall adopt, amend, and revoke such rules and procedures as they may deem proper with respect to the Plan. Any action of the Committee shall be taken in accordance with the rules of governance applicable to the Committee. As may be determined by the Committee, the Committee may carry out its administrative authority and responsibilities under the Plan by designating and authorizing any officer or staff member of the Company or the Bank to act on its behalf.

Subject to the other provisions of this Plan, and with a view to effecting its purpose, the Committee shall have, in its sole and absolute discretion, the authority: (a) to construe and interpret the Plan; (b) to define the terms used herein; (c) to determine the value of an Account and the amount and recipient of any payment; and (d) to make all other determinations and do all other things necessary or advisable for the administration of the Plan. All decisions, determinations, and interpretations made by the Committee shall be binding and conclusive on all Participants in the Plan and on their legal representatives, heirs, and beneficiaries.

Notwithstanding any other provision of the Plan (and without limiting the Committee's authority), in connection with any action concerning stock transactions by Directors who are subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended ("Exchange Act") ("Insiders"), the Committee may adopt such procedures as it deems necessary or desirable to assure the availability of exemptions from Section 16 of the Exchange Act afforded by Rule 16b-3 thereunder or any successor rule. Without limiting the foregoing, in connection with approval of any transaction by an Insider involving an acquisition from the Company, or involving the disposition to the Company, of an interest in common stock of the Company, the Committee may delegate its approval authority to a subcommittee thereof comprised of two or more "Non-Employee Directors" (as defined in Rule 16b-3), or take action by the affirmative vote of two or more Non-Employee Directors (with all other members of the Committee abstaining or recusing themselves from participating in the matter), or refer the matter to the full Board of Directors for action.

Article 16. Amendment and Termination . The Plan may, at any time or from time to time, be amended, modified, or terminated at the sole and complete discretion of the Board of Directors. However, no amendment, modification, or termination of the Plan shall adversely affect such Participant's rights with respect to amounts then accrued in his or her Account.

Article 17. Rule 16b-3 Requirements . With respect to Insiders, stock transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act (except to the extent that noncompliance of a particular transaction would not result in liability under Section 16 of the Exchange Act or the rules adopted thereunder). To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee.

Article 18. Tax Withholding . The payment of any amount under this Plan shall be conditioned upon the satisfaction of tax withholding, or other withholding liabilities under state or federal law.

Section 19. Indemnification. Each person who is or shall have been a member of the Committee, or of the Company's Board of Directors, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's articles of incorporation or bylaws, as a matter of law, or otherwise, or any power that the Company have to indemnify them or hold them harmless.

Section 20. Successors. All obligations of the Company under the Plan with respect to any Account hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

Article 21. Enforceability and Controlling Law. If any provision of this Plan is held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions shall continue in full force and effect. The provisions of this Plan shall be construed, administered, and enforced according to the laws of the State of Hawaii.

Article 22. Gender. Wherever any words are used under the Plan in the masculine, feminine, or neuter gender, they shall be construed as though they were also used in another gender in all cases where they would so apply.

IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officers on this 18th day of December, 2000.

		CPB INC.
		By	/s/ JOICHI SAITO Its Chairman and CEO
		By	/s/ NAOAKI SHIBUYA Its President

EXHIBIT A

CPB INC.
DIRECTORS DEFERRED COMPENSATION PLAN—
ELECTION FOR DEFERRAL OF DIRECTORS FEES

Participant Name
Address
Social Security				Birth Date
Plan Year

You are a non-employee director of CPB Inc. or Central Pacific Bank who is eligible to participate in the Plan and, as such, you may designate a percentage amount of your aggregate retainer and meeting fees for the above Plan year that you wish to have credited to your Account on a pre-tax basis. If you do not elect to participate in the Plan for the above Plan year, you may again elect to participate as of the first day of the next Plan year. For the initial Plan year beginning January 1, 2001, a deferral election must be filed no later than December 31, 2000, and any deferral election shall apply only to fees earned after the date the Company receives the deferral election.

A. Deferral Election.
Check the applicable item:
	1.	I wish to participate in the Plan by deferring all or a portion of my directors fees to the Plan as specified below for the above Plan year.
	2.	I do not wish to contribute any part of my directors fees to the Plan for the above Plan year.
	3.	I am now a participant in the Plan and wish to terminate my elective deferral effective as of the Plan year beginning . I understand that this termination of my election can be only effective as of the beginning of a Plan year and must be executed and delivered to the Company prior to the beginning of the Plan year.
	4.	I am now a participant in the Plan and wish to change my contribution amount to that specified below effective as of the Plan year beginning . I understand that this modification of my election can be only effective as of the beginning of a Plan year and must be executed and delivered to the Company prior to the beginning of the Plan year.
If you checked 1 or 4 , complete the following as applicable:
	1.	I elect % of my directors fees (that is, a ratable amount of my retainer and meeting fees) to be credited to my Account effective for the above Plan year (including succeeding years unless terminated or changed by new election).
	2.	I elect the balance of my Account to be paid to me in the following manner after my termination as a Director:
			A single lump sum payment as soon as administratively practicable following my termination.

						A single lump sum payment as soon as administratively practicable following the anniversary date following my termination (indicate an anniversary no later than the tenth anniversary).
						Annual installment payments commencing as soon as administratively practicable following my termination, which installment payments will be paid over a period of years (indicate number so that the installment payments do not extend beyond the tenth anniversary date of termination).
						Annual installment payments commencing as soon as practicable following the anniversary date following my termination (indicate an anniversary no later that the ninth anniversary) over a period of years (indicate number so that installment payments are completed by the tenth anniversary date of termination).
						other

B. Investment Election.

I understand that my Account constitutes an unfunded obligation which is payable from the general assets of the Company. However, the balance of my Account shall be determined as if the amounts credited to the Account were invested in the investment funds available through the Bank's Trust Division in accordance with my investment directions. I understand that the my investment directions shall be made in writing to the Bank's Trust Division on the appropriate forms distributed for purposes of the Plan.

SIGNATURE

I have been explained the contents of this form and the Directors Deferred Compensation Plan (a copy of which I have received). I hereby authorize the deferral amounts specified above to be deducted from my directors fees and credited to my account pursuant to the terms of the Plan.

EXHIBIT B

CPB INC.
DIRECTORS DEFERRED COMPENSATION PLAN—
BENEFICIARY DESIGNATION FORM

Participant Name
Address
Social Security				Birth Date
Plan Year

As a participant in the above-named plan, I hereby acknowledge that, in accordance with the right granted to me under the plan to designate and redesignate the beneficiary or beneficiaries to receive my plan benefit in the event of my death, I hereby designate the following beneficiaries to receive such benefit in the order of priority as indicated:

	Primary Beneficiary:
		Full name:
		Street address:
		City/State/Zipcode:
		Social Security Number:
		Relationship to me:
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	This beneficiary designation form revokes any prior beneficiary designation made by me.

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EXHIBIT 10.12
CPB INC. DIRECTORS DEFERRED COMPENSATION PLAN
EXHIBIT A CPB INC. DIRECTORS DEFERRED COMPENSATION PLAN— ELECTION FOR DEFERRAL OF DIRECTORS FEES
EXHIBIT B CPB INC. DIRECTORS DEFERRED COMPENSATION PLAN— BENEFICIARY DESIGNATION FORM

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EXHIBIT 13

CPB Inc.
2000 Annual Report

CONNECTING WITH YOU

TABLE OF CONTENTS

Financial Highlights		1
Message to Shareholders		2
Board of Directors, Officers, Legal Counsel, Auditors & Advisors		9
Selected Consolidated Financial Data		10
Management's Discussion & Analysis of Financial Condition & Results of Operations		11
Supplementary Financial Information		23
Market Risk		24
Consolidated Financial Statements & Notes		25
	Consolidated Balance Sheets	25
	Consolidated Statements of Income	26
	Consolidated Statements of Changes in Stockholders' Equity & Comprehensive Income	27
	Consolidated Statements of Cash Flows	28
	Notes to Consolidated Financial Statements	29
	Independent Auditors' Report	58
Common Stock Price Range & Dividends		59
Corporate Organization		59

FINANCIAL HIGHLIGHTS

CPB INC. AND SUBSIDIARY

(In thousands, except per share data)		2000		1999		Change
At Year End
Assets		$	1,816,918	$	1,646,491	10.4	%
Deposits			1,363,066		1,305,654	4.4
Net Loans			1,268,578		1,149,708	10.3
Stockholders' Equity			143,312		144,079	(0.5	)
Number of Shares Outstanding			8,464		9,288	(8.9	)
Book Value Per Share		$	16.93	$	15.51	9.2

For the Year
Net Income		$	19,434	$	16,326	19.0	%
	Per Share—Basic		2.18		1.70	28.2
	Per Share—Diluted		2.14		1.68	27.4
Cash Dividends Declared			5,370		5,241	2.5
	Per Share		0.61		0.55	10.9

MESSAGE TO SHAREHOLDERS

Aloha, Fellow Stakeholders

We are pleased to report that CPB Inc. and its subsidiary, Central Pacific Bank, recorded its second consecutive year of record earnings in 2000. This achievement is particularly satisfying since we have been working very hard over the past several years to reorganize and refocus our Bank to better help our customers. We have taken to heart the challenge of providing our customers with the kinds of financial information and services they need today to make their business and personal financial goals more attainable. In essence, we are contributing to the further development of our community at large. By so doing, we will continue to grow as Hawaii's premier, full-service financial provider.

To fulfill this mission, we had to change. Since launching our strategic plan in 1999, we have reported to you the step-by-step innovations we have made to transform and refocus our Bank. Among these changes, we streamlined our operations and redefined positions to focus on service and sales. We centralized operations, consolidated overlapping functions and outsourced time-consuming support functions. Resources were reallocated to our frontline, customer contact points. Combined with the creation of dedicated personal banking, business and corporate relationship officers, we are now able to further enhance our customer relations through greater personalized service. Two of CPB's customer-friendly innovations—the Customer Service Center and Business Client Service Center—also add to our ability to provide quick and convenient response to our customers' personal or business needs.

Through these and other initiatives, our goal is to develop meaningful, personal financial relationships with our customers. Only by staying connected with our customers will we be able to understand their needs and provide them with solutions in achieving the financial security that they work so hard to attain.

To bring about an expanded line of products, we partnered with companies best able to provide our customers with a complete mix of premium financial products and services. As an example, in partnering with one of the nation's largest brokers, our Bank now offers customers a wide range of investment and life insurance alternatives, meeting an ever-growing demand for such financial planning services.

In the process of improving and expanding our range of products and services, we have also created a more efficient operation through the use of advanced technology. This includes the integration and upgrading of our computer systems and working with key service providers to insure delivery of cost-effective, state-of-the-art products and services, such as consumer and merchant credit card services, expanded automated teller machine (ATM) network and services, and Internet banking.

At times, implementing such significant changes has proven to be quite challenging. Thanks to the commitment and hard work of our management team and our employees, we have successfully completed the major portion of our reorganization plan. Our Bank's continued strong performance through this reorganization process indicates that we are doing the right thing.

In the year 2000 following continued efforts to improve asset quality and reduce expenses, our Company's return on equity (ROE) increased from 11.0 to 13.6. The combined strength of our earnings, and our ability to buy back our shares of common stock and reduce the number of shares outstanding has benefited our shareholders. It also resulted in our Bank's employees becoming the largest shareholder in our Company. With this added incentive for our employees—combined with the internal and infrastructure improvements now in place—we are optimistic about the years to come.

Indeed, we believe that CPB is poised to move forward with its new combination of people, systems and organizational structure to provide the right solutions to meet our customers' financial needs. By working together, we can strive to build more prosperous businesses and create broader opportunities for people and their families in Hawaii.

Naoaki Shibuya
President

At CPB, helping Hawaii businesses succeed is one of our most important priorities in our overall strategy. Because we improved our technological and organizational infrastructure and invested in our people, our corporate and business relationship officers are well positioned to help large and small businesses achieve their financial goals.

As a community bank, our fate is tied directly to the health of the community we serve. Understanding this, CPB is committed to investing in Hawaii-based businesses that help to energize our local economy.

Construction activity serves as one of the leading indicators of a healthy economy, and CPB understands that financing holds the key in supporting Hawaii's construction industry. At CPB, our loan programs are heavily committed to building projects that directly benefit our island economy. In supporting quality construction projects, our Bank in turn serves to stimulate additional business ventures.

Large ventures such as The Shops at Wailea, for example, play an important role in our state's economic well-being by providing new employment and entrepreneurial opportunities, as well as adding to Hawaii's distinction as a premier retail destination worldwide. We also appreciate the role that small businesses play in our modern island economy. As an example, we are supporting the development of the Pacific Gateway Center incubator kitchen project, designed to provide the necessary facilities for individuals to create new food products and startup businesses. In nurturing this entrepreneurial spirit, we work to build stronger communities.

Whether a business is large or small, efficiency, cost-management and productivity are vital to its survival and long-term success. Providing solutions to these real-life issues continues to drive CPB's reorganization.

For larger businesses, our newly established Business Client Service Center serves as a one-stop resource from installing specialized computer software allowing for business-to-business transactions to tracking and resolving account inquiries. Ultimately, these quality services result in extra time for our clients to operate their business.

Smaller businesses can now utilize CPB Business Advantage, the only program of its kind in Hawaii. To save small business owners money on common services and products, we partner with national and local suppliers and service providers to receive valuable benefits and discounts. CPB Business Advantage members enjoy substantial savings on travel, including airfare, hotel accommodation and car rental, purchases with extended warranty, business property and casualty insurance, and equipment leasing. This year, we added valuable local companies to our already extensive list of CPB Business Advantage partners that offer discounts on high-speed Internet services, wireless communications services, outsourced employment services, courier services and office products.

In addition to these valuable programs, CPB kicked-off 2000 by becoming the first bank in Hawaii to offer Internet banking to both businesses and consumers. Through CPBInternet for Business and CPBInternet banking services, our customers can bank anywhere, anytime, and have immediate access to their finances. These new services underscore CPB's commitment to meet the changing needs of customers by putting banking convenience right at their fingertips.

CPB's Internet services can help customers better manage their money. They can access their loan and deposit account information whenever they want, enabling them to make timely and cost-saving decisions. Through CPBInternet for Business' user-friendly screens and support services, business owners can quickly and easily pay bills, transfer funds, make payroll direct deposits, originate electronic funds tax payments (EFTPS), and initiate check stop payment requests and other cash management features.

By connecting directly with Hawaii's business owners through our corporate and business relationship officers, CPB can best tailor its products and programs to provide for the convenience, efficiency, time- and cost-saving solutions they need and want most to prosper in our fast-paced, ever-changing world.

In order to enhance the changing lifestyles of our consumers, CPB has had to work smarter to deliver new conveniences in a timely, yet secure manner. Making it easier and quicker for customers to seek answers to questions or problems, we established a one-stop Customer Service Center with highly trained customer service representatives. Personal banking officers and financial service officers at the branches ensure that we maintain a high level of service quality in helping consumers achieve their financial goals, a worthy mission that will not only benefit our customers and our Bank, but will contribute to the well-being of our community as a whole.

Although many people do not feel comfortable investing directly in the stock market, everyone wants to earn the best possible return on their dollar. Whether the goal is to fund their children's education, lay out a roadmap to a comfortable retirement, or merely maximize the value of their hard-earned money, people are looking to invest with institutions they can trust.

In April, our Bank rolled out its much-anticipated investment program to which the response has been very positive. The establishment of our financial planning program and our strategic alliance with Financial Network Investment Corporation (FNIC) offers customers a wide range of investment and life insurance alternatives. FNIC, one of the leading national investment brokers, was selected for its financial strength, industry reputation and technological resources. This new program complements our existing financial planning services offered through our Trust and Investment Management Division. Our experienced trust and investment officers provide a broad range of services such as investment management, estate planning, and administering of trusts and probates. Now, with the personalized service of qualified relationship bankers and the expertise of licensed financial advisors, our Bank's investment services can meet the simplest to the most complex financial planning needs of our customers.

By partnering with top-rated companies like FNIC, we are able to offer a wide range of products and services that are both high quality and price competitive. In the case of our Internet services, CPB partnered with Digital Insight (formerly nFront), which was awarded "Best Internet Banking Solution" by Microsoft and was accorded the exclusive endorsement for Internet banking by the American Bankers Association. This means CPB customers can feel confident knowing they will be using one of the best Internet banking programs in the country.

Similarly, CPB's partnership with Concord EFS, one of the leading ATM processors in the nation, will allow our Bank to offer numerous new features in the near future, such as gift certificates and check cashing. For the added convenience of our customers, we've expanded our network of ATMs via our partnership with Tesoro—one of the largest gasoline retailers in Hawaii—installing an additional 17 ATMs in its gas station convenience stores.

CPB's partnerships with MBNA bank card services to handle our credit card customers, and with Nova Information Systems to service our merchant credit card customers, have provided significant economies of scale. The net result of these partnerships to our customers is access to modernized conveniences and services, backed by the most innovative and reputable providers of banking services in the country, all available through the careful management and solid local reputation of CPB.

Founded by local business and community leaders some 47 years ago, CPB understands its home. Moreover, we appreciate and respond to the role that we play in relation to the multitude of diverse parts that make Hawaii special. In this regard, CPB proudly supports a wide range of community reinvestment events and programs that help to make this a better place to live while contributing to Hawaii's economy.

The Hawaii Women's Business Center became the first organization in the state focused on helping women to develop and grow successful businesses. In 1998, CPB was one of the founding funders of this unique organization. Today, women-owned businesses in Hawaii are ranked third in the nation. The Center is one of 25 facilities around the country to receive a five-year U.S. Small Business Administration grant, allowing for continued service to meet this growing demand.

Through two endowment funds, CPB continues to develop our communities and future leaders. The CPB Community Endowment Fund provides grants for charitable programs and projects whose primary purpose is geared to community development within targeted areas. CPB's University of Hawaii Endowment Fund awards scholarships to athletes majoring in business and assists financially disadvantaged athletes in realizing their dreams.

