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 September 30, 2003

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

CENTRAL PACIFIC FINANCIAL CORP.
(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)

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ý No o

As of November 10, 2003, the number of shares of common stock outstanding of the registrant was 16,056,442 shares.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARY

Table of Contents

Part I - Financial Information

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets - September 30, 2003 and 2002, and December 31, 2002

	Consolidated Statements of Income - Three and nine months ended September 30, 2003 and 2002

	Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income (Loss) - Nine months ended September 30, 2003 and 2002

	Consolidated Statements of Cash Flows - Nine months ended September 30, 2003 and 2002

	Notes to Consolidated Financial Statements - September 30, 2003 and 2002

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

Item 3.	Quantitative and Qualitative Disclosure About Market Risk

Item 4.	Controls and Procedures

Part II - Other Information

Item 1.	Legal Proceedings

Item 6.	Exhibits and Reports on Form 8-K

Signatures

Exhibit Index

PART I. FINANCIAL INFORMATION

Forward-Looking Statements

Central Pacific Financial Corp. (the “Company”) may from time to time make written or oral forward-looking statements, including statements contained in the Company’s filings with the Securities and Exchange Commission (including this Quarterly Report on Form 10-Q), in its reports to shareholders and in other Company communications, including communications related to the proposed merger between the Company and CB Bancshares, Inc. (“CBBI”) and statements related to the benefits thereof, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include, among others, (i) statements about the benefits of a merger between the Company and CBBI, including future financial and operating results, cost savings and accretion to reported and cash earnings that may be realized from such merger; (ii) statements with respect to the Company’s plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans”, “targets”, “projects” and other similar expressions. These statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the business of the Company and CBBI may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected time frame; (3) revenues following the merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption, including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers, may be greater than expected following the merger; (5) the regulatory approvals required for the merger may not be obtained on the proposed terms; (6) the failure of the Company’s and CBBI’s shareholders to approve the merger; (7) competitive pressures among depository and other financial institutions may increase significantly and may have an effect on pricing, spending, third-party relationships and revenues; (8) the strength of the United States economy in general and the strength

of the Hawaii economy may be different than expected, resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on the combined company’s loan portfolio and allowance for loan losses; (9) changes in the U.S. legal and regulatory framework; and (10) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on the combined company’s activities.

Additional factors that could cause the Company results to differ materially from those described in the forward-looking statements can be found in the Company’s reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission, including the Annual Report on Form 10-K, as amended, for the year ended December 31, 2002, and available at the SEC’s Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made.

Item 1. Financial Statements

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except per share data)	September 30, 2003			December 31, 2002			September 30, 2002

ASSETS
Cash and due from banks	$	63,155		$	62,273		$	55,065
Interest-bearing deposits in other banks	3,371			39,358			17,446
Federal funds sold	—			—			—
Investment securities:
Held to maturity, at cost (fair value of $44,559 at September 30, 2003, $58,491 at December 31, 2002, and $62,130 at September 30, 2002)	42,883			56,320			59,664
Available for sale, at fair value	494,261			484,604			467,463
Total investment securities	537,144			540,924			527,127

Loans held for sale	8,179			6,420			6,014

Loans	1,425,858			1,289,892			1,287,707
Less allowance for loan losses	24,805			24,197			25,131
Net loans	1,401,053			1,265,695			1,262,576

Premises and equipment	56,244			57,725			58,544
Accrued interest receivable	8,482			9,254			9,180
Investment in unconsolidated subsidiaries	1,820			3,150			2,062
Due from customers on acceptances	—			34			111
Other real estate	—			1,903			1,287
Other assets	52,318			41,427			40,330
Total assets	$	2,131,766		$	2,028,163		$	1,979,742

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing deposits	$	331,485		305,351			$	274,489
Interest-bearing deposits	1,399,436			1,335,750			1,332,425
Total deposits	1,730,921			1,641,101			1,606,914

Short-term borrowings	8,716			29,008			3,438
Long-term debt	164,563			147,155			157,514
Bank acceptances outstanding	—			34			111
Minority interest	10,062			10,064			10,064
Other liabilities	30,028			27,358			34,568
Total liabilities	1,944,290			1,854,720			1,812,609

Shareholders’ equity:
Preferred stock, no par value, authorized 1,000,000 shares, none issued	—			—			—
Common stock, no par value; authorized 50,000,000 shares; issued and outstanding 16,042,618 shares at September 30, 2003, 15,973,458 shares at December 31, 2002 and 15,934,658 shares at September 30, 2002	9,392			8,707			8,284
Surplus	45,848			45,848			45,848
Retained earnings	136,109			118,958			110,542
Deferred stock awards	(54		)	(99		)	(28		)
Accumulated other comprehensive income (loss)	(3,819		)	29			2,487
Total shareholders’ equity	187,476			173,443			167,133

Total liabilities and shareholders’ equity	$	2,131,766		$	2,028,163		$	1,979,742

See accompanying notes to consolidated financial statements.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
(In thousands, except per share data)	2003		2002			2003		2002

Interest income:
Interest and fees on loans	$	22,905	$	23,784		$	67,458	$	70,408
Interest and dividends on investment securities:
Taxable interest	3,728		5,089			12,160		15,120
Tax-exempt interest	1,012		813			2,829		2,254
Dividends	253		329			764		825
Interest on deposits in other banks	8		160			73		440
Interest on Federal funds sold and securities purchased under agreements to resell	3		26			30		129

