UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

ý      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                                        For the quarterly period ended June 30, 2001

OR

o      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                                        For the transition period from __________ to _________

Commission file number 0-10777

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

Hawaii	99-0212597
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
220 South King Street, Honolulu, Hawaii	96813
(Address of principal executive offices)	(Zip Code)
(808) 544-0500
(Registrant's telephone number, including area code)

None
(Former name, former address and former fiscal year, if changed since last report)

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

             Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, No Par Value;
Outstanding at August 6, 2001: 8,234,988 shares

PART I.   FINANCIAL INFORMATION

Item 1.  Financial Statements

             The financial statements listed below are filed as a part hereof.

Consolidated Balance Sheets (Unaudited)- June 30,2001 and December 31, 2000

Consolidated Statements of Income (Unaudited) -Three and six months ended June 30, 2001 and 2000

Consolidated Statements of Changes in Stockholders’Equity and Comprehensive Income (Unaudited) - Six months ended June 30, 2001 and 2000

Consolidated Statements of Cash Flows (Unaudited) -Six months ended June 30, 2001 and 2000

Notes to Consolidated Financial Statements (Unaudited) - June 30, 2001 and 2000

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

             CPB Inc. (the "Company") posted second quarter 2001 net income of $5.774 million, increasing by 20.5% over the $4.790 million earned in the second quarter of 2000.  Net income for the first half of 2001 of $11.102 million increased by 18.4% over the $9.376 million earned in 2000.  The increase in net income was mainly attributed to an increase in net interest income.  As of June 30, 2001, total assets of $1.80 billion decreased by $19.8 million or 1.1% from year-end 2000.  Net loans of $1.23 billion decreased by $37.3 million or 2.9% due to the sale of $54 million in residential mortgage loans during the first quarter of 2001.  Total deposits of $1.41 billion increased by $42.9 million or 3.1% during the first half of 2001.

             The following table presents annualized returns on average assets and average stockholders' equity and basic and diluted earnings per share for the periods indicated.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2001			2000			2001			2000
Annualized return on average assets	1.30		%	1.17		%	1.25		%	1.16		%
Annualized return on average stockholders'equity	15.86		%	13.47		%	15.23		%	13.00		%
Basic earnings per share	$	0.70		$	0.53		$	1.33		$	1.03
Diluted earnings per share	$	0.69		$	0.52		$	1.31		$	1.01

        Hawaii's economy continued to show slight improvement over last year.  The statewide unemployment rate for the first five months of 2001 averaged 4.3%, a decrease from the 4.5% reported during the same period last year.  Through May 2001, statewide job growth was 2.3%.

        Partially offsetting this improvement was a decrease in hotel occupancy rates in June 2001 to 74%, compared to 80% for the same period last year. This decrease was primarily driven by economic conditions on the U. S. mainland and in Japan. Domestic visitor arrivals for the first half of 2001 decreased by 1.2% from the same period last year, while foreign visitor arrivals were down by 2.1%.

        Dollar volume of residential real estate sales in the state of Hawaii for the first six months of 2001 totaled $952.6 million, an increase of 4.3% over the same period last year.

        Hawaii's economic environment has had, and will likely continue to have, a direct effect on our Company's performance. While the Hawaii economy is expected to grow modestly in 2001, actual results in tourism, employment and the real estate market could affect loan demand, deposit growth, provision for loan losses, noninterest income and noninterest expense.  Accordingly, the results of operations of the Company for the remainder of 2001 may be directly impacted by the ability of the Hawaii economy to sustain the positive trends experienced during the last several years.

        Certain matters discussed in this report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements relate to, among other things, net interest income, net interest margin, the levels of nonperforming loans, loan losses and the allowance for loan losses, noninterest income and noninterest expense.  Important factors that could cause the results to differ from those discussed in this report include, but are not limited to, changes in market interest rates, general business conditions in the state of Hawaii, the real estate market in Hawaii, competitive conditions among financial institutions, regulatory changes in the financial services industry, and other risks detailed in the Company's reports filed with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended December 31, 2000.

Results of Operations

Net Interest Income

        A comparison of net interest income for the three and six months ended June 30, 2001 and 2000 is set forth below on a taxable equivalent basis using an assumed income tax rate of 35%.

        Net interest income, when expressed as a percentage of average interest earning assets, is referred to as "net interest margin."

		Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)		2001			2000			2001			2000
Interest income		$	33,097		$	31,072		$	67,670		$	60,319
Interest expense		13,864			12,920			29,208			24,894
	Net interest income	$	19,233		$	18,152		$	38,462		$	35,425
Net interest margin		4.60		%	4.71		%	4.60		%	4.64		%

        Interest income increased by $2.0 million or 6.5% in the second quarter of 2001 and by $7.4 or 12.2% in the first half of 2001 compared to the same periods in 2000, due primarily to an increase in average volumes.  Average interest earning assets of $1,671.9 million for the second quarter and first half of 2001 increased by $129.2 million or 8.4% and $145.4 million or 9.5%, respectively, due primarily to increases in loans.  Yield on interest earning assets of 7.92% for the second quarter of 2001 decreased from 8.06% for the same period in 2000 due to the decline in market interest rates during the first half of 2001.  The yield on interest earning assets of 8.09% for the first half of 2001 increased from 7.90% for the first half of 2000 due to net interest recoveries in 2001 of $668,000 on nonaccrual and charged-off loans compared to net interest reversals in 2000 of $457,000.

        Interest and fees on loans increased by $1.2 million or 4.9% and $5.4 million or 11.1% in the second quarter and first half of 2001, respectively, compared to the same periods in 2000 due to increases in average loan balances and the interest recoveries previously discussed.  Interest and dividends on investment securities increased by $225,000 or 4.0% and $1.2 million or 11.6% mainly due to average balance increases.  Interest on interest-bearing deposits in other banks also increased by $522,000 and $630,000, respectively, due to increases in average balances.

        Interest expense for the second quarter and first half of 2001 increased by $944,000 or 7.3% and $4.3 million or 17.3%, respectively, compared to the same periods in 2001 due to higher average interest-bearing liabilities and the higher proportion of balances in relatively higher-rate certificates of deposit and long-term debt.  Average interest-bearing liabilities totaled $1,397.3 million in the second quarter of 2001 and $1,400.3 million in the first half of 2001, increasing by $117.5 million or 9.2% and $133.0 million or 10.5%, respectively, due to increases in large certificates of deposit and in long-term debt. The average rate on interest-bearing liabilities for the second quarter of 2001 decreased to 3.97% from 4.04% in the second quarter of 2000, due in part to the decline in market interest rates in 2001.  The average rate for the first half of 2001 increased to 4.17% from 3.93% in 2000.  As discussed earlier, this increase was due primarily to the change in the composition of the interest-bearing liabilities during the period.

        The resultant net interest income for the second quarter and first half of 2001 increased by $1.1 million or 6.0% and $3.0 million or 8.6%, respectively, over the same periods in 2000.  Net interest margin declined to 4.60% for the second quarter and first half of 2001 from 4.71% and 4.64%, respectively, in 2000. Strong competition for both loans and core deposits is expected to continue and may create additional pressure on net interest margin in the future.

Provision for Loan Losses

        Provision for loan losses is determined by Management's ongoing evaluation of the loan portfolio and assessment of the ability of the allowance for loan losses to cover inherent losses.  The Company, considering current information and events regarding a borrower's ability to repay its obligations, treats a loan as impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.  When a loan is considered to be impaired, the amount of impairment is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, if the loan is considered to be collateral dependent, based on the fair value of the collateral.  Impairment losses are included in the allowance for loan losses through a charge to the provision for loan losses.  For smaller-balance homogeneous loans, primarily residential real estate and consumer loans, the allowance for loan losses is based upon Management's evaluation of the quality, character and risks inherent in the loan portfolio, current and projected economic conditions, and historical loan loss experience.  The allowance is increased by provisions charged to operating expense and reduced by loan charge-offs, net of recoveries.

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

			Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)			2001			2000			2001			2000
Allowance for loan losses:
	Balance at beginning of period		$	23,254		$	21,886		$	22,612		$	20,768
	Provision for loan losses		900			1,000			1,650			2,000
	Loan charge-offs:
	Real estate:
		Mortgage-commercial	200			—			200			—
		Mortgage-residential	27			418			441			768
	Commercial, financial and agricultural		—			101			-			119
	Consumer		136			133			229			216
	Other		1			-			1			12
		Total loan charge-offs	364			652			871			1,115
	Recoveries:
	Real estate:
		Mortgage-commercial	242			-			244			513
		Mortgage-residential	26			46			74			52
	Commercial, financial and agricultural		—			60			318			72
	Consumer		32			50			63			100
	Other		—			—			—			—
		Total recoveries	300			156			699			737
	Net loan charge-offs		64			496			172			378
	Balance at end of period		$	24,090		$	22,390		$	24,090		$	22,390
Annualized ratio of net loan charge-offs to average loans			0.02		%	0.17		%	0.03		%	0.06		%

        The provision for loan losses of $900,000 for the second quarter and $1.7 million for the first half of 2001 decreased by 10.0% and 17.5%, respectively, from the amounts accrued in the same periods in 2000.  For the second quarter, net loan charge-offs of $64,000 in 2001 and $496,000 in 2000, when expressed as an annualized percentage of average total loans, were 0.02% and 0.17%, respectively.  Loan charge-offs during the second quarter of 2001 were comprised primarily of two commercial real estate loans and various consumer loans.  Loan recoveries during the second quarter consisted primarily of one commercial real estate loan.

