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UNITED STATESSECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549FORM 10-K

|      |  |                                                                                                           
|----- |  | ----------------------------------------------------------------------------------------------------------
|[X]   |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]       
|     
|      |  | For the fiscal year ended December 31, 2001                                                               
|     
|OR   
|     
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

Commission File Number 0-12396

CB BANCSHARES, INC.
(Exact name of registrant as specified in its charter)

|                                |  |                                             
|------------------------------- |  | --------------------------------------------
|Hawaii
(State of Incorporation) |  | 99-0197163
(IRS Employer Identification No.)

201 Merchant Street Honolulu, Hawaii 96813
(Address of principal executive offices)

(Registrants Telephone Number) (808) 535-2500

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to
Section 12(g) of the Act:
     Common Stock, Par value $1.00 per share

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [    ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) 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 this
Form 10-K or any amendment to this Form 10-K. [X]

As of January 31, 2002, registrant had outstanding 3,506,082 shares of common
stock. The aggregate market value of registrants Common Stock held by
non-affiliates based on the closing price on January 31, 2002 was approximately
$113,866,000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the annual meeting of shareholders to be
held on April 25, 2002 are incorporated by reference into Part III and IV.

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|                                                                       |                                                                                                 |  |  |  |  |  |  | 
|---------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|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 STOCKHOLDER MATTERS                
|                                                                       | ITEM  6.  SELECTED FINANCIAL DATA                                                              
|                                                                       | ITEM  7.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|ITEM   7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|                                                                       | ITEM  8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|                                                                       | 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                      
|                                                                       | ITEM  13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|PART  IV                                                              
|                                                                       | ITEM  14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                    
|SIGNATURES                                                            
|EXHIBIT INDEX                                                         
|EXHIBIT 21                                                            
|EXHIBIT 23.1                                                          



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|              |  |                                                                                       |  |  |      |  |  | 
|------------- |  | ------------------------------------------------------------------------------------- |  |  | ---- |  |  | 
|              |  |                                                                                       |  |  | Page | 
|              |  |                                                                                       |  |  |      | 
|              |  | PART  I                                                                               |  |  |      | 
|Item 1.       |  | Business                                                                              |  |  | 3    | 
|Item 2.       |  | Properties                                                                            |  |  | 8    | 
|Item 3.       |  | Legal Proceedings                                                                     |  |  | 8    | 
|Item 4.       |  | Submission of Matters to a Vote of Security Holders                                   |  |  | 8    | 
|              |  | PART  II                                                                              |  |  |      | 
|Item 5.       |  | Market for Registrant's Common Equity and Related Stockholder Matters                 |  |  | 8    | 
|Item 6.       |  | Selected Financial Data                                                               |  |  | 9    | 
|Item 7.       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  |  | 10   | 
|Item 7A.      |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |  | 22   | 
|Item 8.       |  | Financial Statements and Supplementary Data                                           |  |  | 24   | 
|Item 9.       |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  |  | 46   | 
|              |  | PART  III                                                                             |  |  |      | 
|Item 10.      |  | Directors and Executive Officers of the Registrant                                    |  |  | 47   | 
|Item 11.      |  | Executive Compensation                                                                |  |  | 47   | 
|Item 12.      |  | Security Ownership of Certain Beneficial Owners and Management                        |  |  | 47   | 
|Item 13.      |  | Certain Relationships and Related Transactions                                        |  |  | 47   | 
|              |  | PART  IV                                                                              |  |  |      | 
|Item 14.      |  | Exhibits, Financial Statement Schedules, and Reports On Form 8-K                      |  |  | 47   | 
|Signatures    |  |                                                                                       |  |  | 49   | 
|Exhibit Index |  |                                                                                       |  |  | 50   | 

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements within
the meaning of the Securities Exchange Act of 1934, as amended by the Private
Securities Litigation Reform Act of 1995. All statements, other than
statements of historical facts, included in this report that address results or
developments that CB Bancshares, Inc. (the Company) expects or anticipates
will or may occur in the future, where statements are preceded by, followed by
or included the words believes, plans, intends, expects, anticipates
or similar expressions, including such things as (i) business strategy; (ii)
economic trends and market condition, particularly in Hawaii; (iii) the
direction of interest rates and prepayment speeds of mortgage loans and
mortgage-backed securities; (iv) the adequacy of the Companys allowances for
credit and real estate losses based on credit risks inherent in the lending
processes; (v) expansion and growth of the Companys business and operations;
(vi) renewal of existing credit agreements with and availability of additional
advances from the Federal Home Loan Bank of Seattle (the FHLB); and (vii)
other matters are forward-looking statements. These statements are based upon
certain assumptions and analyses made by the Company in light of its experience
and its perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. These statements are subject to a number of risks and
uncertainties, many of which are beyond the control of the Company, including
general economic, market or business conditions; real estate market conditions,
particularly in Hawaii; the opportunities (or lack thereof) that may be
presented to and pursued by the Company; competitive actions by other
companies; changes in laws and regulations; and other factors. Actual results
could differ materially from those contemplated by these forward-looking
statements. Consequently, all of the forward-looking statements made in this
report are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even substantially realized, and that they will have the
expected consequences to or effects on the Company and its business or
operations. Forward-looking statements made in this report speak as of the
date hereof. The Company undertakes no obligation to update or revise any
forward-looking statement in this report.




PART  I




ITEM  1.  BUSINESS

CB BANCSHARES, INC.

CB Bancshares, Inc. is a bank holding company which was incorporated in the
State of Hawaii in 1980. As a bank holding company, the Company has the
flexibility to directly or indirectly engage in certain bank-related activities
other than banking, subject to regulation by the Board of Governors of the
Federal Reserve System (the Federal Reserve Board or FRB). The Company has
three wholly-owned subsidiaries, City Bank (the Bank), Datatronix Financial
Services, Inc. (Datatronix) and O.R.E., Inc. (inactive), which are discussed
below.

On July 1, 2000, International Savings and Loan Association, Limited (the
Association), a wholly-owned subsidiary of the Company, merged with the Bank.

CITY BANK

City Bank is a state-chartered bank organized under the laws of the State of
Hawaii in 1959. The Bank is insured by the Federal Deposit Insurance
Corporation (the FDIC), and provides full commercial banking services through
18 branches on the island of Oahu, 1 branch on the island of Hawaii, and 2
branches on the island of Maui. These services include receiving demand,
savings and time deposits; making commercial, real estate and consumer loans;
financing leases and leasing activities; financing international trade
activities; issuing letters of credit; handling domestic and foreign
collections; selling travelers checks and bank money orders; and renting safe
deposit boxes.

The Banks primary focus has been corporate
lending to small-to-medium-sized
businesses by maintaining relationships and expertise within business segments
and providing personal customer service. Efforts will continue to develop and
enhance the expertise of the corporate sales force and to leverage these
corporate relationships to generate core deposit growth. The Bank also has
restructured in order to link the corporate and wholesale lending to the retail
banking group with the intent of developing seamless service between the
corporate loan officers and the branch personnel and to increase cross-sale
opportunities between business and retail customers. The Bank has developed
and begun to implement its customer relationship management program which it
believes will significantly enhance this effort.

The Bank also plans to further develop its electronic banking force by
continuing to enhance internet banking capability for both business and retail
customers.

DATATRONIX FINANCIAL SERVICES, INC.

Datatronix Financial Services, Inc., a wholly-owned subsidiary, was
incorporated in the State of Hawaii in June 2000 and opened for business on
July 1, 2000. Datatronix offers item processing services to banks, thrifts,
credit unions and other financial institutions in the State of Hawaii. As of
December 31, 2001, Datatronix had three customers, with the Bank as its primary
customer.

INTERNATIONAL SAVINGS AND LOAN ASSOCIATION, LIMITED

The Association was chartered by the Territory of Hawaii in 1925. The
Associations principal business consisted of attracting deposits from the
general public and utilizing advances from the FHLB and other borrowings to
fund its real estate lending activities, which consisted primarily of lending
to one-to-four family residential properties. As mentioned previously, on July
1, 2000, the Association was merged with and into the Bank. With the merger,
all Association loan and deposit accounts became Bank accounts. At June 30,
2000, the Association had total assets of $796.7 million.

FHLB BORROWINGS

A primary source of borrowings for the Company is advances from the FHLB. The
Bank has credit line agreements allowing for both short- and long-term
advances. The agreements permit the Bank to borrow up to 35% of total
qualified assets, provided that adequate mortgage loans or investment
securities are pledged as collateral. At December 31, 2001, the Company had
$75.7 million in short-term advances from the FHLB ranging in maturity from
January 2002 to June 2002 and rates from 2.01% to 5.12% and $214.4 million in
long-term advances from the FHLB ranging in maturity from May 2002 to September
2014 and rates from 2.05% to 8.22%. Advances are priced at the date of advance
as either fixed or LIBOR-based. See the Liquidity section of Managements
Discussion and Analysis as well as Notes J and K of Notes to the Companys
Consolidated Financial Statements for further information.

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COMPETITION AND ECONOMIC ENVIRONMENT

The earnings and growth of the Company and its subsidiaries are affected by the
changes in the monetary and fiscal policies of the United States (the U.S.),
as well as by general, local, national and international economic conditions. The
overall growth of loans and investments, deposit levels and interest rates are
directly influenced by the monetary policies of the Federal Reserve System.
Since these changes are generally unpredictable, it is difficult to ascertain
the impact of such future changes on the operations of the Company and its
subsidiaries.

The banking business is highly competitive. The Bank competes for deposits and
loans with five other commercial banks and three other savings associations
located in Hawaii. In addition to other commercial banks and savings
associations, the Bank competes for savings and time deposits and certain types
of loans with other financial institutions, such as consumer finance companies,
credit unions, merchandise retailers, and a variety of financial service and
advisory companies. The Bank also competes for mortgage loans with insurance
and mortgage companies.

The economy of Hawaii is supported principally by tourism, governmental
expenditures (primarily for the military), construction, and agriculture. The
government has made certain strides in attempting to broaden the states
economic base in the areas of diversified agriculture, biotechnology,
information technology and film. A small island economy like that of Hawaii,
which significantly depends on imports for consumption, is greatly influenced
by the changes in external economic conditions. A key to the economic
performance of the state is the health of the U.S. and Japan economies and, to
a lesser extent, the economies of Canada, Europe and other Asian nations.

The events of September 11, 2001 have had a significant negative impact on the
world, U.S. and Hawaii economies. Due to its dependence on tourism,
Hawaii has been significantly affected by these events. For 2001, visitor arrivals declined 9.1%
from the record high of 7 million visitors in 2000. Significant job losses
have occurred in tourism and travel-related sectors and it is uncertain when
Hawaii will rebound from the effects of September 11, 2001. At December 31,
2001, Hawaiis unemployment rate stood at 4.9%, an improvement from the 5.5% in
November 2001, but higher than the 3.6% jobless rate at December 31, 2000.

REGULATORY CONSIDERATIONS

The following discussion sets forth certain elements of the regulatory
framework applicable to the Company. Federal and state regulation of financial
institutions is intended primarily for the protection of depositors rather than
shareholders of those entities. To the extent that the following discussion
describes statutory or regulatory provisions, it is not intended to be complete
and is qualified in its entirety by reference to the particular statutory or
regulatory provisions, and any case law or interpretive letters concerning such
provisions. In addition, there are other statutes and regulations that apply
to and regulate the operation of the Company and its subsidiaries. Any change
in applicable laws, or regulations, may have a material or possibly adverse
effect on the business of the Company or other subsidiaries of the Company.

Bank Holding Company.The Company is a bank holding company subject to
supervision and regulation by the Federal Reserve Board under the Bank Holding
Company Act of 1956, as amended (the BHCA). As a bank holding company, the
Companys activities and those of its banking and non-banking subsidiaries are
limited to the business of banking and activities closely related or incidental
to banking and to certain expressly permitted nonbanking activities. In
addition, with certain exceptions, the Company may not acquire, directly or
indirectly, more than 5% of any class of the voting shares of, or substantially
all of the assets of, a bank or any other company without the prior approval of
the Federal Reserve Board.

The Bank.The Bank is organized under the laws of the State of Hawaii and is
subject to significant regulation by the FDIC and the State of Hawaii Division
of Financial Institutions of the Department of Commerce and Consumer Affairs.
The Bank is also subject to significant federal and state regulation which
materially affects its operations.

The Community Reinvestment Act.The Community Reinvestment Act (the CRA)
requires lenders to identify the communities served by the Companys offices
and to identify the types of credit the institution is prepared to extend
within such communities. Under the CRA regulations of the FDIC and the other
federal banking agencies, an institutions performance in making loans and
investments and maintaining branches and providing services in low- and
moderate-income areas within the communities that it serves is evaluated. In
connection with its assessment of CRA performance, the FDIC assigns a rating of
outstanding, satisfactory, needs to improve, or substantial
noncompliance.

The Federal Home Loan Banks. Under the Federal Home Loan Bank Act, as amended,
the ongoing stock investment requirement is equal to 0.3% of total assets, 1%
of residential mortgages and mortgage-backed securities, or 5% of advances
divided by the institutions Qualifying Assets Ratio (QAR), whichever is
higher. The institutions QAR will determine a ratio of stock to borrowings
(the higher the QAR, the lower the stock to borrowings requirement). The stock
is recorded as a restricted investment security at par. Furthermore, FHLB
advances must be collateralized with certain types of assets. Accordingly, the
Company has pledged certain investments and loans to the FHLB as collateral for
its advances.

Dividend Restrictions. The principal source of the Companys cash flow has
been dividend payments received from the Bank. Dividends paid to the Company
by the Bank in 2001 totaled $6.3 million. Under the laws of Hawaii, payment of
dividends by the Bank is subject to certain restrictions, and payment of
dividends by the Company is likewise subject to certain restrictions.

The Company increased its quarterly dividend in the second quarter of 1999 to
$0.07 per share from $0.06 per share and increased to $0.10 per share in the
third quarter of 2000. The quarterly dividend was subsequently increased to
$0.11 per share in the second quarter of 2001. The Company will continue to
evaluate the dividend on a quarterly basis. In addition, applicable regulatory
authorities are authorized to prohibit banks, thrifts and their holding
companies from paying dividends which would constitute an unsafe and unsound
banking practice. The FRB has indicated that it would generally be an unsafe
and unsound banking practice for banks to pay dividends except out of current
operating earnings. Furthermore, an insured depository institution, such as the
Bank, cannot make a capital distribution (broadly defined to include, among
other things, dividends, redemptions and other repurchases of stock), or pay
management fees to its holding company if, thereafter, the depository
institution would be undercapitalized.

Capital Standards. The Company and the Bank are subject to capital standards
promulgated by the FRB, the FDIC, and the Hawaii Division of Financial
Institutions. The minimum ratio of total capital to risk-weighted assets,
provided for in the guidelines adopted by the FRB, including certain
off-balance-sheet items such as standby letters of credit, is 8%. At least half
of the total capital is to be comprised of common

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equity, retained earnings, non-cumulative perpetual preferred stock, and a
limited amount of cumulative perpetual preferred stock less goodwill (Tier 1
Capital). The remainder may consist of a limited amount of subordinated debt,
other preferred stock, certain other instruments, and a limited amount of
reserves for loan losses (Tier 2 Capital). The FDICs risk-based capital
guidelines for state non-member banks of the Federal Reserve System are
generally similar to those established by the FRB for bank holding companies.

The FRB and FDIC also have adopted minimum leverage ratios for bank holding
companies and banks requiring bank organizations to maintain a Leverage Ratio
(defined as Tier 1 Capital divided by average total assets less goodwill) of at
least 4% of total assets. The Leverage Ratio is the minimum requirement for the
most highly rated banking organizations, and other banking organizations are
expected to maintain an additional cushion of at least 100 to 200 basis points
(1% equals 100 basis points), taking into account the level and nature of risk,
to be allocated to the specific banking organizations by the primary regulator.

FRB guidelines also provide that banking organizations experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels, without
significant reliance on intangible assets. Furthermore, the guidelines indicate
that the FRB will continue to consider a tangible Tier 1 leverage ratio in
evaluating proposals for expansion or new activities. The tangible Tier 1
leverage ratio is the ratio of a banking organizations Tier 1 Capital, less
intangibles, to total assets, less intangibles.

Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business, including restricting the
payment of dividends. At December 31, 2001, the Company and the Bank exceeded
applicable capital requirements. The consolidated capital position of the
Company at December 31, 2001 was as follows:

|                    |                      |  |               |       |                        |  |  |      |  
|------------------- | -------------------- |  | ------------- | ----- | ---------------------- |  |  | ---- | -
|                    |                      |  | Company ratio |       | Minimum required ratio
|                    |                      |  |               |       |                       
|Risk-based Capital: |                      |  |               |       |                        |  |  |     
|                    | Tier 1 capital ratio |  |               | 11.32 | %                      |  |  | 4.00 | %
|                    | Total capital ratio  |  |               | 12.58 | %                      |  |  | 8.00 | %
|                    | Leverage ratio       |  |               | 8.31  | %                      |  |  | 4.00 | %

Under FRB 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
FRBs policy that in serving as a source of strength to its subsidiary banks, 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 FRB to be an unsafe and unsound banking practice or a
violation of the FRB regulations, or both. Any capital loans by a bank holding
company to any of its subsidiary banks are subordinate in right of payment to
deposits and to certain other indebtedness of such subsidiary bank. Moreover,
Congress has passed legislation pursuant to which depositors are granted a
preference over all other unsecured creditors in the event of the insolvency of
a bank or thrift.

Affiliate Transactions.Unless an exemption applies, sections 23A and 23B of
the Federal Reserve Act (i) limit the extent to which a financial institution
or its subsidiaries may engage in covered transactions with an affiliate, to
an amount equal to 10% of such institutions capital and surplus and an
aggregate limit on all such transactions with all affiliates to an amount equal
to 20% of such capital and surplus and (ii) require that all transactions with
an affiliate be on terms substantially the same, or at least as favorable to
the institution or subsidiary, as those provided to a non-affiliate. The term
covered transaction includes the making of loans, purchase of assets,
issuance of a guarantee and other similar types of transactions.

Safety and Soundness.The Federal Deposit Insurance Corporation Improvement Act
of 1991 (FDICIA) requires each federal banking regulatory agency to
prescribe, by regulation, standards for all insured depository institutions and
depository institution holding companies relating to (i) internal controls,
information systems and audit systems; (ii) loan documentation; (iii) credit
underwriting; (iv) interest rate risk exposure; (v) asset growth; (vi)
compensation, fees and benefits; and (vii) such other operational and
managerial standards as the agency determines to be appropriate. The
compensation standards would prohibit employment contracts, compensation or
benefit arrangements, stock option plans, fee arrangements or other
compensatory arrangements that provide excessive compensation, fees or benefits
or could lead to material financial loss. In addition, each federal banking
regulatory agency must prescribe by regulation standards specifying (i) a
maximum ratio of classified assets to capital; (ii) minimum earnings sufficient
to absorb losses without impairing capital to the extent feasible; (iii) a
minimum ratio of market value to book value for publicly traded shares of
depository institutions and depository institution holding companies; and (iv)
such other standards relating to asset quality, earnings and valuation as the
agency determines to be appropriate. If an insured depository institution or
its holding company fail to meet any of the standards promulgated by
regulations, then such company will be required to submit a plan to its federal
regulator specifying the steps it will take to correct the deficiency. The
federal banking agencies have uniform rules concerning these standards.

Prompt Corrective Action.Under FDICIA, each federal banking agency is
required to take prompt corrective action to resolve the problems of insured
depository institutions that do not meet minimum capital ratios. The extent of
an agencys power to take prompt corrective action depends upon whether an
institution is well-capitalized, adequately capitalized,
undercapitalized, significantly
undercapitalized, or critically
undercapitalized.

The federal banking agencies have adopted regulations to implement the prompt
corrective action provisions of FDICIA. Under the regulations, an institution
shall be deemed to be (i) well-capitalized if it has total risk-based capital
of 10% or more, has a Tier 1 risk-based capital ratio of 6% or more, has a Tier
1 leverage capital ratio of 5% or more and is not subject to any written
agreement, order or directive to meet and maintain a specific capital level for
any capital measure; (ii) adequately capitalized if it has a total risk-based
capital ratio of 8% or more, a Tier 1 risk-based capital ratio of 4% or more
and a Tier 1 leverage capital ratio of 4% or more (3% under certain
circumstances) and does not meet the definition of well-capitalized; (iii)
undercapitalized if it has a total risk-based capital ratio that is less than
8%, a Tier 1 risk-based capital ratio of 4% or more or a Tier 1 leverage
capital ratio that is less than 4% (3% under certain circumstances); (iv)
significantly undercapitalized if it has a total risk-based capital ratio
that is less than 6%, a Tier 1 risk-based capital ratio that is less than 3% or
a Tier 1

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leverage capital ratio that is less than 3%; and (v) critically
undercapitalized if it has a ratio of tangible equity to total assets that is
equal to or less than 2%.

FDICIA authorizes the appropriate federal banking agency, after notice and an
opportunity for a hearing, to treat an insured depository institution as if it
had a lower capital-based classification if it is in an unsafe or unsound
condition, engages in an unsafe or unsound practice or receives an
unsatisfactory examination rating. Thus, a well-capitalized institution could
be subjected to the restrictions of undercapitalized institutions.

An undercapitalized institution is required to submit an acceptable capital
restoration plan to its appropriate federal banking agency. The plan must
specify (i) the steps the institution will take to become adequately
capitalized; (ii) the capital levels to be attained each year; (iii) how the
institution will comply with any regulatory sanctions then in effect against
the institution; and (iv) the types and levels of activities in which the
institution will engage. An undercapitalized institution is also generally
prohibited from paying any management fee or dividends to its holding company,
increasing its average total assets and is generally prohibited from making any
acquisitions, establishing any new branches or engaging in any new line of
business except in accordance with an accepted capital restoration plan or with
the approval of the FDIC.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
IBBEA) amended the BHCA to create certain interstate banking and branching
opportunities. Under the IBBEA, a bank holding company may acquire a bank
located in any state, provided that the acquisition does not result in the bank
holding company controlling more than 10% of the deposits in insured depository
institutions in the United States, or 30% of deposits in insured institutions
in the state in which the bank to be acquired is located (unless the state
waives the 30% deposit limitation or it is the initial entry into the state).
The IBBEA permits individual states to restrict the ability of an out-of-state
bank holding company or bank to acquire an in-state bank that has been in
existence for less than five years and to establish a state concentration limit
of less than 30% if such reduced limit does not discriminate against
out-of-state bank holding companies or banks.

The IBBEA authorizes an adequately-capitalized bank, with the approval of the
appropriate federal banking agency, to merge with another
adequately-capitalized bank in any state that has not opted out of interstate
branching. Such a bank may operate the targets offices as branches if certain
conditions are satisfied. The same national and state deposit concentration
limits and applicable state minimum-existence restrictions which apply to
interstate acquisitions (as discussed above) also apply to interstate mergers.
The applicant also must comply with any non-discriminatory host state filing
and notice requirements and demonstrate a record of compliance with applicable
federal and state community reinvestment laws. Hawaii enacted an interstate
branching and bank mergers law which expressly permits interstate branching
under Sections 102 and 103 of the IBBEA.

Under the IBBEA, the resulting bank in an interstate merger may establish or
acquire additional branches at any location in a state where any of the banks
involved in the merger could have established or acquired a branch. A bank also
may acquire one or more branches of an out-of-state bank without acquiring the
target out-of-state bank if the law of the targets home state permits such a
transaction. In addition, the IBBEA permits a bank to establish a de novo
branch in another state if the host state statutorily permits de novo
interstate branching.

Hawaii law authorizes out-of-state banks to engage in interstate merger
transactions (mergers and consolidations with and purchases of all or
substantially all of the assets and branches of) with Hawaii banks, following
which any such out-of-state bank may operate the branches of the Hawaii bank it
has acquired. The Hawaii bank must have been in continuous operation for at
least five years prior to such an acquisition, unless it is subject to or in
danger of becoming subject to certain types of supervisory action. This statute
does not permit out-of-state banks to acquire branches of Hawaii banks other
than through an interstate merger transaction (except in the case of a bank
that is subject to or in danger of becoming subject to certain types of
supervisory action) nor to open branches in Hawaii on a de novo basis. Hawaii
law imposes no state deposit caps or concentration limits. It also permits the
State Commissioner of Financial Institutions to waive, on a case-by-case basis,
federal statewide concentration limits, in accordance with standards that do
not discriminate against out-of-state banks.

The IBBEA also permits a bank subsidiary of a bank holding company to act as
agent for other depository institutions owned by the same holding company for
purposes of receiving deposits, renewing time deposits, closing or servicing
loans and receiving loan payments.

Gramm-Leach Bliley Act.The Gramm-Leach-Bliley Act (the GLB Act) revised and
expanded the existing BHCA and certain sections of the 1933 Glass-Steagall Act
to permit a holding company system to engage in a full range of financial
activities, including but not limited to, banking, insurance, securities,
merchant banking and other activities incidental to financial services. The
GLB Act permits the scope of financial and incidental activities to evolve with
technology and competition. It also provides expanded financial affiliation
opportunities for existing bank holding companies (BHC) and allows all
financial holding companies to control a full-service insured bank. These
expanded permissible activities are allowable for a BHC if it becomes a
financial holding company (FHC). In order to become an FHC, a BHC must file
a declaration with the FRB electing to engage in activities under the new BHCA
Section 4(k) and certifying that it is eligible to do so because all of its
insured depository institution subsidiaries are well-capitalized and
well-managed. An institution is well-capitalized if it meets the primary
regulators definition for that status under the Federal Deposit Insurance Act
for prompt corrective action purposes. Additionally, the FRB must determine
that each depository institution controlled by an FHC has a satisfactory or
better rating under the CRA in order for a company to become an FHC or for an
FHC to engage in new financial activities or acquire, directly or indirectly, a
company engaged in any activity under subsection (k) or (n). The FRB will be
the overall regulatory agency and, along with the Department of Treasury, will
have joint oversight to determine new financial activities of FHC companies.
We have not elected FHC status.

It is anticipated that this change in legislation will serve to provide
consumers added convenience and savings as FHCs will be able to provide
one-stop shops for financial services. It also provides for added privacy
for consumers as policies on collecting, using and protecting personal
financial information must be disclosed in writing to customers and customers
will have the option to block information sharing with unaffiliated third
parties, such as telemarketing companies.

Depository Insurance.The FDIC has a premium schedule under which the
assessment rate for a bank depends upon the risk classification the FDIC
assigns the institution. This allows institutions with improving capital
positions to benefit from the improvement by lower assessments, while requiring
those whose capital is falling to pay higher assessments. The FDIC may raise
an institutions insurance premiums or terminate insurance altogether upon a
finding that the institution has engaged in unsafe and unsound practices.

6



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Other Regulatory Considerations.The Bank is also subject to a wide array of
other state and federal laws and regulations, including, without limitation,
usury laws, the Equal Credit Opportunity Act, the Electronic Funds Transfer
requirements, the Truth-in-Lending Act, the Truth-in-Savings Act and the Real
Estate Settlement Procedures Act.

NUMBER OF EMPLOYEES

As of December 31, 2001, the Company and its subsidiaries employed 524 persons,
467 on a full-time basis and 57 on a part-time basis. Neither the Company nor
any of its subsidiaries is a party to any collective bargaining agreements.

STATISTICAL DISCLOSURES

Guide 3 of the Guides for the Preparation and Filing of Reports under the
Exchange Act of 1934 sets forth certain statistical disclosures to be included
in the Description of Business section of bank holding company filings with
the Securities and Exchange Commission (the SEC).

The statistical information required is presented in the index shown below and
as part of Items 6 or 7 of this Form 10-K for the fiscal year ended December 31,
2001. The tables and information contained therein have been prepared by
the Company and have not been audited or reported upon by the Companys
independent accountants.

Disclosure Requirements

|     |  |                                                                                                          |  |     
|---- |  | -------------------------------------------------------------------------------------------------------- |  | ----
|     |  |                                                                                                          |  | Page
|     |  |                                                                                                          |  |     
|I.   |  | Distribution of Assets, Liabilities and Stockholders Equity; Interest Rates and
Interest Differential - |  |     
|     |  | A. Average balance sheets                                                                                |  | 12  
|     |  | B. Analysis of net interest earnings                                                                     |  | 13  
|     |  | C. Dollar amount of change in interest income and interest expense                                       |  | 13  
|    
|II.  |  | Investment Portfolio -                                                                                   |  |     
|     |  | A. Book value of investment securities                                                                   |  | 18  
|     |  | B. Investment securities by maturities and weighted average yields                                       |  | 18  
|    
|III. |  | Loan Portfolio -                                                                                         |  |     
|     |  | A. Types of loans                                                                                        |  | 16  
|     |  | B. Maturities and sensitivities of loans to changes in interest rates                                    |  | 16  
|     |  | C. Risk elements                                                                                         |  |     
|     |  | 1. Nonaccrual, past due and restructured loans                                                           |  | 17  
|     |  | 2. Potential problem loans                                                                               |  | 17  
|    
|IV.  |  | Summary of Loan Loss Experience -                                                                        |  |     
|     |  | A. Analysis of loss experience                                                                           |  | 14  
|     |  | B. Breakdown of the allowance for loan losses                                                            |  | 15  
|    
|V.   |  | Deposits -                                                                                               |  |     
|     |  | A. Average amount and average rate paid on deposits                                                      |  | 18  
|     |  | B. Maturity distribution of domestic time certificates of deposits of $100,000 or more                   |  | 18  
|    
|VI.  |  | Return on Equity and Assets                                                                              |  | 9   
|    
|VII. |  | Short-Term Borrowings and Long-Term Debt                                                                 |  | 19  

7



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##### Table of Contents






ITEM  2.  PROPERTIES

The operations of the Bank are transacted through its main banking office and
20 branches. The Companys facilities are located on leased premises, and
expenditures by the Company for interior improvements are capitalized. The
leases for these premises expire on various dates through the year 2067. Lease
terms generally provide for additional payments for real property taxes,
insurance and maintenance. See Note H of Notes to the Companys Consolidated
Financial Statements.




ITEM  3.  LEGAL PROCEEDINGS

The Company is a defendant in various legal proceedings arising from normal
business activities. In the opinion of management, after reviewing these
proceedings with counsel, the aggregate liability, if any, resulting from these
proceedings would not have a material effect on the Companys consolidated
financial position or results of operations.




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

No matter was submitted during the fourth quarter of 2001 to a vote of security
holders through the solicitation of proxies or otherwise.




PART  II




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

The Companys common stock is traded on the NASDAQ National Market System under
the symbol CBBI. At March 1, 2002, the Company had approximately 4,000 common
shareholders of record.

The following table sets forth quarterly high and low bid and dividend
information on a per share basis for the Companys common stock over the
preceding two years per share amounts have been retroactively adjusted to
reflect stock dividends:

|               |  |      |       |     |  |           |       |  |  |   |      | 
|-------------- |  | ---- | ----- | --- |  | --------- | ----- |  |  | - | ---- | 
|               |  | High |       | Low |  | Dividends
|               |  |      |       |     |  |          
|2001           |  |      |       |     |  |           |       |  |  |   |      | 
|First quarter  |  | $    | 31.59 |     |  | $         | 23.64 |  |  | $ | 0.10 | 
|Second quarter |  |      | 36.00 |     |  |           | 29.09 |  |  |   | 0.11 | 
|Third quarter  |  |      | 38.15 |     |  |           | 30.25 |  |  |   | 0.11 | 
|Fourth quarter |  |      | 35.95 |     |  |           | 32.06 |  |  |   | 0.11 | 
|2000           |  |      |       |     |  |           |       |  |  |   |      | 
|First quarter  |  | $    | 26.45 |     |  | $         | 21.22 |  |  | $ | 0.07 | 
|Second quarter |  |      | 23.03 |     |  |           | 20.55 |  |  |   | 0.07 | 
|Third quarter  |  |      | 25.69 |     |  |           | 22.30 |  |  |   | 0.10 | 
|Fourth quarter |  |      | 25.81 |     |  |           | 22.64 |  |  |   | 0.10 | 
|               |  |      |       |     |  |           |       |  |  |   |      | 

The Companys ability to pay dividends is limited by certain restrictions
generally imposed on Hawaii corporations. In general, dividends may be paid
only out of a Hawaii corporations surplus, as defined in the Hawaii Revised
Statutes, or net profits for the fiscal year in which the dividend is declared
and/or the preceding fiscal year. The Company may pay dividends out of funds
legally available at such times as the Board of Directors determines are
appropriate.

