10-K

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As filed with the Securites and Exchange Commission on March 14, 2003

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

FORM 10-K

Mark One
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
or
o	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	Name of each exchange on which registered
Common Stock, No Par Value	New York Stock Exchange
Preferred Share Purchase Rights	New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None

        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 ý    No o

        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.    o

        Indicate by check mark whether the registrant is an accelerated filer (as defined Exchange Act Rule 12b-2). Yes ý    No o

        As of June 30 2002, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $309,344,000.

        As of February 28, 2003, the number of shares of common stock of the registrant outstanding was 16,006,748 shares.

        The following documents are incorporated by reference herein:

Document Incorporated	Part of Form 10-K Into Which Incorporated
Definitive Proxy Statement for the Annual Meeting of Shareholders which will be filed within 120 days of the fiscal year ended December 31, 2002	Part III

PART I

Forward-Looking Statements

        This document may contain forward-looking statements concerning projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure, or other financial items, concerning plans and objectives of management for future operations, concerning future economic performance, or concerning any of the assumptions underlying or relating to any of the foregoing. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts, and generally include the words "believes", "plans", "intends", "expects", "anticipates" or words of similar meaning. While we believe that our forward-looking statements and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect. Accordingly, actual results could materially differ from projections for a variety of reasons, to include, but not be limited to: the impact of local, national and international economies and events on CPB Inc. (the "Company") business and operations and on tourism, the military, and other major industries operating within the Hawaii market; the impact of legislation affecting the banking industry; the impact of competitive products, services, pricing, and other competitive forces; movements in interest rates; loan delinquency rates; and trading of the Company's stock. For further information on factors that could cause actual results to materially differ from projections, please see the Company's publicly available Securities and Exchange Commission filings. Be advised the Company does not update any of its forward-looking statements.

ITEM 1. BUSINESS

General

        The Company, a Hawaii corporation, is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "Bank Holding Company Act"). 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 for the Company, 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 Central Business Club of Honolulu, Inc., whose principal business is the operation of a private food service facility.

        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 17 to the Company's consolidated financial statements. In November 1998, CPBREI issued 1,000 shares of Class A preferred stock to the Bank and certain employees of the Bank. 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. In August 2001, the Bank sold 100 shares of Class B preferred stock of CPBREI to third party investors. At December 31, 2002, the Bank held 873 shares of CPBREI Class A preferred stock and 92 shares of CPBREI Class C preferred stock, and employees or former employees held 127 shares of CPBREI Class A preferred stock.

        The Company's internet site can be found at www.cpbi.com. The Company's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to

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those reports can be found on the Company's internet site as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.

        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 that has 24 banking offices and 77 ATMs located throughout the State of Hawaii as of December 31, 2002. The Bank's administrative and main offices are located in Honolulu, and there are eighteen other branches on the island of Oahu. In addition, the Bank operates two branches 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 and products to businesses, professionals and individuals in Hawaii.

Market Area and Competition

        The Bank competes in the financial services industry. The Hawaii market consists of five commercial banks, three savings and loans, one finance company and numerous credit unions.

        Bancwest Corporation had $34.7 billion in assets at year-end 2002. First Hawaiian Bank, the Hawaii-based subsidiary bank, has approximately 24% of the deposits in the State of Hawaii.

        Bank of Hawaii Corporation had $9.5 billion in total assets at year-end 2002. Bank of Hawaii, its largest subsidiary, maintains approximately 24% of the deposits in the State of Hawaii.

        American Savings Bank, a subsidiary of Hawaiian Electric Industries, held $6.2 billion in assets at year-end 2002. American Savings Bank has approximately 16% of the deposits in the State of Hawaii.

        Based on total consolidated assets at December 31, 2002, 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 maintaining approximately 7% of the deposit market share. With $2.0 billion in assets, the Bank is establishing its position in the market as a local community bank that 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 the needs of the communities served. The Bank remains competitive with pricing and superior service levels. The Bank also has a strong capital base that 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—Financial Services Modernization Legislation."

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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 and impact on the Company and the Bank of any future changes in monetary and fiscal policies cannot be predicted.

        From time to time, legislation, as well as regulations, are enacted 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. This legislation may change banking statutes and the operating environment of the Company and its subsidiaries in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. The Company cannot predict whether any of this potential legislation will be enacted, and if enacted, the effect that it, or any implementing regulations, would have on the financial condition or results of operations of the Company or any of its subsidiaries. See "ITEM 1. BUSINESS—Supervision and Regulation."

Supervision and Regulation

General

        Bank holding companies and banks are extensively regulated under both federal and state law. This regulation is 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. The description is qualified in its entirety by reference to the applicable laws and regulations.

The Company

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

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        The Federal Reserve Board may require that the Company terminate an activity or terminate control of or liquidate or divest certain subsidiaries, affiliates or investments 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 the 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.

        Further, the Company is required by the Federal Reserve Board to maintain certain levels of capital. See "ITEM 1. BUSINESS Supervision and Regulation—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 Bank Holding Company Act, 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. However, the Company, subject to the prior approval of the Federal Reserve Board, 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.

        Under Federal Reserve Board regulations, a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, it is the Federal Reserve Board's policy that a bank holding company should stand ready 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.

        The Company is also a "financial institution holding company" within the meaning of Section 412:1-109 of the Hawaii Revised Statutes. As such, the Company and its subsidiary are subject to examination by, and may be required to file reports with, the Hawaii Commissioner of Financial Institutions (the "Commissioner").

        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, corporate governance, and other requirements and restrictions of the Exchange Act.

The Bank

        The Bank, as a Hawaii chartered bank, is subject to primary supervision, periodic examination, and regulation by the Commissioner and the FDIC. The Bank is also subject to certain regulations promulgated by the Federal Reserve Board. If, as a result of an examination of the Bank, the FDIC 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, various remedies are available to the FDIC. Such remedies include the power to enjoin "unsafe or unsound" practices, to require affirmative

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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. The Commissioner separately has many of the same remedial powers.

The Sarbanes-Oxley Act of 2002

        On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002. This new legislation addresses accounting oversight and corporate governance matters, including:

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the creation of a five-member oversight board appointed by the Securities & Exchange Commission that will set standards for accountants and have investigative and disciplinary powers;

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the prohibition of accounting firms from providing various types of consulting services to public clients and requiring accounting firms to rotate partners among public client assignments every five years;

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increased penalties for financial crimes;

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expanded disclosure of corporate operations and internal controls and certification of financial statements;

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enhanced controls on and reporting of insider trading; and

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statutory separations between investment bankers and analysts.

We are currently evaluating what impacts the new legislation and its implementing regulations will have upon our operations, including a likely increase in certain outside professional costs.

USA Patriot Act of 2001

        On October 26, 2001, President Bush signed the USA Patriot Act of 2001. The Patriot Act is intended is to strengthen the U.S law enforcement and the intelligence communities' abilities to work cohesively to combat terrorism on a variety of fronts. The potential impact of the Patriot Act on financial institutions of all kinds is significant and wide ranging. The Patriot Act contains sweeping anti-money laundering and financial transparency laws in addition to current requirements and requires various regulations, including:

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due diligence requirements for financial institutions that administer, maintain, or manage private bank accounts or correspondent accounts for non-US persons;

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standards for verifying customer identification at account opening;

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rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering;

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reports by non-financial businesses filed with the Treasury Department's Financial Crimes Enforcement Network for cash transactions exceeding $10,000; and

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the filing of suspicious activities reports by securities brokers and dealers if they believe a customer may be violating U.S. laws and regulations.

        On July 23, 2002, the U.S. Treasury proposed regulations requiring institutions to incorporate into their written money laundering plans a board approved customer identification program implementing reasonable procedures for:

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verifying the identity of any person seeking to open an account, to the extent reasonable and practicable;

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maintaining records of the information used to verify the person's identity; and

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determining whether the person appears on any list of known or suspected terrorists or terrorist organizations.

Account is defined as a formal banking or business relationship established to provide ongoing services, dealings, or other financial transactions. The Company is not able to predict the impact of such law on its financial condition or results of operations at this time.

Financial Services Modernization Legislation

        General.    On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley Act of 1999 (the "GLBA"), also known as the Financial Services Modernization Act of 1999. The general effect of the law is to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers by revising and expanding the Bank Holding Company Act 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.

        The law also:

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broadened the activities that may be conducted by national banks, banking subsidiaries of bank holding companies, and their financial subsidiaries;

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provided an enhanced framework for protecting the privacy of consumer information;

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adopted a number of provisions related to the capitalization, membership, corporate governance, and other measures designed to modernize the Federal Home Loan Bank system;

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modified the laws governing the implementation of the Community Reinvestment Act; and

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addressed a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions.

        The Company and the Bank do not believe that the GLBA will have a material adverse effect on 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 GLBA 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, this act 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.

        Expanded Bank Activities.    The GLBA also includes a new section of the Federal Deposit Insurance Act governing subsidiaries of state banks that engage in "activities as principal that would only be permissible" for a national bank to conduct in a financial subsidiary. It expressly preserves the ability of a state bank to retain all existing subsidiaries. Because the laws of the State of Hawaii do not permit the Bank to engage in all of the activities permissible to national banks, the Bank may be at a competitive disadvantage to national banks located in its market area that may offer such expanded financial products.

        Privacy.    Under the GLBA, federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. Pursuant to these rules, effective July 1, 2001, financial institutions must provide:

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initial notices to customers about their privacy policies, describing the conditions under which they may disclose nonpublic personal information to nonaffiliated third parties and affiliates;

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annual notices of their privacy policies to current customers; and

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a reasonable method for customers to "opt out" of disclosures to nonaffiliated third parties.

These privacy provisions affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. Since the GLBA's enactment, a number of states have implemented their own versions of privacy laws. The Company has implemented its privacy policies in accordance with the law.

Dividends and Other Transfers of Funds

        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 $126.3 million at December 31, 2002. In addition, the Commissioner 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 or restrictions that are or may be imposed under the prompt corrective action provisions of federal law could limit the amount of dividends that the Bank or 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 Action and Other Enforcement Mechanisms" for further discussion of restrictions on capital distributions.

Transactions with Affiliates

        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). The State of Hawaii 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."

Capital Standards

        The federal banking agencies 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 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 federal banking agencies, to 100% for assets with relatively high credit risk.

        The guidelines 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

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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 Company's and Bank's capital ratios compared to the minimum regulatory capital requirements as of December 31, 2002 are discussed in note 25 to the Consolidated Financial Statements.

Predatory Lending

        The term "predatory lending," much like the terms "safety and soundness" and "unfair and deceptive practices," is far-reaching and covers a potentially broad range of behavior. As such, it does not lend itself to a concise or a comprehensive definition. But typically predatory lending involves at least one, and perhaps all three, of the following elements:

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making unaffordable loans based on the assets of the borrower rather than on the borrower's ability to repay an obligation ("asset-based lending");

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inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced ("loan flipping"); and

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engaging in fraud or deception to conceal the true nature of the loan obligation from an unsuspecting or unsophisticated borrower.

        On October 1, 2002, the Federal Reserve Board regulations aimed at curbing such lending became effective. The rule significantly widens the pool of high-cost home-secured loans covered by the Home Ownership and Equity Protection Act of 1994, a federal law that requires extra disclosures and consumer protections to borrowers. The following triggers coverage under the act:

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interest rates for first lien mortgage loans in excess of 8 percentage points above comparable Treasury securities;

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subordinate-lien loans of 10 percentage points above Treasury securities; and

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fees such as optional insurance and similar debt protection costs paid in connection with the credit transaction, when combined with points and fees if deemed excessive.

In addition, the regulation bars loan flipping by the same lender or loan servicer within a year. Lenders also will be presumed to have violated the law—which says loans shouldn't be made to people unable to repay them—unless they document that the borrower has the ability to repay. Lenders that violate the rules face cancellation of loans and penalties equal to the finance charges paid.

        The Bank is unable at this time to determine the impact of these rule changes and potential state action in this area on its financial condition or results of operation.

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, 2002, 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

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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 ratio actually warrants 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. Finally, pursuant to an interagency agreement, the FDIC can examine any institution that has a substandard regulatory examination score or is considered undercapitalized—without the express permission of the institution's primary regulator.

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. These guidelines provide six standards for establishing and maintaining a system to identify problem assets and prevent those assets from deteriorating. 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.

Premiums for Deposit Insurance

        Through the Bank Insurance Fund ("BIF"), the FDIC insures the deposits of the Company's depository institution subsidiary up to prescribed limits for each depositor. The amount of FDIC assessments paid by each BIF member institution is based on its relative risk of default as measured by regulatory capital ratios and other factors. Specifically, the assessment rate is based on the institution's capitalization risk category and supervisory subgroup category. An institution's capitalization risk category is based on the FDIC's determination of whether the institution is well capitalized, adequately capitalized or less than adequately capitalized. An institution's supervisory subgroup category is based on the FDIC's assessment of the financial condition of the institution and the probability that FDIC intervention or other corrective action will be required.

        FDIC-insured depository institutions pay an assessment rate equal to the rate assessed on deposits insured by the Savings Association Insurance Fund ("SAIF").

        The assessment rate currently ranges from zero to 27 cents per $100 of domestic deposits. The FDIC may increase or decrease the assessment rate schedule on a semi-annual basis. Due to continued growth in deposits and some recent bank failures, the BIF is nearing its minimum ratio of 1.25% of insured deposits as mandated by law. If the ratio drops below 1.25%, it is likely the FDIC will be required to assess premiums on all banks for the first time since 1996. Any increase in assessments or the assessment rate could have a material adverse effect on the Company's earnings, depending on the amount of the increase.

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        The FDIC is authorized to terminate a depository institution's deposit insurance upon a finding by the FDIC that the institution's financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the institution's regulatory agency. The termination of deposit insurance for one or more of the Company's subsidiary depository institutions could have a material adverse effect on the Company's earnings, depending on the collective size of the particular institutions involved.

        All FDIC-insured depository institutions must pay an annual assessment to provide funds for the payment of interest on bonds issued by the Financing Corporation, a federal corporation chartered under the authority of the Federal Housing Finance Board. The bonds, commonly referred to as FICO bonds, were issued to capitalize the Federal Savings and Loan Insurance Corporation. The FDIC established the FICO assessment rates effective for the fourth quarter of 2002 at approximately $0.0170 per $100 of assessable deposits. The FICO assessments are adjusted quarterly to reflect changes in the assessment bases of the FDIC's insurance funds and do not vary depending on a depository institution's capitalization or supervisory evaluations.

Interstate Banking and Branching

        The Bank Holding Company Act 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 State 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 Community Reinvestment Act activities. The Community Reinvestment Act 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 Community Reinvestment Act obligations into account when regulating and supervising other activities. Furthermore, financial institutions are subject to annual reporting and public disclosure requirements for certain written agreements that are entered into between insured depository institutions or their affiliates and nongovernmental entities or persons that are made pursuant to, or in connection with, the fulfillment of the Community Reinvestment Act.

        A bank's compliance with its Community Reinvestment Act obligations is based on a performance-based evaluation system which bases Community Reinvestment Act 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 August 23, 2002, the Bank was received a satisfactory rating.

Federal Reserve System

        The Federal Reserve Board requires all depository institutions to maintain non-interest bearing reserves at specified levels against their transaction accounts (primarily checking, NOW, and Super

10

NOW checking accounts) and non-personal time deposits. At December 31, 2002, the Bank was in compliance with these requirements.

Nonbank Subsidiaries

        The Bank's nonbank subsidiaries are subject to the laws and regulations of both the federal government and the state in which they conduct business.

Employees

        At February 28, 2003, the Company employed 506 persons, 451 on a full-time basis and 55 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.

Factors That May Affect Future Financial Results and Operations or the Value of Company's Common Stock.

        In addition to the other information contained in this report, the following risks may affect the Company. If any of these risks occurs, business, financial condition or operating results of the Company could be adversely affected.

        Changes in market interest rates may adversely affect performance.    The Company's earnings are affected by changing interest rates. Changes in interest rates affect the demand for new loans, the credit profile of existing loans, the rates received on loans and securities and rates paid on deposits and borrowings. The relationship between the rates received on loans and securities and the rates paid on deposits and borrowings is known as interest rate spread. Given the Company's current volume and mix of interest-bearing liabilities and interest-earning assets, its interest rate spread could be expected to increase during times of rising interest rates and, conversely, to decline during times of falling interest rates. Although the Company believes its current level of interest rate sensitivity is reasonable, significant fluctuations in interest rates may have an adverse effect on the Company's business, financial condition and results of operations.

        Deterioration of economic conditions in Hawaii could adversely affect the Company's loan portfolio and reduce the demand for the Company's services.    The Company focuses its business primarily in Hawaii. A deterioration in economic conditions in its market area could have a material adverse impact on the quality of its business. Factors which could impact the Hawaiian economy include: declines in the tourism and airline industries, declines in the U.S. mainland and Japan economies, and consequences from national, international, and political events. An economic slowdown in Hawaii could have the following consequences, any of which could reduce the Company's net income:

•

loan delinquencies may increase;

•

problem assets and foreclosures may increase;

•

claims and lawsuits may increase;

•

demand for the Company's products and services may decline; and

•

collateral for loans may decline in value below the principal amount owed by the borrower.

        If a significant number of borrowers, guarantors and related parties fail to perform as required by the terms of their loans, the Company will sustain losses.    A significant source of risk arises from the possibility that losses will be sustained if a significant number of the Company's borrowers, guarantors and related parties fail to perform in accordance with the terms of their loans. The Company has adopted underwriting and credit monitoring procedures and credit policies, including the establishment and review of the allowance for credit losses, that management believes are appropriate to minimize

11

this risk by assessing the likelihood of nonperformance, tracking loan performance and diversifying the Company's credit portfolio. These policies and procedures, however, may not prevent unexpected losses that could materially adversely affect the Company's results of operations.

        Loan loss reserves may not cover actual loan losses.    If the Company's actual loan losses exceed the amount the Company has reserved for probable losses, it will hurt the Company's business. The Company attempts to limit the risk that borrowers will fail to repay loans by carefully underwriting the loans. Losses nevertheless occur. The Company creates reserves for estimated loan losses in its accounting records. The Company bases these allowances on estimates of the following:

•

industry standards;


•

historical experience with loans;


•

evaluation of current economic conditions;


•

regular reviews of the quality, mix and size of the overall loan portfolio;


•

regular reviews of delinquencies; and


•

the quality of the collateral underlying loans.

        An increase in non-performing assets would reduce the Company's income and increase its expenses. If the level of non-performing assets rises in the future, it could adversely affect the Company's operating results. Non-performing assets are mainly loans on which the borrowers are not making their required payments. Non-performing assets also include loans that have been restructured to permit the borrower to have smaller payments and real estate that has been acquired through foreclosure of unpaid loans. To the extent that assets are non-performing, the Company has less cash available for lending and other activities.

        If the Company loses key employees, business may suffer.    If the Company lost key employees temporarily or permanently, it could hurt business. The Company could be particularly hurt if its key employees went to work for competitors. The Company's future success depends on the continued contributions of existing senior management personnel.

        Governmental regulation may impair the Company's operations or restrict its growth.    The Company and the Bank are subject to significant governmental supervision and regulation. These regulations are intended primarily for the protection of depositors. Statutes and regulations affecting the Company's business may be changed at any time, and the interpretation of these statutes and regulations by examining authorities may also change. Within the last several years Congress and the President have passed and enacted significant changes to these statutes and regulations. There can be no assurance that such changes to the statutes and regulations or in their interpretation will not adversely affect the Company's business. In addition to governmental supervision and regulation, the Bank is subject to changes in other federal and state laws, including changes in tax laws, which could materially affect the banking industry. The Company is subject to the rules and regulations of the Federal Reserve Board. If the Company fails to comply with federal and state bank regulations, the regulators may limit the Company's activities or growth, fine or ultimately put the Company out of business. Banking laws and regulations change from time to time. Bank regulations can hinder its ability to compete with financial services companies that are not regulated or are less regulated. Federal and state bank regulatory agencies regulate many aspects of the Company's operations. These areas include:

•

the capital that must be maintained;


•

the kinds of activities that can be engaged in;


•

the kinds and amounts of investments that can be made;

12

•

the locations of offices;


•

how much interest can be paid on demand deposits;


•

insurance of deposits and the premiums that must be paid for this insurance; and


•

how much cash must set aside as reserves for deposits.

        Competition may adversely affect the Company's performance.    The financial services business in the Company's market areas is highly competitive. It is becoming increasingly competitive due to changes in regulation, technological advances, and the accelerating pace of consolidation among financial services providers. The Bank faces competition both in attracting deposits and in making loans. The Bank competes for loans principally through the interest rates and loan fees the Bank charges and the efficiency and quality of services the Bank provides. Increasing levels of competition in the banking and financial services businesses may reduce the Company's market share or cause the prices it charge for its services to fall. The Company's results may differ in future periods depending upon the nature or level of competition.

        The Company's stock price may be volatile, which could result in substantial losses for the Company's shareholders.    The market price of Common Stock could be subject to wide fluctuations in response to a number of factors, including:

•

the amount of Common Stock outstanding and its trading volume;


•

actual or anticipated changes in the Company's future financial performance;


•

changes in financial estimates of the Company by securities analysts;


•

competitive developments, including announcements by the Company or competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;


•

the operating and stock performance of competitors;


•

changes in interest rates; and


•

additions or departures of key personnel.

ITEM 2. PROPERTIES

        The Bank holds title to the land and building in which the Company's and Bank's headquarters, Kaimuki branch office, Hilo branch office and Kailua-Kona branch office are situated. The bank also holds title to the buildings in which the Moiliili branch office and operations center are situated, and a portion of land on which the Moiliili branch office is situated. The remaining land on which the Moiliili branch and all of the land on which the operations center are situated are leased.

        All other Bank properties 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, 2002, net rent expense under these leases aggregated $3.4 million. For additional information relating to lease rental expense and commitments, see note 15 to the Company's Consolidated Financial Statements.

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 2002.

13

PART II

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

        The Company's common stock is traded on the New York Stock Exchange under the ticker symbol "CPF". As of December 31, 2002, there were 1,970 shareholders of record, excluding individuals and institutions for whom shares were held in the names of nominees and brokerage firms.

        The following table sets forth information on the range of high and low sales prices of the Company's common stock and cash dividends declared as of the dates indicated.

Market Prices and Common Stock Dividends Declared

		Stock Price
						Cash Dividends Declared
		High		Low
2002		$	31.24	$	13.82	$	0.40
	Fourth Quarter		31.24		22.16		0.11
	Third Quarter		23.68		13.82		0.10
	Second Quarter		23.38		17.00		0.10
	First Quarter		17.43		14.63		0.09
2001		$	18.74	$	11.01	$	0.34
	Fourth Quarter		16.15		13.63		0.09
	Third Quarter		18.74		13.69		0.09
	Second Quarter		15.10		11.01		0.08
	First Quarter		15.00		12.38		0.08

14

ITEM 6. SELECTED FINANCIAL DATA

	Year Ended December 31,
	2002			2001			2000			1999			1998
	(Dollars in thousands, except per share data)
Statement of Income Data:
Total interest income	$	118,462		$	129,873		$	126,783		$	112,840		$	111,792
Total interest expense		29,483			51,421			55,559			44,418			46,705
Net interest income		88,979			78,452			71,224			68,422			65,087
Provision for loan losses		1,000			3,000			4,500			3,700			6,600
Net interest income after provision for loan losses		87,979			75,452			66,724			64,722			58,487
Other operating income		15,282			14,113			12,887			13,103			16,822
Other operating expense		55,023			50,683			49,592			53,448			51,273
Income before income taxes		48,238			38,882			30,019			24,377			24,036
Income taxes		14,955			10,177			10,585			8,051			8,967
Net income		33,283			28,705			19,434			16,326			15,069
Balance Sheet Data (Year-End):
Interest-bearing deposits in other banks	$	39,358		$	29,277		$	11,506		$	9,828		$	10,469
Investment securities(1)		540,924			391,947			384,619			321,670			351,436
Loans		1,289,892			1,266,949			1,290,145			1,167,466			1,099,677
Allowance for loan losses		24,197			24,564			22,612			20,768			20,066
Total assets		2,028,163			1,835,641			1,816,918			1,646,491			1,560,885
Core deposits(2)		1,280,471			1,082,131			944,661			958,749			924,960
Total deposits		1,641,101			1,450,925			1,363,066			1,305,654			1,269,123
Long-term debt		147,155			175,572			220,970			98,279			118,289
Total shareholders' equity		173,443			147,070			143,312			144,079			148,066
Per Share Data:(3)
Basic earnings per share	$	2.09		$	1.75		$	1.09		$	0.85		$	0.73
Diluted earnings per share		2.04			1.72			1.07			0.84			0.73
Cash dividends declared		0.40			0.34			0.31			0.28			0.26
Book value		10.86			9.27			8.47			7.76			7.56
Weighted average shares outstanding (in thousands)		15,931			16,410			17,834			19,260			20,708
Financial Ratios:
Return on average assets		1.74	%		1.60	%		1.16	%		1.03	%		1.00	%
Return on average shareholders' equity		20.55			19.34			13.55			10.93			9.79
Average stockholders' equity to average assets		8.46			8.27			8.57			9.41			10.20
Efficiency ratio(4)		53.02			55.59			58.43			65.36			62.79
Net interest margin(5)		5.11			4.76			4.59			4.64			4.65
Net charge-offs to average loans		0.04			0.08			0.22			0.26			0.53
Nonperforming assets to year-end loans & other real estate(6)		0.18			0.25			0.80			0.94			1.27
Allowance for loan losses to year-end loans		1.88			1.94			1.75			1.77			1.81
Allowance for loan losses to nonaccrual loans		5,511.85			1,014.62			265.27			214.21			155.17
Dividend payout ratio		19.14			19.14			27.98			32.35			35.62

(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)

Restated to reflect a two-for-one stock split effected November 8, 2002.

(4)

Efficiency ratio is derived by dividing other operating expense by net operating revenue (net interest income plus other operating income before securities transactions).

(5)

Computed on a taxable equivalent basis.

(6)

Nonperforming assets include nonaccrual loans and other real estate.

15

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

CRITICAL ACCOUNTING POLICIES

        The Company's accounting policies are fundamental to understanding Management's discussion and analysis of financial condition and results of operations. Some of the Company's accounting policies require judgment regarding valuation of assets and liabilities and/or interpretation of specific accounting guidance, and are considered to be critical accounting policies. The following are the Company's critical accounting policies:

        Allowance for Loan Losses—For further information, see Provision and Allowance for Loan Losses section and note 1 to the consolidated financial statements.

OVERVIEW

        The Company and its subsidiary, the Bank, posted record earnings in 2002 and reached $2.0 billion in assets. Improved net interest margin and asset quality contributed to the year's strong earnings. The Company's common stock was listed on the New York Stock Exchange as of December 31, 2002. On December 31, 2002, the Company's common stock price closed at $27.45, an 87% increase over the closing price a year ago. On November 8, 2002, the Company effected a 2-for-1 split of its common stock in the form of a 100% stock dividend. All share and per-share information has been adjusted to reflect the stock split.

        Net income of $33.3 million in 2002 increased by $4.6 million or 15.9% over the $28.7 million earned in 2001, which represented a 47.7% increase over 2000's earnings of $19.4 million. Diluted earnings per share of $2.04 in 2002 increased by 19.0% over the $1.72 per share earned in 2001, which increased by 60.7% over 2000's per-share earnings of $1.07. Cash dividends declared in 2002 of $0.40 per share represented an increase of 17.6% over the $0.34 per share declared in 2001, which increased by 9.7% over the $0.31 declared in 2000. Return on average assets was 1.74% in 2002, compared to 1.60% in 2001 and 1.16% in 2000. Return on average equity of 20.55% in 2002 increased from 19.34% in 2001 and 13.55% in 2000. The Company's efficiency ratio improved to 53.02% in 2002 from 55.59% in 2001 and 58.43% in 2000.

        Total assets of $2.03 billion at December 31, 2002 increased by 10.4% over the $1.84 billion at year-end 2001. Deposit inflows exceeded loan growth, resulting in increased investment securities and reduced borrowings. As of year-end 2002, loans of $1.29 billion increased by $22.9 million or 1.8% over 2001, and investment securities of $540.9 million increased by $149.0 million or 38.0%. Deposits of $1.64 billion increased by $190.2 million over the $1.45 billion at year-end 2001, with noninterest-bearing deposits increasing by 27.9% and interest-bearing deposits increasing by 10.2%. Business checking accounts and the Bank's flagship savings product, the Exceptional Account, provided the deposit growth in 2002. Shareholders' equity of $173.4 million increased by $26.4 million or 17.9%.

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 tables and discussed in this section are expressed on a taxable equivalent basis using an assumed income tax rate of 35%.

16

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

			2002						2001						2000
			Average Balance		Average Yield/ Rate		Amount of Interest		Average Balance		Average Yield/ Rate		Amount of Interest		Average Balance		Average Yield/ Rate		Amount of Interest
			(Dollars in thousands)
Assets
Interest earning assets:
	Interest-bearing deposits in other banks		$	31,022	1.61	%	$	499	$	29,735	3.92	%	$	1,166	$	4,910	6.13	%	$	301
	Federal funds sold			8,393	1.66			139		10,103	3.30			333		296	6.42			19
	Taxable investment securities(1)			375,357	5.71			21,438		291,568	7.18			20,923		290,394	6.96			20,202
	Tax-exempt investment securities(1)			74,802	6.44			4,814		73,243	5.28			3,866		61,328	5.97			3,659
	Loans(2)			1,285,175	7.26			93,257		1,270,450	8.26			104,938		1,223,648	8.49			103,883
		Total interest earning assets		1,774,749	6.77			120,147		1,675,099	7.83			131,226		1,580,576	8.10			128,064
Nonearning assets				140,119						119,914						92,318
		Total assets	$	1,914,868					$	1,795,013					$	1,672,894
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
	Interest-bearing demand deposits		$	138,083	0.39	%	$	538	$	117,205	1.00	%	$	1,167	$	106,922	1.12	%	$	1,194
	Savings and money market deposits			561,848	1.36			7,659		397,813	2.09			8,308		390,132	2.37			9,235
	Time deposits under $100,000			233,250	2.61			6,095		275,324	4.34			11,943		250,173	4.54			11,369
	Time deposits $100,000 and over			364,632	2.45			8,949		398,769	4.62			18,433		382,543	5.60			21,430
	Short-term borrowings			10,436	1.99			208		11,516	5.59			644		57,027	6.53			3,723
	Long-term debt			162,331	3.72			6,034		204,371	5.35			10,926		133,724	6.44			8,608
		Total interest-bearing liabilities		1,470,580	2.00			29,483		1,404,998	3.66			51,421		1,320,521	4.21			55,559
Noninterest-bearing deposits				237,961						198,725						186,557
Other liabilities				44,356						42,855						22,442
Shareholders' equity				161,971						148,435						143,374
		Total liabilities and shareholders' equity		1,914,868						1,795,013						1,672,894
Net interest income							$	90,664					$	79,805					$	72,505
Net interest margin					5.11	%					4.76	%					4.59	%

(1)

At amortized cost.

(2)

Includes nonaccrual loans.

17

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

			2002 Compared to 2001									2001 Compared to 2000
			Increase (Decrease) Due to Change In:									Increase (Decrease) Due to Change In:
									Net Change									Net Change
			Volume			Rate						Volume			Rate
			(Dollars in thousands)
Interest earning assets
	Interest-bearing deposits in other banks		$	50		$	(717	)	$	(667	)	$	1,522		$	(657	)	$	865
	Federal funds sold			(56	)		(138	)		(194	)		630			(316	)		314
	Taxable investment securities			6,016			(5,501	)		515			82			639			721
	Tax-exempt investment securities			82			866			948			711			(504	)		207
	Loans			1,216			(12,897	)		(11,681	)		3,973			(2,918	)		1,055
		Total interest earning assets		7,308			(18,387	)		(11,079	)		6,918			(3,756	)		3,162
Interest-bearing liabilities
	Interest-bearing demand deposits			209			(838	)		(629	)		115			(142	)		(27	)
	Savings and money market deposits			3,428			(4,077	)		(649	)		182			(1,109	)		(927	)
	Time deposits under $100,000			(1,826	)		(4,022	)		(5,848	)		1,142			(568	)		574
	Time deposits $100,000 and over			(1,577	)		(7,907	)		(9,484	)		909			(3,906	)		(2,997	)
	Short-term borrowings			(60	)		(376	)		(436	)		(2,972	)		(107	)		(3,079	)
	Long-term debt			(2,249	)		(2,643	)		(4,892	)		4,550			(2,232	)		2,318
		Total interest-bearing liabilities		(2,075	)		(19,863	)		(21,938	)		3,926			(8,064	)		(4,138	)
Net interest income			$	9,383		$	1,476		$	10,859		$	2,992		$	4,308		$	7,300

        Net interest income of $90.7 million in 2002 increased by $10.9 million or 13.6% over the $79.8 million in 2001, which increased by $7.3 million or 10.1% over 2000. The historically low market interest rates contributed to a decline in average rates on interest-bearing liabilities, including deposits and long-term debt, which exceeded the decline in average yield on interest earning assets.

        Interest income of $120.1 million in 2002 decreased by $11.1 million or 8.4% from $131.2 million in 2001 due to declining interest-earning asset yields consistent with general market conditions. Interest income in 2001 reflected an increase of $3.2 million or 2.5% over 2000 due primarily to increases in loan and other interest earning asset balances. Average interest earning assets in 2002 increased by $99.7 million or 5.9%, including a $85.3 million increase in average investment securities and a $14.7 million increase in average loans. In 2001 increases in average loans and average interest-bearing deposits in other banks contributed much of the increase in interest earning assets compared to 2000. The yield on total interest earning assets decreased to 6.77% in 2002 from 7.83% in 2001 and 8.10% in 2000 in line with the decline in market interest rates. The yield on loans, the largest component of interest earning assets, declined by 100 basis points in 2002 after declining by 23 basis points in 2001.