        The allowance for loan losses expressed as a percentage of total loans was 1.92% at June 30, 2001, increasing from 1.75% at December 31, 2000.  The increase in this ratio was due to the sale of $54 million in residential mortgage loans.  Considering the relatively low level of net loan charge-offs and decrease in total nonaccrual and delinquent loans during the year, Management believes that the allowance for loan losses was adequate to cover the credit risks inherent in the loan portfolio.  However, any deterioration in economic conditions in the state of Hawaii could adversely affect borrowers' ability to repay, collateral values and, consequently, the level of nonperforming loans and provision for loan losses.

Nonperforming Assets

        The following table sets forth nonperforming assets and accruing loans delinquent for 90 days or more at the dates indicated.

(Dollars in thousands)								June 30, 2001			December 31, 2000			June 30, 2000
Nonaccrual loans:
	Real estate:
					Mortgage-commercial			$	153		$	2,258		$	1,893
					Mortgage-residential			1,358			2,069			3,016
	Commercial, financial and agricultural							3,577			4,197			2,161
							Total nonaccrual loans	5,088			8,524			7,070
Other real estate								990			1,792			1,248
	Total nonperforming assets							6,078			10,316			8,318
Loans delinquent for 90 days or more:
	Real estate:
				Mortgage-commercial				—			—			293
				Mortgage-residential				656			653			442
	Commercial, financial and agricultural							90			850			192
	Consumer							23			24			—
						Total loans delinquent for 90 days or more		769			1,527			927
Restructured loans still accruing interest:
	Real estate:
			Mortgage-commercial					445			466			485
		Total restructured loans still accruing interest						445			466			485
Total nonperforming assets, loans delinquent for 90 days or more and restructured loans still accruing interest								$	7,292		$	12,309		$	9,730
Total nonperforming assets as a percentage of loans and other real estate								0.48		%	0.80		%	0.68		%
Total nonperforming assets and loans delinquent for 90 days or more as a percentage of loans and other real estate								0.54		%	0.92		%	0.76		%
Total nonperforming assets, loans delinquent for 90 days or more and restructured loans still accruing interest as a percentage of loans and other real estate								0.58		%	0.95		%	0.80		%

        Nonperforming assets, loans delinquent for 90 days or more and restructured loans still accruing interest totaled $7.3 million at June 30, 2001, a decrease of $5.0 million or 40.8% from year-end 2000.  Nonaccrual loans totaled $5.1 million at June 30, 2001, a decrease of 40.3% from year-end 2000, and included a $3.0 million commercial loan and a $0.9 million loan secured by multi-family residential property.  Nonaccrual commercial mortgage loans totaled $153,000 at June 30, 2001, a decrease of $2.1 million from year-end 2000.  The majority of this decrease was due to loan payoffs of $1.5 million.  Loans delinquent for 90 days or more and still accruing interest totaled $769,000 at June 30, 2001, a 49.6% decrease from year-end 2000, and consisted primarily of residential mortgage loans.  Impaired loans, representing seven loans at June 30, 2001, totaled $7.4 million and at year-end 2000 totaled $11.3 million.

        Management continues to closely monitor loan delinquencies and work with borrowers to resolve loan problems; however, any worsening of current economic conditions in the state of Hawaii may result in future increases in nonperforming assets, delinquencies, net loan charge-offs, provision for loan losses and noninterest expense.

Other Operating Income

        Total other operating income totaled $3.5 million for the second quarter of 2001, an increase of 28.8% over the same period last year.  This increase was primarily driven by investment securities gains and losses.  Excluding the impact of the securities transactions, total other operating income was comparable to the second quarter of 2000.  On a year-to-date basis, other operating income excluding securities gains and losses totaled $6.5 million for 2001, compared to $7.9 million for the same period last year.  This decrease was primarily attributed to the $1.9 million gain on the sale of the merchant portfolio in the first quarter of last year. Additionally, loan sales generated $700,000 million in gains in 2001.