8



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##### Table of Contents






ITEM  6.  SELECTED FINANCIAL DATA

|                                              |                                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |           |       |        |       |  
|--------------------------------------------- | ----------------------------------------------------- | -------------- | -------------------------- | -------------------------------------------------- | ----- | ----- | ------ | --------- | ----- | ------ | ------ | --------- | --- | ----- | ------ | --------- | --- | ------ | ------ | --------- | ----- | ------ | ----- | -
|(dollars in thousands, except per share data) |                                                       | 2001           |                            | 2000                                               |       | 1999  |        | 1998      |       | 1997  
|                                              |                                                       |                |                            |                                                    |       |       |        |           |       |       
|Income Statement Data:                        |                                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |          
|                                              | Interest income                                       |                | $                          | 128,254                                            |       |       | $      | 132,472   |       |        | $      | 111,233   |     |       | $      | 112,060   |     |        | $      | 112,529   |      
|                                              | Interest expense                                      |                |                            | 57,448                                             |       |       |        | 71,478    |       |        |        | 52,717    |     |       |        | 53,811    |     |        |        | 53,859    |      
|                                              |                                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |          
|                                              | Net interest income                                   |                |                            | 70,806                                             |       |       |        | 60,994    |       |        |        | 58,516    |     |       |        | 58,249    |     |        |        | 58,670    |      
|                                              | Provision for credit losses                           |                |                            | 13,628                                             |       |       |        | 7,539     |       |        |        | 4,975     |     |       |        | 7,436     |     |        |        | 6,250     |      
|                                              |                                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |          
|                                              | Net interest income after provision
for credit losses |                |                            | 57,178                                             |       |       |        | 53,455    |       |        |        | 53,541    |     |       |        | 50,813    |     |        |        | 52,420    |      
|                                              | Noninterest
income(1)                                 |                |                            | 3,917                                              |       |       |        | 10,024    |       |        |        | 10,328    |     |       |        | 9,789     |     |        |        | 7,112     |      
|                                              | Noninterest
expense(2)                                |                |                            | 51,695                                             |       |       |        | 46,679    |       |        |        | 58,336    |     |       |        | 46,768    |     |        |        | 47,557    |      
|                                              |                                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |          
|                                              |                                                       |                | Income before income taxes |                                                    |       | 9,400 |        |           |       | 16,800 |        |           |     | 5,533 |        |           |     | 13,834 |        |           |       | 11,975 |      
|                                              | Income tax expense                                    |                |                            | 3,250                                              |       |       |        | 5,582     |       |        |        | 5,227     |     |       |        | 5,465     |     |        |        | 4,757     |      
|                                              |                                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |          
|Net income                                    |                                                       | $              | 6,150                      |                                                    |       | $     | 11,218 |           |       | $      | 306    |           |     | $     | 8,369  |           |     | $      | 7,218  |          
|                                              |                                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |          
|                                              |                                                       | Cash dividends |                            | $                                                  | 1,441 |       |        | $         | 1,093 |        |        | $         | 931 |       |        | $         | 818 |        |        | $         | 1,863 |       
|                                              |                                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |          
|End of Year Balance Sheet Data:               |                                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |          
|                                              | Total assets                                          |                | $                          | 1,586,040                                          |       |       | $      | 1,721,602 |       |        | $      | 1,619,549 |     |       | $      | 1,428,438 |     |        | $      | 1,435,226 |      
|                                              | Total earning assets                                  |                |                            | 1,516,583                                          |       |       |        | 1,633,545 |       |        |        | 1,506,732 |     |       |        | 1,318,294 |     |        |        | 1,346,368 |      
|                                              | Total loans                                           |                |                            | 1,242,942                                          |       |       |        | 1,301,358 |       |        |        | 1,152,731 |     |       |        | 1,079,297 |     |        |        | 1,075,598 |      
|                                              | Total deposits                                        |                |                            | 1,138,435                                          |       |       |        | 1,218,463 |       |        |        | 1,106,145 |     |       |        | 1,084,610 |     |        |        | 1,008,728 |      
|                                              | Long-term debt                                        |                |                            | 214,424                                            |       |       |        | 181,563   |       |        |        | 225,140   |     |       |        | 171,087   |     |        |        | 141,048   |      
|                                              | Stockholders equity                                  |                |                            | 133,762                                            |       |       |        | 123,162   |       |        |        | 114,691   |     |       |        | 132,372   |     |        |        | 125,065   |      
|Average Balances:                             |                                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |          
|                                              | Total assets                                          |                | $                          | 1,678,679                                          |       |       | $      | 1,667,243 |       |        | $      | 1,491,947 |     |       | $      | 1,424,793 |     |        | $      | 1,399,719 |      
|                                              | Total earning assets                                  |                |                            | 1,598,964                                          |       |       |        | 1,583,704 |       |        |        | 1,391,681 |     |       |        | 1,343,524 |     |        |        | 1,338,769 |      
|                                              | Total loans                                           |                |                            | 1,296,274                                          |       |       |        | 1,236,305 |       |        |        | 1,077,769 |     |       |        | 1,063,541 |     |        |        | 1,061,925 |      
|                                              | Total deposits                                        |                |                            | 1,193,758                                          |       |       |        | 1,154,075 |       |        |        | 1,082,642 |     |       |        | 1,038,751 |     |        |        | 955,203   |      
|                                              | Long-term debt                                        |                |                            | 235,028                                            |       |       |        | 205,877   |       |        |        | 205,098   |     |       |        | 168,934   |     |        |        | 113,414   |      
|                                              | Stockholders equity                                  |                |                            | 128,666                                            |       |       |        | 118,132   |       |        |        | 127,567   |     |       |        | 128,889   |     |        |        | 122,419   |      
|Common Stock Data:                            |                                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |          
|                                              | Per
share (diluted)(3):                               |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |           |      
|                                              |                                                       |                |                            | Net income                                         |       | $     | 1.74   |           |       | $      | 3.17   |           |     | $     | 0.08   |           |     | $      | 2.16   |           |       | $      | 1.87  |  
|                                              |                                                       |                |                            | Cash dividends declared                            |       |       | 0.43   |           |       |        | 0.34   |           |     |       | 0.27   |           |     |        | 0.23   |           |       |        | 0.53  |  
|                                              |                                                       |                |                            | Book value (at December 31)                        |       |       | 38.75  |           |       |        | 35.13  |           |     |       | 32.10  |           |     |        | 34.21  |           |       |        | 32.33 |  
|                                              |                                                       |                |                            | Market price (close at December 31)                |       |       | 35.25  |           |       |        | 23.36  |           |     |       | 26.26  |           |     |        | 27.35  |           |       |        | 38.30 |  
|                                              | Average shares outstanding                            |                |                            | 3,538,650                                          |       |       |        | 3,536,614 |       |        |        | 3,782,990 |     |       |        | 3,876,534 |     |        |        | 3,868,857 |      
|Selected Ratios:                              |                                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |          
|                                              | Return on average:                                    |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |           |      
|                                              |                                                       |                |                            | Total assets                                       |       |       | 0.37   | %         |       |        | 0.67   | %         |     |       | 0.02   | %         |     |        | 0.59   | %         |       |        | 0.52  | %
|Stockholders equity                          |                                                       |                | 4.78                       |                                                    |       |       | 9.50   |           |       |        | 0.24   |           |     |       | 6.49   |           |     |        | 5.90   |          
|                                              | Dividend payout ratio                                 |                |                            | 23.43                                              |       |       |        | 9.74      |       |        |        | 304.25    |     |       |        | 9.77      |     |        |        | 25.81     |      
|                                              | Average stockholders
equity to average total assets  |                |                            | 7.66                                               |       |       |        | 7.09      |       |        |        | 8.55      |     |       |        | 9.05      |     |        |        | 8.75      |      
|                                              | Year ended December 31:                               |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |           |      
|                                              |                                                       |                |                            | Net interest margin
(taxable equivalent basis)     |       |       | 4.48   |           |       |        | 3.91   |           |     |       | 4.25   |           |     |        | 4.36   |           |       |        | 4.40  |  
|                                              |                                                       |                |                            | Net loans charged off to average loans             |       |       | 0.90   |           |       |        | 0.65   |           |     |       | 0.45   |           |     |        | 0.57   |           |       |        | 0.50  |  
|                                              |                                                       |                |                            | Noninterest expense to average assets              |       |       | 3.08   |           |       |        | 2.80   |           |     |       | 3.91   |           |     |        | 3.28   |           |       |        | 3.40  |  
|                                              | At December 31:                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |           |      
|                                              |                                                       |                |                            | Risk-based capital ratios:                         |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |           |       |        |       |  
|                                              |                                                       |                |                            | Tier I                                             |       |       | 11.32  |           |       |        | 12.04  |           |     |       | 11.95  |           |     |        | 13.54  |           |       |        | 12.73 |  
|                                              |                                                       |                |                            | Total                                              |       |       | 12.58  |           |       |        | 13.29  |           |     |       | 13.21  |           |     |        | 14.80  |           |       |        | 13.99 |  
|                                              |                                                       |                |                            | Tier I leverage ratio                              |       |       | 8.31   |           |       |        | 8.01   |           |     |       | 7.69   |           |     |        | 8.65   |           |       |        | 7.46  |  
|                                              |                                                       |                |                            | Allowance for credit losses to total loans         |       |       | 1.57   |           |       |        | 1.34   |           |     |       | 1.56   |           |     |        | 1.65   |           |       |        | 1.52  |  
|                                              |                                                       |                |                            | Nonperforming assets to total loans                |       |       | 1.65   |           |       |        | 1.43   |           |     |       | 1.58   |           |     |        | 2.02   |           |       |        | 2.62  |  
|                                              |                                                       |                |                            | Nonperforming assets to total assets               |       |       | 1.29   |           |       |        | 1.08   |           |     |       | 1.12   |           |     |        | 1.53   |           |       |        | 1.96  |  
|                                              |                                                       |                |                            | Allowance for credit losses to
nonperforming loans |       |       | 123.24 |           |       |        | 115.35 |           |     |       | 152.28 |           |     |        | 133.95 |           |       |        | 66.86 |  
|                                              |                                                       |                |                            |                                                    |       |       |        |           |       |        |        |           |     |       |        |           |     |        |        |          



---

|(1) |  | Includes after-tax
impairment charges on asset-backed securities of $6,423,000 incurred in 2001.                                 
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes after-tax
restructuring and merger-related charges of $932,000 and write-off of goodwill of $7,873,000 incurred in 1999.
|   
|   
|   
|   
|(3) |  | Common stock data retroactively adjusted for 10% stock dividend paid in 2001.                                                    

9



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

Managements Discussion and Analysis of Financial Condition and Results of
Operations contains statements relating to future results of the Company
(including certain projections and business trends) that are considered
forward-looking statements. Actual results may differ materially from those
projected as a result of certain risks and uncertainties including, but not
limited to, changes in political and economic conditions, interest rate
fluctuations, competitive product and pricing pressures within the Companys
market, equity and bond market fluctuations, personal and corporate customers
bankruptcies and financial condition, inflation and results of litigation.
Accordingly, historical performance, as well as reasonably applied projections
and assumptions, may not be a reliable indicator of future earnings due to
risks and uncertainties. As circumstances, conditions or events change that
affect the Companys assumptions and projections on which any of the statements
are based, the Company disclaims any obligation to issue any update or revision
to any forward-looking statement contained herein.

RECENT ECONOMIC DEVELOPMENTS

The events of September 11, 2001 have had a significant impact on the world,
U.S. and Hawaii economies. For 2001, visitor arrivals declined 9.1% from the
record high of 7 million visitors in 2000. Significant job losses have
occurred in tourism and travel- related sectors and it is uncertain when Hawaii
will rebound from the effects of September 11, 2001. At December 31, 2001,
Hawaiis unemployment rate stood at 4.9%, an improvement from the 5.5% in
November 2001, but higher than the 3.6% jobless rate at December 31, 2000.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Managements discussion and analysis of its financial condition and results of
operations are based upon the Companys consolidated financial statements,
which have been prepared in accordance with generally accepted accounting
principles. The preparation of these financial statements requires the Company
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to its investments, loans and allowance for loan
losses, intangible assets, income taxes, contingencies, and litigation. The
Company bases its estimates on current market conditions, historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions. The Company believes the following
critical accounting policies require significant judgments and estimates used
in the preparation of its consolidated financial statements.

Allowance for Credit Losses. The allowance for credit losses is periodically
evaluated for adequacy by management. Factors considered include the Companys
loan loss experience, known and inherent risks in the portfolio, current
economic conditions, known adverse situations that may affect the borrowers
ability to repay, regulatory policies, and the estimated value of underlying
collateral. The evaluation of the adequacy of the allowance is based on the
above factors along with prevailing and anticipated economic conditions that
may impact borrowers ability to repay loans. Determination of the allowance
is in part objective and in part a subjective judgment by management given the
information it currently has in its possession. Adverse changes in any of
these factors or the discovery of new adverse information could result in
higher charge-offs and loan loss provisions.

Impairment of Investments. The realization of the Companys investment in
certain mortgage/asset-backed securities and collateralized loan and bond
obligations is dependent on the credit quality of the underlying borrowers and
yields demanded by the marketplace. Increases in market interest rates and
deteriorating credit quality of the underlying borrowers because of adverse
conditions may result in additional losses. The Company records an investment
impairment charge when it believes an investment has experienced a decline in
value that is other than temporary. Future adverse changes in market
conditions or poor operating results of underlying investments could result in
losses or an inability to recover the carrying value of the investments that
may not be reflected in an investments current carrying value, thereby
possibly requiring an impairment charge in the future. Since several of these
investments do not have a liquid trading market, managements estimate of value
is based upon estimates of future returns that may or may not actually be
realized. Accordingly, under different assumptions, the value could be
adversely affected. As of December 31, 2001, approximately $36.1 million of
these assets were carried on the books of the Company.

Deferred Tax Assets. The Company records a valuation allowance to reduce its
deferred tax assets to the amount that it believes is more likely than not to
be realized. This requires an objective as well as a subjective judgment by
management. While the Company has considered future taxable income and ongoing
prudent and feasible tax planning strategies in assessing the need for the
valuation allowance, in the event the Company were to determine that it would
be able to realize its deferred tax assets in the future in excess of its net
recorded amount, an adjustment to the deferred tax asset would increase income
in the period such determination was made. Likewise, should the Company
determine that it would not be able to realize all or part of its net deferred
tax asset in the future, an adjustment to the deferred tax asset would be
charged to income in the period such determination was made.

RESULTS OF OPERATIONS

Consolidated net income for 2001 was $6.2 million, a decrease of $5.1 million,
or 45.2%, from 2000. Diluted earnings per share was $1.74 in 2001, as compared
to $3.17 in 2000. All per share amounts have been restated for the effect of
the 10% stock dividend paid in June 2001.

Based on the adoption of new accounting principles in 2001, the Company
recorded impairment charges of $10.6 million ($6.4 million after-tax) for the
year ended December 31, 2001 related to certain securities in its investment
portfolio. See Note A  Change in Accounting Principles of Notes to the
Companys Consolidated Financial Statements for further discussion.

Operating earnings (defined as consolidated net income excluding after-tax
impairment charge) was $12.6 million in 2001, an increase of 12.1%, or $1.4
million, over 2000. Diluted operating earnings per share was $3.55 in 2001,
an increase of 12.0%, over last year.

Net interest income was $70.8 million for 2001, an increase of $9.8 million, or
16.1%, compared to 2000. The increase in the net interest income was primarily
due to an increase in the net interest margin, which increased to 4.48%, or 57
basis points, for 2001 and a $36.0 million increase in net earning assets.

10



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##### Table of Contents



Noninterest income, excluding impairment charges, was $14.6 million for 2001,
an increase of $4.6 million, or 45.2%, compared to the same periods in 2000.
The increase was primarily due to: (i) an increase of $1.8 million in service
charges and fees due to higher volume; and (ii) an increase of $2.9 million on
gains from the sales of securities and loans.

Noninterest expense was $51.7 million for 2001, an increase of $5.0 million, or
10.7%, compared to 2000. The increase was primarily due to an increase in
salaries and benefits (due to higher incentive-based compensation) and an
increase in other noninterest expense, partially offset by a decrease in net
occupancy expense. The efficiency ratio (exclusive of the impairment charges)
improved from 64.89% in 2000 to 59.86% in 2001.

The Companys efficiency ratio (calculated as noninterest expense, amortization
of goodwill and other intangible assets and nonrecurring charges as a
percentage of total operating revenue minus impairment charges) was 59.9%,
64.9% and 69.8% in 2001, 2000 and 1999, respectively.

The provision for credit losses was $13.6 million, $7.5 million and $5.0
million in 2001, 2000 and 1999, respectively. Net charge-offs to average loans
and leases were 0.90%, 0.65% and 0.45% for 2001, 2000 and 1999, respectively.
The allowance for credit losses was $19.5 million, or 1.57% of total loans and
leases, at December 31, 2001, compared with $17.4 million, or 1.34%, at
December 31, 2000. Nonperforming assets totaled 1.29%, 1.08% and 1.12% of
total assets as of December 31, 2001, 2000 and 1999, respectively.

At December 31, 2001, the Companys ratios of Tier 1 Capital to risk-weighted
assets and Total Capital to risk-weighted assets were 11.32% and 12.58%,
respectively, compared with 12.04% and 13.29%, respectively, at December 31,
2000. These ratios were in excess of the well-capitalized ratios of 6.00%
and 10.00%, respectively, specified by the Federal Reserve Board.

Consolidated net income for 2000 increased $10.9 million over 1999 primarily
due to the one-time charges recorded in 1999 related to the merger of the Bank
and Association and the change in its method of accounting for goodwill  see
Note B of Notes to Consolidated Financial Statements. Operating earnings
(defined as consolidated net income excluding after-tax restructuring and
merger-related changes and write-off of goodwill) were $11.2 million in 2000,
an increase of $2.1 million, or 23.1%, over 1999. Diluted operating earnings
per share for 2000 was $3.17 compared to $2.41 in 1999. The increase in 2000
operating earnings was primarily due to a decrease in noninterest expenses.

NET INTEREST INCOME

Net interest income is the largest single component of the Companys earnings
and represents the difference between interest income received on loans and
other earning assets and interest expense paid on deposits and borrowings. Net
interest income, on a taxable equivalent basis, was $71.6 million in 2001, an
increase of $9.8 million, or 15.8%, over 2000. During 2001, the Companys net
interest margin increased to 4.48%, compared to 3.91% for 2000.

As summarized on Table 2, the $9.8 million increase in net interest income for
2001 consisted of a $14.0 million decrease in interest expense offset by a $4.2
million decrease in interest income.

The average yield on earning assets in 2001 decreased by 35 basis points to
8.07% and the average balance of earning assets increased by $15.3 million.
The $4.2 million decrease in interest income was primarily due to the $47.3
million decrease in the average balance of taxable investment and
mortgage/asset-backed securities.

In 2001, interest costs on interest-bearing deposits and liabilities decreased
to $57.4 million, the average balance of interest-bearing deposits and
liabilities decreased by $20.8 million and the average cost of funds decreased
by 93 basis points to 4.11%. The following table sets forth the condensed
consolidated average balance sheets, an analysis of interest income/expense and
average yield/rate for each major category of earning assets and
interest-bearing deposits and liabilities for the years indicated on a taxable
equivalent basis. The taxable equivalent adjustment is made for items exempt
from federal income taxes (assuming a 35% tax rate) to make them comparable
with taxable items before any income taxes are applied.

Net interest income, on a taxable equivalent basis, was $61.8 million in 2000,
an increase of $2.8 million, or 4.7%, from 1999. During 2000, the Companys
net interest margin declined to 3.91%, compared to 4.25% for 1999. This
decrease was due to a 76 basis point increase in the cost of funds, partially
offset by a 39 basis point increase in the yield on average earning assets.

Average earning assets increased $192.0 million, or 13.80%, in 2000 over 1999.
Average interest-bearing deposits and liabilities increased $185.1 million, or
15.0%, in 2000 over 1999.

11



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##### Table of Contents



TABLE 1: DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS EQUITY; INTEREST RATES

|                                                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |      |      |  | 
|------------------------------------------------------ | --------------------------------------------------------------------- | --------------------- | ------------ | --------- | ------- | --------- | ------- | ------- | -------- | ------- | ------- | ---- | ------- | ------- | --------- | --------- | ------- | --------- | -------- | ------- | ------ |  | ---- | ---- | ---- | - | --------- | --------- | -------- | --------- | ------- | ------ | ------ |  | ---- | ---- | ---- |  | 
|                                                       |                                                                       |                       |              |           | 2001    |           | 2000    |         | 1999    
|                                                       |                                                                       |                       |              |           |         |           |         |         |         
|                                                       |                                                                       |                       |              |           |         |           |         |         | Interest |         |         |      |         |         |           |           |         |           | Interest |         |        |  |      |      |      |   |           |           | Interest |           |         |        |       
|                                                       |                                                                       |                       |              |           | Average |           | Income/ |         | Yield/   |         | Average |      | Income/ |         | Yield/    |           | Average |           | Income/  |         | Yield/
|(dollars in thousands)                                 |                                                                       | Balance               |              | Expense   |         | Rate      |         | Balance |          | Expense |         | Rate |         | Balance |           | Expense   |         | Rate     
|                                                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |          
|ASSETS                                                 |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|Earning assets:                                        |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|                                                       | Interest-bearing
deposits in other
banks                              |                       | $            | 1,030     |         |           | $       | 54      |          |         |         | 5.24 | %       |         | $         | 393       |         |           | $        | 28      |        |  |      | 7.12 | %    |   | $         | 23,004    |          |           | $       | 1,093  |        |  |      | 4.75 | %   
|                                                       | Federal funds sold
and securities
purchased under
agreement to resell |                       |              | 9,871     |         |           |         | 397     |          |         |         | 4.02 |         |         |           | 7,959     |         |           |          | 497     |        |  |      | 6.24 |      |   |           | 5,908     |          |           |         | 309    |        |  |      | 5.23 |     
|                                                       | Taxable investment
and mortgage/asset-backed
securities               |                       |              | 260,867   |         |           |         | 17,538  |          |         |         | 6.72 |         |         |           | 308,011   |         |           |          | 21,701  |        |  |      | 7.05 |      |   |           | 264,783   |          |           |         | 18,272 |        |  |      | 6.90 |     
|                                                       | Nontaxable
investment
securities                                      |                       |              | 30,922    |         |           |         | 2,389   |          |         |         | 7.73 |         |         |           | 31,036    |         |           |          | 2,386   |        |  |      | 7.69 |      |   |           | 20,217    |          |           |         | 1,592  |        |  |      | 7.87 |     
|                                                       | Loans(1)                                                              |                       |              | 1,296,274 |         |           |         | 108,715 |          |         |         | 8.39 |         |         |           | 1,236,305 |         |           |          | 108,713 |        |  |      | 8.79 |      |   |           | 1,077,769 |          |           |         | 90,547 |        |  |      | 8.40 |     
|                                                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|Total earning assets                                   |                                                                       |                       | 1,598,964    |           |         |           | 129,093 |         |          |         | 8.07    |      |         |         | 1,583,704 |           |         |           | 133,325  |         |        |  | 8.42 |      |      |   | 1,391,681 |           |          |           | 111,813 |        |        |  | 8.03 |     
|                                                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|Nonearning assets:                                     |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|                                                       | Cash and due from
banks                                               |                       |              | 28,835    |         |           |         |         |          |         |         |      |         |         |           | 34,826    |         |           |          |         |        |  |      |      |      |   |           | 44,624    |          |           |         |        |        |  |      |      |     
|                                                       | Premises and
equipment                                                |                       |              | 18,372    |         |           |         |         |          |         |         |      |         |         |           | 18,077    |         |           |          |         |        |  |      |      |      |   |           | 13,338    |          |           |         |        |        |  |      |      |     
|                                                       | Other assets                                                          |                       |              | 51,004    |         |           |         |         |          |         |         |      |         |         |           | 48,884    |         |           |          |         |        |  |      |      |      |   |           | 60,448    |          |           |         |        |        |  |      |      |     
|                                                       | Less allowance for
credit losses                                      |                       |              | (18,496   | )       |           |         |         |          |         |         |      |         |         |           | (18,248   | )       |           |          |         |        |  |      |      |      |   |           | (18,144   | )        |           |         |        |        |  |      |      |     
|                                                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|                                                       |                                                                       |                       | Total assets |           | $       | 1,678,679 |         |         |          |         |         |      |         |         |           |           | $       | 1,667,243 |          |         |        |  |      |      |      |   |           |           | $        | 1,491,947 |         |        |        |  |      |      |      |  | 
|                                                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|                                                      
|LIABILITIES AND
STOCKHOLDERS EQUITY                   |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |          
|                                                      
|Interest-bearing
liabilities:                          |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|                                                       | Savings deposits                                                      |                       | $            | 412,331   |         |           | $       | 8,927   |          |         |         | 2.17 | %       |         | $         | 367,793   |         |           | $        | 10,063  |        |  |      | 2.74 | %    |   | $         | 364,366   |          |           | $       | 8,927  |        |  |      | 2.45 | %   
|                                                       | Time deposits                                                         |                       |              | 651,344   |         |           |         | 30,511  |          |         |         | 4.68 |         |         |           | 672,234   |         |           |          | 37,041  |        |  |      | 5.51 |      |   |           | 599,920   |          |           |         | 28,645 |        |  |      | 4.77 |     
|                                                       |                                                                       | Short-term
borrowings |              |           | 97,428  |           |         |         | 5,095    |         |         |      | 5.23    |         |           |           | 171,006 |           |          |         | 11,370 |  |      |      | 6.65 |   |           |           | 62,390   |           |         |        | 3,282  |  |      |      | 5.26 | 
|                                                       |                                                                       | Long-term debt        |              |           | 235,028 |           |         |         | 12,915   |         |         |      | 5.50    |         |           |           | 205,877 |           |          |         | 13,004 |  |      |      | 6.32 |   |           |           | 205,098  |           |         |        | 11,863 |  |      |      | 5.78 | 
|                                                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|Total
interest-bearing
deposits and
liabilities        |                                                                       |                       | 1,396,131    |           |         |           | 57,448  |         |          |         | 4.11    |      |         |         | 1,416,910 |           |         |           | 71,478   |         |        |  | 5.04 |      |      |   | 1,231,774 |           |          |           | 52,717  |        |        |  | 4.28 |     
|                                                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|Noninterest-bearing
liabilities:                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|                                                       | Demand deposits                                                       |                       |              | 130,083   |         |           |         |         |          |         |         |      |         |         |           | 114,048   |         |           |          |         |        |  |      |      |      |   |           | 118,356   |          |           |         |        |        |  |      |      |     
|                                                       | Other liabilities                                                     |                       |              | 23,799    |         |           |         |         |          |         |         |      |         |         |           | 18,153    |         |           |          |         |        |  |      |      |      |   |           | 14,250    |          |           |         |        |        |  |      |      |     
|                                                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|Total liabilities                                      |                                                                       |                       | 1,550,013    |           |         |           |         |         |          |         |         |      |         |         | 1,549,111 |           |         |           |          |         |        |  |      |      |      |   | 1,364,380 |           |          |           |         |        |        |  |      |     
|Stockholders equity                                   |                                                                       |                       | 128,666      |           |         |           |         |         |          |         |         |      |         |         | 118,132   |           |         |           |          |         |        |  |      |      |      |   | 127,567   |           |          |           |         |        |        |  |      |     
|                                                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|Total liabilities and
stockholders equity             |                                                                       | $                     | 1,678,679    |           |         |           |         |         |          |         |         |      |         | $       | 1,667,243 |           |         |           |          |         |        |  |      |      |      | $ | 1,491,947 |           |          |           |         |        |        |  |      |     
|                                                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|Net interest income
and margin on total
earning assets |                                                                       |                       |              |           |         |           | 71,645  |         |          |         | 4.48    | %    |         |         |           |           |         |           | 61,847   |         |        |  | 3.91 | %    |      |   |           |           |          |           | 59,096  |        |        |  | 4.25 | %   
|Taxable equivalent
adjustment                          |                                                                       |                       |              |           |         |           | (839    | )       |          |         |         |      |         |         |           |           |         |           | (853     | )       |        |  |      |      |      |   |           |           |          |           | (580    | )      |        |  |      |     
|                                                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     
|Net interest income                                    |                                                                       |                       |              |           |         | $         | 70,806  |         |          |         |         |      |         |         |           |           |         | $         | 60,994   |         |        |  |      |      |      |   |           |           |          | $         | 58,516  |        |        |  |      |     
|                                                       |                                                                       |                       |              |           |         |           |         |         |          |         |         |      |         |         |           |           |         |           |          |         |        |  |      |      |      |   |           |           |          |           |         |        |        |  |      |     



---

|(1) |  | Yields and amounts earned include loan fees. Nonaccrual loans have been included in earning assets for purposes of these
computations.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------

12



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##### Table of Contents



TABLE 2: INTEREST DIFFERENTIAL

|                                                                       |  |                       |        |                       |  |            |         |        |  |      |         |            |  |   |        |   |  |   |        |   |  |   |        |  
|---------------------------------------------------------------------- |  | --------------------- | ------ | --------------------- |  | ---------- | ------- | ------ |  | ---- | ------- | ---------- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                                                       |  | 2001 Compared to 2000 |        | 2000 Compared to 1999
|                                                                       |  | Increase (Decrease)   |        | Increase (Decrease)  
|                                                                       |  | due to Change in:(1)  |        | due to Change in:(1) 
|                                                                       |  |                       |        |                      
|(in thousands)                                                         |  | Volume                |        | Rate                  |  | Net Change |         | Volume |  | Rate |         | Net Change
|                                                                       |  |                       |        |                       |  |            |         |        |  |      |         |           
|Earning assets:                                                        |  |                       |        |                       |  |            |         |        |  |      |         |            |  |   |        |   |  |   |        |   |  |   |        |  
|Interest-bearing deposits in other
banks                               |  | $                     | 45     |                       |  | $          | (19     | )      |  | $    | 26      |            |  | $ | (1,074 | ) |  | $ | 9      |   |  | $ | (1,065 | )
|Federal funds sold and securities
purchased under agreements to
resell |  |                       | 119    |                       |  |            | (219    | )      |  |      | (100    | )          |  |   | 107    |   |  |   | 81     |   |  |   | 188    |  
|Taxable investment and
mortgage/asset-backed
securities                |  |                       | (3,322 | )                     |  |            | (841    | )      |  |      | (4,163  | )          |  |   | 2,983  |   |  |   | 446    |   |  |   | 3,429  |  
|Nontaxable investment securities                                       |  |                       | (9     | )                     |  |            | 12      |        |  |      | 3       |            |  |   | 852    |   |  |   | (58    | ) |  |   | 794    |  
|Loans(2)                                                               |  |                       | 5,273  |                       |  |            | (5,271  | )      |  |      | 2       |            |  |   | 13,318 |   |  |   | 4,848  |   |  |   | 18,166 |  
|                                                                       |  |                       |        |                       |  |            |         |        |  |      |         |            |  |   |        |   |  |   |        |   |  |   |        |  
|Total earning assets                                                   |  |                       | 2,106  |                       |  |            | (6,338  | )      |  |      | (4,232  | )          |  |   | 16,186 |   |  |   | 5,326  |   |  |   | 21,512 |  
|Interest-bearing liabilities:                                          |  |                       |        |                       |  |            |         |        |  |      |         |            |  |   |        |   |  |   |        |   |  |   |        |  
|Savings deposits                                                       |  |                       | 1,219  |                       |  |            | (2,355  | )      |  |      | (1,136  | )          |  |   | 84     |   |  |   | 1,052  |   |  |   | 1,136  |  
|Time deposits                                                          |  |                       | (1,151 | )                     |  |            | (5,379  | )      |  |      | (6,530  | )          |  |   | 3,453  |   |  |   | 4,943  |   |  |   | 8,396  |  
|Short-term borrowings                                                  |  |                       | (4,892 | )                     |  |            | (1,383  | )      |  |      | (6,275  | )          |  |   | 5,714  |   |  |   | 2,374  |   |  |   | 8,088  |  
|Long-term debt                                                         |  |                       | 1,841  |                       |  |            | (1,930  | )      |  |      | (89     | )          |  |   | 45     |   |  |   | 1,096  |   |  |   | 1,141  |  
|                                                                       |  |                       |        |                       |  |            |         |        |  |      |         |            |  |   |        |   |  |   |        |   |  |   |        |  
|Total interest-bearing
deposits and liabilities                        |  |                       | (2,983 | )                     |  |            | (11,047 | )      |  |      | (14,030 | )          |  |   | 9,296  |   |  |   | 9,465  |   |  |   | 18,761 |  
|                                                                       |  |                       |        |                       |  |            |         |        |  |      |         |            |  |   |        |   |  |   |        |   |  |   |        |  
|Increase (decrease) in net
interest
income (taxable equivalent basis)  |  | $                     | 5,089  |                       |  | $          | 4,709   |        |  | $    | 9,798   |            |  | $ | 6,890  |   |  | $ | (4,139 | ) |  | $ | 2,751  |  
|                                                                       |  |                       |        |                       |  |            |         |        |  |      |         |            |  |   |        |   |  |   |        |   |  |   |        |  



---

|(1) |  | The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Yields and amounts earned include loan fees. Nonaccrual loans have been
included in earning assets for purposes of these computations.                                                  

NONINTEREST INCOME

Noninterest income totaled $3.9 million, $10.0 million and $10.3 million in
2001, 2000 and 1999, respectively. Excluding the impairment charge on asset
backed securities in 2001, total noninterest income was $14.6 million as
compared to $10.0 million in 2000 and $10.3 million in 1999. Net gains on
sales of loans increased to $2.1 million in 2001 from $537,000 in 2000. Net
realized gains on sales of securities increased to a net gain of $931,000 in
2001 from a net loss of $421,000 in 2000. There was a $911,000 increase in
service charges on deposit accounts in 2001 as a result of the Companys
concerted effort to increase fee income related to deposit and credit products.

Total noninterest income decreased $304,000, or 2.9%, from 1999 to 2000. Net
realized gains on sales of loans decreased from $2.7 million in 1999 to
$537,000 in 2000. Net realized gains on sales of securities decreased from a
net loss of $32,000 in 1999 to a net loss of $421,000 in 2000. Such decreases
were partially offset by an $840,000 increase in service charges and fees on
deposit accounts.