        Interest expense of $29.5 million in 2002 decreased by $21.9 million or 42.7% from 2001, which decreased by $4.1 million or 7.4% from 2000. While average interest-bearing liabilities increased during the period, the rate of decline in interest rates paid on those liabilities more than compensated for the balance increases, resulting in an overall decrease in interest expense. Average interest-bearing deposits increased by $108.7 million or 9.1% in 2002, after increasing by $59.3 million or 5.3% in 2001, while the average rate paid on those deposits decreased by 156 basis points and 48 basis points in 2002 and 2001, respectively. In 2002, average short-term borrowings and long-term debt, collectively, decreased by $43.1 million or 20.0%, while the average rate on those borrowings decreased by 175 basis points.

        The resultant net interest margin of 5.11% in 2002 increased by 35 basis points over the net interest margin of 4.76% in 2001 as funding costs declined at a faster rate than asset yields during the

18

year. Strong competition for loans and deposits in the State of Hawaii, particularly for lower-cost core deposits, as well as global, national and local political and economic conditions, in particular, the velocity of changes in interest rates, will continue to have a direct impact on the Company's net interest margin into the future. Given the current environment, the Company expects to maintain a net interest margin at or above the 5-percent level for the near future.

Loan Portfolio

        Total loans increased to $1,289.9 million at December 31, 2002, compared with $1,266.9 million at the end of 2001, and $1,290.1 million at the end of 2000.

        The Bank emphasizes residential and commercial mortgage loans, business loans to professionals and middle-market companies and consumer loans. The Bank's marketing strategy for generating new loans includes a business calling program that 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.

        At December 31, 2002, the Bank did not have any concentration of loans in any industry classified under the Standard Industrial Code that 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 3 Loans by Categories

	December 31,
	2002		2001		2000		1999		1998
	(Dollars in thousands)
Commercial, financial and agricultural	$	262,771	$	233,629	$	233,482	$	186,960	$	189,796
Real estate Construction		117,879		131,631		72,078		45,386		61,370
Mortgage—residential		312,560		347,237		382,360		370,407		330,983
—commercial		540,111		504,346		558,586		526,801		482,849
Consumer		56,571		50,106		43,639		37,912		34,679
Total Loans		1,289,892		1,266,949		1,290,145		1,167,466		1,099,677
Allowance for loan losses		24,197		24,564		22,612		20,768		20,066
Net Loans	$	1,265,695	$	1,242,385	$	1,267,533	$	1,146,698	$	1,079,611

        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 2002 to $262.8 million at December 31, 2002, from $233.6 million at year-end 2001 and $233.5 million at year-end 2000. The Compahy's increased emphasis on commercial lending in 2002 led to the $29.1 million increase over year-end 2001.

        Real Estate—Construction.    Real estate—construction loans decreased to $117.9 million at year-end 2002, from $131.6 million at the end of 2001 and $72.1 million in 2000. The decrease from year-end 2001 was primarily attributed to accelerated loan payoffs in 2002 due to the strength of the real estate market in the state of Hawaii. 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.

19

        Real Estate—Mortgage—Residential.    Residential mortgage loans of $312.6 million at year-end 2002 were comprised primarily of adjustable rate one-to-four family first mortgages. Residential mortgage loan originations, particularly fixed rate mortgage originations, increased in 2002 due to a high volume of refinancing activity. Due to the Bank's policy of selling fixed rate residential mortgage loans, residential mortgage loans at December 31, 2002 decreased by $34.7 million from year-end 2001. 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, 2002 totaled $6.4 million. Home equity lines of credit of $66.7 million at December 31, 2002, 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, 2002 included $161.9 million for stores and offices, and $162.0 million for warehouses and industrial buildings.

        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 4 Mortgage Loan Portfolio Composition

		December 31,
		2002			2001			2000			1999			1998
		Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent		Amount	Percent
		(Dollars in thousands)
Residential:
	1-4 units	221,283	26.0	%	246,075	28.9	%	348,032	37.0	%	361,458	40.3	%	316,691	38.9	%
	5 ore more units	91,277	10.7	%	101,162	11.9	%	34,328	3.6	%	8,949	1.0	%	14,292	1.8	%
Commercial, industrial and other		540,111	63.3	%	504,346	59.2	%	558,586	59.4	%	526,801	58.7	%	482,849	59.3	%
Total		852,671	100.0	%	851,583	100.0	%	940,946	100.0	%	897,208	100.0	%	813,832	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 5 Consumer Loan Portfolio Composition

	December 31,
	2002				2001				2000				1999				1998
	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
	(Dollars in thousands)
Automobile	$	23,565	41.7	%	$	23,765	47.4	%	$	22,852	52.4	%	$	19,462	51.3	%	$	20,214	58.3	%
Credit cards and other revolving credit plans		23,939	42.3	%		17,415	34.8	%		12,010	27.5	%		7,955	21.0	%		4,003	11.5	%
Other		9,067	16.0	%		8,926	17.8	%		8,777	20.1	%		10,495	27.7	%		10,462	30.2	%
Total	$	56,571	100.0	%	$	50,106	100.0	%	$	43,639	100.0	%	$	37,912	100.0	%	$	34,679	100.0	%

        Automobile loans, comprised primarily of indirect dealer loans, totaled $23.6 million or 41.7% of the consumer loan portfolio in 2002. This figure includes $23.2 million in indirect automobile loans.

20

        Revolving credit plans increased to $23.9 million at December 31, 2002, from $17.4 million at year-end 2001.

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, 2002. The table excludes real estate loans (other than construction loans) and consumer loans.

Table 6 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	$	106,861	$	102,034	$	53,876	$	262,771
Real estate—construction		60,789		50,200		6,890		117,879
Total	$	167,650	$	152,234	$	60,766	$	380,650

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

Table 7 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	$	25,358	$	16,853	$	42,211
With variable interest rates		126,876		43,913		170,789
Total	$	152,234	$	60,766	$	213,000

Investment Portfolio

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

21

Table 8 Distribution of Investment Securities

	December 31,
	2002				2001				2000
	Held to maturity		Available for sale		Held to maturity		Available for sale		Held to maturity		Available for sale
	(at amortized cost)		(at fair value)		(at amortized cost)		(at fair value)		(at amortized cost)		(at fair value)
	(Dollars in thousands)
U.S. Treasury and other U.S. government agencies	$	22,625	$	379,688	$	31,612	$	272,377	$	40,227	$	244,472
States and political subdivisions		33,695		50,577		38,247		33,166		45,829		29,311
Other		—		54,339		—		16,545		—		24,780
Total	$	56,320	$	484,604	$	69,859	$	322,088	$	86,056	$	298,563

        The Bank did not hold investments of any nonfederal issuer in amounts exceeding 10% of shareholders' equity at December 31, 2002.

Maturity Distribution of Investment Portfolio

        The following table sets forth the maturity distribution of the investment portfolio at December 31, 2002.

22

Table 9 Maturity Distribution of Investment Portfolio

Portfolio Type and Maturity Grouping		Book value		Weighted average yield(1)
		(Dollar in thousands)
Held-to-maturity portfolio:
U.S. Treasury and other U.S. Government agencies:
	Within one year	$	4,267	5.161	%
	After one but within five years		10,932	6.312	%
	After five but within ten years		6,252	6.872	%
	After ten years		1,174	6.993	%
	Total U.S. Treasury and other U.S. Government agencies		22,625	6.285	%
States and political subdivisions:
	Within one year		3,554	5.832	%
	After one but within five years		15,664	4.562	%
	After five but within ten years		8,742	4.249	%
	After ten years		5,735	9.093	%
	Total States and political subdivisions		33,695	5.386	%
	Total held-to-maturity portfolio	$	56,320	5.747	%
Available-for-sale portfolio:
U.S. Treasury and other U.S. Government agencies:
	Within one year	$	8,099	4.758	%
	After one but within five years		80,413	5.238	%
	After five but within ten years		58,942	4.958	%
	After ten years		232,234	4.349	%
	Total U.S. Treasury and other U.S. Government agencies		379,688	4.635	%
States and political subdivisions:
	Within one year		2,979	7.006	%
	After one but within five years		1,289	4.092	%
	After five but within ten years		11,786	5.980	%
	After ten years		34,523	5.826	%
	Total States and political subdivisions		50,577	5.888	%
Other:
	Within one year		30,000	1.304	%
	After one but within five years		—	0.000	%
	After five but within ten years		—	0.000	%
	After ten years		24,339	6.633	%
	Total Other		54,339	3.686	%
	Total available-for-sale portfolio	$	484,604	4.655	%
Total investment securities		$	540,924	4.771	%

(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

23

deposits which consists of noninterest-bearing demand, interest-bearing demand and savings deposits and time deposits under $100,000.

        Total deposits at December 31, 2002, 2001 and 2000 were $1,641.1 million, $1,450.1 million and $1,363.1 million, respectively. Deposits increased by 13.1% in 2002 compared with a 6.4% growth rate in 2001. This increase was partly attributed to the migration of consumer funds from the equity markets. Interest-bearing deposits, excluding time deposits of $100,000 and over, increased by 15.6% in 2002 compared with a 13.2% increase in 2001. Noninterest-bearing deposits increased by 27.9% in 2001 compared with a 19.6% increase in 2001. The Bank's ratio of core deposits to total deposits was 78.0% at December 31, 2002, compared to 74.6% at year-end 2001 and 69.3% at year-end 2000. Time deposits of $100,000 and over were $360.6 million at year-end 2002 compared with $368.8 million at year-end 2001, and $418.4 million at year-end 2000.

        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 10 Average Balances and Average Rates on Deposits

	Year Ended December 31,
	2002				2001				2000
	Average balance		Average rate paid		Average balance		Average rate paid		Average balance		Average rate paid
	(Dollars in thousands)
Noninterest-bearing demand deposits	$	237,961	—	%	$	198,725	—	%	$	186,557	—	%
Interest-bearing demand deposits		138,083	0.39			117,205	1.00			106,922	1.12
Savings and money market deposits		561,848	1.36			397,813	2.09			390,132	2.37
Time deposits		597,882	2.52			674,093	4.51			632,716	5.18
Total	$	1,535,774	1.51	%	$	1,387,836	2.87	%	$	1,316,327	3.28	%

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

Table 11 Remaining Maturities of Large Certificates of Deposit

	December 31, 2002
	(Dollars in thousands)
Three months or less	$	150,117
Over three through six months		67,147
Over six through twelve months		65,541
Over twelve months		77,825
Total	$	360,630

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 $1.0 million in 2002, compared to $3.0 million in 2001 and $4.5 million in 2000. Net loan charge-offs of

24

$0.5 million in 2002 decreased from $1.0 million in 2001 and $2.7 million in 2000. When expressed as a percentage of average loans, net charge-offs were 0.04% in 2002, 0.08% in 2001, and 0.22% in 2000. Charge-offs in 2002 totaled $1.3 million and included $0.4 million in residential construction loans and $0.5 million in consumer loans. Recoveries of $0.8 million in 2002 included $0.5 million on a commercial mortgage loan and $0.1 million on a commercial loan. In 2001, charge-offs totaling $2.5 million included $1.2 million in commercial mortgage loans to three borrowers. Recoveries of $600,000 on a multifamily residential mortgage loan and $262,000 from a commercial mortgage loan borrower accounted for more than one-half of the total recoveries of $1.5 million.

        The Allowance expressed as a percentage of loans was 1.88% at year-end 2002, compared to the 1.94% maintained at year-end 2001, which increased over the level at December 31, 2000. The consistent level of the Allowance throughout 2002 reflects the continued uncertainty and risks in the current economic environment and the relatively stable level of nonaccrual and delinquent loans during the period.

        While the economy of the United States, and similarly the State of Hawaii, appears to have survived the post-September 11 setback and show signs of growth, significant uncertainties as to the future remain. The decline in the U.S. stock market, the likelihood of military conflict in the Middle East and the fear of further terrorist acts create significant questions as to the future strength of the local economy. Such conditions and occurrences, or lack thereof, will likely affect borrowers' ability to repay loans, collateral values, the level of nonperforming loans, net charge-offs, provision for loan losses and net income in the future.

        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.

25

Table 12 Allowance for Loan Losses

		Year Ended December 31,
		2002			2001			2000			1999			1998
		(Dollars in thousands)
Average amount of loans outstanding		$	1,285,175		$	1,270,450		$	1,223,648		$	1,153,623		$	1,071,350
Allowance for loan losses:
Balance at beginning of year		$	24,564		$	22,612		$	20,768		$	20,066		$	19,164
Charge-offs:
	Commercial, financial and agricultural		159			231			375			425			980
	Real estate—construction		426			—			—			—			—
	Real estate—mortgage—residential		110			685			913			1,268			1,993
	Real estate—mortgage—commercial		120			1,227			1,905			1,569			2,102
	Consumer		466			386			399			286			1,506
	Total		1,281			2,529			3,592			3,548			6,581
Recoveries:
	Commercial, financial and agricultural		118			386			123			65			213
	Real estate—construction		—			—			—			—			—
	Real estate—mortgage—residential		95			722			101			144			52
	Real estate—mortgage—commercial		503			267			518			120			410
	Consumer		100			106			194			221			208
	Total		816			1,481			936			550			883
Net loans charged off			465			1,048			2,656			2,998			5,698
Provision charged to operations			1,000			3,000			4,500			3,700			6,600
Reclassification of allowance for credit losses on off-balance sheet credit exposures			(902	)		—			—			—			—
Balance at end of year		$	24,197		$	24,564		$	22,612		$	20,768		$	20,066
Ratios:
Allowance for loan losses to loans outstanding at end of year			1.88	%		1.94	%		1.75	%		1.77	%		1.81	%
Net loans charged off during year to average loans outstanding during year			0.04	%		0.08	%		0.22	%		0.26	%		0.53	%

        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.

26

Table 13 Allocation of Allowance for Loan Losses

	December 31,
	2002				2001				2000				1999				1998
	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	$	5,200	20.4	%	$	5,300	18.4	%	$	4,200	18.1	%	$	2,600	16.0	%	$	3,900	17.3	%
Real estate—construction		1,500	9.1	%		1,700	10.4	%		700	5.6	%		100	3.9	%		100	5.6	%
Real estate—mortgage—residential		1,700	24.2	%		1,200	27.4	%		2,800	29.6	%		2,700	31.7	%		2,700	30.1	%
Real estate—mortgage—commercial		11,400	41.9	%		12,600	39.8	%		8,900	43.3	%		7,000	45.2	%		7,100	43.8	%
Consumer		300	4.4	%		300	4.0	%		300	3.4	%		300	3.2	%		400	3.2	%
Unallocated		4,097	N/A			3,464	N/A			5,712	N/A			8,068	N/A			5,866	N/A
Total	$	24,197	100.0	%	$	24,564	100.0	%	$	22,612	100.0	%	$	20,768	100.0	%	$	20,066	100.0	%

Nonperforming Assets

        Table 14 sets forth nonperforming assets, accruing loans delinquent for 90 days or more and restructured loans still accruing interest at the dates indicated.

        Total nonperforming assets, accruing loans delinquent for 90 days or more and restructured loans still accruing interest decreased to $2.5 million at year-end 2002 from $3.7 million at year-end 2001. Nonaccrual loans of $0.4 million decreased by $2.0 million or 81.9% from $2.4 million in 2001 due to loan payoffs and charge-offs. Other real estate of $1.9 million at December 31, 2002 increased by $1.1 million and included one commercial property and one residential condominium unit located on the island of Oahu and one commercial property located on the island of Kauai. Loans delinquent for 90 days or more at year-end 2002 totaled $0.2 million, decreasing by 57.3% from year-end 2001. There were no restructured loans still accruing interest as of December 31, 2002 or 2001. Aggressive monitoring and collection efforts are credited with the improvement in nonperforming asset and delinquent loan balances. Accounting policies related to nonperforming assets are discussed in note 1 to the consolidated financial statements.

27

Table 14 Nonperforming Assets, Past Due and Restructured Loans

			December 31,
			2002			2001			2000			1999			1998
			(Dollars in thousands)
Nonaccrual loans
	Real estate
		Mortgage—commercial	$	—		$	1,471		$	5,913		$	2,981		$	6,830
		Mortgage—residential		—			585			2,069			5,124			5,037
		Construction		311			—			—			—			—
	Commercial, financial and agricultural			128			363			542			1,590			1,065
	Consumer			—			2			—			—			—
		Total nonaccrual loans		439			2,421			8,524			9,695			12,932
Other real estate				1,903			812			1,792			1,366			1,155
		Total nonperforming assets		2,342			3,233			10,316			11,061			14,087
Loans delinquent for 90 days or more
	Real estate
		Mortgage—commercial		—			163			—			1,749			315
		Mortgage—residential		85			133			653			1,636			4,206
		Construction		—			—			—			—			—
	Commercial, financial and agricultural			87			122			850			128			706
	Consumer			17			25			24			92			168
		Total loans delinquent for 90 days or more		189			443			1,527			3,605			5,395
Restructured loans still accruing interest
	Real estate
		Mortgage—commercial		—			—			466			500			—
		Total restructured loans still accruing interest		—			—			466			500			—
Total nonperforming assets, loans delinquent for 90 days or more and restructured loans still accruing interest			$	2,531		$	3,676		$	12,309		$	15,166		$	19,482
Total nonperforming assets as a percentage of loans and other real estate				0.18	%		0.25	%		0.80	%		0.94	%		1.27	%
Total nonperforming assets and loans delinquent for 90 days or more as a percentage of loans and other real estate				0.19	%		0.29	%		0.92	%		1.25	%		1.76	%
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				0.19	%		0.29	%		0.95	%		1.29	%		1.76	%

28

Other Operating Income

        Table 15 sets forth components of other operating income and the total as a percentage of average assets.

Table 15 Components of Other Operating Income

		Year Ended December 31,
		2002			2001			2000
		(Dollars in thousands)
Income from fiduciary activities		$	1,380		$	1,225		$	1,079
Service charges on deposit accounts			4,301			3,847			3,093
Other service charges and fees			4,814			4,062			4,247
Equity in earnings of unconsolidated subsidiaries			—			217			571
Fees on foreign exchange			504			420			530
Investment securities gains (losses)			477			1,395			(766	)
Gains on sales of loans			469			925			132
Gain on curtailment of pension obligation			1,395			—			—
Gain on sale of merchant portfolio			—			—			1,850
Other			1,942			2,022			2,151
	Total	$	15,282		$	14,113		$	12,887
Total other operating income as a percentage of average assets			0.80	%		0.79	%		0.77	%

        Total other operating income of $15.3 million in 2002 increased by $1.2 million or 8.3% over the $14.1 million earned in 2001, which increased by $1.2 million or 9.5% over 2000. In 2002, the Company recorded a $1.4 million gain on curtailment of the defined benefit retirement plan. A discussion of the curtailment is provided in note 13 of the consolidated financial statements. Service charges on deposit accounts of $4.3 million increased by $454,000, and other service charges and fees of $4.8 million increased by $752,000 in 2002 compared to 2001 due primarily to increased volumes. Investment securities gains of $477,000 were recognized in 2002 compared with $1.4 million in 2001, while gains on sales of loans of $469,000 in 2002 decreased from $925,000 in 2001.

        Total other operating income of $14.1 million in 2001 increased by $1.2 million or 9.5% over 2000. An increase of $754,000 in service charges on deposits, a net increase of $2.2 million in investment securities gains and a $793,000 increase in gains on sales of loans combined to offset a $1.9 million gain on the sale of the Bank's merchant servicing portfolio recorded in 2000. A reduction in merchant servicing expenses was also realized and is discussed in the Other Operating Expense section.

        Total other operating income, expressed as a percentage of average assets was 0.80% in 2002, 0.79% in 2001 and 0.77% in 2000.

Other Operating Expense

        Table 16 sets forth components of other operating expense and the total as a percentage of average assets.

29

Table 16 Components of Other Operating Expense

		Year Ended December 31,
		2002			2001			2000
		(Dollars in thousands)
Salaries and employee benefits		$	29,828		$	27,805		$	25,071
Net occupancy			3,653			4,880			6,350
Equipment			2,744			2,674			2,708
Other			18,798			15,324			15,463
	Total	$	55,023		$	50,683		$	49,592
Total other operating expense as a percentage of average assets			2.87	%		2.82	%		2.96	%

        Total other operating expense of $55.0 million in 2002 increased by $4.3 million or 8.6% over the $50.7 million of expense recognized in 2001. Salaries and employee benefits increased by $2.0 million or 7.3% reflecting increases in defined benefit plan and profit sharing plan expenses as well as increased staffing in financial services sales, private banking and trust and investment management services. Other expenses increased by $3.5 million due primarily to a $1.1 million interest accrual on a state tax assessment under appeal, a $725,000 increase in professional fees and $586,000 in amortization expense related to investments in companies providing high-technology state tax credits. The tax credits received resulting from these investments is discussed in the Income Taxes section.

        Total other operating expense of $50.7 million in 2001 increased by $1.1 million or 2.2% over the $49.6 million in 2000. Salaries and employee benefits increased by $2.7 million or 10.9% due to a $1.2 million expense for an executive retirement plan and increased profit sharing and defined benefit plan expenses. Net occupancy expense decreased by $1.5 million due to the Company's 2001 purchase and subsequent merger of CKSS Associates into the Bank, which owned two commercial office buildings, in which the Company maintained branch and administrative offices. Other expense in 2001 included a $642,000 prepayment penalty incurred on the early payoff of long-term debt. The debt prepayment was part of the Company's strategy to increase the repricing of its liabilities in the declining interest rate environment.

        Total other operating expense, expressed as a percentage of average assets, was 2.87% in 2002, 2.82% in 2001 and 2.96% in 2000. In 2002, the Company's efficiency ratio, which measures operating expense as a percentage of total revenue (net interest income and other operating income) improved to 53.02% from 55.59% in 2001. The Company believes its efficiency ratio will continue to improve in the near future and expects to achieve a ratio below 50%, a level that compares favorably with high-performing commercial banks in its peer group based on asset size.

Income Taxes

        Income tax expense totaled $15.0 million in 2002, $10.2 million in 2001 and $10.6 million in 2000. The effective tax rate was 31.0% in 2002, 26.2% in 2001 and 35.3% in 2000. In 2002, the Company recorded a $1.4 million net reduction in taxes attributable to $2.1 million in high-technology state tax credits. The state's high-technology tax credit program offers tax credits for investments in high-technology companies at diminishing levels over a 5-year period. During 2002, the Company invested $1.7 million in qualifying entities and received $6.0 million in state tax credits to be realized through 2006. In 2001, the Company recorded a nonrecurring $3.8 million federal income tax benefit related to the carryback of tax-basis capital losses against capital gains recognized in prior years. The capital loss was created from the issuance of preferred stock by CPB Real Estate, Inc.

FINANCIAL CONDITION

        Table 17 sets forth the distribution of average assets, liabilities and shareholders' equity.

30

Table 17 Distribution of Assets, Liabilities and Shareholders' Equity

				2002					2001					2000
				Average Balance			Percent to Total		Average Balance			Percent to Total		Average Balance			Percent to Total
				(Dollars in thousands)
Assets
	Cash and due from banks			$	42,519		2.2	%	$	35,356		2.0	%	$	37,054		2.2	%
	Interest-bearing deposits in other banks				31,022		1.6			29,735		1.7			4,910		0.3
	Federal funds sold				8,393		0.5			10,103		0.5			296		—
	Taxable investment securities				375,357		19.6			291,568		16.2			290,394		17.4
	Tax-exempt investment securities				74,802		3.9			73,243		4.1			61,328		3.7
	Loans				1,285,175		67.1			1,270,450		70.8			1,223,648		73.1
	Allowance for loan losses				(24,916	)	(1.3	)		(24,030	)	(1.3	)		(22,163	)	(1.3	)
	Premises and equipment				59,296		3.1			28,999		1.6			24,231		1.4
	Other assets				63,220		3.3			79,589		4.4			53,196		3.2
		Total assets		$	1,914,868		100.0	%	$	1,795,013		100.0	%	$	1,672,894		100.0	%
Liabilities and Shareholders' Equity
	Deposits:
		Noninterest-bearing demand		$	237,961		12.4	%	$	198,725		11.1	%	$	186,557		11.1	%
		Interest-bearing demand			138,083		7.2			117,205		6.5			106,922		6.4
		Savings and money market			561,848		29.4			397,813		22.2			390,132		23.3
		Time deposits under $100,000			233,250		12.2			275,324		15.3			250,173		15.0
		Time deposits $100,000 and over			364,632		19.0			398,769		22.2			382,543		22.9
			Total deposits		1,535,774		80.2			1,387,836		77.3			1,316,327		78.7
Short-term borrowings					10,436		0.5			11,516		0.6			57,027		3.4
Long-term debt					162,331		8.5			204,371		11.4			133,724		8.0
Other liabilities					44,356		2.3			42,855		2.4			22,442		1.3
		Total liabilities			1,752,897		91.5			1,646,578		91.7			1,529,520		91.4
Shareholders' equity					161,971		8.5			148,435		8.3			143,374		8.6
		Total liabilities and shareholders' equity		$	1,914,868		100.0	%	$	1,795,013		100.0	%	$	1,672,894		100.0	%

        Average total assets of $1,914.9 million increased by $119.9 million or 6.7% in 2002 over 2001, which increased by $122.1 million or 7.3% over 2000. In 2002, funds generated from strong deposit growth were used to reduce long-term debt and purchase investment securities. In 2001, a combination of deposit growth and long-term debt were used to fund loan growth.

        Average loans of $1,285.2 million in 2002 increased by $14.7 million or 1.2% over the $1,270.5 million in 2001, which increased by $46.8 million or 3.8% over 2000. The percentage of loans to total assets has decreased to 67.1% in 2002 from 70.8% in 2001 and 73.1% in 2000. Loan growth has been challenging in this market, which has experienced some contraction, resulting in a heightened level of competitiveness for a smaller number of lending opportunities. Increasing market share, as the Company has consistently experienced over the past number of years, has become more difficult. A reorganization of the Company's financial services sales force and a new sales process was implemented in 2002 with the goal of increasing loans by 8-10% annually in the future, market circumstances and risk tolerance permitting.

        Average interest-bearing deposits in other banks of $31.0 million were virtually unchanged from 2001 after increasing by $24.8 million over 2000. Average investment securities of $450.2 million

31

increased by $85.3 million or 23.4% in 2002 over 2001, which increased by $13.1 million or 3.7% over 2000. Average premises and equipment of $59.3 million in 2002 increased by $30.0 million due to the Company's 2001 purchase and subsequent merger of CKSS Associates, which owned two commercial office buildings in which the Company maintained branch and administrative offices. The CKSS Associates transaction also resulted in the temporary increase in other assets, which increased by $26.4 million in 2001 and a $16.4 million reduction in 2002.

        Funding for this asset growth came primarily from increases in deposits in 2002 and borrowings in 2001. Average deposits of $1,535.8 million increased by $147.9 million or 10.7% in 2002 over 2001, which increased by $71.5 million or 5.4% over 2000. As a percentage of total assets, deposits increased to 80.2% in 2002 from 77.3% in 2001, which fell from 78.7% in 2000. The successful launch in 2001 of the Bank's flagship deposit product, the Exceptional Account, coupled with a general "flight to safety" by investors, resulted in the strong deposit growth experienced in 2002. This ended a period of lackluster deposit growth in 2000 and early 2001, when borrowings from the Federal Home Loan Bank of Seattle provided a supplemental source of funding. With the higher deposit growth, borrowings have been reduced. Average long-term debt as a percent of total assets dropped to 8.5% in 2002 from 11.4% in 2001, which increased from 8.0% in 2000. Consistent with its goals for loan growth, the Company is targeting deposit growth in the 8-10% range for the near future.

        Average shareholders' equity of $162.0 million increased by $13.5 million or 9.1% over the $148.4 million in 2001, which was relatively unchanged from the prior year. As a percentage of total assets, average shareholders' equity was 8.5% in 2002, 8.3% in 2001 and 8.6% in 2000.

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 seeks to maximize the 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 and liabilities.

        Table 18 sets forth information regarding interest rate sensitivity of the Company's assets, liabilities and shareholders' equity at December 31, 2002. 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 repricing date or maturity. All interest-bearing demand and savings balances are included in the three-months-or-less category, even though repricing of these accounts is not contractually required and many not actually occur during that period.

32

Table 18 Rate Sensitivity of Assets, Liabilities and Shareholders' Equity

			Three Months or Less			Over Three Through Six Months			Over Six Through Twelve Months			Over One Through Three Years		Over Three Years		Nonrate Sensitive			Total
			(Dollars in thousands)
Assets
	Interest-bearing deposits in other banks		$	39,358		$	—		$	—		$	—	$	—	$	—		$	39,358
	Federal funds sold			—			—			—			—		—		—			—
	Investment securities			70,314			33,990			68,199			185,281		171,476		11,664			540,924
	Loans held for sale			—			—			—			—		6,420		—			6,420
	Loans			474,661			90,489			159,580			378,259		186,464		439			1,289,892
	Other assets			—			—			—			—		—		151,569			151,569
		Total assets		584,333			124,479			227,779			563,540		364,360		163,672			2,028,163
Liabilities and Shareholders' Equity
	Noninterest-bearing deposits			—			—			—			—		—		305,351			305,351
	Interest-bearing deposits			939,315			145,944			111,680			81,706		57,105		—			1,335,750
	Short-term borrowings			28,008			—			1,000			—		—		—			29,008
	Long-term debt			75,499			3,877			738			26,317		40,724		—			147,155
	Other liabilities			—			—			—			—		—		37,456			37,456
	Shareholders' equity			—			—			—			—		—		173,443			173,443
		Total liabilities and shareholders' equity		1,042,822			149,821			113,418			108,023		97,829		516,250			2,028,163
Interest rate sensitivity gap			$	(458,489	)	$	(25,342	)	$	114,361		$	455,517	$	266,531	$	(352,578	)	$	—
Cumulative interest rate sensitivity gap			$	(458,489	)	$	(483,831	)	$	(369,470	)	$	86,047	$	352,578	$	—		$	—

        As shown in Table 18, the amount of liabilities being repriced or maturing exceeds the asset amount in the three-months-or-less category and the over-three-through-six-months category. In the remaining time periods, the amount of assets repricing or maturing exceeds the 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 decline.

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. The capital standards require a minimum Tier I risk-based capital ratio of 4% and total risk-based capital ratio of 8%. The Federal Reserve Board and the FDIC have also adopted a 3% 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, FDIC-insured institutions such as the Bank must maintain

33

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. The Company's and Bank's capital ratios as of December 31, 2002 and 2001 are discussed in note 25 to the consolidated financial statements.

        On December 31, 2002, the Company's common stock was listed on the New York Stock Exchange (the "NYSE") under the ticker symbol "CPF". The change in trading to the NYSE from the Nasdaq National Market was intended to increase the liquidity and visibility of the Company's stock. On November 8, 2002, the Company effected a 2-for-1 split of its common stock in the form of a 100% stock dividend.

        In 2002, the Company's board of directors authorized the repurchase and retirement of the Company's common stock up to $10 million. This seventh stock repurchase program brings total stock repurchases authorized since inception of the program in 1998 to $77.0 million. During 2002, 142,400 shares were repurchased for a total consideration of $2.6 million at an average price of $18.22 per share. Since 1998, the Company has repurchased 5,748,814 shares, approximately 27% of the 21.2 million shares outstanding as of the commencement of the stock repurchase program. Total consideration paid on these repurchases was $67.3 million at an average price of $11.71 per share. As of December 31, 2002, the remaining amount of repurchases authorized was $9.7 million. Management expects to continue repurchasing common stock to enhance shareholder value while supporting the Company's future asset growth and maintaining regulatory capital ratios at the well-capitalized level.

Liquidity

        The Company's objective in managing its liquidity is to maintain a balance between sources and uses 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, maintenance of an adequate level of readily marketable assets, and access to short-term funding sources. During 2002, the Company's liquidity position improved as strong deposit inflows exceeded loan demand. Consequently, long-term debt was reduced, and investment in marketable investment securities increased.

        The consolidated statements of cash flows identify three major categories of 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, the Company's operating activities provided $23.5 million in cash during the year ended December 31, 2002, compared to $30.8 million in 2001 and $36.5 million in 2000.

        Investing activities represent a use of cash. Net cash used in investing activities totaled $171.3 million in 2002, $31.0 million in 2001 and $199.6 million in 2000. The large decline in cash used in 2001 is attributable to the decline in lending activity as principal repayments exceeded loan originations. In contrast, loan originations exceeded principal repayments by $26.9 million in 2002 and $128.9 million in 2000. Investing activities in 2001 also included $31.0 million in cash used to purchase a 50% interest in CKSS Associates, a Hawaii limited partnership which owned commercial office buildings including the Company's headquarters. Investment securities purchases and maturities generally comprise the balance of investing activities; however, due to the decline in lending activity, investment securities purchases have become a major use of investable cash. Purchases of investment securities in 2002 totaled $297.9 million, while proceeds from sales and maturities totaled $154.1 million, resulting in a net cash outflow of $143.9 million. By comparison, the net cash outflows for investment securities purchases, sales and maturities was $2.7 million in 2001.

34

        Cash provided by financing activities totaled $170.3 million in 2002 and $131.9 million in 2000, compared to $12.2 million in cash used in financing activities in 2001. During 2002, the net increase in deposits of $190.2 million and $15.1 million increase in short-term borrowings provided the source of cash, while repayments on long-term debt totaling $40.4 million represented a use of cash. During 2001, repayments of long-term debt of $63.5 million and a net decrease in short-term borrowings of $42.8 million offset a $87.9 million net increase in deposits.

        For the parent company, the primary uses of funds included the aforementioned common stock repurchases, as well as dividend payments totaling $6.1 million in 2002, $5.4 million in 2001 and $5.3 million in 2000. The parent company's primary source of funds was dividends received from the Bank. As presented in note 25 to the consolidated financial statements, 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, 2002, retained earnings of the Bank were $126.3 million.

Impact of New Accounting Standards

        During 2002, the Financial Accounting Standards Board issued statements on financial accounting standards, which are discussed in note 26 to the consolidated financial statements. The application of those statements is not expected to have a material impact on the Company's consolidated financial statements.