University of Hawaii sports and sports in general provide a key engine fueling Hawaii's economy. Major sporting events such as the Sony Open in Hawaii and football bowl games help to spotlight the beautiful climate and active lifestyles to audiences worldwide.

CPB also appreciates Hawaii's cultural diversity that makes this place so special. CPB supports a variety of cultural and educational organizations and contributes significantly to many economic development organizations in Hawaii, such as the different ethnic Chambers of Commerce, which play a vital role in strengthening our economic base. CPB is proud to support these groups through active membership participation and project and program sponsorships, all with the intention of fostering growth through community reinvestment.

We at CPB have chosen to embrace the myriad of changes that have impacted our financial services industry and our economic landscape as an opportunity to adapt, grow and improve our Company and our Bank. Through bold, yet studied management, we are continually striving to prepare ourselves to handle our customers' changing lifestyles and financial needs.

CPB's management team collectively vowed not to use a sluggish economy as an excuse for less than optimum performance. Instead, we directed all energies into seeking new opportunities to provide for our Bank's continued growth and stability. With "responsiveness" as a keyword, we worked quickly and cooperatively to retool our systems, technology, infrastructure and staff to respond to our customers and their financial success.

As we now turn our focus to securing and developing the human resources we need to fully maximize the foundation we have set, we commit to providing our dedicated employees with training opportunities so they may continue to offer our customers the highest level of service. Well within the targets we had set for ourselves in our strategic plan, we continue to aim high in serving our customers, our communities and our shareholders. As we assess our progress for the year 2000, we believe we have demonstrated that we have the energy, the knowledge and the commitment. In better connecting with our customers and our ability to adapt to change, we are poised to maintain our service advantage.

Thank you for your continuing support of CPB.

Joichi Saito
Chairman of the Board and Chief Executive Officer

BOARD OF DIRECTORS, OFFICERS, LEGAL COUNSEL, AUDITORS AND ADVISORS
AS OF FEBRUARY 1, 2001

CPB INC.
Joichi Saito
Chairman of the Board & Chief Executive Officer
Naoaki Shibuya
President
Austin Y. Imamura
Vice President & Secretary
Neal K. Kanda
Vice President & Treasurer
BOARD OF DIRECTORS
Joseph F. Blanco*
Executive Assistant to the Governor and Special Advisor of Technology Development, State of Hawaii
Paul Devens
Attorney-at-Law; Of Counsel, Devens, Nakano, Saito, Lee, Wong & Ching
Alice F. Guild
Executive Director, Iolani Palace
Dennis I. Hirota, Ph.D.
Registered Professional Engineer; Licensed Professional Land Surveyor; President, Sam O. Hirota, Inc., Engineering and Surveying
Clayton K. Honbo, M.D.
Obstetrics & Gynecology
Stanley W. Hong
President and Chief Executive Officer, The Chamber of Commerce of Hawaii; Attorney-at-Law
Paul Kosasa*
President & Chief Executive Officer, MNS, Ltd., dba ABC Stores
Gilbert J. Matsumoto*
Certified Public Accountant; Principal-President, The Matsumoto Group, Certified Public Accountants
Daniel M. Nagamine
President-Treasurer, Flamingo Enterprises, Inc.; Certified Public Accountant (inactive)
Shunichi Okuyama
Senior Managing Director, The Sumitomo Bank, Ltd.
Joichi Saito
Chairman of the Board & Chief Executive Officer, CPB Inc. & Central Pacific Bank; Chairman of the Board, CPB Properties, Inc.; President, CPB Real Estate, Inc.
Naoaki Shibuya
President, CPB Inc.; President & Chief Operating Officer, Central Pacific Bank; President, CPB Properties, Inc.; Vice President, CPB Real Estate, Inc.
*Central Pacific Bank only
CENTRAL PACIFIC BANK
EXECUTIVE OFFICE
Joichi Saito
Chairman of the Board & Chief Executive Officer
Naoaki Shibuya
President & Chief Operating Officer
AUDIT DEPARTMENT
Jon K. Nakamoto
Vice President & Manager

COMPLIANCE DEPARTMENT
Robert A. LaFlamme
Legal/Deposits & Investments Compliance Officer
Roland S. Higa
Community Reinvestment Act & Lending Compliance Officer
LOAN REVIEW DEPARTMENT
Ruth Mende-Yanagida
Vice President
TRUST & INVESTMENT MANAGEMENT DIVISION
Gary S. Morimoto
Vice President & Manager
COMMERCIAL FINANCE GROUP
Alwyn S. Chikamoto
Senior Vice President & Manager
BUSINESS BANKING DIVISION
Candice Y. Naito
Vice President & Manager
CORPORATE BANKING DIVISION
Robert M. Kamemoto
Vice President & Manager
REAL ESTATE LOAN DIVISION
Clifford K. Fujiwara
Senior Vice President & Manager
CREDIT ADMINISTRATION GROUP
Austin Y. Imamura
Executive Vice President & Secretary/Manager
CREDIT & LEGAL DIVISION
Walter K. Horikoshi
Senior Vice President & Manager
LOAN OPERATIONS DIVISION
Carl T. Nagasako
Vice President & Manager
SPECIAL CREDITS & COLLECTIONS DIVISION
Allan M. Komatsu
Vice President & Manager
FINANCE & OPERATIONS GROUP
Neal K. Kanda
Executive Vice President & Manager
CONTROLLERS DIVISION
Sherri Y. Yim
Vice President & Controller
FINANCIAL TECHNOLOGIES DIVISION
Norman H. Osumi
Vice President & Manager
HUMAN RESOURCES DIVISION
Rita S. Flynn
Vice President & Manager
MARKETING & CORPORATE DEVELOPMENT GROUP
Wayne H. Kirihara
Senior Vice President & Manager
MARKETING DIVISION
Wayne H. Kirihara
Senior Vice President & Acting Manager

PRODUCT & DELIVERY SYSTEMS DEVELOPMENT DIVISION
Wayne H. Kirihara
Senior Vice President & Acting Manager
TRAINING & SERVICE QUALITY DIVISION
Estelle C. Iwamura
Vice President & Manager
RETAIL BANKING GROUP
David J.W. Chang
Senior Vice President & Manager
CUSTOMER SERVICE DIVISION
Raymond T. Kurosu
Senior Vice President & Manager
Barbara Carvalho
Regional Service Manager
West Region
Drezleen M. Oshiro
Regional Service Manager
East Region
RETAIL SALES DIVISION
Blenn A. Fujimoto
Senior Vice President & Manager
Bennette M. Evangelista
Vice President & Regional Sales Manager
West Region
Michael T. Hirao
Vice President & Regional Sales Manager
East Region
CENTRAL PACIFIC BANK BRANCHES
OAHU
East Region
Hawaii Kai Branch
Kaimuki Branch
King-Smith Branch
Main Branch
Makiki Branch
Moiliili Branch
Waikiki Branch
Ward Branch
Kahala Branch
in Times Super Market
Kaheka Branch
in Daiei
Kaimuki Branch
in Times Super Market
West Region
Kailua Branch
Kalihi Branch
Kaneohe Branch
Mapunapuna Branch
Mililani Branch
Pearlridge Branch
Waipahu Branch
Pearl City Branch
in Daiei
Royal Kunia Branch
in Times Super Market
HAWAII
Hilo Branch
Kailua-Kona Branch
KAUAI
Lihue Branch
MAUI
Kahului Branch

CPB REAL ESTATE, INC.
Joichi Saito
President
Naoaki Shibuya
Vice President
Austin Y. Imamura
Secretary
Neal K. Kanda
Treasurer
CPB PROPERTIES, INC.
Joichi Saito
Chairman of the Board
Naoaki Shibuya
President
Austin Y. Imamura
Senior Vice President & Secretary
Neal K. Kanda
Senior Vice President & Treasurer
Curtis A. Okazaki
Vice President & Manager
LEGAL COUNSEL
Devens, Nakano, Saito, Lee, Wong & Ching
Manatt, Phelps & Phillips, LLP
AUDITORS
KPMG LLP
SENIOR ADVISORS
Sakae Takahashi
Chairman Emeritus
Yoshiharu Satoh
Chairman Emeritus
Ernest H. Hara
Daniel K. Inouye, U.S. Senator
Sidney S. Kosasa
Eaton Magoon, Jr.
Shinsuke Nakamine
Minoru Ueda
Harold K. Yamanaka
Lester B.K. Yee, M.D.
NEIGHBOR ISLAND ADVISORS
ISLAND OF HAWAII (HILO)
Tsuneo Akiyama
Roland Higashi
Thomas Hirano
James T. Lambeth, M.D.
Gerrit R. Ludwig, M.D.
Rex Matsuno
Jack Miyashiro
Ernest A. Sakamoto, D.D.S.
ISLAND OF HAWAII (KAILUA-KONA)
James W. Higgins
Wally K. Ichishita
William Kimi, Jr.
Jean A. Murphy, GRI, CIPS
ISLAND OF KAUAI
Lindbergh Akita
Dennis M. Esaki
Richard Maeda
Carolyn A. Nii, CPA
Frank Nonaka
Allan A. Smith
Roy Tanaka
Dennis R. Yamada, Esq.
ISLAND OF MAUI
Hilario A. Aquilizan, M.D.
Hitoshi Hirayama
Lawrence N. C. Ing, Esq.
Howard Miyamoto, D.D.S.
Naoki Tokuhisa
Maria A. Unemori, CPA
Masaru "Pundy" Yokouchi

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below with respect to CPB Inc.'s consolidated statements of income for the years ended December 31, 2000, 1999 and 1998, and with respect to the consolidated balance sheets at December 31, 2000 and 1999, are derived from the consolidated financial statements which have been audited by KPMG LLP, independent auditors, included in this Annual Report. The selected statement of income data for the years 1997 and 1996, and the selected balance sheet data at December 31, 1998, 1997 and 1996, are derived from audited consolidated financial statements which are not included in this Annual Report.

	Year Ended December 31,
(Dollars in thousands, except per share data)	2000			1999			1998			1997			1996
Statement of Income Data:
Total interest income	$	126,960		$	113,312		$	111,792		$	110,332		$	104,287
Total interest expense		55,559			44,418			46,705			44,695			41,679
Net interest income		71,401			68,894			65,087			65,637			62,608
Provision for loan losses		4,500			3,700			6,600			3,500			2,500
Net interest income after provision for loan losses		66,901			65,194			58,487			62,137			60,108
Other operating income		12,710			12,631			16,822			10,827			10,715
Other operating expense		49,592			53,448			51,273			48,646			47,496
Income before income taxes		30,019			24,377			24,036			24,318			23,327
Income taxes		10,585			8,051			8,967			9,359			9,236
Net income		19,434			16,326			15,069			14,959			14,091

Balance Sheet Data (Year-End):
Interest-bearing deposits in other banks	$	11,506		$	9,828		$	10,469		$	34,188		$	26,297
Investment securities(1)		384,619			321,670			351,436			320,711			240,458
Loans		1,291,190			1,170,476			1,105,912			1,041,023			1,041,976
Allowance for loan losses		22,612			20,768			20,066			19,164			19,436
Total assets		1,816,918			1,646,491			1,560,885			1,497,101			1,403,165
Core deposits(2)		944,661			958,749			924,960			875,920			859,280
Total deposits		1,363,066			1,305,654			1,269,123			1,193,158			1,123,614
Long-term debt		220,970			98,279			118,289			127,705			115,840
Total stockholders' equity		143,312			144,079			148,066			151,742			140,882

Per Share Data:(3)
Basic earnings per share	$	2.18		$	1.70		$	1.46		$	1.42		$	1.34
Diluted earnings per share		2.14			1.68			1.45			1.40			1.33
Cash dividends declared		0.61			0.55			0.52			0.49			0.48
Book value		16.93			15.51			15.11			14.34			13.37
Weighted average shares outstanding (in thousands)		8,917			9,630			10,354			10,555			10,530

Financial Ratios:
Return on average assets		1.16	%		1.03	%		1.00	%		1.04	%		1.04	%
Return on average stockholders' equity		13.55			10.93			9.79			10.18			10.27
Average stockholders' equity to average assets		8.57			9.41			10.20			10.26			10.09
Efficiency ratio		58.43			65.36			62.79			63.62			64.77
Net interest margin(4)		4.60			4.67			4.65			4.89			4.89
Net charge-offs to average loans		0.22			0.26			0.53			0.36			0.32
Nonperforming assets to year-end loans & other real estate(5)		0.80			0.94			1.27			1.92			1.41
Allowance for loan losses to year-end loans		1.75			1.77			1.81			1.84			1.87
Allowance for loan losses to nonaccrual loans		265.27			214.21			155.17			116.76			143.97
Dividend payout ratio		27.98			32.35			35.62			34.51			35.82

(1): Held-to-maturity securities at amortized cost, available-for-sale securities at fair value.
(2): Noninterest-bearing demand, interest-bearing demand and savings deposits, and time deposits under $100,000.
(3): Adjusted for a two-for-one split of CPB Inc. common stock effective November 14, 1997.
(4): Computed on a taxable equivalent basis.
(5): Nonperforming assets include nonaccrual loans and other real estate

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

CPB Inc. (the "Company") and its subsidiary, Central Pacific Bank (the "Bank"), recorded a second consecutive year of record earnings in 2000. An increase in net interest income and lower operating expenses contributed to the year's performance. Assets, including loans, also reached new highs, as the amount of nonperforming assets continued its downward trend of the last three years. The Company's stock repurchase program, which began in 1998, enhanced earnings per share growth, while capital was maintained above well-capitalized levels. The Company sold its merchant services portfolio and closed two branches during the year as part of its three-year strategic plan to increase profitability and efficiency.

Net income reached $19.4 million in 2000, increasing by 19.0% over $16.3 million earned in 1999, which increased by 8.3% over $15.1 million earned in 1998. Diluted earnings per share of $2.14 in 2000 increased by 27.4% over $1.68 earned in 1999, which increased by 15.9% over $1.45 earned in 1998. Cash dividends per share of $0.61 in 2000 increased by 10.9% over $0.55 declared in 1999, which increased by 5.8% over $0.52 declared in 1998. Return on average assets improved to 1.16% in 2000 compared to 1.03% in 1999 and 1.00% in 1998. Return on average stockholders' equity increased to 13.55% in 2000 compared to 10.93% in 1999 and 9.79% in 1998.

The Company's performance in 2000 resulted in its sixth consecutive year of earnings increase, operating in the state of Hawaii's economy, which experienced difficulties during most of the last decade. However, modest growth in the state's economy was experienced during the last three years. Tourism, the state's primary industry, continued to increase as measured by visitor arrivals. Real estate activity also increased, with higher average resale prices, while construction activity also increased during 2000. The state's unemployment rate dropped below 4% during the fourth quarter of 2000.

Total assets of $1.82 billion at year-end 2000 increased by 10.4% over year-end 1999. Loans of $1.29 billion increased by 10.3% and investment securities of $385 million increased by 19.6% over the year. Deposits of $1.36 billion increased by 4.4% mainly due to growth in time deposits. Demand, savings and money market deposits decreased during the year due to movement of customer deposits to higher yielding time deposits and competitive factors. Consequently, long-term debt of $221 million more than doubled from the previous year-end balance of $98 million to supplement the funding of asset growth. Stockholders' equity of $143 million decreased by 0.5% due to the Company's stock repurchase program, which is discussed in the Capital Resources section of this Management's Discussion.

As signs of economic slowdown appear for the U. S. economy, Management is cautious in its growth expectations for the local economy in 2001. Lack of significant improvement in the state's economy is likely to continue to have a negative impact on the Company's growth and levels of nonperforming loans and related loan losses.

Forward-Looking Statements

Certain matters discussed in this Annual Report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, net interest income, net interest margin, the levels of nonperforming loans, loan losses and the allowance for loan losses, partnership income and liquidity that involve certain risks and uncertainties. Important factors that could cause the results to differ from those discussed in this report include, but are not limited to, general business conditions in the state of Hawaii, the real estate market in Hawaii, competitive conditions among financial institutions, regulatory changes in the financial services industry, differences between actual and estimated market rates or

price changes upon which certain assumptions are based, the makeup of the Company's portfolio of risk-sensitive instruments and other risks detailed in the Company's reports filed with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended December 31, 2000.

RESULTS OF OPERATIONS

Net Interest Income

Table 1 sets forth information concerning average interest earning assets and interest-bearing liabilities and the yields and rates thereon. Table 2 presents an analysis of changes in components of net interest income between years. Interest income, which includes loan fees, and resultant yield information presented in the table and discussed in this section are expressed on a taxable equivalent basis using an assumed income tax rate of 35%.

Table 1. Average Balances, Interest Income and Expense, Yields and Rates (Taxable Equivalent)

			Year Ended December 31,
			2000						1999						1998
(Dollars in thousands)			Average Balance		Average Yield/Rate		Amount of Interest		Average Balance		Average Yield/Rate		Amount of Interest		Average Balance		Average Yield/Rate		Amount of Interest
Assets:
Interest earning assets:
	Interest-bearing deposits in other banks		$	4,910	6.13	%	$	301	$	26,851	5.16	%	$	1,385	$	15,041	5.64	%	$	849
	Federal funds sold			296	6.42			19		673	4.75			32		70	5.71			4
	Taxable investment securities(1)			290,394	6.96			20,202		269,909	6.35			17,140		302,774	6.41			19,400
	Tax-exempt investment securities(1)			61,328	5.97			3,659		45,849	6.13			2,810		35,050	6.82			2,392
	Loans(2)			1,223,648	8.50			104,060		1,153,623	8.06			92,945		1,071,350	8.42			90,237

		Total interest earning assets		1,580,576	8.11			128,241		1,496,905	7.64			114,312		1,424,285	7.93			112,882
Nonearning assets				92,318						90,525						83,920
		Total assets	$	1,672,894					$	1,587,430					$	1,508,205

Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
	Interest-bearing demand deposits		$	106,922	1.12	%	$	1,194	$	104,320	1.10	%	$	1,152	$	99,059	1.30	%	$	1,285
	Savings and money market deposits			390,132	2.37			9,235		424,466	2.34			9,923		401,936	2.74			11,015
	Time deposits under $100,000			250,173	4.54			11,369		217,683	4.07			8,868		207,584	4.59			9,538
	Time deposits $100,000 and over			382,543	5.60			21,430		341,967	4.72			16,132		322,653	5.16			16,640
	Short-term borrowings			57,027	6.53			3,723		36,602	5.28			1,931		13,281	5.45			724
	Long-term debt			133,724	6.44			8,608		113,820	5.63			6,412		128,274	5.85			7,503

		Total interest-bearing liabilities		1,320,521	4.21			55,559		1,238,858	3.59			44,418		1,172,787	3.98			46,705
Noninterest-bearing deposits				186,557						177,841						162,625
Other liabilities				22,442						21,302						18,927
Stockholders' equity				143,374						149,429						153,866

Total liabilities and stockholders' equity			$	1,672,894					$	1,587,430					$	1,508,205

Net interest income							$	72,682					$	69,894					$	66,177

Net interest margin					4.60	%					4.67	%					4.65	%

(1): At amortized cost.
(2): Includes nonaccrual loans.