Other Operating Expense

        Total other operating expense was $12.5 million for the second quarter of 2001, an increase of 2.9% over the same period last year.  This increase was primarily attributed to an increase in salaries and benefits of $811,000 or 14.1% over last year’s second quarter.  In the second quarter of 2000, restructuring charges totaling $600,000 million were reversed.  On a year-to-date basis, total other operating expense was $26.0 million, an increase of 2.1% over the same period last year.  Salaries and benefits totaled $13.5 million for the first six months of 2001, an increase of 9.5% over the same period last year.  This increase was primarily due to increases in incentive accruals in 2001 and the reversal of restructuring charges in 2000.  In the first quarter of 2001, an expense of $642,000 was recorded due to an early payoff of $20 million in borrowings from the Federal Home Loan Bank of Seattle.  In the first quarter of 2000, expenses of $358,000 related to merchant servicing fees and $480,000 related to early termination of a servicing agreement for the sold merchant services portfolio were recognized.

Income Taxes

        The effective tax rates for the second quarter and first six months of 2001 were 35.84% and 35.76%, respectively.  For 2000, the comparable rates were 35.24% and 35.26%.

Financial Condition

        Total assets at June 30, 2001 was $1.80 billion, a decrease of $19.8 million or 1.1% from year-end 2000.  In the second quarter of 2001, the Company acquired the remaining interest in CKSS Associates, a partnership in which the Company already held a 50% partnership interest.  This transaction accounted for the majority of the increase noted in premises and equipment as of June 30, 2001.  Also occurring in 2001 was the sale of $54 million in residential mortgage loans.  These loans were sold to adjust the Company’s interest rate profile and to enhance liquidity.  Proceeds from the sale were used to reduce short-term borrowings by $40 million and long-term debt by $20 million.  As mentioned earlier, early payoff of long-term debt generated an interest penalty of $642,000, which is included in other expense.  The debt prepayment was part of the Company’s strategy to increase the repricing of its liabilities in the declining interest rate environment. Net loans totaled $1.23 billion as of June 30, 2001, a decrease from $1.27 billion reported at year-end 2000. Investment securities totaled $355.36 million, a decrease of $29.3 million or 7.6%.  Total deposits at June 30, 2001 were $1.41 billion, an increase of $42.9 million or 3.1%.  Core deposits (noninterest-bearing demand, interest-bearing demand and savings deposits, and time deposits under $100,000) at June 30, 2001 were $1.0 billion, an increase from $976 million at March 31, 2001.  Competition for deposits remains strong, and will continue to challenge the bank's ability to gather low-cost retail funds.

Capital Resources

        Stockholders' equity was $146.7 million at June 30, 2001, an increase of $3.4 million or 2.4% from December 31, 2000.  When expressed as a percentage of total assets, stockholders' equity increased to 8.16% at June 30, 2001, from 7.89% at year-end 2000. Book value per share at June 30, 2001 was $17.83, compared to $16.93 at year-end 2000.

        Stock repurchases totaling $6.9 million offset increases due to earnings accumulation and unrealized gains on the available for sale investment securities portfolio.  In the first six months of 2001, the Company repurchased 255,000 shares of common stock. The Company is currently in the fifth segment of its repurchase program, which began in 1998.

        On June 18, 2001, the board of directors declared a second quarter cash dividend of $0.16 per share, a 6.7% increase over the dividend declared in the second quarter of 2000.  Dividends declared in the second quarter of 2001 totaled $1,316,000,  compared with $1,318,000 in the second quarter of 2000.

        The Company's objective with respect to capital resources is to maintain a level of capital that will support sustained asset growth and anticipated risks.  Furthermore, the Company seeks to ensure that regulatory guidelines and industry standards for well-capitalized institutions are met.

        Regulations on capital adequacy guidelines adopted by the Federal Reserve Board (the "FRB") and the Federal Deposit Insurance Corporation (the "FDIC") are as follows.  An institution is required to maintain a minimum ratio of qualifying total capital to risk-adjusted assets of 8% and a minimum ratio of Tier 1 capital to risk-adjusted assets of 4%.  In addition to the risk-based guidelines, federal banking regulators require banking organizations to maintain a minimum amount of Tier 1 capital to total assets, referred to as the leverage ratio.  For a banking organization rated in the highest of the five categories used by regulators to rate banking organizations, the minimum leverage ratio of Tier 1 capital to total assets must be 3%.  In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.

        The following table sets forth the Company’s capital ratios and capital adequacy requirements applicable to the Company as of the dates indicated.