Total interest income	27,909		30,201			83,314		89,176

Interest expense:
Interest on deposits	3,258		5,757			11,296		18,158
Interest on short-term borrowings	20		49			34		178
Interest on long-term debt	1,325		1,252			3,981		4,552

Total interest expense	4,603		7,058			15,311		22,888

Net interest income	23,306		23,143			68,003		66,288
Provision for loan losses	500		300			700		900

Net interest income after provision for loan losses	22,806		22,843			67,303		65,388

Other operating income:
Income from fiduciary activities	448		350			1,290		964
Service charges on deposit accounts	1,097		1,064			3,229		3,211
Other service charges and fees	1,275		1,248			3,878		3,559
Fees on foreign exchange	152		120			415		375
Investment securities gains (losses)	164		(163		)	168		477
Other	790		496			2,278		1,822

Total other operating income	3,926		3,115			11,258		10,408

Other operating expense:
Salaries and employee benefits	7,613		7,367			21,893		22,700
Net occupancy	1,100		936			3,165		2,784
Equipment	561		750			1,857		2,119
Other	4,993		5,229			14,107		12,920

Total other operating expense	14,267		14,282			41,022		40,523

Income before income taxes	12,465		11,676			37,539		35,273
Income taxes	4,182		3,780			12,696		12,163

Net income	$	8,283	$	7,896		$	24,843	$	23,110

Per share data:
Basic earnings per share	$	0.52	$	0.49		$	1.55	$	1.45
Diluted earnings per share	0.51		0.48			1.52		1.42
Cash dividends declared	0.16		0.10			0.48		0.29

Basic weighted average shares outstanding	16,034		15,969			16,016		15,923
Diluted weighted average shares outstanding	16,381		16,314			16,397		16,275

See accompanying notes to consolidated financial statements.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(Unaudited)

	Common Stock			Surplus		Retained Earnings			Deferred Stock Awards			Accumulated other comprehensive income(loss)			Total
Nine months ended September 30, 2003:
Balance at December 31, 2002	$	8,707		$	45,848	$	118,958		$	(99	)	$	29		$	173,443
Net Income	—			—		24,843			—			—			24,843
Net change in unrealized gain (loss) on investment securities, net of taxes of $(2,560)	—			—		—			—			(3,848		)	(3,848		)

Comprehensive income															20,995

Cash dividends declared ($0.48 per share)	—			—		(7,692		)	—			—			(7,692		)
70,360 shares of common stock issued	710			—		—			—			—			710
Vested stock awards, net	(25		)	—		—			45			—			20

Balance at September 30, 2003	$	9,392		$	45,848	$	136,109		$	(54	)	$	(3,819	)	$	187,476

Disclosure of reclassification amount:
Unrealized holding loss on investment securities during period, net of taxes of $(2,577)	$	—		$	—	$	—		$	—		$	(3,873	)	$	(3,873	)
Less reclassification adjustment for losses included in net income, net of taxes of $(17)	—			—		—			—			(25		)	(25		)
Net Change in unrealized gain (loss) on investment securities	$	—		$	—	$	—		$	—		$	(3,848	)	$	(3,848	)

Nine months ended September 30, 2002:
Balance at December 31, 2001	$	6,678		$	45,848	$	94,581		$	(34	)	$	(3	)	$	147,070
Net Income	—			—		23,110			—			—			23,110
Net change in unrealized gain (loss) on on investment securities, net of taxes of $2,267	—			—		—			—			3,408			3,408
Pension liability adjustment, net of taxes of $(611)	—			—		—			—			(918		)	(918		)

Comprehensive income															25,600

Cash dividends declared ($0.29 per share)	—			—		(4,625		)	—			—			(4,625		)
210,574 shares of common stock issued	1,676			—		—			—			—			1,676
142,400 shares of common stock repurchased	(70		)	—		(2,524		)	—			—			(2,594		)
Vested stock awards, net	—			—		—			6			—			6

Balance at September 30, 2002	$	8,284		$	45,848	$	110,542		$	(28	)	$	2,487		$	167,133

Disclosure of reclassification amount:
Unrealized holding loss on investment securities during period, net of taxes of $2,227	$	—		$	—	$	—		$	—		$	3,347		$	3,347
Less reclassification adjustment for gains included in net income, net of taxes of $(41)	—			—		—			—			(61		)	(61		)
Net Change in unrealized gain (loss) on investment securities	$	—		$	—	$	—		$	—		$	3,408		$	3,408

See accompanying notes to consolidated financial statements.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
(Dollars in thousands)	2003			2002

Cash flows from operating activities:
Net income	$	24,843		$	23,110
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	700			900
Provision for depreciation & amortization	3,026			3,157
Net amortization of deferred stock awards	20			6
Net amortization of investment securities	4,391			365
Net gain on investment securities	(168		)	(477		)
Federal Home Loan Bank dividends received	(584		)	(574		)
Net gain on sale of loans	(648		)	(412		)
Proceeds from sales of loans held for sale	62,437			29,948
Originations of loans held for sale	(63,548		)	(34,254		)
Net loss on disposal of premises & equipment	—			102
Deferred income tax benefit	6,772			7,962
Net increase in other assets	(13,124		)	(3,073		)
Net decrease in other liabilities	3,253			(5,244		)