Consolidated Quarterly Results of Operations

Table 19

		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year
		(Dollars in thousands, except per share data)
2002:
	Interest income	$	29,257	$	29,718	$	30,201	$	29,286	$	118,462
	Net interest income		21,322		21,823		23,143		22,691		88,979
	Provision for loan losses		300		300		300		100		1,000
	Net interest income after provision for loan losses		21,022		21,523		22,843		22,591		87,979
	Income before income taxes		11,904		11,693		11,676		12,965		48,238
	Net income		7,540		7,674		7,896		10,173		33,283
	Basic earnings per share		0.48		0.48		0.50		0.64		2.09
	Diluted earnings per share		0.47		0.47		0.49		0.62		2.04
2001:
	Interest income	$	34,299	$	32,725	$	31,819	$	31,030	$	129,873
	Net interest income		18,955		18,861		19,680		20,956		78,452
	Provision for loan losses		750		900		1,050		300		3,000
	Net interest income after provision for loan losses		18,205		17,961		18,630		20,656		75,452
	Income before income taxes		8,281		9,000		10,155		11,446		38,882
	Net income		5,328		5,774		8,722		8,881		28,705
	Basic earnings per share		0.32		0.35		0.53		0.56		1.75
	Diluted earnings per share		0.31		0.34		0.52		0.55		1.72

35

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.

        Table 20 presents information on the Company's financial instruments that 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 22 to the consolidated financial statements for a discussion of the calculation of fair values.

        At December 31, 2002, holdings of relatively shorter-term investments and short-term borrowings increased from year-end 2001. 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 expectation if actual experience differs from assumptions used.

Table 20

		Expected Maturity Within
																							Total Fair Value
		One Year			Two Years			Three Years			Four Years			Five Years			Thereafter			Book Value
		(Dollars in thousands)
Interest-sensitive assets
Interest-bearing deposits in other banks		$	39,358		$	—		$	—		$	—		$	—		$	—		$	39,358		$	39,358
	Weighted average interest rates		1.15	%																	1.15	%
Fixed rate investments		$	150,374		$	138,222		$	47,059		$	32,549		$	29,051		$	96,060		$	493,315		$	506,685
	Weighted average interest rates		4.47	%		4.73	%		5.78	%		5.05	%		4.85	%		5.20	%		4.87	%
Variable rate investments		$	1,182		$	801		$	552		$	380		$	262		$	615		$	3,792		$	3,730
	Weighted average interest rates		3.17	%		2.55	%		3.54	%		4.46	%		4.45	%		4.77	%		3.57	%
Equity investments		$	43,817		$	—		$	—		$	—		$	—		$	—		$	43,817		$	43,817
	Weighted average interest rates		3.39	%																	3.39	%
Fixed rate loans		$	114,610		$	63,753		$	61,253		$	18,737		$	18,046		$	67,161		$	343,560		$	360,010
	Weighted average interest rates		7.90	%		8.03	%		8.04	%		8.25	%		7.59	%		7.44	%		7.87	%
Variable rate loans		$	247,201		$	140,074		$	124,031		$	48,453		$	59,272		$	333,721		$	952,752		$	972,925
	Weighted average interest rates		5.55	%		5.90	%		6.34	%		6.63	%		6.10	%		6.75	%		6.21	%
Total—December 31, 2002		$	596,542		$	342,850		$	232,895		$	100,119		$	106,631		$	497,557		$	1,876,594		$	1,926,525
Total—December 31, 2001		$	502,118		$	287,630		$	224,106		$	158,110		$	95,345		$	436,072		$	1,703,381		$	1,703,069
Interest-sensitive liabilities
Interest-bearing demand and
savings deposits		$	750,758		$	—		$	—		$	—		$	—		$	—		$	750,758		$	750,758
Weighted average interest rates			1.86	%																	1.86	%
Time deposits		$	446,180		$	48,938		$	32,768		$	17,293		$	37,564		$	2,249		$	584,992		$	591,531
Weighted average interest rates			1.72	%		2.61	%		3.17	%		3.99	%		4.32	%		5.55	%		2.12	%
Short-term borrowings		$	29,008		$	—		$	—		$	—		$	—		$	—		$	29,008		$	29,007
Weighted average interest rates			1.20	%																	1.20	%
Long-term debt		$	25,114		$	60,371		$	20,946		$	7,698		$	13,269		$	19,757		$	147,155		$	152,992
Weighted average interest rates			3.14	%		3.40	%		6.14	%		5.31	%		3.78	%		5.70	%		4.19	%
Total—December 31, 2002		$	1,251,060		$	109,309		$	53,714		$	24,991		$	50,833		$	22,006		$	1,511,913		$	1,524,288
Total—December 31, 2001		$	1,199,085		$	61,767		$	74,395		$	25,801		$	16,415		$	24,264		$	1,401,727		$	1,408,629

36

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 Item 7 of this report.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        For consolidated quarterly results of operations, see "Consolidated Quarterly Results of Operations" in Item 7 of this report.

37

CONSOLIDATED BALANCE SHEETS

CPB INC. & SUBSIDIARY—DECEMBER 31, 2002 & 2001

			2002			2001
			(Dollars in thousands)
Assets
Cash and due from banks			$	62,273		$	39,820
Interest-bearing deposits in other banks				39,358			29,277
Federal funds sold				—			13,500
Investment securities:
	Held to maturity, at amortized cost (fair value of $58,491 at December 31, 2002 and $71,142 at December 31, 2001			56,320			69,859
	Available for sale, at fair value			484,604			322,088
		Total investment securities		540,924			391,947
Loans held for sale				6,420			1,708
Loans				1,289,892			1,266,949
	Less allowance for loan losses			24,197			24,564
		Net loans		1,265,695			1,242,385
Premises and equipment				57,725			60,635
Accrued interest receivable				9,254			9,000
Investment in unconsolidated subsidiaries				3,150			1,284
Due from customers on acceptances				34			—
Other real estate				1,903			812
Other assets				41,427			45,273
		Total assets	$	2,028,163		$	1,835,641
Liabilities and Shareholders' Equity
Deposits:
	Noninterest-bearing deposits		$	305,351		$	238,663
	Interest-bearing deposits			1,335,750			1,212,262
		Total deposits		1,641,101			1,450,925
Short-term borrowings				29,008			13,893
Long-term debt				147,155			175,572
Minority interest				10,064			10,064
Bank acceptances outstanding				34			—
Other liabilities				27,358			38,117
		Toal liabilities		1,854,720			1,688,571
Shareholders' 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 15,973,458 at December 31, 2002 and 15,866,484 at December 31, 2001			8,707			6,678
	Surplus			45,848			45,848
	Retained earnings			118,958			94,581
	Deferred stock awards			(99	)		(34	)
	Accumulated other comprehensive income (loss)			29			(3	)
		Total shareholders' equity		173,443			147,070
		Total liabilities and shareholders' equity	$	2,028,163		$	1,835,641

38

CONSOLIDATED STATEMENTS OF INCOME

CPB INC. & SUBSIDIARY—YEARS ENDED DECEMBER 31, 2002, 2001 & 2000

			2002		2001		2000
			(Dollars in thousands, except per share data)
Interest income:
	Interest and fees on loans		$	93,257	$	104,938	$	103,883
	Interest and dividends on investment securities:
		Taxable interest		20,305		19,473		18,835
		Tax-exempt interest		3,129		2,513		2,378
		Dividends		1,133		1,450		1,367
	Interest on deposits in other banks			499		1,166		301
	Interest on Federal funds sold			139		333		19
		Total interest income		118,462		129,873		126,783
Interest expense:
	Interest on deposits			23,241		39,851		43,228
	Interest on short-term borrowings			208		644		3,723
	Interest on long-term debt			6,034		10,926		8,608
		Total interest expense		29,483		51,421		55,559
		Net interest income		88,979		78,452		71,224
Provision for loan losses				1,000		3,000		4,500
		Net interest income after provision for loan losses		87,979		75,452		66,724
Other operating income:
	Income from fiduciary activities			1,380		1,225		1,079
	Service charges on deposit accounts			4,301		3,847		3,093
	Other service charges and fees			4,814		4,062		4,247
	Equity in earnings of unconsolidated subsidiaries			—		217		571
	Fees on foreign exchange			504		420		530
	Investment securities gains (losses)			477		1,395		(766	)
	Gains on sales of loans			469		925		132
	Gain on sale of merchant portfolio			—		—		1,850
	Gain on curtailment of pension obligation			1,395		—		—
	Other			1,942		2,022		2,151
		Total other operating income		15,282		14,113		12,887
Other operating expense:
	Salaries and employee benefits			29,828		27,805		25,071
	Net occupancy			3,653		4,880		6,350
	Equipment			2,744		2,674		2,708
	Other			18,798		15,324		15,463
		Total other operating expense		55,023		50,683		49,592
		Income before income taxes		48,238		38,882		30,019
Income taxes				14,955		10,177		10,585
		Net income	$	33,283	$	28,705	$	19,434
Per share data:
	Basic earnings per share		$	2.09	$	1.75	$	1.09
	Diluted earnings per share			2.04		1.72		1.07
	Cash dividends declared			0.40		0.34		0.31

See accompanying notes to consolidated financial statements.

39

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME

CPB INC. & SUBSIDIARY—YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

		Common Stock			Surplus		Retained Earnings			Deferred Stock Awards			Accumulated Other Comprehensive Income(Loss)			Total
		(Dollars in thousands, except per share data)
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 ($0.31 per share)			—			—		(5,370	)		—			—			(5,370	)
33,180 shares of common stock issued			229			—		—			—			—			229
1,681,158 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
	Net Income		—			—		28,705			—			—			28,705
	Net change in unrealized gain (loss) on investment securities, net of taxes of $638 and net of reclassification (see disclosure)		—			—		—			—			958			958
	Pension liability adjustment, net of taxes of $(2,675)		—			—		—			—			(4,021	)		(4,021	)
Comprehensive income																	25,642
Cash dividends declared ($0.34 per share)			—			—		(5,425	)		—			—			(5,425	)
127,008 shares of common stock issued			923			—		—			—			—			923
1,192,160 shares of common stock repurchased			(456	)		—		(16,931	)		—			—			(17,387	)
2,700 shares of deferred stock awards granted			39			—		—			(34	)		—			5
Balance at December 31, 2001		$	6,678		$	45,848	$	94,581		$	(34	)	$	(3	)	$	147,070
	Net Income		—			—		33,283			—			—			33,283
	Net change in unrealized gain (loss) on investment securities, net of taxes of $1,986 and net of reclassification (see disclosure)		—			—		—			—			2,986			2,986
	Pension liability adjustment, net of taxes of $(1,966)		—			—		—			—			(2,954	)		(2,954	)
Comprehensive income																	33,315
Cash dividends declared ($0.40 per share)			—			—		(6,382	)		—			—			(6,382	)
246,674 shares of common stock issued			2,024			—		—			—			—			2,024
142,400 shares of common stock repurchased			(70	)		—		(2,524	)		—			—			(2,594	)
2,700 shares of deferred stock awards granted			75			—		—			(72	)		—			3
Vested stock awards			—			—		—			7			—			7
Balance at December 31, 2002		$	8,707		$	45,848	$	118,958		$	(99	)	$	29		$	173,443
Disclosure of reclassification amount:
Year ended December 31, 2000:
Unrealized holding gain on investment securities during year, 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
Year ended December 31, 2001:
Disclosure of reclassification amount:
Unrealized holding gain on investment securities during year, net of taxes of $461		$	—		$	—	$	—		$	—		$	694		$	694
Less reclassification adjustment for gains included in net income, net of taxes of $176			—			—		—			—			(264	)		(264	)
Net Change in unrealized gain (loss) on investment securities		$	—		$	—	$	—		$	—		$	958		$	958
Year ended December 31, 2002:
Disclosure of reclassification amount:
Unrealized holding gain on investment securities during year, net of taxes of $1,945		$	—		$	—	$	—		$	—		$	2,925		$	2,925
Less reclassification adjustment for gains included in net income, net of taxes of $(41)			—			—		—			—			(61	)		(61	)
Net Change in unrealized gain (loss) on investment securities		$	—		$	—	$	—		$	—		$	2,986		$	2,986

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

CPB INC. & SUBSIDIARY—YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

				2002			2001			2000
				(Dollars in thousands)
Cash flows from operating activities:
	Net income			$	33,283		$	28,705		$	19,434
	Adjustments to reconcilie net income to net cash provided by operating activities:
		Provision for loan losses			1,000			3,000			4,500
		Provision for depreciation and amortization			4,188			3,502			2,698
		Amortization of deferred stock awards			10			5			—
		Net amortization (accretion) of investment securities			1,132			(276	)		(59	)
		Net loss (gain) on investment securities			(477	)		(1,395	)		766
		Federal Home Loan Bank dividends received			(799	)		(1,386	)		(1,246	)
		Net gain on sale of loans			(469	)		(925	)		(132	)
		Proceeds from sales of loans held for sale			44,339			80,521			13,364
		Originations & purchases of loans held for sale			(48,833	)		(81,184	)		(11,222	)
		Deferred income tax expense (benefit)			4,222			(2,830	)		(8,987	)
		Equity in earnings of unconsolidated subsidiaries			—			(217	)		(571	)
		Net decrease in other assets			2,042			601			3,805
		Net increase (decrease) in other liabilities			(16,158	)		2,692			14,158
			Net cash provided by operating activities		23,480			30,813			36,508
Cash flows from investing activities:
	Proceeds from maturities of and calls on investment securities held to maturity				13,415			11,166			15,402
	Proceeds from sales of investment securities held to maturity				—			5,376			—
	Proceeds from sales of investment securities available for sale				16,689			54,824			30,592
	Proceeds from maturities of and calls on investment securities available for sale				123,968			44,685			24,397
	Purchases of investment securities available for sale				(297,933	)		(118,725	)		(123,133	)
	Net increase in interest-bearing deposits in other banks				(10,081	)		(17,771	)		(1,678	)
	Net decrease (increase) in Fed Funds Sold				13,500			1,500			(15,000	)
	Net principal repayments (loan originations)				(26,914	)		20,615			(128,902	)
	Purchases of premises and equipment				(1,278	)		(1,690	)		(1,685	)
	Net proceeds from disposal of premises and equipment				—			—			442
	Distributions from unconsolidated subsidiaries				—			125			500
	Contributions to unconsolidated subsidiaries				(2,644	)		(81	)		(532	)
	Acquisition of remaining interest in CKSS				—			(31,043	)		—
			Net cash used by investing activities		(171,278	)		(31,019	)		(199,597	)
Cash flows from financing activities:
	Net increase in deposits				190,176			87,859			57,412
	Proceeds from long-term debt				12,000			18,120			155,000
	Repayments of long-term debt				(40,417	)		(63,518	)		(32,309	)
	Net increase (decrease) in short-term borrowings				15,115			(42,827	)		(22,280	)
	Cash dividends paid				(6,053	)		(5,351	)		(5,316	)
	Proceeds from sale of common stock				2,024			923			229
	Proceeds from sale of preferred stock				—			10,000			—
	Repurchases of common stock				(2,594	)		(17,387	)		(20,865	)
			Net cash provided (used) by financing activities		170,251			(12,181	)		131,871
			Net increase (decrease) in cash and cash equivalents		22,453			(12,387	)		(31,218	)
Cash and cash equivalents:
			At beginning of year		39,820			52,207			83,425
			At end of year	$	62,273		$	39,820		$	52,207
Supplemental disclosure of cash flow information:
	Cash paid during the year for interest			$	30,840		$	54,854		$	53,214
	Cash paid during the year for income taxes				24,715			9,911			5,123
Supplemental disclosure of noncash investing activities:
	Reclassification of loans to other real estate			$	2,855		$	2,458		$	2,741

See accompanying notes to consolidated financial statements.

41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CPB INC. & SUBSIDIARY—YEARS ENDED DECEMBER 31, 2002, 2001 & 2000

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, 2002. 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 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), CKSS Associates, Central Business Club of Honolulu and CPB Real Estate, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.

        In June 2001, the Company acquired the remaining 50% interest in CKSS Associates ("CKSS"), a limited partnership, that it did not already own for $18.5 million. The acquisition was accounted for as a purchase. In November 2001, CPB Properties, Inc., a general partner with a 50% interest in CKSS, and CKSS were merged into the Bank.

        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.

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, 2002 and 2001, would be reported at fair value, with changes in fair value

42

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 Held for Sale

        Loans held for sale, consisting primarily of fixed-rate residential mortgage loans which were originated with the intent to sell, are valued at the lower of cost or market value on an aggregate basis.

Loans

        Loans are stated at the principal amount outstanding, net of unearned income. Unearned income represents net deferred loan fees that 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.

43

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, consisting of mortgage servicing rights, are carried at the lower of amortized cost or fair value and are included in other assets. Intangible assets totaled $853,000 and $1,456,000 at December 31, 2002 and 2001, respectively. Amortization expense amounted to $927,000, $437,000 and $308,000 for the years ended December 31, 2002, 2001 and 2000, respectively. Accumulated amortization amounted to $2,926,000 and $1,999,000 at December 31, 2002 and 2001, respectively.

Impairment of Long-Lived Assets

        Long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

Other Real Estate

        Other real estate is composed of properties acquired through foreclosure proceedings. Properties acquired through foreclosure are valued at fair value that 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 decrease 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.

44

Stock Compensation 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 Statement of Financial Accounting Standards ("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. In December 2002, SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123", was issued. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, it amends the disclosure requirements of SFAS No. 123. 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. 148.

        The following table presents pro forma disclosures of the impact that the 2002, 2000, 1999 and 1997 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. 148.

		2002			2001			2000
		(Dollars in thousands, except per share data)
Net income, as reported		$	33,283		$	28,705		$	19,434
Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects			(787	)		(355	)		(321	)
Pro forma net income		$	32,496		$	28,350		$	19,113
Earnings per share:
	Basic—as reported	$	2.09		$	1.75		$	1.09
	Basic—pro forma	$	2.04		$	1.73		$	1.07
	Diluted—as reported	$	2.04		$	1.72		$	1.07
	Diluted—pro forma	$	1.99		$	1.69		$	1.05

        Pro forma net income and earnings per share reflect only those options granted since 1995. The full impact of calculating compensation cost for options under SFAS No. 148 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 was not considered.

45

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 difference 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. There were no gains or losses in 2002. Net gains for 2001 totaled $5,000. Net losses for 2000 totaled $1,000.

Use of Estimates

        The preparation of the consolidated financial statements requires Management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. 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. 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.

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, 2002 and 2001 was $26,253,000 and $24,750,000, respectively.

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3.    INVESTMENT SECURITIES

        A summary of investment securities at December 31, 2002 and 2001 follows:

			Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
			(Dollars in thousands)
2002
Held to Maturity
	U.S. Treasury and other U.S. Government agencies		$	22,625	$	823	$	—	$	23,448
	States and political subdivisions			33,695		1,348		—		35,043
		Total	$	56,320	$	2,171	$	—	$	58,491
Available for Sales
	U.S. Treasury and other U.S. Government agencies		$	369,967	$	10,017	$	296	$	379,688
	States and political subdivisions			48,716		1,903		42		50,577
	Privately-issued mortgage-backed securities			10,440		82		—		10,522
	Federal Home Loan Bank of Seattle stock			13,412		—		—		13,412
	Mutual funds			30,000		—		—		30,000
	Other			405		—		—		405
		Total	$	472,940	$	12,002	$	338	$	484,604
2001
Held to Maturity
	U.S. Treasury and other U.S. Government agencies		$	31,612	$	830	$	—	$	32,442
	States and political subdivisions			38,247		520		67		38,700
		Total	$	69,859	$	1,350	$	67	$	71,142
Available for Sales
	U.S. Treasury and other U.S. Government agencies		$	266,546	$	6,907	$	1,076	$	272,377
	States and political subdivisions			32,404		771		9		33,166
	Privately-issued mortgage-backed securities			3,158		99		—		3,257
	Federal Home Loan Bank of Seattle stock			12,613		—		—		12,613
	Other			675		—		—		675
		Total	$	315,396	$	7,777	$	1,085	$	322,088

        The amortized cost and estimated fair value of investment securities at December 31, 2002, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities

47

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

			Amortized cost		Estimated fair value
			(Dollars in thousands)
Held to Maturity
	Due in one year or less		$	3,554	$	3,687
	Due after one year through five years			15,664		16,435
	Due after five years through ten years			8,742		9,174
	Due after ten years			5,735		5,747
	Mortgage-backed securities			22,625		23,448
		Total	$	56,320	$	58,491
Available for Sale
	Due in one year or less		$	10,972	$	11,078
	Due after one year through five years			75,157		78,744
	Due after five years through ten years			10,680		11,786
	Due after ten years			33,854		34,521
	Mortgage-backed securities			298,460		304,658
	Federal Home Loan Bank of Seattle stock			13,412		13,412
	Mutual funds			30,000		30,000
	Other			405		405
		Total	$	472,940	$	484,604

        Proceeds from sales of investment securities available for sale were $16,689,000 in 2002, $54,824,000 in 2001 and $30,592,000 in 2000, resulting in gross realized gains of $747,000 and $1,129,000 in 2002 and 2001, respectively, and gross realized losses of $126,000 and $683,000 in 2001 and 2000, respectively. Investment securities losses in 2002, 2001, and 2000 also included writedowns of $270,000, $68,000 and $83,000, respectively, on an equity security to reflect an impairment in value deemed other than temporary.

        In 2001, the Bank, in response to an unsolicited tender offer from the issuer, tendered an investment security designated as held to maturity with an amortized cost of $5,027,000. The proceeds from this tender was $5,376,000 and resulted in a realized gain of $349,000.

        Investment securities of $84,645,000 and $179,308,000 at December 31, 2002 and 2001, 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 9).

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4.    LOANS

        Loans, excluding loans held for sale, consisted of the following at December 31, 2002 and 2001:

			2002		2001
			(Dollars in thousands)
Real estate:
	Mortgage—commercial		$	542,588	$	506,222
	Mortgage—residential			313,614		348,644
	Construction			118,276		132,165
Commercial, financial and agricultural				264,044		235,179
Consumer				56,571		50,106
				1,295,093		1,272,316
Less unearned income				5,201		5,367
		Total	$	1,289,892	$	1,266,949

        In the normal course of business, the Bank has made loans to certain directors, executive officers and their affiliates under terms which Management believes are consistent with the Bank's general lending policies. An analysis of the activity of such loans in 2002 follows:

		(Dollars in thousands)
Balance, beginning of year		$	3,062
Additions			782
Repayments			(904	)
Other changes			(358	)
	Balance, end of year	$	2,582

        The amount of other changes is primarily attributable to the sale of one residential mortgage loan and the addition of new executive officers in 2002.

        Impaired loans at December 31, 2002 and 2001 (see note 5 for related allowance for loan losses), amounted to $311,000 and $2,397,000, respectively, and included all nonaccrual and restructured loans greater than $500,000. The average recorded investment in impaired loans amounts to $1,943,000 in 2002, $7,800,000 in 2001 and $8,124,000 in 2000. Interest income recognized on such loans amounted to $10,000 in 2002, $1,288,000 in 2001 and $130,000 in 2000, of which $10,000, $1,258,000 and $93,000, respectively, was earned on nonaccrual loans, and $30,000 and $37,000 was recorded in 2001 and 2000, respectively, on restructured loans still accruing interest.

        Nonaccrual loans at December 31, 2002 and 2001 totaled $439,000 and $2,421,000, respectively. The Bank collected and recognized interest income of $6,000 on these loans in 2002. The Bank would have recognized additional interest income of $22,000 had these loans been accruing interest throughout 2002. Additionally, the Bank collected and recognized interest income of $173,000 on charged-off loans in 2002.

        There were no restructured loans still accruing interest at December 31, 2002 and 2001.

49

        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:

		2002			2001			2000
		(Dollars in thousands)
Balance, beginning of year		$	24,564		$	22,612		$	20,768
Provision for loan losses			1,000			3,000			4,500
			25,564			25,612			25,268
Charge-offs			(1,281	)		(2,529	)		(3,592	)
Recoveries			816			1,481			936
	Net charge-offs		(465	)		(1,048	)		(2,656	)
Reclassification of allowance for credit losses on off-balance sheet credit exposures			(902	)		—			—
Balance, end of year		$	24,197		$	24,564		$	22,612

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

		2002			2001			2000
		(Dollars in thousands)
Balance, beginning of year		$	426		$	3,208		$	2,547
Provision for loan losses			1,274			81			14
Net charge-offs			(1,618	)		(464	)		(2,139	)
Other changes			(82	)		(2,399	)		2,786
	Balance, end of year	$	—		$	426		$	3,208

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

        At December 31, 2002, all impaired loans were measured based on the fair value of the underlying collateral.

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6.    PREMISES AND EQUIPMENT

        Premises and equipment consisted of the following at December 31, 2002 and 2001:

		2002		2001
		(Dollars in thousands)
Land		$	9,534	$	9,534
Office buildings and improvements			77,080		77,077
Furniture, fixtures and equipment			19,568		18,680
			106,182		105,291
Less accumulated depreciation and amortization			48,457		44,656
	Net	$	57,725	$	60,635

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

		2002		2001		2000
		(Dollars in thousands)
Net occupancy		$	2,725	$	2,087	$	1,129
Equipment			1,463		1,415		1,569
	Total	$	4,188	$	3,502	$	2,698

7.    DEPOSITS

        Certificates of deposit of $100,000 or more totaled $360,630,000 and $368,794,000 at December 31, 2002 and 2001, respectively.

        Interest expense on certificates of deposits of $100,000 or more totaled $8,949,000, $18,433,000 and $21,430,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

8.    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 365 days at December 31, 2002 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, 2002, 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.

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        A summary of short-term borrowings follows:

		2002			2001			2000
		(Dollars in thousands)
Federal funds purchased
	Amount outstanding at December 31	$	—		$	—		$	—
	Average amount outstanding during year		—			—			5
	Highest month-end balance during year		—			—			—
	Weighted average interest rate on balances outstanding at December 31		—			—			—
	Weighted average interest rate during year		—			—			6.88	%
Securities sold under agreements to repurchase
	Amount outstanding at December 31	$	1,000		$	1,000		$	19,267
	Average amount outstanding during year		1,000			2,817			10,167
	Highest month-end balance during year		1,000			20,118			19,267
	Weighted average interest rate on balances outstanding at December 31		1.15	%		2.05	%		6.65	%
	Weighted average interest rate during year		1.96	%		6.04	%		6.66	%
Other short-term borrowings
	Amount outstanding at December 31	$	28,008		$	12,893		$	37,453
	Average amount outstanding during year		9,436			8,699			46,855
	Highest month-end balance during year		52,634			33,912			97,664
	Weighted average interest rate on balances outstanding at December 31		1.37	%		1.98	%		6.67	%
	Weighted average interest rate during year		1.98	%		5.44	%		6.50	%

9.    LONG-TERM DEBT

        Long-term debt at December 31, 2002 and 2001 consisted of intermediate-term FHLB advances with a weighted average interest rate of 3.177% and 3.793%, respectively. FHLB advances outstanding at December 31, 2002 were secured by interest-bearing deposits at the FHLB of $39.4 million, the Bank's holdings of FHLB stock, other unencumbered investment securities with a fair value of $19.5 million and certain real estate loans totaling $244.8 million in accordance with the collateral provisions of the Advances, Security and Deposit Agreement between the Bank and the FHLB. At December 31, 2002, the Bank had available to it additional unused FHLB advances of approximately $232.8 million.

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        At December 31, 2002, approximate maturities of FHLB advances were as follows:

			(Dollars in thousands)
Year ending December 31:
	2003		$	25,115
	2004			60,371
	2005			20,946
	2006			7,698
	2007			13,269
	Thereafter			19,756
		Total	$	147,155

10.    SHAREHOLDER RIGHTS PLAN

        On August 26, 1998, the Company's board of directors adopted a Shareholder Rights Plan (the "Rights Plan") that entitled holders of common stock to receive one right for each share of common stock outstanding as of September 16, 1998. Adjusted for the two-for-one stock split of the Company's common stock on November 8, 2002, each right entitles the registered holder to purchase from the Company one two-hundredth (2/100th) of a share of the Company's Junior Participating Preferred Stock, Series A, no par value per share, at a price of $37.50 per one two-hundredth (2/100th) 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.

11.    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 $1,164,000, $890,000 and $649,000 for 2002, 2001 and 2000, 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.

12.    STOCK COMPENSATION PLANS

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.

53

        In November 1986, the Company adopted the 1986 Stock Option Plan ("1986 Plan") making available 440,000 shares for grant to employees. In 1992, the Company's shareholders 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 shareholders approved the 1997 Plan which provides 2,000,000 shares of the Company's common stock for grants to employees as qualified incentive stock options and to directors as nonqualified stock options (adjusted for the two-for-one stock split of the Company's common stock on November 8, 2002). 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. The nonqualified stock options vest at the rate at 1,500 shares annually beginning one 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 in January 2002, March 2002, November 2000, November 1999, July 1997 and June 1995 of $13.03, $14.99, $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 1.19%, 1.19%, 2.33%, 2.32%, 2.63% and 3.07%, expected volatility of 38%, 38%, 43%, 36%, 28% and 30%, risk-free interest rate of 5.02%, 5.02%, 5.04%, 6.25%, 5.45%, and 6.10% and expected life of 7.5 years for years 2002, 2000, 1999, 1997 and 1995, respectively. There were no grants in 2001, 1998 or 1996.

		2002				2001				2000
		Shares		Weighted average exercise price		Shares		Weighted average exercise price		Shares		Weighted average exercise price
		(Dollars in thousands)
Outstanding at January 1:		827,898		$	7.41	1,006,118		$	7.47	1,023,418		$	8.77
	Granted	195,586			13.08	—			—	136,800			13.08
	Exercised	(246,674	)		8.21	(127,008	)		7.26	(33,180	)		6.880
	Forfeited	(46,638	)		6.06	(51,212	)		12.02	(120,920	)		10.20
Outstanding at December 31		730,172		$	5.76	827,898		$	7.42	1,006,118		$	7.47
Options exercisable at December 31		332,184			8.03	485,938			7.71	483,598			7.59
Shares available for future grants		1,183,984				1,335,632				1,287,120

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

		Options outstanding					Options exercisable
Date of grant		Exercise price		Shares		Remaining average contractual life (months)	Shares
June 14, 1995		$	6.52		70,200	29.5		70,200
July 30, 1997			8.94		306,224	55.0		192,224
November 2, 1999			12.09		83,360	82.1		40,640
November 7, 2000			13.08		96,080	94.2		29,120
January 7, 2002			15.10		40,000	111.8		—
March 12, 2002			16.84		134,308	110.4		—
	Total				730,172			332,184
Weighted average life						35.3
Weighted average exercise price				$	5.76		$	8.03

Stock Awards

        In May 2001 and November 2002, the Company awarded 300 shares of common stock to each of its non-officer directors. Compensation expense is measured as the market price of the stock awards at the grant date, and is recognized over a five-year vesting period.

13.    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, and 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. As a result of the reactivation, employees for whom benefits were fixed in 1986 began to accrue additional benefits under a new formula that became effective January 1, 1991. Employees who were not participants at curtailment, but who 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 resulted in an increase of $5,914,000 in the unrecognized prior service cost, which is being amortized over a period of 13 years.

        Effective December 31, 2002, the Bank curtailed its defined benefit retirement plan, and recorded a net curtailment gain of $1.4 million. Plan benefits were fixed as of that date.

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        The following table sets forth information pertaining to the defined benefit retirement plan for the years ended December 31, 2002, 2001 and 2000:

			2002			2001			2000
			(Dollars in thousands)
Change in benefit obligation
	Benefit obligation at January 1		$	24,399		$	22,917		$	21,082
	Service cost			358			305			203
	Interest cost			1,705			1,665			1,624
	Actuarial loss			1,734			1,355			1,697
	Benefits paid			(1,891	)		(1,843	)		(1,689	)
	Gain from curtailment			(1,110	)		—			—
		Benefit obligation at December 31	$	25,195		$	24,399		$	22,917
Benefit obligation actuarial assumptions
	Weighted average discount rate			6.75	%		7.25	%		7.50	%
	Weighted average rate of compensation increase			3.00	%		3.00	%		3.00	%
Change in plan assets
	Fair value of assets at January 1		$	20,234		$	22,391		$	24,409
	Actual return on plan assets			(1,259	)		(1,091	)		(329	)
	Employer contributions			1,930			777			—
	Benefits paid			(1,891	)		(1,843	)		(1,689	)
		Fair value of assets at December 31	$	19,014		$	20,234		$	22,391
Funded status
	Benefit obligation at December 31		$	(25,195	)	$	(24,399	)	$	(22,917	)
	Fair value of plan assets			19,014			20,234			22,391
	Unrecognized transition cost			—			—			—
	Unamortized prior service cost			—			(1,120	)		(844	)
	Unrecognized net actuarial loss			11,615			8,649			4,520
		Net amount recognized	$	5,434		$	3,364		$	3,150
Amounts recognized in the consolidated statements of financial condition
	Prepaid benefit cost		$	—		$	—		$	3,150
	Accrued benefit liability			(6,181	)		(3,332	)		—
	Accumulated other comprehensive income			11,615			6,696			—
		Net amount recognized	$	5,434		$	3,364		$	3,150

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Components of net periodic cost (benefit)
	Service cost		$	358		$	305		$	203
	Interest cost			1,705			1,665			1,624
	Expected return on plan assets			(1,767	)		(1,939	)		(2,125	)
	Amortization of unrecognized transition asset			—			—			(46	)
	Recognized prior service cost			276			275			275
	Recognized net loss			684			257			—
		Net periodic cost (benefit)	$	1,256		$	563		$	(69	)
Net periodic cost actuarial assumptions
	Weighted average discount rate			6.75	%		7.25	%		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 1995 and 2001, the Bank established Supplemental Executive Retirement Plans ("SERP") which provide certain officers of the Bank with supplemental retirement benefits in excess of limits imposed on qualified plans by Federal tax laws. Effective December 31, 2002, the Bank curtailed its SERP, and accordingly, plan benefits were fixed as of that date.