Table 2. Analysis of Changes in Net Interest Income (Taxable Equivalent)

			Year Ended December 31,
			2000 Compared to 1999									1999 Compared to 1998
			Increase (Decrease) Due to Change in:									Increase (Decrease) Due to Change in:
			Increase (Decrease) Due to Change in:						Net Change			Increase (Decrease) Due to Change in:						Net Change
(Dollars in thousands)			Volume			Rate			Net Change			Volume			Rate			Net Change
Interest earning assets:
	Interest-bearing deposits in other banks		$	(1,132	)	$	48		$	(1,084	)	$	666		$	(130	)	$	536
	Federal funds sold			(18	)		5			(13	)		34			(6	)		28
	Taxable investment securities			1,301			1,761			3,062			(2,107	)		(153	)		(2,260	)
	Tax-exempt investment securities			949	)		(100	)		849			736			(318	)		418
	Loans			5,644			5,471			11,115			6,927			(4,219	)		2,708

		Total interest earning assets		6,744			7,185			13,929			6,256			(4,826	)		1,430

Interest-bearing liabilities:
	Interest-bearing demand deposits			29			13			42			68			(201	)		(133	)
	Savings and money market deposits			(803	)		115			(688	)		617			(1,709	)		(1,092	)
	Time deposits under $100,000			1,322			1,179			2,501			464			(1,134	)		(670	)
	Time deposits $100,000 and over			1,915			3,383			5,298			997			(1,505	)		(508	)
	Short-term borrowings			1,078			714			1,792			1,271			(64	)		1,207	)
	Long-term debt			1,121			1,075			2,196			(846	)		(245	)		(1,091	)

		Total interest-bearing liabilities		4,662			6,479			11,141			2,571			(4,858	)		(2,287	)

Net interest income			$	2,082		$	706		$	2,788		$	3,685		$	32		$	3,717

Net interest income in 2000 increased by $2.8 million or 4.0% over 1999, which increased by $3.7 million or 5.6% over 1998. The increases were mainly due to growth in volume of interest earning assets during the last two years. Changes in interest rates had a material impact on both interest income and interest expense. The net effect, however, had a smaller impact on net interest income.

Interest income in 2000 increased by 12.2% over 1999 due to growth in volume and higher yields on loans and investment securities. Average volume of interest earning assets of $1.58 billion increased by 5.6% and the related yield of 8.11% increased by 47 basis points over 1999. Average loans outstanding in 2000 increased by 6.1% and average investment securities by 11.4% over the previous year. The decrease in average interest-bearing deposits in other banks in 2000 was due to growth in other asset categories.

Interest income in 1999 increased by 1.3% over 1998 primarily impacted by a decrease in yield on interest earning assets. Average volume of interest earning assets increased by 5.1%, while the related yield decreased by 29 basis points compared to 1998. Yields reflected movements in the general level of the interest rates during the last three years.

Interest expense in 2000 increased by 25.1% over 1999 due to growth in volume and effective rates paid on time deposits, short-term borrowings and long-term debt. Effective rates on core deposits, defined as total deposits excluding time deposits $100,000 and over, remained relatively unchanged. Average interest-bearing liabilities in 2000 of $1.32 billion increased by 6.6% and the effective rate on those funds was 4.21%. Average time deposits in 2000 increased by 13.1%, average short-term borrowings increased by 55.8% and average long-term debt increased by 17.5%. The increase in these purchased funding categories in 2000 totaled $80.9 million and provided funding for asset growth as savings and money market deposits decreased by 8.1%. The effective rate on interest-bearing liabilities in 2000 was materially affected by movements in the general level of interest rates as well as the aggregate decrease in lower cost demand, savings and money market accounts compared to 1999. Management has placed a major emphasis on core deposits for 2001. Financial targets, marketing programs and employee incentives have been aligned accordingly. Management expects to decrease reliance on large certificates of deposit and long-term debt as the primary incremental sources of future asset growth.

Interest expense in 1999 decreased by 4.9% from 1998 primarily due to a decrease in the effective rate on interest-bearing liabilities, which decreased by 39 basis points. Average total interest-bearing liabilities increased by 5.6% compared to 1998.

As a result, net interest margin in 2000 decreased to 4.60% from 4.67% in 1999 and 4.65% in 1998. The ratio has been relatively stable during the last three years. The decline of net interest margin in 2000 reflected lack of growth in core deposits and this ratio will continue to be under pressure to the extent that core deposits do not increase in the future.

Provision and Allowance for Loan Losses

Provision for loan losses ("Provision") is determined by Management's ongoing evaluation of the loan portfolio and their assessment of the ability of the allowance for loan losses ("Allowance") to cover inherent losses. The Company's methodology for determining the adequacy of the Allowance and the Provision takes into account many factors, including the level and trend of nonperforming and potential problem loans, net charge-off experience, current repayment by borrowers, fair value of collateral securing specific loans and general economic factors in Hawaii. The Company's Provision was $4.5 million, $3.7 million and $6.6 million in 2000, 1999 and 1998, respectively. Net loan charge-offs decreased to $2.7 million compared to $3.0 million in 1999 and $5.7 million in 1998, or when expressed as a percentage of average loans, decreased to 0.22% from 0.26% in 1999 and 0.53% in 1998. In 2000, partial charge-offs on two loans secured by commercial properties accounted for $1.9 million of total charge-offs with business and residential mortgage loans comprising the balance of the charge-offs. Recoveries totaling $503,000 from two commercial loans accounted for over one-half of total recoveries of $936,000. The Allowance expressed as a percentage of loans was 1.75% at December 31, 2000 compared to 1.77% and 1.81% at the previous two year-ends. In Management's judgment, the Allowance at year-end 2000 was adequate to cover losses inherent in the loan portfolio.

Uncertain economic conditions in the state of Hawaii may adversely affect borrowers' ability to repay, value of collateral and consequently the level of nonperforming loans, net charge-offs, provision for loan losses and net income.

Nonperforming Assets

Table 3 sets forth nonperforming assets, accruing loans delinquent for 90 days or more and restructured loans still accruing interest at the dates indicated.

Table 3. Nonperforming Assets, Past Due and Restructured Loans

			December 31,
(Dollars in thousands)			2000			1999			1998			1997			1996
Nonaccrual loans
	Real estate:
		Mortgage—commercial	$	15,913		$	12,981		$	16,830		$	13,979		$	18,863
		Mortgage—residential		2,069			5,124			5,037			1,081			2,462
		Construction		—			—			—			—			—
	Commercial, financial and agricultural			542			1,590			1,065			1,312			2,175
	Consumer			—			—			—			41			—

	Total			8,524			9,695			12,932			16,413			13,500
Other real estate				1,792			1,366			1,155			3,677			1,235

	Total nonperforming assets			10,316			11,061			14,087			20,090			14,735
Loans delinquent for 90 days or more
	Real estate:
		Mortgage—commercial		—			1,749			315			311			341
		Mortgage—residential		653			1,636			4,206			10,112			4,366
		Construction		—			—			—			—			—
	Commercial, financial and agricultural			850			128			706			1,302			1,038
	Consumer			24			92			168			508			568

	Total			1,527			3,605			5,395			12,233			6,313
Restructured loans still accruing interest
	Real estate:
		Mortgage—commercial		466			500			—			2,727			11,095
	Commercial, financial and agricultural			—			—			—			—			1,723

	Total			466			500			—			2,727			12,818

Total nonperforming assets, loans delinquent for 90 days or more and restructured loans still accruing interest			$	12,309		$	15,166		$	19,482		$	35,050		$	33,866

Total nonperforming assets as a percentage of loans and other real estate				0.80	%		0.94	%		1.27	%		1.92	%		1.41	%

Total nonperforming assets and loans delinquent for 90 days or more as a percentage of loans and other real estate				0.92	%		1.25	%		1.76	%		3.09	%		2.02	%

Total nonperforming assets, loans delinquent for 90 days or more and restructured loans still accruing interest as a percentage of loans and other real estate				0.95	%		1.29	%		1.76	%		3.36	%		3.25	%

Total nonperforming assets, accruing loans delinquent for 90 days or more and restructured loans still accruing interest decreased to $12.3 million at December 31, 2000 from $15.2 million a year ago. Nonaccrual loans of $8.5 million decreased from $9.7 million during that period due to loan payoffs and partial charge-off of a mortgage loan, offset by a $3.1 million loan secured by commercial real estate which was placed on nonaccrual status during the year. Problems with residential mortgage loans still persist, however, a more active real estate market in Hawaii helped mitigate losses. Other real estate of $1.8 million increased from $1.4 million held a year ago. Nine properties were held at year-end 2000, comprised of one commercial property and eight residential properties. Loans

delinquent for 90 days or more decreased to $1.5 million from $3.6 million a year ago and was comprised of seven loans at year-end 2000. One-half of the delinquency balance was attributed to a mortgage loan secured by commercial property with the balance comprised of residential mortgage loans. A restructured loan still accruing interest of $466,000, secured by commercial property, was held at December 31, 2000 compared to $500,000 held a year ago. Although nonperforming loans decreased during 2000, provision for loan losses increased over 1999 due to an increase in loans outstanding. The Allowance expressed as a percentage of loans at year-end 2000 declined from year-end 1999. Accounting for nonperforming assets is discussed in note 1 to the consolidated financial statements on pages 26 and 27 of this Annual Report.

Other Operating Income

Table 4 sets forth components of other operating income and the total as a percentage of average assets.

Table 4. Components of Other Operating Income

		Year Ended December 31,
(Dollars in thousands)		2000			1999			1998
Income from fiduciary activities		$	1,079		$	792		$	644
Service charges on deposit accounts			3,093			3,235			3,064
Other service charges and fees			4,247			6,802			6,444
Equity in earnings of unconsolidated subsidiaries			571			476			420
Fees on foreign exchange			530			582			616
Investment securities gains (losses)			(766	)		(250	)		254
Gains (losses) on sales of loans			(45	)		(289	)		4,340
Gain on sale of merchant portfolio			1,850			—			—
Other			2,151			1,283			1,040

	Total	$	12,710		$	12,631		$	16,822

Total other operating income as a percentage of average assets			0.76	%		0.80	%		1.12	%

Other operating income of $12.7 million in 2000 was virtually unchanged from 1999. Sale of the Company's merchant services portfolio in 2000 generated a nonrecurring gain of $1.85 million. The related effect of this sale was the reduction of $2.9 million in merchant servicing fees in 2000 compared to 1999. Investment securities losses of $766,000 compared to losses of $250,000 realized in the previous year through sales of selected holdings. Sales and subsequent purchases of investment securities during 2000 increased the average maturity of the investment securities portfolio which decreased the asset sensitivity of the Bank's balance sheet as the general level of interest rates appeared to stabilize. See Asset/Liability Management section on pages 17 and 18 of this Annual Report for a general discussion on this topic. Income from fiduciary activities increased by $287,000 or 36.2% over 1999.

Other operating income in 1999 decreased by $4.2 million or 24.9% from 1998 due to a nonrecurring gain of $4.6 million recognized from the sale of the Company's credit card portfolio in 1998. Service charges on deposit accounts and other service charges and fees increased by 5.6% over 1998. Income from fiduciary activities increased by 23.0% and investment securities losses of $250,000 were realized in 1999 compared to $254,000 in gains in 1998. Income from bank-owned life insurance accounted for the balance of the increase in other income in 1999 over 1998.

Total other operating income, expressed as a percentage of average assets, was 0.76% in 2000, 0.80% in 1999 and 1.12% in 1998. Excluding the gain from sale of the credit card portfolio, the 1998 percentage was 0.81%

Other Operating Expense

Table 5 sets forth components of other operating expense and the total as a percentage of average assets.

Table 5. Components of Other Operating Expense

		Year Ended December 31,
(Dollars in thousands)		2000			1999			1998
Salaries and employee benefits		$	25,071		$	27,989		$	26,466
Net occupancy			6,350			6,186			6,349
Equipment			2,708			2,718			2,879
Other			15,463			16,555			15,579

	Total	$	49,592		$	53,448		$	51,273

Total other operating expense as a percentage of average assets			2.96	%		3.37	%		3.40	%

Other operating expense of $49.6 million in 2000 decreased by $3.9 million or 7.2% compared to 1999. Salaries and employee benefits in 2000 decreased by $2.9 million or 10.4% from 1999. The decrease was mainly attributable to a 6.3% reduction in the number of full-time equivalent employees, reduction in contribution to profit sharing and employee ownership plans from 10% to 5% of defined net income and reversal in 2000 of $600,000 in restructuring charges from the $1.6 million accrued in 1999. This reversal was due to revised estimates of severance payments in connection with staff downsizing occurring through 2000. Of the original 76 positions being eliminated, approximately one-third of the employees impacted were retained to fill new positions and vacancies created by attrition. The $1.6 million accrual in 1999 provided for expenses related to the closing of three branches in 1999 and 2000, sale of the Bank's merchant services portfolio and other programs to enhance efficiency. Profit sharing contributions decreased by $800,000 to $1.3 million due to reduction in plan benefits. Contributions to the Company's 401(k) plan increased by $318,000 due to an increase in Company matching of employee contributions. The number of full-time equivalent employees at year-end 2000 decreased to 504 from 540 and 587 employees at the end of 1999 and 1998, respectively. The reduction in staff during the last two years was a result of the sale of the Company's credit card and merchant services portfolios, closing of three branches and the successful completion of programs to enhance operating efficiencies. The increase in salaries and employee benefits in 1999 was mainly due to the aforementioned $1.6 million in restructuring charges.

Net occupancy expense of $6.4 million in 2000 increased by 2.7% over 1999 and equipment expense of $2.7 million was lower than both 1999 and 1998. A reduction in the number of employees and elimination of operating expenses related to the sale of the Bank's merchant services portfolio impacted these expenses. Other expense of $15.5 million decreased by $1.1 million or 6.6% in 2000 over 1999, mainly due to a reduction of $3.6 million in interchange and other expenses related to merchant services and a settlement fee with the entity, which provided processing of merchant services. Nonrecurring expenses of $450,000 recognized in 2000 representing lease termination charges and writedown of equipment related to branch closures offset the abovementioned reduction. Legal, audit and professional fees of $2.8 million increased by $977,000 or 54.7% in 2000 over 1999 mainly due to consulting fees on strategic planning projects and income tax strategies. The increase in other expense in 1999 over 1998 was mainly due to a $746,000 or 27.7% increase in expenses related to merchant and bank card services.

Total other operating expense as a percentage of average assets was 2.96% in 2000, 3.37% in 1999 and 3.40% in 1998.

Income Taxes

Income tax expense totaled $10.6 million in 2000, $8.1 million in 1999 and $9.0 million in 1998. The effective tax rate was 35.3% in 2000, 33.0% in 1999 and 37.3% in 1998. Accrual adjustments recorded in 1999 and investment in bank-owned life insurance accounted for the lower effective tax rate for that year.

FINANCIAL CONDITION

Table 6 sets forth the distribution of assets, liabilities and stockholders' equity.

Table 6. Distribution of Assets, Liabilities and Stockholders' Equity

			Year Ended December 31,
			2000					1999					1998
(Dollars in thousands)			Average Balance			Percent to Total		Average Balance			Percent to Total		Average Balance			Percent to Total
Assets:
	Cash and due from banks		$	37,054		2.2	%	$	40,648		2.6	%	$	35,260		2.3	%
	Interest-bearing deposits in other banks			4,910		0.3	%		26,851		1.7	%		15,041		1.0	%
	Federal funds sold			296		—			673		—			70		—
	Taxable investment securities			290,394		17.4			269,909		17.0			302,774		20.1
	Tax-exempt investment securities			61,328		3.7			45,849		2.9			35,050		2.3
	Loans			1,223,648		73.1			1,153,623		72.7			1,071,350		71.1
	Allowance for loan losses			(22,163	)	(1.3	)		(20,796	)	(1.3	)		(19,567	)	(1.3	)
	Premises and equipment			24,231		1.4			25,846		1.6			26,696		1.8
	Other assets			53,196		3.2			44,827		2.8			41,531		2.7

		Total assets	$	1,672,894		100.0	%	$	1,587,430		100.0	%	$	1,508,205		100.0	%

Liabilities and Stockholders' Equity:
	Deposits:
		Noninterest-bearing demand	$	186,557		11.1	%	$	177,841		11.2	%	$	162,625		10.8	%
		Interest-bearing demand		106,922		6.4			104,320		6.6			99,059		6.6
		Savings and money market		390,132		23.3			424,466		26.7			401,936		26.6
		Time deposits under $100,000		250,173		15.0			217,683		13.7			207,584		13.7
		Time deposits $100,000 and over		382,543		22.9			341,967		21.6			322,653		21.4

		Total deposits		1,316,327		78.7			1,266,277		79.8			1,193,857		79.1
	Short-term borrowings			57,027		3.4			36,602		2.3			13,281		0.9
	Long-term debt			133,724		8.0			113,820		7.2			128,274		8.5
	Other liabilities			22,442		1.3			21,302		1.3			18,927		1.3

		Total liabilities		1,529,520		91.4			1,438,001		90.6			1,354,339		89.8
	Stockholders' equity			143,374		8.6			149,429		9.4			153,866		10.2

		Total liabilities and stockholders' equity	$	1,672,894		100.0	%	$	1,587,430		100.0	%	$	1,508,205		100.0	%

Average total assets of $1.67 billion increased by $86 million or 5.4% in 2000 over 1999, which increased by $79 million or 5.3% over 1998. Loans and investment securities increased in 2000 as average core deposits, increased only slightly over 1999. This growth in interest earning assets required funding from time deposits $100,000 and over, and short- and long-term borrowings.