Net Cash Provided by Operating Activities	27,370			21,516

Cash flows from investing activities:
Proceeds from maturities of & calls on investment securities held to maturity	13,386			10,097
Proceeds from sales of investment securities available for sale	16,482			16,689
Proceeds from maturities of & calls on investment securities available for sale	701,383			65,646
Purchases of investment securities available for sale	(737,517		)	(221,250		)
Net decrease in interest-bearing deposits in other banks	35,987			11,831
Net decrease in Fed Funds Sold	—			13,500
Net loan originations	(136,058		)	(22,793		)
Purchases of premises & equipment	(1,825		)	(1,168		)
Distributions from (contributions to) unconsolidated subsidiaries	910			(921		)

Net Cash Used by Investing Activities	(107,252		)	(128,369		)

Cash flows from financing activities:
Net increase in deposits	89,820			155,989
Proceeds from long-term debt	22,000			12,000
Repayments of long-term debt	(4,592		)	(30,058		)
Net decrease in short-term borrowings	(20,292		)	(10,455		)
Cash dividends paid	(6,882		)	(4,460		)
Proceeds from sale of common stock	710			1,676
Repurchases of common stock	—			(2,594		)

Net Cash Provided by Financing Activities	80,764			122,098

Net increase in cash & cash equivalents	882			15,245

Cash and cash equivalents:
At beginning of period	62,273			39,820

At end of period	$	63,155		$	55,065

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	15,923		$	23,944
Cash paid during the period for income taxes	$	9,137		$	14,338

Supplemental disclosure of noncash investing & financing activities:
Reclassification of loans to other real estate	$	—		$	2,114

See accompanying notes to consolidated financial statements.

CENTRAL PACIFIC FINANCIAL CORP. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2003 and 2002

1. Basis of Presentation

The financial information included herein is unaudited, except for the consolidated balance sheet at December 31, 2002. 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 nine months ended September 30, 2003 are not necessarily indicative of the results to be expected for the full year.

2. Comprehensive Income (Loss)

Components of other comprehensive income (loss), net of taxes, is presented below:

	September 30,
(Dollars in thousands)	2003			2002

Unrealized holding gains (losses) on available-for-sale investment securities	$	3,156		$	7,426
Pension liability adjustments	(6,975		)	(4,939		)
Balance at end of period	$	(3,819	)	$	2,487

3. Segment Information

The Company has two reportable segments: financial services and treasury. The segments reported are consistent with internal functional reporting lines. They are managed separately because each unit has different target markets, technological requirements, marketing strategies and specialized skills. The financial services segment includes retail branch offices, corporate lending, construction and real estate development lending, residential mortgage lending, trust services and international banking services. A full range of deposit and loan products, and various other banking services are offered. The treasury segment is responsible for managing the Company’s investment securities portfolio and wholesale funding activities.

The all others category includes Central Business Club of Honolulu and activities such as mortgage servicing, electronic

banking, investment services and management of bank owned properties.

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 Annual Report on Form 10-K, as amended, for the year ended December 31, 2002 filed with the SEC. The majority of the Company’s net income is derived from net interest income. Accordingly, Management focuses primarily on net interest income, 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)	Financial Services		Treasury			All Others			Total

Three months ended September 30, 2003:
Net interest income (expense)	$	18,462	$	3,209		$	1,635		$	23,306
Intersegment net interest income (expense)	2,237		(1,435		)	(802		)	—
Provision for loan losses	594		—			(94		)	500
Other operating income	1,794		232			1,900			3,926
Other operating expense	4,614		364			9,289			14,267
Administrative and overhead expense allocation	6,656		(231		)	(6,425		)	—
Income taxes	3,817		671			(306		)	4,182

Net income (loss)	$	6,812	$	1,202		$	269		$	8,283

Three months ended September 30, 2002:
Net interest income (expense)	$	17,435	$	4,328		$	1,380		$	23,143
Intersegment net interest income (expense)	2,178		(1,497		)	(681		)	—
Provision for loan losses	225		—			75			300
Other operating income	1,674		71			1,370			3,115
Other operating expense	5,094		292			8,896			14,282
Administrative and overhead expense allocation	5,882		(207		)	(5,675		)	—
Income taxes	3,365		778			(363		)	3,780

Net income (loss)	$	6,721	$	2,039		$	(864	)	$	7,896

Nine months ended September 30, 2003:
Net interest income (expense)	$	53,474	$	10,382		$	4,147		$	68,003
Intersegment net interest income (expense)	6,225		(4,106		)	(2,119		)	—
Provision for loan losses	1,003		—			(303		)	700
Other operating income	5,980		389			4,889			11,258
Other operating expense	14,451		1,165			25,406			41,022
Administrative and overhead expense allocation	20,642		(303		)	(20,339		)	—
Income taxes	10,685		2,085			(74		)	12,696

Net income (loss)	$	18,898	$	3,718		$	2,227		$	24,843

Nine months ended September 30, 2002:
Net interest income (expense)	$	50,350	$	11,526		$	4,412		$	66,288
Intersegment net interest income (expense)	4,580		(2,282		)	(2,298		)	—
Provision for loan losses	652		—			248			900
Other operating income	5,285		721			4,402			10,408
Other operating expense	15,077		1,058			24,388			40,523
Administrative and overhead expense allocation	18,979		(272		)	(18,707		)	—
Income taxes	8,952		2,909			302			12,163