		Actual					Minimum required for capital adequacy purposes					Excess
	(Dollars in thousands)	Amount			Ratio		Amount			Ratio		Amount			Ratio
At June 30, 2001:
	Leverage capital	$	141,978		8.03	%	$	70,689		4.00	%	$	71,289		4.03	%
	Tier 1 risk-based capital	141,978			9.48		59,926			4.00		82,052			5.48
	Total risk-based capital	160,771			10.73		119,852			8.00		40,919			2.73
At December 31, 2000:
	Leverage capital	$	140,222		7.97	%	$	70,362		4.00	%	$	69,860		3.97	%
	Tier 1 risk-based capital	140,222			9.63		58,215			4.00		82,007			5.63
	Total risk-based capital	158,469			10.89		116,431			8.00		42,038			2.89

        In addition, FDIC-insured institutions such as the Bank must maintain leverage, Tier 1 and total risk-based capital ratios of at least 5%, 6% and 10%, respectively, to be considered "well capitalized" under the prompt corrective action provisions of the FDIC Improvement Act of 1991.

        The following table sets forth the Bank’s capital ratios and capital requirements to be considered "well capitalized" as of the dates indicated.

		Actual					Minimum required to be well-capitalized					Excess
(Dollars in thousands)		Amount			Ratio		Amount			Ratio		Amount			Ratio
At June 30, 2001:
	Leverage capital	$	139,084		7.88	%	$	88,247		5.00	%	$	50,837		2.88	%
	Tier 1 risk-based capital	139,084			9.27		89,977			6.00		49,107			3.27
	Total risk-based capital	157,895			10.53		149,961			10.00		7,934			0.53
At December 31, 2000:
	Leverage capital	$	136,563		7.77	%	$	87,837		5.00	%	$	48,726		2.77	%
	Tier 1 risk-based capital	136,563			9.38		87,356			6.00		49,207			3.38
	Total risk-based capital	154,817			10.63		145,594			10.00		9,223			0.63

Asset/Liability Management and Liquidity

        The Company's asset/liability management and liquidity are discussed in the 2000 Annual Report to Shareholders.  No significant changes have occurred during the three and six months ended June 30, 2001.

Item 3.    Quantitative and Qualitative Disclosures About Market
Risk

        The Company discussed the nature and extent of market risk exposure in the 2000 Annual Report to Shareholders.  No significant changes have occurred during the three and six months ended June 30, 2001.

PART II.  OTHER INFORMATION

Items 1 to 5.

        Items 1 to 5 are omitted pursuant to instructions to Part II.

Item 6.	Exhibits and Reports on Form 8-K
(a)	Exhibits
	None
(b)	Reports on Form 8-K
	The Company filed no reports on Form 8-K during the second quarter of 2001.

SIGNATURES

        Pursuant to the requirements 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.

			CPB INC.
			(Registrant)
	Date:	August 9, 2001	/s/ Joichi Saito
			Joichi Saito
			Chairman of the Board and
			Chief Executive Officer
	Date:	August 9, 2001	/s/ Neal K. Kanda
			Neal K. Kanda
			Vice President and Treasurer
			(Principal Financial and
			Accounting Officer)

CPB INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except per share data)			June 30,  2001			December 31,  2000
ASSETS
Cash and due from banks			$	42,659		$	52,207
Interest-bearing deposits in other banks			26,751			11,506
Federal funds sold			25,000			15,000
Investment securities:
	Held to maturity, at cost (fair value of $80,295 at June 30, 2001 and $86,566 at December 31, 2000)		78,810			86,056
	Available for sale, at fair value		276,554			279,714
	Available for sale securities pledged to creditor, at fair value		—			18,849
		Total investment securities	355,364			384,619
Loans			1,255,402			1,291,190
	Less allowance for loan losses		24,090			22,612
		Net loans	1,231,312			1,268,578
Premises and equipment			61,489			23,319
Accrued interest receivable			9,579			10,646
Investment in unconsolidated subsidiaries			1,376			8,924
Due from customers on acceptances			13			-
Other real estate			990			1,792
Other assets			42,573			40,327
		Total assets	$	1,797,106		$	1,816,918
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
	Noninterest-bearing deposits		$	213,450		$	199,625
	Interest-bearing deposits		1,192,549			1,163,441
		Total deposits	1,405,999			1,363,066
Short-term borrowings			4,000			56,720
Long-term debt			199,727			220,970
Bank acceptances outstanding			13			-
Other liabilities			40,634			32,850
		Total liabilities	1,650,373			1,673,606
Stockholders' equity:
	Preferred stock, no par value, authorized 1,000,000 shares, none issued		—			—
	Common stock, no par value; authorized 50,000,000 shares; issued and outstanding 8,227,568 shares at June 30, 2001, and 8,464,468 shares at December 31, 2000		6,269			6,172
	Surplus		45,848			45,848
	Retained earnings		89,951			88,232
	Accumulated other comprehensive income, net of taxes		4,665			3,060
		Total stockholders' equity	146,733			143,312
		Total liabilities and stockholders' equity	$	1,797,106		$	1,816,918

See accompanying notes to consolidated financial statements.