Average loans of $1.22 billion increased by 6.1% in 2000 over 1999, which increased by 7.7% over 1998. Loans as a proportion of total assets of 73.1% in 2000 increased over the last three years. Average investment securities of $352 million increased by 11.4% over 1999, which decreased by 6.5% from 1998. Average interest-bearing deposits in other banks decreased to $5 million compared to $27 million in 1999 and $15 million in 1998.

Average total deposits of $1.32 billion increased by 3.4% in 2000 over 1999, which increased by 6.1% over 1998. Average core deposits of $934 million increased by 1.0% over 1999, which increased by 6.1% over 1998. Average time deposits $100,000 and over of $383 million increased by 11.9% in 2000 over 1999, which increased by 6.0% over 1998. Average short-term borrowings and long-term debt totaling $191 million increased by 26.8% in 2000 over 1999, which increased by 6.3% over 1998.

Loans at year-end 2000 of $1.29 billion increased by $121 million or 10.3% over year-end 1999. Commercial mortgage loans of $560 million increased by $32 million or 6.0%, real estate construction loans of $73 million increased by $27 million or 58.7% and commercial, financial and agricultural loans increased by $47 million or 24.8%.

The slowdown in growth of core deposits adversely affected net interest margin and ratios related to funding trends during 2000. The ratio of average loans to core deposits as an indicator of funding trends was 131% in 2000, increasing from 125% in 1999 and 123% in 1998. Management views this as an adverse trend and is taking steps to improve this ratio through greater emphasis on core deposit growth and enhancing core relationships with loan customers.

Average stockholders' equity as a percentage of total assets decreased to 8.6% from 9.4% in 1999 and 10.2% in 1998, as capital levels remained within Management's targets.

Asset/Liability Management

The Company's earnings and capital are subject to risk of interest rate fluctuations to the extent the rate-sensitive assets and rate-sensitive liabilities mature or reprice during different periods or in differing amounts. Asset/liability management attempts to coordinate the Company's rate-sensitive assets and rate-sensitive liabilities to meet its financial objectives.

The Company's asset/liability management policy is to maximize risk-adjusted return to shareholders while maintaining consistently acceptable levels of liquidity, interest rate risk and capitalization. The Company's asset/liability management committee monitors its interest rate risk through the use of income simulation and rate shock analyses. This process is designed to measure the impact of future changes in interest rates on net interest margin and market value of portfolio equity. Adverse exposures are managed through the shortening or lengthening of the duration of the Company's assets or liabilities.

Table 7 sets forth information concerning interest rate sensitivity of the Company's assets, liabilities and stockholders' equity at December 31, 2000. The assumptions used in determining interest rate sensitivity of various asset and liability products had a significant impact on the resulting table. For purposes of this presentation, assets and liabilities are classified by the earliest re-pricing date or maturity. All interest-bearing demand and savings balances are included in the three months or less category, even though re-pricing of these accounts is not contractually required and may not actually occur during that period.

As shown in Table 7, the amount of liabilities being re-priced exceeds the amount of assets in the three months or less through over six through twelve months categories. In the remaining time periods, re-pricing assets exceed re-pricing liabilities. Generally, where rate-sensitive liabilities exceed rate-sensitive assets in the short-term, net interest margin is expected to be negatively impacted when interest rates increase and positively impacted when interest rates decrease.

Table 7. Rate Sensitivity of Assets, Liabilities and Stockholders' Equity

(Dollars in thousands)			Three Months or Less			Over Three Through Six Months			Over Six Through Twelve Months			Over One Year Through Three Years			Over Three Years		Nonrate Sensitive			Total
Assets:
	Interest-bearing deposits in other banks		$	11,506		$	—		$	—		$	—		$	—	$	—		$	11,506
	Federal funds sold			15,000			—			—			—			—		—			15,000
	Investment securities			33,607			12,586			19,244			92,918			221,169		5,095			384,619
	Loans			519,936			84,444			168,577			332,479			180,357		5,397			1,291,190
	Other assets			—			—			—			—			—		114,603			114,603

		Total assets		580,049			97,030			187,821			425,397			401,526		125,095			1,816,918

Liabilities and Stockholders' Equity:
	Noninterest-bearing deposits			—			—			—			—			—		199,625			199,625
	Interest-bearing deposits			714,825			161,934			235,818			47,531			3,333		—			1,163,441
	Short-term borrowings			40,720			15,000			1,000			—			—		—			56,720
	Long-term debt			840			641			42,084			84,490			92,915		—			220,970
	Other liabilities			—			—			—			—			—		32,850			32,850
	Stockholders' equity			—			—			—			—			—		143,312			143,312

		Total liabilities and stockholders' equity		756,385			177,575			278,902			132,021			96,248		375,787			1,816,918

Interest rate sensitivity gap			$	(176,336	)	$	(80,545	)	$	(91,081	)	$	293,376		$	305,278	$	(250,692	)	$	—

Cumulative interest rate sensitivity gap			$	(176,336	)	$	(256,881	)	$	(347,962	)	$	(54,586	)	$	250,692	$	—		$	—

Capital Resources

The Company's objective is to maintain a level of capital that will support sustained asset growth and anticipated credit risks and to ensure that regulatory guidelines and industry standards are met.

Regulations on capital adequacy guidelines adopted by the Board of Governors of the Federal Reserve System ("Federal Reserve Board") and the Federal Deposit Insurance Corporation ("FDIC") are as follows. In 1989, a risk-based capital framework was adopted consisting of capital comprised of a core capital component (Tier I), essentially common stockholders' equity, less intangible assets, and a supplemental component (Tier II), which includes the allowance for loan losses up to 1.25% of risk-weighted assets, and a system for assigning assets and off-balance sheet items to one of four risk-weighted categories. The capital standards require a minimum Tier I risk-based capital ratio of 4.00% and total risk-based capital ratio (Tier I plus Tier II) of 8.00%. The Federal Reserve Board and the FDIC have also adopted a 3.00% minimum leverage ratio which is Tier I capital as a percentage of total assets. Higher-risk banks as measured by the Federal regulatory rating system are expected to maintain capital above the minimum leverage ratio requirement.

In addition, effective December 19, 1992, FDIC-insured institutions such as the Bank must maintain leverage capital ratio and Tier I and total risk-based capital ratios of at least 5%, 6% and 10%, respectively, to be considered "well capitalized" under the prompt corrective action provisions of the FDIC Improvement Act of 1991.

Table 8 sets forth the Company's and Bank's capital ratios as of the dates indicated.

Table 8. Regulatory Capital Ratios

		December 31, 2000						December 31, 1999
		Minimum Required		Actual		Excess		Minimum Required		Actual		Excess
Company:
	Tier I risk-based capital ratio	4.00	%	9.63	%	5.63	%	4.00	%	11.24	%	7.24	%
	Total risk-based capital ratio	8.00		10.89		2.89		8.00		12.50		4.50
	Leverage capital ratio	4.00		7.97		3.97		4.00		9.00		5.00

Bank:
	Tier I risk-based capital ratio	6.00	%	9.38	%	3.38	%	6.00	%	10.47	%	4.47	%
	Total risk-based capital ratio	10.00		10.63		0.63		10.00		11.72		1.72
	Leverage capital ratio	5.00		7.77		2.77		5.00		8.38		3.38

During 2000, the Company's board of directors authorized the repurchase and retirement of CPB Inc. common stock for a total consideration of $25 million, in addition to authorizations of $12 million in 1999 and $20 million in 1998. During 2000, 840,579 shares were repurchased for a total consideration of $20.9 million at an average price of $24.82 per share. For the three years ended December 31, 2000, the Company had repurchased 2,207,127 shares for a total consideration of $47.4 million at an average price of $21.46 per share, or approximately 20.8% of the 10.6 million shares outstanding prior to the initial repurchase transaction. The authorized remaining amount of repurchases was $9.6 million at December 31, 2000. Management expects to continue repurchases to enhance shareholder value based on the rate of the Company's future asset growth and ability to maintain well-capitalized levels of regulatory capital ratio.

Capital levels for the Company and the Bank were in excess of minimum regulatory required levels at December 31, 2000 and 1999. The relatively low rate of asset growth in the last three years and increasing earnings contributed towards the excess.

Liquidity

The Company's objective in managing its liquidity is to maintain a balance between sources and ses of funds in order to economically meet the cash requirements of customers for loans and deposit withdrawals and participate in investment opportunities as they arise. Management monitors the Company's liquidity position in relation to trends of loan demand and deposit growth on a daily basis to assure maximum utilization and maintenance of an adequate level of readily marketable assets and access to short-term funding sources.

The consolidated statements of cash flows identify three major sources and uses of cash as operating, investing and financing activities. Cash generated from operations represents a major source of liquidity. As presented in the consolidated statements of cash flows on page 25 of this Annual Report, the Company's operating activities provided cash totaling $37 million, $13 million and $27 million in 2000, 1999 and 1998, respectively. The increase in 2000 over 1999 was due to fluctuations in other assets from bank-owned life insurance purchased in 1999 and other liabilities which increased in 1999 due to deferred income tax expense.

Investing activities represent a use of cash. Net cash used in investing activities was $200 million in 2000, $49 million in 1999 and $78 million in 1998. The large increase in 2000 was due to increase in loans and investment securities. Cash used in net loan originations over principal repayments was $129 million in 2000, $74 million in 1999 and $70 million in 1998. Activities from investment securities

and interest-bearing deposits in other banks used cash of $54 million in 2000 and $5 million in 1998 and provided cash of $26 million in 1999.

In addition to cash flows from operating activities, financing activities generally provide funding for growth in loans and investment securities with increased deposits supplemented by the Company's borrowing sources, which include short-term sources such as Federal funds purchased and securities sold under agreements to repurchase and short- and long-term Federal Home Loan Bank of Seattle advances.

Deposits increased by $57 million in 2000, $37 million in 1999 and $76 million in 1998. The Company's total borrowings provided cash of $100 million in 2000 and $57 million in 1999 and used cash of $14 million in 1998. The increase in total borrowings in 2000 was due to the higher growth in loans and investment securities compared to deposit growth. The Company's loan to deposit ratio was 94.7% and 89.6% at year-end 2000 and 1999, respectively. Net cash used for repurchases of the Company's common stock was $21 million in 2000, $12 million in 1999 and $15 million in 1998. Accordingly, net cash provided by financing activities was $132 million in 2000, $77 million in 1999 and $43 million in 1998.

The primary uses of funds, as reflected in the Company's parent company condensed statements of cash flows, were for the abovementioned repurchase of CPB Inc. common stock and $5.3 million, $5.2 million and $5.4 million for payment of dividends to shareholders in 2000, 1999 and 1998, respectively. The Company's primary source of funds was dividends received from the Bank. As presented in note 27 to the consolidated financial statements on page 44 of this Annual Report, the Bank's retained earnings, as defined, is the maximum amount permitted to be distributed as a dividend without prior regulatory approvals. At December 31, 2000, retained earnings of the Bank was $95 million.

Impact of New Accounting Standards

During 2000, the Financial Accounting Standards Board issued statements on financial accounting standards which are discussed in note 28 to the consolidated financial statements on page 46 of this Annual Report. The statements are not expected to have a material impact on the Company's consolidated financial statements.

SUPPLEMENTARY FINANCIAL INFORMATION

SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA

A summary of unaudited quarterly operating results for the years ended December 31, 2000 and 1999 follows:

(Dollars in thousands, except per share data)		First quarter		Second quarter		Third quarter		Fourth quarter		Full year
2000:
	Interest income	$	28,959	$	30,757	$	32,644	$	34,600	$	126,960
	Net interest income		16,985		17,837		18,092		18,487		71,401
	Provision for loan losses		1,000		1,000		1,500		1,000		4,500
	Net interest income after provision for loan losses		15,985		16,837		16,592		17,487		66,901
	Income before income taxes		7,087		7,396		7,663		7,873		30,019
	Net income		4,586		4,790		4,943		5,115		19,434
	Basic earnings per share		0.50		0.53		0.56		0.59		2.18
	Diluted earnings per share		0.49		0.52		0.55		0.58		2.14

1999:
	Interest income	$	27,758	$	27,661	$	28,986	$	28,907	$	113,312
	Net interest income		16,998		16,971		17,690		17,235		68,894
	Provision for loan losses		1,500		700		800		700		3,700
	Net interest income after provision for loan losses		15,498		16,271		16,890		16,535		65,194
	Income before income taxes		5,765		6,080		6,244		6,288		24,377
	Net income		3,679		3,975		4,297		4,375		16,326
	Basic earnings per share		0.38		0.41		0.44		0.47		1.70
	Diluted earnings per share		0.37		0.41		0.44		0.46		1.68

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of its business, the Company is exposed to market risk, primarily in the form of interest rate risk. Economic impact of interest rate risk may occur as interest rates change resulting in gains or losses in future net interest income, cash flows, or current fair market value. The Company utilizes product pricing and investment and debt management strategies to manage its interest rate risk.

The following table presents information on the Company's financial instruments which are sensitive to changes in interest rates. Expected maturities of interest-sensitive assets and liabilities are contractual maturities. Interest-bearing demand and savings deposits, which have indeterminate maturities, are included in the earliest maturity category. The resulting table is based on assumptions that include prepayment rates on mortgage-related assets and a forecast of market interest rates. See note 24 to the consolidated financial statements on page 41 and 42 of this Annual Report for a discussion of the calculation of fair values.

At December 31, 2000, holdings of relatively shorter-term loans and investments and long-term borrowings increased from year-end 1999. Fair value of interest-sensitive assets and liabilities, as a percentage of book value, rose as market interest rates declined throughout the year. Maturities and fair values of interest-sensitive assets and liabilities may vary from expectations if actual experience differs from assumptions used.

		Expected Maturity Within
		Expected Maturity Within																					Total Fair Value
(Dollars in thousands)		One Year			Two Years			Three Years			Four Years			Five Years			Thereafter			Book Value			Total Fair Value
Interest-sensitive assets:
Interest-bearing deposits in other banks		$	11,506			—			—			—			—			—		$	11,506		$	11,506
	Weighted average interest rates		6.10	%		—			—			—			—			—			6.10	%
Federal funds sold		$	15,000			—			—			—			—			—		$	15,000		$	15,000
	Weighted average interest rates		6.32	%		—			—			—			—			—			6.32	%
Fixed rate investments		$	47,347		$	41,747		$	51,171		$	48,793		$	40,962		$	110,716		$	340,736		$	341,246
	Weighted average interest rates		5.62	%		6.49	%		6.50	%		6.57	%		6.64	%		6.17	%		6.30	%
Variable rate investments		$	4,069		$	3,094		$	2,727		$	2,007		$	1,301		$	9,987		$	23,185		$	23,185
	Weighted average interest rates		6.69	%		5.00	%		4.94	%		4.81	%		5.71	%		4.60	%		5.14	%
Equity investments		$	20,698			—			—			—			—			—		$	20,698		$	20,698
	Weighted average interest rates		6.21	%		—			—			—			—			—			6.21	%
Fixed rate loans		$	144,354		$	79,622		$	56,269		$	30,690		$	24,894		$	79,733		$	415,562		$	414,139
	Weighted average interest rates		8.71	%		8.52	%		8.41	%		8.16	%		8.15	%		6.93	%		8.22	%
Variable rate loans		$	259,125		$	138,779		$	87,681		$	53,099		$	77,453		$	259,491		$	875,628		$	875,746
	Weighted average interest rates		8.70	%		8.39	%		8.01	%		7.83	%		7.91	%		7.81	%		8.19	%
Total—December 31, 2000		$	502,100		$	263,242		$	197,848		$	134,589		$	144,609		$	459,927		$	1,702,315		$	1,701,520
Total—December 31, 1999		$	343,297		$	201,564		$	183,846		$	157,837		$	116,995		$	498,435		$	1,501,974		$	1,484,263

Interest-sensitive liabilities:
Interest-bearing demand and savings deposits		$	487,208			—			—			—			—			—		$	487,208		$	487,208
	Weighted average interest rates		1.95	%		—			—			—			—			—			1.95	%
Time deposits		$	625,369		$	32,624		$	14,907		$	2,251		$	869		$	213		$	676,233		$	677,566
	Weighted average interest rates		5.71	%		4.43	%		5.30	%		4.81	%		5.90	%		6.22	%		5.64	%
Short-term borrowings		$	56,720			—			—			—			—			—		$	56,720		$	56,720
	Weighted average interest rates		6.42	%		—			—			—			—			—			6.42	%
Long-term debt		$	43,565		$	60,027		$	24,463		$	59,862		$	20,424		$	12,629		$	220,970		$	224,391
	Weighted average interest rates		6.03	%		6.84	%		6.54	%		6.73	%		6.17	%		6.45	%		6.54	%
Total—December 31, 2000		$	1,212,862		$	92,651		$	39,370		$	62,113		$	21,293		$	12,842		$	1,441,131		$	1,446,656
Total—December 31, 1999		$	1,133,589		$	75,439		$	38,456		$	5,957		$	6,570		$	18,072		$	1,278,083		$	1,274,684

CONSOLIDATED BALANCE SHEETS

CPB INC. AND SUBSIDIARY—DECEMBER 31, 2000 AND 1999

(Dollars in thousands)			2000		1999
Assets
Cash and due from banks			$	52,207	$	83,425
Interest-bearing deposits in other banks				11,506		9,828
Federal funds sold				15,000		—
Investment securities:
	Held to maturity, at amortized cost (fair value of $86,566 and $99,808 at December 31, 2000 and 1999, respectively)			86,056		101,567
	Available for sale, at fair value			279,714		220,103
	Available for sale securities pledged to creditor, at fair value			18,849		—