Net income (loss)	$	16,555	$	6,270		$	285		$	23,110

At September 30, 2003:
Investment securities	$	—	$	537,144		$	—		$	537,144
Loans (including loans held for sale)	1,304,792		—			129,245			1,434,037
Other	43,913		51,557			65,115			160,585

Total assets	$	1,348,705	$	588,701		$	194,360		$	2,131,766

At December 31, 2002:
Investment securities	$	—	$	540,924		$	—		$	540,924
Loans (including loans held for sale)	1,224,097		—			72,215			1,296,312
Other	42,973		88,037			59,917			190,927

Total assets	$	1,267,070	$	628,961		$	132,132		$	2,028,163

4. Accounting Pronouncements

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

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The provisions of SFAS No. 149 are effective for contracts entered into or modified after June 30, 2003, except as stated below and for hedging relationships designated after June 30, 2003. The provisions of SFAS No. 149 that relate to SFAS No. 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. In addition, paragraphs 7(a) and 23(a), which relate to forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to both existing contracts and new contracts entered into after June 30, 2003. The application of SFAS No. 143 did not have a material impact on the Company’s consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for

how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The provisions of SFAS No. 150 are effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. The application of SFAS No. 150 did not have a material impact on the Company’s consolidated financial statements.

5. Stock Compensation Plans

The Company has elected to apply the provisions of APB No. 25, and provide the pro forma disclosure provisions of SFAS No. 148.

The following table presents pro forma disclosures of the impact that the 2003, 2002, 2000, 1999 and 1997 option grants would have had on net income and earnings per share had the grants been measured using the fair value of accounting prescribed by SFAS No. 148.

	Three months ended September 30,						Nine months ended September 30,
	2003			2002			2003			2002

Net income, as reported	$	8,283		$	7,896		$	24,843		$	23,110
Deduct: Total stock compensation expense determined under fair value based method for all awards, net of related tax effects	(176		)	(204		)	(528		)	(597		)

Pro forma net income	$	8,107		$	7,692		$	24,315		$	22,513

Earnings per share:
Basic - as reported	$	0.52		$	0.49		$	1.55		$	1.45
Basic - pro forma	$	0.51		$	0.48		$	1.52		$	1.41

Diluted - as reported	$	0.51		$	0.48		$	1.52		$	1.42
Diluted - pro forma	$	0.50		$	0.47		$	1.49		$	1.38

6. Trust Preferred Securities

In March 2003, the Company created a wholly-owned statutory business trust, CPB Capital Trust I (the “Trust”). At September 30, 2003, the Trust had outstanding trust preferred securities (the “Securities”) which totaled $15.0 million. The Securities bear an interest rate of three-month LIBOR plus 3.25%, and mature on April 7, 2033. The principal assets of the Trust are $15.5

million of the Company’s subordinated debentures with an identical interest rate and maturity as the Securities. The Trust has issued $0.5 million of common stock to the Company.

The Securities, the assets of the Trust, and the common securities issued by the Trust are redeemable in whole or in part on any January 7, April 7, July 7, or October 7 on or after April 7, 2008, or at any time in whole but not in part at any time within 90 days following the occurrence of certain events. The obligations of the Company with respect to the issuance of the Securities constitute a full and unconditional guarantee by the Company of the Trust’s obligations with respect to the Securities. Subject to certain exceptions and limitations, the Company may elect from time to time to defer subordinated debenture interest payments, which could result in a deferral of distribution payments on the related Securities.

The Securities are reported on the consolidated balance sheet as long-term debt, and the related dividend payments are reported as interest on long-term debt on the income statement. For the nine months ended September 30, 2003, interest expense totaled $349,000.

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

Critical Accounting Policies

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

Allowance for Loan Losses (“Allowance”) - The provision for loan losses (“Provision”) is determined by Management’s ongoing evaluation of the loan portfolio and assessment of the Allowance to cover inherent losses. The Company’s methodology for determining the adequacy of the Allowance and the Provision takes into account many factors, including the level and trend of nonperforming and potential problem loans, net charge-off experience, current repayment by borrowers, fair value of collateral securing specific loans and general economic factors in Hawaii. The Allowance consists of two components: allocated and unallocated. To calculate the allocated component, the Company combines specific reserves required for individual loans (including impaired loans), reserves required for pooled graded loans and loan concentrations, and reserves required for homogeneous loans (e.g., consumer loans, residential mortgage loans). The Company uses a loan grading system whereby loans are segregated by risk. Certain graded commercial and commercial real estate loans are analyzed on an individual basis. Other graded loans are analyzed on an aggregate basis based upon migration analysis (i.e., movements between loan grades) and risks inherent in loan concentrations in specific industries or categories. The determination of an allocated reserve for homogeneous loans is done at an aggregate level based upon various factors including historical loss experience, delinquencies, and economic conditions. The unallocated component of the allowance incorporates the Company’s judgmental determination of the risks inherent in the loan portfolio, economic uncertainties, and imprecision in the estimation model.

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 through a charge to the Provision.

Overview of Material Events

On March 17, 2003, the Company presented to senior management of CB Bancshares, Inc. (“CBBI”), an offer to combine the Company and CBBI by means of a public offer to acquire at least a majority and up to 100% of the outstanding CBBI common stock for 1.7233 shares of the Company’s common stock plus $19.09 in cash for each share of CBBI common stock (as adjusted for the 10% stock dividend paid to CBBI shareholders on June 27, 2003) (the “Merger Consideration”), to be followed by a merger of the two companies in which all remaining CBBI common stock would receive the Merger Consideration. On April 16, 2003, the Company publicly announced the proposed business combination. On May 4, 2003, CBBI announced that its board of directors rejected the Company’s offer.