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        The following table sets forth information pertaining to the SERP for the years ended December 31, 2002, 2001 and 2000:

			2002			2001			2000
			(Dollars in thousands)
Change in benefit obligation
	Benefit obligation at January 1		$	2,492		$	767		$	629
	Service cost			78			17			12
	Interest cost			176			55			50
	Actuarial loss (gain)			(95	)		171			123
	Benefits paid			(151	)		(47	)		(47	)
	Curtailment gain			(158	)		—			—
	Transitional obligation			—			1,200			—
	Prior service cost			—			329			—
		Benefit obligation at December 31	$	2,342		$	2,492		$	767
Change in plan assets
	Fair value of assets at January 1		$	—		$	—		$	—
	Employer contributions			151			47			47
	Benefits paid			(151	)		(47	)		(47	)
		Fair value of assets at December 31	$	—		$	—		$	—
Funded status
	Benefit obligation at December 31		$	(2,342	)	$	(2,492	)	$	(767	)
	Unrecognized transition obligation			324			344			17
	Unrecognized net actuarial loss			32			296			139
		Net amount recognized	$	(1,986	)	$	(1,852	)	$	(611	)
Components of net periodic cost (benefit)
	Service cost		$	78		$	17		$	12
	Interest cost			176			55			50
	Amortization of unrecognized transition obligation			3			1,203			3
	Recognized prior service cost			18			—			—
	Recognized net (gain) loss			11			(32	)		(13	)
		Net periodic cost	$	286		$	1,243		$	52

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

14.    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

58

limitations of the Internal Revenue Code. Employees may elect to receive up to 50% of their annual allocation in cash.

        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.

        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. The Bank made contributions to the profit sharing plan of $1,164,000, $890,000 and $649,000 for 2002, 2001 and 2000, respectively. Contributions to the 401(K) plan totaled $659,000, $630,000 and $651,000 in 2002, 2001 and 2000, respectively.

15.    OPERATING LEASES

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

        Total rent expense for 2001 and 2000 represents gross rent expense less the net operating income from Company-owned properties of $1,419,000 and $499,000 for 2001 and 2000, respectively.

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

		2002		2001			2000
		(Dollars in thousands)
Total rent expense		$	3,428	$	3,352		$	4,635
	Less sublease rental income		—		(144	)		(188	)
	Total	$	3,428	$	3,208		$	4,447

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        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, 2002:

			Rental commitment
			(Dollars in thousands)
Year ending December 31:
	2003		$	2,680
	2004			2,474
	2005			2,392
	2006			2,313
	2007			1,879
	Thereafter			11,974
		Total	$	23,712

        In addition, the Bank leases certain properties that it owns. 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, 2002:

			(Dollars in thousands)
Year ending December 31:
	2003		$	3,236
	2004			2,660
	2005			2,009
	2006			1,291
	2007			514
	Thereafter			174
		Total	$	9,884

        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.

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16.    OTHER EXPENSE

        Components of other expense for the years ended December 31, 2002, 2001 and 2000 were as follows:

		2002		2001		2000
		(Dollars in thousands)
Legal and other professional services		$	3,368	$	2,260	$	2,433
Computer services			1,680		1,584		1,408
Advertising			1,300		1,600		1,300
Merchant and other bank card services			654		16		365
Other			11,796		9,864		9,957
	Total	$	18,798	$	15,324	$	15,463

17.    INCOME AND FRANCHISE TAXES

        Components of income tax expense (benefit) for the years ended December 31, 2002, 2001 and 2000 were as follows:

			Current		Deferred			Total
			(Dollars in thousands)
2002:
	Federal		$	10,441	$	3,419		$	13,860
	State			292		803			1,095
		Total	$	10,733	$	4,222		$	14,955
2001:
	Federal		$	9,862	$	(2,415	)	$	7,447
	State			3,145		(415	)		2,730
		Total	$	13,007	$	(2,830	)	$	10,177
2000:
	Federal		$	15,933	$	(7,448	)	$	8,485
	State			3,639		(1,539	)		2,100
		Total	$	19,572	$	(8,987	)	$	10,585

        Income tax expense amounted to $14,955,000, $10,177,000 and $10,585,000 for 2002, 2001 and 2000, respectively. Income tax expense for the periods presented differed from the "expected" tax

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expense (computed by applying the U.S. Federal corporate tax rate of 35% to income before income taxes) for the following reasons:

			2002			2001			2000
			(Dollars in thousands)
Computed "expected" tax expense			$	16,883		$	13,609		$	10,507
Increase (decrease) in taxes resulting from:
	Tax-exempt interest			(1,247	)		(1,136	)		(1,149	)
	Other tax-exempt income			(459	)		(40	)		(437	)
	State franchise tax, net of Federal income tax benefit			712			1,774			1,365
	Stock-based benefits			(805	)		—			—
	Capital loss carryback			—			(3,842	)		—
	Other			(129	)		(188	)		299
		Total	$	14,955		$	10,177		$	10,585

        At December 31, 2002 and 2001, current Federal income taxes payable of $1,450,000 and $9,495,000, respectively, and current state franchise taxes payable of $4,154,000 and $10,091,000, respectively, were included in other liabilities.

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        The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2002 and 2001 were as follows:

			2002		2001
			(Dollars in thousands)
Deferred tax assets
	Allowance for loan losses		$	8,182	$	8,010
	Net unrealized gain on available-for-sale securities			4,660		2,674
	Employee retirement benefits			6,119		4,423
	Premises and equipment, principally due to differences in depreciation			1,594		1,240
	Accrued expenses			1,257		1,106
	State franchise tax			1,514		1,041
	Interest on nonaccrual loans			40		173
	Other			683		333
		Total deferred tax assets	$	24,049	$	19,000
Deferred tax liabilities
	Real estate investment trust dividends		$	9,025	$	—
	Investment in unconsolidated subsidiaries			—		587
	FHLB stock dividends received			3,153		2,834
	Deferred gain on curtailed retirement plan			3,328		2,771
	Accreted discounts receivable			846		671
	Deferred finance fees			432		637
	Other			234		227
		Total deferred tax liabilities	$	17,018	$	7,727
		Net deferred tax assets	$	7,031	$	11,273

        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, 2002 and 2001.

        In 1998, the Company completed a corporate reorganization. In September 2002, the State of Hawaii tax department notified the Company that it was disallowing the tax treatment of this reorganization, and assessed the Company approximately $0.9 million in interest on the unpaid tax liability. The unpaid tax liability and the related interest were paid in October 2002. The Company appealed this decision, and was notified in December 2002 that the Hawaii State Board of Taxation Review had denied the appeal. The Company has filed an appeal with the Hawaii State Tax Appeal Court. If the Company were successful in its appeal, the tax benefits, which have not yet been recognized, would amount to approximately $5.3 million as of December 31, 2002.

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18.    COMPREHENSIVE INCOME

        Components of comprehensive income, net of taxes, for the years ended December 31, 2002, 2001 and 2000 were as follows:

	2002			2001			2000
	(Dollars in thousands)
Unrealized holding gains on available-for-sale investment securities	$	7,004		$	4,018		$	3,060
Pension liability adjustments		(6,975	)		(4,021	)		—
	$	29		$	(3	)	$	3,060

19.    EARNINGS PER SHARE

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

			2002		2001		2000
			(Dollars in thousands, except per share data)
Basic earnings per share computation
	Numerator:
		Income available to common stockholders	$	33,283	$	28,705	$	19,434
	Denominator:
		Weighted average common shares outstanding		15,931		16,410		17,834
	Basic earnings per share		$	2.09	$	1.75	$	1.09
Diluted earnings per share computation
	Numerator:
		Income available to common stockholders	$	33,283	$	28,705	$	19,434
	Denominator:
		Weighted average common shares outstanding		15,931		16,410		17,834
		Incremental shares from conversion of options		395		350		298
				16,326		16,760		18,132
Diluted earnings per share			$	2.04	$	1.72	$	1.07

20.    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 those 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 collections and unsold traveler's checks,

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which are not reflected in the accompanying consolidated financial statements. Management does not anticipate any material losses as a result of these transactions.

21.    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 counterparty 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, 2002 and 2001 financial instruments with off-balance sheet risk were as follows:

		2002		2001
		(Dollars in thousands)
Financial instruments whose contract amounts represent credit risk:
	Commitments to extend credit	$	342,357	$	328,524
	Standby letters of credit and financial guarantees written		18,273		18,164
Financial instruments whose contract amounts exceed the amount of credit risk:
	Forward foreign exchange contracts		—		89

        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.

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        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.

22.    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.

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.

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Off-Balance Sheet Financial Instruments

        The fair values of off-balance 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.

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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.

				December 31, 2002				December 31, 2001
				Carrying/ notional amount		Estimated fair value		Carrying/ notional amount		Estimated fair value
				(Dollars in thousands)
Financial assets
	Cash and due from banks			$	62,273	$	62,273	$	39,820	$	39,820
	Interest-bearing deposits in other banks				39,358		39,358		29,277		29,277
	Federal funds sold				—		—		13,500		13,500
	Investment securities				540,924		543,095		391,947		393,230
	Net loans				1,272,115		1,308,732		1,244,093		1,242,434
	Accrued interest receivable				9,254		9,254		9,000		9,000
	Due from customers on acceptances				34		34		—		—
Financial liabilities
	Deposits:
		Noninterest-bearing deposits			305,351		305,351		238,663		238,663
		Interest-bearing demand and savings deposits			750,758		750,758		601,515		601,515
		Time deposits			584,992		591,531		610,747		613,449
			Total deposits		1,641,101		1,647,640		1,450,925		1,453,627
	Short-term borrowings				29,008		29,008		13,893		13,893
	Long-term debt				147,155		152,992		175,572		179,772
	Bank acceptances outstanding				34		34		—		—
	Accrued interest payable (included in other liabilities)				2,858		2,858		4,215		4,215
Off-balance sheet financial instruments
	Commitments to extend credit				342,357		1,712		328,524		1,643
	Standby letters of credit and financial guarantees written				18,273		137		18,164		136
	Forward foreign exchange contracts				—		—		89		—

23.    DECLARATION OF DIVIDENDS AND DIVIDEND POLICY

        The Company's board of directors, at a meeting held on December 17, 2002, declared a fourth quarter cash dividend of $0.11 per share, in addition to the three quarterly cash dividends previously declared, for a total of $0.40 per share for the year ended December 31, 2002.

        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.

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24.    SEGMENT INFORMATION

        The Company has two reportable segments: financial services 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 financial services segment includes retail branch offices, corporate lending, construction and real estate development lending, residential mortgage lending, and international banking services. A full range of deposit and loan products, and various other banking services is offered. 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.

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        Segment profits (losses) and assets are provided in the following table for the periods indicated:

			Financial Services		Treasury			All Others			Total
			(Dollars in thousands)
Year ended December 31, 2002:
	Net interest income		$	67,610	$	15,659		$	5,710		$	88,979
	Intersegment net interest income (expense)			6,379		(3,459	)		(2,920	)		—
	Provision for loan losses			719		—			281			1,000
	Other operating income			7,011		880			7,391			15,282
	Other operating expense			19,603		1,493			33,927			55,023
	Administrative and overhead expense allocation			24,730		498			(25,228	)		—
	Income taxes			12,022		3,736			(803	)		14,955
		Net income	$	23,926	$	7,353		$	2,004		$	33,283
At December 31, 2002:
	Investment securities		$	—	$	540,924		$	—		$	540,924
	Loans (including loans held for sale)			1,224,097		—			72,215			1,296,312
	Other			42,973		88,037			59,917			190,927
		Total assets	$	1,267,070	$	628,961		$	132,132		$	2,028,163
Year ended December 31, 2001:
	Net interest income		$	60,084	$	8,635		$	9,733		$	78,452
	Intersegment net interest income (expense)			3,929		1,350			(5,279	)		—
	Provision for loan losses			1,511		—			1,489			3,000
	Other operating income			7,443		1,514			5,156			14,113
	Other operating expense			17,849		1,566			31,268			50,683
	Administrative and overhead expense allocation			23,142		524			(23,666	)		—
	Income taxes			7,255		2,499			423			10,177
		Net income	$	21,699	$	6,910		$	96		$	28,705
At December 31, 2001:
	Investment securities		$	—	$	391,947		$	—		$	391,947
	Loans (including loans held for sale)			1,182,641		—			86,016			1,268,657
	Other			41,058		72,284			61,695			175,037
		Total assets	$	1,223,699	$	464,231		$	147,711		$	1,835,641
Year ended December 31, 2000:
	Net interest income		$	53,111	$	4,798		$	13,315		$	71,224
	Intersegment net interest income (expense)			6,306		2,762			(9,068	)		—
	Provision for loan losses			3,500		—			1,000			4,500
	Other operating income			5,412		(624	)		8,099			12,887
	Other operating expense			18,636		495			30,461			49,592
	Administrative and overhead expense allocation			19,523		354			(19,877	)		—
	Income taxes			8,064		2,138			383			10,585
		Net income	$	15,106	$	3,949		$	379		$	19,434
At December 31, 2000:
	Investment securities		$	—	$	384,619		$	—		$	384,619
	Loans (including loans held for sale)			1,136,564		—			154,626			1,291,190
	Other			43,447		73,432			24,230			141,109
		Total assets	$	1,180,011	$	458,051		$	178,856		$	1,816,918

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25.    PARENT COMPANY AND REGULATORY RESTRICTIONS

        The Bank, as a Hawaii state-chartered bank, is prohibited from declaring or paying dividends greater than its retained earnings. As of December 31, 2002, retained earnings of the Bank totaled $126,349,000.

        Section 131 of the Federal Deposit Insurance Corporation Improvement Act ("FIDCIA") 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, 2002 and 2001, 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
		Amount		Ratio		Amount		Ratio		Amount		Ratio
		(Dollars in thousands)
Company
As of December 31, 2002:
	Tier 1 risk-based capital	$	176,418	11.57	%	$	60,991	4.00	%	$	91,487	6.00	%
	Total risk-based capital		195,552	12.82			121,982	8.00			152,478	10.00
	Leverage capital		176,418	8.99			78,487	4.00			98,109	5.00
As of December 31, 2001:
	Tier 1 risk-based capital	$	152,970	10.12	%	$	60,462	4.00	%	$	90,694	6.00	%
	Total risk-based capital		171,935	11.37			120,925	8.00			151,156	10.00
	Leverage capital		152,970	8.43			72,626	4.00			90,783	5.00
Bank
As of December 31, 2002:
	Tier 1 risk-based capital	$	170,708	11.21	%	$	60,908	4.00	%	$	91,362	6.00	%
	Total risk-based capital		189,817	12.47			121,817	8.00			152,271	10.00
	Leverage capital		170,708	8.71			78,386	4.00			97,983	5.00
As of December 31, 2001:
	Tier 1 risk-based capital	$	149,912	9.91	%	$	60,506	4.00	%	$	90,760	6.00	%
	Total risk-based capital		168,890	11.17			121,013	8.00			151,266	10.00
	Leverage capital		149,912	8.22			72,934	4.00			91,168	5.00

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

CPB Inc. Condensed Balance Sheets
December 31, 2002 and 2001

			2002			2001
			(Dollars in thousands)
Assets
	Cash		$	935		$	786
	Investment securities available for sale			1,924			1,522
	Investment in subsidiary bank, at equity in underlying net assets			167,699			143,982
	Dividends receivable from subsidiary bank			1,771			1,425
	Accrued interest receivable and other assets			3,336			838
		Total assets	$	175,665		$	148,553
Liabilities and Shareholders' Equity
	Dividends payable		$	1,757		$	1,428
	Other liabilities			465			55
		Total liabilities		2,222			1,483
Shareholders 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 15,973,458 and 15,866,484 shares at December 31, 2002 and 2001, respectively			8,707			6,678
	Surplus			45,848			45,848
	Retained earnings			118,958			94,581
	Deferred stock awards			(99	)		(34	)
	Accumulated other comprehensive income			29			(3	)
		Total shareholders' equity		173,443			147,070
		Total liabilities and shareholders' equity	$	175,665		$	148,553

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CPB Inc. Condensed Statements of Income
Years ended December 31, 2002, 2001 and 2000

			2002			2001			2000
			(Dollars in thousands)
Income:
	Dividends from subsidiary bank		$	9,541		$	21,554		$	5,458
	Interest income:
		Interest and dividends on investment securities		69			78			189
		Interest from subsidiary bank		8			22			174
		Investment securities losses		(230	)		(68	)		(83	)
		Total income		9,388			21,586			5,738
Total expenses				2,029			446			398
	Income before income taxes and equity in undistributed income of subsidiary bank			7,359			21,140			5,340
Income taxes				(2,235	)		(143	)		(24	)
	Income before equity in undistributed income of subsidiary bank			9,594			21,283			5,364
Equity in undistributed income of subsidiary bank				23,689			7,422			14,070
	Net income		$	33,283		$	28,705		$	19,434

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CPB Inc. Condensed Statements of Cash Flows
Years ended December 31, 2002, 2001 and 2000

				2002			2001			2000
				(Dollars in thousands)
Cash flows from operating activities
	Net income			$	33,283		$	28,705		$	19,434
	Adjustments to reconcile net income to net cash provided by operating activities:
		Net loss on investment securities			231			68			83
		Deferred income tax benefit			(322	)		(42	)		(69	)
		Increase in dividends receivable from subsidiary bank			(345	)		(71	)		(35	)
		Equity in undistributed income of subsidiary bank			(26,789	)		(23,422	)		(14,070	)
		Other, net			(2,425	)		(44	)		26
			Net cash provided by operating activities		3,633			5,194			5,369
Cash flows from investing activities
	Proceeds from maturities of investment securities available for sale				475			—			—
	Purchases of investment securities available for sale				(436	)		—			(333	)
	Investment in and advances to subsidiaries				—			—			(1,058	)
	Distribution of capital by subsidiary bank				3,100			16,000			15,000
			Net cash provided by investing activities		3,139			16,000			13,609
Cash flows from financing activities
	Proceeds from sale of common stock				2,024			923			229
	Repurchases of common stock				(2,594	)		(17,387	)		(20,865	)
	Dividends paid				(6,053	)		(5,351	)		(5,316	)
			Net cash used in financing activities		(6,623	)		(21,815	)		(25,952	)
		Net increase (decrease) in cash and cash equivalents			149			(621	)		(6,974	)
Cash and cash equivalents
	At beginning of year				786			1,407			8,381
	At end of year			$	935		$	786		$	1,407

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26.    ACCOUNTING PRONOUNCEMENTS

        In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 supersedes APB Opinion No. 17, "Intangible Assets", and provides accounting and reporting guidance on intangible assets acquired individually or with a group of other assets (but not those acquired in a business combination). The provisions of SFAS No. 142 are to be applied starting with fiscal years beginning after December 15, 2001. The application of SFAS No. 142 did not have a material impact on the Company's consolidated financial statements.

        In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 provides accounting and reporting guidance on obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The provisions of SFAS No. 143 are effective for fiscal years beginning after June 15, 2002. The application of SFAS No. 143 is not expected to have a material impact on the Company's consolidated financial statements.

        In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of a segment of a business (as previously defined in that opinion). It also amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements", to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The provisions of SFAS No. 144 are effective for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The application of SFAS No. 144 did not have a material impact on the Company's consolidated financial statements.

        In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 rescinds SFAS No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria for APB Opinion No. 30 will now be used to classify those gains and losses. SFAS No. 64 amended SFAS No. 4, and is no longer necessary because SFAS No. 4 has been rescinded. SFAS No. 44 was issued to establish accounting requirements for the effects of transition to the provisions of the Motor Carrier Act of 1980. Because the transition has been completed, SFAS No. 44 is no longer necessary. SFAS No. 145 amends SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. SFAS No. 145 also makes technical corrections to existing pronouncements. The application of SFAS No. 145 did not have a material impact on the Company's consolidated financial statements.

        In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities. It nullifies the Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability be recognized for those costs only when the liability is incurred, that is, when it meets the definition of a liability in the FASB's conceptual framework. It also establishes fair value as the objective for initial

75

measurement of liabilities related to exit or disposal activities. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The application of SFAS No. 146 is not expected to have a material impact on the Company's consolidated financial statements.

        In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain Financial Institutions—an Amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9." SFAS No. 147 removes acquisitions of financial institutions, except for transactions between two or more mutual enterprises, from the scope of both SFAS No. 72 ("Accounting for Certain Acquisitions of Banking or Thrift Institutions") and FASB Interpretation No. 9 ("Applying APB Opinions No. 16 and 17 When a Savings and Loan Association of a Similar Institution Is Acquired in a Business Combination Accounted for by the Purchase Method"), and requires that those transactions be accounted for in accordance with SFAS No. 141 and 142. The requirement in paragraph 5 of SFAS No. 72 is no longer applicable to acquisitions within the scope of SFAS No. 147. SFAS No. 147 also amends SFAS No. 144 to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets. Paragraph 5 of SFAS No. 147 is effective for acquisitions for which the date of acquisition is on or after October 1, 2002. The provision in paragraph 6 related to accounting for the impairment or disposal of certain long-term customer-relationship intangible assets are effective on October 1, 2002. Transition provisions for previously recognized unidentifiable intangible assets in paragraphs 8-14 are effective on October 1, 2002. The application of SFAS No. 147 did not have a material impact on the Company's consolidated financial statements.

        In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. It also incorporates, without change, the guidance of FASB Interpretation No. 34, "Disclosure of Indirect Guarantees of Indebtedness of Others," which is being superseded. The initial recognition and initial measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor's fiscal year-end. The disclosure requirements in this interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The interpretive guidance incorporated without change from Interpretation No. 34 continues to be required for financial statements for fiscal years ending after June 15, 1981, the effective date of Interpretation No. 34. The application of Interpretation No. 45 did not have a material impact on the Company's consolidated financial statements.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123." SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, it amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company has elected to continue to apply the provisions of APB Opinion No. 25 for its stock option plan and provide the disclosure provisions of SFAS No. 148.

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        In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities." This interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," addresses consolidation by business enterprises of variable interest entities. It explains how to identify variable interest entities and how an enterprise assesses its interest in a variable interest entity to decide whether to consolidate that entity. It requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. This interpretation applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The interpretation applies to public enterprises as of the beginning of the applicable interim or annual period, and it applies to nonpublic enterprises as of the end of the applicable annual period. The application of Interpretation No. 46 is not expected to have a material impact on the Company's consolidated financial statements.

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INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Directors of CPB Inc.:

        We have audited the accompanying consolidated balance sheets of CPB Inc. and subsidiary as of December 31, 2002 and 2001, and the related consolidated statements of income, changes in shareholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2002. 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, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America.

/s/ KPMG LLP

January 17, 2003

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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. 99.3 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. 99.3 to this Annual Report on Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Equity Compensation Plan Information as of December 31, 2002

	(a)	(b)		(c)
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	730,172	$	5.76	1,183,984
Equity compensation plans not approved by security holders	—		—	—
Total	730,172	$	5.76	1,183,984

        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. 99.3 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. 99.3 to this Annual Report on Form 10-K.

ITEM 14. CONTROLS AND PROCEDURES

        Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934, as amended) are effective. Subsequent to the date of their evaluation,

79

there were no significant changes in the Company's internal controls or in other factors that could significantly affect the disclosure controls.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)1.    Financial Statements

        The following consolidated financial statements are included in Item 8 of this report:

        CPB Inc. and Subsidiary:

Independent Auditors' Report

Consolidated Balance Sheets at December 31, 2002 and 2001

Consolidated Statements of Income for the Years ended December 31, 2002, 2001 and 2000

Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income for the Years ended December 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows for the Years ended December 31, 2002, 2001 and 2000

Notes to Consolidated Financial Statements

(a)2.    All schedules required by this Item 15(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.*
10.1	Agreement for Sale and Purchase of Partnership Interests, dated June 25, 2001, by and among Kajima Development Corporation, Sumitomo Corporation, Sumitomo Corporation of America, as Sellers, Central Pacific Bank as Purchaser, and CPB Properties, Inc.(2)
10.2	Termination of Share Purchase Agreement, dated as of October 22, 2001, by and between CPB Inc. and The Sumitomo Bank, Limited(2)
10.3	Plan of Merger of CPB Properties, Inc. with and into Central Pacific Bank and Articles of Merger as filed with the State of Hawaii Department of Commerce and Consumer Affairs on October 29, 2001, effective at 4:59 p.m. on October 31, 2001(2)
10.4	Certificate of Cancellation of Limited Partnership for CKSS Associates, as filed with the State of Hawaii Department of Commerce and Consumer Affairs on October 29, 2001, effective at 5:00 p.m. on October 31, 2001(2)
10.5	Split Dollar Life Insurance Plan(3)(9)
10.6	Central Pacific Bank and Subsidiaries 2000 Annual Executive Incentive Plan(9)
10.7	Central Pacific Bank Supplemental Executive Retirement Plan(5)(9)

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10.8	CPB Inc. 1986 Stock Option Plan, as amended(4)(9)
10.9	CPB Inc. 1997 Stock Option Plan, as amended(5)(9)
10.10	License and Service Agreement dated July 30, 1997 by and between Central Pacific Bank and Fiserv Solutions, Inc.(6)
10.11	CPB Inc. Directors Deferred Compensation Plan(9)
10.12	Supplemental Retirement Agreement dated February 28, 2002 by and between Central Pacific Bank and Naoaki Shibuya(9)(10)
10.13	Supplemental Retirement Agreement dated June 28, 2002 by and between Central Pacific Bank and Joichi Saito*(9)
10.14	Executive Employment Agreement dated January 1, 2003 by and between Central Pacific Bank and Clinton L. Arnoldus*(9)
10.15	Executive Employment Agreement dated January 1, 2003 by and between Central Pacific Bank and Neal K. Kanda*(9)
10.16	Executive Employment Agreement dated January 1, 2003 by and between Central Pacific Bank and Sherri Y. Yim*(9)
10.17	Executive Employment Agreement dated January 1, 2003 by and between Central Pacific Bank and Denis K. Isono*(9)
10.18	Executive Employment Agreement dated January 1, 2003 by and between Central Pacific Bank and Blenn A. Fujimoto*(9)
10.19	Executive Employment Agreement dated January 1, 2003 by and between Central Pacific Bank and Alwyn S. Chikamoto*(9)
10.20	Executive Employment Agreement dated January 1, 2003 by and between Central Pacific Bank and Craig H. Hashimoto*(9)
21	Subsidiaries of CPB Inc.(11)
23	Consent of KPMG LLP*
99.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
99.2	Certification of Principal Financial and Accounting Officer Pursuant to 18 U.S.C., As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
99.3	Proxy Statement for Annual Meeting of Shareholders to be held on April 23, 2003(8)

*

Filed herewith.

(1)

Filed as Exhibits 3.1 and 10.7 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 10.1, 10.2, 10.3 and 10.4 to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, filed with the Securities and Exchange Commission on March 28, 2002.

(3)

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.

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(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 Exhibits 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.

(6)

Filed as Exhibit 10.11 to 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.

(7)

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.

(8)

To be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2002, and incorporated herein by reference.

(9)

Denotes management contract or compensation plan or arrangement.

(10)

Filed as Exhibit 10 to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, filed with the Securities and Exchange Commission on May 10, 2002.

(11)

Filed as Exhibit 21 to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, filed with the Securities and Exchange Commission on March 28, 2002.

(b)  The Company filed no reports on Form 8-K during the fourth quarter of 2002.

(c)  The exhibits listed in Item 15(a)3. are incorporated herein by reference or attached hereto.

(d)  All schedules required by this Item 15(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.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: March 12, 2003
	CPB INC. (Registrant)
	/s/  CLINT L. ARNOLDUS     Clint L. Arnoldus Chairman of the Board, President and Chief Executive Officer

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        Pursuant to the requirements of the Exchange Act, 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/  CLINT L. ARNOLDUS Clint L. Arnoldus	Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer), Director	March 12, 2003
/s/  NEAL K. KANDA Neal K. Kanda	Vice President, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer)	March 12, 2003
/s/  JOSEPH F. BLANCO Joseph F. Blanco	Director	March 12, 2003
/s/  ALICE F. GUILD Alice F. Guild	Director	March 12, 2003
/s/  DENNIS I. HIROTA Dennis I. Hirota, Ph.D.	Director	March 12, 2003
/s/  CLAYTON K. HONBO Clayton K. Honbo	Director	March 12, 2003
/s/  STANLEY W. HONG Stanley W. Hong	Director	March 12, 2003
/s/  PAUL KOSASA Paul Kosasa	Director	March 12, 2003
/s/  GILBERT J. MATSUMOTO Gilbert J. Matsumoto	Director	March 12, 2003
/s/  DANIEL M. NAGAMINE Daniel M. Nagamine	Director	March 12, 2003

84

Certification of the Principal Executive Officer
Pursuant to 15 U.S.C. 78m(a) of 78o(d),
As Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

        I, Clint L. Arnoldus, Chief Executive Officer of CPB Inc. (the "Company"), certify that:

(1)

I have reviewed this annual report on Form 10-K of the Company;

(2)

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

(3)

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report;

(4)

The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14) for the Company and we have:

(a)

designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)

evaluated the effectiveness of the Company's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

(c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(5)

The Company's other certifying officers and I have disclosed, based on our most recent evaluation, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

(a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data and have identified for the Company's auditors any material weaknesses in internal controls; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls; and

(6)

The Company's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:    March 12, 2003 /s/  CLINT L. ARNOLDUS Clint L. Arnoldus
Chairman of the Board, President
and Chief Executive Officer

85

Certification of the Principal Financial and Accounting Officer
Pursuant to 15 U.S.C. 78m(a) of 78o(d),
As Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

        I, Neal K. Kanda, Principal Financial and Accounting Officer of CPB Inc. (the "Company"), certify that:

(1)

I have reviewed this annual report on Form 10-K of the Company;

(2)

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

(3)

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report;

(4)

The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14) for the Company and we have:

(a)

designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)

evaluated the effectiveness of the Company's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

(c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(5)

The Company's other certifying officers and I have disclosed, based on our most recent evaluation, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

(a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data and have identified for the Company's auditors any material weaknesses in internal controls; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls; and

(6)

The Company's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:    March 12, 2003 /s/  NEAL K. KANDA Neal K. Kanda
Vice-President, Secretary and Treasurer
(Principal Financial and Accounting Officer)

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QuickLinks

PART I

ITEM 1. BUSINESS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

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

Market Prices and Common Stock Dividends Declared

ITEM 6. SELECTED FINANCIAL DATA

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

Table 1 Average Balances, Interest Income and Expense, Yields and Rates (Taxable Equivalent)
Table 2 Analysis of Changes in Net Interest Income (Taxable Equivalent)
Table 3 Loans by Categories
Table 4 Mortgage Loan Portfolio Composition
Table 5 Consumer Loan Portfolio Composition
Table 6 Maturity Distribution of commercial and Construction Loans
Table 7 Maturity Distribution of Fixed and Variable Rate Loans
Table 8 Distribution of Investment Securities
Table 9 Maturity Distribution of Investment Portfolio
Table 10 Average Balances and Average Rates on Deposits
Table 11 Remaining Maturities of Large Certificates of Deposit
Table 12 Allowance for Loan Losses
Table 13 Allocation of Allowance for Loan Losses
Table 14 Nonperforming Assets, Past Due and Restructured Loans
Table 15 Components of Other Operating Income
Table 16 Components of Other Operating Expense
Table 17 Distribution of Assets, Liabilities and Shareholders' Equity
Table 18 Rate Sensitivity of Assets, Liabilities and Shareholders' Equity
Table 19
Table 20

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED BALANCE SHEETS CPB INC. & SUBSIDIARY—DECEMBER 31, 2002 & 2001
CONSOLIDATED STATEMENTS OF INCOME CPB INC. & SUBSIDIARY—YEARS ENDED DECEMBER 31, 2002, 2001 & 2000
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME CPB INC. & SUBSIDIARY—YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
CONSOLIDATED STATEMENTS OF CASH FLOWS CPB INC. & SUBSIDIARY—YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CPB INC. & SUBSIDIARY—YEARS ENDED DECEMBER 31, 2002, 2001 & 2000
INDEPENDENT AUDITORS' REPORT

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

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Equity Compensation Plan Information as of December 31, 2002

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. CONTROLS AND PROCEDURES

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

SIGNATURES
Certification of the Principal Executive Officer Pursuant to 15 U.S.C. 78m(a) of 78o(d), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of the Principal Financial and Accounting Officer Pursuant to 15 U.S.C. 78m(a) of 78o(d), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

EX-3.2

Exhibit 3.2

AMENDED BYLAWS

OF

CPB INC.

ARTICLE I

Principal Office

The principal office of the Corporation shall be maintained at 220 South King Street, Honolulu, Hawaii 96813, and shall be subject to change as the Board of Directors may from time to time determine in accordance with law.  Additional places of business may be established from time to time and hereafter changed or discontinued, in the manner prescribed by law.

ARTICLE II

Stockholders

Section 1.    The annual meeting of the stockholders shall be held at such time and place in Honolulu, Hawaii, at 10:00 o’ clock a.m. during a week day during the month of February, March, or April as the Board of Directors shall direct.  The annual meeting shall be a general meeting, and at such meeting any business within the powers of the corporation, without special notice of such business may be transacted, except as limited by law or by these Bylaws.

1

Section 2.    At each annual meeting, the stockholders shall elect the number of Directors specified in these Bylaws to serve until their term expires as provided in Section 1 of Article III of these Bylaws and until their successors are duly elected and qualified, and shall transact such other business as may come before them.

Section 3.    Special meetings of the stockholders may be called at any time by the President, the Chairman of the Board of Directors, or a majority of the Board of Directors.  Such requests must state the purpose of the meeting.  The business of special meetings shall be confined to that stated in the notice.

Section 4.    A written or printed notice of all meetings, annual or special, stating the place, day and hour of the meeting and whether it is annual or special and in case of each special meeting stating briefly the business proposed to be transacted thereat, shall be given by mailing such notice, postage prepaid, at least ten (10) days before the date assigned for the meeting, to each stockholder at his or her address as it appears upon the transfer books of the corporation; or notice of any meeting may be given by publication in one or more newspapers in general circulation in Honolulu, not less than two (2) times on separate days,

2

the first publication to be not less than three (3) days previous to the date assigned for the meeting.  Upon notice being given in accordance with the provisions hereof, the failure of any stockholder to receive actual notice of any  meeting shall not in any way invalidate the meeting or proceedings thereat.