		Total investment securities		384,619		321,670

Loans				1,291,190		1,170,476
	Less allowance for loan losses			22,612		20,768

		Net loans		1,268,578		1,149,708

Premises and equipment				23,319		24,774
Accrued interest receivable				10,646		9,606
Investment in unconsolidated subsidiaries				8,924		8,451
Due from customers on acceptances				—		12
Other real estate				1,792		1,366
Other assets				40,327		37,651

Total assets			$	1,816,918	$	1,646,491

Liabilities and Stockholders' Equity
Deposits:
	Noninterest-bearing deposits		$	199,625	$	204,850
	Interest-bearing deposits			1,163,441		1,100,804

		Total deposits		1,363,066		1,305,654
Short-term borrowings				56,720		79,000
Long-term debt				220,970		98,279
Bank acceptances outstanding				—		12
Other liabilities				32,850		19,467

		Total liabilities		1,673,606		1,502,412

Stockholders' equity:
	Preferred stock, no par value, authorized 1,000,000 shares, none issued			—		—
	Common stock, no par value, authorized 50,000,000 shares; issued and outstanding 8,464,468 and 9,288,457 shares at December 31, 2000 and 1999, respectively			6,172		6,540
	Surplus			45,848		45,848
	Retained earnings			88,232		94,436
	Accumulated other comprehensive income (loss)			3,060		(2,745	)

		Total stockholders' equity		143,312		144,079

		Total liabilities and stockholders' equity	$	1,816,918	$	1,646,491

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF INCOME

CPB INC. AND SUBSIDIARY—YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

(Dollars in thousands, except per share data)			2000			1999			1998
Interest income:
	Interest and fees on loans		$	104,060		$	92,945		$	90,158
	Interest and dividends on investment securities:
		Taxable interest		18,835			15,795			18,125
		Tax-exempt interest		2,378			1,810			1,381
		Dividends		1,367			1,345			1,275
	Interest on deposits in other banks			301			1,385			849
	Interest on Federal funds sold			19			32			4

		Total interest income		126,960			113,312			111,792

Interest expense:
	Interest on deposits			43,228			36,075			38,478
	Interest on short-term borrowings			3,723			1,931			724
	Interest on long-term debt			8,608			6,412			7,503

		Total interest expense		55,559			44,418			46,705

		Net interest income		71,401			68,894			65,087
Provision for loan losses				4,500			3,700			6,600
		Net interest income after provision for loan losses		66,901			65,194			58,487
Other operating income:
	Income from fiduciary activities			1,079			792			644
	Service charges on deposit accounts			3,093			3,235			3,064
	Other service charges and fees			4,247			6,802			6,444
	Equity in earnings of unconsolidated subsidiaries			571			476			420
	Fees on foreign exchange			530			582			616
	Investment securities gains (losses)			(766	)		(250	)		254
	Gains (losses) on sales of loans			(45	)		(289	)		4,340
	Gain on sale of merchant portfolio			1,850			—			—
	Other			2,151			1,283			1,040

		Total other operating income		12,710			12,631			16,822

Other operating expense:
	Salaries and employee benefits			25,071			27,989			26,466
	Net occupancy			6,350			6,186			6,349
	Equipment			2,708			2,718			2,879
	Other			15,463			16,555			15,579

		Total other operating expense		49,592			53,448			51,273

		Income before income taxes		30,019			24,377			24,036
Income taxes				10,585			8,051			8,967

		Net income	$	19,434		$	16,326		$	15,069

Per share data:
	Basic earnings per share		$	2.18		$	1.70		$	1.46
	Diluted earnings per share			2.14			1.68			1.45
	Cash dividends declared			0.61			0.55			0.52

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME

CPB INC. AND SUBSIDIARY—YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

(Dollars in thousands, except per share data)		Common stock			Surplus		Retained earnings			Accumulated other comprehensive income (loss)			Total
Balance at December 31, 1997		$	6,612		$	45,848	$	99,188		$	94		$	151,742
	Net income		—			—		15,069			—			15,069
	Net change in unrealized gain (loss) on investment securities, net of taxes of $355		—			—		—			533			533

Comprehensive income														15,602

Cash dividends declared ($0.52 per share)			—			—		(5,335	)		—			(5,335	)
55,400 shares of common stock issued			583			—		—			—			583
836,988 shares of common stock repurchased			(558	)		—		(13,968	)		—			(14,526	)

Balance at December 31, 1998			6,637			45,848		94,954			627			148,066
	Net income		—			—		16,326			—			16,326
	Net change in unrealized gain (loss) on investment securities, net of taxes of $(2,244) and net of reclassification		—			—		—			(3,372	)		(3,372	)

Comprehensive income														12,954

Cash dividends declared ($0.55 per share)			—			—		(5,241	)		—			(5,241	)
20,421 shares of common stock issued			271			—		—			—			271
529,560 shares of common stock repurchased			(368	)		—		(11,603	)		—			(11,971	)

Balance at December 31, 1999			6,540			45,848		94,436			(2,745	)		144,079
	Net income		—			—		19,434			—			19,434
	Net change in unrealized gain (loss) on investment securities, net of taxes of $3,863 and net of reclassification (see disclosure)		—			—		—			5,805			5,805

Comprehensive income														25,239

Cash dividends declared ($0.61 per share)			—			—		(5,370	)		—			(5,370	)
16,590 shares of common stock issued			229			—		—			—			229
840,579 shares of common stock repurchased			(597	)		—		(20,268	)		—			(20,865	)

Balance at December 31, 2000		$	6,172		$	45,848	$	88,232		$	3,060		$	143,312

Disclosure of reclassification amount:
Year ended December 31, 2000:
Unrealized holding loss on investment securities during period, net of taxes of $4,081			—			—		—			6,134			6,134
Less reclassification adjustment for losses included in net income, net of taxes of $218			—			—		—			329			329

Net change in unrealized gain (loss) on investment securities			—			—		—		$	5,805		$	5,805

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

CPB INC. AND SUBSIDIARY—YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

(Dollars in thousands)			2000			1999			1998
Cash flows from operating activities:
	Net income		$	19,434		$	16,326		$	15,069
	Adjustments to reconcile net income to net cash provided by operating activities:
		Provision for loan losses		4,500			3,700			6,600
		Provision for depreciation and amortization		2,698			2,848			2,979
		Net (accretion) amortization of investment securities		(59	)		312			300
		Net loss (gain) on investment securities		766			250			(254	)
		Federal Home Loan Bank stock dividends received		(1,246	)		(1,318	)		(1,275	)
		Net loss (gain) on sale of loans		45			289			(4,340	)
		Proceeds from sales of loans held for sale		13,187			35,524			69,147
		Originations and purchases of loans held for sale		(11,222	)		(32,299	)		(66,711	)
		Deferred income tax (benefit) expense		(8,987	)		4,417			(871	)
		Equity in earnings of unconsolidated subsidiaries		(571	)		(476	)		(420	)
		Net decrease (increase) in other assets		3,805			(11,977	)		1,127
		Net increase (decrease) in other liabilities		14,158			(4,344	)		5,345

		Net cash provided by operating activities		36,508			13,252			26,696

Cash flows from investing activities:
	Proceeds from maturities of and calls on investment securities held to maturity			15,402			19,881			60,489
	Purchases of investment securities held to maturity			—			(1,087	)		(28,354	)
	Proceeds from sales of investment securities available for sale			30,592			37,163			20,574
	Proceeds from maturities of and calls on investment securities available for sale			24,397			54,097			26,351
	Purchases of investment securities available for sale			(123,133	)		(85,149	)		(107,668	)
	Net (increase) decrease in interest-bearing deposits in other banks			(1,678	)		641			23,719
	Net increase in Federal funds sold			(15,000	)		—			—
	Net loan originations over principal repayments			(128,902	)		(73,817	)		(69,529	)
	Purchases of premises and equipment			(1,685	)		(948	)		(3,226	)
	Net proceeds from disposal of premises and equipment			442			159			90
	Distributions from unconsolidated subsidiaries			500			375			380
	Contributions to unconsolidated subsidiaries			(532	)		(469	)		(418	)

		Net cash used in investing activities		(199,597	)		(49,154	)		(77,592	)

Cash flows from financing activities:
	Net increase in deposits			57,412			36,531			75,965
	Proceeds from long-term debt			155,000			22,550			30,000
	Repayments of long-term debt			(32,309	)		(42,560	)		(39,416	)
	Net (decrease) increase in short-term borrowings			(22,280	)		76,986	)		(4,234	)
	Cash dividends paid			(5,316	)		(5,215	)		(5,436	)
	Proceeds from sale of common stock			229			271			583
	Repurchases of common stock			(20,865	)		(11,971	)		(14,526	)

		Net cash provided by financing activities		131,871			76,592			42,936

		Net (decrease) increase in cash and cash equivalents		(31,218	)		40,690			(7,960	)
Cash and cash equivalents:
		At beginning of year		83,425			42,735			50,695

		At end of year	$	52,207		$	83,425		$	42,735

Supplemental disclosure of cash flow information:
	Cash paid during the year for interest		$	53,214		$	44,017		$	47,207
	Cash paid during the year for income taxes			5,798			12,800			2,301

Supplemental disclosure of noncash investing and financing activities:
	Reclassification of loans to other real estate		$	3,522		$	2,741		$	846

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CPB INC. AND SUBSIDIARY—YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

CPB Inc.'s (the "Company's") sole operating subsidiary, Central Pacific Bank (the "Bank"), is a full-service commercial bank which had 24 banking offices located throughout the state of Hawaii at December 31, 2000. The Bank engages in a broad range of lending activities including the granting of commercial, consumer and real estate loans. The Bank also offers a variety of deposit instruments. These include personal and business checking and savings accounts, money market accounts and time certificates of deposit.

Other products and services include non-deposit investment products, debit and credit card services, Internet banking services, cash management services, traveler's checks, safe deposit boxes, international banking services, night depository facilities and wire transfer services. The Bank's Trust and Investment Management Division also offers investment management, asset custody and general consultation and planning services.

The Bank's business depends on rate differentials, the difference between the interest rate paid by the Bank on its deposits and other borrowings and the interest rate received by the Bank on loans extended to its customers and investment securities held in the Bank's portfolio. These rates are highly sensitive to many factors that are beyond the control of the Bank. Accordingly, the earnings and growth of the Company are subject to the influence of domestic and foreign economic conditions, including inflation, recession and unemployment.

Principles of Consolidation

The consolidated financial statements include the accounts of CPB Inc. and its subsidiary, Central Pacific Bank and its subsidiaries, CPB Properties, Inc. (wholly-owned) and CPB Real Estate, Inc. CPB Real Estate, Inc. was incorporated in 1998 and was formed for the purpose of acquiring, holding and managing real estate mortgage loans and mortgage-backed securities. All significant intercompany accounts and transactions have been eliminated in consolidation.

During 1997, CPB Inc. formed a limited liability company with Source Management LLC to create a residential mortgage brokerage firm named Trans-Pacific Mortgage Group LLC, of which the Company owned 49%. In December 1999, the Company relinquished its ownership interest in Trans-Pacific Mortgage Group LLC. The investment was accounted for by the equity method.

CPB Properties, Inc. is a general partner with a 50% interest in CKSS Associates, a limited partnership. The investment is accounted for by the equity method.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers cash and cash equivalents to include cash and due from banks.

Investment Securities

The Company accounts for its investment securities in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires that investments in debt securities and marketable equity securities be designated as trading, held to maturity or available for sale. Trading securities, of which the Company

had none at December 31, 2000 and 1999, would be reported at fair value, with changes in fair value included in earnings. Available-for-sale securities are reported at fair value, with net unrealized gains and losses, net of taxes, included in accumulated other comprehensive income. Held-to-maturity debt securities are reported at amortized cost.

Gains and losses from the disposition of investment securities are computed using the specific identification method.

Loans

Loans are stated at the principal amount outstanding, net of unearned income. Unearned income represents net deferred loan fees which are recognized over the life of the related loan as an adjustment to yield.

Interest income on loans is generally recognized on an accrual basis. Loans are placed on nonaccrual status when interest payments are 90 days past due, or earlier should Management determine that the borrowers will be unable to meet contractual principal and/or interest obligations, unless the loans are well-secured and in the process of collection. When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income should Management determine that the collectibility of such accrued interest is doubtful. All subsequent receipts are applied to principal outstanding, and no interest income is recognized unless the financial condition and payment record of the borrowers warrant such recognition. A nonaccrual loan may be restored to an accrual basis when principal and interest payments are current and full payment of principal and interest is expected.

Allowance for Loan Losses

The allowance for loan losses is established through provisions for loan losses charged against income. Loans deemed to be uncollectible are charged off against the allowance, and all interest previously accrued but not collected is reversed against current period interest income. Subsequent receipts, if any, are credited first to the remaining principal, then to the allowance as recoveries, and finally to unaccrued interest.

The Company, considering current information and events regarding the borrowers' ability to repay their obligations, treats a loan as impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. When a loan is considered to be impaired, the amount of the impairment is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, if the loan is considered to be collateral dependent, based on the fair value of the collateral. Impairment losses are included in the allowance for loan losses through a charge to the provision for loan losses. Interest income is recognized on an accrual basis unless the loan is placed on nonaccrual status.

For smaller-balance homogeneous loans (primarily residential real estate and consumer loans), the allowance for loan losses is based upon Management's evaluation of the quality, character and inherent risks in the loan portfolio, current and projected economic conditions, and past loan loss experience. Delinquent consumer loans are charged off within 120 days, unless determined to be adequately collateralized or in imminent process of collection.

Premises and Equipment

Premises and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are included in other operating expense and are computed under the straight-line method over the estimated useful lives of the assets or the applicable leases, whichever is shorter. Major improvements and betterments are capitalized, while recurring maintenance and repairs

are charged to operating expense. Net gains or losses on dispositions of premises and equipment are included in other operating expense.

Intangible Assets

Intangible assets are carried at the lower of amortized cost or fair value and are included in other assets. Intangible assets totaled $954,000 and $1,153,000 at December 31, 2000 and 1999, respectively. Amortization expense amounted to $308,000, $322,000 and $262,000 for the years ended December 31, 2000, 1999 and 1998, respectively. Accumulated amortization amounted to $1,562,000 and $1,254,000 at December 31, 2000 and 1999, respectively.

Other Real Estate

Other real estate is composed of properties acquired through foreclosure proceedings. Properties acquired through foreclosure are valued at fair value which establishes the new cost basis of other real estate. Losses arising at the time of acquisition of such properties are charged against the allowance for loan losses. Subsequent to acquisition, such properties are carried at the lower of cost or fair value less estimated selling expenses, determined on an individual asset basis. Any deficiency resulting from the excess of cost over fair value less estimated selling expenses is recognized as a valuation allowance. Any subsequent increase in fair value up to its cost basis is recorded as a reduction of the valuation allowance. Increases or decreases in the valuation allowance are included in other operating expense. Net gains or losses recognized on the sale of these properties are included in other operating income.

Stock Option Plans

Prior to January 1, 1996, the Company accounted for its stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations, whereby compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation," which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and future years as if the fair-value based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.

Income Taxes

Deferred tax assets and liabilities are recognized using the asset and liability method for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income taxes in the period that includes the enactment date.

Forward Foreign Exchange Contracts

The Bank periodically is a party to a limited amount of forward foreign exchange contracts to satisfy customer requirements for foreign currencies. These contracts are not utilized for trading purposes and are carried at market value, with realized gains and losses included in fees on foreign

exchange. Net losses for 2000 and 1999 totaled $1,000 and $2,000, respectively. There were no gains or losses in 1998.

Use of Estimates

The Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements. With respect to the allowance for loan losses, the Company believes the allowance for loan losses is adequate to provide for potential losses on loans and other extensions of credit, including off-balance sheet credit exposures. While the Company utilizes available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in economic conditions, particularly in the state of Hawaii. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Accordingly, actual results could differ from those estimates.

Reclassifications

Certain amounts in the consolidated financial statements and notes thereto for the previous two years have been reclassified to conform with the current year's presentation. Such reclassifications had no effect on the Company's results of operations.

2. RESERVE REQUIREMENTS

The Bank is required by the Federal Reserve Bank to maintain reserves based on the amount of deposits held. The amount held as a reserve at December 31, 2000 and 1999 was $30,127,000 and $61,316,000, respectively.

3. INVESTMENT SECURITIES

A summary of investment securities at December 31, 2000 and 1999 follows:

(Dollars in thousands)			Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
2000:
Held to Maturity:
	U.S. Treasury and other U.S. Government agencies		$	40,227	$	345	$	5	$	40,567
	States and political subdivisions			45,829		349		179		45,999

		Total	$	86,056	$	694	$	184	$	86,566

Available for Sale:
	U.S. Treasury and other U.S. Government agencies		$	240,044	$	5,605	$	1,177	$	244,472
	States and political subdivisions			28,658		679		26		29,311
	Privately-issued mortgage-backed securities			4,069		14		—		4,083
	Federal Home Loan Bank of Seattle stock			19,955		—		—		19,955
	Other			742		—		—		742

		Total	$	293,468	$	6,298	$	1,203	$	298,563

1999:
Held to Maturity:
	U.S. Treasury and other U.S. Government agencies		$	48,733	$	4	$	787	$	47,950
	States and political subdivisions			52,834		40		1,016		51,858

		Total	$	101,567	$	44	$	1,803	$	99,808

Available for Sale:
	U.S. Treasury and other U.S. Government agencies		$	177,629	$	27	$	4,241	$	173,415
	States and political subdivisions			22,905		9		225		22,689
	Privately-issued mortgage-backed securities			4,608		—		143		4,465
	Federal Home Loan Bank of Seattle stock			18,709		—		—		18,709
	Other			825		—		—		825

		Total	$	224,676	$	36	$	4,609	$	220,103

The amortized cost and estimated fair value of investment securities at December 31, 2000, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities

because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

(Dollars in thousands)			Amortized cost		Estimated fair value
Held to Maturity:
	Due in one year or less		$	2,012	$	2,014
	Due after one year through five years			17,436		17,572
	Due after five years through ten years			24,232		24,394
	Due after ten years			7,034		7,008
	Mortgage-backed securities			35,342		35,578

		Total	$	86,056	$	86,566

Available for Sale:
	Due in one year or less		$	3,207	$	3,204
	Due after one year through five years			53,045		54,824
	Due after five years through ten years			8,889		9,109
	Due after ten years			17,498		17,926
	Mortgage-backed securities			190,132		192,803
	Federal Home Loan Bank of Seattle stock			19,955		19,955
	Other			742		742

		Total	$	293,468	$	298,563

Proceeds from sales of investment securities available for sale were $30,592,000 in 2000, $37,163,000 in 1999 and $20,574,000 in 1998, resulting in gross realized gains of $232,000 and $254,000 in 1999 and 1998, respectively, and gross realized losses of $683,000 and $482,000 in 2000 and 1999, respectively. Investment securities losses in 2000 also included an $83,000 writedown of an equity security to reflect an impairment in value deemed other than temporary.