The following table sets forth information by category of noninterest income
for the years indicated:

|                                                   |       |      |         |       |  |      |       |        |  |   |       |        | 
|-------------------------------------------------- | ----- | ---- | ------- | ----- |  | ---- | ----- | ------ |  | - | ----- | ------ | 
|(in thousands)                                     |       | 2001 |         | 2000  |  | 1999
|                                                   |       |      |         |       |  |     
|Service charges on deposits                        |       | $    | 3,811   |       |  | $    | 2,900 |        |  | $ | 2,060 |       
|Other service charges and fees                     |       |      | 4,897   |       |  |      | 4,044 |        |  |   | 3,979 |       
|Net realized gains (losses) on sales
of securities |       |      | 931     |       |  |      | (421  | )      |  |   | (32   | )     
|Net gains (losses) on sales of loans               |       |      | 2,060   |       |  |      | 537   |        |  |   | 2,744 |       
|Earnings on bank-owned life insurance              |       |      | 1,359   |       |  |      | 1,383 |        |  |   | 777   |       
|Impairment on asset-backed securities              |       |      | (10,642 | )     |  |      |      |        |  |   |      |       
|Other                                              |       |      | 1,501   |       |  |      | 1,581 |        |  |   | 800   |       
|                                                   |       |      |         |       |  |      |       |        |  |   |       |       
|                                                   | Total |      | $       | 3,917 |  |      | $     | 10,024 |  |   | $     | 10,328 | 
|                                                   |       |      |         |       |  |      |       |        |  |   |       |       

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PROVISION AND ALLOWANCE FOR CREDIT LOSSES

The following table summarizes changes in the allowance for credit losses for
the years indicated:

|                                                            |                   |      |        |        |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |       | 
|----------------------------------------------------------- | ----------------- | ---- | ------ | ------ |  | ---- | ------ | ----- |  | ---- | ------ | ----- |  | - | ------ | ----- |  | - | ------ | ----- | 
|(dollars in thousands)                                      |                   | 2001 |        | 2000   |  | 1999 |        | 1998  |  | 1997
|                                                            |                   |      |        |        |  |      |        |       |  |     
|Balance at beginning of year                                |                   | $    | 17,447 |        |  | $    | 17,942 |       |  | $    | 17,771 |       |  | $ | 16,365 |       |  | $ | 15,431 |      
|Charge-offs:                                                |                   |      |        |        |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |      
|Commercial and financial                                    |                   |      | 9,052  |        |  |      | 3,138  |       |  |      | 442    |       |  |   | 533    |       |  |   | 2,489  |      
|Real estate  mortgage                                      |                   |      | 2,034  |        |  |      | 4,378  |       |  |      | 4,085  |       |  |   | 5,854  |       |  |   | 2,315  |      
|Installment and consumer                                    |                   |      | 1,342  |        |  |      | 1,490  |       |  |      | 896    |       |  |   | 737    |       |  |   | 1,121  |      
|                                                            |                   |      |        |        |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |      
|                                                            | Total charge-offs |      |        | 12,428 |  |      |        | 9,006 |  |      |        | 5,423 |  |   |        | 7,124 |  |   |        | 5,925 | 
|                                                            |                   |      |        |        |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |      
|Recoveries:                                                 |                   |      |        |        |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |      
|Commercial and financial                                    |                   |      | 108    |        |  |      | 170    |       |  |      | 94     |       |  |   | 107    |       |  |   | 233    |      
|Real estate  mortgage                                      |                   |      | 399    |        |  |      | 537    |       |  |      | 314    |       |  |   | 534    |       |  |   | 26     |      
|Installment and consumer                                    |                   |      | 310    |        |  |      | 265    |       |  |      | 211    |       |  |   | 453    |       |  |   | 350    |      
|                                                            |                   |      |        |        |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |      
|                                                            | Total recoveries  |      |        | 817    |  |      |        | 972   |  |      |        | 619   |  |   |        | 1,094 |  |   |        | 609   | 
|                                                            |                   |      |        |        |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |      
|Net loans charged-off                                       |                   |      | 11,611 |        |  |      | 8,034  |       |  |      | 4,804  |       |  |   | 6,030  |       |  |   | 5,316  |      
|Provision for credit losses                                 |                   |      | 13,628 |        |  |      | 7,539  |       |  |      | 4,975  |       |  |   | 7,436  |       |  |   | 6,250  |      
|                                                            |                   |      |        |        |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |      
|Balance at end of year                                      |                   | $    | 19,464 |        |  | $    | 17,447 |       |  | $    | 17,942 |       |  | $ | 17,771 |       |  | $ | 16,365 |      
|                                                            |                   |      |        |        |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |      
|Net charge-offs to average loans
outstanding                |                   |      | 0.90   | %      |  |      | 0.65   | %     |  |      | 0.45   | %     |  |   | 0.57   | %     |  |   | 0.50   | %    
|Allowance for credit losses to year-end
loans               |                   |      | 1.57   | %      |  |      | 1.34   | %     |  |      | 1.56   | %     |  |   | 1.65   | %     |  |   | 1.52   | %    
|Allowance for credit losses to year-end
nonperforming loans |                   |      | 123.24 | %      |  |      | 115.35 | %     |  |      | 152.28 | %     |  |   | 133.95 | %     |  |   | 66.86  | %    

The provision for credit losses is based upon periodic evaluations by
management as to the adequacy of the allowance for credit losses. In these
evaluations, management considers numerous factors including, but not limited
to, current economic conditions, loan portfolio composition, loan loss
experience and managements estimate of potential losses. These various
analyses lead to a determination of the amount needed in the allowance for
credit losses. To the extent the existing allowance is below the amount so
determined, a provision is made that will bring the allowance to such amount.
Thus, the provision for credit losses may fluctuate and may not be comparable
from year to year.

Provision for credit losses was $13.6 million in 2001, an increase of $6.1
million, or 80.8%, over 2000. The Companys allowance for credit losses
increased to $19.5 million at December 31, 2001, from $17.4 million at December
31, 2000 and $17.9 million at December 31, 1999. The allowance for credit
losses as a percentage of total loans was 1.57% at December 31, 2001, compared
to 1.34% and 1.56% at December 31, 2000 and 1999, respectively.

Allowance for credit losses as a percentage of nonperforming loans increased to
123.24% at December 31, 2001 from 115.35% at December 31, 2000. The increase
was primarily due to the increase in the provision for credit losses, which was
increased following the events of September 11, 2001. Following September 11,
2001, management reviewed the portfolio and identified certain borrowers in
sectors who may be impacted by the slowing of Hawaiis economy  see previous
discussion in Recent Economic Developments. As of December 31, 2001, the
credit exposure to these borrowers was approximately $60.0 million. These
borrowers, as well as the portfolio in general, are being closely monitored to
assess the continued impact, if any, of September 11, 2001.

The net investment in loans that are considered to be impaired was $20.3
million at December 31, 2001, a decrease of $4.9 million from the $25.2 million
at December 31, 2000. Additional information on impaired loans is presented in
Note F of Notes to the Companys Consolidated Financial Statements.

In managements judgment, the allowance for credit losses was adequate to
absorb potential losses currently inherent in the loan portfolio at December 31,
2001. However, changes in prevailing economic conditions (including the
effect of the September 11, 2001 events) in the Companys markets or in the
financial condition of its customers could alter the level of nonperforming
assets and charge-offs in the future and, accordingly, affect the allowance for
credit losses.

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##### Table of Contents



The allowance for credit losses has been allocated by the Companys management
according to the amount deemed to be reasonably necessary to provide for the
possibility of loan losses being incurred within the following categories of
loans at December 31 for the years indicated:

|                           |       |      |        |        |      |      |       |        |      |      |        |        |  |      |       |        |   |      |       |        |  |  |       |        |   |   |       |        |  |  |       |        |   |   |        |        |  |  |       |        |  
|-------------------------- | ----- | ---- | ------ | ------ | ---- | ---- | ----- | ------ | ---- | ---- | ------ | ------ |  | ---- | ----- | ------ | - | ---- | ----- | ------ |  |  | ----- | ------ | - | - | ----- | ------ |  |  | ----- | ------ | - | - | ------ | ------ |  |  | ----- | ------ | -
|                           |       |      | 2001   |        | 2000 |      | 1999  |        | 1998 |      | 1997  
|                           |       |      |        |        |      |      |       |        |      |      |       
|(dollars in thousands)     |       | Amt. |        | %(1)   |      | Amt. |       | %(1)   |      | Amt. |        | %(1)   |  | Amt. |       | %(1)   |   | Amt. |       | %(1)  
|                           |       |      |        |        |      |      |       |        |      |      |        |        |  |      |       |        |   |      |       |       
|Commercial & financial     |       | $    | 11,208 |        |      |      | 19.19 | %      |      | $    | 10,303 |        |  |      | 19.40 | %      |   | $    | 7,359 |        |  |  | 19.55 | %      |   | $ | 4,539 |        |  |  | 19.41 | %      |   | $ | 3,718  |        |  |  | 17.67 | %     
|Real estate  construction |       |      | 487    |        |      |      | 4.41  |        |      |      |       |        |  |      | 2.06  |        |   |      |      |        |  |  | 1.31  |        |   |   |      |        |  |  | 2.59  |        |   |   |       |        |  |  | 3.89  |       
|Real estate  mortgage     |       |      | 4,856  |        |      |      | 65.05 |        |      |      | 4,755  |        |  |      | 69.54 |        |   |      | 7,680 |        |  |  | 71.17 |        |   |   | 9,519 |        |  |  | 69.31 |        |   |   | 10,744 |        |  |  | 70.91 |       
|Installment & consumer     |       |      | 860    |        |      |      | 11.35 |        |      |      | 483    |        |  |      | 9.00  |        |   |      | 1,432 |        |  |  | 7.97  |        |   |   | 1,264 |        |  |  | 8.69  |        |   |   | 476    |        |  |  | 7.53  |       
|Unallocated                |       |      | 2,053  |        |      |      | n/a   |        |      |      | 1,906  |        |  |      | n/a   |        |   |      | 1,471 |        |  |  | n/a   |        |   |   | 2,449 |        |  |  | n/a   |        |   |   | 1,427  |        |  |  | n/a   |       
|                           |       |      |        |        |      |      |       |        |      |      |        |        |  |      |       |        |   |      |       |        |  |  |       |        |   |   |       |        |  |  |       |        |   |   |        |        |  |  |       |       
|                           | Total |      | $      | 19,464 |      |      |       | 100.00 | %    |      | $      | 17,447 |  |      |       | 100.00 | % |      | $     | 17,942 |  |  |       | 100.00 | % |   | $     | 17,771 |  |  |       | 100.00 | % |   | $      | 16,365 |  |  |       | 100.00 | %
|                           |       |      |        |        |      |      |       |        |      |      |        |        |  |      |       |        |   |      |       |        |  |  |       |        |   |   |       |        |  |  |       |        |   |   |        |        |  |  |       |       



---

|(1) |  | Represents percentage of loans in each category to total loans.
|--- |  | ---------------------------------------------------------------

NONINTEREST EXPENSE

The following table sets forth information by category of noninterest expense
for the years indicated:

|                                                                   |       |      |        |        |  |      |        |        |  |   |        |        | 
|------------------------------------------------------------------ | ----- | ---- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|(dollars in thousands)                                             |       | 2001 |        | 2000   |  | 1999
|                                                                   |       |      |        |        |  |     
|Salaries and employee benefits                                     |       | $    | 23,111 |        |  | $    | 20,832 |        |  | $ | 20,427 |       
|Net occupancy expense                                              |       |      | 6,588  |        |  |      | 7,000  |        |  |   | 8,022  |       
|Equipment expense                                                  |       |      | 3,469  |        |  |      | 3,070  |        |  |   | 3,441  |       
|Legal and professional fees                                        |       |      | 4,147  |        |  |      | 4,043  |        |  |   | 3,224  |       
|Advertising and promotion                                          |       |      | 2,997  |        |  |      | 2,436  |        |  |   | 2,181  |       
|Stationery and supplies                                            |       |      | 1,004  |        |  |      | 1,002  |        |  |   | 1,347  |       
|Provision for other real estate
owned losses                       |       |      | 150    |        |  |      | 243    |        |  |   | 927    |       
|Deposit insurance premiums                                         |       |      | 227    |        |  |      | 512    |        |  |   | 652    |       
|Restructuring
and merger-related charges
and write-off of goodwill |       |      |       |        |  |      |       |        |  |   | 9,424  |       
|Other                                                              |       |      | 10,002 |        |  |      | 7,541  |        |  |   | 8,691  |       
|                                                                   |       |      |        |        |  |      |        |        |  |   |        |       
|                                                                   | Total |      | $      | 51,695 |  |      | $      | 46,679 |  |   | $      | 58,336 | 
|                                                                   |       |      |        |        |  |      |        |        |  |   |        |       
|Total noninterest expense as
a percentage of average assets        |       |      | 3.08   | %      |  |      | 2.80   | %      |  |   | 3.91   | %     
|                                                                   |       |      |        |        |  |      |        |        |  |   |        |       

Noninterest expense increased $5.0 million, or 10.7%, in 2001, as compared to
2000. The Companys operating expense ratio, which is a commonly used
indicator of operating efficiency, increased to 3.1% in 2001, as compared to
2.8% in 2000.

Salaries and employment benefits increased by $2.3 million, or 10.9%, in 2001,
to $23.1 million, compared to $20.8 million in 2000. The increase in salaries
and employee benefits over 2000 was due to higher incentive-based compensation
in 2001.

Net occupancy expense was $6.6 million in 2001, which compares to $7.0 million
in 2000. The decrease in net occupancy expense in 2001 was primarily
attributable to the decreased net expenses of the Companys leased facilities.
Down-sized branches and renegotiated lease agreements resulted in decreased
rent expense.

Equipment expense increased by $399,000, or 13.0%, in 2001, primarily due to a
$300,000 refund of certain software lease payments received in the first
quarter of 2000.

Legal and professional fees increased by $104,000, or 2.6%, in 2001, primarily
due to an increase in fees related to certain management consulting projects.

Deposit insurance premiums amounted to $227,000 in 2001, compared to $512,000
in 2000, reflecting a decrease in the assessment rate.

Total noninterest expense, excluding restructuring and merger-related charges
and write-off of goodwill, decreased $2.2 million, or 4.6%, from 1999 to 2000.
The primary reason for the decrease in noninterest expense was the $1.0 million
decrease in net occupancy expense, which was offset by the $819,000 increase in
legal and professional fees.

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##### Table of Contents



INCOME TAXES

Total income tax expense of the Company was $3.3 million, $5.6 million and $5.2
million in 2001, 2000 and 1999, respectively. The corresponding effective
income tax rate was 34.6%, 33.2% and 94.5%, respectively. The significant
decline in the effective tax rate in 2000 as compared to 1999 was primarily due
to: (i) the elimination of goodwill amortization in 2000 due to the write-off
in December 1999 and (ii) the utilization of capital losses (against capital
gains). Note N of Notes to the Companys Consolidated Financial Statements
presents a reconciliation of the Companys effective and statutory income tax
rates.

LOAN PORTFOLIO

Total loans at December 31, 2001 decreased to $1,197.3 million, a $75.6
million, or 5.9%, decrease from the previous year-end. The decrease in total
loans was primarily due to decreases in commercial and financial and
real-estate mortgage loans, partially offset by increases in real estate -
construction and installment and consumer loans.

The amount of loans outstanding at December 31 for the years indicated are
shown in the following table categorized as to types of loans:

|                           |  |      |           |      |  |      |           |      |  |      |           |  |  |   |         |  |  |   |           | 
|-------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | ------- |  |  | - | --------- | 
|(in thousands)             |  | 2001 |           | 2000 |  | 1999 |           | 1998 |  | 1997
|                           |  |      |           |      |  |      |           |      |  |     
|Commercial and financial   |  | $    | 229,824   |      |  | $    | 246,877   |      |  | $    | 224,660   |  |  | $ | 191,128 |  |  | $ | 186,418   | 
|Real estate  construction |  |      | 52,750    |      |  |      | 26,237    |      |  |      | 15,096    |  |  |   | 25,453  |  |  |   | 41,069    | 
|Real estate  mortgage     |  |      | 778,853   |      |  |      | 885,262   |      |  |      | 818,010   |  |  |   | 682,313 |  |  |   | 747,897   | 
|Installment and consumer   |  |      | 135,901   |      |  |      | 114,562   |      |  |      | 91,647    |  |  |   | 85,562  |  |  |   | 79,363    | 
|                           |  |      |           |      |  |      |           |      |  |      |           |  |  |   |         |  |  |   |           | 
|                           |  | $    | 1,197,328 |      |  | $    | 1,272,938 |      |  | $    | 1,149,413 |  |  | $ | 984,456 |  |  | $ | 1,054,747 | 
|                           |  |      |           |      |  |      |           |      |  |      |           |  |  |   |         |  |  |   |           | 

Commercial and financial.Loans outstanding in this category decreased to
$229.8 million, a decrease of $17.1 million, or 6.9%, over year-end 2000. Loans
in this category are primarily loans to small- and medium-sized businesses and
professionals doing business in Hawaii. These loans have been made primarily
on a collateralized basis. Typically, real estate serves as collateral as well
as equipment, receivables and personal assets as deemed necessary.

Real estate  mortgage.Real estate  mortgage loans decreased to $778.9
million at December 31, 2001, a decrease of $106.4 million, or 12.0%, over
year-end 2000. This occurrence was a reflection of the falling interest rate
environment experienced in 2001 and the related prepayments. The average size
of loans in this category at December 31, 2001 was $177,000.

Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table shows the contractual maturities of the Companys loan
portfolio by category (excluding real estate-mortgage and installment and
consumer) at December 31, 2001. Demand loans are included as due within one
year:

|                           |  |               |         |                |  |               |        |       |  |   |        |  |  |   |         | 
|-------------------------- |  | ------------- | ------- | -------------- |  | ------------- | ------ | ----- |  | - | ------ |  |  | - | ------- | 
|                           |  |               |         |                |  | After 1 but   |        |       |  |   |        |  |  |  
|(in thousands)             |  | Within 1 year |         | Within 5 years |  | After 5 years |        | Total
|                           |  |               |         |                |  |               |        |      
|Commercial and financial   |  | $             | 130,073 |                |  | $             | 69,008 |       |  | $ | 30,743 |  |  | $ | 229,824 | 
|Real estate  construction |  |               | 40,820  |                |  |               | 11,221 |       |  |   | 709    |  |  |   | 52,750  | 
|                           |  |               |         |                |  |               |        |       |  |   |        |  |  |   |         | 
|                           |  | $             | 170,893 |                |  | $             | 80,229 |       |  | $ | 31,452 |  |  | $ | 282,574 | 
|                           |  |               |         |                |  |               |        |       |  |   |        |  |  |   |         | 

The following table sets forth the interest rate sensitivity of the above
amounts due after one year at December 31, 2001:

|                           |  |            |        |               |  |       |        |  |  |   |         | 
|-------------------------- |  | ---------- | ------ | ------------- |  | ----- | ------ |  |  | - | ------- | 
|(in thousands)             |  | Fixed Rate |        | Variable Rate |  | Total
|                           |  |            |        |               |  |      
|After 1 but within
5 years |  | $          | 65,230 |               |  | $     | 14,999 |  |  | $ | 80,229  | 
|After 5 years              |  |            | 31,043 |               |  |       | 409    |  |  |   | 31,452  | 
|                           |  |            |        |               |  |       |        |  |  |   |         | 
|                           |  | $          | 96,273 |               |  | $     | 15,408 |  |  | $ | 111,681 | 
|                           |  |            |        |               |  |       |        |  |  |   |         | 

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RISK ELEMENTS IN LENDING ACTIVITIES

Nonperforming (nonaccrual) assets and past due and restructured loans at
December 31 are reflected below for the years indicated:

|                                                                               |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |       |        |        | 
|------------------------------------------------------------------------------ | ------------ | ----------------------------------------- | --------------------------- | ----- | ----- | ------ | ----- | ----- | ------ | ------ | ----- | ----- | ------ | ------ | ----- | ----- | ------ | ------ | ----- | ----- | ------ | ------ | 
|(dollars in thousands)                                                         |              | 2001                                      |                             | 2000  |       | 1999   |       | 1998  |        | 1997  
|                                                                               |              |                                           |                             |       |       |        |       |       |        |       
|Nonperforming loans:                                                           |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |      
|                                                                               | Commercial   |                                           | $                           | 7,034 |       |        | $     | 6,268 |        |        | $     | 1,831 |        |        | $     | 1,291 |        |        | $     | 1,207 |       
|                                                                               | Real estate: |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |       |       
|                                                                               |              | Commercial                                |                             |       | 2,438 |        |       |       | 3,030  |        |       |       | 518    |        |       |       | 933    |        |       |       | 2,997  |       
|                                                                               |              | Residential                               |                             |       | 6,174 |        |       |       | 5,827  |        |       |       | 8,992  |        |       |       | 10,803 |        |       |       | 20,010 |       
|                                                                               |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |      
|                                                                               |              |                                           | Total real estate loans     |       |       | 8,612  |       |       |        | 8,857  |       |       |        | 9,510  |       |       |        | 11,736 |       |       |        | 23,007 | 
|                                                                               |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |      
|                                                                               | Consumer     |                                           |                             | 148   |       |        |       |      |        |        |       | 441   |        |        |       | 240   |        |        |       | 261   |       
|                                                                               |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |      
|                                                                               |              |                                           | Total nonperforming loans   |       |       | 15,794 |       |       |        | 15,125 |       |       |        | 11,782 |       |       |        | 13,267 |       |       |        | 24,475 | 
|Other real estate owned                                                        |              |                                           | 4,674                       |       |       |        | 3,458 |       |        |        | 6,385 |       |        |        | 8,583 |       |        |        | 3,686 |      
|                                                                               |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |      
|                                                                               |              |                                           | Total nonperforming assets  |       | $     | 20,468 |       |       | $      | 18,583 |       |       | $      | 18,167 |       |       | $      | 21,850 |       |       | $      | 28,161 | 
|                                                                               |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |      
|Past due loans:                                                                |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |      
|                                                                               | Commercial   |                                           | $                           |      |       |        | $     | 975   |        |        | $     | 96    |        |        | $     | 2,433 |        |        | $     | 15    |       
|                                                                               | Real estate  |                                           |                             | 2,190 |       |        |       | 473   |        |        |       | 3,481 |        |        |       | 3,602 |        |        |       | 3,569 |       
|                                                                               | Consumer     |                                           |                             | 1,464 |       |        |       | 1,256 |        |        |       | 592   |        |        |       | 381   |        |        |       | 490   |       
|                                                                               |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |      
|                                                                               |              |                                           | Total
past due loans(1)     |       | $     | 3,654  |       |       | $      | 2,704  |       |       | $      | 4,169  |       |       | $      | 6,416  |       |       | $      | 4,074  | 
|                                                                               |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |      
|Restructured loans:                                                            |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |      
|                                                                               | Commercial   |                                           | $                           | 2,214 |       |        | $     | 4,153 |        |        | $     | 4,440 |        |        | $     |      |        |        | $     |      |       
|                                                                               | Real estate: |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |       |       
|                                                                               |              | Commercial                                |                             |       |      |        |       |       |       |        |       |       | 1,231  |        |       |       | 1,284  |        |       |       |       |       
|                                                                               |              | Residential                               |                             |       | 8,629 |        |       |       | 11,730 |        |       |       | 11,280 |        |       |       | 11,108 |        |       |       | 424    |       
|                                                                               |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |      
|                                                                               |              |                                           | Total
restructured loans(2) |       | $     | 10,843 |       |       | $      | 15,883 |       |       | $      | 16,951 |       |       | $      | 12,392 |       |       | $      | 424    | 
|                                                                               |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |      
|Nonperforming assets to total loans and other real estate owned (end of year): |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |       
|                                                                               |              | Excluding 90 days past due
accruing loans |                             |       | 1.64  | %      |       |       | 1.42   | %      |       |       | 1.57   | %      |       |       | 2.01   | %      |       |       | 2.61   | %     
|                                                                               |              | Including 90 days past due
accruing loans |                             |       | 1.93  | %      |       |       | 1.63   | %      |       |       | 1.93   | %      |       |       | 2.60   | %      |       |       | 2.99   | %     
|Nonperforming assets to total assets
(end of year):                            |              |                                           |                             |       |       |        |       |       |        |        |       |       |        |        |       |       |        |        |       |      
|                                                                               |              | Excluding 90 days past due
accruing loans |                             |       | 1.29  | %      |       |       | 1.08   | %      |       |       | 1.12   | %      |       |       | 1.53   | %      |       |       | 1.96   | %     
|                                                                               |              | Including 90 days past due
accruing loans |                             |       | 1.52  | %      |       |       | 1.24   | %      |       |       | 1.38   | %      |       |       | 1.98   | %      |       |       | 2.25   | %     



---

|(1) |  | Represents loans which are past due 90 days or more as to principal
and/or interest, are still accruing interest and are in the process of
collection.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Represents loans which have been restructured, are current and still
accruing interest.                                                               

Nonperforming loans increased to $15.8 million at December 31, 2001, an
increase of $669,000, or 4.4%, over the $15.1 million at year-end 2000. The
increase in nonperforming loans was primarily due to a $766,000 increase in the
nonperforming commercial loan category.

At December 31, 2001, Other real estate owned (net of valuation allowance)
amounted to $4.7 million, an increase of $1.2 million, or 35.2%, from the prior
year-end. The increase was primarily due to a $1.0 million residential
property foreclosed in 2001.

Past due loans which are still accruing interest increased $950,000, or 35.1%,
to $3.7 million at December 31, 2001. The increase is primarily due to the
addition of a $1.4 million residential real estate loan in 2001. Substantially
all loans in this category are both well-collateralized and in the process of
collection.

Restructured loans decreased $5.0 million, or 31.7%, as compared to 2000,
primarily due to (i) commercial loan category charge-offs and transfer to
foreclosure of $1.2 million and $1.6 million, respectively; and (ii)
residential loan category reclassification to nonperforming loans of $1.9
million.

At December 31, 2001, the Company was not aware of any significant potential
problem loans (not otherwise classified as nonperforming or past due) where
possible credit problems of the borrower caused management to have serious
concerns as to the ability of such borrower to comply with the present loan
repayment terms.

17



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##### Table of Contents



DEPOSITS

The Company competes for deposits in Hawaii principally by providing quality
customer service at its branch offices.

The Company has a network of 21 branch offices which seek to provide a stable
core deposit base. The deposit base provided by these branches consists of
interest- and noninterest-bearing demand and savings accounts, money market
certificates and time certificates of deposit.

The average daily amount of deposits and the average rate paid on such deposit
categories is summarized below:

|                                    |       |        |         |           |      |        |      |      |   |        |         |           |  |  |      |      |   |   |         |           |  |  |      |      |  
|----------------------------------- | ----- | ------ | ------- | --------- | ---- | ------ | ---- | ---- | - | ------ | ------- | --------- |  |  | ---- | ---- | - | - | ------- | --------- |  |  | ---- | ---- | -
|                                    |       |        | 2001    |           | 2000 |        | 1999
|                                    |       |        |         |           |      |        |     
|(dollars in thousands)              |       | Amount |         | Rate      |      | Amount |      | Rate |   | Amount |         | Rate     
|                                    |       |        |         |           |      |        |      |      |   |        |         |          
|Noninterest-bearing demand
deposits |       | $      | 130,083 |           |      |        |     | %    |   | $      | 114,048 |           |  |  |     | %    |   | $ | 118,356 |           |  |  |     | %   
|Interest-bearing demand deposits    |       |        | 256,882 |           |      |        | 2.29 |      |   |        | 209,507 |           |  |  | 3.11 |      |   |   | 198,379 |           |  |  | 2.55 |     
|Savings                             |       |        | 155,449 |           |      |        | 1.97 |      |   |        | 158,286 |           |  |  | 2.25 |      |   |   | 165,987 |           |  |  | 2.33 |     
|Time deposits                       |       |        | 651,344 |           |      |        | 4.68 |      |   |        | 672,234 |           |  |  | 5.51 |      |   |   | 599,920 |           |  |  | 4.77 |     
|                                    |       |        |         |           |      |        |      |      |   |        |         |           |  |  |      |      |   |   |         |           |  |  |      |     
|                                    | Total |        | $       | 1,193,758 |      |        |      | 3.30 | % |        | $       | 1,154,075 |  |  |      | 4.08 | % |   | $       | 1,082,642 |  |  |      | 3.47 | %
|                                    |       |        |         |           |      |        |      |      |   |        |         |           |  |  |      |      |   |   |         |           |  |  |      |     

The remaining maturities of time deposits in amounts of $100,000 or more
outstanding at December 31, 2001 is summarized below:

|                                |       |   |         |         | 
|------------------------------- | ----- | - | ------- | ------- | 
|(in thousands)                  |       |   |         |        
|                                |       |   |         |        
|3 months or less                |       | $ | 119,038 |        
|Over 3 months through 6 months  |       |   | 47,358  |        
|Over 6 months through 12 months |       |   | 47,875  |        
|Over 12 months                  |       |   | 28,077  |        
|                                |       |   |         |        
|                                | Total |   | $       | 242,348 | 
|                                |       |   |         |        

INVESTMENT AND MORTGAGE-BACKED SECURITIES PORTFOLIO

The following table sets forth the book value and the distribution by category
of investment securities at December 31 for the years indicated:

|                                                                 |       |      |         |         |  |      |         |         |  |   |         |         | 
|---------------------------------------------------------------- | ----- | ---- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|(in thousands)                                                   |       | 2001 |         | 2000    |  | 1999
|                                                                 |       |      |         |         |  |     
|Held-to-maturity                                                 |       |      |         |         |  |      |         |         |  |   |         |        
|Corporate bonds                                                  |       | $    | 24,830  |         |  | $    |        |         |  | $ |        |        
|Mortgage-backed securities                                       |       |      | 1,170   |         |  |      |        |         |  |   |        |        
|                                                                 |       |      |         |         |  |      |         |         |  |   |         |        
|                                                                 | Total |      | $       | 26,000  |  |      | $       |        |  |   | $       |        | 
|                                                                 |       |      |         |         |  |      |         |         |  |   |         |        
|Available-for-sale                                               |       |      |         |         |  |      |         |         |  |   |         |        
|U.S. Treasury and other U.S
government agencies and corporations |       | $    | 5,450   |         |  | $    | 16,068  |         |  | $ | 15,795  |        
|State and political subdivisions                                 |       |      | 33,204  |         |  |      | 33,100  |         |  |   | 30,353  |        
|Mortgage/asset-backed securities                                 |       |      | 164,909 |         |  |      | 248,921 |         |  |   | 270,350 |        
|                                                                 |       |      |         |         |  |      |         |         |  |   |         |        
|                                                                 | Total |      | $       | 203,563 |  |      | $       | 298,089 |  |   | $       | 316,498 | 
|                                                                 |       |      |         |         |  |      |         |         |  |   |         |        
|FHLB stock                                                       |       | $    | 32,406  |         |  | $    | 32,430  |         |  | $ | 31,727  |        
|                                                                 |       |      |         |         |  |      |         |         |  |   |         |        

The following table sets forth the maturities of investment securities at
December 31, 2001 and the weighted average yields of such securities
(calculated on the basis of the cost and effective yields weighted for the
scheduled maturity of each security):

|                                                                 |       |        |               |       |                |        |                 |       |                |        |             |        |             |        |      |       |   |   |        |        |  |  |      |      |   |   |         |         |  |  |      |      |  
|---------------------------------------------------------------- | ----- | ------ | ------------- | ----- | -------------- | ------ | --------------- | ----- | -------------- | ------ | ----------- | ------ | ----------- | ------ | ---- | ----- | - | - | ------ | ------ |  |  | ---- | ---- | - | - | ------- | ------- |  |  | ---- | ---- | -
|                                                                 |       |        |               |       |                |        |                 |       |                |        | After 1 but |        | After 5 but |        |      |       |   |   |        |        | 
|                                                                 |       |        | Within 1 year |       | within 5 years |        | within 10 years |       | After 10 years
|                                                                 |       |        |               |       |                |        |                 |       |               
|(dollars in thousands)                                           |       | Amount |               | Yield |                | Amount |                 | Yield |                | Amount |             | Yield  |             | Amount |      | Yield
|                                                                 |       |        |               |       |                |        |                 |       |                |        |             |        |             |        |      |      
|Held-to-maturity                                                 |       |        |               |       |                |        |                 |       |                |        |             |        |             |        |      |       |   |   |        |        |  |  |      |      |   |   |         |         |  |  |      |     
|Corporate bonds                                                  |       | $      |              |       |                |        |                | %     |                | $      | 24,830      |        |             |        | 4.48 | %     |   | $ |       |        |  |  |     | %    |   | $ |        |         |  |  |     | %   
|Mortgage-backed securities                                       |       |        |              |       |                |        |                |       |                |        |            |        |             |        |     |       |   |   |       |        |  |  |     |      |   |   | 1,170   |         |  |  | 6.15 |     
|                                                                 |       |        |               |       |                |        |                 |       |                |        |             |        |             |        |      |       |   |   |        |        |  |  |      |      |   |   |         |         |  |  |      |     
|                                                                 | Total |        | $             |      |                |        |                 |      | %              |        | $           | 24,830 |             |        |      | 4.48  | % |   | $      |       |  |  |      |     | % |   | $       | 1,170   |  |  |      | 6.15 | %
|                                                                 |       |        |               |       |                |        |                 |       |                |        |             |        |             |        |      |       |   |   |        |        |  |  |      |      |   |   |         |         |  |  |      |     
|Available-for-sale                                               |       |        |               |       |                |        |                 |       |                |        |             |        |             |        |      |       |   |   |        |        |  |  |      |      |   |   |         |         |  |  |      |     
|U.S. Treasury and other U.S
government agencies and
corporations |       | $      |              |       |                |        |                | %     |                | $      | 5,142       |        |             |        | 6.38 | %     |   | $ |       |        |  |  |     | %    |   | $ |        |         |  |  |     | %   
|State and political subdivisions                                 |       |        |              |       |                |        |                |       |                |        |            |        |             |        |     |       |   |   | 5,632  |        |  |  | 6.07 |      |   |   | 27,285  |         |  |  | 5.01 |     
|Mortgage/asset-backed securities                                 |       |        | 14            |       |                |        | 8.32            |       |                |        | 5,362       |        |             |        | 7.10 |       |   |   | 36,339 |        |  |  | 5.06 |      |   |   | 122,114 |         |  |  | 6.64 |     
|                                                                 |       |        |               |       |                |        |                 |       |                |        |             |        |             |        |      |       |   |   |        |        |  |  |      |      |   |   |         |         |  |  |      |     
|                                                                 | Total |        | $             | 14    |                |        |                 | 8.32  | %              |        | $           | 10,504 |             |        |      | 6.45  | % |   | $      | 41,971 |  |  |      | 5.33 | % |   | $       | 149,399 |  |  |      | 5.55 | %
|                                                                 |       |        |               |       |                |        |                 |       |                |        |             |        |             |        |      |       |   |   |        |        |  |  |      |      |   |   |         |         |  |  |      |     

18



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##### Table of Contents



A table setting forth information regarding
investment and mortgage/asset-backed
securities, including estimated fair value and carrying value of such
securities is included in Note D of Notes to the Companys Consolidated
Financial Statements.