Section 5.    Notwithstanding the provisions of Sections 1 to 4 inclusive of this Article, the meeting and voting of stockholders may be dispensed with if all of the stockholders who would have been entitled to vote upon the action if such meeting of stockholders were held shall consent in writing to such corporate action being taken.

Section 6.    The presence of all stockholders, in person or by proxy, at any meeting shall render the same a valid meeting, unless any stockholder shall at the opening of said meeting object to the holding of the same for non-compliance with the provisions relating to notice of meeting.  Any meeting so held without objection shall, notwithstanding the fact that no notice of meeting was given or that the notice given was improper, be valid for all purposes and at such meeting any general business may be transacted and any corporate action may be taken.

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Section 7.    Any annual or special meeting of the stockholders may be adjourned for any period of time, but any meeting at which Directors are to be elected may be adjourned only from day to day until such Directors have been elected; provided, however, that such election shall be held at the second of such adjourned meetings.

Section 8.    In advance of any meeting of stockholders, the Board of Directors shall appoint a judge or judges of election, who need not be stockholders to act at such meeting or any adjournment thereof.  If a judge or judges of election for any reason be not so appointed, the chairman of any such meeting shall make such appointment at the meeting.  The number of judges shall be one or three.  If appointed at a meeting, the majority of shares present and entitled to vote shall determine whether one or three judges are to be appointed.

In case any person appointed as judge fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Board of Directors in advance of the convening of the meeting, or at the meeting by the person acting as chairman.

The judge or judges of election shall determine the number of shares outstanding, the voting power of each,

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the shares represented at the meeting, the existence of a quorum, the authenticity, validity, and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes, determine the result, and do such acts as may be proper to conduct the election or vote with fairness to all stockholders.  If there be three judges of election, the decision, act, or certificate of a majority shall be effective in all respects as the decision, act, or certificate of all.

Section 9.    At all meetings, the stockholders shall be entitled to one vote for each share standing in their respective names on the books, and they may vote either in person or by proxy duly executed in writing.

The acts of the holders of a majority of the shares represented at any meeting, at which a quorum is present, shall be the acts of the stockholders.  The stockholders present at a duly organized meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

The presence, in person or by proxy, of the holders of a majority of the outstanding shares entitled to vote shall constitute a quorum.  If a meeting cannot be organized

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because a quorum has not attended, those present may adjourn the meeting to such time and place as they may determine; but in the case of a meeting called for the election of Directors, those who attend the second of such adjourned meeting, although less than a quorum as fixed in this Section, shall nevertheless constitute a quorum for the purpose of electing Directors.

Section 10.   The officer or agent having charge of the transfer books for shares shall make, at least five days before each meeting of stockholders, a complete list of stockholders entitled to vote at the meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list shall be kept on file at the principal place of business and shall be subject to inspection by any stockholder for any proper purpose at any time during usual business hours.  Such list shall also be produced and kept open at the time and place of the meeting, and shall be subject to the inspection of any stockholder for any proper purpose during the whole time of the meeting.

ARTICLE III

Board of Directors

Section 1.    The business of the Corporation shall be managed by a Board of Directors which shall be nine (9)

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in number.  The Board of Directors shall be divided into three (3) classes with three (3) Directors in each class, with the terms of office of one class expiring each year.

At the annual meeting of stockholders in 1985, the stockholders shall elect all three classes of Directors: three (3) members of the Board of Directors for terms of three (3) years; three (3) members of the Board of Directors for terms of two (2) years; and three (3) members of the Board of Directors for terms of one (1) year.  Thereafter, the stockholders at each annual meeting shall elect members of the Board of Directors for each class for terms of three (3) years to succeed those members of the Board of Directors whose terms shall have expired.  Each member of the Board of Directors shall hold office until the date of the annual meeting of the stockholders in the calendar year in which his or her term of office expires and thereafter until his or her successor is duly elected.

Section 2.    A Director may be removed for cause by the Board of Directors when a Director has been declared of unsound mind by an order of court or convicted of a felony.  A director may be removed without cause at any annual meeting of the corporation by a vote of 80% of the shareholders entitled to vote at the meeting.

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Section 3.    Vacancies on the Board of Directors caused by the death, resignation, disqualification or otherwise, of any Director who was previously duly elected, may be filled by the remaining members of the Board, though less than a quorum, and each person so elected shall be a Director until his successor is elected by the stockholders. Vacancies resulting from an increase in the number of Directors may be filled only by members of the Board of Directors.

Section 4.    A majority of all the Directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the Directors who are present at a meeting at which a quorum is present shall be the acts of the Board of Directors.

Section 5.    Following the annual meeting of stockholders, the Directors-elect shall then convene to consider and act on the appointment of Officers and employees, authorize their compensation, and transact any other business properly brought before the meeting.

Section 6.    Special meetings of the Board of Directors may be called at any time by the Chairman of the Board, and shall be called whenever so requested by not less than three (3) members of the Board.

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Section 7.    No notice of the regular meetings of Directors need be given.  Notice of the time, place and purpose of each special meeting shall be given to each member of the Board by telephone, telegram, personally or by mail, in each case not less than twenty-four (24) hours prior to the time of the meeting.  A meeting may be held on shorter notice if all members consent.

Section 8.    The order of business at all meetings of the Board of Directors shall be as follows:

1.	Roll call and determination of quorum
2.	Reading of the Minutes of previous meeting
3.	Reports of Officers
4.	Report of Executive Committee
5.	Report of Committees
6.	Deferred business
7.	New business

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Section 9.    The Board of Directors shall keep complete records of its proceedings in a Minute Book kept for that purpose alone.

Section 10.  No director shall be entitled to any salary as such; but the Board of Directors may fix, from time to time, a reasonable fee to be paid each Director for his services in attending meetings of the Board; provided that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity, and receiving compensation therefor.

Section 11.  At any annual or special meeting of stockholders, all of the acts and doings of the Board of Directors may be ratified, confirmed and approved by stockholders and such ratification, confirmation and approval shall be as valid and as binding upon the corporation and upon all stockholders as though it had been approved, confirmed or ratified by every stockholder.

Section 12.  Notwithstanding any provisions to the contrary of this Article, and unless prohibited by law, the meeting and voting of Directors may by dispensed with if all of the Directors who would have been entitled to vote upon the action if such meeting of Directors were held shall consent in writing to such corporate action being taken.

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Section 13.  Unless prohibited by law, members of the Board of Directors or any committee designated thereby may participate in a meeting of such board or committee by means of a conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other at the same time, and participation by such means shall constitute presence in person at a meeting.

ARTICLE IV

Executive Committee

Section 1.    At the first meeting of the Board of Directors after the annual meeting of stockholders, the Board shall appoint an Executive Committee of not less than three (3) members to serve for the ensuing year. This Executive Committee shall be considered always in session. A majority of the members of the Committee shall constitute a quorum.

Section 2.    The Executive Committee shall have all the powers of the Board of Directors in the management of the business and affairs of the Corporation while the Board is not in session, not in conflict, however, with the specific directions that may be given by the Board of Directors.

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Section 3.    The Executive Committee shall hold regular meetings upon such days and at such hours, and upon such notice, if any, as it may decide. Special meetings of the Executive Committee may be held at any time with or without notice. The Executive Committee shall keep a separate book of minutes of its proceedings.

ARTICLE V

Other Committees

The Board of Directors and the Executive Committee shall have power to appoint other committees consisting of members of the Board of Directors or of stockholders of the Corporation, or of other persons and to delegate to any such Committee such powers as they may deem necessary.

ARTICLE VI

Officers

Section 1.    The Officers of the Corporation shall be a President, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers, including a Chief Executive Officer, as the Board of Directors may deem necessary, and such Officers shall have such powers and perform such duties as are prescribed by the Bylaws or as may be prescribed by the Board of Directors. No officer need be a

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Director or a stockholder and two or more offices may be held by the same person.

The Board of Directors may, from time to time, designate a Chief Executive Officer of the Corporation, who may also be the Chairman of the Board or the President. The Chief Executive Officer shall be responsible for the general supervision of the property, business and affairs of the Corporation. He shall carry out the policies and procedures for the governing and conduct of the affairs of the Corporation as are adopted and directed by the Board of Directors and prescribed by law. The Chief Executive Officer shall serve at the pleasure of the Board and the office may be terminated at any time at the discretion of the Board without any cause.

Section 2.    A Chairman of the Board of Directors may be elected by a majority of the whole Board of Directors. If so elected, he shall preside at all meetings of the Board of Directors and shall perform such other duties and have such other powers as may be delegated by the Board of Directors.

Section 3.    The President shall preside at all meetings of stockholders, and in general shall perform such duties as are incident to his office or are prescribed by the Board. If no Chairman of the Board of Directors is

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elected, he shall also preside over the meetings of the Board of Directors.

Section 4.    The Vice President shall perform such duties and do such acts as may be prescribed by the Chief Executive Officer, the President, the Board of Directors, or the Executive Committee. Subject to the provisions of Section 3 of this Article, the Vice Presidents in the order directed by the Board of Directors shall perform the duties and have the powers of the President in his absence or in the event of the inability or refusal of the latter to act.

Section 5.    The Treasurer shall have custody of all the funds, notes, bonds and other evidences of property of the corporation, and shall be responsible for keeping all the books and accounts of the Corporation, and shall render statements thereof in such form and as often as required by the Board of Directors. He shall be responsible for the keeping of the stock books, stock transfer books and stock ledger of the Corporation. The Treasurer shall perform all other duties assigned to him by the President or the Board of Directors.

Section 6.    The Secretary shall keep the minutes of the meetings of the Board of Directors and of the stockholders. He shall see that proper notices are given of all

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meetings of which notice is required. He shall have custody of the seal and when necessary shall attest to the same when affixed to written instruments properly executed on behalf of the Corporation; and generally shall perform such other duties as may be prescribed from time to time by the Board, the Executive Committee, the President or the Vice Presidents.

ARTICLE VII

Authority of Executive Officers

Section 1.    The President or the Vice Presidents, together with the Secretary, or Treasurer, or such other Executive Officers as may be appointed from time to time, are authorized to do and perform such corporate and official acts as are necessary in the carrying on of the business of the Corporation, subject always to the directions of the Board of Directors and the Executive Committee. Subject to like limitation, they are fully empowered to make and execute all deeds, leases, releases, agreements, contracts, bills of sale, assignments, letters of attorney or substitution and other instruments which may be necessary to sell, assign, transfer, convey, release and assure or lease to any party entitled thereto, whether purchaser, lessee or transferee, any estate or property, real or personal, stocks, bonds, loans, insurance policies, storage receipts, certificates of deposit, scrip or evidences of debt at any time standing in

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the name of the Corporation or held or controlled by it in its own right; and to cause the corporate seal to be affixed to any and all such instruments, and attested by the Secretary and duly acknowledged.

Section 2.    Such of the Executive Officers as may from time to time be designated by the Board of Directors or by the Executive Committee, shall have the power and authority to sign checks, drafts, letters of credit, orders, receipts and acquittances, and to endorse checks, bills of exchange, orders, drafts and vouchers made payable or endorsed to the Corporation.

Section 3.    The Board of Directors may from time to time by resolution provide for the execution of any corporate instrument or document by a mechanical device or a machine, or by use of facsimile signatures, under such terms as shall be set forth in the resolution of the Board of Directors.

ARTICLE VIII

Voting of Stock or Business Interests

By The Corporation

In all cases where the Corporation owns, holds, or represents, under power of attorney or proxy or in any representative capacity, shares of the capital stock of any

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corporation, or shares or interests in business trusts, co-partnerships or other associations, such shares or interests shall be represented and voted by the President, or in the absence of the President, by the Vice President, or, in the absence of the Vice President, by the Secretary; provided, however, that any person specifically appointed by the Board of Directors for that purpose shall have the right, if present, to represent and vote such shares or interest.

ARTICLE IX

Surety Bonds

All active Officers and employees of the Corporation and, in addition, any Director who is authorized to receive payments of money or to handle negotiable securities on behalf of the Corporation, shall, before entering upon the performance of their duties, furnish bond in such amounts and such surety as is approved by the Board of Directors.

ARTICLE X

Indemnification

Section 1.    The company shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative

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(other than an action by or in the right of the company) by reason of the fact that he or she is or was a Director, Officer, employee or agent of the company or of any division of the company, or is or was serving at the request of the company as a Director, Officer employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of this company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.  The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the company and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

Section 2.    The company shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or

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in the right of the company to procure a judgment in its favor by reason of the fact that he or she is or was a Director, Officer, employee or agent of the company or of any division of the company, or is or was serving at the request of the company as a Director, Officer, employee or agent of the company or of any division of the company, or is or was serving at the request of the company as a Director, Officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interest of the company, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to this company unless and only to the extent that the court in which such action or suit was brought or in any other court having jurisdiction in the premises shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

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Section 3.    To the extent that a Director, Officer, employee or agent of the company or of any division of the company, or a person serving at the request of the company as a Director, Officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 or Section 2 of this Article, or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith.

Section 4.    Any indemnification under Section 1 or Section 2 of this Article (unless ordered by a court) shall be made by the company only as authorized in the specific case upon a determination that indemnification of the director, Officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 1 or Section 2.  Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion to the corporation or (3) by a majority vote of the shareholders.

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Section 5.    Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the company in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in a particular case upon receipt of an undertaking by or on behalf of the Director, Officer, employee or agent to repay such amount unless it shall ultimately be determined that he or she is entitled to be indemnified by the company as authorized in this Article.

Section 6.    Any indemnification pursuant to this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled and shall continue as to the person who has ceased to be a Director, Officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 7.    The company shall have the power to purchase and maintain insurance on behalf of any person who is or was a Director, Officer, employee or agent of the company or of any division of the company, or is or was serving at the request of the company as a Director, Officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in

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any such capacity or arising out of his or her status as such, whether or not the company would have the power to indemnify him or her against such liability under the provisions of this Article.  Any such insurance may be procured from any insurance company designated by the Board of Directors, including any insurance company in which the corporation shall have any equity or other interest, through stock ownership or otherwise.

Section 8.    This Article shall be effective with respect to any person who is a Director, Officer, employee or agent of the company at any time on or after the date of incorporation of this corporation with respect to any action, suit or proceeding pending on or after that date, by reason of the fact that he or she is or was, before or after that date, a Director, Officer, employee or agent of the company or is or was serving, before or after that date, at the request of the company as a Director, Officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise.

ARTICLE XI

Capital Stock

Section 1.    The shares of this Corporation shall be issued and signed by the President, or a Vice President,

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and the Secretary or Treasurer.  Such shares of stock shall be transferable only on the books of the Corporation and by the holder thereof in person or by an attorney upon surrender of the certificate properly endorsed or assigned.

Section 2.    All shares of stock in the Corporation are assignable, and any stockholder may sell, assign and transfer his or her shares and certificates of stock at pleasure.

Section 3.    In case any certificate of stock is lost, mutilated or destroyed, the Board of Directors may issue a new certificate in place thereof upon receipt of a proper bond of indemnification in which the Corporation is named as the beneficiary.

Section 4.    Transfer of stock shall not be suspended preparatory to the declaration of dividends; and unless an agreement to the contrary shall be expressed in the assignment, dividends shall be paid to the stockholders in whose name the stock shall stand at the date of the declaration of dividends.

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ARTICLE XII

Fiscal Year

The fiscal year of the Corporation shall begin on the first day of January in each year and end on the thirty-first day of December of each year.

ARTICLE XIII

Seal

The seal of the Corporation shall be circular in form and shall bear the name of the Corporation around the border and such other device or inscription as the Board of Directors shall determine.

ARTICLE XIV

Amendments

Subject to repeal or change at any regular meeting of the stockholders, or at any special meeting called for that purpose by the vote of the holders of eighty percent (80%) of the outstanding shares entitled to vote at such meeting, the power to alter, amend or repeal these Bylaws or adopt new bylaws shall be vested in the Board of Directors.

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ARTICLE XV

Gender Clause

The names and titles as used herein, or any pronouns used in place thereof, shall mean and include the masculine or feminine, the singular or plural number, according to the context hereof.

As approved by all the Incorporators of this Corporation on February 1, 1982 and, as amended by the Board of Directors of the Corporation on February 20, 1985 and November 7, 1986.

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CERTIFICATION

The undersigned hereby certify that the attached Bylaws of CPB INC., as amended, is a true and correct copy.

DATED:	January 30, 1987.
		/s/ Harold K. Yamanaka
		HAROLD K. YAMANAKA, Secretary
APPROVED:
/s/ Yoshiharu Satoh
YOSHIHARU SATOH, President

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CPB INC.

CERTIFICATION BY SECRETARY

I HEREBY CERTIFY that I am the duly elected, qualified and acting Secretary of CPB INC. (the “Corporation”), a Hawaii corporation, and as such, do hereby certify that the following resolutions marked as Exhibit A and Exhibit B were duly adopted by the Board of Directors of the Corporation pursuant to such Board’s proper power and authority, effective March 6, 2000, and that the following resolutions are currently effective.

/s/ Neal Kanda

Neal Kanda

Vice President & Secretary

CPB Inc.

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Exhibit A

BOARD RESOLUTIONS

CPB INC.

RESOLVED, and as authorized under Article XIV of the Bylaws of CPB Inc. (the “Company”), that the Bylaws of the Company be and it is hereby amended as follows:

A paragraph 11 is added to Article II to read as follows:

11.  At any annual or special meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before the meeting, business must be: (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) properly brought before the meeting at the direction of the Board of Directors, or  (iii) properly brought before the meeting by a stockholder, provided that the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than thirty (30) calendar days nor more than sixty (60) calendar days prior to the meeting; provided, however, that in the event that less than forty (40) calendar days’ notice or prior to the disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must so be received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting:  (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and address, as they appear on the corporation’s books, of the stockholders proposing such business, (c) the class and number of shares of the corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Notwithstanding anything to the contrary contained in these Bylaws, no business shall be conducted at a meeting of the stockholders except in accordance with the procedures set forth in this Section 11 of Article II and the requirements of the laws of the State of Hawaii. The chairperson of any meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section 11 of Article II, and the requirements of the State of Hawaii, and if the chairperson should so determine, the chairperson shall so declare to the

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meeting and any such business not properly brought before the meeting shall not be transacted.

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Exhibit B

BOARD RESOLUTIONS

CPB INC.

RESOLVED, and as authorized under Article XIV of the Bylaws of CPB Inc. (the “Company”), that the Bylaws of the Company be and it is hereby amended as follows:

The following is added to the end of Section 1 of Article III to read as follows:

Subject to the rights of the holders of any class or series having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of directors shall be made by the Board of Directors, or a committee thereof, or by any stockholder entitled to vote for the election of directors.

A stockholder’s nomination shall be made by giving timely notice in proper written form to the Secretary of the corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the executive office of the corporation not less than thirty (30) calendar days nor more than sixty (60) calendar days prior to the meeting; provided, that in the event that less than forty (40) calendar days’ notice or prior public disclosure of the date of the meeting is given or made to the stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth (10th) calendar day following the day on which the notice of the date of the meeting was mailed or public disclosure was made.

To be in proper written form, a stockholder’s notice shall set forth in writing: (a) as to each person whom the stockholders propose to nominate for election as a director, all information relating to that person that is required to be disclosed in solicitations of proxies for the election of directors or is otherwise required, in each case pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended, included, but not limited to, the person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; and (b) as to the stockholder giving the notice, (i) the name and record address, as they appear on the corporation’s books, of the stockholder, (ii) a description of all arrangements or understandings between the stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nominations are to be made by the stockholder and (iii) a representation that the stockholder intends to appear in person or by proxy at the meeting to nominate the person named in the notice. At the request of the Board of Directors, any person nominated by the Board of

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Directors, or a committee thereof, for election as a director shall furnish to the Secretary of the corporation the information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee.

In the event that a stockholder seeks to nominate one or more directors, the Secretary shall appoint an inspector, who shall not be affiliated with the corporation, to determine whether the stockholder has complied with this Section 1. If the inspector shall determine that the stockholder has not complied with this Section 1 and the applicable laws of the State of Hawaii, then the inspector shall direct the chairman of the meeting to declare to the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws and/or the applicable laws of the State of Hawaii, and the chairman shall so declare to the meeting and the defective nomination shall be so disregarded.

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CPB INC.

CERTIFICATION BY SECRETARY

I HEREBY CERTIFY that I am the duly elected, qualified and acting Secretary of CPB INC. (the “Corporation”), a Hawaii corporation, and as such, do hereby certify that the following resolution regarding “Amendment Of Bylaws Of CPB Inc. To Change Date, Time And Location Of Annual Shareholders Meeting” was duly adopted by the Board of Directors of the Corporation pursuant to such Board’s proper power and authority, on February 12, 2003, and that the following resolution is currently effective.

CPB INC.

BOARD OF DIRECTORS

RESOLUTION

Amendment Of Bylaws Of CPB Inc.

To Change Date, Time And Location Of Annual Shareholders Meeting

WHEREAS, the first sentence in Section 1 of Article II of the Amended Bylaws of CPB Inc. (the “Bylaws”) provides that: “The annual meeting of the stockholders shall be held at such time and place in Honolulu, Hawaii, at 10:00 o’clock a.m. during a week day during the month of February, March or April as the Board of Directors shall direct.”

WHEREAS, the Board of Directors of CPB Inc. (the “Board”) desires to have more flexibility in the selection of the date, time and location of said annual meeting of the stockholders, and to amend the Bylaws accordingly.

WHEREAS, the Board is authorized to amend the Bylaws pursuant Article XIV of the Bylaws, which provides that: “Subject to repeal or change at any regular meeting of the stockholders, or at any special meeting called for that purpose by the vote of the holders of eighty percent of the outstanding shares entitled to vote at such meeting, the power to alter, amend or repeal these Bylaws or adopt new bylaws shall be vested in the Board of Directors.”

NOW THEREFORE, BE IT RESOLVED, that the first sentence in Section 1 of Article II of the Bylaws is revised in its entirety to read as follows:

“The annual meeting of the stockholders shall be held at such time and place, and within four months after the close of the Corporation’s fiscal year, all as determined by the President or the Board of Directors.”

RESOLVED FURTHER, that the officers of the Corporation shall be and they hereby are authorized, empowered and directed to do all such things and acts and to make, execute, deliver and file all such instruments and documents on behalf

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of the Corporation as may be necessary and by them deemed appropriate to evidence or effect the amendments to the Bylaws and all acts of the officers of the Corporation which are consistent with the purposes and intent of these resolutions shall be and the same hereby are in all respects ratified, approved and confirmed.

/s/ Neal Kanda

Neal Kanda

Vice President & Secretary

CPB Inc.

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EX-10.13

Exhibit 10.13

CENTRAL PACIFIC BANK
SUPPLEMENTAL RETIREMENT AGREEMENT

THIS AGREEMENT is adopted this 28th day of June, 2002, by and between CENTRAL PACIFIC BANK, a state-chartered commercial bank located in Honolulu, Hawaii (the “Company”), and JOICHI SAITO (the “Executive”).

INTRODUCTION

To provide supplemental retirement benefits to the Executive for his years of service to the Company, the Company is willing to provide the benefits contained in this Agreement to the Executive. The Company will pay the benefits from its general assets.

AGREEMENT

The Company and the Executive agree as follows:

Article 1
Definitions

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1         “Code” means the Internal Revenue Code of 1986, as amended.

1.2         “Normal Retirement Date” means the June 30, 2002.

1.3         “Plan Year” means a twelve-month period commencing on July 1 and ending on June 30 of each year.  The initial Plan Year shall commence on July 1, 2002.

1.4         “Termination for Cause” See Article 5.

1.5         “Termination of Employment” means that the Executive ceases to be employed by the Company for any reason, voluntary or involuntary, other than by reason of a leave of absence approved by the Company.

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Article 2
Lifetime Benefits

2.1         Normal Retirement Benefit. Upon Termination of Employment on or after the Normal Retirement Date for reasons other than death, the Company shall pay to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Agreement.

2.1.1     Amount of Benefit. The annual benefit under this Section 2.1 is $75,000. The Company’s Board of Directors, in its sole discretion, may increase the annual benefit under this Section 2.1.1.

2.1.2     Payment of Benefit. The Company shall pay the annual benefit to the Executive in 12 equal monthly installments commencing with the month following the Executive’s Normal Retirement Date, paying the annual benefit to the Executive for his remaining lifetime, or to his beneficiary for her remaining lifetime or June 2020, whichever comes first.

Article 3
Death Benefits

3.1         Death During Active Service. If the Executive dies while in the active service of the Company, the Company shall pay to the Executive’s beneficiary the benefit described in this Section 3.1. This benefit shall be paid in lieu of the benefits under Article 2.

3.1.1     Amount of Benefit. The annual benefit under this Section 3.1 is the Normal Retirement Benefit amount described in Section 2.1.1.

3.1.2     Payment of Benefit. The Company shall pay the annual to the Executive’s Beneficiary in 12 equal monthly installments commencing with the month following the Executive’s death, paying the annual benefit to the Executive’s beneficiary for her remaining lifetime or until June 2020, whichever comes first.

3.2         Death During Payment of a Lifetime Benefit. If the Executive dies after any Lifetime Benefit payments have commenced under this Agreement but before receiving all such payments, the Company shall pay the benefits to the Executive’s Beneficiary at the same time and in the same amounts that would have been paid to the Executive for the Beneficiary’s remaining lifetime or up to June 2020, whichever comes first. If the Beneficiary does survive the Executive, then the Beneficiary, has the right to petition the Company for an alternative form of payment. However, the Company has complete and total authority regarding the decision to grant an alternative form of payment. However, if the Beneficiary does not survive the death of the Executive, then all remaining benefit payments will cease.

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Article 4
Beneficiary

4.1         Beneficiary. The beneficiary of the Executive shall be Ms. Yoko Saito.

Article 5
General Limitations

5.1         Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if the Company either (i) terminates the Executive’s employment prior to the Normal Retirement Date for, or (ii) while paying Lifetime Benefits determines that the Executive committed one of the following acts while in the employ of the Company prior to the Normal Retirement date:

(a)        Gross negligence or gross neglect of duties;

(b)        Commission of a felony or of a gross misdemeanor involving moral turpitude; or

(c)        Fraud, disloyalty, dishonesty or willful violation of any law or significant Company policy committed in connection with the Executive’s employment and resulting in an adverse effect on the Company.

Article 6
Claims and Review Procedures

6.1         Claims Procedure. An Executive or beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1     Initiation – Written Claim. The claimant initiates a claim by submitting to the Company a written claim for the benefits.

6.1.2     Timing of Company Response. The Company shall respond to such claimant within 90 days after receiving the claim. If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision.

6.1.3     Notice of Decision. If the Company denies part or all of the claim, the Company shall notify the claimant in writing of such denial. The Company shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

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(a)        The specific reasons for the denial;

(b)        A reference to the specific provisions of the Agreement on which the denial is based;

(c)        A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d)        An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and

(e)        A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefits determination on review.

6.2         Review Procedure. If the Company denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows:

6.2.1     Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Company’s notice of denial, must file with the Company a written request for review.

6.2.2     Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Company shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

6.2.3     Considerations on Review. In considering the review, the Company shall take into account all material and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

6.2.4     Timing of Company Response. The Company shall respond in writing to such claimant within 60 days after receiving the request for review. If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision.

6.2.5     Notice of Decision. The Company shall notify the claimant in writing of its decision on review. The Company shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

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(a)        The specific reasons for the denial;

(b)        A reference to the specific provisions of the Agreement on which the denial is based;

(c)        A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

(d)        A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

Article 7
Amendments and Termination

This Agreement may be amended or terminated only by a written agreement signed by the Company and the Executive.

Article 8
Miscellaneous

8.1         Binding Effect. This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, successors, administrators and transferees.

8.2         No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Company, nor does it interfere with the Company’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.

8.3         Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

8.4         Reorganization. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement. Upon the occurrence of such event, the term “Company” as used in this Agreement shall be deemed to refer to the successor or survivor company.

8.5         Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

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8.6         Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of Hawaii, except to the extent preempted by the laws of the United States of America.

8.7         Unfunded Arrangement. The Executive and beneficiary are general unsecured creditors of the Company for the payment of benefits under this Agreement. The benefits represent the mere promise by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life is a general asset of the Company to which the Executive and beneficiary have no preferred or secured claim.

8.8         Entire Agreement. This Agreement constitutes the entire agreement between the Company and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.

8.9         Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

(a)        Establishing and revising the method of accounting for the Agreement;

(b)        Maintaining a record of benefit payments;

(c)        Establishing rules and prescribing any forms necessary or desirable to administer the Agreement; and

(d)        Interpreting the provisions of the Agreement.

8.10       Named Fiduciary. The Company shall be the named fiduciary and plan administrator under this Agreement. It may delegate to others certain aspects of the management and operational responsibilities including the employment of advisors and the delegation of ministerial duties to qualified individuals.

IN WITNESS WHEREOF, the Executive and the Company have signed this Agreement.

EXECUTIVE	Central Pacific Bank
/s/ Joichi Saito	/s/ Neal K. Kanda
Joichi Saito	Neal K. Kanda
	Executive Vice President

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EX-10.14

Exhibit 10.14

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“Agreement”) is made and shall be effective as of this first day of January, 2003, by and between Central Pacific Bank, a Hawaii corporation, (the “Corporation”), with its principal offices at 220 South King Street, Honolulu, Hawaii 96813, and Clinton L. Arnoldus (the “Employee”).

RECITALS

A.          Employee is presently an employee of the Corporation and is presently employed in his current executive capacity as Chairman, President and Chief Executive Officer of the Corporation.

B.          The Corporation and the Employee wish to acknowledge and memorialize the terms and conditions of the Employee’s employment with the Corporation.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and of the terms, conditions and covenants contained herein, the parties hereto agree as follows:

1.           Employment. Employee shall continue to be employed in his current title and/or capacity (herein collectively referred to as “capacity”), but subject to the terms and conditions stated hereinafter.

2.           Scope of the Employment. During the term of employment, the Employee shall exert the Employee’s best efforts and devote the Employee’s full and exclusive professional and/or business efforts, time and attention in fulfilling and discharging the Employee’s duties in his current capacity or in any other future capacity as designated by the Corporation. The services to be performed by the Employee in the Employee’s current capacity may be extended, curtailed or otherwise modified, from time to time, and/or the Employee’s title and/or capacity may change, at the discretion of the Corporation.

3.           Term. The term of the Employee’s employment by the Corporation pursuant to this Agreement shall be at the will of the Corporation and shall be subject to termination as provided in paragraphs 10, 11 and 12 hereinafter.

4.           Compensation and Other Benefits. The Employee shall continue to have the same compensation as presently paid to Employee, as the same may be changed from time to time at the discretion of the Corporation (including but not limited to annual discretionary cash bonus and stock options, if any) and continue to have the same rights, privileges and other benefits presently enjoyed

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by Employee in his current capacity (subject, however, to any change, at the discretion of the Corporation, in rights, privileges and other benefits as a result of any change in the Employee’s capacity), including but not limited to vacation and sick leave privileges and the right to participate in any retirement, pension, profit-sharing, stock option, insurance, medical, or other plans which may now be in effect or which may hereafter be adopted, all as described in the Corporation’s Employee Benefits and Policies Manual (the “Employee Manual”).

5.           Conduct. Employee shall continue to abide by the policies set forth in the Corporation’s Employee Manual and all other applicable policies and procedures of the Corporation, and comply with all applicable laws, ordinances, rules and regulations now or hereafter made applicable to the Corporation, its employees, and to Employee in his designated capacity.

6.           Confidentiality of Trade Secrets and Other Materials.

a.          The Employee shall regard and preserve as confidential all Trade Secrets (as defined below) and other non-public, confidential, privileged and/or proprietary information, including, without limitation, client lists, client files, and any other client information (collectively referred to herein as “Confidential Information”) pertaining to the Corporation and its affiliates and subsidiaries, that has been or may be revealed to or obtained by the Employee by reason of the Employee’s employment. The Employee shall not take, retain, copy or use, or disclose to any non- affiliated third party, either during the Employee’s employment or forever thereafter, any Trade Secret or other Confidential Information connected with the Corporation and its affiliates and subsidiaries, except as required in the line of the Employee’s employment capacity with the Corporation, or as authorized in advance and in writing by the Corporation, or as required by law, rule, regulation or lawful court order. This provision shall not apply with respect to information of the Corporation and its affiliates and subsidiaries, which has been voluntarily disclosed by the Corporation and its affiliates and subsidiaries, to the public or otherwise enters the public domain through lawful means.

b.          The Employee further agrees that all know-how, strategies, tactics, documents, reports, plans, proposals, marketing and sales plans, client lists, client files and materials, or any other Confidential Information and Trade Secrets revealed to or made by the Employee or that come into the Employee’s possession by reason of the Employee’s employment hereunder are the property of the Corporation and shall not be used by the Employee in any way adverse to the interest of the Corporation and its affiliates and subsidiaries, or for any unauthorized purpose. The Employee shall not deliver, reproduce or in any way allow such documents or things to be delivered or used by any non-affiliated third party without specific direction or consent of a duly authorized representative of the Corporation. The Employee shall not publish, release or otherwise make available to any third party any information describing any Trade Secret or other Confidential Information of the Corporation and its affiliates and subsidiaries, without prior specific written authorization of the Corporation. Notwithstanding the foregoing, the Employee may disclose any information (including,

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Confidential Information or Trade Secrets) to any third-party pursuant to the Employee’s proper authority and capacity of employment with the Corporation.

c.          For purposes of this Agreement, the term “Trade Secrets” shall include, but not be limited to, information of the Corporation and its affiliates and subsidiaries, encompassed in all know-how, strategies, tactics, plans, proposals, marketing and sales plans, client lists, client files, financial information, costs, risk analysis, and all concepts or ideas in or reasonably related to the Corporation and its affiliates and subsidiaries, that have not been previously publicly released by duly authorized representatives of the Corporation and its affiliates and subsidiaries.