On May 9, 2003, the Company rescinded, revoked and withdrew its original offer and presented a new offer to CBBI that provided for a per share consideration of 1.6005 shares of the Company’s common stock and $22.27 in cash for each share of CBBI common stock outstanding (as adjusted for the 10% stock dividend paid to CBBI shareholders on June 27, 2003). On May 12, 2003, CBBI announced that its board of directors rejected the Company’s new offer.

The Company has filed applications with the Board of Governors of the Federal Reserve System and the Hawaii Commissioner of Financial Institutions for approval to acquire control of a majority of the outstanding shares of CBBI common stock. On October 21, 2003, the Company’s application with the Hawaii Commissioner of Financial Institutions was deemed complete and accepted for filing. Both applications are still pending.

The CBBI board of directors has taken a number of actions to resist the proposed business combination. The Company plans to continue to pursue a business combination with CBBI because the Company believes such a combination will benefit its shareholders and CBBI’s shareholders, as well as customers and employees of both companies and the State of Hawaii.

The consummation of the proposed business combination is

subject to numerous conditions including, without limitation, receipt of required regulatory approvals, receipt of required approval of the shareholders of the Company, receipt of either approval of the Company’s acquisition of CBBI common stock by CBBI shareholders or approval or exemption of the Company’s acquisition by CBBI’s board of directors under the Hawaii Control Share Acquisitions statute (or inapplicability or invalidity of that statute), effectiveness of the registration statement, CBBI’s 1989 Rights Agreement not having been triggered before August 4, 2003, and inapplicability of CBBI’s 2003 Rights Agreement to the transaction.

Further information relating to the Company’s proposed business combination with CBBI can be found in the registration statement on Form S-4, File No. 333-104783, filed by the Company with the Securities and Exchange Commission on April 28, 2003, and amendments thereto filed on May 5, 2003, May 9, 2003, July 17, 2003, September 5, 2003 and September 19, 2003, respectively (the “Registration Statement”).

CBBI and the Company have taken legal action against each other involving matters related to the proposed business combination, as described more fully in the Registration Statement. Since the filing of the most recent amendment to the Registration Statement, CBBI and the Company have taken the actions described below.

The motions the Company filed on August 18, 2003, a motion for judgment on the pleadings with respect to CBBI’s counterclaim and a motion to dismiss CBBI’s July 21, 2003 complaint, were heard by the Honorable Victoria S. Marks on September 29, 2003 and were granted in part and denied in part. With respect to the Company’s motion to dismiss CBBI’s July 21, 2003 complaint, Judge Marks agreed that CBBI’s complaint was duplicative of CBBI’s counterclaim to our earlier-filed complaint and dismissed the action. With respect to the Company’s motion for judgment on the pleadings, Judge Marks denied the motion. The parties are presently in discovery on that action.

As of September 30, 2003, the Company capitalized merger-related costs totaling $8.8 million. This amount is reflected as a component of other assets on the consolidated balance sheet. In the event that the proposed merger does not occur, all capitalized costs will be expensed. For the nine months ended September 30, 2003, merger-related expenses total $1.3 million, and are reflected as a component of other operating expense on the consolidated statement of income.

Financial Summary

For the third quarter of 2003, the Company reported net income

of $8.3 million or $0.51 per diluted share, up 4.9% and 6.3%, respectively, from the same period last year. For the first nine months of 2003, net income was $24.8 million or $1.52 per diluted share, an increase of 7.5% and 7.0%, respectively, from the same period last year. Strong loan and core deposit growth contributed to this increase.

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 Septmeber 30,						Nine Months Ended September 30,
	2003			2002			2003			2002

Annualized return on average assets	1.58		%	1.62		%	1.62		%	1.63		%

Annualized return on average stockholders’ equity	17.89		%	19.04		%	18.11		%	19.43		%

Basic earnings per share	$	0.52		$	0.49		$	1.55		$	1.45
Diluted earnings per share	$	0.51		$	0.48		$	1.52		$	1.42

Material Trends

Hawaii’s economy continued to show signs of improvement in 2003. The state’s unemployment rate was 4.3% in September 2003, compared to 4.1% in September 2002.(1) Despite the slight increase over the prior year, the state’s unemployment rate has remained consistently below the national unemployment rate. For 2003, the state unemployment rate is forecasted to be 3.8%.(2) On the national level, the unemployment rate was 5.8% in September 2003, compared to 5.4% in September 2002.(3) The number of construction jobs in Hawaii are up 7.6% through the second quarter of 2003(4), consistent with the forecasted 10% growth in construction industry employment.(5) Total state personal income is forecasted to grow by 3.6% in 2003.(6) The housing market, supported by low mortgage interest rates, continues to show strong growth. Residential home sales in Hawaii for the first nine months of 2003 were $2.6 billion, an increase of 37.7% over the same period last year.(7) The median sales price for single family homes and condominiums increased over the same period last year by 9.7% and

(1) Hawaii State Department of Labor and Industrial Relations.

(2) University of Hawaii Economic Research Organization.

(3) Hawaii State Department of Labor and Industrial Relations.