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

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

Advances from the FHLB were made under a credit line agreement totaling $412.4
million, of which $122.2 million was undrawn at December 31, 2001. See Notes J
and K of Notes to the Companys Consolidated Financial Statements.

At December 31, 2001, there were five long-term FHLB advances totaling $103.0
million, callable between March 2003 and August 2006.

FINANCIAL CONDITION

Total assets at December 31, 2001 were $1,586.0 million, a decrease of $135.6
million, or 7.9%, from 2000. The decrease was due primarily to a decline in
loans and investments of $75.6 million, or 5.9%, and $68.5 million, or 20.7%,
respectively, and consisting predominantly of longer-term fixed rate or
prime-based loans and mortgage/asset-backed securities. Cash flows from this
asset decrease was offset by an $80.0 million, or 6.6% decrease in total
deposits ($186.8 million decrease in time deposits, offset by a $106.8 million
increase in demand deposits). The remaining cash flows have been used to pay
down maturing advances. These changes have made the balance sheet less
liability-sensitive and better positioned if there is an upward movement in
interest rates.

LIQUIDITY MANAGEMENT

The primary objective of liquidity management is to maintain a balance between
sources and uses of funds in order that the cash flow needs of the Company are
met in the most economical and expedient manner. The liquidity needs of a
financial institution require the availability of cash to meet the withdrawal
demands of depositors and the credit commitments of borrowers. In order to
optimize liquidity, management monitors and forecasts the various sources and
uses of funds in an effort to continually meet the financial requirements of
the Company and the financial needs of its customer base.

To ensure liquidity on a short-term basis, the Companys primary sources are
cash or cash equivalents, loan repayments, proceeds from the sale of assets
available for sale, increases in deposits, proceeds from maturing securities
and, when necessary, federal funds purchased, brokered deposits and credit
arrangements with correspondent banks and the FHLB. Maturities of investment
securities are also structured to cover large commitments and seasonal
fluctuations in credit arrangements.

At December 31, 2001, the Company had advances outstanding from the FHLB of
$290.1 million (20.0% of total liabilities) compared to $350.5 million (21.9%
of total liabilities) at December 31, 2000. The maximum amount of advances
from the FHLB that the Company had outstanding at any month-end during such
periods was $354.2 million. As of December 31, 2001, the Bank had available
unused credit lines of $122.2 million from the FHLB. During 2002, $75.7 million
of short-term and $35.0 million of long-term borrowings from the FHLB will
mature  see Note K of Notes to the Companys Consolidated Financial Statements
for future maturities of long-term borrowings from the FHLB. It has been the
Companys general practice to satisfy maturing obligations to the FHLB in part
by additional advances under its credit line agreement with the FHLB. The
credit line agreements have normal FHLB default provisions which, among other
matters, accelerate the maturity date if there is a material adverse change to
the financial condition of the Bank and/or if repayment ability becomes
impaired. The Companys ability to continue to draw upon this credit line and
avoid an acceleration of the maturity dates is dependent upon the Companys
continued adequate financial condition and fulfillment of collateral
requirements. As of December 31, 2001, these borrowings were collateralized by
$497.1 million in loans and all stock in the FHLB. In the remote case that the
FHLB ceases to make advances available as a reliable source of liquidity, the
Company would be required to repay the advances as they mature or are
accelerated from other sources of funds in order to avoid the risk that the
security pledged as collateral for the advances might be taken by the FHLB.
Management believes that the Company could obtain other sources of funding,
such as through repurchase agreements, brokered CDs, federal fund lines with other
correspondent banks or lines of credit with the Federal Reserve System in order
to meet such repayment requirements.

The consolidated statements of cash flows identify three major sources and uses
of cash as operating, investing and financing activities. The Companys
operating activities provided $9.4 million in 2001, a decrease of $8.6 million
from the $18.1 million provided in 2000. The primary source of cash flows from
operations in 2001 was the sale of $172.5 million of loans held for sale, which
amounted to $59.0 million at December 31, 2000.

The Companys most liquid assets are cash, interest bearing deposits, Federal
funds sold and investment securities and loans held for sale. The levels of
these assets are dependent on the Companys operating, financing, lending and
investment activities during any given period. At December 31, 2001, cash,
interest-bearing deposits, Federal funds sold and available for sale investment
and mortgage/asset-backed securities totaled $237.6 million, a decrease of
30.1% from $339.9 million at December 31, 2000.

Investing activities provided (used) cash flow of $122.2 million in 2001,
$(133.4) million during 2000, and $(221.3) million in 1999. The primary source
of cash for investing activities in 2001 was proceeds of sales and maturities
of available-for-sale securities of $98.4 million.

Financing activities provided (used) cash flow of $(149.4) million in 2001,
$88.6 million during 2000, and $198.4 million in 1999. During 2001, proceeds
from long-term debt of $151.2 million was the primary source of cash flows from
financing activities.

At any time, the Company has outstanding commitments to extend credit. See
Note Q of Notes to the Companys Consolidated Financial Statements. See Note P
of Notes to the Companys Consolidated Financial Statements for further
discussion and disclosure of risk management activities.

CAPITAL RESOURCES

During 2000, Citibank Properties, Inc. (CB Properties), a wholly-owned
subsidiary of the Bank, elected to be taxed as a real estate investment trust
(REIT). On July 18, 2000, CB Properties issued 120 shares of Series A
Preferred Stock, 10,000 shares of Series B

19



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##### Table of Contents



Preferred Stock, and 55,000 shares of Series C Preferred Stock at $1,000 per
share in exchange for approximately $150 million in participation interests in
mortgage loans and mortgage-related securities less the assumption of $85
million in advances made from the FHLB to the Bank. This transaction was
recorded as minority interest for financial statement purposes and classified
as Tier 1 capital for regulatory purposes pursuant to guidelines set forth by
the FDIC. CB Properties business objective is to acquire, hold, finance and
manage qualifying REIT assets. During 2001, CB Properties issued 1.7 million
shares of common stock in exchange for approximately $128 million in
participation interests in mortgage loans and mortgage-related securities, less
the cancellation of $61.3 million in debt owed by CB Properties to the Bank.
On August 21, 2000, the Bank sold 7,000 shares of Series B Preferred Stock to
third party investors, of which 4,400 shares were repurchased at par value
during 2001.

The Company has a strong capital base with a Tier I capital ratio of 11.32% at
December 31, 2001. This is well above the minimum regulatory guideline of 4.00%
for Tier I capital. Bank holding companies are also required to comply with
risk-based capital guidelines as established by the FRB. Risk-based capital
ratios are calculated with reference to risk-weighted assets that include both
on and off-balance sheet exposures. A companys risk-based capital ratio is
calculated by dividing its qualifying capital (the numerator of the ratio) by
its risk-weighted assets (the denominator). The minimum required qualifying
Total Capital ratio is 8%. As of December 31, 2001, the Companys total capital
to risk-adjusted assets ratio was 12.58%.

During the second quarter of 1999, the Company announced that its Board of
Directors had authorized a stock repurchase program to repurchase up to 10%, or
approximately 360,000 shares, of its 3.6 million shares of common stock
outstanding. When the stock repurchase program was terminated in 2000, 353,495
shares had been repurchased at prices ranging from $23.69 to $33.63 per share,
at a total cost of $10.6 million.

EFFECTS OF INFLATION

The financial statements and related data presented herein have been prepared
in accordance with generally accepted accounting principles which require the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation. Virtually all of the assets and liabilities of the
Company are monetary in nature. As a result, interest rate changes have a more
significant impact on the Companys performance than the effects of general
levels of inflation.

20



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##### Table of Contents



QUARTERLY RESULTS OF OPERATIONS (Unaudited)

Operating earnings for the fourth quarter of 2001 were $3.3 million, or $0.92
per diluted share, a 10.3% increase over operating earnings of $3.0 million, or
$0.86 per diluted share, for the same quarter in 2000. Operating cash earnings
for the fourth quarter of 2001 were $3.4 million, or $0.95 per diluted share, a
10.0% increase over the same quarter in 2000.

During the fourth quarter of 2001, the Company recorded an impairment charge of
$4.0 million ($2.5 million after tax) related to certain securities in its
investment portfolio. Inclusive of this charge, the Company had net income of
$885,000, or $0.24 per diluted share, in the fourth quarter of 2001.

The following table summarizes the Companys quarterly results for the years
2001 and 2000:

|                                      |                                   |       |         |        |  |       |        |        |  |       |        |        |   |   |        |        |  |   |         |        | 
|------------------------------------- | --------------------------------- | ----- | ------- | ------ |  | ----- | ------ | ------ |  | ----- | ------ | ------ | - | - | ------ | ------ |  | - | ------- | ------ | 
|                                      |                                   |       | Quarter |        |  |       |       
|                                      |                                   |       |        
|(in thousands, except per share data) |                                   | First |         | Second |  | Third |        | Fourth |  | Total
|                                      |                                   |       |         |        |  |       |        |        |  |      
|2001:                                 |                                   |       |         |        |  |       |        |        |  |       |        |        |   |   |        |        |  |   |         |       
|Total interest income                 |                                   | $     | 34,261  |        |  | $     | 32,783 |        |  | $     | 31,895 |        |   | $ | 29,315 |        |  | $ | 128,254 |       
|Total interest expense                |                                   |       | 18,459  |        |  |       | 15,614 |        |  |       | 12,884 |        |   |   | 10,491 |        |  |   | 57,448  |       
|                                      |                                   |       |         |        |  |       |        |        |  |       |        |        |   |   |        |        |  |   |         |       
|                                      | Net interest income               |       |         | 15,802 |  |       |        | 17,169 |  |       |        | 19,011 |   |   |        | 18,824 |  |   |         | 70,806 | 
|Provision for credit losses           |                                   |       | 2,750   |        |  |       | 2,271  |        |  |       | 3,650  |        |   |   | 4,957  |        |  |   | 13,628  |       
|Noninterest income                    |                                   |       | 3,244   |        |  |       | 3,249  |        |  |       | (2,922 | )      |   |   | 346    |        |  |   | 3,917   |       
|Noninterest expense                   |                                   |       | 12,249  |        |  |       | 13,168 |        |  |       | 13,564 |        |   |   | 12,714 |        |  |   | 51,695  |       
|                                      |                                   |       |         |        |  |       |        |        |  |       |        |        |   |   |        |        |  |   |         |       
|                                      | Income (loss) before income taxes |       |         | 4,047  |  |       |        | 4,979  |  |       |        | (1,125 | ) |   |        | 1,499  |  |   |         | 9,400  | 
|Income tax expense                    |                                   |       | 1,246   |        |  |       | 1,839  |        |  |       | (449   | )      |   |   | 614    |        |  |   | 3,250   |       
|                                      |                                   |       |         |        |  |       |        |        |  |       |        |        |   |   |        |        |  |   |         |       
|                                      | Net income (loss)                 |       | $       | 2,801  |  |       | $      | 3,140  |  |       | $      | (676   | ) |   | $      | 885    |  |   | $       | 6,150  | 
|                                      |                                   |       |         |        |  |       |        |        |  |       |        |        |   |   |        |        |  |   |         |       
|Basic earnings (loss) per share       |                                   | $     | 0.80    |        |  | $     | 0.89   |        |  | $     | (0.19  | )      |   | $ | 0.26   |        |  | $ | 1.76    |       
|Diluted earnings (loss) per share     |                                   | $     | 0.80    |        |  | $     | 0.89   |        |  | $     | (0.19  | )      |   | $ | 0.24   |        |  | $ | 1.74    |       
|                                     
|2000:                                 |                                   |       |         |        |  |       |        |        |  |       |        |        |   |   |        |        |  |   |         |       
|Total interest income                 |                                   | $     | 31,205  |        |  | $     | 32,746 |        |  | $     | 34,385 |        |   | $ | 34,136 |        |  | $ | 132,472 |       
|Total interest expense                |                                   |       | 15,948  |        |  |       | 17,153 |        |  |       | 18,853 |        |   |   | 19,524 |        |  |   | 71,478  |       
|                                      |                                   |       |         |        |  |       |        |        |  |       |        |        |   |   |        |        |  |   |         |       
|                                      | Net interest income               |       |         | 15,257 |  |       |        | 15,593 |  |       |        | 15,532 |   |   |        | 14,612 |  |   |         | 60,994 | 
|Provision for credit losses           |                                   |       | 1,906   |        |  |       | 1,875  |        |  |       | 1,525  |        |   |   | 2,233  |        |  |   | 7,539   |       
|Noninterest income                    |                                   |       | 1,714   |        |  |       | 2,752  |        |  |       | 2,665  |        |   |   | 2,893  |        |  |   | 10,024  |       
|Noninterest expense                   |                                   |       | 11,168  |        |  |       | 12,025 |        |  |       | 12,135 |        |   |   | 11,351 |        |  |   | 46,679  |       
|                                      |                                   |       |         |        |  |       |        |        |  |       |        |        |   |   |        |        |  |   |         |       
|                                      | Income before income taxes        |       |         | 3,897  |  |       |        | 4,445  |  |       |        | 4,537  |   |   |        | 3,921  |  |   |         | 16,800 | 
|Income tax expense                    |                                   |       | 1,463   |        |  |       | 1,675  |        |  |       | 1,548  |        |   |   | 896    |        |  |   | 5,582   |       
|                                      |                                   |       |         |        |  |       |        |        |  |       |        |        |   |   |        |        |  |   |         |       
|                                      | Net income                        |       | $       | 2,434  |  |       | $      | 2,770  |  |       | $      | 2,989  |   |   | $      | 3,025  |  |   | $       | 11,218 | 
|                                      |                                   |       |         |        |  |       |        |        |  |       |        |        |   |   |        |        |  |   |         |       
|Basic earnings per share              |                                   | $     | 0.68    |        |  | $     | 0.78   |        |  | $     | 0.85   |        |   | $ | 0.86   |        |  | $ | 3.17    |       
|Diluted earnings per share            |                                   | $     | 0.68    |        |  | $     | 0.78   |        |  | $     | 0.85   |        |   | $ | 0.86   |        |  | $ | 3.17    |       

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ITEM  7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASSET/LIABILITY MANAGEMENT AND INTEREST RATE SENSITIVITY

Market risk is the risk of loss in a financial instrument arising from adverse
changes in market rates/prices such as interest rates, foreign currency
exchange rates, commodity prices and equity prices. The Companys primary
market risk exposure is interest rate risk. The ongoing monitoring and
management of this risk is an important component of the Companys
asset/liability management process which is governed by policies established by
its Board of Directors that are reviewed and approved annually. The Board of
Directors delegates responsibility for carrying out the asset/liability
management policies to the Asset/Liability Committee (ALCO). In this
capacity, ALCO develops guidelines and strategies impacting the Companys
asset/liability management related activities based upon estimated market risk
sensitivity, policy limits and overall market interest rate levels and trends.

The matching of assets and liabilities may be analyzed by examining the extent
to which such assets and liabilities are interest rate sensitive and by
monitoring an institutions interest-rate sensitivity gap. An asset or
liability is said to be interest rate sensitive within a specific time period
if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of
interest-bearing assets maturing or repricing within a specific time period and
the amount of interest-bearing liabilities maturing or repricing within that
time period. A gap is considered positive when the amount of interest rate
sensitive assets exceeds the amount of interest rate sensitive liabilities. A
gap is considered negative when the amount of interest rate sensitive
liabilities exceeds the amount of interest rate sensitive assets. During a
period of falling interest rates, the net earnings of an institution with a
positive gap theoretically may be adversely affected due to its
interest-earning assets repricing to a greater extent than its interest-bearing
liabilities. Conversely, during a period of rising interest rates,
theoretically, the net earnings of an institution with a positive gap position
may increase as it is able to invest in higher yielding interest-earning assets
at a more rapid rate than its interest-bearing liabilities reprice.

The Company also measures and monitors its sensitivity to interest rates using
net interest income simulations on a quarterly basis. Any identified exposure
is managed primarily through the use of derivative instruments that have been
designated and have qualified as either cash flow hedging instruments such as
swaps, caps and floors or fair value hedging instruments such as options.
Additionally, the Company extends or shortens the duration of the investment
and mortgage/asset-backed securities portfolio, retail certificates of deposit
and FHLB advances. The Company currently does not engage in the use of trading
activities, high-risk derivatives and synthetic instruments in controlling its
interest rate risk. Such uses are permitted at the recommendation of ALCO with
the approval of the Board of Directors.

The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at December 31, 2001, which are
anticipated by the Company, based upon certain assumptions, to reprice or
mature in each of the future time periods shown. Except as stated below, the
amounts of assets and liabilities shown which reprice or mature during a
particular period were determined in accordance with the earlier of term to
repricing or the contractual terms of the asset or liability. Since all
interest rates and yields do not adjust at the same velocity or magnitude, and
since volatility is subject to change, the gap is only a general indicator of
interest rate sensitivity.

|                                           |                                                                                              |      |         |         |        |      |          |         |     |       |         |           |          |       |         |         |  |   |         |         |  |   |          |         |  |   |           |         | 
|------------------------------------------ | -------------------------------------------------------------------------------------------- | ---- | ------- | ------- | ------ | ---- | -------- | ------- | --- | ----- | ------- | --------- | -------- | ----- | ------- | ------- |  | - | ------- | ------- |  | - | -------- | ------- |  | - | --------- | ------- | 
|                                           |                                                                                              |      | 0-90    |         | 91-180 |      | 181-365  |         | 1-5 |       | Over 5  |           | Non-rate |       |         |         | 
|(in thousands)                             |                                                                                              | Days |         | days    |        | days |          | Years   |     | years |         | sensitive |          | Total
|                                           |                                                                                              |      |         |         |        |      |          |         |     |       |         |           |          |      
|Assets:                                    |                                                                                              |      |         |         |        |      |          |         |     |       |         |           |          |       |         |         |  |   |         |         |  |   |          |         |  |   |           |        
|                                           | Investment and mortgage/asset-backed securities and
interest-bearing deposits in
other banks |      | $       | 37,433  |        |      | $        | 6,814   |     |       | $       | 13,292    |          |       | $       | 93,062  |  |   | $       | 112,385 |  |   | $        |        |  |   | $         | 262,986 | 
|                                           | Federal funds sold                                                                           |      |         | 10,655  |        |      |          |        |     |       |         |          |          |       |         |        |  |   |         |        |  |   |          |        |  |   |           | 10,655  | 
|                                           | Commercial loans                                                                             |      |         | 167,250 |        |      |          | 3,194   |     |       |         | 7,492     |          |       |         | 34,852  |  |   |         | 5,415   |  |   |          |        |  |   |           | 218,203 | 
|                                           | Real estate loans                                                                            |      |         | 102,044 |        |      |          | 74,860  |     |       |         | 131,621   |          |       |         | 362,330 |  |   |         | 197,041 |  |   |          |        |  |   |           | 867,896 | 
|                                           | Consumer loans                                                                               |      |         | 68,087  |        |      |          | 5,447   |     |       |         | 9,574     |          |       |         | 51,028  |  |   |         | 3,243   |  |   |          |        |  |   |           | 137,379 | 
|                                           | Other assets                                                                                 |      |         |        |        |      |          |        |     |       |         |          |          |       |         |        |  |   |         |        |  |   |          | 88,921  |  |   |           | 88,921  | 
|                                           |                                                                                              |      |         |         |        |      |          |         |     |       |         |           |          |       |         |         |  |   |         |         |  |   |          |         |  |   |           |        
|Total assets                               |                                                                                              | $    | 385,469 |         |        | $    | 90,315   |         |     | $     | 161,979 |           |          | $     | 541,272 |         |  | $ | 318,084 |         |  | $ | 88,921   |         |  | $ | 1,586,040 |        
|                                           |                                                                                              |      |         |         |        |      |          |         |     |       |         |           |          |       |         |         |  |   |         |         |  |   |          |         |  |   |           |        
|Liabilities and stockholders equity:      |                                                                                              |      |         |         |        |      |          |         |     |       |         |           |          |       |         |         |  |   |         |         |  |   |          |         |  |   |           |        
|                                           | Noninterest-bearing deposits                                                                 |      | $       |        |        |      | $        |        |     |       | $       |          |          |       | $       |        |  |   | $       |        |  |   | $        | 160,570 |  |   | $         | 160,570 | 
|                                           | Time and savings deposits                                                                    |      |         | 398,408 |        |      |          | 102,532 |     |       |         | 101,386   |          |       |         | 207,911 |  |   |         | 167,628 |  |   |          |        |  |   |           | 977,865 | 
|                                           | Short-term borrowings                                                                        |      |         | 66,200  |        |      |          | 9,900   |     |       |         |          |          |       |         |        |  |   |         |        |  |   |          |        |  |   |           | 76,100  | 
|                                           | Long-term debt                                                                               |      |         | 20,002  |        |      |          | 10,003  |     |       |         | 5,005     |          |       |         | 76,252  |  |   |         | 103,162 |  |   |          |        |  |   |           | 214,424 | 
|                                           | Other liabilities                                                                            |      |         |        |        |      |          |        |     |       |         |          |          |       |         |        |  |   |         |        |  |   |          | 23,319  |  |   |           | 23,319  | 
|                                           | Stockholders equity                                                                         |      |         |        |        |      |          |        |     |       |         |          |          |       |         |        |  |   |         |        |  |   |          | 133,762 |  |   |           | 133,762 | 
|                                           |                                                                                              |      |         |         |        |      |          |         |     |       |         |           |          |       |         |         |  |   |         |         |  |   |          |         |  |   |           |        
|Total liabilities and stockholders
equity |                                                                                              | $    | 484,610 |         |        | $    | 122,435  |         |     | $     | 106,391 |           |          | $     | 284,163 |         |  | $ | 270,790 |         |  | $ | 317,651  |         |  | $ | 1,586,040 |        
|                                           |                                                                                              |      |         |         |        |      |          |         |     |       |         |           |          |       |         |         |  |   |         |         |  |   |          |         |  |   |           |        
|Interest rate sensitivity gap              |                                                                                              | $    | (99,141 | )       |        | $    | (32,120  | )       |     | $     | 55,588  |           |          | $     | 257,109 |         |  | $ | 47,294  |         |  | $ | (228,730 | )       |  | $ |          |        
|Cumulative interest rate
sensitivity gap   |                                                                                              | $    | (99,141 | )       |        | $    | (131,261 | )       |     | $     | (75,673 | )         |          | $     | 181,436 |         |  | $ | 228,730 |         |  | $ |         |         |  | $ |          |        

The Companys policy is to match its level of interest-earning assets and
interest-bearing liabilities within a limited range, thereby reducing its
exposure to interest rate fluctuations. In connection with these asset and
liability management objectives, various actions have been taken, including
changes in the composition of assets and liabilities, and the use of financial
instruments.

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When appropriate, ALCO may utilize off-balance sheet instruments such as
interest rate floors, caps and swaps to hedge its interest rate risk position.
A Board of Directors approved hedging policy statement governs the use of these
instruments.

The financial instruments used and their notional amounts outstanding at
December 31 for the years indicated were as follows:

|                       |                                    |      |   |        |   |      |   |        |   |  |   |   |  
|---------------------- | ---------------------------------- | ---- | - | ------ | - | ---- | - | ------ | - |  | - | - | -
|(dollars in thousands) |                                    | 2001 |   | 2000   |   | 1999
|                       |                                    |      |   |        |   |     
|Interest rate swaps:   |                                    |      |   |        |   |      |   |        |   |  |   |  
|                       | Pay-floating swaps-notional amount |      | $ | 15,000 |   |      | $ | 15,000 |   |  | $ |  |  
|                       | Average receive rate               |      |   | 7.29   | % |      |   | 7.29   | % |  |   |  | %
|                       | Average pay rate                   |      |   | 2.07   | % |      |   | 6.67   | % |  |   |  | %

Under interest rate swaps, the Company agrees with other parties to exchange,
at specified intervals, the difference between fixed rate and floating rate
interest amounts calculated by reference to the agreed notional amount. The
Company received the fixed rate and paid the floating rate for all of its swaps
outstanding at December 31, 2001.

Interest rate contracts are primarily used to convert certain deposits and
long-term debt to floating interest rates or to convert certain groups of
customer loans and other interest earning assets to fixed rates. Certain
interest rate swaps specifically match the amounts and terms of particular
liabilities.

Interest rate options, which primarily consist of caps and floors, are interest
rate protection instruments that involve the payment from the seller to the
buyer of an interest rate differential in exchange for a premium paid by the
buyer. This differential represents the difference between current interest
rates and an agreed upon rate applied to a notional amount. Interest rate caps
limit the cap holders risk associated with an increase in interest rates.
Interest rate floors limit the risk associated with a decline in interest
rates.

INTEREST RATE RISK

Interest rate options at December 31, 2001 and 2000 consisted of the following:

|               |                             |        |          |            |           |        |          |            |           |        |  |   |    |    |  |  | 
|-------------- | --------------------------- | ------ | -------- | ---------- | --------- | ------ | -------- | ---------- | --------- | ------ |  | - | -- | -- |  |  | 
|               |                             |        | 2001     |            | 2000     
|               |                             |        |          |            |          
|               |                             |        | Notional |            | Estimated |        | Notional |            | Estimated
|(in thousands) |                             | Amount |          | Fair Value |           | Amount |          | Fair Value
|               |                             |        |          |            |           |        |          |           
|Caps           |                             | $      | 50,000   |            |           | nil    |          | $          | 50,000    |        |  | $ | 30 |   
|               |                             |        |          |            |           |        |          |            |           |        |  |   |    |    |  | 
|               | Total interest rate options |        | $        | 50,000     |           |        | nil      |            | $         | 50,000 |  |   | $  | 30 | 
|               |                             |        |          |            |           |        |          |            |           |        |  |   |    |    |  | 

Interest rate risk represents the sensitivity of earnings to changes in market
interest rates. As interest rates change, the interest income and expense
streams associated with the Companys financial instruments also change thereby
impacting net interest income (NII), the primary component of the Companys
earnings. ALCO utilizes the results of a detailed and dynamic simulation model
to quantify the estimated exposure of NII to sustained interest rate changes.
While ALCO routinely monitors simulated NII sensitivity over a rolling two-year
horizon, it also utilizes additional tools to monitor potential longer-term
interest rate risk.

The simulation model captures the impact of changing interest rates on the
interest income received and interest expense paid on all assets and
liabilities reflected on the Companys balance sheet as well as for off-balance
sheet derivative financial instruments. This sensitivity analysis is compared
to ALCO policy limits which specify a maximum tolerance level for NII exposure
over a one-year horizon, assuming no balance sheet growth, given both a 200
basis point (bp) upward and downward shift in interest rates. A parallel and
pro rata shift in rates over a 12-month period is assumed. The following
reflects the Companys NII sensitivity analysis as of December 31, 2001.

|            |  |                           |       |   
|----------- |  | ------------------------- | ----- | --
|Rate Change |  | Estimated NII Sensitivity
|            |  |                          
|+200bp      |  |                           | (1.80 | )%
|200bp      |  |                           | (2.32 | )%

The decrease in loans and investments from December 31, 2000 to 2001 of $75.6
million, or 5.9%, and $68.5 million, or 20.7%, respectively, has been
predominantly in longer-term fixed rate or prime-based loans and
mortgage/asset-backed securities. Cash flows from this asset decrease was
offset by an $80.0 million, or 6.6%, decrease in total deposits ($186.8 million
decrease in time deposits, offset by a $106.8 million increase in demand
deposits). The remaining cash flows have been used to pay down maturing
advances. These changes have made the balance sheet less liability sensitive
and more positively exposed to continued upward movement in interest rates.

The preceding sensitivity analysis does not represent a Company forecast and
should not be relied upon as being indicative of expected operating results.
These hypothetical estimates are based upon numerous assumptions including:
the nature and timing of interest rate levels including yield curve shape,
prepayments on loans and securities, deposit decay rates, pricing decisions on
loans and deposits, reinvestment/replacement of asset and liability
cash flows,
and others. While assumptions are developed based upon current economic and
local market conditions, the Company cannot make any assurances as to the
predictive nature of these assumptions including how customer preferences or
competitor influences might change.

Also, as market conditions vary from those assumed in the sensitivity analysis,
actual results will also differ due to: prepayment/refinancing levels likely
deviating from those assumed, the varying impact of interest rate change caps
or floors on adjustable rate assets, the potential effect of changing debt
service levels on customers with adjustable rate loans, depositor early
withdrawals and product preference changes, and other internal/external
variables. Furthermore, the sensitivity analysis does not reflect actions that
ALCO might take in responding to or anticipating changes in interest rates.

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ITEM  8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS REPORT

CB BANCSHARES, INC. AND SUBSIDIARIES

December 31, 2001, 2000 and 1999

C O N T E N T S

|                                                                                           |  |      |       | 
|------------------------------------------------------------------------------------------ |  | ---- | ----- | 
|                                                                                           |  | PAGE
|                                                                                           |  |     
|INDEPENDENT AUDITORS REPORT                                                               |  |      | 25    | 
|                                                                                          
|CONSOLIDATED FINANCIAL STATEMENTS                                                          |  |      |       | 
|CONSOLIDATED BALANCE SHEETS                                                                |  |      | 26    | 
|CONSOLIDATED STATEMENTS OF INCOME                                                          |  |      | 27    | 
|CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY AND COMPREHENSIVE INCOME (LOSS) |  |      | 28    | 
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                                      |  |      | 29    | 
|                                                                                          
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                             |  |      | 30-46 | 

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INDEPENDENT AUDITORS REPORT

CB Bancshares, Inc. and Subsidiaries

The Board of Directors and Stockholders
CB Bancshares, Inc.:

We have audited the accompanying consolidated balance sheets of CB Bancshares,
Inc. and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of income, changes in stockholders equity and
comprehensive income (loss), and cash flows for each of the years in the
three-year period ended December 31, 2001. 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 CB Bancshares, Inc.
and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America.

/s/ KPMG LLP

KPMG LLP

Honolulu, Hawaii
January 17, 2002

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##### Table of Contents



CONSOLIDATED BALANCE SHEETS

CB Bancshares, Inc. and Subsidiaries

|                                                                |                                                           |                                                                                                            |                            |         |              |           |           |           |       |           | 
|--------------------------------------------------------------- | --------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ------------ | --------- | --------- | --------- | ----- | --------- | 
|                                                                |                                                           |                                                                                                            |                            |         | December 31,
|                                                                |                                                           |                                                                                                            |                            |         |             
|(in thousands, except number of shares and per share data)      |                                                           | 2001                                                                                                       |                            | 2000   
|                                                                |                                                           |                                                                                                            |                            |        
|ASSETS                                                          |                                                           |                                                                                                            |                            |         |              |           |           |          
|Cash and due from banks (note A)                                |                                                           | $                                                                                                          | 22,395                     |         |              | $         | 40,172    |          
|Interest-bearing deposits in other banks (note K)               |                                                           |                                                                                                            | 1,017                      |         |              |           | 1,058     |          
|Federal funds sold                                              |                                                           |                                                                                                            | 10,655                     |         |              |           | 610       |          
|Investment and mortgage-backed securities (notes D, J and K):   |                                                           |                                                                                                            |                            |         |              |           |           |          
|                                                                | Held-to-maturity                                          |                                                                                                            |                            | 26,000  |              |           |           |          |      
|                                                                | Available-for-sale                                        |                                                                                                            |                            | 203,563 |              |           |           | 298,089   |      
|                                                                | FHLB stock                                                |                                                                                                            |                            | 32,406  |              |           |           | 32,430    |      
|Loans held-for-sale                                             |                                                           |                                                                                                            | 50,661                     |         |              |           | 33,696    |          
|Loans, net (notes E, F, J and K)                                |                                                           |                                                                                                            | 1,172,817                  |         |              |           | 1,250,215 |          
|Premises and equipment, net (note H)                            |                                                           |                                                                                                            | 17,633                     |         |              |           | 18,081    |          
|Other real estate owned and other repossessed property (note G) |                                                           |                                                                                                            | 4,674                      |         |              |           | 3,458     |          
|Accrued interest receivable and other assets (notes N and S)    |                                                           |                                                                                                            | 44,219                     |         |              |           | 43,793    |          
|                                                                |                                                           |                                                                                                            |                            |         |              |           |           |          
|TOTAL ASSETS                                                    |                                                           | $                                                                                                          | 1,586,040                  |         |              | $         | 1,721,602 |          
|                                                                |                                                           |                                                                                                            |                            |         |              |           |           |          
|LIABILITIES AND STOCKHOLDERS EQUITY                            |                                                           |                                                                                                            |                            |         |              |           |           |          
|Deposits (note I):                                              |                                                           |                                                                                                            |                            |         |              |           |           |          
|                                                                | Noninterest-bearing                                       |                                                                                                            | $                          | 160,570 |              |           | $         | 128,944   |      
|                                                                | Interest-bearing                                          |                                                                                                            |                            | 977,865 |              |           |           | 1,089,519 |      
|                                                                |                                                           |                                                                                                            |                            |         |              |           |           |          
|                                                                |                                                           |                                                                                                            | Total deposits             |         |              | 1,138,435 |           |           |       | 1,218,463 | 
|                                                                |                                                           |                                                                                                            |                            |         |              |           |           |          
|Short-term borrowings (note J)                                  |                                                           |                                                                                                            | 76,100                     |         |              |           | 170,700   |          
|Accrued expenses and other liabilities (notes N and O)          |                                                           |                                                                                                            | 20,599                     |         |              |           | 20,714    |          
|Long-term debt (note K)                                         |                                                           |                                                                                                            | 214,424                    |         |              |           | 181,563   |          
|Minority interest in consolidated subsidiary (note L)           |                                                           |                                                                                                            | 2,720                      |         |              |           | 7,000     |          
|                                                                |                                                           |                                                                                                            |                            |         |              |           |           |          
|                                                                |                                                           |                                                                                                            | Total liabilities          |         |              | 1,452,278 |           |           |       | 1,598,440 | 
|                                                                |                                                           |                                                                                                            |                            |         |              |           |           |          
|Commitments and contingencies (notes H, K, P, Q, R and S)       |                                                           |                                                                                                            |                            |         |              |           |           |          
|Stockholders equity (notes S and T):                           |                                                           |                                                                                                            |                            |         |              |           |           |          
|                                                                | Preferred
stock $1 par value                             |                                                                                                            |                            |         |              |           |           |           |      
|                                                                |                                                           | Authorized and unissued 25,000,000 shares                                                                  |                            |         |             |           |           |           |      |          
|                                                                | Common
stock $1 par value                                |                                                                                                            |                            |         |              |           |           |           |      
|                                                                |                                                           | Authorized 50,000,000 shares; issued and outstanding
3,506,082 shares in 2001 and 3,188,534 shares in 2000 |                            |         | 3,506        |           |           |           | 3,189 |          
|                                                                | Additional paid-in capital                                |                                                                                                            |                            | 65,427  |              |           |           | 54,594    |      
|                                                                | Retained earnings                                         |                                                                                                            |                            | 65,714  |              |           |           | 72,284    |      
|                                                                | Unreleased shares to employee stock ownership plan        |                                                                                                            |                            | (1,839  | )            |           |           |          |      
|                                                                | Accumulated other comprehensive income (loss), net of tax |                                                                                                            |                            | 954     |              |           |           | (6,905    | )    
|                                                                |                                                           |                                                                                                            | Total stockholders equity |         |              | 133,762   |           |           |       | 123,162   | 
|                                                                |                                                           |                                                                                                            |                            |         |              |           |           |          
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                      |                                                           | $                                                                                                          | 1,586,040                  |         |              | $         | 1,721,602 |          
|                                                                |                                                           |                                                                                                            |                            |         |              |           |           |          

See accompanying notes to the consolidated financial statements.