Investment securities of $186,563,000 and $169,516,000 at December 31, 2000 and 1999, respectively, were pledged to secure public funds on deposit, securities sold under agreements to repurchase and other short-term borrowings.

As a member of the Federal Home Loan Bank of Seattle ("FHLB"), the Bank is required to obtain and hold a specified number of shares of capital stock of the FHLB based on the amount of its outstanding FHLB advances. These shares are pledged to the FHLB as collateral to secure outstanding advances (see note 10).

4. LOANS

Loans consisted of the following at December 31, 2000 and 1999:

(Dollars in thousands)		2000		1999
Real estate:
	Mortgage—commercial	$	560,246	$	528,461
	Mortgage—residential		385,756		376,005
	Construction		72,521		45,703
Commercial, financial and agricultural			234,720		188,118
Consumer			43,639		37,912

			1,296,882		1,176,199
Less unearned income			5,692		5,723

	Total	$	1,291,190	$	1,170,476

Loans held for sale, consisting primarily of fixed-rate residential mortgage loans which were originated with the intent to sell, amounted to $1,045,000 and $3,010,000 at December 31, 2000 and 1999, respectively, and were valued at the lower of aggregate cost or market value.

In the normal course of business, the Bank has made loans to certain directors, executive officers and their affiliates under terms consistent with the Bank's general lending policies. An analysis of the activity of such loans in 2000 follows:

(Dollars in thousands)
Balance, beginning of year		$	6,587
Additions			1,097
Repayments			(2,433	)
Other changes			(699	)

	Balance, end of year	$	4,552

The amount of other changes is primarily attributable to the writedown of a loan to a not-for-profit organization on whose board certain officers and directors serve.

Impaired loans at December 31, 2000 and 1999, all of which had related allowance for loan losses established (see note 5), amounted to $11,304,000 and $6,089,000, respectively, and included all nonaccrual and restructured loans greater than $500,000. The average recorded investment in impaired loans amounted to $8,124,000 in 2000, $9,533,000 in 1999 and $20,199,000 in 1998. Interest income recognized on such loans amounted to $130,000 in 2000, $350,000 in 1999 and $749,000 in 1998, of which $93,000, $260,000 and $3,000, respectively, was earned on nonaccrual loans, and $37,000, $1,000, was recorded in 2000 and 1999, respectively, on restructured loans still accruing interest.

Nonaccrual loans at December 31, 2000 and 1999 totaled $8,524,000 and $9,695,000, respectively. The Bank collected and recognized interest income of $44,000 on nonaccrual loans in 2000. The Bank would have recognized additional interest income of $751,000 had these loans been accruing interest throughout 2000. Additionally, the Bank collected and recognized interest income of $155,000 on charged-off loans in 2000.

Restructured loans still accruing interest at December 31, 2000 and 1999 amounted to $466,000 and $500,000, respectively.

Substantially all of the Bank's loans are to residents of, or companies doing business in, the state of Hawaii and are generally secured by personal assets, business assets, residential properties or income-producing or commercial properties.

5. ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses were as follows:

(Dollars in thousands)		2000			1999			1998
Balance, beginning of year		$	20,768		$	20,066		$	19,164
Provision for loan losses			4,500			3,700			6,600

			25,268			23,766			25,764

Charge-offs			(3,592	)		(3,548	)		(6,581	)
Recoveries			936			550			883

	Net charge-offs		(2,656	)		(2,998	)		(5,698	)

	Balance, end of year	$	22,612		$	20,768		$	20,066

Changes in the allowance for loan losses for impaired loans (included in the above amounts) were as follows:

(Dollars in thousands)		2000			1999			1998
Balance, beginning of year		$	2,547		$	2,960		$	3,790
Provision for loan losses			14			2,615			2,555
Net charge-offs			(2,139	)		(2,175	)		(2,997	)
Other changes			2,786			(853	)		(388	)

	Balance, end of year	$	3,208		$	2,547		$	2,960

The amount of other changes represents the net transfer of allocated allowances for loans which were not classified as impaired for the entire year.

At December 31, 2000, all impaired loans were measured based on the fair value of the underlying collateral.

6. PREMISES AND EQUIPMENT

Premises and equipment consisted of the following at December 31, 2000 and 1999:

(Dollars in thousands)		2000		1999
Land		$	6,753	$	6,753
Office buildings and improvements			23,281		23,140
Furniture, fixtures and equipment			16,695		16,701

			46,729		46,594
Less accumulated depreciation and amortization			23,410		21,820

	Net	$	23,319	$	24,774

Depreciation and amortization of premises and equipment were charged to the following operating expenses:

(Dollars in thousands)		2000		1999		1998		Useful lives
Net occupancy		$	1,129	$	1,151	$	1,201	1 to 39 years
Equipment			1,569		1,697		1,778	1 to 20 years

	Total	$	2,698	$	2,848	$	2,979

7. INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES

CKSS ASSOCIATES

CPB Properties, Inc. is a general partner with a 50% interest in CKSS Associates, a limited partnership. The partnership developed an office building complex in Honolulu known as Central Pacific Plaza, part of which serves as the Company's headquarters. CPB Properties, Inc. contributed cash of $846,000 and land with a carrying value of $1,381,000. CPB Properties, Inc. recorded its contribution to the partnership at book value. The partnership has agreed to a value of $5,200,000 for the land and has credited the subsidiary with a contribution of $6,046,000. For accounting purposes, the difference between the $1,381,000 carrying value of the land and the $5,200,000 value of the land agreed upon by the partnership in determining the amount of the contribution would be recognized, if at all, only upon the sale of the subsidiary's interest in the partnership or upon the sale of the land and building by the partnership.

Financial information of CKSSAssociates is summarized as follows:

CKSS Associates
Condensed Balance Sheets
December 31, 2000 and 1999

(Dollars in thousands)			2000		1999
Assets:
	Office buildings and improvements (including land valued at $5,200)		$	35,966	$	37,172
	Furniture, fixtures and equipment			313		346
	Other assets			2,222		2,797

		Total assets	$	38,501	$	40,315

Liabilities and Partners'Equity:
	Notes payable		$	15,201	$	17,201
	Other liabilities			583		538
	Partners' equity			22,717		22,576

		Total liabilities and partners' equity	$	38,501	$	40,315

CKSS Associates
Condensed Statements of Income
Years ended December 31, 2000, 1999 and 1998

(Dollars in thousands)			2000		1999		1998
Revenues:
	Rental income from bank		$	1,982	$	1,890	$	1,903
	Other rental income and other revenues			6,321		6,351		6,234

		Total revenues		8,303		8,241		8,137
Total costs and expenses				7,162		7,134		7,137

		Net income	$	1,141	$	1,107	$	1,000

Notes Payable

At December 31, 2000, notes payable included $6,801,000 payable to The Sumitomo Bank, Limited ("Sumitomo"), a stockholder of CPB Inc., and $8,400,000 due to the Bank. The notes payable to

Sumitomo, due on June 18, 2001, are secured by a mortgage on Central Pacific Plaza. The notes payable to the Bank include $8,300,000 due on August 10, 2001, which is secured by a mortgage on the Kaimuki Plaza, and $100,000 due on April 10, 2001, which is secured by second mortgages on the Central Pacific Plaza and Kaimuki Plaza properties. The notes payable bear interest at either a fixed rate or a variable rate based upon the London Interbank Offered Rate ("LIBOR") or the Federal funds rate. The weighted average interest rate on these notes was 7.018% at December 31, 2000.

Operating Lease

In 1995 CKSS Associates completed its development of a four-story office building known as the Kaimuki Plaza in Kaimuki, on the island of Oahu, Hawaii, on land owned by CPB Properties, Inc. In 1992, CKSS Associates and CPB Properties, Inc. entered into a lease agreement effective from January 1, 1993 to December 31, 2047. This lease agreement has been accounted for as an operating lease. Fixed annual lease payments through 2007 are $300,000 for 2001 through 2002 and $360,000 for 2003 through 2007. Thereafter, and until the end of the lease term, minimum annual lease payments will be renegotiated to a rate not less than $360,000 per year. Lease rent paid to CPB Properties, Inc. totaled $300,000 during each of the years ended December 31, 2000, 1999 and 1998.

8. DEPOSITS

Certificates of deposit of $100,000 or more totaled $418,405,000 and $346,905,000 at December 31, 2000 and 1999, respectively.

Interest expense on certificates of deposit of $100,000 or more totaled $21,430,000, $16,132,000, and $16,640,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

9. SHORT-TERM BORROWINGS

Federal funds purchased generally mature on the day following the date of purchase.

Securities sold under agreements to repurchase with a weighted average contractual maturity of 53 days at December 31, 2000, were treated as financings, and the obligations to repurchase the identical securities sold were reflected as a liability with the dollar amount of securities underlying the agreements remaining in the asset accounts. At December 31, 2000, the underlying securities were held in a custodial account subject to Bank control.

Other short-term borrowings consist primarily of the Treasury Tax and Loan balance, which represents tax payments collected on behalf of the U.S. government, and FHLB short-term advances. The Treasury Tax and Loan balances bear market interest rates and are callable at any time.

A summary of short-term borrowings follows:

(Dollars in thousands)		2000			1999			1998
Federal funds purchased:
	Amount outstanding at December 31	$	—		$	—		$	—
	Average amount outstanding during year		5			3,266			998
	Highest month-end balance during year		—			34,000			—
	Weighted average interest rate on balances outstanding at December 31		—			—			—
	Weighted average interest rate during year		6.88	%		5.07	%		5.05	%

Securities sold under agreements to repurchase:
	Amount outstanding at December 31	$	19,267		$	1,000		$	1,000
	Average amount outstanding during year		10,167			1,548			2,342
	Highest month-end balance during year		19,267			1,000			2,500
	Weighted average interest rate on balances outstanding at December 31		6.65	%		5.55	%		4.70	%
	Weighted average interest rate during year		6.66	%		4.86	%		5.43	%

Other short-term borrowings:
	Amount outstanding at December 31	$	37,453		$	78,000		$	1,014
	Average amount outstanding during year		46,855			31,788			9,941
	Highest month-end balance during year		97,664			78,000			33,992
	Weighted average interest rate on balances outstanding at December 31		6.67	%		5.56	%		3.95	%
	Weighted average interest rate during year		6.50	%		5.31	%		5.50	%

10. LONG-TERM DEBT

Long-term debt at December 31, 2000 and 1999 consisted of intermediate-term FHLB advances with a weighted average interest rate of 6.532% and 6.029%, respectively. FHLB advances outstanding at December 31, 2000 were secured by interest-bearing deposits at the FHLB of $11.5 million, the Bank's holdings of FHLB stock, other unencumbered investment securities with a fair value of $176.7 million and certain real estate loans totaling $285.5 million in accordance with the collateral provisions of the Advances, Security and Deposit Agreement between the Bank and the FHLB. At December 31, 2000, the Bank had available to it additional unused FHLB advances of approximately $106.9 million.

At December 31, 2000, approximate maturities of FHLB advances were as follows:

(Dollars in thousands)
Year ending December 31:
	2001		$	43,565
	2002			60,027
	2003			24,463
	2004			59,861
	2005			20,425
	Thereafter			12,629

		Total	$	220,970

11. SHAREHOLDER RIGHTS PLAN

On August 26, 1998, the Company's board of directors adopted a Shareholder Rights Plan (the "Rights Plan") which entitled holders of common stock to receive one right for each share of common stock outstanding as of September 16, 1998. Each right entitles the registered holder to purchase from the Company one one-hundredth (1/100th) of a share of the Company's Junior Participating Preferred Stock, Series A, no par value per share, at a price of $75.00 per one one-hundredth (1/100th) of a share, subject to adjustment. The rights are exercisable only upon the occurrence of specific events and will expire on August 26, 2008. The Rights Plan was designed to ensure that shareholders receive fair and equal treatment in the event of unsolicited or coercive attempts to acquire the Company. The Rights Plan was also intended to guard against unfair tender offers and other abusive takeover tactics. The Rights Plan was not intended to prevent an acquisition bid for the Company on terms that are fair to all shareholders.

12. EMPLOYEE STOCK OWNERSHIP PLAN

The Bank has an employee stock ownership plan ("ESOP") and related trust covering substantially all full-time employees with at least one year of service. Normal vesting occurs at the rate of 20% per year starting the second year of participation. The Bank made contributions of $649,000, $1,280,000 and $1,241,000 for 2000, 1999 and 1998, respectively, which were charged to salaries and employee benefits. Effective January 1, 2000, contributions to the profit sharing plan and ESOP combined were reduced from 10% to 5% of defined net income.

13. STOCK OPTION PLANS

The Company has adopted stock option plans for the purpose of granting options to purchase CPB Inc. common stock to directors, officers and other key individuals. Options are granted with an exercise price equal to the stock's fair market value at the date of grant. All options have 10-year terms. Incentive stock options vest at the rate of 20% per year while nonqualified stock options, which do not qualify as incentive stock options ("nonqualified stock options"), vest annually over the respective periods.

In November 1986, the Company adopted the 1986 Stock Option Plan ("1986 Plan") making available 440,000 shares for grants to employees. In 1992, the Company's stockholders approved an increase to 1,040,000 shares for grants. The 1986 Plan expired in 1997, and no new options will be granted under this plan. Outstanding options may be exercised by optionees until the expiration of the respective options in accordance with the original terms of the 1986 Plan.

In February 1997, the Company adopted the 1997 Stock Option Plan ("1997 Plan") basically as a continuance of the previous plan for a 10-year term. In April 1997, the Company's stockholders approved the 1997 Plan which provides for 1,000,000 shares of the Company's common stock for grants to employees as qualified incentive stock options and to directors as nonqualified stock options. During 1997, in addition to employee grants, each director of the Company and the Bank received a grant based on 1,500 shares multiplied by the lesser of 10 years or the number of years to age 70. Vesting is 1,500 shares annually beginning a year from July 30, 1997, the date of grant.

The table below presents activity of the 1986 and 1997 Stock Option Plans for the years indicated. The per share weighted average fair value of options granted during 2000, 1999, 1997 and 1995 of $10.90, $9.53, $5.47 and $4.54, respectively, was determined using the Black Scholes option-pricing model with the following weighted average assumptions: expected dividend yield of 2.33%, 2.32%, 2.63% and 3.07%, expected volatility of 43%, 36%, 28% and 30%, risk-free interest rate of 5.04%,

6.25%, 5.45% and 6.10% and expected life of 7.5 years for 2000, 1999, 1997 and 1995, respectively. There were no grants in 1998 or 1996.

The following table presents information on options outstanding under the 1986 and 1997 Stock Option Plans:

Options outstanding
					Remaining average contractual life (months)	Options exercisable
	Exercise price					Options exercisable
Date of grant	Exercise price		Shares			Shares
July 8, 1992	$	12.725		72,739	18.3		72,739
June 14, 1995		13.04		78,220	53.5		78,220
July 30, 1997		17.875		204,700	79.0		75,040
November 2, 1999		24.175		79,000	106.1		15,800
November 7, 2000		26.15		68,400	118.2		—

Total				503,059			241,799

Weighted average life					59.8
Weighted average exercise price			$	14.94		$	15.17

	2000				1999				1998
	Shares		Weighted average exercise price		Shares		Weighted average exercise price		Shares		Weighted average exercise price
Outstanding at January 1	511,709		$	17.54	434,390		$	15.73	501,390		$	15.09
Granted	68,400			26.15	103,200			24.18	—			—
Exercised	(16,590	)		13.76	(20,421	)		13.29	(55,400	)		10.52
Forfeited	(60,460	)		20.40	(5,460	)		14.37	(11,600	)		12.73

Outstanding at December 31	503,059		$	14.94	511,709		$	17.54	434,390		$	15.73
Options exercisable at December 31	241,799			15.17	220,019			14.53	183,230			13.90
Shares available for future grants	878,360				946,760				1,049,960

The Company applied APB Opinion No. 25 in accounting for its stock option plans, and accordingly, no compensation cost was recognized for its options in the consolidated financial statements. The following table presents pro forma disclosures of the impact that the 2000, 1999, 1997 and 1995 option grants would have had on net income and earnings per share had the grants been measured using the fair value of accounting prescribed by SFAS No. 123.

(Dollars in thousands, except per share data)		2000		1999		1998
As reported:
	Net income	$	19,434	$	16,326	$	15,069
	Basic earnings per share		2.18		1.70		1.46
	Diluted earnings per share		2.14		1.68		1.45
Pro forma:
	Net income	$	19,113	$	16,090	$	14,851
	Basic earnings per share		2.14		1.68		1.44
	Diluted earnings per share		2.10		1.66		1.43

Pro forma net income and earnings per share reflect only those options granted since 1995. Therefore, the full impact of calculating compensation cost for options under SFAS No. 123 is not reflected in the pro forma net income and earnings per share amounts presented above because

compensation cost is reflected over the options' vesting period of five years and compensation cost for options granted prior to January 1, 1995 is not considered.