CPB INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

							Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except per share data)							2001			2000			2001			2000
Interest income:
	Interest and fees on loans						$	26,349		$	25,122		$	54,275		$	48,846
	Interest and dividends on investment securities:
						Taxable interest	4,834			4,584			10,039			8,794
						Tax-exempt interest	610			614			1,199			1,205
						Dividends	354			375			678			677
	Interest on deposits in other banks						564			42			771			141
	Interest on Federal funds sold and securities purchased under agreements to resell						57			5			62			7
					Total interest income		32,768			30,742			67,024			59,670
Interest expense:
	Interest on deposits						11,000			10,182			22,514			19,902
	Interest on short-term borrowings						138			764			570			1,445
	Interest on long-term debt						2,726			1,974			6,124			3,547
				Total interest expense			13,864			12,920			29,208			24,894
				Net interest income			18,904			17,822			37,816			34,776
Provision for loan losses							900			1,000			1,650			2,000
	Net interest income after provision for loan losses						18,004			16,822			36,166			32,776
Other operating income:
	Income from fiduciary activities						269			262			570			498
	Service charges on deposit accounts						941			753			1,798			1,534
	Other service charges and fees						1,042			985			2,007			2,217
	Equity in earnings of
	unconsolidated subsidiaries						94			160			217			302
	Fees on foreign exchange						112			128			226			281
	Investment securities gains (losses)						437			(307		)	617			(667		)
	Gain on sale of merchant servicing portfolio						—			—			—			1,850
	Other						575			714			1,716			1,187
			Total other operating income				3,470			2,695			7,151			7,202
Other operating expense:
	Salaries and employee benefits						6,559			5,748			13,461			12,297
	Net occupancy						1,375			1,580			2,951			3,171
	Equipment						662			710			1,371			1,377
	Other						3,878			4,083			8,253			8,650
		Total other operating expense					12,474			12,121			26,036			25,495
		Income before income taxes					9,000			7,396			17,281			14,483
Income taxes							3,226			2,606			6,179			5,107
		Net income					$	5,774		$	4,790		$	11,102		$	9,376
Per share data:
	Basic earnings per share						$	0.70		$	0.53		$	1.33		$	1.03
	Diluted earnings per share						0.69			0.52			1.31			1.01
	Cash dividends declared						0.16			0.15			0.32			0.30
Basic weighted average shares outstanding							8,227			9,022			8,332			9,141
Diluted weighted average shares outstanding							8,391			9,176			8,483			9,286

See accompanying notes to consolidated financial statements.

CPB INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except per share data)		Common stock			Surplus			Retained earnings			Accumulated other comprehensive income(loss)			Total
Six months ended June 30, 2001:
Balance at December 31, 2000		$	6,172		$	45,848		$	88,232		$	3,060		$	143,312
	Net income	—			—			11,102			—			11,102
	Net change in unrealized gain(loss) on investment securities, net of taxes of $1,068	—			—			—			1,605			1,605
Comprehensive income														12,707
Cash dividends declared ($0.32 per share)		—			—			(2,632		)	—			(2,632		)
18,100 shares of common stock issued		286			—			—			—			286
255,000 shares of common stock repurchased		(189		)	—			(6,751		)	—			(6,940		)
Balance at June 30, 2001		$	6,269		$	45,848		$	89,951		$	4,665		$	146,733
Disclosure of reclassification amount:
Unrealized holding gain(loss) on investment securities during period, net of taxes of $1,037		—			—			—			1,558			1,558
Less: reclassification adjustment for gains (losses) included in net income, net of taxes of ($31)		—			—			—			(47		)	(47		)
	Net change in unrealized gain(loss) on investment securities	—			—			—			$	1,605		$	1,605
Six months ended June 30, 2000:
Balance at December 31, 1999		$	6,540		$	45,848		$	94,436		$	(2,745	)	$	144,079
	Net income	—			—			9,376			—			9,376
	Net change in unrealized gain(loss) on investment securities, net of taxes of $(5)	—			—			—			(8		)	(8		)
Comprehensive income														9,368
Cash dividends declared ($0.30 per share)		—			—			(2,701		)	—			(2,701		)
4,540 shares of common stock issued		73			—			—			—			73
507,799 shares of common stock repurchased		(361		)	—			(11,922		)	—			(12,283		)
Balance at June 30, 2000		$	6,252		$	45,848		$	89,189		$	(2,753	)	$	138,536
Disclosure of reclassification amount:
Unrealized holding gain(loss) on investment securities during period, net of taxes of $205		—			—			—			310			310
Less: reclassification adjustment for gains included in net income, net of taxes of $211		—			—			—			318			318
Net change in unrealized gain(loss) on investment securities		—			—			—			$	(8	)	$	(8	)

See accompanying notes to consolidated financial statements.