26



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##### Table of Contents



CONSOLIDATED STATEMENTS OF INCOME

CB Bancshares, Inc. and Subsidiaries

|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |        |   |        |         | 
|------------------------------------- | -------------------------------------------------------------------------- | ---------------------------------------------- | -------------------------- | ----------------------------------------------------- | ------- | ------------------------ | ------- | ------- | - | ------ | ------- | ------ | - | ------ | ------- | 
|                                      |                                                                            |                                                |                            |                                                       |         | Years ended December 31,
|                                      |                                                                            |                                                |                            |                                                       |         |                         
|(in thousands, except per share data) |                                                                            | 2001                                           |                            | 2000                                                  |         | 1999                    
|                                      |                                                                            |                                                |                            |                                                       |         |                         
|Interest income:                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|                                      | Interest and fees on loans                                                 |                                                | $                          | 108,712                                               |         |                          | $       | 108,695 |   |        | $       | 90,524 |  
|                                      | Interest and dividends on investment and mortgage/asset-backed securities: |                                                |                            |                                                       |         |                          |         |         |   |        |         |        |  
|                                      |                                                                            |                                                | Taxable interest income    |                                                       |         | 15,260                   |         |         |   | 19,597 |         |        |   | 16,023 |        
|                                      |                                                                            |                                                | Nontaxable interest income |                                                       |         | 1,553                    |         |         |   | 1,551  |         |        |   | 1,035  |        
|                                      |                                                                            |                                                | Dividends                  |                                                       |         | 2,278                    |         |         |   | 2,104  |         |        |   | 2,249  |        
|                                      | Other interest income                                                      |                                                |                            | 451                                                   |         |                          |         | 525     |   |        |         | 1,402  |  
|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|                                      |                                                                            |                                                |                            | Total interest income                                 |         |                          | 128,254 |         |   |        | 132,472 |        |   |        | 111,233 | 
|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|Interest expense:                     |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|                                      | Deposits (note I)                                                          |                                                |                            | 39,438                                                |         |                          |         | 47,104  |   |        |         | 37,572 |  
|                                      | FHLB advances and other short-term borrowings                              |                                                |                            | 5,095                                                 |         |                          |         | 11,370  |   |        |         | 3,282  |  
|                                      | Long-term debt                                                             |                                                |                            | 12,915                                                |         |                          |         | 13,004  |   |        |         | 11,863 |  
|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|                                      |                                                                            |                                                |                            | Total interest expense                                |         |                          | 57,448  |         |   |        | 71,478  |        |   |        | 52,717  | 
|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|                                      |                                                                            |                                                |                            | Net interest income                                   |         |                          | 70,806  |         |   |        | 60,994  |        |   |        | 58,516  | 
|Provision for credit losses (note F)  |                                                                            |                                                | 13,628                     |                                                       |         |                          | 7,539   |         |   |        | 4,975   |       
|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|                                      |                                                                            |                                                |                            | Net interest income after provision for
credit losses |         |                          | 57,178  |         |   |        | 53,455  |        |   |        | 53,541  | 
|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|Noninterest income:                   |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|                                      | Service charges on deposit accounts                                        |                                                |                            | 3,811                                                 |         |                          |         | 2,900   |   |        |         | 2,060  |  
|                                      | Other service charges and fees                                             |                                                |                            | 4,897                                                 |         |                          |         | 4,063   |   |        |         | 3,979  |  
|                                      | Net realized gains on sales of securities (notes D and U)                  |                                                |                            | 931                                                   |         |                          |         | (421    | ) |        |         | (32    | )
|                                      | Net gains (losses) on sales of loans                                       |                                                |                            | 2,060                                                 |         |                          |         | 537     |   |        |         | 2,744  |  
|                                      |                                                                            | Impairment of asset-backed securities (note A) |                            |                                                       | (10,642 | )                        |         |         |  |        |         |        |  |       
|                                      | Other (note O)                                                             |                                                |                            | 2,860                                                 |         |                          |         | 2,945   |   |        |         | 1,577  |  
|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|                                      |                                                                            |                                                |                            | Total noninterest income                              |         |                          | 3,917   |         |   |        | 10,024  |        |   |        | 10,328  | 
|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|Noninterest expense:                  |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|                                      | Salaries and employee benefits (note S)                                    |                                                |                            | 23,111                                                |         |                          |         | 20,832  |   |        |         | 20,427 |  
|                                      | Net occupancy expense (note H)                                             |                                                |                            | 6,588                                                 |         |                          |         | 7,000   |   |        |         | 8,022  |  
|                                      | Equipment expense (note H)                                                 |                                                |                            | 3,469                                                 |         |                          |         | 3,070   |   |        |         | 3,441  |  
|                                      | Other (notes B, C and M)                                                   |                                                |                            | 18,527                                                |         |                          |         | 15,777  |   |        |         | 26,446 |  
|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|                                      |                                                                            |                                                |                            | Total noninterest expense                             |         |                          | 51,695  |         |   |        | 46,679  |        |   |        | 58,336  | 
|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|                                      |                                                                            |                                                |                            | Income before income taxes                            |         |                          | 9,400   |         |   |        | 16,800  |        |   |        | 5,533   | 
|Income tax expense (note N)           |                                                                            |                                                | 3,250                      |                                                       |         |                          | 5,582   |         |   |        | 5,227   |       
|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|                                      |                                                                            |                                                |                            | NET INCOME                                            |         | $                        | 6,150   |         |   | $      | 11,218  |        |   | $      | 306     | 
|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|Per share data (note T):              |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       
|                                      | Basic                                                                      |                                                | $                          | 1.76                                                  |         |                          | $       | 3.17    |   |        | $       | 0.08   |  
|                                      | Diluted                                                                    |                                                | $                          | 1.74                                                  |         |                          | $       | 3.17    |   |        | $       | 0.08   |  
|                                      |                                                                            |                                                |                            |                                                       |         |                          |         |         |   |        |         |       

See accompanying notes to the consolidated financial statements.

27



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##### Table of Contents



CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)

CB Bancshares, Inc. and Subsidiaries

|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |        |        |        |        |  
|------------------------------------- | --------------------- | --------------------------------------------- | ------------------------------------------------------------------- | --------------------------------- | - | ------------ | ----- | ---------- | - | -------- | ------ | ------------- | - | ------------- | ------- | ------ | ------ | - | ------ | - | - | ---------- | ------ | ----------- | - | ------ | ------- | ------ | ------ | ------ | ------ | -
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   | Unreleased |        |             |   |        |         |        |        |       
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   | Shares to  |        |             |   |        |         |        |        |       
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   | Employee   |        | Accumulated |   |        |         |       
|                                      |                       |                                               |                                                                     |                                   |   | Common Stock |       | Additional |   |          |        |               |   | Stock         |         | Other  |        |   |        |  
|                                      |                       |                                               |                                                                     |                                   |   |              |       | Paid-In    |   | Retained |        | Ownership     |   | Comprehensive |         |        |        |  
|(in thousands, except per share data) |                       | Shares                                        |                                                                     | Amount                            |   | Capital      |       | Earnings   |   | Plan     |        | Income (Loss) |   | Total        
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |              
|Year ended December 31, 2001:         |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|Balance at January 1, 2001            |                       |                                               | 3,189                                                               |                                   |   | $            | 3,189 |            |   | $        | 54,594 |               |   | $             | 72,284  |        |        | $ |       |   |   | $          | (6,905 | )           |   | $      | 123,162 |       
|                                      | Comprehensive income  |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |        |       
|                                      |                       | Net income                                    |                                                                     |                                   |  |              |       |            |  |          |        |               |  |               |         |        | 6,150  |   |        |   |  |            |        |             |  |        |         |        | 6,150  |       
|                                      |                       | Other comprehensive income,
net of tax        |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |        |        |       
|                                      |                       |                                               | Unrealized gains on securities,
net of reclassification adjustment  |                                   |   |             |       |            |   |         |        |               |   |              |         |        |        |  |        |   |   |           |        |             |   | 7,859  |         |        |        | 7,859  |       
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|                                      |                       |                                               |                                                                     | Total comprehensive income        |   |              |      |            |   |          |       |               |   |               |        |        |        |   | 6,150  |   |   |            |       |             |   |        | 7,859   |        |        |        | 14,009 |  
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|Cash dividends:                       |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|                                      | $0.43 per share       |                                               |                                                                     |                                  |   |              |       |           |   |          |        |              |   |               |         | (1,441 | )      |   |        |  |   |            |        |            |   |        |         | (1,441 | )     
|Options exercised                     |                       |                                               | 8                                                                   |                                   |   |              | 8     |            |   |          | 191    |               |   |               |        |        |        |   |       |   |   |            |       |             |   |        | 199     |       
|Stock dividend                        |                       |                                               | 318                                                                 |                                   |   |              | 318   |            |   |          | 10,907 |               |   |               | (11,279 | )      |        |   |       |   |   |            |       |             |   |        | (54     | )     
|Cancelled and retired shares          |                       |                                               | (9                                                                  | )                                 |   |              | (9    | )          |   |          | (265   | )             |   |               |        |        |        |   |       |   |   |            |       |             |   |        | (274    | )     
|Unreleased ESOP shares                |                       |                                               |                                                                    |                                   |   |              |      |            |   |          |       |               |   |               |        |        |        |   | (1,839 | ) |   |            |       |             |   |        | (1,839  | )     
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|Balance at December 31, 2001          |                       |                                               | 3,506                                                               |                                   |   | $            | 3,506 |            |   | $        | 65,427 |               |   | $             | 65,714  |        |        | $ | (1,839 | ) |   | $          | 954    |             |   | $      | 133,762 |       
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|Year ended December 31, 2000:         |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|Balance at January 1, 2000            |                       |                                               | 3,255                                                               |                                   |   | $            | 3,255 |            |   | $        | 56,219 |               |   | $             | 62,159  |        |        | $ |       |   |   | $          | (6,942 | )           |   | $      | 114,691 |       
|                                      | Comprehensive income: |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |        |       
|                                      |                       | Net income                                    |                                                                     |                                   |  |              |       |            |  |          |        |               |  |               |         |        | 11,218 |   |        |   |  |            |        |             |  |        |         |        | 11,218 |       
|                                      |                       | Other comprehensive income (loss),
net of tax |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |        |        |       
|                                      |                       |                                               | Unrealized losses on securities,
net of reclassification adjustment |                                   |   |             |       |            |   |         |        |               |   |              |         |        |        |  |        |   |   |           |        |             |   | 37     |         |        |        | 37     |       
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|                                      |                       |                                               |                                                                     | Total comprehensive income        |   |              |      |            |   |          |       |               |   |               |        |        |        |   | 11,218 |   |   |            |       |             |   |        | 37      |        |        |        | 11,255 |  
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|Cash dividends:                       |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|                                      | $0.34 per share       |                                               |                                                                     |                                  |   |              |       |           |   |          |        |              |   |               |         | (1,093 | )      |   |        |  |   |            |        |            |   |        |         | (1,093 | )     
|Cancelled and retired shares          |                       |                                               | (66                                                                 | )                                 |   |              | (66   | )          |   |          | (1,625 | )             |   |               |        |        |        |   |       |   |   |            |       |             |   |        | (1,691  | )     
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|Balance at December 31, 2000          |                       |                                               | 3,189                                                               |                                   |   | $            | 3,189 |            |   | $        | 54,594 |               |   | $             | 72,284  |        |        | $ |       |   |   | $          | (6,905 | )           |   | $      | 123,162 |       
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|Year ended December 31, 1999:         |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|Balance at January 1, 1999            |                       |                                               | 3,552                                                               |                                   |   | $            | 3,552 |            |   | $        | 65,108 |               |   | $             | 62,784  |        |        | $ |       |   |   | $          | 928    |             |   | $      | 132,372 |       
|                                      | Comprehensive income: |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |        |       
|                                      |                       | Net income                                    |                                                                     |                                   |  |              |       |            |  |          |        |               |  |               |         |        | 306    |   |        |   |  |            |        |             |  |        |         |        | 306    |       
|                                      |                       | Other comprehensive income (loss),
net of tax |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |        |        |       
|                                      |                       |                                               | Unrealized losses on securities,
net of reclassification adjustment |                                   |   |             |       |            |   |         |        |               |   |              |         |        |        |  |        |   |   |           |        |             |   | (7,870 | )       |        |        | (7,870 | )     
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|                                      |                       |                                               |                                                                     | Total comprehensive income
(loss) |   |              |      |            |   |          |       |               |   |               |        |        |        |   | 306    |   |   |            |       |             |   |        | (7,870  | )      |        |        | (7,564 | )
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|Options exercised                     |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|Cash dividends:                       |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|                                      | $0.23 per share       |                                               |                                                                     |                                  |   |              |       |           |   |          |        |              |   |               |         | (931   | )      |   |        |  |   |            |        |            |   |        |         | (931   | )     
|Cancelled and retired shares          |                       |                                               | (297                                                                | )                                 |   |              | (297  | )          |   |          | (8,889 | )             |   |               |        |        |        |   |       |   |   |            |       |             |   |        | (9,186  | )     
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       
|Balance at December 31, 1999          |                       |                                               | 3,255                                                               |                                   |   | $            | 3,255 |            |   | $        | 56,219 |               |   | $             | 62,159  |        |        | $ |       |   |   | $          | (6,942 | )           |   | $      | 114,691 |       
|                                      |                       |                                               |                                                                     |                                   |   |              |       |            |   |          |        |               |   |               |         |        |        |   |        |   |   |            |        |             |   |        |         |       

See accompanying notes to the consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

CB Bancshares, Inc. and Subsidiaries

|                                                   |                                                                                   |                                                     |                                                     |          |                          |          |        |          |          |         |        |          |          |         | 
|-------------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | -------- | ------------------------ | -------- | ------ | -------- | -------- | ------- | ------ | -------- | -------- | ------- | 
|                                                   |                                                                                   |                                                     |                                                     |          | Years ended December 31,
|                                                   |                                                                                   |                                                     |                                                     |          |                         
|(in thousands)                                     |                                                                                   | 2001                                                |                                                     | 2000     |                          | 1999    
|                                                   |                                                                                   |                                                     |                                                     |          |                          |         
|Cash flows from operating activities:              |                                                                                   |                                                     |                                                     |          |                          |          |        |          |          |         |        |         
|                                                   | Net income                                                                        |                                                     | $                                                   | 6,150    |                          |          | $      | 11,218   |          |         | $      | 306      |         
|                                                   | Adjustments to reconcile net income to net cash
provided by operating activities: |                                                     |                                                     |          |                          |          |        |          |          |         |        |          |         
|                                                   |                                                                                   | Provision for credit losses                         |                                                     |          | 13,628                   |          |        |          | 7,539    |         |        |          | 4,975    |        
|                                                   |                                                                                   | Impairment of asset-backed securities               |                                                     |          | 10,642                   |          |        |          |         |         |        |          |         |        
|                                                   |                                                                                   | Gain on sale of foreclosed assets                   |                                                     |          | (50                      | )        |        |          | (378     | )       |        |          |         |        
|                                                   |                                                                                   | Net realized (gains) losses on sales of securities  |                                                     |          | (931                     | )        |        |          | 421      |         |        |          | 32       |        
|                                                   |                                                                                   | Depreciation and amortization                       |                                                     |          | 2,329                    |          |        |          | 2,906    |         |        |          | 4,492    |        
|                                                   |                                                                                   | Deferred income taxes                               |                                                     |          | 86                       |          |        |          | 2,526    |         |        |          | 1,409    |        
|                                                   |                                                                                   | Decrease (increase) in accrued interest receivable  |                                                     |          | 1,526                    |          |        |          | (923     | )       |        |          | (2,203   | )      
|                                                   |                                                                                   | Increase (decrease) in accrued interest payable     |                                                     |          | (3,577                   | )        |        |          | 29       |         |        |          | 822      |        
|                                                   |                                                                                   | Loans originated for sale                           |                                                     |          | (189,441                 | )        |        |          | (60,965  | )       |        |          | (144,342 | )      
|                                                   |                                                                                   | Sale of loans held for sale                         |                                                     |          | 172,476                  |          |        |          | 59,039   |         |        |          | 148,323  |        
|                                                   |                                                                                   | Decrease (increase) in other assets                 |                                                     |          | (1,952                   | )        |        |          | (3,240   | )       |        |          | 1,743    |        
|                                                   |                                                                                   | Increase (decrease) in other liabilities            |                                                     |          | (1,601                   | )        |        |          | (580     | )       |        |          | 3,461    |        
|                                                   |                                                                                   | Write-off of goodwill                               |                                                     |          |                         |          |        |          |         |         |        |          | 7,873    |        
|                                                   |                                                                                   | Restructuring and merger-related charges            |                                                     |          |                         |          |        |          |         |         |        |          | 1,551    |        
|                                                   |                                                                                   | Other                                               |                                                     |          | 151                      |          |        |          | 458      |         |        |          | (329     | )      
|                                                   |                                                                                   |                                                     |                                                     |          |                          |          |        |          |          |         |        |         
|                                                   |                                                                                   |                                                     | Net cash provided by operating activities           |          |                          | 9,436    |        |          |          | 18,050  |        |          |          | 28,113  | 
|                                                   |                                                                                   |                                                     |                                                     |          |                          |          |        |          |          |         |        |         
|Cash flows from investing activities:              |                                                                                   |                                                     |                                                     |          |                          |          |        |          |          |         |        |         
|                                                   | Net decrease (increase) in interest-bearing deposits
in other banks               |                                                     |                                                     | 41       |                          |          |        | (982     | )        |         |        | 19,924   |         
|                                                   | Net decrease (increase) in federal funds sold                                     |                                                     |                                                     | (10,045  | )                        |          |        | 5,090    |          |         |        | 42,052   |         
|                                                   | Purchase of held-to-maturity securities                                           |                                                     |                                                     | (26,200  | )                        |          |        |         |          |         |        |         |         
|                                                   | Repayments on held-to-maturity securities                                         |                                                     |                                                     | 198      |                          |          |        |         |          |         |        |         |         
|                                                   | Proceeds from sales of available-for-sale securities                              |                                                     |                                                     | 54,607   |                          |          |        | 7,227    |          |         |        | 32,883   |         
|                                                   | Proceeds from maturities of available-for-sale securities                         |                                                     |                                                     | 43,843   |                          |          |        | 16,268   |          |         |        | 42,581   |         
|                                                   | Purchase of available-for-sale securities                                         |                                                     |                                                     | (928     | )                        |          |        | (5,649   | )        |         |        | (205,303 | )       
|                                                   | Proceeds from sale of FHLB stock                                                  |                                                     |                                                     | 2,300    |                          |          |        | 1,400    |          |         |        |         |         
|                                                   | Purchase of FHLB stock                                                            |                                                     |                                                     | (2,276   | )                        |          |        | (2,103   | )        |         |        | (2,246   | )       
|                                                   | Net loan originations under (over) principal payments                             |                                                     |                                                     | 56,508   |                          |          |        | (161,415 | )        |         |        | (150,222 | )       
|                                                   | Proceeds from sales of premises and equipment                                     |                                                     |                                                     |         |                          |          |        | 471      |          |         |        |         |         
|                                                   | Capital expenditures                                                              |                                                     |                                                     | (1,805   | )                        |          |        | (3,330   | )        |         |        | (1,233   | )       
|                                                   | Proceeds from sales of foreclosed assets                                          |                                                     |                                                     | 5,946    |                          |          |        | 9,652    |          |         |        | 10,282   |         
|                                                   | Purchase of bank owned life insurance                                             |                                                     |                                                     |         |                          |          |        |         |          |         |        | (10,000  | )       
|                                                   |                                                                                   |                                                     |                                                     |          |                          |          |        |          |          |         |        |         
|                                                   |                                                                                   | Net cash provided by (used in) investing activities |                                                     |          | 122,189                  |          |        |          | (133,371 | )       |        |          | (221,282 | )      
|                                                   |                                                                                   |                                                     |                                                     |          |                          |          |        |          |          |         |        |         
|Cash flows from financing activities:              |                                                                                   |                                                     |                                                     |          |                          |          |        |          |          |         |        |         
|                                                   | Net increase (decrease) in time deposits                                          |                                                     |                                                     | (186,798 | )                        |          |        | 97,602   |          |         |        | 31,073   |         
|                                                   | Net increase (decrease) in other deposits                                         |                                                     |                                                     | 106,770  |                          |          |        | 14,514   |          |         |        | (9,538   | )       
|                                                   | Net increase (decrease) in short-term borrowings                                  |                                                     |                                                     | (94,600  | )                        |          |        | 15,816   |          |         |        | 132,958  |         
|                                                   | Proceeds from long-term debt                                                      |                                                     |                                                     | 151,200  |                          |          |        |         |          |         |        | 150,000  |         
|                                                   | Principal payments on long-term debt                                              |                                                     |                                                     | (118,285 | )                        |          |        | (43,573  | )        |         |        | (95,947  | )       
|                                                   | Net increase (decrease) in minority interest in consolidated subsidiary           |                                                     |                                                     | (4,280   | )                        |          |        | 7,000    |          |         |        |         |         
|                                                   | Cash dividends paid                                                               |                                                     |                                                     | (1,441   | )                        |          |        | (1,093   | )        |         |        | (931     | )       
|                                                   | Cash-in-lieu payments on stock dividend                                           |                                                     |                                                     | (54      | )                        |          |        |         |          |         |        |         |         
|                                                   | Stock repurchase                                                                  |                                                     |                                                     | (273     | )                        |          |        | (1,691   | )        |         |        | (9,186   | )       
|                                                   | Stock options exercised                                                           |                                                     |                                                     | 198      |                          |          |        |         |          |         |        |         |         
|                                                   | Unreleased ESOP shares                                                            |                                                     |                                                     | (1,839   | )                        |          |        |         |          |         |        |         |         
|                                                   |                                                                                   |                                                     |                                                     |          |                          |          |        |          |          |         |        |         
|                                                   |                                                                                   |                                                     | Net cash provided by (used in) financing activities |          |                          | (149,402 | )      |          |          | 88,575  |        |          |          | 198,429 | 
|                                                   |                                                                                   |                                                     |                                                     |          |                          |          |        |          |          |         |        |         
|                                                   |                                                                                   |                                                     | Increase (decrease) in cash and due from banks      |          |                          | (17,777  | )      |          |          | (26,746 | )      |          |          | 5,260   | 
|Cash and due from banks at beginning of year       |                                                                                   |                                                     | 40,172                                              |          |                          |          | 66,918 |          |          |         | 61,658 |         
|                                                   |                                                                                   |                                                     |                                                     |          |                          |          |        |          |          |         |        |         
|Cash and due from banks at end of year             |                                                                                   | $                                                   | 22,395                                              |          |                          | $        | 40,172 |          |          |         | 66,918 |         
|                                                   |                                                                                   |                                                     |                                                     |          |                          |          |        |          |          |         |        |         
|Supplemental disclosures of cash flow information: |                                                                                   |                                                     |                                                     |          |                          |          |        |          |          |         |        |         
|                                                   |                                                                                   | Interest paid on deposits and other borrowings      |                                                     | $        | 61,023                   |          |        | $        | 71,451   |         |        | $        | 51,895   |        
|                                                   |                                                                                   | Income taxes paid                                   |                                                     |          | 5,248                    |          |        |          | 3,399    |         |        |          | 3,213    |        

Supplemental schedule of non-cash operating and investing activity:



| |  | The Company converted $7,262, $6,680 and $9,038 of loans into other real
estate owned and repossessed personal property in 2001, 2000 and 1999,
respectively.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | During 2000, the Company transferred $23,965 of loans classified as
held-for-investment to held-for-sale.                                                    
|
| |  | During 1999, the Company securitized $58,965 of mortgage loans into
mortgage-backed securities classified as available-for-sale.                             

See accompanying notes to the consolidated financial statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CB Bancshares, Inc. and Subsidiaries

NOTE A  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CB Bancshares, Inc. and Subsidiaries (the Company) provide financial services
to domestic markets and grant commercial, financial, real estate, installment
and consumer loans to customers throughout the State of Hawaii. Although the
Company has a diversified loan portfolio, a substantial portion of its debtors
ability to honor their contracts is primarily dependent upon the economy and
the real estate market in the State of Hawaii.

The significant accounting policies of the Company are as follows:

Principles of Consolidation and Presentation.The consolidated financial
statements include the accounts of CB Bancshares, Inc. (the Parent Company)
and its wholly-owned subsidiaries: City Bank and its wholly-owned subsidiaries
(the Bank); International Savings and Loan Association, Limited and its
wholly-owned subsidiaries (the Association) up to June 30, 2000; Datatronix
Financial Services, Inc. (Datatronix) and O.R.E., Inc. Significant
intercompany transactions and balances have been eliminated in consolidation.

The Companys consolidated financial statements have been prepared in
accordance with generally accepted accounting principles and conform to
prevailing practices within the banking industry. Preparing financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and the accompanying notes and the disclosure of
contingent assets and liabilities. Actual results could differ from those
estimates. Also, certain reclassifications have been made to the consolidated
financial statements and accompanying notes for the previous two years to
conform to the current years presentation. Such reclassifications did not
have a material effect on the consolidated financial statements.

Risks Associated with Financial Instruments.The credit risk of a financial
instrument is the possibility that a loss may result from the failure of
another party to perform in accordance with the terms of the contract. The
most significant credit risk associated with the Companys financial
instruments is concentrated in its loans receivable. The Company has
established a system for monitoring the level of credit risk in its loan
portfolio.

Concentrations of credit risk would exist for groups of borrowers when they
have similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or
other conditions. The ability of the Companys borrowers to repay their
commitments is contingent on several factors, including the economic conditions
in the borrowers geographic area and the individual financial condition of the
borrowers. The Company generally requires collateral or other security to
support borrower commitments on loans receivable. This collateral may take
several forms. Generally, on the Companys mortgage loans, the collateral will
be the underlying mortgaged property. The Companys lending activities are
primarily concentrated in the State of Hawaii.

Market risk is the risk of loss from adverse changes in market prices and
rates. The Companys market risk arises primarily from interest rate risk
inherent in its lending and deposit taking activities. To that end, management
actively monitors and manages its interest rate risk exposure. The Company
does not currently engage in trading activities. The Company is subject to
interest rate risk to the degree that its interest-earning assets reprice on a
different frequency or schedule than its interest-bearing liabilities. The
Company closely monitors the pricing sensitivity of its financial instruments.

Cash and Cash Equivalents. For purposes of the consolidated statements of cash
flows, cash and cash equivalents are defined as those amounts included in the
balance sheet caption, Cash and due from banks. Included in cash are amounts
restricted for the Federal Reserve requirement of $6,741,000 and $6,151,000 in
2001 and 2000, respectively.

Investment and Mortgage/Asset-Backed Securities. Investment and
mortgage/asset-backed securities are classified into the following categories:

Held-to-maturity securities are securities the Company has the positive intent
and ability to hold to maturity. Held-to-maturity securities are reported at
amortized cost with premiums and discounts included in interest income over the
period to maturity, using the interest method.

Available-for-sale securities are securities not classified as either trading
or held-to-maturity. Securities available-for-sale are reported at fair value
with unrealized gains and losses, net of tax, included as other comprehensive
income in stockholders equity. Gains and losses on sales are determined using
the specific identification method.

For individual held-to-maturity and available-for-sale securities, declines in
fair value below cost for other than temporary market conditions would result
in write-downs of the carrying value to the current fair value and the realized
losses included in earnings.

As a member of the Federal Home Loan Bank of Seattle (the FHLB), the Company
is required to maintain a minimum investment in the capital stock of the FHLB
in an amount at least equal to the greater of 1% of the aggregate principal
amount of its unpaid residential loans, residential purchase contracts and
similar obligations at the end of each calendar year, assuming for such
purposes that at least 30% of its assets were residential mortgage loans, or 5%
of its advances from the FHLB. The stock is recorded as a restricted
investment security at par.

Loans Held-to-Maturity.Interest income on loans receivable is accrued as it
is earned. Loans the Company has the intent and ability to hold until maturity
are reported at the outstanding principal balance, adjusted for any
charge-offs, the allowance for credit losses, any deferred fees or costs on
originated loans, and unamortized premiums or discounts on purchased loans.

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Loan origination fees and costs are deferred and recognized as an adjustment of
the yield. Accretion of discounts and deferred loan fees is discontinued when
loans are placed on nonaccrual status. Loan commitment fees received are
deferred as other liabilities until the loan is advanced and are then
recognized over the loan term as an adjustment of the yield. At expiration,
unused commitment fees are recognized as fees and commission revenue.
Guarantee fees received are recognized as fee revenue over the related terms.

The allowance for credit losses is periodically evaluated for adequacy by
management. Factors considered include the Companys loan loss experience,
known and inherent risks in the portfolio, current economic conditions, adverse
situations that may affect the borrowers ability to repay, regulatory
policies, and the estimated value of underlying collateral, if any. The
allowance for credit losses is increased by provision for credit losses and
decreased by charge-offs (net of recoveries).

Loans are impaired when, based on current information and events, it is
probable that principal or interest will not be collected at scheduled maturity
or will be unreasonably delayed. Impaired loans are measured at the present
value of expected future cash flows discounted at the loans effective interest
rate or the fair value of the collateral, if the loan is collateral dependent.
Large groups of smaller balance homogeneous loans, such as residential
mortgages and consumer installment loans, are collectively evaluated for
impairment, except for loans restructured under a troubled debt restructuring.

Interest accrual on impaired loans is discontinued when, in managements
opinion, the borrower may be unable to make scheduled payments. When interest
accrual is discontinued, any outstanding accrued interest is reversed and,
subsequently, interest income is recognized as payments are received.

The Company generally places loans on nonaccrual status that are 90 days past
due as to principal or interest unless well-collateralized and in the process
of collection, or when management believes that collection of principal or
interest has become doubtful, or when a loan is first classified as impaired.
When loans are placed on nonaccrual status, previously accrued and uncollected
interest is reversed against interest income of the current period. Cash
interest payments received on nonaccrual loans are applied as a reduction of
principal balance when doubt exists as to the ultimate collection of the
principal; otherwise, such payments are recorded as income.

Nonaccrual loans are generally returned to accrual status when they become both
current as to principal and interest or become both well collateralized and in
the process of collection.

Loans Held-for-Sale. The Company sells loans and participations in loans with
yield rates to the investors based upon current market rates. Gain or loss on
the sale of loans is recognized to the extent that the selling prices differ
from the carrying value of the loans sold based on the estimated relative fair
values of the assets sold and any retained interests. Residential mortgage
loans originated for sale are classified as loans held-for-sale and are
accounted for at the lower of aggregate cost or fair value.

Transfers and Servicing of Financial Assets.A transfer of financial assets is
accounted for as a sale when control is surrendered over the assets
transferred. Servicing rights and other retained interests in the assets sold
are recorded by allocating the previous recorded investment between the asset
sold and the interest retained based on their relative fair values, if
practicable to determine, at the date of transfer.

For the years presented, servicing assets and the related amortization were not
material.

Goodwill. The Companys accounting policy for assessing recoverability of
goodwill is as follows:

It is the Companys policy to review goodwill for impairment whenever events or
changes in circumstances indicate that its investment in the underlying
assets/businesses which gave rise to such goodwill may not be recoverable. The
Company evaluates the recoverability of goodwill by estimating the future
discounted cash flows of the businesses to which the goodwill relates. When
estimated future discounted cash flows are less than the carrying value of the
net assets (tangible and identifiable intangible) and related goodwill,
impairment losses of goodwill are charged to operations. Impairment losses,
limited to the carrying value of goodwill, represent the excess of the sum of
the carrying value of the net assets (tangible and identifiable intangible) and
goodwill over the discounted cash flows of the business being evaluated. In
determining the estimated future cash flows, the Company considers current and
projected future levels of income as well as business trends, prospects and
market and economic conditions. Prior to December 24, 1999, the assessment of
recoverability and measurement of impairment of goodwill was based on
undiscounted cash flows and goodwill was amortized on a straight-line basis
over its estimated useful life, principally over a fifteen year period.

As of January 1, 2002, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 142, Goodwill and Other Intangible Assets   see New
Accounting Principles discussion below.

Premises and Equipment.Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed using both the straight-line and accelerated methods over the
estimated useful lives of the assets or the applicable facility leases,
whichever is shorter. The range of estimated useful lives is 3 to 45 years for
premises and leasehold improvements and 3 to 20 years for equipment.

Other Real Estate Owned. Other real estate owned properties acquired through,
or in lieu of, foreclosure proceedings are recorded at fair value on the date
of foreclosure establishing a new cost basis. Losses arising at the time of
acquisition of such properties are charged against the allowance for credit
losses. After foreclosure, management performs periodic valuations and the
properties are carried at the lower of cost or fair value, less estimated costs
to sell. Revenues, expenses and provisions to the valuation allowance are
included in operations as incurred.