(4) Ibid.

(5) University of Hawaii Economic Research Organization.

(6) Ibid.

(7) Honolulu Board of Realtors.

13.6%, respectively.(8) For the first nine months of 2003, hotel occupancy and average daily room rates increased 2.4% and 2.2%, respectively, over last year.(9) Domestic visitor arrivals increased 3.2% for the first nine months of 2003 compared to the same period last year.(10) In addition, the total amount of domestic visitor days and average length of stay in Hawaii increased 7.1% and 3.8% through September 2003, respectively, over last year.(11) Offsetting the positive visitor trends is the continued decrease in the international tourism market, particularly in the Japanese market. For the nine months ended September 30, 2003, total Japanese visitor arrivals were down 13.4%, compared with the same period last year.(12) Japanese visitor arrivals, which decreased by 4.3% in 2002, are expected to decrease by 18.6% in 2003.(13) Contributing to this decline are the weak Japanese economy and concerns about the continuing war in Iraq.

In September 2003, the Japanese yen reached its highest level in three years at 111 yen to the dollar. Also, in September 2003, international visitor arrivals decreased 2.6% from August 2003, representing the smallest monthly decrease since March 2003. These events may have an impact on Hawaii’s economy through the end of the year.

The results of operations of the Company in 2003 may be directly impacted by the ability of Hawaii’s economy to sustain positive growth. Loan demand, deposit growth, provision for loan losses, noninterest income, and noninterest expense will be affected by economic conditions through the end of the year.

Results of Operations

Net Interest Income

A comparison of net interest income for the three and nine months ended September 30, 2003 and 2002 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.”

(8) Ibid.

(9) Hawaii State Department of Business, Economic Development and Tourism.

(10) Ibid.

(11) Ibid.

(12) Ibid.

(13) University of Hawaii Economic Research Organization.

	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2003			2002			2003			2002

Interest income	$	28,453		$	30,638		$	84,837		$	90,390
Interest expense	4,603			7,058			15,311			22,888
Net interest income	$	23,850		$	23,580		$	69,526		$	67,502

Net interest margin	4.89		%	5.24		%	4.88		%	5.13		%

Interest income, including loan fees, on a taxable equivalent basis decreased by $2.2 million or 7.1% in the third quarter of 2003 and $5.6 million or 6.1% in the first nine months of 2003 compared to the same periods last year. These decreases were primarily due to lower interest rates, accelerated amortization on investment securities due to prepayments on mortgage-backed securities, and accelerated asset repricings, offset by higher average interest earning assets. In addition, during the third quarter of 2003, a $1.3 million loan prepayment penalty was received. The yield on interest earning assets was 5.84% for the third quarter of 2003 and 5.96% for the first nine months of 2003, compared to 6.81% and 6.86%, respectively, for the same periods in 2002. Average interest earning assets were $1.950 billion for the third quarter and $1.898 for the first nine months of 2003, compared to $1.799 billion for the third quarter of 2002 and $1.756 billion for the first nine months of 2002.

Interest expense decreased $2.5 million or 34.8% in the third quarter of 2003 and $7.6 million or 33.1% for the nine months ended September 30, 2003, compared to the same periods in 2002, primarily due to lower interest rates offset by higher average interest-bearing liabilities. The average rate on interest-bearing liabilities was 1.17% for the third quarter of 2003 and 1.33% for the first nine months of 2003, compared to 1.90% and 2.09%, respectively, for the comparable periods in 2002. Average interest-bearing liabilities totaled $1.569 billion in the third quarter of 2003 and $1.535 billion for the first nine months of 2003, compared to $1.486 billion and $1.460 billion for the same periods last year.

Net interest income on a taxable equivalent basis increased by $0.3 million or 1.1% for the third quarter of 2003 and $2.0 million or 3.0% for first nine months of 2003 compared to the same periods last year. The net interest margin was 4.89% for the third quarter of 2003 and 4.88% for the first nine months of 2003 compared to 5.24% and 5.13%, respectively, for the same periods in 2002. In the current interest rate environment, net interest margin is expected to decline due to repricing of the loan and investment securities portfolios.

Provision for Loan Losses

A discussion of the Company’s accounting policy regarding the allowance for loan losses is contained in the Critical Accounting Policies section of this report.

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 September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2003			2002			2003			2002

Allowance for loan losses:
Balance at beginning of period	$	25,425		$	24,868		$	24,197		$	24,564

Provision for loan losses	500			300			700			900

Loan charge-offs:
Real estate:
Mortgage-commercial	882			—			882			—
Mortgage-residential	15			—			15			110
Commercial, financial and agricultural	109			8			411			8
Consumer	238			77			376			366
Other	2			2			6			4
Total loan charge-offs	1,246			87			1,690			488

Recoveries:
Real estate:
Construction	75			—			159			—
Mortgage-commercial	6			1			1,052			2
Mortgage-residential	4			27			105			72
Commercial, financial and agricultural	13			2			197			13
Consumer	28			20			85			68
Other	—			—			—			—
Total recoveries	126			50			1,598			155

Net loan charge-offs	1,120			37			92			333

Balance at end of period	$	24,805		$	25,131		$	24,805		$	25,131

Annualized ratio of net loan charge-offs to average loans	0.32		%	0.01		%	0.01		%	0.03		%

The provision for loan losses was $500,000 for the third quarter of 2003, a 66.7% increase from the third quarter of 2002.