CPB INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

					Six Months Ended
					June 30,
(Dollars in thousands)					2001			2000
Cash flows from operating activities:
	Net income				$	11,102		$		9,376
Adjustments to reconcile net income to net cash provided by operating activities:
	Provision for loan losses				1,650			2,000
	Provision for depreciation and amortization				1,378			1,370
	Net amortization and accretion of investment securities				(305		)	28
	Net loss (gain) on investment securities				(506		)	667
	Federal Home Loan Bank stock dividends received				(674		)	(610			)
	Origination of loans held for sale				(68,989		)	(642			)
	Net (gain) loss on sale of loans				(718		)	28
	Proceeds from sales of loans held for sale				69,499			3,413
	Deferred income tax expense				(925		)	(365			)
	Equity in earnings of unconsolidated subsidiaries				(217		)	(302			)
	Net decrease in other assets				560			(9,160			)
	Net increase in other liabilities				7,969			1,633
		Net cash provided by operating activities			19,824			7,436
Cash flows from investing activities:
	Proceeds from maturities of and calls on investment securities held to maturity				7,302			7,216
	Proceeds from sales of investment securities available for sale				34,294			29,340
	Proceeds from maturities of and calls on investment securities available for sale				18,875			15,422
	Purchases of investment securities available for sale				(27,057		)	(56,585			)
	Net (increase) decrease in interest-bearing deposits in other banks				(15,245		)	4,831
	Net increase in Federal funds sold				(10,000		)	—
	Net loan repayments (originations)				34,232			(51,688			)
	Purchases of premises and equipment				(420		)	(868			)
	Distributions from unconsolidated subsidiaries				125			250
	Investments in unconsolidated subsidiaries				(81		)	(27			)
	Acquisition of remaining interest in CKSS Associates				(31,043		)	—
			Net cash provided by (used in) investing activities		10,982			(52,109			)
Cash flows from financing activities:
	Net increase in deposits				42,933			16,470
	Proceeds from long-term debt				—			50,000
	Repayments of long-term debt				(21,243		)	(11,318			)
	Net decrease in short-term borrowings				(52,720		)	(33,340			)
	Cash dividends paid				(2,670		)	(2,670			)
	Proceeds from sale of common stock				286			73
	Repurchases of common stock				(6,940		)	(12,283			)
				Net cash provided by (used in) financing activities	(40,354		)	6,932
				Net decrease in cash and cash equivalents	(9,548		)	(37,741			)
Cash and cash equivalents:
	At beginning of period				52,207			83,425
	At end of period				$	42,659		$	45,684
Supplemental disclosure of cash flow information:
	Cash paid during the period for interest				$	29,521		$	22,510
	Cash paid during the period for income taxes				$	—		$	5,100
Supplemental disclosure of noncash investing and financing activities:
	Transfer of loans to other real estate				$	1,592		$	1,897

See accompanying notes to consolidated financial statements.

CPB INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2001 and 2000

1.  Basis of Presentation

        The financial information included herein is unaudited, except for the consolidated balance sheet at December 31, 2000.  However, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods.

        The results of operations for the three and six months ended June 30, 2001 are not necessarily indicative of the results to be expected for the full year.

2.  Comprehensive Income

        Components of other comprehensive income (loss) for the three and six months ended June 30, 2001 and 2000 were comprised solely of unrealized holding gains (losses) on available-for-sale investment securities.  Accumulated other comprehensive income (loss), net of taxes, is presented below as of the dates indicated:

	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2001			2000			2001			2000
Balance at beginning of period	$	4,739		$	(2,817	)	$	3,060		$	(2,745	)
Current-period change	(74		)	64			1,605			(8		)
Balance at end of period	$	4,665		$	(2,753	)	$	4,665		$	(2,753	)

3.  Segment Information

        The Company has three reportable segments: retail branches, commercial finance and treasury.  The segments reported are consistent with internal functional reporting lines.  They are managed separately because each unit has different target markets, technological requirements, marketing strategies and specialized skills.  The retail branch segment includes all retail branch offices.  Products and services offered include a full range of deposit and loan products, safe deposit boxes and various other bank services.  The commercial finance segment focuses on lending to corporate customers, residential mortgage lending, construction and real estate development lending and international banking services.  The treasury segment is responsible for managing the Company's investment securities portfolio and wholesale funding activities.  Other activities include trust, mortgage servicing, and indirect lending activities.