7.           Noncompetition During Employment. While employed hereunder, the Employee agrees to devote all of his professional and business expertise and efforts to the Corporation, and not to work for any other business or entity or engage in any activity in competition with the Corporation and its affiliates and subsidiaries, and not to render any services, directly or indirectly, of a business, commercial or professional nature to any other person, firm, corporation or organization for compensation without the prior written consent of the Corporation, and not to solicit or entice any employee of the Corporation and its affiliates and subsidiaries, to leave the employ thereof or work for anyone in competition with the Corporation and its affiliates and subsidiaries. Furthermore, the Employee hereby agrees not to take any preliminary steps to set up or engage in any business enterprise that would be in competition with the Corporation and its affiliates and subsidiaries, until after the termination of employment hereunder. In addition, while employed hereunder, the Employee hereby agrees to divulge to the Corporation any and all competitive plans which the Employee may have under consideration, whether or not the Employee intends to act upon such plans. As used in the preceding sentence, the term “competitive plans” shall include, but not be limited to, plans to set up, establish or engage in any business enterprise in competition with the Corporation and its affiliates and subsidiaries, and plans to seek or accept employment from anyone in competition with the Corporation and its affiliates and subsidiaries.

8.           Noncompetition After Termination.

a.          Employee agrees that for a period of twenty-four (24) months after this Agreement or the Employee’s employment, whichever is later, has been terminated for any reason, regardless of whether the termination is initiated by Corporation or Employee, or for a period of time equal to the length of Employee’ employment with Corporation if such tenure is less than twenty-four (24) months, Employee will not, directly or indirectly, solicit any person, company, firm, or corporation who is or was a customer of Corporation during a period of five (5) years prior to the termination of Employee’ employment. Employee agrees not to solicit such customers on behalf of himself or any other person, firm, company, or corporation. Corporation agrees to provide a list of such customers whom the Employee may not solicit.

b.          Employee agrees that for a period of twelve (12) months after the termination of his employment with Corporation, regardless of whether the termination was initiated by

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Corporation or Employee, he will not accept employment with, or act as a consultant, contractor, advisor, or in any other capacity for, a competitor of the Corporation, or enter into competition with the Corporation, either by himself or through any entity owned or managed in whole or in part by the Employee, within the island of Oahu. The term “competitor” as used in this paragraph 8, means any entity primarily engaged in the business of providing banking and other related services.

c.          The parties have attempted to limit Employee’ right to compete only to the extent necessary to protect Corporation from unfair competition. The parties recognize, however, that reasonable people may differ in making such a determination. Consequently, the parties hereby agree that, if the scope or enforceability of the foregoing restrictive covenant is in any way disputed at any time, a court or other trier of fact may modify and enforce the covenant to the extent that it believes the covenant is reasonable under the circumstances existing at that time.

9.           Injunctive Relief. The Employee understands and hereby agrees that the Corporation will suffer irreparable harm in the event that the Employee fails to comply with any of the Employee’ obligations under paragraphs 6, 7 and 8 above and that monetary damages will be inadequate to compensate the Corporation for such breach. Accordingly, the Employee hereby agrees that the Corporation will be entitled to injunctive relief to enforce the terms of paragraphs 6, 7 and 8 above, as well as any other remedies available to the Corporation at law or in equity.

10.         Termination by Corporation.

a.          Termination For Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time for cause without further liability or obligation to the Employee except as provided herein by giving written notice to the Employee. Upon such termination, the Employee shall have no right to receive compensation or other benefits for any period after termination for cause except as provided herein. Termination for cause shall include, but not be limited to, termination because of the Employee’s personal dishonesty, theft, gross misconduct, gross carelessness, breach of fiduciary duty, failure to perform stated duties, failure to comply with any of the Corporation’s policies or procedures, or any violation of law. If this Agreement and the Employee’s employment is terminated for cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the date of termination. Furthermore, any termination shall be without prejudice to any right or remedy to which the Corporation may be entitled either at law, in equity, or under this Agreement.

b.          Termination Without Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time without cause without further liability or obligation to the Employee except as provided herein by giving the Employee thirty (30) days prior written notice. Upon the effective date of such termination, the Employee shall have no right to receive

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compensation or other benefits for any period after termination without cause except as provided herein. If this Agreement and the Employee’s employment is terminated without cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the effective date of termination.

11.         Termination by Employee. The Employee may resign and terminate the Employee’s employment hereunder at any time effective thirty (30) days after delivery of written notice to the Corporation. If the Employee voluntarily resigns, the Employee shall be entitled to Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee.

12.         Termination After Change of Control. If the Employee’s employment pursuant to this Agreement is terminated as a result of and within twelve (12) months after a Change of Control (as hereinafter defined), the Employee shall be entitled to the immediate vesting of all nonvested stock options granted and accumulated up to the date of termination and a severance pay in an amount equal to three (3) times the Employee’s annual base salary and annual cash bonus. A “Change of Control” is defined as the occurrence of any of the following events: (i) a merger where the Corporation and/or CPB, Inc., the 100% owner of the Corporation (“CPBI”) is not the surviving corporation; (ii) the transfer of all or substantially all of the assets of the Corporation to another unaffiliated corporation, entity or person; (iii) the acquisition by any person, group of related or affiliated persons (excluding, however, affiliates of the Corporation) or group of persons acting in concert in one or more transactions of equity securities of the Corporation and/or CPBI of fifty percent (50%) or more of the outstanding voting power of the Corporation and/or CPBI after such transaction or transactions.

13.         Limitation on Severance Payments. Notwithstanding the foregoing, any severance payment and, if applicable, the value of any option acceleration and any other benefits payable hereunder shall be reduced by such amount as is necessary, in the opinion of tax counsel or other appropriate tax advisor selected in good faith by the Corporation, so that no portion of the foregoing will be subject to excise taxes for an “excess parachute payment” under Internal Revenue Code Sections 280G and 4999.

14.         Withholding. All amounts payable by the Corporation hereunder shall be subject to all federal, state, local and other withholdings and employment taxes as required by applicable law.

15.         Arbitration. Any dispute or controversy arising under, out of, in connection with or related to this Agreement or by breach hereunder shall be determined and settled by binding arbitration in Honolulu, Hawaii, in accordance with the Rules of the American Arbitration Association

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and Hawaii Revised Statutes Chapter 658A. Judgment upon the award may be entered in a court of competent jurisdiction, provided that such award shall under no circumstances include as an element thereof, any award for punitive damages. The prevailing party shall be entitled to recover from the other party its or his own expenses for the arbitrator’s fees, attorney’s fees, and for other expenses of presenting its or his case. Other arbitration costs, including fees for records or transcripts, shall be borne equally by the parties. The arbitrator is expressly empowered to determine any matter related to the employment of the Employee, including, but not limited to, the manner in which employment is terminated, any claims of tortious conduct, and any other claim, related to the termination of employment and/or the parties’ actions or omissions of actions prior to or during the Employee’s employment. Demand for arbitration hereunder shall be made by notice in writing given to the other party within six (6) months of the event giving rise to the claim. Failure by any party to assert in writing within six (6) months of any claim within the scope of this paragraph shall forever bar the assertion of that claim in any forum.

16.         Binding Effect and Assignment. The rights and obligations of this Agreement shall be binding upon and inure to the benefit of the Corporation, its successors and assigns. This Agreement shall not be assigned by the Employee; however, the obligations of the Employee hereunder, to the extent that such obligations may be performed by the Employee’s estate, shall be binding upon the Employee’s heirs and estate.

17.         Survival of Rights, Duties and Obligations. The termination of Employee’s employment or of this Agreement shall not release either party to this Agreement from any liability which at the time of termination is already accrued to the other party or which thereafter may accrue with respect to any act or omission arising either prior to such termination or after such termination when there is a continuing obligation. Without limiting the foregoing, Sections 6, 8 and 9 shall survive termination of the Employee’s employment with the Corporation and/or the termination of this Agreement.

18.         Receipt of Agreement. Each of the parties hereto acknowledges having read this Agreement in its entirety and having received a fully executed copy thereof. A fully executed copy shall be an original for all purposes. The Employee further acknowledges that he has been advised, prior to his execution of this Agreement, of his right to retain and seek the advice of an attorney regarding this Agreement.

19.         Hawaii Law. This Agreement is to be governed by and construed under the laws of the State of Hawaii.

20.         Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the employment of the Employee by the Corporation during the term of this Agreement and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties. No modification, amendment, or waiver of any of the provisions of this Agreement shall be effective unless in writing, specifically referring hereto, and signed by both parties.

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Furthermore, the parties agree to amend this Agreement or to re-execute a new agreement, as and when necessary, to ensure the terms and provisions of this Agreement comply with all laws, rules and regulations at any time applicable to the Corporation and/or this Agreement.

21.         Waiver of Breach. The failure to enforce at any time any of the provisions of this Agreement, or to require at any time performance by the other party of any of the provisions hereof, shall in no way affect either the validity of this Agreement or any part hereof of the right of either party thereafter to enforce each and every provision in accordance with the terms of this Agreement.

22.         Notice. Any written notice required or permitted to be given hereunder shall be deemed delivered either when personally delivered or when mailed, registered or certified, postage prepaid with return receipt requested, if to the Employee, addressed to the Employee at the last residence address of the Employee as shown in the records of the Corporation, and if to the Corporation, addressed to the President of the Corporation at the principal office of the Corporation.

23.         Attorneys’ Fees. Should any litigation be commenced between the parties to this Agreement, concerning any provision of this Agreement or the rights and obligations of any party in relation thereto, the party prevailing in such litigation shall be entitled, in addition to such relief as may be granted by a court of competent jurisdiction, to a reasonable sum for attorney’s fees in such litigation which shall be determined by the court in which such litigation occurs, as well as all court costs.

24.         Severability. If any provision of this Agreement is held to be invalid or unenforceable by any court or lawful authority, the invalidity or unenforceability of such provision shall not affect the validity and enforceability of the remaining provisions of this Agreement, and all such remaining provisions and this Agreement shall be construed so as to be valid and enforceable to the maximum extent permitted by law, and this Agreement shall be reformed accordingly.

[signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above and effective as of the Effective Date.

CENTRAL PACIFIC BANK
By	/s/ Glenn K.C. Ching
	Glenn K.C. Ching
	General Counsel
	Senior Vice President
		(Corporation)
	/s/ Clint Arnoldus
		(Employee)

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EX-10.15

Exhibit 10.15

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“Agreement”) is made and shall be effective as of this first day of January, 2003, by and between Central Pacific Bank, a Hawaii corporation, (the “Corporation”), with its principal offices at 220 South King Street, Honolulu, Hawaii 96813, and Neal K. Kanda (the “Employee”).

RECITALS

A.          Employee is presently an employee of the Corporation and is presently employed in his current executive capacity as Executive Vice President and Chief Financial Officer of the Corporation.

B.          The Corporation and the Employee wish to acknowledge and memorialize the terms and conditions of the Employee’s employment with the Corporation.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and of the terms, conditions and covenants contained herein, the parties hereto agree as follows:

1.           Employment. Employee shall continue to be employed in his current title and/or capacity (herein collectively referred to as “capacity”), but subject to the terms and conditions stated hereinafter.

2.           Scope of the Employment. During the term of employment, the Employee shall exert the Employee’s best efforts and devote the Employee’s full and exclusive professional and/or business efforts, time and attention in fulfilling and discharging the Employee’s duties in his current capacity or in any other future capacity as designated by the Corporation. The services to be performed by the Employee in the Employee’s current capacity may be extended, curtailed or otherwise modified, from time to time, and/or the Employee’s title and/or capacity may change, at the discretion of the Corporation.

3.           Term. The term of the Employee’s employment by the Corporation pursuant to this Agreement shall be at the will of the Corporation and shall be subject to termination as provided in paragraphs 10, 11 and 12 hereinafter.

4.           Compensation and Other Benefits. The Employee shall continue to have the same compensation as presently paid to Employee, as the same may be changed from time to time at the discretion of the Corporation (including but not limited to annual discretionary cash bonus and stock

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options, if any) and continue to have the same rights, privileges and other benefits presently enjoyed by Employee in his current capacity (subject, however, to any change, at the discretion of the Corporation, in rights, privileges and other benefits as a result of any change in the Employee’s capacity), including but not limited to vacation and sick leave privileges and the right to participate in any retirement, pension, profit-sharing, stock option, insurance, medical, or other plans which may now be in effect or which may hereafter be adopted, all as described in the Corporation’s Employee Benefits and Policies Manual (the “Employee Manual”).

5.           Conduct. Employee shall continue to abide by the policies set forth in the Corporation’s Employee Manual and all other applicable policies and procedures of the Corporation, and comply with all applicable laws, ordinances, rules and regulations now or hereafter made applicable to the Corporation, its employees, and to Employee in his designated capacity.

6.           Confidentiality of Trade Secrets and Other Materials.

a.          The Employee shall regard and preserve as confidential all Trade Secrets (as defined below) and other non-public, confidential, privileged and/or proprietary information, including, without limitation, client lists, client files, and any other client information (collectively referred to herein as “Confidential Information”) pertaining to the Corporation and its affiliates and subsidiaries, that has been or may be revealed to or obtained by the Employee by reason of the Employee’s employment. The Employee shall not take, retain, copy or use, or disclose to any non- affiliated third party, either during the Employee’s employment or forever thereafter, any Trade Secret or other Confidential Information connected with the Corporation and its affiliates and subsidiaries, except as required in the line of the Employee’s employment capacity with the Corporation, or as authorized in advance and in writing by the Corporation, or as required by law, rule, regulation or lawful court order. This provision shall not apply with respect to information of the Corporation and its affiliates and subsidiaries, which has been voluntarily disclosed by the Corporation and its affiliates and subsidiaries, to the public or otherwise enters the public domain through lawful means.

b.          The Employee further agrees that all know-how, strategies, tactics, documents, reports, plans, proposals, marketing and sales plans, client lists, client files and materials, or any other Confidential Information and Trade Secrets revealed to or made by the Employee or that come into the Employee’s possession by reason of the Employee’s employment hereunder are the property of the Corporation and shall not be used by the Employee in any way adverse to the interest of the Corporation and its affiliates and subsidiaries, or for any unauthorized purpose. The Employee shall not deliver, reproduce or in any way allow such documents or things to be delivered or used by any non-affiliated third party without specific direction or consent of a duly authorized representative of the Corporation. The Employee shall not publish, release or otherwise make available to any third party any information describing any Trade Secret or other Confidential Information of the Corporation and its affiliates and subsidiaries, without prior specific written authorization of the Corporation. Notwithstanding the foregoing, the Employee may disclose any information (including,

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Confidential Information or Trade Secrets) to any third-party pursuant to the Employee’s proper authority and capacity of employment with the Corporation.

c.          For purposes of this Agreement, the term “Trade Secrets” shall include, but not be limited to, information of the Corporation and its affiliates and subsidiaries, encompassed in all know-how, strategies, tactics, plans, proposals, marketing and sales plans, client lists, client files, financial information, costs, risk analysis, and all concepts or ideas in or reasonably related to the Corporation and its affiliates and subsidiaries, that have not been previously publicly released by duly authorized representatives of the Corporation and its affiliates and subsidiaries.

7.           Noncompetition During Employment. While employed hereunder, the Employee agrees to devote all of his professional and business expertise and efforts to the Corporation, and not to work for any other business or entity or engage in any activity in competition with the Corporation and its affiliates and subsidiaries, and not to render any services, directly or indirectly, of a business, commercial or professional nature to any other person, firm, corporation or organization for compensation without the prior written consent of the Corporation, and not to solicit or entice any employee of the Corporation and its affiliates and subsidiaries, to leave the employ thereof or work for anyone in competition with the Corporation and its affiliates and subsidiaries. Furthermore, the Employee hereby agrees not to take any preliminary steps to set up or engage in any business enterprise that would be in competition with the Corporation and its affiliates and subsidiaries, until after the termination of employment hereunder. In addition, while employed hereunder, the Employee hereby agrees to divulge to the Corporation any and all competitive plans which the Employee may have under consideration, whether or not the Employee intends to act upon such plans. As used in the preceding sentence, the term “competitive plans” shall include, but not be limited to, plans to set up, establish or engage in any business enterprise in competition with the Corporation and its affiliates and subsidiaries, and plans to seek or accept employment from anyone in competition with the Corporation and its affiliates and subsidiaries.

8.           Noncompetition After Termination.

a.          Employee agrees that for a period of twenty-four (24) months after this Agreement or the Employee’s employment, whichever is later, has been terminated for any reason, regardless of whether the termination is initiated by Corporation or Employee, or for a period of time equal to the length of Employee’ employment with Corporation if such tenure is less than twenty-four (24) months, Employee will not, directly or indirectly, solicit any person, company, firm, or corporation who is or was a customer of Corporation during a period of five (5) years prior to the termination of Employee’ employment. Employee agrees not to solicit such customers on behalf of himself or any other person, firm, company, or corporation. Corporation agrees to provide a list of such customers whom the Employee may not solicit.

b.          Employee agrees that for a period of twelve (12) months after the termination of his employment with Corporation, regardless of whether the termination was initiated by

3

Corporation or Employee, he will not accept employment with, or act as a consultant, contractor, advisor, or in any other capacity for, a competitor of the Corporation, or enter into competition with the Corporation, either by himself or through any entity owned or managed in whole or in part by the Employee, within the island of Oahu. The term “competitor” as used in this paragraph 8, means any entity primarily engaged in the business of providing banking and other related services.

c.          The parties have attempted to limit Employee’ right to compete only to the extent necessary to protect Corporation from unfair competition. The parties recognize, however, that reasonable people may differ in making such a determination. Consequently, the parties hereby agree that, if the scope or enforceability of the foregoing restrictive covenant is in any way disputed at any time, a court or other trier of fact may modify and enforce the covenant to the extent that it believes the covenant is reasonable under the circumstances existing at that time.

9.           Injunctive Relief. The Employee understands and hereby agrees that the Corporation will suffer irreparable harm in the event that the Employee fails to comply with any of the Employee’ obligations under paragraphs 6, 7 and 8 above and that monetary damages will be inadequate to compensate the Corporation for such breach. Accordingly, the Employee hereby agrees that the Corporation will be entitled to injunctive relief to enforce the terms of paragraphs 6, 7 and 8 above, as well as any other remedies available to the Corporation at law or in equity.

10.         Termination by Corporation.

a.          Termination For Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time for cause without further liability or obligation to the Employee except as provided herein by giving written notice to the Employee. Upon such termination, the Employee shall have no right to receive compensation or other benefits for any period after termination for cause except as provided herein. Termination for cause shall include, but not be limited to, termination because of the Employee’s personal dishonesty, theft, gross misconduct, gross carelessness, breach of fiduciary duty, failure to perform stated duties, failure to comply with any of the Corporation’s policies or procedures, or any violation of law. If this Agreement and the Employee’s employment is terminated for cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the date of termination. Furthermore, any termination shall be without prejudice to any right or remedy to which the Corporation may be entitled either at law, in equity, or under this Agreement.

b.          Termination Without Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time without cause without further liability or obligation to the Employee except as provided herein by giving the Employee thirty (30) days prior written notice. Upon the effective date of such termination, the Employee shall have no right to receive

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compensation or other benefits for any period after termination without cause except as provided herein. If this Agreement and the Employee’s employment is terminated without cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the effective date of termination.

11.         Termination by Employee. The Employee may resign and terminate the Employee’s employment hereunder at any time effective thirty (30) days after delivery of written notice to the Corporation. If the Employee voluntarily resigns, the Employee shall be entitled to Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee.

12.         Termination After Change of Control. If the Employee’s employment pursuant to this Agreement is terminated as a result of and within twelve (12) months after a Change of Control (as hereinafter defined), the Employee shall be entitled to the immediate vesting of all nonvested stock options granted and accumulated up to the date of termination and a severance pay in an amount equal to three (3) times the Employee’s annual base salary and annual cash bonus. A “Change of Control” is defined as the occurrence of any of the following events: (i) a merger where the Corporation and/or CPB, Inc., the 100% owner of the Corporation (“CPBI”) is not the surviving corporation; (ii) the transfer of all or substantially all of the assets of the Corporation to another unaffiliated corporation, entity or person; (iii) the acquisition by any person, group of related or affiliated persons (excluding, however, affiliates of the Corporation) or group of persons acting in concert in one or more transactions of equity securities of the Corporation and/or CPBI of fifty percent (50%) or more of the outstanding voting power of the Corporation and/or CPBI after such transaction or transactions.

13.         Limitation on Severance Payments. Notwithstanding the foregoing, any severance payment and, if applicable, the value of any option acceleration and any other benefits payable hereunder shall be reduced by such amount as is necessary, in the opinion of tax counsel or other appropriate tax advisor selected in good faith by the Corporation, so that no portion of the foregoing will be subject to excise taxes for an “excess parachute payment” under Internal Revenue Code Sections 280G and 4999.

14.         Withholding. All amounts payable by the Corporation hereunder shall be subject to all federal, state, local and other withholdings and employment taxes as required by applicable law.

15.         Arbitration. Any dispute or controversy arising under, out of, in connection with or related to this Agreement or by breach hereunder shall be determined and settled by binding arbitration in Honolulu, Hawaii, in accordance with the Rules of the American Arbitration Association

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and Hawaii Revised Statutes Chapter 658A. Judgment upon the award may be entered in a court of competent jurisdiction, provided that such award shall under no circumstances include as an element thereof, any award for punitive damages. The prevailing party shall be entitled to recover from the other party its or his own expenses for the arbitrator’s fees, attorney’s fees, and for other expenses of presenting its or his case. Other arbitration costs, including fees for records or transcripts, shall be borne equally by the parties. The arbitrator is expressly empowered to determine any matter related to the employment of the Employee, including, but not limited to, the manner in which employment is terminated, any claims of tortious conduct, and any other claim, related to the termination of employment and/or the parties’ actions or omissions of actions prior to or during the Employee’s employment. Demand for arbitration hereunder shall be made by notice in writing given to the other party within six (6) months of the event giving rise to the claim. Failure by any party to assert in writing within six (6) months of any claim within the scope of this paragraph shall forever bar the assertion of that claim in any forum.

16.         Binding Effect and Assignment. The rights and obligations of this Agreement shall be binding upon and inure to the benefit of the Corporation, its successors and assigns. This Agreement shall not be assigned by the Employee; however, the obligations of the Employee hereunder, to the extent that such obligations may be performed by the Employee’s estate, shall be binding upon the Employee’s heirs and estate.

17.         Survival of Rights, Duties and Obligations. The termination of Employee’s employment or of this Agreement shall not release either party to this Agreement from any liability which at the time of termination is already accrued to the other party or which thereafter may accrue with respect to any act or omission arising either prior to such termination or after such termination when there is a continuing obligation. Without limiting the foregoing, Sections 6, 8 and 9 shall survive termination of the Employee’s employment with the Corporation and/or the termination of this Agreement.

18.         Receipt of Agreement. Each of the parties hereto acknowledges having read this Agreement in its entirety and having received a fully executed copy thereof. A fully executed copy shall be an original for all purposes. The Employee further acknowledges that he has been advised, prior to his execution of this Agreement, of his right to retain and seek the advice of an attorney regarding this Agreement.

19.         Hawaii Law. This Agreement is to be governed by and construed under the laws of the State of Hawaii.

20.         Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the employment of the Employee by the Corporation during the term of this Agreement and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties. No modification, amendment, or waiver of any of the provisions of this Agreement shall be effective unless in writing, specifically referring hereto, and signed by both parties.

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Furthermore, the parties agree to amend this Agreement or to re-execute a new agreement, as and when necessary, to ensure the terms and provisions of this Agreement comply with all laws, rules and regulations at any time applicable to the Corporation and/or this Agreement.

21.         Waiver of Breach. The failure to enforce at any time any of the provisions of this Agreement, or to require at any time performance by the other party of any of the provisions hereof, shall in no way affect either the validity of this Agreement or any part hereof of the right of either party thereafter to enforce each and every provision in accordance with the terms of this Agreement.

22.         Notice. Any written notice required or permitted to be given hereunder shall be deemed delivered either when personally delivered or when mailed, registered or certified, postage prepaid with return receipt requested, if to the Employee, addressed to the Employee at the last residence address of the Employee as shown in the records of the Corporation, and if to the Corporation, addressed to the President of the Corporation at the principal office of the Corporation.

23.         Attorneys’ Fees. Should any litigation be commenced between the parties to this Agreement, concerning any provision of this Agreement or the rights and obligations of any party in relation thereto, the party prevailing in such litigation shall be entitled, in addition to such relief as may be granted by a court of competent jurisdiction, to a reasonable sum for attorney’s fees in such litigation which shall be determined by the court in which such litigation occurs, as well as all court costs.

24.         Severability. If any provision of this Agreement is held to be invalid or unenforceable by any court or lawful authority, the invalidity or unenforceability of such provision shall not affect the validity and enforceability of the remaining provisions of this Agreement, and all such remaining provisions and this Agreement shall be construed so as to be valid and enforceable to the maximum extent permitted by law, and this Agreement shall be reformed accordingly.

[signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above and effective as of the Effective Date.

CENTRAL PACIFIC BANK
By	/s/ Glenn K.C. Ching
	Glenn K.C. Ching
	General Counsel
	Senior Vice President
		(Corporation)
	/s/ Neal Kanda
		(Employee)

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EX-10.16

Exhibit 10.16

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“Agreement”) is made and shall be effective as of this first day of January, 2003, by and between Central Pacific Bank, a Hawaii corporation, (the “Corporation”), with its principal offices at 220 South King Street, Honolulu, Hawaii 96813, and Sherri Y. Yim (the “Employee”).

RECITALS

A.          Employee is presently an employee of the Corporation and is presently employed in her current executive capacity as Senior Vice President and Controller of the Corporation.

B.          The Corporation and the Employee wish to acknowledge and memorialize the terms and conditions of the Employee’s employment with the Corporation.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and of the terms, conditions and covenants contained herein, the parties hereto agree as follows:

1.           Employment. Employee shall continue to be employed in her current title and/or capacity (herein collectively referred to as “capacity”), but subject to the terms and conditions stated hereinafter.

2.           Scope of the Employment. During the term of employment, the Employee shall exert the Employee’s best efforts and devote the Employee’s full and exclusive professional and/or business efforts, time and attention in fulfilling and discharging the Employee’s duties in her current capacity or in any other future capacity as designated by the Corporation. The services to be performed by the Employee in the Employee’s current capacity may be extended, curtailed or otherwise modified, from time to time, and/or the Employee’s title and/or capacity may change, at the discretion of the Corporation.

3.           Term. The term of the Employee’s employment by the Corporation pursuant to this Agreement shall be at the will of the Corporation and shall be subject to termination as provided in paragraphs 10, 11 and 12 hereinafter.

4.           Compensation and Other Benefits. The Employee shall continue to have the same compensation as presently paid to Employee, as the same may be changed from time to time at the discretion of the Corporation (including but not limited to annual discretionary cash bonus and stock options, if any) and continue to have the same rights, privileges and other benefits presently enjoyed

1

by Employee in her current capacity (subject, however, to any change, at the discretion of the Corporation, in rights, privileges and other benefits as a result of any change in the Employee’s capacity), including but not limited to vacation and sick leave privileges and the right to participate in any retirement, pension, profit-sharing, stock option, insurance, medical, or other plans which may now be in effect or which may hereafter be adopted, all as described in the Corporation’s Employee Benefits and Policies Manual (the “Employee Manual”).

5.           Conduct. Employee shall continue to abide by the policies set forth in the Corporation’s Employee Manual and all other applicable policies and procedures of the Corporation, and comply with all applicable laws, ordinances, rules and regulations now or hereafter made applicable to the Corporation, its employees, and to Employee in her designated capacity.

6.           Confidentiality of Trade Secrets and Other Materials.

a.          The Employee shall regard and preserve as confidential all Trade Secrets (as defined below) and other non-public, confidential, privileged and/or proprietary information, including, without limitation, client lists, client files, and any other client information (collectively referred to herein as “Confidential Information”) pertaining to the Corporation and its affiliates and subsidiaries, that has been or may be revealed to or obtained by the Employee by reason of the Employee’s employment. The Employee shall not take, retain, copy or use, or disclose to any non- affiliated third party, either during the Employee’s employment or forever thereafter, any Trade Secret or other Confidential Information connected with the Corporation and its affiliates and subsidiaries, except as required in the line of the Employee’s employment capacity with the Corporation, or as authorized in advance and in writing by the Corporation, or as required by law, rule, regulation or lawful court order. This provision shall not apply with respect to information of the Corporation and its affiliates and subsidiaries, which has been voluntarily disclosed by the Corporation and its affiliates and subsidiaries, to the public or otherwise enters the public domain through lawful means.

b.          The Employee further agrees that all know-how, strategies, tactics, documents, reports, plans, proposals, marketing and sales plans, client lists, client files and materials, or any other Confidential Information and Trade Secrets revealed to or made by the Employee or that come into the Employee’s possession by reason of the Employee’s employment hereunder are the property of the Corporation and shall not be used by the Employee in any way adverse to the interest of the Corporation and its affiliates and subsidiaries, or for any unauthorized purpose. The Employee shall not deliver, reproduce or in any way allow such documents or things to be delivered or used by any non-affiliated third party without specific direction or consent of a duly authorized representative of the Corporation. The Employee shall not publish, release or otherwise make available to any third party any information describing any Trade Secret or other Confidential Information of the Corporation and its affiliates and subsidiaries, without prior specific written authorization of the Corporation. Notwithstanding the foregoing, the Employee may disclose any information (including,

2

Confidential Information or Trade Secrets) to any third-party pursuant to the Employee’s proper authority and capacity of employment with the Corporation.

c.          For purposes of this Agreement, the term “Trade Secrets” shall include, but not be limited to, information of the Corporation and its affiliates and subsidiaries, encompassed in all know-how, strategies, tactics, plans, proposals, marketing and sales plans, client lists, client files, financial information, costs, risk analysis, and all concepts or ideas in or reasonably related to the Corporation and its affiliates and subsidiaries, that have not been previously publicly released by duly authorized representatives of the Corporation and its affiliates and subsidiaries.

7.           Noncompetition During Employment. While employed hereunder, the Employee agrees to devote all of her professional and business expertise and efforts to the Corporation, and not to work for any other business or entity or engage in any activity in competition with the Corporation and its affiliates and subsidiaries, and not to render any services, directly or indirectly, of a business, commercial or professional nature to any other person, firm, corporation or organization for compensation without the prior written consent of the Corporation, and not to solicit or entice any employee of the Corporation and its affiliates and subsidiaries, to leave the employ thereof or work for anyone in competition with the Corporation and its affiliates and subsidiaries. Furthermore, the Employee hereby agrees not to take any preliminary steps to set up or engage in any business enterprise that would be in competition with the Corporation and its affiliates and subsidiaries, until after the termination of employment hereunder. In addition, while employed hereunder, the Employee hereby agrees to divulge to the Corporation any and all competitive plans which the Employee may have under consideration, whether or not the Employee intends to act upon such plans. As used in the preceding sentence, the term “competitive plans” shall include, but not be limited to, plans to set up, establish or engage in any business enterprise in competition with the Corporation and its affiliates and subsidiaries, and plans to seek or accept employment from anyone in competition with the Corporation and its affiliates and subsidiaries.

8.           Noncompetition After Termination.

a.          Employee agrees that for a period of twenty-four (24) months after this Agreement or the Employee’s employment, whichever is later, has been terminated for any reason, regardless of whether the termination is initiated by Corporation or Employee, or for a period of time equal to the length of Employee’ employment with Corporation if such tenure is less than twenty-four (24) months, Employee will not, directly or indirectly, solicit any person, company, firm, or corporation who is or was a customer of Corporation during a period of five (5) years prior to the termination of Employee’ employment. Employee agrees not to solicit such customers on behalf of herself or any other person, firm, company, or corporation. Corporation agrees to provide a list of such customers whom the Employee may not solicit.

b.          Employee agrees that for a period of twelve (12) months after the termination of her employment with Corporation, regardless of whether the termination was initiated by

3

Corporation or Employee, she will not accept employment with, or act as a consultant, contractor, advisor, or in any other capacity for, a competitor of the Corporation, or enter into competition with the Corporation, either by herself or through any entity owned or managed in whole or in part by the Employee, within the island of Oahu. The term “competitor” as used in this paragraph 8, means any entity primarily engaged in the business of providing banking and other related services.

c.          The parties have attempted to limit Employee’ right to compete only to the extent necessary to protect Corporation from unfair competition. The parties recognize, however, that reasonable people may differ in making such a determination. Consequently, the parties hereby agree that, if the scope or enforceability of the foregoing restrictive covenant is in any way disputed at any time, a court or other trier of fact may modify and enforce the covenant to the extent that it believes the covenant is reasonable under the circumstances existing at that time.

9.           Injunctive Relief. The Employee understands and hereby agrees that the Corporation will suffer irreparable harm in the event that the Employee fails to comply with any of the Employee’ obligations under paragraphs 6, 7 and 8 above and that monetary damages will be inadequate to compensate the Corporation for such breach. Accordingly, the Employee hereby agrees that the Corporation will be entitled to injunctive relief to enforce the terms of paragraphs 6, 7 and 8 above, as well as any other remedies available to the Corporation at law or in equity.

10.         Termination by Corporation.

a.          Termination For Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time for cause without further liability or obligation to the Employee except as provided herein by giving written notice to the Employee. Upon such termination, the Employee shall have no right to receive compensation or other benefits for any period after termination for cause except as provided herein. Termination for cause shall include, but not be limited to, termination because of the Employee’s personal dishonesty, theft, gross misconduct, gross carelessness, breach of fiduciary duty, failure to perform stated duties, failure to comply with any of the Corporation’s policies or procedures, or any violation of law. If this Agreement and the Employee’s employment is terminated for cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the date of termination. Furthermore, any termination shall be without prejudice to any right or remedy to which the Corporation may be entitled either at law, in equity, or under this Agreement.

b.          Termination Without Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time without cause without further liability or obligation to the Employee except as provided herein by giving the Employee thirty (30) days prior written notice. Upon the effective date of such termination, the Employee shall have no right to receive

4

compensation or other benefits for any period after termination without cause except as provided herein. If this Agreement and the Employee’s employment is terminated without cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the effective date of termination.