Income Taxes.The Company files consolidated income tax returns. The Bank and
Datatronix pay to the Parent Company the amount of income taxes they would have
paid had they filed separate income tax returns.

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Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized 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 operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

Stock-Based Compensation. The Company applies the intrinsic value-based method
of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations
including Financial Accounting Standards Board (FASB) interpretation No. 44,
Accounting for Certain Transactions Involving Stock Compensation, an
interpretation of APB Opinion No. 25 issued in March 2001, in accounting for
its fixed plan stock options. As such, compensation expense would be recorded
on the date of grant only if the current market price of the underlying stock
exceeded the exercise price. SFAS No. 123, Accounting for Stock-Based
Compensation, established accounting and disclosure requirements using a fair
value-based method of accounting for stock-based employee compensation plans.
As allowed by SFAS No. 123, the Company has elected to continue to apply the
intrinsic value-based method of accounting described above, and has adopted the
disclosure requirements of SFAS No. 123.

Earnings Per Share.Basic earnings per common share are based on the
weighted-average number of common shares outstanding for the year. Diluted
earnings per common share are based on the assumption that all potentially
dilutive common shares and dilutive stock options were converted at the
beginning of the year. All per share amounts have been restated to reflect the
impact of the 10% stock dividend issued in June 2001.

New Accounting Principles. Statement of Financial Accounting Standards No.
133. In June 1998, FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 requires entities to
recognize all derivatives in their financial statements as either assets or
liabilities measured at fair value. The effective date for SFAS No. 133, as
amended, was fiscal years beginning after June 15, 2000, or January 1, 2001 for
the Company. The Company implemented the standard as of January 1, 2001. The
Company uses interest rate swaps, caps and floors to modify the interest rate
characteristics of certain assets and liabilities. Interest rate swaps are
primarily used to convert certain fixed rate deposits to floating interest
rates. Since adoption of SFAS No. 133, as amended, these interest rate swaps
have been designated and qualify as fair value hedging instruments. On January
1, 2001, the Company recorded the cumulative effect of adopting SFAS No. 133,
as amended, in its identified fair value hedges. A transition adjustment of
$263,000 associated with establishing fair values of the derivative instruments
and hedged items on the balance sheet was recorded in investment securities.
No adjustments were required to net earnings in connection with adopting SFAS
No. 133, as amended. During 2001, no amounts were recognized in earnings in
connection with the ineffective portion of fair value hedges, no amounts were
excluded from the measure of effectiveness, and there were no transactions that
no longer qualified as a fair value hedge. During 2001, the Company has not had
any cash flow hedges. Derivatives not designated as hedges primarily consist
of options and instruments containing option features that behave based on
limits (caps, floors, or collars). These instruments are used to hedge
risks associated with interest rate movements. Although these instruments are
effective as hedges from an economic perspective, they do not qualify for hedge
accounting under SFAS No. 133, as amended.

Emerging Issues Task Force Issue No. 99-20. Effective as of April 1, 2001, the
Company adopted Emerging Issues Task Force Issue No. 99-20, Recognition of
Interest Income and Impairment on Purchased and Retained Beneficial Interests
in Securitized Financial Assets (EITF 99-20). EITF 99-20 states that
interest income earned on retained or purchased beneficial interests in certain
securitized financial assets should be recognized over the life of the
investment based on an anticipated yield determined by periodically estimating
cash flows. Interest income should be revised prospectively for changes in cash
flows. Additionally, impairment should be recognized if the fair value of the
beneficial interest as determined under EITF 99-20 has declined below its
carrying amount and the decline is other than temporary. Because the book
values of certain of the Companys asset backed securities were more than the
fair values of those securities as determined under EITF 99-20 during 2001, the
Company recognized a $10.6 million noncash charge (after tax charge of $6.4
million) in the Consolidated Statements of Income.

SFAS No. 141 and 142. In July 2001, SFAS No. 141, Business Combinations,
and SFAS No. 142, Goodwill and Other Intangible Assets, were issued. SFAS
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. SFAS No. 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of SFAS No. 142. SFAS No. 142 will also require that
intangible assets with estimable useful lives be amortized over their
respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes FASB Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. The Company is required to adopt the provisions of
SFAS No. 142 effective for the Company beginning January 1, 2002. As of
December 31, 2001, the Company has no assets classified as goodwill under the
new pronouncement. However, the Company does have servicing premiums. Under the
provisions of SFAS No. 142, the Company expects to continue amortizing these
intangible assets over their estimated useful lives. The impact of the adoption
of SFAS No. 142 is not expected to have a material impact on the Companys
consolidated financial statements.

SFAS No. 143. In June 2001, SFAS No. 143, Accounting for Asset Retirement
Obligations, was issued, which requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs would be capitalized as part of the carrying amount of
the long-lived asset and depreciated over the life of the asset. The liability
is accreted at the end of each period through charges to operating expense. If
the obligation is settled for other than the carrying amount of the liability,
the Company will recognize a gain or loss on settlement. The provisions of SFAS
No. 143 are effective for fiscal years beginning after June 15, 2002.
Management does not expect the implementation of SFAS No. 143 to have a
material impact on the Companys consolidated financial statements.

SFAS No. 144. In August, 2001 SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets was issued. While
SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, it retains many
of

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the fundamental provisions of that Statement. The statement is effective for
fiscal years beginning after December 15, 2001 and must be adopted as of the
beginning of the fiscal year. Management does not expect the implementation of
SFAS No. 144 to have a material impact on the Companys consolidated financial
statements.

NOTE B  CHANGE IN ACCOUNTING FOR GOODWILL

In December 1999, the Company elected to change its method for assessing
recoverability of goodwill from one based on undiscounted cash flows to one
based on discounted cash flows. The Company determined that using a discounted
cash flow methodology was a preferable policy. The rate used in determining
discounted cash flows was a rate corresponding to the Companys cost of
capital. The Company believes that fair value (i.e., discounted cash flows) is
preferable because it is consistent with the basis used for investment
decisions (acquisitions and capital projects) and takes into account the
specific and detailed operating plans and strategies of the related business
segment. This change represents a change in accounting principle which is
indistinguishable from a change in estimate. Accordingly, the effect of the
change was recorded in the fourth quarter of 1999. For the year ended December
31, 1999, amortization of goodwill was $851,000.

As a result of the change to a discounted cash flow methodology, the Company
recorded a non-cash write-off of goodwill of $7.9 million ($2.38 per diluted
share) in 1999 to write down the carrying value of goodwill to zero as of
December 24, 1999, using the methodology described in Note A.

NOTE C  RESTRUCTURING AND MERGER-RELATED CHARGES

In the fourth quarter of 1999, the Company announced plans to merge its two
principal subsidiaries, the Bank and the Association (the Merger). On July
1, 2000, the Association was merged with and into the Bank.

In connection with the Merger, the Company recorded $1.6 million ($0.9 million
and $0.28 per diluted share, after taxes) of restructuring and merger-related
charges primarily comprised of write-offs of improvements associated with
excess leased commercial property in 1999.

NOTE D  INVESTMENT AND MORTGAGE-BACKED SECURITIES

The amortized cost and estimated fair values of the Companys investment
portfolio at December 31, 2001 and 2000 were as follows:

|                                  |                                                                   |                            |         |           |        |            |       |            |   |           |        |        |   |  |         |         |        | 
|--------------------------------- | ----------------------------------------------------------------- | -------------------------- | ------- | --------- | ------ | ---------- | ----- | ---------- | - | --------- | ------ | ------ | - |  | ------- | ------- | ------ | 
|                                  |                                                                   |                            |         |           |        |            |       | Gross      |   | Gross     |        |        |   | 
|                                  |                                                                   |                            |         | Amortized |        | Unrealized |       | Unrealized |   | Estimated
|(in thousands)                    |                                                                   | Cost                       |         | Gains     |        | Losses     |       | Fair Value
|                                  |                                                                   |                            |         |           |        |            |       |           
|2001:                             |                                                                   |                            |         |           |        |            |       |            |   |           |        |        |   |  |         |        
|Held to Maturity:                 |                                                                   |                            |         |           |        |            |       |            |   |           |        |        |   |  |         |        
|                                  |                                                                   | Corporate bonds            |         | $         | 24,830 |            |       | $          |  |           |        | $      |  |  |         | $       | 24,830 | 
|                                  |                                                                   | Mortgage-backed securities |         |           | 1,170  |            |       |            |  |           |        |        |  |  |         |         | 1,170  | 
|                                  |                                                                   |                            |         |           |        |            |       |            |   |           |        |        |   |  |         |        
|                                  | Total held to maturity                                            |                            | $       | 26,000    |        |            | $     |           |   |           | $      |       |   |  | $       | 26,000  |       
|                                  |                                                                   |                            |         |           |        |            |       |            |   |           |        |        |   |  |         |        
|Available-for-sale securities:    |                                                                   |                            |         |           |        |            |       |            |   |           |        |        |   |  |         |        
|                                  | U.S. Treasury and other U.S.
government agencies and
corporations |                            | $       | 5,142     |        |            | $     | 308        |   |           | $      |       |   |  | $       | 5,450   |       
|States and political subdivisions |                                                                   |                            | 32,917  |           |        |            | 690   |            |   |           | 403    |        |   |  | 33,204  |        
|Mortgage/asset-backed securities  |                                                                   |                            | 163,829 |           |        |            | 2,065 |            |   |           | 985    |        |   |  | 164,909 |        
|                                  |                                                                   |                            |         |           |        |            |       |            |   |           |        |        |   |  |         |        
|                                  | Total available-for-sale                                          |                            | $       | 201,888   |        |            | $     | 3,063      |   |           | $      | 1,388  |   |  | $       | 203,563 |       
|                                  |                                                                   |                            |         |           |        |            |       |            |   |           |        |        |   |  |         |        
|                                  | Total investments                                                 |                            | $       | 227,888   |        |            | $     | 3,063      |   |           | $      | 1,388  |   |  | $       | 229,563 |       
|                                  |                                                                   |                            |         |           |        |            |       |            |   |           |        |        |   |  |         |        
|2000:                             |                                                                   |                            |         |           |        |            |       |            |   |           |        |        |   |  |         |        
|Available-for-sale securities:    |                                                                   |                            |         |           |        |            |       |            |   |           |        |        |   |  |         |        
|                                  | U.S. Treasury and other U.S
government agencies and
corporations  |                            | $       | 16,008    |        |            | $     | 88         |   |           | $      | 28     |   |  | $       | 16,068  |       
|States and political subdivisions |                                                                   |                            | 32,862  |           |        |            | 661   |            |   |           | 423    |        |   |  | 33,100  |        
|Mortgage/asset-backed securities  |                                                                   |                            | 260,556 |           |        |            | 1,167 |            |   |           | 12,802 |        |   |  | 248,921 |        
|                                  |                                                                   |                            |         |           |        |            |       |            |   |           |        |        |   |  |         |        
|                                  | Total available-for-sale                                          |                            | $       | 309,426   |        |            | $     | 1,916      |   |           | $      | 13,253 |   |  | $       | 298,089 |       
|                                  |                                                                   |                            |         |           |        |            |       |            |   |           |        |        |   |  |         |        

Securities with an aggregate carrying value of $99,634,000 and $148,205,000, at
December 31, 2001 and 2000, respectively, were pledged to collateralize public
deposits and for other purposes required by law.

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The following presents the amortized cost and estimated fair value of
available-for-sale investment securities at December 31, 2001 by contractual
maturity. Expected maturity will differ from contractual maturity because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. The stated maturity of mortgage/asset-backed
securities are presented in total since the principal cash flows of these
securities are not received at a single maturity date.

|                                 |       |      |                  |            |                    |      |           |            |           |   |         |         |  |   |         |         | 
|-------------------------------- | ----- | ---- | ---------------- | ---------- | ------------------ | ---- | --------- | ---------- | --------- | - | ------- | ------- |  | - | ------- | ------- | 
|                                 |       |      | Held to Maturity |            | Available for Sale
|                                 |       |      |                  |            |                   
|                                 |       |      | Amortized        |            | Estimated          |      | Amortized |            | Estimated
|(in thousands)                   |       | Cost |                  | Fair Value |                    | Cost |           | Fair Value
|                                 |       |      |                  |            |                    |      |           |           
|Due in one year or less          |       | $    |                 |            |                    | $    |          |            |           | $ |        |         |  | $ |        |        
|Due 1 to 5 years                 |       |      | 24,830           |            |                    |      | 24,830    |            |           |   | 5,142   |         |  |   | 5,450   |        
|Due 5 to 10 years                |       |      |                 |            |                    |      |          |            |           |   | 5,632   |         |  |   | 5,819   |        
|Due > 10 years                   |       |      |                 |            |                    |      |          |            |           |   | 27,285  |         |  |   | 27,385  |        
|                                 |       |      |                  |            |                    |      |           |            |           |   |         |         |  |   |         |        
|Mortgage/asset-backed
securities |       |      | 1,170            |            |                    |      | 1,170     |            |           |   | 163,829 |         |  |   | 164,909 |        
|                                 |       |      |                  |            |                    |      |           |            |           |   |         |         |  |   |         |        
|                                 | Total |      | $                | 26,000     |                    |      | $         | 26,000     |           |   | $       | 201,888 |  |   | $       | 203,563 | 
|                                 |       |      |                  |            |                    |      |           |            |           |   |         |         |  |   |         |        

Proceeds from sales of securities available-for-sale during 2001, 2000, and
1999 were $54,607,000, $7,227,000, and $32,883,000, respectively. These sales
resulted in gross realized gains of $1,075,000, $0, and $267,000 and gross
realized losses of $1,000, $421,000 and $299,000, respectively. Income tax
benefit recognized on net securities losses (including impairment charge) were
$3,787,000, $164,000 and $13,000 in 2001, 2000 and 1999, respectively.

NOTE E  LOANS

The loan portfolio consisted of the following at December 31, 2001 and 2000:

|                         |                             |             |         |         |           |   |         |         |           | 
|------------------------ | --------------------------- | ----------- | ------- | ------- | --------- | - | ------- | ------- | --------- | 
|(in thousands)           |                             | 2001        |         | 2000   
|                         |                             |             |         |        
|Commercial and financial |                             | $           | 229,824 |         |           | $ | 246,877 |        
|Real estate:             |                             |             |         |         |           |   |         |        
|                         | Construction                |             |         | 52,750  |           |   |         | 26,237  |          
|                         | Commercial                  |             |         | 190,328 |           |   |         | 192,194 |          
|                         | Residential                 |             |         | 588,525 |           |   |         | 693,068 |          
|Installment and consumer |                             |             | 135,901 |         |           |   | 114,562 |        
|                         |                             |             |         |         |           |   |         |        
|                         |                             | Gross loans |         |         | 1,197,328 |   |         |         | 1,272,938 | 
|Less:                    |                             |             |         |         |           |   |         |        
|                         | Unearned income             |             |         | 108     |           |   |         | 4       |          
|                         | Net deferred loan fees      |             |         | 4,939   |           |   |         | 5,272   |          
|                         | Allowance for credit losses |             |         | 19,464  |           |   |         | 17,447  |          
|                         |                             |             |         |         |           |   |         |        
|                         |                             | Loans, net  |         | $       | 1,172,817 |   |         | $       | 1,250,215 | 
|                         |                             |             |         |         |           |   |         |        

Substantially all of the Companys real estate loans are collateralized by
properties located in the State of Hawaii.

Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The unpaid principal balances of mortgage loans,
including mortgage/asset-backed securities serviced for others, were
$360,758,000 and $427,254,000 at December 31, 2001 and 2000, respectively.
Custodial escrow balances maintained with the foregoing loan servicing, and
included in demand deposits, were $2,058,000 and $2,508,000 at December 31,
2001 and 2000, respectively.

Nonaccrual loans amounted to $15.8 million and $15.1 million at December 31,
2001 and 2000, respectively.

In the normal course of business, the Company makes loans to its executive
officers and directors and to companies and individuals affiliated with its
executive officers and directors. In managements opinion, such loans and loan
commitments were made at the Companys normal credit terms, including interest
rates and collateral requirements, and do not represent more than a normal risk
of collection. The following is the activity of loans to such parties in 2001:

|                             |            |   |       |         |  
|---------------------------- | ---------- | - | ----- | ------- | -
|(in thousands)               |            |   |       |        
|                            
|Balance at beginning of year |            | $ | 9,740 |        
|                             | New loans  |   |       | 14,564  |  
|                             | Repayments |   |       | (15,736 | )
|                             |            |   |       |        
|Balance at end of year       |            | $ | 8,568 |        
|                             |            |   |       |        

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NOTE F  ALLOWANCE FOR CREDIT LOSSES

The changes in the allowance for credit losses for the years indicated were as
follows:

|                             |                              |      |        |         |   |      |        |        |   |   |        |        |  
|---------------------------- | ---------------------------- | ---- | ------ | ------- | - | ---- | ------ | ------ | - | - | ------ | ------ | -
|(in thousands)               |                              | 2001 |        | 2000    |   | 1999
|                             |                              |      |        |         |   |     
|Balance at beginning of year |                              | $    | 17,447 |         |   | $    | 17,942 |        |   | $ | 17,771 |       
|                             | Provision charged to expense |      |        | 13,628  |   |      |        | 7,539  |   |   |        | 4,975  |  
|                             | Recoveries                   |      |        | 817     |   |      |        | 972    |   |   |        | 619    |  
|                             | Charge-offs                  |      |        | (12,428 | ) |      |        | (9,006 | ) |   |        | (5,423 | )
|                             |                              |      |        |         |   |      |        |        |   |   |        |       
|Balance at end of year       |                              | $    | 19,464 |         |   | $    | 17,447 |        |   | $ | 17,942 |       
|                             |                              |      |        |         |   |      |        |        |   |   |        |       

Information related to loans considered to be impaired for the years indicated were as follows:

|                                                                                      |  |      |        |      |  |      |        |  |  |   |        | 
|------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|(in thousands)                                                                        |  | 2001 |        | 2000 |  | 1999
|                                                                                      |  |      |        |      |  |     
|Recorded investment in impaired loans                                                 |  | $    | 20,315 |      |  | $    | 25,180 |  |  | $ | 20,038 | 
|Impaired loans with related allowance
for credit losses calculated under
SFAS No. 114 |  |      | 8,052  |      |  |      | 21,349 |  |  |   | 8,224  | 
|Total allowance for credit losses on
impaired loans                                   |  |      | 1,555  |      |  |      | 3,636  |  |  |   | 2,262  | 
|Average recorded investment in impaired
loans during the year                         |  |      | 23,897 |      |  |      | 23,369 |  |  |   | 19,147 | 
|Interest income on impaired loans using
cash basis of income recognition              |  |      | 937    |      |  |      | 1,758  |  |  |   | 1,499  | 
|                                                                                      |  |      |        |      |  |      |        |  |  |   |        | 

NOTE G  OTHER REAL ESTATE OWNED

The carrying value of foreclosed real estate, net of the following allowance
for losses, were $4,674,000, $3,458,000 and $6,385,000 at December 31, 2001,
2000 and 1999, respectively. Activity in the allowance for losses on other
real estate owned was as follows:

|                             |                                |      |     |      |   |      |     |      |   |   |       |        |  
|---------------------------- | ------------------------------ | ---- | --- | ---- | - | ---- | --- | ---- | - | - | ----- | ------ | -
|(in thousands)               |                                | 2001 |     | 2000 |   | 1999
|                             |                                |      |     |      |   |     
|Balance at beginning of year |                                | $    | 217 |      |   | $    | 940 |      |   | $ | 1,102 |       
|                             | Provision charged to expense   |      |     | 150  |   |      |     | 243  |   |   |       | 927    |  
|                             | Charge-offs, net of recoveries |      |     | (190 | ) |      |     | (966 | ) |   |       | (1,089 | )
|                             |                                |      |     |      |   |      |     |      |   |   |       |       
|Balance at end of year       |                                | $    | 177 |      |   | $    | 217 |      |   | $ | 940   |       
|                             |                                |      |     |      |   |      |     |      |   |   |       |       

NOTE H  PREMISES AND EQUIPMENT

The Companys premises and equipment at December 31, 2001 and 2000 were as
follows:

|                                               |                    |      |        |        |  |   |        |        | 
|---------------------------------------------- | ------------------ | ---- | ------ | ------ |  | - | ------ | ------ | 
|(in thousands)                                 |                    | 2001 |        | 2000  
|                                               |                    |      |        |       
|Premises                                       |                    | $    | 22,516 |        |  | $ | 21,749 |       
|Equipment                                      |                    |      | 25,887 |        |  |   | 24,259 |       
|                                               |                    |      |        |        |  |   |        |       
|                                               | Total cost         |      |        | 48,403 |  |   |        | 46,008 | 
|Less accumulated depreciation and
amortization |                    |      | 30,770 |        |  |   | 27,927 |       
|                                               |                    |      |        |        |  |   |        |       
|                                               | Net carrying value |      | $      | 17,633 |  |   | $      | 18,081 | 
|                                               |                    |      |        |        |  |   |        |       

Depreciation and amortization charged to operations for the years ended
December 31, 2001, 2000 and 1999 were as follows:

|                      |                                     |      |       |       |  |      |       |       |  |   |       |       | 
|--------------------- | ----------------------------------- | ---- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|(in thousands)        |                                     | 2001 |       | 2000  |  | 1999
|                      |                                     |      |       |       |  |     
|Net occupancy expense |                                     | $    | 1,036 |       |  | $    | 898   |       |  | $ | 816   |      
|Equipment expense     |                                     |      | 2,234 |       |  |      | 1,894 |       |  |   | 2,057 |      
|                      |                                     |      |       |       |  |      |       |       |  |   |       |      
|                      | Total depreciation and amortization |      | $     | 3,270 |  |      | $     | 2,792 |  |   | $     | 2,873 | 
|                      |                                     |      |       |       |  |      |       |       |  |   |       |      

The Company leases certain properties and equipment under leases that expire on
various dates through 2067. Certain leases provide for renegotiations at fixed
intervals and require payment of real estate taxes, maintenance, insurance and
certain other operating expenses. Rent charged against operations, including
equipment rental, was as follows:

|                |                          |      |       |       |  |      |       |       |  |   |       |       | 
|--------------- | ------------------------ | ---- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|(in thousands)  |                          | 2001 |       | 2000  |  | 1999
|                |                          |      |       |       |  |     
|Rental expense  |                          | $    | 5,505 |       |  | $    | 6,093 |       |  | $ | 6,223 |      
|Sublease income |                          |      | 557   |       |  |      | 934   |       |  |   | 799   |      
|                |                          |      |       |       |  |      |       |       |  |   |       |      
|                | Total net rental expense |      | $     | 4,948 |  |      | $     | 5,159 |  |   | $     | 5,424 | 
|                |                          |      |       |       |  |      |       |       |  |   |       |      

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The following are future minimum net rental commitments for long-term
noncancelable operating leases as of December 31, 2001. Future rentals subject
to renegotiations are computed at the latest annual rents.

|               |       |        |           |        | 
|-------------- | ----- | ------ | --------- | ------ | 
|               |       |        | Operating
|(in thousands) |       | Leases
|               |       |       
|2002           |       | $      | 3,684     |       
|2003           |       |        | 3,657     |       
|2004           |       |        | 3,912     |       
|2005           |       |        | 3,861     |       
|2006           |       |        | 3,370     |       
|Thereafter     |       |        | 14,250    |       
|               |       |        |           |       
|               | Total |        | $         | 32,734 | 
|               |       |        |           |       

NOTE I  DEPOSITS

Deposits consisted of the following at December 31, 2001 and 2000:

|                              |                                 |                 |                |         |         |           |         |           |         |           | 
|----------------------------- | ------------------------------- | --------------- | -------------- | ------- | ------- | --------- | ------- | --------- | ------- | --------- | 
|(in thousands)                |                                 | 2001            |                | 2000   
|                              |                                 |                 |                |        
|Noninterest-bearing deposits  |                                 | $               | 160,570        |         |         | $         | 128,944 |          
|Interest-bearing deposits:    |                                 |                 |                |         |         |           |         |          
|                              |                                 | Demand deposits |                |         | 239,710 |           |         |           | 184,127 |          
|                              |                                 | Savings         |                |         | 197,927 |           |         |           | 178,366 |          
|Time deposits of $100 or more |                                 |                 | 242,348        |         |         |           | 293,959 |          
|Time deposits less than $100  |                                 |                 | 297,880        |         |         |           | 433,067 |          
|                              |                                 |                 |                |         |         |           |         |          
|                              | Total interest-bearing deposits |                 |                | 977,865 |         |           |         | 1,089,519 |        
|                              |                                 |                 |                |         |         |           |         |          
|                              |                                 |                 | Total deposits |         | $       | 1,138,435 |         |           | $       | 1,218,463 | 
|                              |                                 |                 |                |         |         |           |         |          

Interest expense on deposits for the years ended December 31, 2001, 2000 and
1999 were as follows:

|                              |                        |      |        |        |  |      |        |        |  |   |        |        | 
|----------------------------- | ---------------------- | ---- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|(in thousands)                |                        | 2001 |        | 2000   |  | 1999
|                              |                        |      |        |        |  |     
|Demand deposits               |                        | $    | 5,200  |        |  | $    | 5,693  |        |  | $ | 5,058  |       
|Savings                       |                        |      | 3,727  |        |  |      | 4,370  |        |  |   | 3,869  |       
|Time deposits of $100 or
more |                        |      | 10,908 |        |  |      | 14,329 |        |  |   | 11,392 |       
|Time deposits less than $100  |                        |      | 19,603 |        |  |      | 22,712 |        |  |   | 17,253 |       
|                              |                        |      |        |        |  |      |        |        |  |   |        |       
|                              | Total interest expense |      | $      | 39,438 |  |      | $      | 47,104 |  |   | $      | 37,572 | 
|                              |                        |      |        |        |  |      |        |        |  |   |        |       

At December 31, 2001, the scheduled maturities of time deposits were as
follows:

|               |       |   |         |         | 
|-------------- | ----- | - | ------- | ------- | 
|(in thousands)
|              
|2002           |       | $ | 433,869 |        
|2003           |       |   | 71,598  |        
|2004           |       |   | 11,881  |        
|2005           |       |   | 17,179  |        
|2006           |       |   | 5,701   |        
|               |       |   |         |        
|               | Total |   | $       | 540,228 | 
|               |       |   |         |        

NOTE J  SHORT-TERM BORROWINGS

Short-term borrowings at December 31, 2001 and 2000 consisted of the following:

|                                   |                             |      |        |        |  |   |         |         | 
|---------------------------------- | --------------------------- | ---- | ------ | ------ |  | - | ------- | ------- | 
|(in thousands)                     |                             | 2001 |        | 2000  
|                                   |                             |      |        |       
|Advances from the FHLB             |                             | $    | 75,700 |        |  | $ | 170,300 |        
|Federal treasury tax and loan
note |                             |      | 400    |        |  |   | 400     |        
|                                   |                             |      |        |        |  |   |         |        
|                                   | Total short-term borrowings |      | $      | 76,100 |  |   | $       | 170,700 | 
|                                   |                             |      |        |        |  |   |         |        

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Average interest rates and average and maximum balances for short-term
borrowing categories were as follows for categories of borrowings where the
average outstanding balance for the year was 30% or more of stockholders
equity at December 31 for the years indicated:

|                                     |  |      |         |      |  |      |         |   |  |   |         |  
|------------------------------------ |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|(dollars in thousands)               |  | 2001 |         | 2000 |  | 1999
|                                     |  |      |         |      |  |     
|Advances from the FHLB:              |  |      |         |      |  |      |         |   |  |   |         |  
|Average interest rate at year-end    |  |      | 3.13    | %    |  |      | 6.62    | % |  |   | 5.70    | %
|Maximum outstanding at any month-end |  | $    | 174,000 |      |  | $    | 219,000 |   |  | $ | 154,375 |  
|Average outstanding                  |  |      | 93,273  |      |  |      | 167,765 |   |  |   | 44,829  |  
|Average interest rate for the year   |  |      | 4.71    | %    |  |      | 6.46    | % |  |   | 5.22    | %
|                                    
|Federal funds purchased:             |  |      |         |      |  |      |         |   |  |   |         |  
|Average interest rate at year-end    |  |      |        | %    |  |      |        | % |  |   |        | %
|Maximum outstanding at any month-end |  |      | 14,300  |      |  |      |        |   |  |   | 51,880  |  
|Average outstanding                  |  |      | 3,755   |      |  |      | 1,165   |   |  |   | 16,893  |  
|Average interest rate for the year   |  |      | 3.48    | %    |  |      | 6.51    | % |  |   | 5.45    | %
|                                     |  |      |         |      |  |      |         |   |  |   |         |  

NOTE K  LONG-TERM DEBT

Long-term debt at December 31, 2001 and 2000 consisted of the following:

|                                   |                      |      |         |         |  |   |         |         | 
|---------------------------------- | -------------------- | ---- | ------- | ------- |  | - | ------- | ------- | 
|(in thousands)                     |                      | 2001 |         | 2000   
|                                   |                      |      |         |        
|Advances from the FHLB             |                      | $    | 214,424 |         |  | $ | 180,242 |        
|Collateralized mortgage
obligation |                      |      |        |         |  |   | 1,321   |        
|                                   |                      |      |         |         |  |   |         |        
|                                   | Total long-term debt |      | $       | 214,424 |  |   | $       | 181,563 | 
|                                   |                      |      |         |         |  |   |         |        

The advances from the FHLB bear interest at rates ranging from 2.05% to 8.22%.
Interest is payable monthly over the term of each advance. Pursuant to
collateral agreements with the FHLB, short and long-term advances are
collateralized by a blanket pledge of certain securities with carrying values
of nil and $70,998,000, loans of $497,119,000 and $735,665,000,
interest-bearing deposits in other banks (nil in 2001 and 2000), and all stock
in the FHLB in 2001 and 2000, respectively. FHLB advances are under credit
line agreements of $412,351,000 and $578,085,000 in 2001 and 2000,
respectively. Aggregate maturities of long-term advances from the FHLB as of
December 31, 2001 were as follows:

|               |       |   |        |         | 
|-------------- | ----- | - | ------ | ------- | 
|(in thousands) |       |   |        |        
|              
|2002           |       | $ | 35,000 |        
|2003           |       |   | 88,000 |        
|2004           |       |   | 61,200 |        
|2005           |       |   |       |        
|2006           |       |   | 30,000 |        
|Thereafter     |       |   | 224    |        
|               |       |   |        |        
|               | Total |   | $      | 214,424 | 
|               |       |   |        |        

NOTE L  MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY

During 2000, Citibank Properties, Inc. (CB Properties), a wholly-owned
subsidiary of the Bank, elected to be taxed as a real estate investment trust
(REIT). On July 18, 2000, CB Properties issued 120 shares of Series A
Preferred Stock, 10,000 shares of Series B Preferred Stock, and 55,000 shares
of Series C Preferred Stock at $1,000 per share in exchange for approximately
$150 million in participation interests in mortgage loans and mortgage-related
securities less the assumption of $85 million in advances made from the FHLB to
the Bank. During 2001, CB Properties issued 1.7 million shares of common stock
in exchange for approximately $128 million in participation interests in
mortgage loans and mortgage-related securities, less the cancellation of $61.3
million in debt owed by CB Properties to the Bank. On August 21, 2000, the
Bank sold 7,000 shares of Series B Preferred Stock to third party investors, of
which 4,400 shares were repurchased at par value during 2001. This transaction
was recorded as a minority interest for financial statement purposes and
classified as Tier 1 capital for regulatory purposes pursuant to guidelines set
forth by the Federal Deposit Insurance Corporation. CB Properties business
objective is to acquire, hold, finance and manage qualifying REIT assets.