        The accounting policies of the segments are consistent with the Company's accounting policies that are described in note 1 to the consolidated financial statements in the 2000 Annual Report to Shareholders.  The majority of the Company's net income is derived from net interest income.  Accordingly, Management focuses primarily on net interest income (expense), rather than gross interest income and expense amounts, in evaluating segment profitability.  Intersegment net interest income (expense) is allocated to each segment based on the amount of net investable funds provided (used) by that segment at a rate equal to the Bank's average rate on interest-sensitive assets and liabilities. All administrative and overhead expenses are allocated to the segments at cost.  Cash, investment securities, loans and their related balances are allocated to the segment responsible for acquisition and maintenance of those assets.  Segment assets also include all premises and equipment used directly in segment operations.

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

(Dollars in thousands)							Retail Branch			Commercial Finance			Treasury			All Others			Total
Three months ended June 30, 2001:
	Net interest income (expense)						$	(4,677	)	$	17,876		$	2,344		$	3,361		$	18,904
	Intersegment net interest income (expense)						9,912			(8,439		)	44			(1,517		)	—
	Provision for loan losses						280			159			—			461			900
	Other operating income (expense)						1,766			211			513			980			3,470
	Other operating expense						3,528			651			104			8,191			12,474
	Administrative and overhead expense allocation						3,865			1,512			113			(5,490		)	—
	Income tax expense (credit)						(237		)	2,635			965			(137		)	3,226
		Net income					$	(435	)	$	4,691		$	1,719		$	(201	)	$	5,774
Three months ended June 30, 2000:
	Net interest income (expense)						$	(1,501	)	$	13,951		$	1,432		$	3,940		$	17,822
	Intersegment net interest income (expense)						8,107			(6,103		)	526			(2,530		)	—
	Provision for loan losses						284			374			—			342			1,000
	Other operating income						751			296			(296		)	1,944			2,695
	Other operating expense						3,834			526			79			7,682			12,121
	Administrative and overhead expense allocation						3,934			939			79			(4,952		)	—
	Income tax expense (benefit)						(236		)	2,192			528			122			2,606
	Net income (loss)						$	(459	)	$	4,113		$	976		$	160		$	4,790
Six months ended June 30, 2001:
	Net interest income (expense)						$	(8,614	)	$	35,763		$	3,481		$	7,186		$	37,816
	Intersegment net interest income (expense)						19,769			(16,831		)	873			(3,811		)	—
	Provision for loan losses						391			225			—			1,034			1,650
	Other operating income						3,096			532			714			2,809			7,151
	Other operating expense						7,061			1,624			835			16,516			26,036
	Administrative and overhead expense allocation						8,167			3,376			252			(11,795		)	—
	Income tax expense (benefit)						(484		)	5,088			1,430			145			6,179
			Net income (loss)				$	(884	)	$	9,151		$	2,551		$	284		$	11,102
Six months ended June 30, 2000:
	Net interest income (expense)						$	(2,767	)	$	26,704		$	3,046		$	7,793		$	34,776
	Intersegment net interest
	income (expense)						16,390			(12,269		)	855			(4,976		)	—
	Provision for loan losses						665			458			—			877			2,000
	Other operating income						1,597			612			(637		)	5,630			7,202
	Other operating expense						7,498			1,599			198			16,200			25,495
	Administrative and overhead
	expense allocation						8,163			1,741			172			(10,076		)	—
	Income tax expense (benefit)						(420		)	3,917			1,015			595			5,107
				Net income (loss)			$	(686	)	$	7,332		$	1,879		$	851		$	9,376
At June 30, 2001:
	Investment securities						$	—		$	—		$	355,364		$	—		$	355,364
	Loans						156,694			982,630			—			116,078			1,255,402
	Other						17,459			21,148			89,380			58,353			186,340
					Total assets		$	174,153		$	1,003,778		$	444,744		$	174,431		$	1,797,106
At December 31, 2000:
	Investment securities						$	—		$	—		$	384,619		$	—		$	384,619
	Loans						169,839			944,436			—			176,915			1,291,190
	Other						19,906			21,841			73,432			25,930			141,109
						Total assets	$	189,745		$	966,277		$	458,051		$	202,845		$	1,816,918

4.  Accounting Pronouncements

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

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

        In June 2001, the FASB issued SFAS No. 141, Business Combinations.  SFAS No. 141 supersedes Accounting Principles Board (APB) Opinion No. 16, Business Combinations, and SFAS No. 38, Accounting for Preacquisition Contingencies of Purchased Enterprises, and provides accounting and reporting guidance on business combinations initiated after June 30, 2001.  The application of SFAS No. 141 is not expected to have a material impact on the Company’s consolidated financial statements.

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