This increase was attributed to strong loan growth and an increase in net charge-offs, primarily consisting of an $882,000 commercial mortgage loan charge-off.

For the first nine months of 2003, the provision for loan losses was $700,000, representing a 22.2% decrease from the same period last year. Other than the $882,000 charge-off mentioned previously, there were no other significant charge-offs during the year. Year-to-date recoveries totaled $1.6 million, and consisted primarily of a $1.0 million recovery on a commercial mortgage loan in the first quarter.

Net loan charge-offs, when expressed as an annualized percentage of average total loans, were 0.32% for the third quarter of 2003 and 0.01% for first nine months of 2003, compared to 0.01% and 0.03% for the same periods last year.

The allowance for loan losses, expressed as a percentage of total loans, was 1.73% at September 30, 2003, compared to 1.94% at September 30, 2002 and 1.88% at year-end 2002. Considering the relatively low level of net loan charge-offs, nonaccrual loans and delinquent loans, Management believes that the allowance for loan losses is adequate to cover the credit risks inherent in the loan portfolio. Deterioration of Hawaii’s economy 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)	September 30, 2003			December 31, 2002			September 30, 2002

Nonaccrual loans:
Real estate:
Construction	$	—		$	—		$	2,000
Mortgage-commercial	1,592			—			691
Mortgage-residential	61			311			197
Commercial, financial and agricultural	187			128			294
Consumer	3			—			1
Total nonaccrual loans	1,843			439			3,183

Other real estate	—			1,903			1,287
Total nonperforming assets	1,843			2,342			4,470

Loans delinquent for 90 days or more:
Real estate:
Construction	15			—			—
Mortgage-commercial	—			—			437
Mortgage-residential	82			85			30
Commercial, financial and agricultural	618			87			13
Consumer	7			17			16
Total loans delinquent for 90 days or more	722			189			496

Total nonperforming assets, loans delinquent for 90 days or more and restructured loans still accruing interest	$	2,565		$	2,531		$	4,966

Total nonperforming assets as a percentage of loans and other real estate	0.13		%	0.18		%	0.35		%

Total nonperforming assets and loans delinquent for 90 days or more as a percentage of loans and other real estate	0.18		%	0.19		%	0.38		%

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	0.18		%	0.19		%	0.38		%

Nonperforming assets, loans delinquent for 90 days or more and restructured loans still accruing interest totaled $2.6 million at September 30, 2003, compared to $5.0 million from a year ago and $2.5 million from year-end 2002. The $2.0 million decrease in nonaccrual construction loans from September 30, 2002 was due to the loans being returned to an accrual status. The increase in nonaccrual commercial mortgage loans was attributed to one loan that totaled $1.6 million. There was no other real estate as of September 30, 2003 due to the sale of the three properties since year-end 2002.

There was one impaired loan which totaled $1.6 million at September 30, 2003, compared to zero at December 31, 2002 and September 30, 2002.

Management continues to closely monitor loan delinquencies, and work with borrowers to resolve loan problems. Deterioration of Hawaii’s economy may impact loan quality, and may result in increases in delinquencies, nonperforming assets, and restructured loans.

Other Operating Income

Total other operating income was $3.9 million for the third quarter of 2003 and $11.3 million for the first nine months of 2003, an increase of 26.0% and 8.2%, respectively, from the same periods last year. Excluding securities transactions, other operating income increased by 14.8% for the third quarter of 2003 and 11.7% for the first nine months of 2003, compared to the same periods last year. This increase was primarily driven by increases in trust income and gains on sale of residential mortgage loans.

Other Operating Expense

Total other operating expense was $14.3 million for the third quarter of 2003, relatively unchanged from the third quarter of 2002. For the first nine months of 2003, total operating expense was $41.0 million, an increase of 1.2% over the same period last year. Salaries and benefits totaled $7.6 million for the third quarter of 2003 and $21.9 million for the first nine months of 2003, compared to $7.4 million and $22.7 million for the same periods last year. During the third quarter of 2003, the Company added resources in the sales management, retail investment sales, and business banking areas which resulted in the increase over the same period last year in salaries and benefits expense. Other operating expense decreased by $236,000 or 4.5% in the third quarter of 2003 compared to the same period last year. In the third quarter of 2003, the Company recognized $617,000 in merger-related expenses. In addition, in the third quarter of 2002, the Company recognized $976,000 in interest expense on a state tax assessment under appeal. For the

first nine months of 2003, other operating expense increased by $1.2 million or 9.2% over the same period last year. This was primarily attributed to merger-related expenses which totaled $1.3 million.

Income Taxes

The effective tax rate was 33.55% for the third quarter of 2003 and 33.82% for the first nine months of 2003, compared to 32.37% and 34.48%, respectively, for the same periods last year. This reduction was attributed to $1.1 million in State of Hawaii tax credits that the Company realized in the first nine months of 2003. The State’s high-technology tax credit program offers tax credits for investments in high-technology companies at diminishing levels over a 5-year period. In the fourth quarter of 2002, the Company invested $1.7 million in qualifying entities and received $6.0 million in state tax credits to be realized through 2006.