14. SHARE PURCHASE AGREEMENT

On December 16, 1986, the Company's stockholders ratified a Share Purchase Agreement which gives Sumitomo the right to purchase newly issued common stock of the Company for the purpose of maintaining its pro rata ownership interest in the Company. Pursuant to the agreement, warrants were issued giving Sumitomo the right to purchase shares at fair market value at the time such warrants are exercised, contingent upon the exercise of stock options by the optionees and subject to the approval of the Federal Reserve Board. At December 31, 2000, Sumitomo held exercisable warrants for 48,860 shares and warrants for 25,821 shares which will be exercisable as stock options are exercised by the optionees. All warrants will expire on June 14, 2006. No warrants were exercised during the three-year period ended December 31, 2000.

15. PENSION PLANS

The Bank has a defined benefit retirement plan covering substantially all of its employees. The plan was curtailed in 1986, and accordingly, plan benefits were fixed as of that date.

The Bank also had a money purchase pension plan which covered all full-time employees with at least one year of service. This plan was terminated in 1991 as part of a review of the employee benefits program. Participants in the money purchase pension plan became fully vested at the time of termination.

Effective January 1, 1991, the Bank reactivated its defined benefit retirement plan to address changes brought about by the Omnibus Reconciliation Act of 1990 and to provide a more competitive employee benefit program. As a result of the reactivation, employees for whom benefits became fixed in 1986 continued to accrue additional benefits under the new formula that became effective on January 1, 1991. Employees who were not participants at curtailment, but were subsequently eligible to join, became participants effective January 1, 1991. Under the reactivated plan, benefits are based upon the employees' years of service and their highest average annual salaries in a 60-consecutive-month period of service, reduced by benefits provided from the Bank's terminated money purchase pension plan. The reactivation of the defined benefit retirement plan on January 1, 1991 resulted in an increase of $5,914,000 in the unrecognized prior service cost, which is being amortized over a period of 13 years.

The following table sets forth information pertaining to the defined benefit retirement plan for the years ended December 31, 2000, 1999 and 1998:

(Dollars in thousands)			2000			1999			1998
Change in benefit obligation:
	Benefit obligation at January 1		$	21,082		$	23,285		$	22,221
	Service cost			203			203			304
	Interest cost			1,624			1,549			1,612
	Actuarial loss (gain)			1,697			(2,369	)		685
	Benefits paid			(1,689	)		(1,586	)		(1,537	)

		Benefit obligation at December 31	$	22,917		$	21,082		$	23,285

Benefit obligation actuarial assumptions:
	Weighted average discount rate			7.50	%		8.00	%		7.00	%
	Weighted average rate of compensation increase			3.00			3.00			3.00

Change in plan assets:
	Fair value of assets at January 1		$	24,409		$	22,737		$	22,086
	Actual return on plan assets			(329	)		3,016			2,188
	Employer contributions			—			242			—
	Benefits paid			(1,689	)		(1,586	)		(1,537	)

		Fair value of assets at December 31	$	22,391		$	24,409		$	122,737

Funded status:
	Benefit obligation at December 31		$	(22,917	)	$	(21,082	)	$	(23,285	)
	Fair value of plan assets			22,391			24,409			22,737
	Unrecognized transition asset			—			(46	)		(91	)
	Unamortized prior service cost			(844	)		(569	)		(294	)
	Unrecognized net actuarial loss			4,520			368			3,909

		Prepaid benefit cost	$	3,150		$	3,080		$	2,976

Components of net periodic cost (benefit):
	Service cost		$	203		$	203		$	304
	Interest cost			1,624			1,549			1,612
	Expected return on plan assets			(2,125	)		(1,987	)		(1,922	)
	Amortization of unrecognized transition asset			(46	)		(46	)		(46	)
	Recognized prior service cost			275			275			275
	Recognized net loss			—			143			96

		Net periodic cost (benefit)	$	(69	)	$	137		$	319

Net periodic cost actuarial assumptions:
	Weighted average discount rate			7.50	%		8.00	%		7.50	%
	Weighted average rate of compensation increase			3.00			3.00			3.00
	Expected long-term rate of return on plan assets			9.00			9.00			9.00

In January 1995, the Bank established a Supplemental Executive Retirement Plan ("SERP") which provides certain officers of the Bank with supplemental retirement benefits in excess of limits imposed on qualified plans by Federal tax law.

The following table sets forth information pertaining to the SERP for the years ended December 31, 2000, 1999 and 1998:

(Dollars in thousands)			2000			1999			1998
Change in benefit obligation:
	Benefit obligation at January 1		$	629		$	682		$	611
	Service cost			12			14			7
	Interest cost			50			48			46
	Actuarial loss (gain)			123			(68	)		65
	Benefits paid			(47	)		(47	)		(47	)

		Benefit obligation at December 31	$	767		$	629		$	682

Change in plan assets:
	Fair value of assets at January 1		$	—		$	—		$	—
	Employer contributions			47			47			47
	Benefits paid			(47	)		(47	)		(47	)

		Fair value of assets at December 31	$	—		$	—		$	—

Funded status:
	Benefit obligation at December 31		$	(767	)	$	(629	)	$	(682	)
	Unrecognized transition obligation			17			20			22
	Unrecognized net actuarial loss			139			4			82

		Accrued benefit cost	$	(611	)	$	(605	)	$	(578	)

Components of net periodic cost:
	Service cost		$	212		$	614		$	617
	Interest cost			50			48			46
	Amortization of unrecognized transition obligation			3			3			3
	Recognized net (gain) loss			(13	)		10			(1	)

		Net periodic cost	$	152		$	675		$	655

Actuarial assumptions, including weighted average discount rates and rates of compensation increase, were consistent with the rates used for the defined benefit retirement plan.

16. PROFIT SHARING AND 401(K) PLANS

The Bank's profit sharing plan covers substantially all employees with at least one year of service. The board of directors has sole discretion in determining the annual contribution to the plan, subject to limitations of the Internal Revenue Code. Employees may elect to receive up to 50% of their annual allocation in cash. The Bank made contributions of $649,000, $853,000 and $826,000 for 2000, 1999 and 1998, respectively.

Effective March 31, 1996, the profit sharing plan was merged with an existing employee-funded 401(k) plan which allows employees to direct their own investments. Effective September 1, 1996, the Bank instituted a 50% employer-matching program for the 401(k) plan, contributing up to 2% of qualifying employees' salaries. Bank contributions to the 401(k) plan totaled $651,000, $334,000 and $318,000 in 2000, 1999 and 1998, respectively.

Effective January 1, 2000, combined contributions to the profit sharing plan and ESOP were reduced from 10% to 5% of defined net income, while contributions to the Bank's 401(k) plan increased from 50% to 100% of employee contributions up to 4% of the employee's salary.

17. OPERATING LEASES

The Bank occupies a number of properties under leases which expire on various dates through 2038 and, in most instances, provide for renegotiation of rental terms at fixed intervals. These leases generally contain renewal options for periods ranging from 5 to 15 years.

Total rent expense represents gross rent expense less the net operating income from Company—owned properties of $499,000, $544,000 and $459,000 for 2000, 1999 and 1998, respectively.

Net rent expense, charged to net occupancy expense, for all operating leases is summarized as follows:

(Dollars in thousands)			2000			1999			1998
Total rent expense			$	4,635		$	4,566		$	4,661
	Less sublease rental income			(188	)		(289	)		(295	)

		Net	$	4,447		$	4,277		$	4,366

The following is a schedule of future minimum rental commitments for all noncancellable operating leases that had initial lease terms in excess of one year at December 31, 2000:

(Dollars in thousands)			Rental commitment		Less sublease rental income			Net rental commitment
Year ending December 31:
	2001		$	3,828	$	(43	)	$	3,785
	2002			3,451		(18	)		3,433
	2003			3,170		—			3,170
	2004			2,905		—			2,905
	2005			2,618		—			2,618
	Thereafter			13,583		—			13,583

		Total	$	29,555	$	(61	)	$	29,494

Rental commitments include $10,260,000 in commitments to CKSS Associates by the Bank for office space in the Central Pacific Plaza and Kaimuki Plaza buildings.

In addition, the Bank and CPB Properties, Inc. lease certain properties that they own. The following is a schedule of future minimum rental income for those noncancellable operating leases that had initial lease terms in excess of one year at December 31, 2000:

(Dollars in thousands)
Year ending December 31:
	2001		$	1,031
	2002			853
	2003			690
	2004			589
	2005			551
	Thereafter			15,886

		Total	$	19,600

In instances where the lease calls for a renegotiation of rental payments, the lease rental payment in effect prior to renegotiation was used throughout the remaining lease term.

18. OTHER EXPENSE

Components of other expense for the years ended December 31, 2000, 1999 and 1998 were as follows:

(Dollars in thousands)		2000		1999		1998
Legal and other professional services		$	2,433	$	1,467	$	1,413
Computer software			1,408		1,353		1,235
Advertising			1,300		1,200		1,245
Merchant and bank card services			365		3,441		2,695
Other			9,957		9,094		8,991

	Total	$	15,463	$	16,555	$	15,579

19. INCOME AND FRANCHISE TAXES

Components of income tax expense (benefit) for the years ended December 31, 2000, 1999 and 1998 were as follows:

(Dollars in thousands)			Current		Deferred			Total
2000:
	Federal		$	15,933	$	(7,448	)	$	8,485
	State			3,639		(1,539	)		2,100

		Total	$	19,572	$	(8,987	)	$	10,585

1999:
	Federal		$	3,297	$	3,580		$	6,877
	State			337		837			1,174

		Total	$	3,634	$	4,417		$	8,051

1998:
	Federal		$	7,962	$	(734	)	$	7,228
	State			1,876		(137	)		1,739

		Total	$	9,838	$	(871	)	$	8,967

Income tax expense amounted to $10,585,000, $8,051,000 and $8,967,000 for 2000, 1999 and 1998, respectively. Income tax expense for the periods presented differed from the "expected" tax expense (computed by applying the U.S. Federal corporate tax rate of 35% to income before income taxes) for the following reasons:

(Dollars in thousands)			2000			1999			1998
Computed "expected" tax expense			$	10,507		$	8,532		$	8,413
Increase (decrease) in taxes resulting from:
	Tax-exempt interest			(1,149	)		(842	)		(708	)
	Other tax-exempt income			(437	)		(267	)		(128	)
	State franchise tax, net of Federal income tax benefit			1,365			763			1,130
	Other			299			(135	)		260

		Total	$	10,585		$	8,051		$	8,967

At December 31, 2000, current Federal income taxes payable of $8,729,000 and current state franchise taxes payable of $7,761,000 were included in other liabilities. At December 31, 1999, current Federal income taxes receivable of $1,912,000 were included in other assets, and current state franchise taxes payable of $3,953,000 were included in other liabilities.

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2000 and 1999 were as follows:

(Dollars in thousands)			2000		1999
Deferred tax assets:
	Allowance for loan losses		$	7,374	$	6,772
	Net unrealized gain on available-for-sale securities			2,035		—
	Employee retirement benefits			1,834		1,861
	State franchise tax			1,194		570
	Premises and equipment, principally due to differences in depreciation			1,089		86
	Interest on nonaccrual loans			1,004		749
	Accrued expenses			639		1,175
	Other			461		165

		Total deferred tax assets	$	15,630	$	11,378

Deferred tax liabilities:
	FHLB stock dividends received			4,121		3,623
	Deferred gain on curtailed retirement plan			2,771		2,771
	Deferred finance fees			991		650
	Investment in unconsolidated subsidiaries			683		802
	Accreted discounts receivable			432		279
	Net unrealized loss on available-for-sale securities			—		1,827
	Other			231		150

		Total deferred tax liabilities	$	9,229	$	10,102

		Net deferred tax assets	$	6,401	$	1,276

In assessing the realizability of deferred tax assets, Management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers projected

future taxable income and tax planning strategies in making this assessment. There was no valuation allowance for deferred tax assets as of December 31, 2000 and 1999.

In 1998, the Company completed a corporate reorganization which was intended to reduce the Company's overall effective tax rate. The Company believes that the associated tax benefits are realizable; however, the state of Hawaii has indicated that it may challenge the tax treatment of this reorganization. Estimated tax benefits which have not yet been recognized amounted to approximately $3,600,000 as of December 31, 2000.

20. COMPREHENSIVE INCOME

Components of other comprehensive income for the years ended December 31, 2000, 1999 and 1998 were comprised solely of unrealized holding (losses) gains on available-for-sale investment securities. Accumulated other comprehensive income, net of taxes, is presented below as of the dates indicated:

(Dollars in thousands)		2000			1999			1998
Balance at beginning of year		$	(2,745	)	$	627		$	94
Current-year change			5,805			(3,372	)		533

	Balance at end of year	$	(3,060	)	$	(2,745	)	$	627

21. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing net income by the weighted average number of shares outstanding. Stock options and share purchase agreement warrants are considered common stock equivalents for purposes of calculating diluted earnings per share.

(In thousands, except per share data)			2000		1999		1998
Basic earnings per share computation
	Numerator:
		Income available to common stockholders	$	19,434	$	16,326	$	15,069
	Denominator:
		Weighted average common shares outstanding		8,917		9,630		10,354
	Basic earnings per share		$	2.18	$	1.70	$	1.46

Diluted earnings per share computation
	Numerator:
		Income available to common stockholders	$	19,434	$	16,326	$	15,069
	Denominator:
		Weighted average common shares outstanding		8,917		9,630		10,354
		Incremental shares from conversion of options and share purchase agreement warrants		149		110		78

				9,066		9,740		10,432
	Diluted earnings per share		$	2.14	$	1.68	$	1.45

22. CONTINGENT LIABILITIES AND OTHER COMMITMENTS

The Company and its subsidiary are involved in legal actions arising in the ordinary course of business. Management, after consultation with legal counsel, believes the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial statements.

In the normal course of business, there are outstanding contingent liabilities and other commitments, such as unused letters of credit, items held for collection and unsold traveler's checks, which are not reflected in the accompanying consolidated financial statements. Management does not anticipate any material losses as a result of these transactions.

23. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees written, and forward foreign exchange contracts. Those instruments involve, to varying degrees, elements of credit, interest rate and foreign exchange risk in excess of the amounts recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments.

The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit and financial guarantees written is represented by the contractual amount of those instruments. For forward foreign exchange contracts, the contract amounts do not represent exposure to credit loss. The Bank controls the credit risk of its forward foreign exchange contracts through credit approvals, limits and monitoring procedures. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

At December 31, 2000 and 1999 financial instruments with off-balance sheet risk were as follows:

(Dollars in thousands)		2000		1999
Financial instruments whose contract amounts represent credit risk:
	Commitments to extend credit	$	307,763	$	322,464
	Standby letters of credit and financial guarantees written		20,390		12,864

Financial instruments whose contract amounts exceed the amount of credit risk:
	Forward foreign exchange contracts	$	161	$	243

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on Management's credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Standby letters of credit and financial guarantees written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds collateral supporting those commitments for which collateral is deemed necessary.

Forward foreign exchange contracts represent commitments to purchase or sell foreign currencies at a future date at a specified price. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movements in foreign currency exchange rates.

24. FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," as amended by SFAS No. 119, requires that the Company disclose estimated fair values for its financial instruments. Fair value estimates, methods and assumptions are set forth below for the Company's financial instruments.

Short-Term Financial Instruments

The carrying values of short-term financial instruments are deemed to approximate fair values. Such instruments are considered readily convertible to cash and include cash and due from banks, interest-bearing deposits in other banks, Federal funds sold, accrued interest receivable, due from customers on acceptances, short-term borrowings, bank acceptances outstanding and accrued interest payable.

Investment Securities

The fair value of investment securities is based on market price quotations received from securities dealers. Where quoted market prices are not available, fair values are based on quoted market prices of comparable securities. The equity investment in common stock of the FHLB, which is redeemable for cash at par value, is reported at its par value.

Loans

The fair value of loans is estimated based on discounted cash flows of portfolios of loans with similar financial characteristics including the type of loan, interest terms and repayment history. The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risks inherent in the loans. Assumptions regarding credit risk, cash flows, and discount rates are judgmentally determined using available market information and specific borrower information.

Deposit Liabilities

The fair values of deposits with no stated maturity, such as noninterest-bearing demand deposits and interest-bearing demand and savings accounts, are equal to the amount payable on demand. The

fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

				December 31, 2000					December 31, 1999
(Dollars in thousands)				Carrying/ notional amount		Estimated fair value			Carrying/ notional amount		Estimated fair value
Financial assets:
	Cash and due from banks			$	52,207	$	52,207		$	83,425	$	83,425
	Interest-bearing deposits in other banks				11,506		11,506			9,828		9,828
	Federal funds sold				15,000		15,000			—		—
	Investment securities				384,619		385,129			321,670		319,911
	Net loans				1,268,578		1,267,252			1,149,708		1,133,756
	Accrued interest receivable				10,646		10,646			9,606		9,606
	Due from customers on acceptances				—		—			12		12
Financial liabilities:
	Deposits:
		Noninterest-bearing deposits			199,625		199,625			204,850		204,850
		Interest-bearing demand and savings deposits			487,208		487,208			537,059		537,059
		Time deposits			676,233		678,337			563,745		562,394
			Total deposits		1,363,066		1,365,170			1,305,654		1,304,303
	Short-term borrowings				56,720		56,720			79,000		79,000
	Long-term debt				220,970		224,391			98,279		96,231
	Bank acceptances outstanding				—		—			12		12
	Accrued interest payable (included in other liabilities)				7,648		7,648			5,303		5,303
Off-balance sheet financial instruments:
	Commitments to extend credit				307,763		1,539			322,464		1,019
	Standby letters of credit and financial guarantees written				20,390		153			12,864		97
	Forward foreign exchange contracts				161		(1	)		43		—

Long-Term Debt

The fair value of FHLB advances is estimated by discounting scheduled cash flows over the contractual borrowing period at the estimated market rate for similar borrowing arrangements.

Off-Balance Sheet Financial Instruments

The fair values of off-balance sheet financial instruments are estimated based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties, current settlement values or quoted market prices of comparable instruments.

Limitations

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Bank's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Bank's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are

subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of future business and the value of assets and liabilities that are not considered financial instruments. For example, significant assets and liabilities that are not considered financial assets or liabilities include deferred tax assets, premises and equipment and intangible assets. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in many of the estimates.