11.         Termination by Employee. The Employee may resign and terminate the Employee’s employment hereunder at any time effective thirty (30) days after delivery of written notice to the Corporation. If the Employee voluntarily resigns, the Employee shall be entitled to Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee.

12.         Termination After Change of Control. If the Employee’s employment pursuant to this Agreement is terminated as a result of and within twelve (12) months after a Change of Control (as hereinafter defined), the Employee shall be entitled to the immediate vesting of all nonvested stock options granted and accumulated up to the date of termination and a severance pay in an amount equal to three (3) times the Employee’s annual base salary and annual cash bonus. A “Change of Control” is defined as the occurrence of any of the following events: (i) a merger where the Corporation and/or CPB, Inc., the 100% owner of the Corporation (“CPBI”) is not the surviving corporation; (ii) the transfer of all or substantially all of the assets of the Corporation to another unaffiliated corporation, entity or person; (iii) the acquisition by any person, group of related or affiliated persons (excluding, however, affiliates of the Corporation) or group of persons acting in concert in one or more transactions of equity securities of the Corporation and/or CPBI of fifty percent (50%) or more of the outstanding voting power of the Corporation and/or CPBI after such transaction or transactions.

13.         Limitation on Severance Payments. Notwithstanding the foregoing, any severance payment and, if applicable, the value of any option acceleration and any other benefits payable hereunder shall be reduced by such amount as is necessary, in the opinion of tax counsel or other appropriate tax advisor selected in good faith by the Corporation, so that no portion of the foregoing will be subject to excise taxes for an “excess parachute payment” under Internal Revenue Code Sections 280G and 4999.

14.         Withholding. All amounts payable by the Corporation hereunder shall be subject to all federal, state, local and other withholdings and employment taxes as required by applicable law.

15.         Arbitration. Any dispute or controversy arising under, out of, in connection with or related to this Agreement or by breach hereunder shall be determined and settled by binding arbitration in Honolulu, Hawaii, in accordance with the Rules of the American Arbitration Association

5

and Hawaii Revised Statutes Chapter 658A. Judgment upon the award may be entered in a court of competent jurisdiction, provided that such award shall under no circumstances include as an element thereof, any award for punitive damages. The prevailing party shall be entitled to recover from the other party its or her own expenses for the arbitrator’s fees, attorney’s fees, and for other expenses of presenting its or her case. Other arbitration costs, including fees for records or transcripts, shall be borne equally by the parties. The arbitrator is expressly empowered to determine any matter related to the employment of the Employee, including, but not limited to, the manner in which employment is terminated, any claims of tortious conduct, and any other claim, related to the termination of employment and/or the parties’ actions or omissions of actions prior to or during the Employee’s employment. Demand for arbitration hereunder shall be made by notice in writing given to the other party within six (6) months of the event giving rise to the claim. Failure by any party to assert in writing within six (6) months of any claim within the scope of this paragraph shall forever bar the assertion of that claim in any forum.

16.         Binding Effect and Assignment. The rights and obligations of this Agreement shall be binding upon and inure to the benefit of the Corporation, its successors and assigns. This Agreement shall not be assigned by the Employee; however, the obligations of the Employee hereunder, to the extent that such obligations may be performed by the Employee’s estate, shall be binding upon the Employee’s heirs and estate.

17.         Survival of Rights, Duties and Obligations. The termination of Employee’s employment or of this Agreement shall not release either party to this Agreement from any liability which at the time of termination is already accrued to the other party or which thereafter may accrue with respect to any act or omission arising either prior to such termination or after such termination when there is a continuing obligation. Without limiting the foregoing, Sections 6, 8 and 9 shall survive termination of the Employee’s employment with the Corporation and/or the termination of this Agreement.

18.         Receipt of Agreement. Each of the parties hereto acknowledges having read this Agreement in its entirety and having received a fully executed copy thereof. A fully executed copy shall be an original for all purposes. The Employee further acknowledges that she has been advised, prior to her execution of this Agreement, of her right to retain and seek the advice of an attorney regarding this Agreement.

19.         Hawaii Law. This Agreement is to be governed by and construed under the laws of the State of Hawaii.

20.         Entire Agreement. This Agreement contains the entire agreement between the parties  with respect to the employment of the Employee by the Corporation during the term of this Agreement and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties. No modification, amendment, or waiver of any of the provisions of this Agreement shall be effective unless in writing, specifically referring hereto, and signed by both parties.

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Furthermore, the parties agree to amend this Agreement or to re-execute a new agreement, as and when necessary, to ensure the terms and provisions of this Agreement comply with all laws, rules and regulations at any time applicable to the Corporation and/or this Agreement.

21.         Waiver of Breach. The failure to enforce at any time any of the provisions of this Agreement, or to require at any time performance by the other party of any of the provisions hereof, shall in no way affect either the validity of this Agreement or any part hereof of the right of either party thereafter to enforce each and every provision in accordance with the terms of this Agreement.

22.         Notice. Any written notice required or permitted to be given hereunder shall be deemed delivered either when personally delivered or when mailed, registered or certified, postage prepaid with return receipt requested, if to the Employee, addressed to the Employee at the last residence address of the Employee as shown in the records of the Corporation, and if to the Corporation, addressed to the President of the Corporation at the principal office of the Corporation.

23.         Attorneys’ Fees. Should any litigation be commenced between the parties to this Agreement, concerning any provision of this Agreement or the rights and obligations of any party in relation thereto, the party prevailing in such litigation shall be entitled, in addition to such relief as may be granted by a court of competent jurisdiction, to a reasonable sum for attorney’s fees in such litigation which shall be determined by the court in which such litigation occurs, as well as all court costs.

24.         Severability. If any provision of this Agreement is held to be invalid or unenforceable by any court or lawful authority, the invalidity or unenforceability of such provision shall not affect the validity and enforceability of the remaining provisions of this Agreement, and all such remaining provisions and this Agreement shall be construed so as to be valid and enforceable to the maximum extent permitted by law, and this Agreement shall be reformed accordingly.

[signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above and effective as of the Effective Date.

CENTRAL PACIFIC BANK
By	/s/ Glenn K.C. Ching
	Glenn K.C. Ching
	General Counsel
	Senior Vice President
		(Corporation)
	/s/ Sherri Yim
		(Employee)

8

EX-10.17

Exhibit 10.17

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“Agreement”) is made and shall be effective as of this first day of January, 2003, by and between Central Pacific Bank, a Hawaii corporation, (the “Corporation”), with its principal offices at 220 South King Street, Honolulu, Hawaii 96813, and Denis K. Isono (the “Employee”).

RECITALS

A.          Employee is presently an employee of the Corporation and is presently employed in his current executive capacity as Executive Vice President and Chief Operations Officer of the Corporation.

B.          The Corporation and the Employee wish to acknowledge and memorialize the terms and conditions of the Employee’s employment with the Corporation.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and of the terms, conditions and covenants contained herein, the parties hereto agree as follows:

1.           Employment. Employee shall continue to be employed in his current title and/or capacity (herein collectively referred to as “capacity”), but subject to the terms and conditions stated hereinafter.

2.           Scope of the Employment. During the term of employment, the Employee shall exert the Employee’s best efforts and devote the Employee’s full and exclusive professional and/or business efforts, time and attention in fulfilling and discharging the Employee’s duties in his current capacity or in any other future capacity as designated by the Corporation. The services to be performed by the Employee in the Employee’s current capacity may be extended, curtailed or otherwise modified, from time to time, and/or the Employee’s title and/or capacity may change, at the discretion of the Corporation.

3.           Term. The term of the Employee’s employment by the Corporation pursuant to this Agreement shall be at the will of the Corporation and shall be subject to termination as provided in paragraphs 10, 11 and 12 hereinafter.

4.           Compensation and Other Benefits. The Employee shall continue to have the same compensation as presently paid to Employee, as the same may be changed from time to time at the discretion of the Corporation (including but not limited to annual discretionary cash bonus and stock

1

options, if any) and continue to have the same rights, privileges and other benefits presently enjoyed by Employee in his current capacity (subject, however, to any change, at the discretion of the Corporation, in rights, privileges and other benefits as a result of any change in the Employee’s capacity), including but not limited to vacation and sick leave privileges and the right to participate in any retirement, pension, profit-sharing, stock option, insurance, medical, or other plans which may now be in effect or which may hereafter be adopted, all as described in the Corporation’s Employee Benefits and Policies Manual (the “Employee Manual”).

5.           Conduct. Employee shall continue to abide by the policies set forth in the Corporation’s Employee Manual and all other applicable policies and procedures of the Corporation, and comply with all applicable laws, ordinances, rules and regulations now or hereafter made applicable to the Corporation, its employees, and to Employee in his designated capacity.

6.           Confidentiality of Trade Secrets and Other Materials.

a.          The Employee shall regard and preserve as confidential all Trade Secrets (as defined below) and other non-public, confidential, privileged and/or proprietary information, including, without limitation, client lists, client files, and any other client information (collectively referred to herein as “Confidential Information”) pertaining to the Corporation and its affiliates and subsidiaries, that has been or may be revealed to or obtained by the Employee by reason of the Employee’s employment. The Employee shall not take, retain, copy or use, or disclose to any non- affiliated third party, either during the Employee’s employment or forever thereafter, any Trade Secret or other Confidential Information connected with the Corporation and its affiliates and subsidiaries, except as required in the line of the Employee’s employment capacity with the Corporation, or as authorized in advance and in writing by the Corporation, or as required by law, rule, regulation or lawful court order. This provision shall not apply with respect to information of the Corporation and its affiliates and subsidiaries, which has been voluntarily disclosed by the Corporation and its affiliates and subsidiaries, to the public or otherwise enters the public domain through lawful means.

b.          The Employee further agrees that all know-how, strategies, tactics, documents, reports, plans, proposals, marketing and sales plans, client lists, client files and materials, or any other Confidential Information and Trade Secrets revealed to or made by the Employee or that come into the Employee’s possession by reason of the Employee’s employment hereunder are the property of the Corporation and shall not be used by the Employee in any way adverse to the interest of the Corporation and its affiliates and subsidiaries, or for any unauthorized purpose. The Employee shall not deliver, reproduce or in any way allow such documents or things to be delivered or used by any non-affiliated third party without specific direction or consent of a duly authorized representative of the Corporation. The Employee shall not publish, release or otherwise make available to any third party any information describing any Trade Secret or other Confidential Information of the Corporation and its affiliates and subsidiaries, without prior specific written authorization of the Corporation. Notwithstanding the foregoing, the Employee may disclose any information (including,

2

Confidential Information or Trade Secrets) to any third-party pursuant to the Employee’s proper authority and capacity of employment with the Corporation.

c.          For purposes of this Agreement, the term “Trade Secrets” shall include, but not be limited to, information of the Corporation and its affiliates and subsidiaries, encompassed in all know-how, strategies, tactics, plans, proposals, marketing and sales plans, client lists, client files, financial information, costs, risk analysis, and all concepts or ideas in or reasonably related to the Corporation and its affiliates and subsidiaries, that have not been previously publicly released by duly authorized representatives of the Corporation and its affiliates and subsidiaries.

7.           Noncompetition During Employment. While employed hereunder, the Employee agrees to devote all of his professional and business expertise and efforts to the Corporation, and not to work for any other business or entity or engage in any activity in competition with the Corporation and its affiliates and subsidiaries, and not to render any services, directly or indirectly, of a business, commercial or professional nature to any other person, firm, corporation or organization for compensation without the prior written consent of the Corporation, and not to solicit or entice any employee of the Corporation and its affiliates and subsidiaries, to leave the employ thereof or work for anyone in competition with the Corporation and its affiliates and subsidiaries. Furthermore, the Employee hereby agrees not to take any preliminary steps to set up or engage in any business enterprise that would be in competition with the Corporation and its affiliates and subsidiaries, until after the termination of employment hereunder. In addition, while employed hereunder, the Employee hereby agrees to divulge to the Corporation any and all competitive plans which the Employee may have under consideration, whether or not the Employee intends to act upon such plans. As used in the preceding sentence, the term “competitive plans” shall include, but not be limited to, plans to set up, establish or engage in any business enterprise in competition with the Corporation and its affiliates and subsidiaries, and plans to seek or accept employment from anyone in competition with the Corporation and its affiliates and subsidiaries.

8.           Noncompetition After Termination.

a.          Employee agrees that for a period of twenty-four (24) months after this Agreement or the Employee’s employment, whichever is later, has been terminated for any reason, regardless of whether the termination is initiated by Corporation or Employee, or for a period of time equal to the length of Employee’ employment with Corporation if such tenure is less than twenty-four (24) months, Employee will not, directly or indirectly, solicit any person, company, firm, or corporation who is or was a customer of Corporation during a period of five (5) years prior to the termination of Employee’ employment. Employee agrees not to solicit such customers on behalf of himself or any other person, firm, company, or corporation. Corporation agrees to provide a list of such customers whom the Employee may not solicit.

b.          Employee agrees that for a period of twelve (12) months after the termination of his employment with Corporation, regardless of whether the termination was initiated by

3

Corporation or Employee, he will not accept employment with, or act as a consultant, contractor, advisor, or in any other capacity for, a competitor of the Corporation, or enter into competition with the Corporation, either by himself or through any entity owned or managed in whole or in part by the Employee, within the island of Oahu. The term “competitor” as used in this paragraph 8, means any entity primarily engaged in the business of providing banking and other related services.

c.          The parties have attempted to limit Employee’ right to compete only to the extent necessary to protect Corporation from unfair competition. The parties recognize, however, that reasonable people may differ in making such a determination. Consequently, the parties hereby agree that, if the scope or enforceability of the foregoing restrictive covenant is in any way disputed at any time, a court or other trier of fact may modify and enforce the covenant to the extent that it believes the covenant is reasonable under the circumstances existing at that time.

9.           Injunctive Relief. The Employee understands and hereby agrees that the Corporation will suffer irreparable harm in the event that the Employee fails to comply with any of the Employee’ obligations under paragraphs 6, 7 and 8 above and that monetary damages will be inadequate to compensate the Corporation for such breach. Accordingly, the Employee hereby agrees that the Corporation will be entitled to injunctive relief to enforce the terms of paragraphs 6, 7 and 8 above, as well as any other remedies available to the Corporation at law or in equity.

10.         Termination by Corporation.

a.          Termination For Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time for cause without further liability or obligation to the Employee except as provided herein by giving written notice to the Employee. Upon such termination, the Employee shall have no right to receive compensation or other benefits for any period after termination for cause except as provided herein. Termination for cause shall include, but not be limited to, termination because of the Employee’s personal dishonesty, theft, gross misconduct, gross carelessness, breach of fiduciary duty, failure to perform stated duties, failure to comply with any of the Corporation’s policies or procedures, or any violation of law. If this Agreement and the Employee’s employment is terminated for cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the date of termination. Furthermore, any termination shall be without prejudice to any right or remedy to which the Corporation may be entitled either at law, in equity, or under this Agreement.

b.          Termination Without Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time without cause without further liability or obligation to the Employee except as provided herein by giving the Employee thirty (30) days prior written notice. Upon the effective date of such termination, the Employee shall have no right to receive

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compensation or other benefits for any period after termination without cause except as provided herein. If this Agreement and the Employee’s employment is terminated without cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the effective date of termination.

11.         Termination by Employee. The Employee may resign and terminate the Employee’s employment hereunder at any time effective thirty (30) days after delivery of written notice to the Corporation. If the Employee voluntarily resigns, the Employee shall be entitled to Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee.

12.         Termination After Change of Control. If the Employee’s employment pursuant to this Agreement is terminated as a result of and within twelve (12) months after a Change of Control (as hereinafter defined), the Employee shall be entitled to the immediate vesting of all nonvested stock options granted and accumulated up to the date of termination and a severance pay in an amount equal to three (3) times the Employee’s annual base salary and annual cash bonus. A “Change of Control” is defined as the occurrence of any of the following events: (i) a merger where the Corporation and/or CPB, Inc., the 100% owner of the Corporation (“CPBI”) is not the surviving corporation; (ii) the transfer of all or substantially all of the assets of the Corporation to another unaffiliated corporation, entity or person; (iii) the acquisition by any person, group of related or affiliated persons (excluding, however, affiliates of the Corporation) or group of persons acting in concert in one or more transactions of equity securities of the Corporation and/or CPBI of fifty percent (50%) or more of the outstanding voting power of the Corporation and/or CPBI after such transaction or transactions.

13.         Limitation on Severance Payments. Notwithstanding the foregoing, any severance payment and, if applicable, the value of any option acceleration and any other benefits payable hereunder shall be reduced by such amount as is necessary, in the opinion of tax counsel or other appropriate tax advisor selected in good faith by the Corporation, so that no portion of the foregoing will be subject to excise taxes for an “excess parachute payment” under Internal Revenue Code Sections 280G and 4999.

14.         Withholding. All amounts payable by the Corporation hereunder shall be subject to all federal, state, local and other withholdings and employment taxes as required by applicable law.

15.         Arbitration. Any dispute or controversy arising under, out of, in connection with or related to this Agreement or by breach hereunder shall be determined and settled by binding arbitration in Honolulu, Hawaii, in accordance with the Rules of the American Arbitration Association

5

and Hawaii Revised Statutes Chapter 658A. Judgment upon the award may be entered in a court of competent jurisdiction, provided that such award shall under no circumstances include as an element thereof, any award for punitive damages. The prevailing party shall be entitled to recover from the other party its or his own expenses for the arbitrator’s fees, attorney’s fees, and for other expenses of presenting its or his case. Other arbitration costs, including fees for records or transcripts, shall be borne equally by the parties. The arbitrator is expressly empowered to determine any matter related to the employment of the Employee, including, but not limited to, the manner in which employment is terminated, any claims of tortious conduct, and any other claim, related to the termination of employment and/or the parties’ actions or omissions of actions prior to or during the Employee’s employment. Demand for arbitration hereunder shall be made by notice in writing given to the other party within six (6) months of the event giving rise to the claim. Failure by any party to assert in writing within six (6) months of any claim within the scope of this paragraph shall forever bar the assertion of that claim in any forum.

16.         Binding Effect and Assignment. The rights and obligations of this Agreement shall be binding upon and inure to the benefit of the Corporation, its successors and assigns. This Agreement shall not be assigned by the Employee; however, the obligations of the Employee hereunder, to the extent that such obligations may be performed by the Employee’s estate, shall be binding upon the Employee’s heirs and estate.

17.         Survival of Rights, Duties and Obligations. The termination of Employee’s employment or of this Agreement shall not release either party to this Agreement from any liability which at the time of termination is already accrued to the other party or which thereafter may accrue with respect to any act or omission arising either prior to such termination or after such termination when there is a continuing obligation. Without limiting the foregoing, Sections 6, 8 and 9 shall survive termination of the Employee’s employment with the Corporation and/or the termination of this Agreement.

18.         Receipt of Agreement. Each of the parties hereto acknowledges having read this Agreement in its entirety and having received a fully executed copy thereof. A fully executed copy shall be an original for all purposes. The Employee further acknowledges that he has been advised, prior to his execution of this Agreement, of his right to retain and seek the advice of an attorney regarding this Agreement.

19.         Hawaii Law. This Agreement is to be governed by and construed under the laws of the State of Hawaii.

20.         Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the employment of the Employee by the Corporation during the term of this Agreement and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties. No modification, amendment, or waiver of any of the provisions of this Agreement shall be effective unless in writing, specifically referring hereto, and signed by both parties.

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Furthermore, the parties agree to amend this Agreement or to re-execute a new agreement, as and when necessary, to ensure the terms and provisions of this Agreement comply with all laws, rules and regulations at any time applicable to the Corporation and/or this Agreement.

21.         Waiver of Breach. The failure to enforce at any time any of the provisions of this Agreement, or to require at any time performance by the other party of any of the provisions hereof, shall in no way affect either the validity of this Agreement or any part hereof of the right of either party thereafter to enforce each and every provision in accordance with the terms of this Agreement.

22.         Notice. Any written notice required or permitted to be given hereunder shall be deemed delivered either when personally delivered or when mailed, registered or certified, postage prepaid with return receipt requested, if to the Employee, addressed to the Employee at the last residence address of the Employee as shown in the records of the Corporation, and if to the Corporation, addressed to the President of the Corporation at the principal office of the Corporation.

23.         Attorneys’ Fees. Should any litigation be commenced between the parties to this Agreement, concerning any provision of this Agreement or the rights and obligations of any party in relation thereto, the party prevailing in such litigation shall be entitled, in addition to such relief as may be granted by a court of competent jurisdiction, to a reasonable sum for attorney’s fees in such litigation which shall be determined by the court in which such litigation occurs, as well as all court costs.

24.         Severability. If any provision of this Agreement is held to be invalid or unenforceable by any court or lawful authority, the invalidity or unenforceability of such provision shall not affect the validity and enforceability of the remaining provisions of this Agreement, and all such remaining provisions and this Agreement shall be construed so as to be valid and enforceable to the maximum extent permitted by law, and this Agreement shall be reformed accordingly.

[signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above and effective as of the Effective Date.

CENTRAL PACIFIC BANK
By	/s/ Glenn K.C. Ching
	Glenn K.C. Ching
	General Counsel
	Senior Vice President
		(Corporation)
	/s/ Denis K. Isono
		(Employee)

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EX-10.18

Exhibit 10.18

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“Agreement”) is made and shall be effective as of this first day of January, 2003, by and between Central Pacific Bank, a Hawaii corporation, (the “Corporation”), with its principal offices at 220 South King Street, Honolulu, Hawaii 96813, and Blenn A. Fujimoto (the “Employee”).

RECITALS

A.          Employee is presently an employee of the Corporation and is presently employed in his current executive capacity as Executive Vice President and Chief Financial Services Officer of the Corporation.

B.          The Corporation and the Employee wish to acknowledge and memorialize the terms and conditions of the Employee’s employment with the Corporation.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and of the terms, conditions and covenants contained herein, the parties hereto agree as follows:

1.           Employment. Employee shall continue to be employed in his current title and/or capacity (herein collectively referred to as “capacity”), but subject to the terms and conditions stated hereinafter.

2.           Scope of the Employment. During the term of employment, the Employee shall exert the Employee’s best efforts and devote the Employee’s full and exclusive professional and/or business efforts, time and attention in fulfilling and discharging the Employee’s duties in his current capacity or in any other future capacity as designated by the Corporation. The services to be performed by the Employee in the Employee’s current capacity may be extended, curtailed or otherwise modified, from time to time, and/or the Employee’s title and/or capacity may change, at the discretion of the Corporation.

3.           Term. The term of the Employee’s employment by the Corporation pursuant to this Agreement shall be at the will of the Corporation and shall be subject to termination as provided in paragraphs 10, 11 and 12 hereinafter.

4.           Compensation and Other Benefits. The Employee shall continue to have the same compensation as presently paid to Employee, as the same may be changed from time to time at the discretion of the Corporation (including but not limited to annual discretionary cash bonus and stock

1

options, if any) and continue to have the same rights, privileges and other benefits presently enjoyed by Employee in his current capacity (subject, however, to any change, at the discretion of the Corporation, in rights, privileges and other benefits as a result of any change in the Employee’s capacity), including but not limited to vacation and sick leave privileges and the right to participate in any retirement, pension, profit-sharing, stock option, insurance, medical, or other plans which may now be in effect or which may hereafter be adopted, all as described in the Corporation’s Employee Benefits and Policies Manual (the “Employee Manual”).

5.           Conduct. Employee shall continue to abide by the policies set forth in the Corporation’s Employee Manual and all other applicable policies and procedures of the Corporation, and comply with all applicable laws, ordinances, rules and regulations now or hereafter made applicable to the Corporation, its employees, and to Employee in his designated capacity.

6.           Confidentiality of Trade Secrets and Other Materials.

a.          The Employee shall regard and preserve as confidential all Trade Secrets (as defined below) and other non-public, confidential, privileged and/or proprietary information, including, without limitation, client lists, client files, and any other client information (collectively referred to herein as “Confidential Information”) pertaining to the Corporation and its affiliates and subsidiaries, that has been or may be revealed to or obtained by the Employee by reason of the Employee’s employment. The Employee shall not take, retain, copy or use, or disclose to any non- affiliated third party, either during the Employee’s employment or forever thereafter, any Trade Secret or other Confidential Information connected with the Corporation and its affiliates and subsidiaries, except as required in the line of the Employee’s employment capacity with the Corporation, or as authorized in advance and in writing by the Corporation, or as required by law, rule, regulation or lawful court order. This provision shall not apply with respect to information of the Corporation and its affiliates and subsidiaries, which has been voluntarily disclosed by the Corporation and its affiliates and subsidiaries, to the public or otherwise enters the public domain through lawful means.

b.          The Employee further agrees that all know-how, strategies, tactics, documents, reports, plans, proposals, marketing and sales plans, client lists, client files and materials, or any other Confidential Information and Trade Secrets revealed to or made by the Employee or that come into the Employee’s possession by reason of the Employee’s employment hereunder are the property of the Corporation and shall not be used by the Employee in any way adverse to the interest of the Corporation and its affiliates and subsidiaries, or for any unauthorized purpose. The Employee shall not deliver, reproduce or in any way allow such documents or things to be delivered or used by any non-affiliated third party without specific direction or consent of a duly authorized representative of the Corporation. The Employee shall not publish, release or otherwise make available to any third party any information describing any Trade Secret or other Confidential Information of the Corporation and its affiliates and subsidiaries, without prior specific written authorization of the Corporation. Notwithstanding the foregoing, the Employee may disclose any information (including,

2

Confidential Information or Trade Secrets) to any third-party pursuant to the Employee’s proper authority and capacity of employment with the Corporation.

c.          For purposes of this Agreement, the term “Trade Secrets” shall include, but not be limited to, information of the Corporation and its affiliates and subsidiaries, encompassed in all know-how, strategies, tactics, plans, proposals, marketing and sales plans, client lists, client files, financial information, costs, risk analysis, and all concepts or ideas in or reasonably related to the Corporation and its affiliates and subsidiaries, that have not been previously publicly released by duly authorized representatives of the Corporation and its affiliates and subsidiaries.

7.           Noncompetition During Employment. While employed hereunder, the Employee agrees to devote all of his professional and business expertise and efforts to the Corporation, and not to work for any other business or entity or engage in any activity in competition with the Corporation and its affiliates and subsidiaries, and not to render any services, directly or indirectly, of a business, commercial or professional nature to any other person, firm, corporation or organization for compensation without the prior written consent of the Corporation, and not to solicit or entice any employee of the Corporation and its affiliates and subsidiaries, to leave the employ thereof or work for anyone in competition with the Corporation and its affiliates and subsidiaries. Furthermore, the Employee hereby agrees not to take any preliminary steps to set up or engage in any business enterprise that would be in competition with the Corporation and its affiliates and subsidiaries, until after the termination of employment hereunder. In addition, while employed hereunder, the Employee hereby agrees to divulge to the Corporation any and all competitive plans which the Employee may have under consideration, whether or not the Employee intends to act upon such plans. As used in the preceding sentence, the term “competitive plans” shall include, but not be limited to, plans to set up, establish or engage in any business enterprise in competition with the Corporation and its affiliates and subsidiaries, and plans to seek or accept employment from anyone in competition with the Corporation and its affiliates and subsidiaries.

8.           Noncompetition After Termination.

a.          Employee agrees that for a period of twenty-four (24) months after this Agreement or the Employee’s employment, whichever is later, has been terminated for any reason, regardless of whether the termination is initiated by Corporation or Employee, or for a period of time equal to the length of Employee’ employment with Corporation if such tenure is less than twenty-four (24) months, Employee will not, directly or indirectly, solicit any person, company, firm, or corporation who is or was a customer of Corporation during a period of five (5) years prior to the termination of Employee’ employment. Employee agrees not to solicit such customers on behalf of himself or any other person, firm, company, or corporation. Corporation agrees to provide a list of such customers whom the Employee may not solicit.

b.          Employee agrees that for a period of twelve (12) months after the termination of his employment with Corporation, regardless of whether the termination was initiated by

3

Corporation or Employee, he will not accept employment with, or act as a consultant, contractor, advisor, or in any other capacity for, a competitor of the Corporation, or enter into competition with the Corporation, either by himself or through any entity owned or managed in whole or in part by the Employee, within the island of Oahu. The term “competitor” as used in this paragraph 8, means any entity primarily engaged in the business of providing banking and other related services.

c.          The parties have attempted to limit Employee’ right to compete only to the extent necessary to protect Corporation from unfair competition. The parties recognize, however, that reasonable people may differ in making such a determination. Consequently, the parties hereby agree that, if the scope or enforceability of the foregoing restrictive covenant is in any way disputed at any time, a court or other trier of fact may modify and enforce the covenant to the extent that it believes the covenant is reasonable under the circumstances existing at that time.

9.           Injunctive Relief. The Employee understands and hereby agrees that the Corporation will suffer irreparable harm in the event that the Employee fails to comply with any of the Employee’ obligations under paragraphs 6, 7 and 8 above and that monetary damages will be inadequate to compensate the Corporation for such breach. Accordingly, the Employee hereby agrees that the Corporation will be entitled to injunctive relief to enforce the terms of paragraphs 6, 7 and 8 above, as well as any other remedies available to the Corporation at law or in equity.

10.         Termination by Corporation.

a.          Termination For Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time for cause without further liability or obligation to the Employee except as provided herein by giving written notice to the Employee. Upon such termination, the Employee shall have no right to receive compensation or other benefits for any period after termination for cause except as provided herein. Termination for cause shall include, but not be limited to, termination because of the Employee’s personal dishonesty, theft, gross misconduct, gross carelessness, breach of fiduciary duty, failure to perform stated duties, failure to comply with any of the Corporation’s policies or procedures, or any violation of law. If this Agreement and the Employee’s employment is terminated for cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the date of termination. Furthermore, any termination shall be without prejudice to any right or remedy to which the Corporation may be entitled either at law, in equity, or under this Agreement.

b.          Termination Without Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time without cause without further liability or obligation to the Employee except as provided herein by giving the Employee thirty (30) days prior written notice. Upon the effective date of such termination, the Employee shall have no right to receive

4

compensation or other benefits for any period after termination without cause except as provided herein. If this Agreement and the Employee’s employment is terminated without cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the effective date of termination.

11.         Termination by Employee. The Employee may resign and terminate the Employee’s employment hereunder at any time effective thirty (30) days after delivery of written notice to the Corporation. If the Employee voluntarily resigns, the Employee shall be entitled to Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee.

12.         Termination After Change of Control. If the Employee’s employment pursuant to this Agreement is terminated as a result of and within twelve (12) months after a Change of Control (as hereinafter defined), the Employee shall be entitled to the immediate vesting of all nonvested stock options granted and accumulated up to the date of termination and a severance pay in an amount equal to three (3) times the Employee’s annual base salary and annual cash bonus. A “Change of Control” is defined as the occurrence of any of the following events: (i) a merger where the Corporation and/or CPB, Inc., the 100% owner of the Corporation (“CPBI”) is not the surviving corporation; (ii) the transfer of all or substantially all of the assets of the Corporation to another unaffiliated corporation, entity or person; (iii) the acquisition by any person, group of related or affiliated persons (excluding, however, affiliates of the Corporation) or group of persons acting in concert in one or more transactions of equity securities of the Corporation and/or CPBI of fifty percent (50%) or more of the outstanding voting power of the Corporation and/or CPBI after such transaction or transactions.

13.         Limitation on Severance Payments. Notwithstanding the foregoing, any severance payment and, if applicable, the value of any option acceleration and any other benefits payable hereunder shall be reduced by such amount as is necessary, in the opinion of tax counsel or other appropriate tax advisor selected in good faith by the Corporation, so that no portion of the foregoing will be subject to excise taxes for an “excess parachute payment” under Internal Revenue Code Sections 280G and 4999.

14.         Withholding. All amounts payable by the Corporation hereunder shall be subject to all federal, state, local and other withholdings and employment taxes as required by applicable law.

15.         Arbitration. Any dispute or controversy arising under, out of, in connection with or related to this Agreement or by breach hereunder shall be determined and settled by binding arbitration in Honolulu, Hawaii, in accordance with the Rules of the American Arbitration Association

5

and Hawaii Revised Statutes Chapter 658A. Judgment upon the award may be entered in a court of competent jurisdiction, provided that such award shall under no circumstances include as an element thereof, any award for punitive damages. The prevailing party shall be entitled to recover from the other party its or his own expenses for the arbitrator’s fees, attorney’s fees, and for other expenses of presenting its or his case. Other arbitration costs, including fees for records or transcripts, shall be borne equally by the parties. The arbitrator is expressly empowered to determine any matter related to the employment of the Employee, including, but not limited to, the manner in which employment is terminated, any claims of tortious conduct, and any other claim, related to the termination of employment and/or the parties’ actions or omissions of actions prior to or during the Employee’s employment. Demand for arbitration hereunder shall be made by notice in writing given to the other party within six (6) months of the event giving rise to the claim. Failure by any party to assert in writing within six (6) months of any claim within the scope of this paragraph shall forever bar the assertion of that claim in any forum.

16.         Binding Effect and Assignment. The rights and obligations of this Agreement shall be binding upon and inure to the benefit of the Corporation, its successors and assigns. This Agreement shall not be assigned by the Employee; however, the obligations of the Employee hereunder, to the extent that such obligations may be performed by the Employee’s estate, shall be binding upon the Employee’s heirs and estate.

17.         Survival of Rights, Duties and Obligations. The termination of Employee’s employment or of this Agreement shall not release either party to this Agreement from any liability which at the time of termination is already accrued to the other party or which thereafter may accrue with respect to any act or omission arising either prior to such termination or after such termination when there is a continuing obligation. Without limiting the foregoing, Sections 6, 8 and 9 shall survive termination of the Employee’s employment with the Corporation and/or the termination of this Agreement.