NOTE M  OTHER NONINTEREST EXPENSE

Other noninterest expense for the years ended December 31, 2001, 2000 and 1999
were as follows:

|                                             |                                 |      |        |        |  |         |       |        |  |   |       |        | 
|-------------------------------------------- | ------------------------------- | ---- | ------ | ------ |  | ------- | ----- | ------ |  | - | ----- | ------ | 
|(in thousands)                               |                                 | 2001 |        | 2000   |  | 1999(1)
|                                             |                                 |      |        |        |  |        
|Legal and professional fees                  |                                 | $    | 4,147  |        |  | $       | 4,043 |        |  | $ | 3,224 |       
|Advertising and promotion                    |                                 |      | 2,997  |        |  |         | 2,436 |        |  |   | 2,181 |       
|Stationery and supplies                      |                                 |      | 1,004  |        |  |         | 1,002 |        |  |   | 1,347 |       
|Provision for other real estate owned
losses |                                 |      | 150    |        |  |         | 243   |        |  |   | 927   |       
|Deposit insurance premiums                   |                                 |      | 227    |        |  |         | 512   |        |  |   | 652   |       
|Other                                        |                                 |      | 10,002 |        |  |         | 7,541 |        |  |   | 8,691 |       
|                                             |                                 |      |        |        |  |         |       |        |  |   |       |       
|                                             | Total other noninterest expense |      | $      | 18,527 |  |         | $     | 15,777 |  |   | $     | 17,022 | 
|                                             |                                 |      |        |        |  |         |       |        |  |   |       |       



---

|(1) |  | 1999 figures are exclusive of restructuring and merger-related charges and
write-off of goodwill.
|--- |  | -------------------------------------------------------------------------------------------------

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NOTE N  INCOME TAXES

The components of income tax expense for the years ended December 31, 2001,
2000 and 1999 were as follows:

|               |         |                          |   |       |       |      |   |       |       |  |   |       |       | 
|-------------- | ------- | ------------------------ | - | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|(in thousands) |         | 2001                     |   | 2000  |       | 1999
|               |         |                          |   |       |       |     
|Current:       |         |                          |   |       |       |      |   |       |       |  |   |      
|               | Federal |                          | $ | 2,571 |       |      | $ | 2,506 |       |  | $ | 3,345 |      
|               | State   |                          |   | 593   |       |      |   | 550   |       |  |   | 473   |      
|               |         |                          |   |       |       |      |   |       |       |  |   |      
|               |         | Total current            |   |       | 3,164 |      |   |       | 3,056 |  |   |       | 3,818 | 
|               |         |                          |   |       |       |      |   |       |       |  |   |      
|Deferred:      |         |                          |   |       |       |      |   |       |       |  |   |      
|               | Federal |                          |   | 70    |       |      |   | 2,071 |       |  |   | 1,234 |      
|               | State   |                          |   | 16    |       |      |   | 455   |       |  |   | 175   |      
|               |         |                          |   |       |       |      |   |       |       |  |   |      
|               |         | Total deferred           |   |       | 86    |      |   |       | 2,526 |  |   |       | 1,409 | 
|               |         |                          |   |       |       |      |   |       |       |  |   |      
|               |         | Total income tax expense |   | $     | 3,250 |      |   | $     | 5,582 |  |   | $     | 5,227 | 
|               |         |                          |   |       |       |      |   |       |       |  |   |      

The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and deferred tax liabilities as of December 31, 2001 and
2000 were as follows:

|                          |                                                    |                           |                                       |        |        |        |   |        |        |        | 
|------------------------- | -------------------------------------------------- | ------------------------- | ------------------------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|(in thousands)            |                                                    | 2001                      |                                       | 2000  
|                          |                                                    |                           |                                       |       
|Deferred tax assets:      |                                                    |                           |                                       |        |        |        |   |       
|                          | Allowance for credit losses                        |                           | $                                     | 7,741  |        |        | $ | 6,970  |       
|                          | Gain on sale of building                           |                           |                                       | 1,574  |        |        |   | 1,781  |       
|                          | Deferred compensation                              |                           |                                       | 971    |        |        |   | 985    |       
|                          | Unrealized losses on available-for-sale securities |                           |                                       |       |        |        |   | 4,432  |       
|                          | Capital loss carryforward                          |                           |                                       | 1,971  |        |        |   | 2,679  |       
|                          | Other                                              |                           |                                       | 864    |        |        |   | 1,416  |       
|                          |                                                    |                           |                                       |        |        |        |   |       
|                          |                                                    | Gross deferred tax assets |                                       |        | 13,121 |        |   |        | 18,263 |       
|                          | Less: valuation allowance                          |                           |                                       | (1,591 | )      |        |   | (2,397 | )     
|                          |                                                    |                           |                                       |        |        |        |   |       
|                          |                                                    | Total deferred tax assets |                                       |        | 11,530 |        |   |        | 15,866 |       
|                          |                                                    |                           |                                       |        |        |        |   |       
|Deferred tax liabilities: |                                                    |                           |                                       |        |        |        |   |       
|                          | FHLB stock dividends                               |                           |                                       | 8,420  |        |        |   | 8,143  |       
|                          | Deferred loan fees                                 |                           |                                       | 3,645  |        |        |   | 3,292  |       
|                          | Hawaii state franchise taxes                       |                           |                                       | 334    |        |        |   | 227    |       
|                          | Unrealized gains on available-for-sale securities  |                           |                                       | 721    |        |        |   |       |       
|                          | Other                                              |                           |                                       | 2,354  |        |        |   | 2,923  |       
|                          |                                                    |                           |                                       |        |        |        |   |       
|                          |                                                    |                           | Total deferred tax liabilities        |        |        | 15,474 |   |        |        | 14,585 | 
|                          |                                                    |                           |                                       |        |        |        |   |       
|                          |                                                    |                           | Net deferred tax (liabilities) assets |        | $      | (3,944 | ) |        | $      | 1,281  | 
|                          |                                                    |                           |                                       |        |        |        |   |       

The net change in the total valuation allowance for the years ended December 31,
2001 and 2000 was a decrease of $806,000 and an increase of $2,397,000,
respectively. 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 and tax
planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods which the deferred tax assets are deductible, management believes it is
more likely than not that the Company will realize the benefits of these
deductible differences net of the existing valuation allowance at December 31,
2001.

Reconciliation of the federal statutory rate to the Companys effective income
tax rate for the years ended December 31, 2001, 2000 and 1999 was as follows:

|                                                         |                           |  |      |      |      |  |      |      |   |  |      |      |  
|-------------------------------------------------------- | ------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  | ---- | ---- | -
|                                                         |                           |  | 2001 |      | 2000 |  | 1999
|                                                         |                           |  |      |      |      |  |     
|Federal statutory rate                                   |                           |  | 35.0 | %    |      |  | 35.0 | %    |   |  | 35.0 | %   
|Tax exempt interest                                      |                           |  | (0.2 | )    |      |  | (0.3 | )    |   |  | (2.3 | )   
|Hawaii state franchise taxes, net of federal
tax benefit |                           |  | 3.0  |      |      |  | 4.9  |      |   |  | 11.3 |     
|Amortization and write-off of goodwill                   |                           |  |     |      |      |  |     |      |   |  | 55.2 |     
|Tax exempt earnings on bank owned life
insurance         |                           |  | (2.4 | )    |      |  | (2.6 | )    |   |  | (4.1 | )   
|Capital loss utilized                                    |                           |  | (2.2 | )    |      |  | (3.0 | )    |   |  |     |     
|Other                                                    |                           |  | 1.4  |      |      |  | (0.8 | )    |   |  | (0.6 | )   
|                                                         |                           |  |      |      |      |  |      |      |   |  |      |     
|                                                         | Effective income tax rate |  |      | 34.6 | %    |  |      | 33.2 | % |  |      | 94.5 | %
|                                                         |                           |  |      |      |      |  |      |      |   |  |      |     

During 1997, legislation was passed requiring the Association to recapture as
taxable income $565,000 of its bad debt reserves, which represents additions to
the reserve after June 30, 1988. The Association has provided deferred taxes
for the amount and will recapture its bad debt reserves over six years.

NOTE O  DEFERRED GAIN

Previously, CB Properties entered into a limited partnership agreement as a
limited partner. The partnership acquired the ground leases of certain real
property, constructed a commercial building on the property and sold the
leasehold estate and commercial

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building to an unrelated third party (the Purchaser). Prior to the sale, the
Bank entered into a 20-year office lease agreement with the partnership for the
ground floor, mezzanine and first four floors of the building. The Banks
lease was assigned to the Purchaser and has not been affected by the sale of
the building.

The Company recognized a deferred gain in a manner similar to that for a
sale-leaseback transaction. The deferred gain is being amortized over the
remaining lease term, resulting in annual gains of $447,000. As of December 31,
2001, the unamortized deferred gain was $3,203,000.

NOTE P  RISK MANAGEMENT ACTIVITIES

Refer to Note A  New Accounting Principles, for the Companys current
accounting treatment of derivative financial investments.

Under interest rate swaps, the Company agrees with other parties to exchange,
at specified intervals, the difference between fixed rate and floating rate
interest amounts calculated by reference to an agreed upon notional amount. At
December 31, 2001, there were three interest rate swaps outstanding, classified
as fair value hedges against time deposits, with a notional principal amount
totaling $15,000,000. The Company paid the floating rate and received the
fixed rate. The estimated fair values of the outstanding interest rate swaps
were $250,541 and $263,728 at December 31, 2001 and December 31, 2000,
respectively, and are recorded as an adjustment to investments and time
deposits. There were no interest rate swaps outstanding at December 31, 1999.

Interest rate options at December 31, 2001 and 2000 consisted of the following:

|               |                             |        |          |            |           |        |          |            |           |        |  |   |    |    |  |  | 
|-------------- | --------------------------- | ------ | -------- | ---------- | --------- | ------ | -------- | ---------- | --------- | ------ |  | - | -- | -- |  |  | 
|               |                             |        | 2001     |            | 2000     
|               |                             |        |          |            |          
|               |                             |        | Notional |            | Estimated |        | Notional |            | Estimated
|(in thousands) |                             | Amount |          | Fair Value |           | Amount |          | Fair Value
|               |                             |        |          |            |           |        |          |           
|Caps           |                             | $      | 50,000   |            |           | nil    |          | $          | 50,000    |        |  | $ | 30 |   
|               |                             |        |          |            |           |        |          |            |           |        |  |   |    |    |  | 
|               | Total interest rate options |        | $        | 50,000     |           |        | nil      |            | $         | 50,000 |  |   | $  | 30 | 
|               |                             |        |          |            |           |        |          |            |           |        |  |   |    |    |  | 

Interest rate contracts are primarily used to convert certain deposits or to
convert certain groups of customer loans to fixed or floating rates. Certain
interest rate swaps specifically match the amounts and terms of particular
liabilities.

The following table indicates the types of swaps used, as of December 31, their
aggregate notional amounts and weighted-average interest rates, and includes
the matched swaps. Average variable rates are based on rates implied in the
yield curve at the reporting date. Those rates may change significantly,
affecting future cash flows.

|                                      |                      |      |        |      |   |      |        |      |   |   |   |   | 
|------------------------------------- | -------------------- | ---- | ------ | ---- | - | ---- | ------ | ---- | - | - | - | - | 
|(dollars in thousands)                |                      | 2001 |        | 2000 |   | 1999
|                                      |                      |      |        |      |   |     
|Pay floating swaps  notional
amounts |                      | $    | 15,000 |      |   | $    | 15,000 |      |   | $ |  |  
|                                      | Average receive rate |      |        | 7.29 | % |      |        | 7.29 | % |   |   |  | 
|                                      | Average pay rate     |      |        | 2.07 | % |      |        | 6.67 | % |   |   |  | 
|                                      |                      |      |        |      |   |      |        |      |   |   |   |  

Interest rate options written and purchased are contracts that allow the holder
of the option to purchase or sell a financial instrument at a specified price
and within a specified period of time from the seller or writer of the
option. As a writer of options, the Company receives a premium at the outset
and then bears the risk of an unfavorable change in the price of the financial
instrument underlying the option. At December 31, 2001, there were outstanding
written option contracts with a notional principal amount of $5,000,000 and an
estimated fair value of $(39,844). At December 31, 2000, there were
outstanding written interest rate options with a notional principal amount of
$10,000,000 and estimated fair value of $42,188.

NOTE Q  CREDIT-RELATED INSTRUMENTS

At any time, the Company has a significant number of outstanding commitments to
extend credit. These commitments take the form of approved lines of credit and
loans with terms of up to one year. The Company also provides financial
guarantees and letters of credit to guarantee the performance of customers to
third parties. These agreements generally extend for up to one year. The
contractual amounts of these credit-related instruments are set out in the
following table by category of instrument. Because many of those instruments
expire without being advanced in whole or in part, the amounts do not represent
future cash flow requirements.

|                                 |        |      |         |         |  |   |         |         | 
|-------------------------------- | ------ | ---- | ------- | ------- |  | - | ------- | ------- | 
|(in thousands)                   |        | 2001 |         | 2000   
|                                 |        |      |         |        
|Loan commitments                 |        | $    | 269,124 |         |  | $ | 187,638 |        
|Guarantees and letters of
credit |        |      | 3,626   |         |  |   | 5,015   |        
|                                 |        |      |         |         |  |   |         |        
|                                 | Totals |      | $       | 272,750 |  |   | $       | 192,653 | 
|                                 |        |      |         |         |  |   |         |        

These credit-related financial instruments have off-balance sheet risk because
only origination fees and accruals for probable losses are recognized in the
consolidated financial statements until the commitments are fulfilled or
expire. Credit risk represents the accounting loss that would be recognized at
the reporting date if counterparties failed completely to perform as
contracted. The credit risk amounts are equal to the contractual amounts,
assuming that the amounts are fully advanced and that the collateral or other
security is of no value.

The Companys policy is to require suitable collateral to be provided by
certain customers prior to the disbursement of approved loans. For retail
loans, the Company usually retains a security interest in the property or
products financed, which provides repossession rights in the event of default
by the customer. Guarantees and letters of credit also are subject to strict
credit assessments before being provided. Those agreements specify monetary
limits to the Companys obligations. Collateral for commercial loans,
guarantees, and letters of credit is usually in the form of cash, inventory,
marketable securities, or other property.

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NOTE R  COMMITMENTS AND CONTINGENCIES

The Company is a defendant in various legal proceedings arising from normal
business activities. While the results of these proceedings can not be
predicted with certainty, management believes, based on advice of counsel, the
aggregate liability, if any, resulting from these proceedings would not have a
material effect on the Companys consolidated financial position or results of
operations.

NOTE S  EMPLOYEE BENEFIT PLANS

Employee Stock Ownership Plan. The Company has an Employee Stock Ownership
Plan (the ESOP) for all employees of the Company who satisfy
length-of-service requirements. Trust assets under the plan are invested
primarily in shares of stock of the Company. Employer contributions are to be
paid in cash, shares of stock or other property as determined by the Board of
Directors; provided, however, contributions may not be made in amounts which
cannot be allocated to any participants account by reason of statutory
limitations. In October 2001, the ESOP borrowed $2,115,000 from the Bank to
purchase 62,269 outstanding shares of the Companys common stock from a
stockholder. The shares purchased collateralize the loan from the Bank in
accordance with a stock pledge agreement. The loan will be repaid principally
from the Companys contributions to the ESOP. Shares purchased with the loan
proceeds are held in a suspense account for allocation among participants as
the loan is repaid. Shares released from the suspense account are allocated
among participants on the basis of compensation, as described in the plan. The
Company accounts for its ESOP in accordance with Statement of Position 93-6.
Accordingly, the Company reports compensation expense equal to the fair value
of the shares allocated, and the allocated shares are considered outstanding
for the computation of earnings per share. Dividends on allocated ESOP shares
are recorded as a reduction to retained earnings, whereas dividends on
unallocated ESOP shares are used to make debt service payments on the ESOP
loan. ESOP compensation expense was $276,000, $350,000 and $240,000 for 2001,
2000 and 1999, respectively. At December 31, 2001, unreleased ESOP shares
amounted to $1,839,000 and is shown as a reduction of stockholders equity in
the accompanying consolidated balance sheets. The table below reflects ESOP
activity for the periods indicated:

|                                    |  |      |           |      |  |   |         | 
|----------------------------------- |  | ---- | --------- | ---- |  | - | ------- | 
|Year ended December 31,             |  | 2001 |           | 2000
|                                    |  |      |           |     
|Allocated shares, beginning of year |  |      | 222,363   |      |  |   | 208,813 | 
|Shares committed to be released     |  |      | 8,140     |      |  |   | 13,550  | 
|Unallocated shares                  |  |      | 54,129    |      |  |   |        | 
|Fair value of unallocated shares    |  | $    | 1,908,000 |      |  | $ |        | 
|                                    |  |      |           |      |  |   |         | 

Profit Sharing Retirement Savings Plan.The Company has an Employee Profit
Sharing Retirement Savings Plan for all employees who satisfy length-of-service
requirements. Eligible employees may contribute up to 15% of their
compensation, limited to the total amount deductible under applicable
provisions of the Internal Revenue Code, of which 20% of the amount contributed
will be matched by the Company, provided that the matching contribution shall
not exceed 2% of the participants compensation. In addition, the Company will
contribute an amount equal to 2% of the compensation of eligible participants,
and additional amounts determined by the Board of Directors at their
discretion. Effective January 1, 2000, the Company contributed an amount equal
to 3% of the compensation of eligible participants. Contributions to the plan
for 2001, 2000 and 1999 were $366,000, $361,000 and $462,000, respectively.

Deferred Compensation.The Company has deferred compensation agreements with
several key management employees, all of whom are officers. Under the
agreements, the Company is obligated to provide for each such employee or his
beneficiaries, during a period of ten years after the employees death,
disability, or retirement, annual benefits ranging from $25,000 to $250,000.
The estimated present value of future benefits to be paid is being accrued over
the period from the effective date of the agreements until the full eligibility
dates of the participants. The expense incurred for this plan for the years
ended December 31, 2001, 2000 and 1999 amounted to $118,000, $197,000 and
$216,000, respectively. The Company is the beneficiary of life insurance
policies, with an aggregate cash surrender value of $12,656,000 at December 31,
2001, that were purchased as a method of partially financing benefits under
this plan.

Stock Compensation Plans.On September 16, 1994, the Board of Directors
adopted a Stock Compensation Plan (the SCP) which the stockholders approved
on January 26, 1995. On April 30, 1998, the stockholders approved the increase
of shares of common stock reserved under the SCP to 440,000 shares. Such
shares may be granted to employees, including officers and other key employees,
of the Company. The purpose of the SCP is to enhance the ability of the
Company to attract, retain and reward key employees and to encourage a sense of
proprietorship and to stimulate the interests of those employees in the
financial success of the Company. The SCP is administered by the Compensation
Committee (the Committee) of the Board of Directors. The SCP provides for
the award of incentive stock options, performance stock options, non-qualified
stock options, stock grants and stock appreciation rights (SARs).

During 1995 and 1994, the SCP option grants were performance and index options
with a term of ten years. During 1997, the Company amended the terms of these
options. The amendment provides that the performance options granted shall
become exercisable in full on the later of the first anniversary of the grant
date or the effective date of the amendment. The amendment also fixes the
exercise price of the index options granted in 1995 and 1994 at $28.45 and
$33.84, respectively.

On January 11, 2001, July 17, 2000, January 26, 2000, January 19, 1999, January 2,
1998 and December 15, 1997, the Company granted additional SCP stock options
of 88,550, 550, 81,400, 53,900, 13,750 and 79,750 shares, respectively. The
exercise prices of these options are $26.82, $21.82, $25.91, $27.73, $38.64 and
$39.09 per share, respectively. The options become exercisable on the first
anniversary of the grant date and terminate ten years after the grant date.

The Company adopted the Directors Stock Option Plan (DSOP) which the
stockholders approved on April 29, 1999. Under the DSOP, each director of the
Company, the Bank or the Association, who is not an employee, receives an
annual grant of options to acquire restricted stock at a price equal to the
fair market value of the Companys common stock at the date of the grant. A
director who is not an employee of the Company, the Bank or the Association
receives an annual option for 1,000 shares (not to exceed an annual option for
1,000 restricted shares to any one director). Under the DSOP, the stock option
grants are exercisable from the date

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of the grant for a ten-year period. On April 26, 2001, April 27, 2000 and April 29,
1999, the Company granted stock options of 16,500, 17,600 and 18,700,
respectively. The exercise prices of these options are $31.46, $22.27 and
$24.77 per share, respectively.

The original exercise price of each option equals the market price of the
Companys stock on the date of grant. Accordingly, no compensation cost has
been recognized for the plan. Had compensation cost for the plan been
determined using the fair value based method, the Companys net income and net
income per share would have been the pro forma amounts below:

|            |                               |         |   |           |      |      |   |            |      |  |   |          |       |  
|----------- | ----------------------------- | ------- | - | --------- | ---- | ---- | - | ---------- | ---- |  | - | -------- | ----- | -
|            |                               |         |   | 2001      |      | 2000 |   | 1999      
|            |                               |         |   |           |      |      |   |           
|Net income: |                               |         |   |           |      |      |   |            |      |  |   |         
|            | As reported                   |         | $ | 6,150,000 |      |      | $ | 11,218,000 |      |  | $ | 306,000  |      
|            | Pro forma                     |         |   | 4,948,000 |      |      |   | 10,179,000 |      |  |   | (106,000 | )    
|            | Pro forma earnings per share: |         |   |           |      |      |   |            |      |  |   |          |      
|            |                               | Basic   |   | $         | 1.42 |      |   | $          | 3.16 |  |   | $        | (0.03 | )
|            |                               | Diluted |   | $         | 1.40 |      |   | $          | 3.16 |  |   | $        | (0.03 | )
|            |                               |         |   |           |      |      |   |            |      |  |   |         

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes options-pricing model. For grants in 2001, 2000 and 1999, the
following weighted-average assumptions were used; expected dividend of 1.25%,
1.40% and 0.61%, expected volatility of 34.47%, 39.71% and 32.15%, risk-free
interest rate of 4.45%, 5.00% and 6.36%, and expected life of 6.0 years, 6.0
years and 6.0 years. The weighted-average fair value of options granted during
2001, 2000 and 1999 was $11.44, $12.65 and $13.37, respectively.

Transactions involving stock options are summarized as follows:

|                             |           |             |               |                |                  |   |       |       | 
|---------------------------- | --------- | ----------- | ------------- | -------------- | ---------------- | - | ----- | ----- | 
|                             |           |             | Stock Options |                | Weighted-Average
|Description                  |           | Outstanding |               | Exercise Price
|                             |           |             |               |               
|Balance at December 31, 1998 |           |             | 151,745       |                |                  | $ | 35.32 |      
|                             | Granted   |             |               | 72,600         |                  |   | $     | 26.96 | 
|                             | Forfeited |             |               | (10,450        | )                |   | $     | 34.57 | 
|                             |           |             |               |                |                  |   |       |      
|Balance at December 31, 1999 |           |             | 213,895       |                |                  | $ | 32.55 |      
|                             | Granted   |             |               | 99,550         |                  |   | $     | 25.25 | 
|                             | Forfeited |             |               | (29,150        | )                |   | $     | 23.55 | 
|                             |           |             |               |                |                  |   |       |      
|Balance at December 31, 2000 |           |             | 284,295       |                |                  | $ | 30.02 |      
|                             | Granted   |             |               | 105,050        |                  |   | $     | 27.55 | 
|                             | Forfeited |             |               | (12,540        | )                |   | $     | 30.71 | 
|                             | Exercised |             |               | (8,250         | )                |   | $     | 24.15 | 
|                             |           |             |               |                |                  |   |       |      
|Balance at December 31, 2001 |           |             | 368,555       |                |                  | $ | 29.42 |      
|                             |           |             |               |                |                  |   |       |      

As of December 31, 2001 and 2000, stock options outstanding had exercise prices
between $22.27 and $39.09. At December 31, 2001, the weighted-average
remaining contractual life was 7.3 years and 283,300 stock options were
exercisable with a weighted-average exercise price of $30.20. As of December
31, 2000, the weighted-average remaining contractual life was 7.2 years and
160,545 stock options were exercisable with a weighted-average exercise price
of $34.15.

Under the SCP, the Committee may grant a specified number of shares to an
employee subject to terms and conditions prescribed by the Committee. The
Committee also has the authority to grant any participant SARs and the right to
receive a payment, in cash or common stock, equal to the excess of the fair
market value of a specified number of shares of common stock on the date such
right is exercised over the fair market value on the date of grant of such
right. An SAR may not be exercised prior to the first anniversary of the date
of grant or more than ten years after the date of grant. No shares of stock or
SARs were granted during 2001, 2000 and 1999.

Upon the occurrence of a reorganization event, as defined in the SCP, the
Committee may, in its discretion, provide that the options granted shall be
terminated unless exercised within 30 days of notice and advance the exercise
dates of any, or all, outstanding options.

NOTE T  STOCKHOLDERS EQUITY

Regulatory Matters. The Company is subject to various capital requirements
administered by federal regulatory agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Companys financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company must meet specific capital guidelines that involve quantitative
measures of the Companys assets, liabilities and certain off-balance sheet
items as calculated under regulatory accounting practices. The Companys
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings and other factors.

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Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios of Total and Tier 1
capital (as defined in the regulations) to risk-weighted assets (as defined)
and Tier I capital (as defined) to average assets (as defined). The following
table presents the actual and required regulatory capital amounts and ratios of
the Company as of December 31, 2001 and 2000. Management believes that the
Company and the Bank meet all capital adequacy requirements to which they are
subject as of December 31, 2001.

|                                          |              |        |        |         |  |        |  |       |   |        |                      |        |                        |  |  |      |   |  |   |         |  |  |  |       |  
|----------------------------------------- | ------------ | ------ | ------ | ------- |  | ------ |  | ----- | - | ------ | -------------------- | ------ | ---------------------- |  |  | ---- | - |  | - | ------- |  |  |  | ----- | -
|                                          |              |        |        |         |  |        |  |       |   |        | For Capital Adequacy |        |                        |  |  |      |   |  |  
|                                          |              |        |        |         |  |        |  |       |   |        | Purposes             |        | To Be Well Capitalized
|                                          |              |        | Actual |         |  |        |  |       |   |        |                     
|(in thousands of dollars)                 |              | Amount |        | Ratio   |  | Amount |  | Ratio |   | Amount |                      | Ratio 
|                                          |              |        |        |         |  |        |  |       |   |        |                      |       
|December 31, 2001:                        |              |        |        |         |  |        |  |       |   |        |                      |        |                        |  |  |      |   |  |   |         |  |  |  |      
|Tier 1 capital (to risk weighted
assets): |              |        |        |         |  |        |  |       |   |        |                      |        |                        |  |  |      |   |  |   |         |  |  |  |      
|                                          | Consolidated |        | $      | 135,528 |  |        |  | 11.32 | % |        | $                    | 47,878 |                        |  |  | 4.00 | % |  | $ | n/a     |  |  |  | n/a   | %
|                                          | Bank         |        |        | 131,225 |  |        |  | 10.96 |   |        |                      | 47,884 |                        |  |  | 4.00 |   |  |   | 71,826  |  |  |  | 6.00  |  
|Total capital (to risk weighted
assets):  |              |        |        |         |  |        |  |       |   |        |                      |        |                        |  |  |      |   |  |   |         |  |  |  |      
|                                          | Consolidated |        |        | 150,580 |  |        |  | 12.58 |   |        |                      | 95,755 |                        |  |  | 8.00 |   |  |   | n/a     |  |  |  | n/a   |  
|                                          | Bank         |        |        | 146,279 |  |        |  | 12.22 |   |        |                      | 95,768 |                        |  |  | 8.00 |   |  |   | 119,710 |  |  |  | 10.00 |  
|Tier 1 capital (to average assets):       |              |        |        |         |  |        |  |       |   |        |                      |        |                        |  |  |      |   |  |   |         |  |  |  |      
|                                          | Consolidated |        |        | 135,528 |  |        |  | 8.31  |   |        |                      | 65,211 |                        |  |  | 4.00 |   |  |   | n/a     |  |  |  | n/a   |  
|                                          | Bank         |        |        | 131,225 |  |        |  | 8.01  |   |        |                      | 65,566 |                        |  |  | 4.00 |   |  |   | 81,957  |  |  |  | 5.00  |  
|December 31, 2000:                        |              |        |        |         |  |        |  |       |   |        |                      |        |                        |  |  |      |   |  |   |         |  |  |  |      
|Tier 1 capital (to risk weighted
assets): |              |        |        |         |  |        |  |       |   |        |                      |        |                        |  |  |      |   |  |   |         |  |  |  |      
|                                          | Consolidated |        | $      | 137,067 |  |        |  | 12.04 | % |        | $                    | 45,555 |                        |  |  | 4.00 | % |  | $ | n/a     |  |  |  | n/a   | %
|                                          | Bank         |        |        | 134,498 |  |        |  | 11.37 |   |        |                      | 47,304 |                        |  |  | 4.00 |   |  |   | 70,956  |  |  |  | 6.00  |  
|Total capital (to risk weighted
assets):  |              |        |        |         |  |        |  |       |   |        |                      |        |                        |  |  |      |   |  |   |         |  |  |  |      
|                                          | Consolidated |        |        | 151,379 |  |        |  | 13.29 |   |        |                      | 91,109 |                        |  |  | 8.00 |   |  |   | n/a     |  |  |  | n/a   |  
|                                          | Bank         |        |        | 149,313 |  |        |  | 12.63 |   |        |                      | 94,608 |                        |  |  | 8.00 |   |  |   | 118,261 |  |  |  | 10.00 |  
|Tier 1 capital (to average assets):       |              |        |        |         |  |        |  |       |   |        |                      |        |                        |  |  |      |   |  |   |         |  |  |  |      
|                                          | Consolidated |        |        | 137,067 |  |        |  | 8.01  |   |        |                      | 68,443 |                        |  |  | 4.00 |   |  |   | n/a     |  |  |  | n/a   |  
|                                          | Bank         |        |        | 134,498 |  |        |  | 7.82  |   |        |                      | 68,794 |                        |  |  | 4.00 |   |  |   | 85,992  |  |  |  | 5.00  |  

The most recent notification from the federal regulatory agencies categorized
the Company as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Company must
maintain minimum Tier 1 and Total risk-based capital ratios and Tier 1 leverage
ratios as set forth in the table above. To be categorized as adequately
capitalized, the Company must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table. As of
December 31, 2001, there are no conditions or events since that notification
that management believes have changed the Companys capital category.

Earnings Per Share. The table below presents the information used to compute
basic and diluted earnings per common share for the years ended December 31,
2001, 2000 and 1999:

|                                       |                                             |                                                                 |      |           |           |      |      |            |           |   |      |           |           | 
|-------------------------------------- | ------------------------------------------- | --------------------------------------------------------------- | ---- | --------- | --------- | ---- | ---- | ---------- | --------- | - | ---- | --------- | --------- | 
|                                       |                                             |                                                                 |      | 2001      |           | 2000 |      | 1999      
|                                       |                                             |                                                                 |      |           |           |      |      |           
|Numerator:                             |                                             |                                                                 |      |           |           |      |      |            |           |   |      |          
|                                       | Net income                                  |                                                                 | $    | 6,150,000 |           |      | $    | 11,218,000 |           |   | $    | 306,000   |          
|                                       |                                             |                                                                 |      |           |           |      |      |            |           |   |      |          
|Denominator:                           |                                             |                                                                 |      |           |           |      |      |            |           |   |      |          
|                                       | Weighted average shares outstanding         |                                                                 |      | 3,492,201 |           |      |      | 3,535,953  |           |   |      | 3,781,600 |          
|                                       | Effect of dilutive securities-stock options |                                                                 |      | 46,449    |           |      |      | 661        |           |   |      | 1,390     |          
|                                       |                                             |                                                                 |      |           |           |      |      |            |           |   |      |          
|                                       |                                             | Adjusted weighted average shares
outstanding, assuming dilution |      |           | 3,538,650 |      |      |            | 3,536,614 |   |      |           | 3,782,990 | 
|                                       |                                             |                                                                 |      |           |           |      |      |            |           |   |      |          
|Earnings per share  basic             |                                             | $                                                               | 1.76 |           |           | $    | 3.17 |            |           | $ | 0.08 |          
|Earnings per share  assuming dilution |                                             | $                                                               | 1.74 |           |           | $    | 3.17 |            |           | $ | 0.08 |          
|                                       |                                             |                                                                 |      |           |           |      |      |            |           |   |      |          

At December 31, 2001, there were outstanding options to purchase 368,555 shares
at a range of $22.27 to $39.09. At December 31, 2000, there were outstanding
options to purchase 284,295 shares at a range of $22.27 to $39.09. At December 31,
1999, there were outstanding options to purchase 213,895 shares at a range
of $27.73 to $39.09. Earnings per share reflects 10% stock dividend paid in
June 2001.

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NOTE U  OTHER COMPREHENSIVE INCOME (LOSS)

The schedule below presents the reclassification amount to adjust for gains and
losses on securities included in net income, including the amount of income
taxes allocated, and also included in other comprehensive income as unrealized
gains (losses) in the year in which they arose:

|                                  |                                                                     |        |            |         |               |        |            |        |   |   |        |        |  
|--------------------------------- | ------------------------------------------------------------------- | ------ | ---------- | ------- | ------------- | ------ | ---------- | ------ | - | - | ------ | ------ | -
|                                  |                                                                     |        | Before Tax |         | Tax (Expense) |        | Net of Tax
|(in thousands)                    |                                                                     | Amount |            | Benefit |               | Amount
|                                  |                                                                     |        |            |         |               |       
|2001:                             |                                                                     |        |            |         |               |        |            |        |   |   |        |       
|Unrealized gains on securities:   |                                                                     |        |            |         |               |        |            |        |   |   |        |       
|                                  | Unrealized holding gain arising during the year                     |        | $          | 3,287   |               |        | $          | (1,352 | ) |   | $      | 1,935  |  
|                                  | Less: reclassification adjustment for losses realized
in net income |        |            | (9,711  | )             |        |            | 3,787  |   |   |        | (5,924 | )
|                                  |                                                                     |        |            |         |               |        |            |        |   |   |        |        |  
|Other comprehensive income        |                                                                     | $      | 12,998     |         |               | $      | (5,139     | )      |   | $ | 7,859  |       
|                                  |                                                                     |        |            |         |               |        |            |        |   |   |        |       
|2000:                             |                                                                     |        |            |         |               |        |            |        |   |   |        |       
|Unrealized losses on securities:  |                                                                     |        |            |         |               |        |            |        |   |   |        |       
|                                  | Unrealized holding losses arising during the year                   |        | $          | (360    | )             |        | $          | 140    |   |   | $      | (220   | )
|                                  | Less: reclassification adjustment for losses realized in net
income |        |            | (421    | )             |        |            | 164    |   |   |        | (257   | )
|                                  |                                                                     |        |            |         |               |        |            |        |   |   |        |        |  
|Other comprehensive income        |                                                                     | $      | 61         |         |               | $      | (24        | )      |   | $ | 37     |       
|                                  |                                                                     |        |            |         |               |        |            |        |   |   |        |       
|1999:                             |                                                                     |        |            |         |               |        |            |        |   |   |        |       
|Unrealized losses on securities:  |                                                                     |        |            |         |               |        |            |        |   |   |        |       
|                                  | Unrealized holding losses arising during the year                   |        | $          | (13,302 | )             |        | $          | 5,413  |   |   | $      | (7,889 | )
|                                  | Less: reclassification adjustment for gains realized in net
income  |        |            | (32     | )             |        |            | 13     |   |   |        | (19    | )
|                                  |                                                                     |        |            |         |               |        |            |        |   |   |        |        |  
|Other comprehensive income (loss) |                                                                     | $      | (13,270    | )       |               | $      | 5,400      |        |   | $ | (7,870 | )     
|                                  |                                                                     |        |            |         |               |        |            |        |   |   |        |       

NOTE V  FAIR VALUE OF FINANCIAL INSTRUMENTS

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 Companys entire holdings of a particular
financial instrument. Because a limited or no market exists for a significant
portion of the Company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 anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
considered financial assets or liabilities include premises and equipment,
goodwill, core deposit intangibles, and deferred income taxes. 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 any of the estimates.