Financial Condition

Total assets at September 30, 2003 were $2.132 billion, an increase of 7.7% from the $1.980 billion reported at September 30, 2002. Compared to year-end 2002, total assets were up $103.6 million or 5.1%. Net loans grew 11.0% to $1,401.1 billion from a year ago and 10.7% from year-end 2002. Investment securities totaled $537.1 million, compared to $527.1 million a year ago and $540.9 million at year-end 2002. Total deposits at September 30, 2003 were $1.731 billion, an increase of $124.0 million or 7.7% over September 30, 2002. Compared to year-end 2002, total deposits grew by $89.8 million or 5.5%. Core deposits as of September 30, 2003 was $1.376 billion, an increase of 10.7% over September 30, 2002 and 7.4% over year-end 2002. Competition for deposits remains strong, and will continue to challenge the Company’s ability to gather low-cost retail funds. Long-term debt was $164.6 million at September 30, 2003, up 4.5% from the $157.5 million at September 30, 2002 and 11.8% from the $147.2 from December 31, 2002.

Capital Resources

Stockholders’ equity was $187.5 million at September 30, 2003, an increase of $20.3 million or 12.2% from a year ago, and an increase of $14.0 million or 8.1% from year-end 2002. When expressed as a percentage of total assets, stockholders’ equity increased to 8.79% at September 30, 2003, from 8.44% a year ago and 8.55% at year-end 2002. Book value per share at September 30, 2003 was $11.69, compared to $10.49 at September 30, 2002 and $10.86 at year-end 2002.

On September 15, 2003, the board of directors declared a third

quarter cash dividend of $2.6 million or $0.16 per share, an increase of 61.1% and 60.0%, respectively, over the same periods last year. Year-to-date 2003 dividends declared of $7.7 million or $0.48 per share represent an increase of 66.3% and 65.5%, respectively, over the same periods in 2002.

In March 2003, CPB Capital Trust I, a wholly owned subsidiary of the Company, issued $15 million floating rate securities. The securities are reported as long-term debt on the balance sheet. The Federal Reserve has determined that certain cumulative preferred securities, such as the securities issued by CPB Capital Trust I, qualify as minority interest, and are included in Tier 1 capital.

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 September 30, 2003:
Leverage capital	$	209,335	10.01	%	$	83,682	4.00	%	$	125,653	6.01	%
Tier 1 risk-based capital	209,335		12.98		64,528		4.00		144,807		8.98
Total risk-based capital	230,435		14.28		129,056		8.00		101,379		6.28

At December 31, 2002:
Leverage capital	$	176,418	8.99	%	$	78,487	4.00	%	$	97,931	4.99	%
Tier 1 risk-based capital	176,418		11.57		60,991		4.00		115,427		7.57
Total risk-based capital	195,552		12.82		121,982		8.00		73,570		4.82

In addition, FDIC-insured institutions such as the Company’s subsidiary, Central Pacific Bank (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 September 30, 2003:
Leverage capital	$	184,828	8.89	%	$	104,010	5.00	%	$	80,818	3.89	%
Tier 1 risk-based capital	184,828		11.58		95,792		6.00		89,036		5.58
Total risk-based capital	204,849		12.83		159,653		10.00		45,196		2.83

At December 31, 2002:
Leverage capital	$	170,708	8.71	%	$	97,983	5.00	%	$	72,725	3.71	%
Tier 1 risk-based capital	170,708		11.21		91,362		6.00		79,346		5.21
Total risk-based capital	189,817		12.47		152,271		10.00		37,546		2.47

Asset/Liability Management and Liquidity

The Company’s asset/liability management and liquidity are discussed in the Annual Report on Form 10-K, as amended, for the year ended December 31, 2002 filed with the SEC. No significant changes have occurred during the three and nine months ended September 30, 2003.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company discussed the nature and extent of market risk exposure in the Annual Report on Form 10-K, as amended, for the year ended December 31, 2002 filed with the SEC. No significant changes have occurred during the three and nine months ended September 30, 2003.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

As of the end of the period covered by this report and pursuant to Rule 13a-15 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), the Company’s Management, including the Chief Executive Officer and Principal Financial and Accounting Officer, conducted an evaluation of the effectiveness and design of the Company’s disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon that evaluation, the Company’s Chief Executive Officer and Principal Financial and Accounting Officer concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting information required to be disclosed by the Company, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in internal controls

In addition and as of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter to which this report relates that have materially affected or is reasonably likely to materially affect, the internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Please refer to the “Overview of Material Events” in Part I, Item 2, for information relating to legal proceedings involving matters related to the proposed business combination with CBBI.

Items 2, 3, 4 and 5.

Items 2, 3, 4 and 5 are omitted pursuant to instructions to Part II.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit 31.1 - Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

Exhibit 31.2 - Certification of the Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

Exhibit 32.1 - Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

Exhibit 32.2 - Certification of the Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

* Filed herewith.

(b) Reports on Form 8-K

The Company filed the following report on Form 8-K during the third quarter of 2003:

(1) July 23, 2003, under Item 9, regarding the Company’s financial results for the quarter ended June 30, 2003.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CENTRAL PACIFIC FINANCIAL CORP.
		(Registrant)


Date:	November 12, 2003	/s/ Clint Arnoldus
		Clint Arnoldus
		Chairman, President and Chief Executive Officer


Date:	November 12, 2003	/s/ Neal K. Kanda
		Neal K. Kanda
		Vice President and Treasurer (Principal Financial and Accounting Officer)

Central Pacific Financial Corp.

Exhibit Index

Exhibit No.		Description

31.1		Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of the Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002