25. DECLARATION OF DIVIDENDS

The Company's board of directors, at a special meeting held on December 18, 2000, declared a fourth quarter cash dividend of $0.16 per share, in addition to the three quarterly cash dividends previously declared, for a total of $0.61 per share for the year ended December 31, 2000.

26. SEGMENT INFORMATION

The Company has three reportable segments: retail banking, commercial finance and treasury. The segments reported are consistent with internal functional reporting lines. They are managed separately because each unit has different target markets, technological requirements, marketing strategies and specialized skills. The retail banking segment includes all retail branch offices. Products and services offered include checking, savings, money market and time deposits; real estate, commercial and consumer loans; safe deposit boxes; and various other bank services. The commercial finance segment focuses on lending to corporate customers; construction and real estate development lending; and international banking services. The treasury segment is responsible for managing the Company's investment securities portfolio and wholesale funding activities.

The accounting policies of the segments are consistent with those described in note 1. The majority of the Company's net income is derived from net interest income. Accordingly, Management focuses primarily on net interest income (expense), rather than gross interest income and expense amounts, in evaluating segment profitability. Intersegment net interest income (expense) is allocated to each segment based on the amount of net investable funds provided (used) by that segment at a rate equal to the Bank's average rate on interest-sensitive assets and liabilities. All administrative and overhead expenses are allocated to the segments at cost. Cash, investment securities, loans and their related balances are allocated to the segment responsible for acquisition and maintenance of those assets. Segment assets also include all premises and equipment used directly in segment operations.

Segment profits and assets are provided in the following table for the periods indicated.

(Dollars in thousands)			Retail Banking			Commercial Finance			Treasury			All Others			Total
Year ended December 31, 2000:
	Net interest income (expense)		$	(11,999	)	$	63,050		$	4,798		$	15,552		$	71,401
	Intersegment net interest income (expense)			43,328			(35,872	)		2,762			(10,218	)		—
	Provision for loan losses			922			2,577			—			1,001			4,500
	Other operating income			3,817			537			(624	)		8,980			12,710
	Other operating expense			14,937			2,720			495			31,440			49,592
	Administrative and overhead expense allocation			15,003			4,240			354			(19,597	)		—
	Income taxes			1,466			6,349			2,138			632			10,585

		Net income	$	2,818		$	11,829		$	3,949		$	838		$	19,434

At December 31, 2000:
	Investment securities		$	—		$	—		$	384,619		$	—		$	384,619
	Loans			169,839			944,436			—			176,915			1,291,190
	Other			19,906			21,841			73,432			25,930			141,109

		Total assets	$	189,745		$	966,277		$	458,051		$	202,845		$	1,816,918

Year ended December 31, 1999:
	Net interest income (expense)		$	(8,762	)	$	56,193		$	7,378		$	14,085		$	68,894
	Intersegment net interest income (expense)			45,060			(36,735	)		772			(9,097	)		—
	Provision for loan losses			405			1,936			—			1,359			3,700
	Other operating income			4,614			77			(196	)		8,136			12,631
	Other operating expense			15,602			2,128			344			35,374			53,448
	Administrative and overhead expense allocation			18,165			3,124			338			(21,627	)		—
	Income taxes			2,224			3,962			2,481			(616	)		8,051

		Net income (loss)	$	4,516		$	8,385		$	4,791		$	(1,366	)	$	16,326

At December 31, 1999:
	Investment securities		$	—		$	—		$	321,670		$	—		$	321,670
	Loans			290,183			701,236			—			179,057			1,170,476
	Other			30,091			18,439			46,567			59,248			154,345

		Total assets	$	320,274		$	719,675		$	368,237		$	238,305		$	1,646,491

Year ended December 31, 1998:
	Net interest income (expense)		$	(9,284	)	$	51,492		$	8,514		$	14,365		$	65,087
	Intersegment net interest income (expense)			44,926			(35,976	)		(334	)		(8,616	)		—
	Provision for loan losses			1,202			3,463			—			1,935			6,600
	Other operating income			4,356			130			283			12,053			16,822
	Other operating expense			15,994			2,900			311			32,068			51,273
	Administrative and overhead expense allocation			16,177			2,085			1,064			(19,326	)		—
	Income taxes			2,493			2,697			2,589			1,188			8,967

		Net income	$	4,132		$	4,501		$	4,499		$	1,937		$	15,069

At December 31, 1998:
	Investment securities		$	—		$	—		$	351,436		$	—		$	351,436
	Loans			286,221			671,784			—			147,907			1,105,912
	Other			23,291			16,490			34,741			29,015			103,537

		Total assets	$	309,512		$	688,274		$	386,177		$	176,922		$	1,560,885

27. PARENT COMPANY AND REGULATORY RESTRICTIONS

At December 31, 2000, retained earnings of the parent company, CPB Inc., included $93,849,000 of equity in undistributed income of the Bank.

The Bank, as a Hawaii state-chartered bank, is prohibited from declaring or paying dividends greater than its retained earnings. As of December 31, 2000, retained earnings of the Bank totaled $95,196,000.

Section 131 of the Federal Deposit Insurance Corporation Improvement Act ("FDICIA") required the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Comptroller of the Currency and the Office of Thrift Supervision (collectively, the "Agencies") to develop a mechanism to take prompt corrective action to resolve the problems of insured depository institutions. The final rules to implement FDICIA's Prompt Corrective Action provisions established minimum regulatory capital standards to determine an insured depository institution's capital category. However, the Agencies may impose higher minimum standards on individual institutions or may downgrade an institution from one capital category to a lower capital category because of safety and soundness concerns.

The Prompt Corrective Action provisions impose certain restrictions on institutions that are undercapitalized. The restrictions become increasingly more severe as an institution's capital category declines from undercapitalized to critically undercapitalized. As of December 31, 2000 and 1999, the Bank's regulatory capital ratios exceeded the minimum thresholds for a "well-capitalized" institution.

The following table sets forth actual and required capital and capital ratios for the Company and the Bank as of the dates indicated:

		Actual				Minimum required for capital adequacy purposes				Minimum required to be well-capitalized
(Dollars in thousands)		Amount		Ratio		Amount		Ratio		Amount		Ratio
Company:
As of December 31, 2000:
	Tier I risk-based capital	$	140,222	9.63	%	$	58,215	4.00	%	$	87,323	6.00	%
	Total risk-based capital		158,469	10.89			116,431	8.00			145,539	10.00
	Leverage capital		140,222	7.97			70,362	4.00			87,953	5.00
As of December 31, 1999:
	Tier I risk-based capital	$	146,703	11.24	%	$	52,199	4.00	%	$	78,298	6.00	%
	Total risk-based capital		163,070	12.50			104,397	8.00			130,497	10.00
	Leverage capital		146,703	9.00			65,198	4.00			81,498	5.00

Bank:
As of December 31, 2000:
	Tier I risk-based capital	$	136,563	9.38	%	$	58,237	4.00	%	$	87,356	6.00	%
	Total risk-based capital		154,817	10.63			116,475	8.00			145,594	10.00
	Leverage capital		136,563	7.77			70,269	4.00			87,837	5.00
As of December 31, 1999:
	Tier I risk-based capital	$	136,345	10.47	%	$	52,093	4.00	%	$	78,140	6.00	%
	Total risk-based capital		152,680	11.72			104,187	8.00			130,234	10.00
	Leverage capital		136,345	8.38			65,118	4.00			81,397	5.00

Condensed financial statements, solely of the parent company, CPB Inc., follow:

CPB Inc.
Condensed Balance Sheets
December 31, 2000 and 1999

(Dollars in thousands)			2000		1999
Assets:
	Cash		$	1,407	$	8,381
	Investment securities available for sale			2,250		1,969
	Investment in subsidiary bank, at equity in underlying net assets			139,635		133,725
	Dividends receivable from subsidiary bank			1,355		1,320
	Accrued interest receivable and other assets			83		71

		Total assets	$	144,730	$	145,466

Liabilities and Stockholders' Equity:
	Dividends payable		$	1,354	$	1,300
	Other liabilities			64		87

		Total liabilities		1,418		1,387

Stockholders' equity:
	Preferred stock, no par value, authorized 1,000,000 shares, none issued			—		—
	Common stock, no par value, authorized 50,000,000 shares; issued and outstanding 8,464,468 and 9,288,457 shares at December 31, 2000 and 1999, respectively			6,172		6,540
	Surplus			45,848		45,848
	Retained earnings			88,232		94,436
	Accumulated other comprehensive income (loss)			3,060		(2,745	)

		Total stockholders' equity		143,312		144,079

		Total liabilities and stockholders' equity	$	144,730	$	145,466

CPB Inc.
Condensed Statements of Income
Years ended December 31, 2000, 1999 and 1998

(Dollars in thousands)			2000			1999			1998
Income:
	Dividends from subsidiary bank		$	5,458		$	5,322		$	6,801
	Equity in loss from unconsolidated subsidiary			—			(78	)		(80	)
	Interest income:
		Interest on investment securities		189			78			55
		Interest from subsidiary bank		174			253			271
		Investment securities losses		(83	)		—			—

		Total income		5,738			5,575			7,047
Total expenses				398			346			339

	Income before income taxes and equity in undistributed income of subsidiary bank			5,340			5,229			6,708
Income taxes				(24	)		(37	)		(37	)

	Income before equity in undistributed income of subsidiary bank			5,364			5,266			6,745
Equity in undistributed income of subsidiary bank				14,070			11,060			8,324

	Net income		$	19,434		$	16,326		$	15,069

CPB Inc.
Condensed Statements of Cash Flows
Years ended December 31, 2000, 1999 and 1998

(Dollars in thousands)				2000			1999			1998
Cash flows from operating activities:
	Net income			$	19,434		$	16,326		$	15,069
	Adjustments to reconcile net income to net cash provided by operating activities:
		Deferred income tax (benefit) expense			(69	)		16			10
		Increase in dividends receivable from subsidiary bank			(35	)		(45	)		(1,275	)
		Equity in undistributed income of subsidiary bank			(14,070	)		(11,060	)		(8,324	)
		Other, net			109			120			54

			Net cash provided by operating activities		5,369			5,357			5,534

Cash flows from investing activities:
	Proceeds from maturities of investment securities available for sale				—			—			760
	Purchases of investment securities available for sale				(333	)		—			(1,242	)
	Investment in and advances to subsidiaries				(1,058	)		(30	)		(60	)
	Distribution of capital by subsidiary bank				15,000			12,000			13,988

			Net cash provided by investing activities		13,609			11,970			13,446

Cash flows from financing activities:
	Proceeds from sale of common stock				229			271			583
	Repurchases of common stock				(20,865	)		(11,971	)		(14,526	)
	Dividends paid				(5,316	)		(5,215	)		(5,436	)

			Net cash used in financing activities		(25,952	)		(16,915	)		(19,379	)

			Net (decrease) increase in cash and cash equivalents		(6,974	)		412			(399	)

Cash and cash equivalents:
	At beginning of year				8,381			7,969			8,368

	At end of year			$	1,407		$	8,381		$	7,969

28. ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement No. 133, an Amendment of SFAS Statement No. 133," which deferred the effective date of SFAS No. 133. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," an amendment of FASB Statement No. 133." SFAS No. 138 amends the accounting and reporting standards of SFAS No. 133 for certain derivative instruments and certain hedging activities. SFAS No. 133, as amended, is now effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The application of SFAS No. 133, as amended, effective from January 1, 2001, did not have a material impact on the Company's consolidated financial statements.

In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140 supersedes and replaces SFAS No. 125 of the same name and provides accounting and reporting guidance for transfers and servicing of financial assets and extinguishments of liabilities. The provisions of SFAS No. 140 are to be applied prospectively to transactions occurring after March 31, 2001. The application of SFAS No. 140 is not expected to have a material impact on the Company's consolidated financial statements.

INDEPENDENT AUDITORS' REPORT

The Stockholders and Board of Directors of CPB Inc.:

We have audited the accompanying consolidated balance sheets of CPB Inc. and subsidiary as of December 31, 2000 and 1999, and the related consolidated statements of income, changes in stockholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CPB Inc. and subsidiary as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.

Honolulu, Hawaii
January 23, 2001

COMMON STOCK PRICE RANGE AND DIVIDENDS

The Company's common stock is traded on the Nasdaq National Market ("Nasdaq") under the symbol "CPBI." The following table sets forth quarterly per share information for the high and low sales prices of the common stock for 2000 and 1999 as reported by Nasdaq and cash dividends declared for those years.

			High		Low		Cash dividends declared
2000:
	First quarter		$	29.13	$	22.00	$	0.15
	Second quarter			29.25		20.75		0.15
	Third quarter			27.00		24.00		0.15
	Fourth quarter			28.31		24.25		0.16

		Year	$	29.25	$	20.75	$	0.61

1999:
	First quarter		$	18.00	$	16.56	$	0.13
	Second quarter			27.00		17.63		0.14
	Third quarter			26.50		21.38		0.14
	Fourth quarter			29.13		22.13		0.14

		Year	$	29.13	$	16.56	$	0.55

The closing price of the common stock as of January 31, 2001 as reported by Nasdaq was $28.31 per share.

On January 31, 2001, there were approximately 2,089 stockholders of record of the common stock, excluding individuals and institutions for whom shares were held in the names of nominees and brokerage firms.

The Company and its predecessor have paid regular semi-annual cash dividends on the common stock since 1958. Beginning in 1988, the Company commenced paying regular quarterly cash dividends. It is the present intention of the Company's board of directors to continue to pay regular quarterly cash dividends. However, since substantially all of the funds available for the payment of dividends are derived from Central Pacific Bank, future dividends will depend upon the Bank's earnings, its financial condition, its capital needs, applicable governmental policies and regulations and such other matters as the Company's board of directors may deem to be appropriate.

CORPORATE ORGANIZATION

CPB Inc. is a Hawaii corporation organized on February 1, 1982 as a bank holding company pursuant to a Plan of Reorganization and Agreement of Merger and is subject to the Bank Holding Company Act of 1956, as amended. CPB Inc.'s principal business is to serve as a holding company for its subsidiary, Central Pacific Bank. The Bank was incorporated in its present form in the state of Hawaii on March 16, 1982 in connection with the holding company reorganization, and its predecessor entity was incorporated in the state of Hawaii on January 15, 1954. The Bank's deposits are insured by the Federal Deposit Insurance Corporation up to applicable limits. Central Pacific Bank is not a member of the Federal Reserve System, but is a member of the Federal Home Loan Bank of Seattle.

Central Pacific Bank owns 100% of the outstanding stock of CPB Properties, Inc., the general and managing partner and 50% owner of CKSS Associates, a Hawaii limited partnership. CKSS Associates owns Central Pacific Plaza in fee, which is where CPB Inc. and Central Pacific Bank's administrative headquarters and Main Branch offices are located. CKSS Associates also owns the Kaimuki Plaza

building where the Bank's Kaimuki Branch office is located. CPB Properties, Inc. holds the fee interest in the land underlying Kaimuki Plaza. CPB Properties, Inc. also owns in leasehold University Square, the building where the Bank's Moiliili Branch office is located. Central Pacific Bank owns the land and buildings where its Hilo and Kailua-Kona Branch offices are located and the building where its Operations Center facility is located.

Central Pacific Bank owns 99.8% and CPB Inc. owns 0.2% of the outstanding common stock of CPB Real Estate, Inc., which aquires, holds and manages real estate mortgage loans and mortgage-backed securites. CPB Real Estate, Inc. was incorporated in 1998.

BANKING SERVICES

Central Pacific Bank is a full-service commercial bank with 24 branch offices statewide, including five supermarket branches which offer extended hours, seven days a week. Twenty branches are located on the island of Oahu. The Bank also operates two branches on the island of Hawaii, one on the island of Kauai, and a branch on the island of Maui. Its administrative offices are located in Honolulu.

The Bank's services include personal and business deposit instruments; commercial, consumer and real estate loans; debit and credit card services; traveler's checks; safe deposit boxes; international banking services; wire transfer services; ATM, Internet banking services and other electronic banking services; and trust, investment and life insurance services.

CORPORATE HEADQUARTERS

220 South King Street
Honolulu, Hawaii • 96813-4538

Mailing Address: P.O. Box 3590
Honolulu, Hawaii • 96811-3590

Telephone: (808) 544-0500
Fax: (808) 531-2875

SWIFT: CEPBUS77
FEDWIRE: CENT PAC HONO 121301578
MCI Telex: 634261 CENPAC

Web site: www.cpbi.com
NASDAQ Symbol: CPBI

Shareholders having inquiries about their account, lost stock certificate, dividend checks or change of address may contact American Stock Transfer & Trust Company by calling toll-free 1-800-937-5449 between 8 a.m. and 5 p.m. (eastern standard time), Monday through Friday. Send written correspondence to American Stock Transfer & Trust Company, 40 Wall Street, New York, NY 10005 or visit their Web site at www.amstock.com.

Shareholders may obtain without charge a copy of the Company's Annual Report on Form 10-K including financial statements required to be filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2000, by writing to: Austin Y. Imamura, Vice President and Secretary, CPB Inc., P.O. Box 3590, Honolulu, Hawaii 96811-3590. This report is also available on the Company's Web site at www.cpbi.com.

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TABLE OF CONTENTS
FINANCIAL HIGHLIGHTS

MESSAGE TO SHAREHOLDERS

BOARD OF DIRECTORS, OFFICERS, LEGAL COUNSEL, AUDITORS AND ADVISORS AS OF FEBRUARY 1, 2001

SELECTED CONSOLIDATED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SUPPLEMENTARY FINANCIAL INFORMATION

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT

COMMON STOCK PRICE RANGE AND DIVIDENDS

CORPORATE ORGANIZATION

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Exhibit 23

The Board of Directors
CPB Inc.:

We consent to incorporation by reference in the registration statements No. 33-11462 and No. 333-35999 on Form S-8 of CPB Inc. of our report dated January 23, 2001, with respect to the consolidated balance sheets of CPB Inc. and subsidiary as of December 31, 2000 and 1999, and the related consolidated statements of income, changes in stockholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2000, which report appears in the December 31, 2000 annual report on Form 10-K of CPB Inc.

/s/ KPMG LLP

Honolulu, Hawaii
March 30, 2001

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Exhibit 23