18.         Receipt of Agreement. Each of the parties hereto acknowledges having read this Agreement in its entirety and having received a fully executed copy thereof. A fully executed copy shall be an original for all purposes. The Employee further acknowledges that he has been advised, prior to his execution of this Agreement, of his right to retain and seek the advice of an attorney regarding this Agreement.

19.         Hawaii Law. This Agreement is to be governed by and construed under the laws of the State of Hawaii.

20.         Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the employment of the Employee by the Corporation during the term of this Agreement and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties. No modification, amendment, or waiver of any of the provisions of this Agreement shall be effective unless in writing, specifically referring hereto, and signed by both parties.

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Furthermore, the parties agree to amend this Agreement or to re-execute a new agreement, as and when necessary, to ensure the terms and provisions of this Agreement comply with all laws, rules and regulations at any time applicable to the Corporation and/or this Agreement.

21.         Waiver of Breach. The failure to enforce at any time any of the provisions of this Agreement, or to require at any time performance by the other party of any of the provisions hereof, shall in no way affect either the validity of this Agreement or any part hereof of the right of either party thereafter to enforce each and every provision in accordance with the terms of this Agreement.

22.         Notice. Any written notice required or permitted to be given hereunder shall be deemed delivered either when personally delivered or when mailed, registered or certified, postage prepaid with return receipt requested, if to the Employee, addressed to the Employee at the last residence address of the Employee as shown in the records of the Corporation, and if to the Corporation, addressed to the President of the Corporation at the principal office of the Corporation.

23.         Attorneys’ Fees. Should any litigation be commenced between the parties to this Agreement, concerning any provision of this Agreement or the rights and obligations of any party in relation thereto, the party prevailing in such litigation shall be entitled, in addition to such relief as may be granted by a court of competent jurisdiction, to a reasonable sum for attorney’s fees in such litigation which shall be determined by the court in which such litigation occurs, as well as all court costs.

24.         Severability. If any provision of this Agreement is held to be invalid or unenforceable by any court or lawful authority, the invalidity or unenforceability of such provision shall not affect the validity and enforceability of the remaining provisions of this Agreement, and all such remaining provisions and this Agreement shall be construed so as to be valid and enforceable to the maximum extent permitted by law, and this Agreement shall be reformed accordingly.

[signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above and effective as of the Effective Date.

CENTRAL PACIFIC BANK
By	/s/ Glenn K.C. Ching
	Glenn K.C. Ching
	General Counsel
	Senior Vice President
		(Corporation)
	/s/ Blenn Fujimoto
		(Employee)

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EX-10.19

Exhibit 10.19

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“Agreement”) is made and shall be effective as of this first day of January, 2003, by and between Central Pacific Bank, a Hawaii corporation, (the “Corporation”), with its principal offices at 220 South King Street, Honolulu, Hawaii 96813, and Alwyn S. Chikamoto (the “Employee”).

RECITALS

A.          Employee is presently an employee of the Corporation and is presently employed in his current executive capacity as Executive Vice President and Chief Credit Officer of the Corporation.

B.          The Corporation and the Employee wish to acknowledge and memorialize the terms and conditions of the Employee’s employment with the Corporation.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and of the terms, conditions and covenants contained herein, the parties hereto agree as follows:

1.           Employment. Employee shall continue to be employed in his current title and/or capacity (herein collectively referred to as “capacity”), but subject to the terms and conditions stated hereinafter.

2.           Scope of the Employment. During the term of employment, the Employee shall exert the Employee’s best efforts and devote the Employee’s full and exclusive professional and/or business efforts, time and attention in fulfilling and discharging the Employee’s duties in his current capacity or in any other future capacity as designated by the Corporation. The services to be performed by the Employee in the Employee’s current capacity may be extended, curtailed or otherwise modified, from time to time, and/or the Employee’s title and/or capacity may change, at the discretion of the Corporation.

3.           Term. The term of the Employee’s employment by the Corporation pursuant to this Agreement shall be at the will of the Corporation and shall be subject to termination as provided in paragraphs 10, 11 and 12 hereinafter.

4.           Compensation and Other Benefits. The Employee shall continue to have the same compensation as presently paid to Employee, as the same may be changed from time to time at the discretion of the Corporation (including but not limited to annual discretionary cash bonus and stock options, if any) and continue to have the same rights, privileges and other benefits presently enjoyed

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by Employee in his current capacity (subject, however, to any change, at the discretion of the Corporation, in rights, privileges and other benefits as a result of any change in the Employee’s capacity), including but not limited to vacation and sick leave privileges and the right to participate in any retirement, pension, profit-sharing, stock option, insurance, medical, or other plans which may now be in effect or which may hereafter be adopted, all as described in the Corporation’s Employee Benefits and Policies Manual (the “Employee Manual”).

5.           Conduct. Employee shall continue to abide by the policies set forth in the Corporation’s Employee Manual and all other applicable policies and procedures of the Corporation, and comply with all applicable laws, ordinances, rules and regulations now or hereafter made applicable to the Corporation, its employees, and to Employee in his designated capacity.

6.           Confidentiality of Trade Secrets and Other Materials.

a.          The Employee shall regard and preserve as confidential all Trade Secrets (as defined below) and other non-public, confidential, privileged and/or proprietary information, including, without limitation, client lists, client files, and any other client information (collectively referred to herein as “Confidential Information”) pertaining to the Corporation and its affiliates and subsidiaries, that has been or may be revealed to or obtained by the Employee by reason of the Employee’s employment. The Employee shall not take, retain, copy or use, or disclose to any non- affiliated third party, either during the Employee’s employment or forever thereafter, any Trade Secret or other Confidential Information connected with the Corporation and its affiliates and subsidiaries, except as required in the line of the Employee’s employment capacity with the Corporation, or as authorized in advance and in writing by the Corporation, or as required by law, rule, regulation or lawful court order. This provision shall not apply with respect to information of the Corporation and its affiliates and subsidiaries, which has been voluntarily disclosed by the Corporation and its affiliates and subsidiaries, to the public or otherwise enters the public domain through lawful means.

b.          The Employee further agrees that all know-how, strategies, tactics, documents, reports, plans, proposals, marketing and sales plans, client lists, client files and materials, or any other Confidential Information and Trade Secrets revealed to or made by the Employee or that come into the Employee’s possession by reason of the Employee’s employment hereunder are the property of the Corporation and shall not be used by the Employee in any way adverse to the interest of the Corporation and its affiliates and subsidiaries, or for any unauthorized purpose. The Employee shall not deliver, reproduce or in any way allow such documents or things to be delivered or used by any non-affiliated third party without specific direction or consent of a duly authorized representative of the Corporation. The Employee shall not publish, release or otherwise make available to any third party any information describing any Trade Secret or other Confidential Information of the Corporation and its affiliates and subsidiaries, without prior specific written authorization of the Corporation. Notwithstanding the foregoing, the Employee may disclose any information (including,

2

Confidential Information or Trade Secrets) to any third-party pursuant to the Employee’s proper authority and capacity of employment with the Corporation.

c.          For purposes of this Agreement, the term “Trade Secrets” shall include, but not be limited to, information of the Corporation and its affiliates and subsidiaries, encompassed in all know-how, strategies, tactics, plans, proposals, marketing and sales plans, client lists, client files, financial information, costs, risk analysis, and all concepts or ideas in or reasonably related to the Corporation and its affiliates and subsidiaries, that have not been previously publicly released by duly authorized representatives of the Corporation and its affiliates and subsidiaries.

7.           Noncompetition During Employment. While employed hereunder, the Employee agrees to devote all of his professional and business expertise and efforts to the Corporation, and not to work for any other business or entity or engage in any activity in competition with the Corporation and its affiliates and subsidiaries, and not to render any services, directly or indirectly, of a business, commercial or professional nature to any other person, firm, corporation or organization for compensation without the prior written consent of the Corporation, and not to solicit or entice any employee of the Corporation and its affiliates and subsidiaries, to leave the employ thereof or work for anyone in competition with the Corporation and its affiliates and subsidiaries. Furthermore, the Employee hereby agrees not to take any preliminary steps to set up or engage in any business enterprise that would be in competition with the Corporation and its affiliates and subsidiaries, until after the termination of employment hereunder. In addition, while employed hereunder, the Employee hereby agrees to divulge to the Corporation any and all competitive plans which the Employee may have under consideration, whether or not the Employee intends to act upon such plans. As used in the preceding sentence, the term “competitive plans” shall include, but not be limited to, plans to set up, establish or engage in any business enterprise in competition with the Corporation and its affiliates and subsidiaries, and plans to seek or accept employment from anyone in competition with the Corporation and its affiliates and subsidiaries.

8.           Noncompetition After Termination.

a.          Employee agrees that for a period of twenty-four (24) months after this Agreement or the Employee’s employment, whichever is later, has been terminated for any reason, regardless of whether the termination is initiated by Corporation or Employee, or for a period of time equal to the length of Employee’ employment with Corporation if such tenure is less than twenty-four (24) months, Employee will not, directly or indirectly, solicit any person, company, firm, or corporation who is or was a customer of Corporation during a period of five (5) years prior to the termination of Employee’ employment. Employee agrees not to solicit such customers on behalf of himself or any other person, firm, company, or corporation. Corporation agrees to provide a list of such customers whom the Employee may not solicit.

b.          Employee agrees that for a period of twelve (12) months after the termination of his employment with Corporation, regardless of whether the termination was initiated by

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Corporation or Employee, he will not accept employment with, or act as a consultant, contractor, advisor, or in any other capacity for, a competitor of the Corporation, or enter into competition with the Corporation, either by himself or through any entity owned or managed in whole or in part by the Employee, within the island of Oahu. The term “competitor” as used in this paragraph 8, means any entity primarily engaged in the business of providing banking and other related services.

c.          The parties have attempted to limit Employee’ right to compete only to the extent necessary to protect Corporation from unfair competition. The parties recognize, however, that reasonable people may differ in making such a determination. Consequently, the parties hereby agree that, if the scope or enforceability of the foregoing restrictive covenant is in any way disputed at any time, a court or other trier of fact may modify and enforce the covenant to the extent that it believes the covenant is reasonable under the circumstances existing at that time.

9.           Injunctive Relief. The Employee understands and hereby agrees that the Corporation will suffer irreparable harm in the event that the Employee fails to comply with any of the Employee’ obligations under paragraphs 6, 7 and 8 above and that monetary damages will be inadequate to compensate the Corporation for such breach. Accordingly, the Employee hereby agrees that the Corporation will be entitled to injunctive relief to enforce the terms of paragraphs 6, 7 and 8 above, as well as any other remedies available to the Corporation at law or in equity.

10.         Termination by Corporation.

a.          Termination For Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time for cause without further liability or obligation to the Employee except as provided herein by giving written notice to the Employee. Upon such termination, the Employee shall have no right to receive compensation or other benefits for any period after termination for cause except as provided herein. Termination for cause shall include, but not be limited to, termination because of the Employee’s personal dishonesty, theft, gross misconduct, gross carelessness, breach of fiduciary duty, failure to perform stated duties, failure to comply with any of the Corporation’s policies or procedures, or any violation of law. If this Agreement and the Employee’s employment is terminated for cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the date of termination. Furthermore, any termination shall be without prejudice to any right or remedy to which the Corporation may be entitled either at law, in equity, or under this Agreement.

b.          Termination Without Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time without cause without further liability or obligation to the Employee except as provided herein by giving the Employee thirty (30) days prior written notice. Upon the effective date of such termination, the Employee shall have no right to receive

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compensation or other benefits for any period after termination without cause except as provided herein. If this Agreement and the Employee’s employment is terminated without cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the effective date of termination.

11.         Termination by Employee. The Employee may resign and terminate the Employee’s employment hereunder at any time effective thirty (30) days after delivery of written notice to the Corporation. If the Employee voluntarily resigns, the Employee shall be entitled to Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee.

12.         Termination After Change of Control. If the Employee’s employment pursuant to this Agreement is terminated as a result of and within twelve (12) months after a Change of Control (as hereinafter defined), the Employee shall be entitled to the immediate vesting of all nonvested stock options granted and accumulated up to the date of termination and a severance pay in an amount equal to three (3) times the Employee’s annual base salary and annual cash bonus. A “Change of Control” is defined as the occurrence of any of the following events: (i) a merger where the Corporation and/or CPB, Inc., the 100% owner of the Corporation (“CPBI”) is not the surviving corporation; (ii) the transfer of all or substantially all of the assets of the Corporation to another unaffiliated corporation, entity or person; (iii) the acquisition by any person, group of related or affiliated persons (excluding, however, affiliates of the Corporation) or group of persons acting in concert in one or more transactions of equity securities of the Corporation and/or CPBI of fifty percent (50%) or more of the outstanding voting power of the Corporation and/or CPBI after such transaction or transactions.

13.         Limitation on Severance Payments. Notwithstanding the foregoing, any severance payment and, if applicable, the value of any option acceleration and any other benefits payable hereunder shall be reduced by such amount as is necessary, in the opinion of tax counsel or other appropriate tax advisor selected in good faith by the Corporation, so that no portion of the foregoing will be subject to excise taxes for an “excess parachute payment” under Internal Revenue Code Sections 280G and 4999.

14.         Withholding. All amounts payable by the Corporation hereunder shall be subject to all federal, state, local and other withholdings and employment taxes as required by applicable law.

15.         Arbitration. Any dispute or controversy arising under, out of, in connection with or related to this Agreement or by breach hereunder shall be determined and settled by binding arbitration in Honolulu, Hawaii, in accordance with the Rules of the American Arbitration Association

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and Hawaii Revised Statutes Chapter 658A. Judgment upon the award may be entered in a court of competent jurisdiction, provided that such award shall under no circumstances include as an element thereof, any award for punitive damages. The prevailing party shall be entitled to recover from the other party its or his own expenses for the arbitrator’s fees, attorney’s fees, and for other expenses of presenting its or his case. Other arbitration costs, including fees for records or transcripts, shall be borne equally by the parties. The arbitrator is expressly empowered to determine any matter related to the employment of the Employee, including, but not limited to, the manner in which employment is terminated, any claims of tortious conduct, and any other claim, related to the termination of employment and/or the parties’ actions or omissions of actions prior to or during the Employee’s employment. Demand for arbitration hereunder shall be made by notice in writing given to the other party within six (6) months of the event giving rise to the claim. Failure by any party to assert in writing within six (6) months of any claim within the scope of this paragraph shall forever bar the assertion of that claim in any forum.

16.         Binding Effect and Assignment. The rights and obligations of this Agreement shall be binding upon and inure to the benefit of the Corporation, its successors and assigns. This Agreement shall not be assigned by the Employee; however, the obligations of the Employee hereunder, to the extent that such obligations may be performed by the Employee’s estate, shall be binding upon the Employee’s heirs and estate.

17.         Survival of Rights, Duties and Obligations. The termination of Employee’s employment or of this Agreement shall not release either party to this Agreement from any liability which at the time of termination is already accrued to the other party or which thereafter may accrue with respect to any act or omission arising either prior to such termination or after such termination when there is a continuing obligation. Without limiting the foregoing, Sections 6, 8 and 9 shall survive termination of the Employee’s employment with the Corporation and/or the termination of this Agreement.

18.         Receipt of Agreement. Each of the parties hereto acknowledges having read this Agreement in its entirety and having received a fully executed copy thereof. A fully executed copy shall be an original for all purposes. The Employee further acknowledges that he has been advised, prior to his execution of this Agreement, of his right to retain and seek the advice of an attorney regarding this Agreement.

19.         Hawaii Law. This Agreement is to be governed by and construed under the laws of the State of Hawaii.

20.         Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the employment of the Employee by the Corporation during the term of this Agreement and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties. No modification, amendment, or waiver of any of the provisions of this Agreement shall be effective unless in writing, specifically referring hereto, and signed by both parties.

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Furthermore, the parties agree to amend this Agreement or to re-execute a new agreement, as and when necessary, to ensure the terms and provisions of this Agreement comply with all laws, rules and regulations at any time applicable to the Corporation and/or this Agreement.

21.         Waiver of Breach. The failure to enforce at any time any of the provisions of this Agreement, or to require at any time performance by the other party of any of the provisions hereof, shall in no way affect either the validity of this Agreement or any part hereof of the right of either party thereafter to enforce each and every provision in accordance with the terms of this Agreement.

22.         Notice. Any written notice required or permitted to be given hereunder shall be deemed delivered either when personally delivered or when mailed, registered or certified, postage prepaid with return receipt requested, if to the Employee, addressed to the Employee at the last residence address of the Employee as shown in the records of the Corporation, and if to the Corporation, addressed to the President of the Corporation at the principal office of the Corporation.

23.         Attorneys’ Fees. Should any litigation be commenced between the parties to this Agreement, concerning any provision of this Agreement or the rights and obligations of any party in relation thereto, the party prevailing in such litigation shall be entitled, in addition to such relief as may be granted by a court of competent jurisdiction, to a reasonable sum for attorney’s fees in such litigation which shall be determined by the court in which such litigation occurs, as well as all court costs.

24.         Severability. If any provision of this Agreement is held to be invalid or unenforceable by any court or lawful authority, the invalidity or unenforceability of such provision shall not affect the validity and enforceability of the remaining provisions of this Agreement, and all such remaining provisions and this Agreement shall be construed so as to be valid and enforceable to the maximum extent permitted by law, and this Agreement shall be reformed accordingly.

[signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above and effective as of the Effective Date.

CENTRAL PACIFIC BANK
By	/s/ Glenn K.C. Ching
	Glenn K.C. Ching
	General Counsel
	Senior Vice President
		(Corporation)
	/s/ Alwyn Chikamoto
		(Employee)

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EX-10.20

Exhibit 10.20

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“Agreement”) is made and shall be effective as of this first day of January, 2003, by and between Central Pacific Bank, a Hawaii corporation, (the “Corporation”), with its principal offices at 220 South King Street, Honolulu, Hawaii 96813, and Craig H. Hashimoto (the “Employee”).

RECITALS

A.          Employee is presently an employee of the Corporation and is presently employed in his current executive capacity as Senior Vice President and Director of Human Resources of the Corporation.

B.          The Corporation and the Employee wish to acknowledge and memorialize the terms and conditions of the Employee’s employment with the Corporation.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and of the terms, conditions and covenants contained herein, the parties hereto agree as follows:

1.           Employment. Employee shall continue to be employed in his current title and/or capacity (herein collectively referred to as “capacity”), but subject to the terms and conditions stated hereinafter.

2.           Scope of the Employment. During the term of employment, the Employee shall exert the Employee’s best efforts and devote the Employee’s full and exclusive professional and/or business efforts, time and attention in fulfilling and discharging the Employee’s duties in his current capacity or in any other future capacity as designated by the Corporation. The services to be performed by the Employee in the Employee’s current capacity may be extended, curtailed or otherwise modified, from time to time, and/or the Employee’s title and/or capacity may change, at the discretion of the Corporation.

3.           Term. The term of the Employee’s employment by the Corporation pursuant to this Agreement shall be at the will of the Corporation and shall be subject to termination as provided in paragraphs 10, 11 and 12 hereinafter.

4.           Compensation and Other Benefits. The Employee shall continue to have the same compensation as presently paid to Employee, as the same may be changed from time to time at the discretion of the Corporation (including but not limited to annual discretionary cash bonus and stock

1

options, if any) and continue to have the same rights, privileges and other benefits presently enjoyed by Employee in his current capacity (subject, however, to any change, at the discretion of the Corporation, in rights, privileges and other benefits as a result of any change in the Employee’s capacity), including but not limited to vacation and sick leave privileges and the right to participate in any retirement, pension, profit-sharing, stock option, insurance, medical, or other plans which may now be in effect or which may hereafter be adopted, all as described in the Corporation’s Employee Benefits and Policies Manual (the “Employee Manual”).

5.           Conduct. Employee shall continue to abide by the policies set forth in the Corporation’s Employee Manual and all other applicable policies and procedures of the Corporation, and comply with all applicable laws, ordinances, rules and regulations now or hereafter made applicable to the Corporation, its employees, and to Employee in his designated capacity.

6.           Confidentiality of Trade Secrets and Other Materials.

a.          The Employee shall regard and preserve as confidential all Trade Secrets (as defined below) and other non-public, confidential, privileged and/or proprietary information, including, without limitation, client lists, client files, and any other client information (collectively referred to herein as “Confidential Information”) pertaining to the Corporation and its affiliates and subsidiaries, that has been or may be revealed to or obtained by the Employee by reason of the Employee’s employment. The Employee shall not take, retain, copy or use, or disclose to any non- affiliated third party, either during the Employee’s employment or forever thereafter, any Trade Secret or other Confidential Information connected with the Corporation and its affiliates and subsidiaries, except as required in the line of the Employee’s employment capacity with the Corporation, or as authorized in advance and in writing by the Corporation, or as required by law, rule, regulation or lawful court order. This provision shall not apply with respect to information of the Corporation and its affiliates and subsidiaries, which has been voluntarily disclosed by the Corporation and its affiliates and subsidiaries, to the public or otherwise enters the public domain through lawful means.

b.          The Employee further agrees that all know-how, strategies, tactics, documents, reports, plans, proposals, marketing and sales plans, client lists, client files and materials, or any other Confidential Information and Trade Secrets revealed to or made by the Employee or that come into the Employee’s possession by reason of the Employee’s employment hereunder are the property of the Corporation and shall not be used by the Employee in any way adverse to the interest of the Corporation and its affiliates and subsidiaries, or for any unauthorized purpose. The Employee shall not deliver, reproduce or in any way allow such documents or things to be delivered or used by any non-affiliated third party without specific direction or consent of a duly authorized representative of the Corporation. The Employee shall not publish, release or otherwise make available to any third party any information describing any Trade Secret or other Confidential Information of the Corporation and its affiliates and subsidiaries, without prior specific written authorization of the Corporation. Notwithstanding the foregoing, the Employee may disclose any information (including,

2

Confidential Information or Trade Secrets) to any third-party pursuant to the Employee’s proper authority and capacity of employment with the Corporation.

c.          For purposes of this Agreement, the term “Trade Secrets” shall include, but not be limited to, information of the Corporation and its affiliates and subsidiaries, encompassed in all know-how, strategies, tactics, plans, proposals, marketing and sales plans, client lists, client files, financial information, costs, risk analysis, and all concepts or ideas in or reasonably related to the Corporation and its affiliates and subsidiaries, that have not been previously publicly released by duly authorized representatives of the Corporation and its affiliates and subsidiaries.

7.           Noncompetition During Employment. While employed hereunder, the Employee agrees to devote all of his professional and business expertise and efforts to the Corporation, and not to work for any other business or entity or engage in any activity in competition with the Corporation and its affiliates and subsidiaries, and not to render any services, directly or indirectly, of a business, commercial or professional nature to any other person, firm, corporation or organization for compensation without the prior written consent of the Corporation, and not to solicit or entice any employee of the Corporation and its affiliates and subsidiaries, to leave the employ thereof or work for anyone in competition with the Corporation and its affiliates and subsidiaries. Furthermore, the Employee hereby agrees not to take any preliminary steps to set up or engage in any business enterprise that would be in competition with the Corporation and its affiliates and subsidiaries, until after the termination of employment hereunder. In addition, while employed hereunder, the Employee hereby agrees to divulge to the Corporation any and all competitive plans which the Employee may have under consideration, whether or not the Employee intends to act upon such plans. As used in the preceding sentence, the term “competitive plans” shall include, but not be limited to, plans to set up, establish or engage in any business enterprise in competition with the Corporation and its affiliates and subsidiaries, and plans to seek or accept employment from anyone in competition with the Corporation and its affiliates and subsidiaries.

8.           Noncompetition After Termination.

a.          Employee agrees that for a period of twenty-four (24) months after this Agreement or the Employee’s employment, whichever is later, has been terminated for any reason, regardless of whether the termination is initiated by Corporation or Employee, or for a period of time equal to the length of Employee’ employment with Corporation if such tenure is less than twenty-four (24) months, Employee will not, directly or indirectly, solicit any person, company, firm, or corporation who is or was a customer of Corporation during a period of five (5) years prior to the termination of Employee’ employment. Employee agrees not to solicit such customers on behalf of himself or any other person, firm, company, or corporation. Corporation agrees to provide a list of such customers whom the Employee may not solicit.

b.          Employee agrees that for a period of twelve (12) months after the termination of his employment with Corporation, regardless of whether the termination was initiated by

3

Corporation or Employee, he will not accept employment with, or act as a consultant, contractor, advisor, or in any other capacity for, a competitor of the Corporation, or enter into competition with the Corporation, either by himself or through any entity owned or managed in whole or in part by the Employee, within the island of Oahu. The term “competitor” as used in this paragraph 8, means any entity primarily engaged in the business of providing banking and other related services.

c.          The parties have attempted to limit Employee’ right to compete only to the extent necessary to protect Corporation from unfair competition. The parties recognize, however, that reasonable people may differ in making such a determination. Consequently, the parties hereby agree that, if the scope or enforceability of the foregoing restrictive covenant is in any way disputed at any time, a court or other trier of fact may modify and enforce the covenant to the extent that it believes the covenant is reasonable under the circumstances existing at that time.

9.           Injunctive Relief. The Employee understands and hereby agrees that the Corporation will suffer irreparable harm in the event that the Employee fails to comply with any of the Employee’ obligations under paragraphs 6, 7 and 8 above and that monetary damages will be inadequate to compensate the Corporation for such breach. Accordingly, the Employee hereby agrees that the Corporation will be entitled to injunctive relief to enforce the terms of paragraphs 6, 7 and 8 above, as well as any other remedies available to the Corporation at law or in equity.

10.         Termination by Corporation.

a.          Termination For Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time for cause without further liability or obligation to the Employee except as provided herein by giving written notice to the Employee. Upon such termination, the Employee shall have no right to receive compensation or other benefits for any period after termination for cause except as provided herein. Termination for cause shall include, but not be limited to, termination because of the Employee’s personal dishonesty, theft, gross misconduct, gross carelessness, breach of fiduciary duty, failure to perform stated duties, failure to comply with any of the Corporation’s policies or procedures, or any violation of law. If this Agreement and the Employee’s employment is terminated for cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the date of termination. Furthermore, any termination shall be without prejudice to any right or remedy to which the Corporation may be entitled either at law, in equity, or under this Agreement.

b.          Termination Without Cause. The Corporation may terminate this Agreement and the Employee’s employment at any time without cause without further liability or obligation to the Employee except as provided herein by giving the Employee thirty (30) days prior written notice. Upon the effective date of such termination, the Employee shall have no right to receive

4

compensation or other benefits for any period after termination without cause except as provided herein. If this Agreement and the Employee’s employment is terminated without cause, the Employee shall be entitled to the Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee. Except as otherwise provided herein, all other benefits specifically provided for in this Agreement shall cease and lapse as of the effective date of termination.

11.         Termination by Employee. The Employee may resign and terminate the Employee’s employment hereunder at any time effective thirty (30) days after delivery of written notice to the Corporation. If the Employee voluntarily resigns, the Employee shall be entitled to Employee’s base salary and accumulated and unused vacation time earned by the Employee and computed pro rata up to and including the effective date of termination, and the Corporation shall have no further obligation to the Employee.

12.         Termination After Change of Control. If the Employee’s employment pursuant to this Agreement is terminated as a result of and within twelve (12) months after a Change of Control (as hereinafter defined), the Employee shall be entitled to the immediate vesting of all nonvested stock options granted and accumulated up to the date of termination and a severance pay in an amount equal to three (3) times the Employee’s annual base salary and annual cash bonus. A “Change of Control” is defined as the occurrence of any of the following events: (i) a merger where the Corporation and/or CPB, Inc., the 100% owner of the Corporation (“CPBI”) is not the surviving corporation; (ii) the transfer of all or substantially all of the assets of the Corporation to another unaffiliated corporation, entity or person; (iii) the acquisition by any person, group of related or affiliated persons (excluding, however, affiliates of the Corporation) or group of persons acting in concert in one or more transactions of equity securities of the Corporation and/or CPBI of fifty percent (50%) or more of the outstanding voting power of the Corporation and/or CPBI after such transaction or transactions.

13.         Limitation on Severance Payments. Notwithstanding the foregoing, any severance payment and, if applicable, the value of any option acceleration and any other benefits payable hereunder shall be reduced by such amount as is necessary, in the opinion of tax counsel or other appropriate tax advisor selected in good faith by the Corporation, so that no portion of the foregoing will be subject to excise taxes for an “excess parachute payment” under Internal Revenue Code Sections 280G and 4999.

14.         Withholding. All amounts payable by the Corporation hereunder shall be subject to all federal, state, local and other withholdings and employment taxes as required by applicable law.

15.         Arbitration. Any dispute or controversy arising under, out of, in connection with or related to this Agreement or by breach hereunder shall be determined and settled by binding arbitration in Honolulu, Hawaii, in accordance with the Rules of the American Arbitration Association

5

and Hawaii Revised Statutes Chapter 658A. Judgment upon the award may be entered in a court of competent jurisdiction, provided that such award shall under no circumstances include as an element thereof, any award for punitive damages. The prevailing party shall be entitled to recover from the other party its or his own expenses for the arbitrator’s fees, attorney’s fees, and for other expenses of presenting its or his case. Other arbitration costs, including fees for records or transcripts, shall be borne equally by the parties. The arbitrator is expressly empowered to determine any matter related to the employment of the Employee, including, but not limited to, the manner in which employment is terminated, any claims of tortious conduct, and any other claim, related to the termination of employment and/or the parties’ actions or omissions of actions prior to or during the Employee’s employment. Demand for arbitration hereunder shall be made by notice in writing given to the other party within six (6) months of the event giving rise to the claim. Failure by any party to assert in writing within six (6) months of any claim within the scope of this paragraph shall forever bar the assertion of that claim in any forum.

16.         Binding Effect and Assignment. The rights and obligations of this Agreement shall be binding upon and inure to the benefit of the Corporation, its successors and assigns. This Agreement shall not be assigned by the Employee; however, the obligations of the Employee hereunder, to the extent that such obligations may be performed by the Employee’s estate, shall be binding upon the Employee’s heirs and estate.

17.         Survival of Rights, Duties and Obligations. The termination of Employee’s employment or of this Agreement shall not release either party to this Agreement from any liability which at the time of termination is already accrued to the other party or which thereafter may accrue with respect to any act or omission arising either prior to such termination or after such termination when there is a continuing obligation. Without limiting the foregoing, Sections 6, 8 and 9 shall survive termination of the Employee’s employment with the Corporation and/or the termination of this Agreement.

18.         Receipt of Agreement. Each of the parties hereto acknowledges having read this Agreement in its entirety and having received a fully executed copy thereof. A fully executed copy shall be an original for all purposes. The Employee further acknowledges that he has been advised, prior to his execution of this Agreement, of his right to retain and seek the advice of an attorney regarding this Agreement.

19.         Hawaii Law. This Agreement is to be governed by and construed under the laws of the State of Hawaii.

20.         Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the employment of the Employee by the Corporation during the term of this Agreement and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties. No modification, amendment, or waiver of any of the provisions of this Agreement shall be effective unless in writing, specifically referring hereto, and signed by both parties.

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Furthermore, the parties agree to amend this Agreement or to re-execute a new agreement, as and when necessary, to ensure the terms and provisions of this Agreement comply with all laws, rules and regulations at any time applicable to the Corporation and/or this Agreement.

21.         Waiver of Breach. The failure to enforce at any time any of the provisions of this Agreement, or to require at any time performance by the other party of any of the provisions hereof, shall in no way affect either the validity of this Agreement or any part hereof of the right of either party thereafter to enforce each and every provision in accordance with the terms of this Agreement.

22.         Notice. Any written notice required or permitted to be given hereunder shall be deemed delivered either when personally delivered or when mailed, registered or certified, postage prepaid with return receipt requested, if to the Employee, addressed to the Employee at the last residence address of the Employee as shown in the records of the Corporation, and if to the Corporation, addressed to the President of the Corporation at the principal office of the Corporation.

23.         Attorneys’ Fees. Should any litigation be commenced between the parties to this Agreement, concerning any provision of this Agreement or the rights and obligations of any party in relation thereto, the party prevailing in such litigation shall be entitled, in addition to such relief as may be granted by a court of competent jurisdiction, to a reasonable sum for attorney’s fees in such litigation which shall be determined by the court in which such litigation occurs, as well as all court costs.

24.         Severability. If any provision of this Agreement is held to be invalid or unenforceable by any court or lawful authority, the invalidity or unenforceability of such provision shall not affect the validity and enforceability of the remaining provisions of this Agreement, and all such remaining provisions and this Agreement shall be construed so as to be valid and enforceable to the maximum extent permitted by law, and this Agreement shall be reformed accordingly.

[signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above and effective as of the Effective Date.

CENTRAL PACIFIC BANK
By	/s/ Glenn K.C. Ching
	Glenn K.C. Ching
	General Counsel
	Senior Vice President
		(Corporation)
	/s/ Craig Hashimoto
		(Employee)

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EX-23

Exhibit 23

Independent Auditors’ Consent

The Board of Directors

CPB Inc.:

We consent to the 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 17, 2003, with respect to the consolidated balance sheets of CPB Inc. as of December 31, 2002 and 2001, 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, 2002, which report appears in the December 31, 2002 annual report on Form 10-K of CPB Inc.

/s/ KPMG LLP

Honolulu, Hawaii

March 11, 2003

EX-99.1

Exhibit 99.1

Certification Pursuant to

18 U.S.C. Section 1350, As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

                In connection with the Annual Report of CPB Inc. (the “Company”) on Form 10-K for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Clint L. Arnoldus, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.

Date: March 12, 2003	/s/ Clint L. Arnoldus
	Clint L. Arnoldus Chairman of the Board, President, and Chief Executive Officer

EX-99.2

Exhibit 99.2

Certification Pursuant to

18 U.S.C. Section 1350, As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

                In connection with the Annual Report of CPB Inc. (the “Company”) on Form 10-K for the period ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Neal K. Kanda, Principal Financial and Accounting Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.

Date: March 12, 2003	/s/ Neal K. Kanda
	Neal K. Kanda Vice President, Secretary and Treasurer (Principal Financial And Accounting Officer)