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:



| |  | Cash and due from banks, interest-bearing deposits in other banks and federal
funds sold: The carrying amounts approximate fair values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Investment securities (including
mortgage/asset-backed securities): Fair values
for securities are based on quoted market prices, if available. If not
available, quoted market prices of comparable instruments are used except in
the case of certain options and swaps that utilize pricing models. For
restricted investment securities, the carrying amount approximates fair
value.                                                                                                                                                                                                                                                                    
|
| |  | Loans:For variable rate loans that reprice frequently and entail no
significant change in credit risk, fair values are based on carrying values.
For certain mortgage loans (e.g., one-to-four family residential), fair
values are based on quoted market prices of similar loans sold in conjunction
with securitization transactions, adjusted for differences in loan
characteristics. For other loans, fair values are estimated based on
discounted cash flow analyses using interest rates currently offered for
loans with similar terms to borrowers of similar credit quality. The
carrying amount of accrued interest approximates its fair value.
|
| |  | Deposits:The estimated fair values of deposits with no stated maturities,
which includes demand deposits, checking accounts, passbook savings and
certain types of money market accounts, is equal to the amount payable on
demand. The estimated fair values of fixed maturity deposits is estimated
using a discounted cash flow calculation with rates currently offered by the
Company for deposits of similar remaining maturity. The carrying amount of
accrued interest payable approximates its fair value.                                                                                                                                          
|
| |  | Short-term borrowings:The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, advances from the FHLB and other
short-term borrowings approximate their fair values.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Long-term debt (other than deposits): The fair values are estimated using
discounted cash flow analyses using the Companys current incremental
borrowing rates for similar types of borrowing arrangements.                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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| |  | Off-balance sheet financial instruments: Fair values for letters of credit,
guarantees, and lending commitments are based on fees currently charged to
enter into similar agreements, considering the remaining terms of the
agreements and the counterparties credit standing.                                                 
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Derivative financial instruments:Fair values for swaps, caps, floors,
forwards, and options are based upon current settlement values (financial
forwards), if available. If there are no relevant comparables, fair values
are based on pricing models or formulas using current assumptions for
interest rate swaps and options.

The following table provides a summary of the carrying and fair values of the
Companys financial instruments at December 31, 2001
and 2000:

|                                         |                                          |                       |   |             |        |                |   |             |     |           |   |           |        |  |   |           |     | 
|---------------------------------------- | ---------------------------------------- | --------------------- | - | ----------- | ------ | -------------- | - | ----------- | --- | --------- | - | --------- | ------ |  | - | --------- | --- | 
|                                         |                                          |                       |   | 2001        |        | 2000          
|                                         |                                          |                       |   |             |        |               
|                                         |                                          |                       |   | Carrying or |        | Estimated      |   | Carrying or |     | Estimated
|(in thousands)                           |                                          | Notional Value        |   | Fair Value  |        | Notional Value |   | Fair Value 
|                                         |                                          |                       |   |             |        |                |   |            
|Financial assets:                        |                                          |                       |   |             |        |                |   |             |     |           |   |           |        |  |   |          
|                                         | Cash and due from banks                  |                       | $ | 22,395      |        |                | $ | 22,395      |     |           | $ | 40,172    |        |  | $ | 40,172    |    
|                                         | Interest-bearing deposits in other banks |                       |   | 1,017       |        |                |   | 1,017       |     |           |   | 1,058     |        |  |   | 1,058     |    
|                                         | Federal funds sold                       |                       |   | 10,655      |        |                |   | 10,655      |     |           |   | 610       |        |  |   | 610       |    
|                                         | Investment securities                    |                       |   | 229,563     |        |                |   | 229,718     |     |           |   | 298,089   |        |  |   | 298,089   |    
|                                         | FHLB stock                               |                       |   | 32,406      |        |                |   | 32,406      |     |           |   | 32,430    |        |  |   | 32,430    |    
|                                         | Loans                                    |                       |   | 1,223,478   |        |                |   | 1,249,694   |     |           |   | 1,283,911 |        |  |   | 1,284,470 |    
|Financial liabilities:                   |                                          |                       |   |             |        |                |   |             |     |           |   |           |        |  |   |          
|                                         | Deposits                                 |                       |   | 1,138,435   |        |                |   | 1,140,368   |     |           |   | 1,218,261 |        |  |   | 1,225,442 |    
|                                         | Short-term borrowings                    |                       |   | 76,100      |        |                |   | 77,463      |     |           |   | 170,700   |        |  |   | 171,193   |    
|                                         | Long-term debt                           |                       |   | 214,424     |        |                |   | 219,174     |     |           |   | 181,563   |        |  |   | 180,952   |    
|Off-balance sheet financial instruments: |                                          |                       |   |             |        |                |   |             |     |           |   |           |        |  |   |          
|                                         | Derivative financial instruments:        |                       |   |             |        |                |   |             |     |           |   |           |        |  |   |           |    
|                                         |                                          | Interest rate cap     |   |             | 50,000 |                |   |             |    |           |   |           | 50,000 |  |   |           | 30  | 
|                                         |                                          | Interest rate swaps   |   |             | 15,000 |                |   |             | 251 |           |   |           | 15,000 |  |   |           | 264 | 
|                                         |                                          | Interest rate options |   |             | 5,000  |                |   |             | (40 | )         |   |           | 10,000 |  |   |           | 42  | 
|                                         | Loan commitments                         |                       |   | 269,124     |        |                |   | 49          |     |           |   | 187,638   |        |  |   | 48        |    
|                                         | Guarantees and letters of credit         |                       |   | 3,626       |        |                |   | 48          |     |           |   | 5,015     |        |  |   | 57        |    
|                                         |                                          |                       |   |             |        |                |   |             |     |           |   |           |        |  |   |          

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NOTE W  FINANCIAL STATEMENTS OF CB BANCSHARES, INC. (PARENT COMPANY)

Condensed financial statements of CB Bancshares, Inc. (Parent company only)
follows:

CONDENSED BALANCE SHEETS

|                                                           |                                                           |                                                                                                             |       |              |         |   |       |         |         | 
|---------------------------------------------------------- | --------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ----- | ------------ | ------- | - | ----- | ------- | ------- | 
|                                                           |                                                           |                                                                                                             |       | December 31,
|                                                           |                                                           |                                                                                                             |       |             
|(in thousands, except number of shares and per share data) |                                                           | 2001                                                                                                        |       | 2000        
|                                                           |                                                           |                                                                                                             |       |             
|ASSETS                                                     |                                                           |                                                                                                             |       |              |         |   |       |        
|Cash on deposit with the Bank                              |                                                           | $                                                                                                           | 4,308 |              |         | $ | 322   |        
|Investment in subsidiaries:                                |                                                           |                                                                                                             |       |              |         |   |       |        
|                                                           | Bank                                                      |                                                                                                             |       | 129,459      |         |   |       | 120,593 |        
|                                                           | Other                                                     |                                                                                                             |       | 887          |         |   |       | 452     |        
|Premises and equipment                                     |                                                           |                                                                                                             | 139   |              |         |   | 158   |        
|Other assets                                               |                                                           |                                                                                                             | 992   |              |         |   | 1,745 |        
|                                                           |                                                           |                                                                                                             |       |              |         |   |       |        
|                                                           |                                                           | TOTAL ASSETS                                                                                                |       | $            | 135,785 |   |       | $       | 123,270 | 
|                                                           |                                                           |                                                                                                             |       |              |         |   |       |        
|LIABILITIES AND STOCKHOLDERS EQUITY                       |                                                           |                                                                                                             |       |              |         |   |       |        
|Employee stock ownership plan note payable                 |                                                           | $                                                                                                           | 1,774 |              |         | $ |      |        
|Other liabilities                                          |                                                           |                                                                                                             | 249   |              |         |   | 108   |        
|                                                           |                                                           |                                                                                                             |       |              |         |   |       |        
|                                                           |                                                           | Total liabilities                                                                                           |       |              | 2,023   |   |       |         | 108     | 
|                                                           |                                                           |                                                                                                             |       |              |         |   |       |        
|Stockholders equity:                                      |                                                           |                                                                                                             |       |              |         |   |       |        
|                                                           | Preferred
stock $1 par value                             |                                                                                                             |       |              |         |   |       |         |        
|                                                           |                                                           | Authorized and unissued 25,000,000 shares                                                                   |       |              |        |   |       |         |        | 
|                                                           | Common
stock $1 par value                                |                                                                                                             |       |              |         |   |       |         |        
|                                                           |                                                           | Authorized 50,000,000 shares; issued and outstanding,
3,506,082 in 2001 and 3,188,534 in 2000, respectively |       |              | 3,506   |   |       |         | 3,189   | 
|                                                           | Additional paid-in capital                                |                                                                                                             |       | 65,427       |         |   |       | 54,594  |        
|                                                           | Retained earnings                                         |                                                                                                             |       | 65,714       |         |   |       | 72,284  |        
|                                                           | Unreleased shares to employee stock ownership plan        |                                                                                                             |       | (1,839       | )       |   |       |        |        
|                                                           | Accumulated other comprehensive income (loss),
net of tax |                                                                                                             |       | 954          |         |   |       | (6,905  | )      
|                                                           |                                                           |                                                                                                             |       |              |         |   |       |        
|                                                           |                                                           | Total stockholders equity                                                                                  |       |              | 133,762 |   |       |         | 123,162 | 
|                                                           |                                                           |                                                                                                             |       |              |         |   |       |        
|                                                           |                                                           | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                  |       | $            | 135,785 |   |       | $       | 123,270 | 
|                                                           |                                                           |                                                                                                             |       |              |         |   |       |        

CONDENSED STATEMENTS OF INCOME

|                                                       |                                   |                     |       |                          |       |      |       |        |       |  |         |         |        | 
|------------------------------------------------------ | --------------------------------- | ------------------- | ----- | ------------------------ | ----- | ---- | ----- | ------ | ----- |  | ------- | ------- | ------ | 
|                                                       |                                   |                     |       | Years Ended December 31,
|                                                       |                                   |                     |       |                         
|(in thousands)                                         |                                   | 2001                |       | 2000                     |       | 1999
|                                                       |                                   |                     |       |                          |       |     
|Income:                                                |                                   |                     |       |                          |       |      |       |        |       |  |         |        
|                                                       | Dividends from subsidiaries:      |                     |       |                          |       |      |       |        |       |  |         |         |       
|                                                       |                                   | Bank                |       | $                        | 6,270 |      |       | $      | 4,000 |  |         | $       | 2,600  | 
|                                                       |                                   | Association         |       |                          |      |      |       |        | 1,400 |  |         |         | 9,439  | 
|                                                       |                                   | Citibank Properties |       |                          |      |      |       |        | 8     |  |         |         |       | 
|                                                       | Other interest income             |                     |       | 8                        |       |      |       | 10     |       |  |         | 9       |       
|                                                       | Other income                      |                     |       | 25                       |       |      |       | 9      |       |  |         |        |       
|                                                       |                                   |                     |       |                          |       |      |       |        |       |  |         |        
|                                                       |                                   | Total income        |       |                          | 6,303 |      |       |        | 5,427 |  |         |         | 12,048 | 
|                                                       |                                   | Total expenses      |       |                          | 2,145 |      |       |        | 2,353 |  |         |         | 2,314  | 
|                                                       |                                   |                     |       |                          |       |      |       |        |       |  |         |        
|                                                       |                                   | Operating profit    |       |                          | 4,158 |      |       |        | 3,074 |  |         |         | 9,734  | 
|                                                       |                                   |                     |       |                          |       |      |       |        |       |  |         |        
|Equity in undistributed income (loss) of
Subsidiaries: |                                   |                     |       |                          |       |      |       |        |       |  |         |        
|                                                       | Bank                              |                     |       | 1,007                    |       |      |       | 6,688  |       |  |         | 3,824   |       
|                                                       | Association                       |                     |       |                         |       |      |       | 561    |       |  |         | (14,208 | )     
|                                                       | Other                             |                     |       | 236                      |       |      |       | 50     |       |  |         |        |       
|                                                       |                                   |                     |       |                          |       |      |       |        |       |  |         |        
|                                                       |                                   |                     | 1,243 |                          |       |      | 7,299 |        |       |  | (10,384 | )      
|                                                       |                                   |                     |       |                          |       |      |       |        |       |  |         |        
|                                                       | Income (loss) before income taxes |                     |       | 5,401                    |       |      |       | 10,373 |       |  |         | (650    | )     
|Income tax benefit                                     |                                   |                     | 749   |                          |       |      | 845   |        |       |  | 956     |        
|                                                       |                                   |                     |       |                          |       |      |       |        |       |  |         |        
|                                                       | NET INCOME                        |                     | $     | 6,150                    |       |      | $     | 11,218 |       |  | $       | 306     |       
|                                                       |                                   |                     |       |                          |       |      |       |        |       |  |         |        

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CONDENSED STATEMENTS OF CASH FLOW

|                                          |                                                                                   |                                                                                   |        |                          |        |      |        |        |        |   |         |        |        |  
|----------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------ | ------------------------ | ------ | ---- | ------ | ------ | ------ | - | ------- | ------ | ------ | -
|                                          |                                                                                   |                                                                                   |        | Years Ended December 31,
|                                          |                                                                                   |                                                                                   |        |                         
|(in thousands)                            |                                                                                   | 2001                                                                              |        | 2000                     |        | 1999
|                                          |                                                                                   |                                                                                   |        |                          |        |     
|Cash flows from operating activities:     |                                                                                   |                                                                                   |        |                          |        |      |        |        |        |   |         |       
|                                          | Net income                                                                        |                                                                                   | $      | 6,150                    |        |      | $      | 11,218 |        |   | $       | 306    |       
|                                          | Adjustments to reconcile net income to net
cash provided by operating activities: |                                                                                   |        |                          |        |      |        |        |        |   |         |        |       
|                                          |                                                                                   | Deficiency (excess) of equity in earnings
of subsidiaries over dividends received |        |                          | (1,243 | )    |        |        | (7,299 | ) |         |        | 10,384 |  
|                                          |                                                                                   | Other                                                                             |        |                          | 1,084  |      |        |        | (1,430 | ) |         |        | (614   | )
|                                          |                                                                                   |                                                                                   |        |                          |        |      |        |        |        |   |         |       
|Net cash provided by operating activities |                                                                                   |                                                                                   | 5,991  |                          |        |      | 2,489  |        |        |   | 10,076  |       
|                                          |                                                                                   |                                                                                   |        |                          |        |      |        |        |        |   |         |       
|Cash flows from investing activities:     |                                                                                   |                                                                                   |        |                          |        |      |        |        |        |   |         |       
|                                          | Purchase of investments                                                           |                                                                                   |        | (435                     | )      |      |        |       |        |   |         |       |       
|                                          |                                                                                   |                                                                                   |        |                          |        |      |        |        |        |   |         |       
|Net cash used by investing activities     |                                                                                   |                                                                                   | (435   | )                        |        |      |       |        |        |   |        |       
|                                          |                                                                                   |                                                                                   |        |                          |        |      |        |        |        |   |         |       
|Cash flows from financing activities:     |                                                                                   |                                                                                   |        |                          |        |      |        |        |        |   |         |       
|                                          | Cash-in-lieu payments on stock dividend                                           |                                                                                   |        | (54                      | )      |      |        |       |        |   |         |       |       
|                                          | Cash dividends                                                                    |                                                                                   |        | (1,441                   | )      |      |        | (1,093 | )      |   |         | (931   | )     
|                                          | Stock repurchase                                                                  |                                                                                   |        | (273                     | )      |      |        | (1,691 | )      |   |         | (9,186 | )     
|                                          | Stock options exercised                                                           |                                                                                   |        | 198                      |        |      |        |       |        |   |         |       |       
|                                          |                                                                                   |                                                                                   |        |                          |        |      |        |        |        |   |         |       
|Net cash used in financing activities     |                                                                                   |                                                                                   | (1,570 | )                        |        |      | (2,784 | )      |        |   | (10,117 | )     
|                                          |                                                                                   |                                                                                   |        |                          |        |      |        |        |        |   |         |       
|                                          | Increase (decrease) in cash                                                       |                                                                                   |        | 3,986                    |        |      |        | (295   | )      |   |         | (41    | )     
|Cash at beginning of year                 |                                                                                   |                                                                                   | 322    |                          |        |      | 617    |        |        |   | 658     |       
|                                          |                                                                                   |                                                                                   |        |                          |        |      |        |        |        |   |         |       
|Cash at end of year                       |                                                                                   | $                                                                                 | 4,308  |                          |        | $    | 322    |        |        | $ | 617     |       
|                                          |                                                                                   |                                                                                   |        |                          |        |      |        |        |        |   |         |       

NOTE X  SEGMENT INFORMATION

The Companys business segments are organized around services and products
provided. The segment data presented below was prepared on the same basis of
accounting as the consolidated financial statements as described in Note A.
Intersegment income and expense are valued at prices comparable to those for
unaffiliated companies.

|                                               |  |        |         |           |  |          |         |           |  |       |         |   |  |   |         |   |  |   |           |  
|---------------------------------------------- |  | ------ | ------- | --------- |  | -------- | ------- | --------- |  | ----- | ------- | - |  | - | ------- | - |  | - | --------- | -
|(in thousands)                                 |  | Retail |         | Wholesale |  | Treasury |         | All Other |  | Total
|                                               |  |        |         |           |  |          |         |           |  |      
|2001:                                          |  |        |         |           |  |          |         |           |  |       |         |   |  |   |         |   |  |   |           |  
|Net interest income                            |  | $      | 38,148  |           |  | $        | 31,143  |           |  | $     | 1,533   |   |  | $ | (18     | ) |  | $ | 70,806    |  
|Intersegment net interest income (expense)     |  |        | 1,111   |           |  |          | (7,628  | )         |  |       | 6,517   |   |  |   |        |   |  |   |          |  
|Provision for credit losses                    |  |        | 2,470   |           |  |          | 11,158  |           |  |       |        |   |  |   |        |   |  |   | 13,628    |  
|Net other operating expense                    |  |        | (9,175  | )         |  |          | (9,646  | )         |  |       | (12,859 | ) |  |   | (16,098 | ) |  |   | (47,778   | )
|Administrative and overhead expense
allocation |  |        | (7,959  | )         |  |          | (5,099  | )         |  |       | (936    | ) |  |   | 13,994  |   |  |   |          |  
|Income tax expense (benefit)                   |  |        | 6,605   |           |  |          | (802    | )         |  |       | (1,931  | ) |  |   | (622    | ) |  |   | 3,250     |  
|Net income (loss)                              |  |        | 13,050  |           |  |          | (1,586  | )         |  |       | (3,814  | ) |  |   | (1,500  | ) |  |   | 6,150     |  
|Total assets                                   |  |        | 785,310 |           |  |          | 457,465 |           |  |       | 312,514 |   |  |   | 30,751  |   |  |   | 1,586,040 |  
|                                               |  |        |         |           |  |          |         |           |  |       |         |   |  |   |         |   |  |   |           |  

|                                               |  |        |         |           |  |          |         |           |  |       |         |   |  |   |         |   |  |   |           |  
|---------------------------------------------- |  | ------ | ------- | --------- |  | -------- | ------- | --------- |  | ----- | ------- | - |  | - | ------- | - |  | - | --------- | -
|(in thousands)                                 |  | Retail |         | Wholesale |  | Treasury |         | All Other |  | Total
|                                               |  |        |         |           |  |          |         |           |  |      
|2000:                                          |  |        |         |           |  |          |         |           |  |       |         |   |  |   |         |   |  |   |           |  
|Net interest income                            |  | $      | 29,045  |           |  | $        | 32,548  |           |  | $     | (587    | ) |  | $ | (12     | ) |  | $ | 60,994    |  
|Intersegment net interest income (expense)     |  |        | 1,638   |           |  |          | (7,371  | )         |  |       | 5,733   |   |  |   |        |   |  |   |          |  
|Provision for credit losses                    |  |        | 1,736   |           |  |          | 5,803   |           |  |       |        |   |  |   |        |   |  |   | 7,539     |  
|Net other operating expense                    |  |        | (9,227  | )         |  |          | (7,980  | )         |  |       | (2,021  | ) |  |   | (17,427 | ) |  |   | (36,655   | )
|Administrative and overhead expense
allocation |  |        | (8,131  | )         |  |          | (5,651  | )         |  |       | (1,308  | ) |  |   | 15,090  |   |  |   |          |  
|Income tax expense (benefit)                   |  |        | 3,890   |           |  |          | 1,928   |           |  |       | 609     |   |  |   | (845    | ) |  |   | 5,582     |  
|Net income (loss)                              |  |        | 7,699   |           |  |          | 3,815   |           |  |       | 1,208   |   |  |   | (1,504  | ) |  |   | 11,218    |  
|Total assets                                   |  |        | 848,380 |           |  |          | 453,716 |           |  |       | 392,090 |   |  |   | 27,416  |   |  |   | 1,721,602 |  
|                                               |  |        |         |           |  |          |         |           |  |       |         |   |  |   |         |   |  |   |           |  




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

None.

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PART  III

Certain information required by Part III is omitted from this Report in that
the Registrant will file a definitive proxy statement pursuant to Regulation
14A (the Proxy Statement) not later than 120 days after the end of the fiscal
year covered by this Report, and certain information included therein is
incorporated herein by reference. Only those sections of the Proxy Statement
which specifically address the items set forth herein are incorporated by
reference.




ITEM  10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information concerning the Companys directors and executive officers
required by this Item is incorporated by reference to the Companys Proxy
Statement.

The information regarding compliance with Section 16 of the Securities and
Exchange Act of 1934 is to be set forth in the Proxy Statement and is hereby
incorporated by reference.




ITEM  11.  EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the
Companys Proxy Statement.




ITEM  12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by reference to the
Companys Proxy Statement.




ITEM  13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference to the
Companys Proxy Statement.




PART  IV




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

(a) FINANCIAL STATEMENTS AND SCHEDULES

The following consolidated financial statements of the Registrant and its
subsidiaries are included in Item 8:

Independent Auditors Report

Consolidated Balance Sheets  December 31, 2001 and 2000

Consolidated Statements of Income  For years ended December 31, 2001, 2000 and
1999

Consolidated Statements of Changes in Stockholders Equity and Comprehensive
Income (Loss)  For years ended December 31, 2001, 2000 and 1999

Consolidated Statement of Cash Flows  For years ended December 31, 2001, 2000
and 1999

Notes to the Consolidated Financial Statements

(b) EXHIBITS

The following exhibits are filed as a part of, or incorporated by reference
into this Report:

|            |  |                                                                                                                                                                                                                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                                   
|3.1         |  | Articles of Incorporation of CB Bancshares, Inc., incorporated
by reference to Exhibit 3.1 filed with the Registrants
Registration Statement on Form S-4, Registration No. 33-72340.                                                                                                                                             
|3.2         |  | By-laws of CB Bancshares, Inc., incorporated by reference to
Exhibits 3.2 and 3.3 filed with the Registrants Registration
Statement on Form S-4, Registration No. 33-72340.                                                                                                                                                      
|4.0         |  | No instrument which defines the rights of holders of long-term
debt, of the registrant and all of its consolidated
subsidiaries, is filed herewith pursuant to Regulation S-K,
Item 601(b)(4)(iii)(A). Pursuant to this regulation, the
registrant hereby agrees to furnish a copy of any such
instrument to the SEC upon request.
|4.1         |  | Rights Agreement dated as of March 16, 1989, between CB
Bancshares, Inc. and City Bank, Rights Agent, incorporated by
reference to Form 8-A, filed on April 24, 1989 (File
No. 0-12396).                                                                                                                                          
|4.2         |  | Amendment to Rights Agreement made as of June 21, 1989,
incorporated by reference to Form 8 Amendment No. 1 to Form 8-A,
filed on July 11, 1989 (File No. 0-12396).                                                                                                                                                               
|4.3         |  | Amendment No. 2 to Rights Agreement entered into as of August 15,
1990, incorporated by reference to Form 8 Amendment No. 2
to Form 8-A, filed on August 28, 1990 (File
No. 0-12396).                                                                                                                                             

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|            |  |                                                                                                                                                                                                                                                                    
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                    
|4.4         |  | Amendment No. 3 to Rights Agreement entered into as of
February 17, 1993, incorporated by reference to Exhibit 4.4 to
Form 8-A/A, Amendment No. 3, filed on March 25, 1999.                                                                                        
|4.5         |  | Amendment No. 4 to Rights Agreement entered into as of March 25,
1999, incorporated by reference to Exhibit 4.5 to Form 8-A/A,
Amendment No. 3, filed on March 25, 1999.                                                                                           
|10.1        |  | Stock Compensation Plan, incorporated by reference to Exhibit
A and B to the Registrants Proxy Statement for the January 25,
1995 Special Meeting of Shareholders, filed on December 9,
1995. *                                                                   
|10.2        |  | Form of Stock Option Agreement incorporated by reference to
Exhibit 10.6 of Form 10-K filed on April 1, 1996. *                                                                                                                                                    
|10.4        |  | Form of Change in Control Agreement is incorporated by
reference to Exhibit 99.2 of Form 8-K filed on April 18, 1996.                                                                                                                                              
|10.5        |  | Agreement and Plan of Merger dated as of December 22, 1999, by
and between City Bank and International Savings and Loan
Association, Limited, is incorporated by reference to Exhibit
10.5 to the Registrants Form 10-K filed on March 15, 2001.                  
|10.6        |  | Advances, Security and Deposit Agreement dated as of May 20,
1999 by and between City Bank, including its successors, and
the Federal Home Loan Bank of Seattle is incorporated by
reference to Exhibit 10.6 to the Registrants Form 10-K filed
on March 15, 2001.
|10.7        |  | Director Stock Option Plan, incorporated by reference to
Exhibit 4 files with the Registrants Registration Statement
on Form S-8, Registration No. 333-81279, filed on June 22,
1999. *                                                                           
|10.8        |  | Directors Deferred Compensation Plan effective April 29, 1999,
incorporated by reference to Exhibit 10.9 to the Registrants
Form 10-K filed on March 15, 2000. *                                                                                                  
|10.9        |  | Stock Purchase Agreement dated August 21, 2000, by and between
City Bank and Island Insurance Co., Ltd, is incorporated by
reference to Exhibit 10.9 to the Registrants Form 10-K filed
on March 15, 2001.                                                        
|10.10       |  | Stock Purchase Agreement dated August 21, 2000, by and between
City Bank and the Trustees of the Hawaii Electricians Health
and Welfare Fund is incorporated by reference to Exhibit 10.10
to the Registrants Form 10-K filed on March 15, 2001.                  
|10.11       |  | Stock Purchase Agreement dated August 21, 2000, by and between
City Bank and the Trustees of the Hawaii Electricians Pension
Fund is incorporated by reference to Exhibit 10.11 to the
Registrants Form 10-K filed on March 15, 2001.                             
|16          |  | Letter re: change in certifying accountant, incorporated by
reference to 16 to Registrants Form 10-K filed on March 15,
2000.                                                                                                                                     
|18          |  | Letter re: change in accounting principles, incorporated by
reference to Exhibit 17 to Registrants Form 10-K filed on
March 15, 2000.                                                                                                                             
|21          |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                    
|23          |  | Consent of experts and counsel.                                                                                                                                                                                                                                    



|* |  | Management contract or compensatory plan or arrangement.
|- |  | --------------------------------------------------------

All other schedules are omitted because they are not applicable, not material,
or because the information is included in the financial statement or the notes
thereto.

(c)  REPORTS ON FORM 8-K

The Company has filed no reports on Form 8-K for the quarter ended December 31,
2001.

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##### Table of Contents






SIGNATURES

Pursuant to the Requirement of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

|                     |                                                                                                       
|-------------------- | ------------------------------------------------------------------------------------------------------
|Date: March 21, 2002 | CB BANCSHARES, INC.                                                                                   
|                     |                                                                                                       
|                     | /s/ Ronald K. Migita
        
        Ronald K. Migita, 
        President and Chief Executive Officer

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

Date: March 21, 2002

|                                                                                        |  |                                                                                               
|--------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------
|/s/ Donald J. Andres

Donald J. Andres, Director                                        |  | /s/ Tomio Fuchu
Tomio Fuchu, Vice Chairman                                                    
|                                                                                        |  |                                                                                               
|/s/ Duane K. Kurisu

Duane K. Kurisu, Director                                          |  | /s/ Colbert M. Matsumoto

Colbert M. Matsumoto, Director                                      
|                                                                                        |  |                                                                                               
|/s/ Ronald K. Migita

Ronald K. Migita, President, Chief Executive
Officer and Director |  | /s/ Caryn S. Morita

Caryn S. Morita, Secretary and Director                                  
|                                                                                        |  |                                                                                               
|/s/ Calvin K. Y. Say

Calvin K. Y. Say, Director                                        |  | /s/ Mike K. Sayama

Mike K. Sayama, Director                                                  
|                                                                                        |  |                                                                                               
|/s/ Yoshiki Takada
Yoshiki Takada, Director                                             |  | /s/ Lionel Y. Tokioka

Lionel Y. Tokioka, Chairman of the Board                               
|                                                                                        |  |                                                                                               
|/s/ Dwight L. Yoshimura

Dwight L. Yoshimura, Director                                  |  | /s/ Dean K. Hirata

Dean K. Hirata, Senior Vice President
andChief Financial Officer/Treasurer

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EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                   
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                   
|3.1     |  | Articles of Incorporation of CB Bancshares, Inc., incorporated
by reference to Exhibit 3.1 filed with the Registrants
Registration Statement on Form S-4, Registration No. 33-72340.                                                                                                                                             
|3.2     |  | By-laws of CB Bancshares, Inc., incorporated by reference to
Exhibits 3.2 and 3.3 filed with the Registrants Registration
Statement on Form S-4, Registration No. 33-72340.                                                                                                                                                      
|4.0     |  | No instrument which defines the rights of holders of long-term
debt, of the registrant and all of its consolidated
subsidiaries, is filed herewith pursuant to Regulation S-K,
Item 601(b)(4)(iii)(A). Pursuant to this regulation, the
registrant hereby agrees to furnish a copy of any such
instrument to the SEC upon request.
|4.1     |  | Rights Agreement dated as of March 16, 1989, between CB
Bancshares, Inc. and City Bank, Rights Agent, incorporated by
reference to Form 8-A, filed on April 24, 1989 (File
No. 0-12396).                                                                                                                                          
|4.2     |  | Amendment to Rights Agreement made as of June 21, 1989,
incorporated by reference to Form 8 Amendment No. 1 to Form 8-A,
filed on July 11, 1989 (File No. 0-12396).                                                                                                                                                               
|4.3     |  | Amendment No. 2 to Rights Agreement entered into as of August 15,
1990, incorporated by reference to Form 8 Amendment No. 2
to Form 8-A, filed on August 28, 1990 (File
No. 0-12396).                                                                                                                                             
|4.4     |  | Amendment No. 3 to Rights Agreement entered into as of
February 17, 1993, incorporated by reference to Exhibit 4.4 to
Form 8-A/A, Amendment No. 3, filed on March 25, 1999.                                                                                                                                                       
|4.5     |  | Amendment No. 4 to Rights Agreement entered into as of March 25,
1999, incorporated by reference to Exhibit 4.5 to Form 8-A/A,
Amendment No. 3, filed on March 25, 1999.                                                                                                                                                          
|10.1    |  | Stock Compensation Plan, incorporated by reference to Exhibit
A and B to the Registrants Proxy Statement for the January 25,
1995 Special Meeting of Shareholders, filed on December 9,
1995. *                                                                                                                                  
|10.2    |  | Form of Stock Option Agreement incorporated by reference to
Exhibit 10.6 of Form 10-K filed on April 1, 1996. *                                                                                                                                                                                                                   
|10.4    |  | Form of Change in Control Agreement is incorporated by
reference to Exhibit 99.2 of Form 8-K filed on April 18, 1996.                                                                                                                                                                                                             
|10.5    |  | Agreement and Plan of Merger dated as of December 22, 1999, by
and between City Bank and International Savings and Loan
Association, Limited, is incorporated by reference to Exhibit
10.5 to the Registrants Form 10-K filed on March 15, 2001.                                                                                 
|10.6    |  | Advances, Security and Deposit Agreement dated as of May 20,
1999 by and between City Bank, including its successors, and
the Federal Home Loan Bank of Seattle is incorporated by
reference to Exhibit 10.6 to the Registrants Form 10-K filed
on March 15, 2001.                                                               
|10.7    |  | Director Stock Option Plan, incorporated by reference to
Exhibit 4 files with the Registrants Registration Statement
on Form S-8, Registration No. 333-81279, filed on June 22,
1999. *                                                                                                                                          
|10.8    |  | Directors Deferred Compensation Plan effective April 29, 1999,
incorporated by reference to Exhibit 10.9 to the Registrants
Form 10-K filed on March 15, 2000. *                                                                                                                                                                 
|10.9    |  | Stock Purchase Agreement dated August 21, 2000, by and between
City Bank and Island Insurance Co., Ltd, is incorporated by
reference to Exhibit 10.9 to the Registrants Form 10-K filed
on March 15, 2001.                                                                                                                       
|10.10   |  | Stock Purchase Agreement dated August 21, 2000, by and between
City Bank and the Trustees of the Hawaii Electricians Health
and Welfare Fund is incorporated by reference to Exhibit 10.10
to the Registrants Form 10-K filed on March 15, 2001.                                                                                 
|10.11   |  | Stock Purchase Agreement dated August 21, 2000, by and between
City Bank and the Trustees of the Hawaii Electricians Pension
Fund is incorporated by reference to Exhibit 10.11 to the
Registrants Form 10-K filed on March 15, 2001.                                                                                            
|16      |  | Letter re: change in certifying accountant, incorporated by
reference to 16 to Registrants Form 10-K filed on March 15,
2000.                                                                                                                                                                                                    
|18      |  | Letter re: change in accounting principles, incorporated by
reference to Exhibit 17 to Registrants Form 10-K filed on
March 15, 2000.                                                                                                                                                                                            
|21      |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                   
|23      |  | Consent of experts and counsel.                                                                                                                                                                                                                                                                                                   



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|* |  | Management contract or compensatory plan or arrangement.
|- |  | --------------------------------------------------------

50