ITEM 1. BUSINESS
General
CPB Inc. (the "Company"), a Hawaii corporation, is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "BHCA"). Pursuant to a Plan of Reorganization and Agreement of Merger, the Company was organized on February 1, 1982 to serve as a holding company for its subsidiary, Central Pacific Bank (the "Bank"). The Bank was incorporated in its present form in the State of Hawaii on March 16, 1982 in connection with the holding company reorganization, and its predecessor entity was incorporated in the State of Hawaii on January 15, 1954. The Bank's deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") up to applicable limits. The Bank is not a member of the Federal Reserve System.
The Bank owns 100% of the outstanding stock of CPB Properties, Inc. ("CPB Properties"), a company which is a general and managing partner and 50% owner of CKSS Associates ("CKSS"), a Hawaii limited partnership. CKSS owns the Central Pacific Plaza, the property in which the Company's and the Bank's headquarters and main office are located. CKSS also owns the Kaimuki Plaza, the property in which the Bank's Kaimuki branch office is located. In addition, CPB Properties owns, University Square, the building in which the Bank's Moiliili branch office is located. The Bank owns the property and buildings where its Hilo and Kailua-Kona branch offices are located and the building where its operations center facility is located. See "ITEM 2.
ITEM 2. PROPERTIES
All Bank properties, except for the properties in which the Hilo, Kailua-Kona and Moiliili branches and the operations center are situated, are occupied under leases which expire on various dates through 2038, and, in most instances, include options to renew. These leases generally contain renewal options for periods ranging from 5 to 15 years. For the year ended December 31, 2000, net rent expense under these leases aggregated $4.4 million. For additional information relating to lease rental expense and commitments, see Note 17 to the Company's Consolidated Financial Statements in the 2000 Annual Report.
CPB Properties is a general partner and the managing partner with a 50% interest in CKSS. Other partners in CKSS are Kajima Development Corporation, a general partner, Sumitomo Corporation, a limited partner, and Sumitomo Corporation of America, a limited partner. CKSS was formed to develop, construct and lease a 22-story office building complex in the downtown financial district of Honolulu at the corner of King and Alakea Streets (the "Central Pacific Plaza"). The Company's and the Bank's headquarters are located in the Central Pacific Plaza. The Central Pacific Plaza contains approximately 235,000 square feet of rentable space of which approximately 73,000 square feet are occupied by the Company. CKSS carried the Central Pacific Plaza on its books at a net book value of $23.5 million as of December 31, 2000. To finance the building, CKSS entered into a loan agreement with The Sumitomo Bank, Limited ("Sumitomo") which is secured by a mortgage on the Central Pacific Plaza. The loan agreement, as amended, allows CKSS to borrow up to $12.5 million at 0.75% above LIBOR. As of December 31, 2000, the amount payable to Sumitomo under the loan agreement totaled $6.8 million, due on June 18, 2001.
In October 1992, CPB Properties, as lessor, entered into a lease agreement with CKSS for certain real property located in Kaimuki, Hawaii, effective from January 1, 1993 to December 31, 2047. Under the terms of the lease, CKSS would develop a 4-story office building (the "Kaimuki Plaza"). In November 1994, the Bank entered a 25-year lease agreement with CKSS to lease office space in the Kaimuki Plaza for its Kaimuki Branch. The lease is effective from November 1, 1994 through October 31, 2019. At December 31, 2000, CKSS carried the Kaimuki Plaza building complex at a net book value of $12.8 million. On April 30, 1993, CKSS entered into a building loan agreement with the Bank to borrow up to $12.2 million at 0.75% above LIBOR to finance the Kaimuki Plaza. At December 31, 2000, the Bank had advanced $8.3 million, due on August 10, 2001, pursuant to this loan agreement.
At December 31, 2000, an additional $0.1 million was payable to the Bank, at 0.75% above LIBOR, pursuant to a loan agreement secured by second mortgages on the Central Pacific and Kaimuki Plazas, which matures on April 10, 2001. The weighted average interest rate on all loans related to the Company's headquarters and Kaimuki Plaza at December 31, 2000 was 7.018%.
The Bank holds title to the land and building in which the Hilo and Kailua-Kona branch offices and operations center are situated. CPB Properties holds title to a portion of the land and the building in which the Moiliili branch office is situated.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to ordinary routine litigation incidental to its business, none of which is considered likely to have a materially adverse effect on the Company.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Company's shareholders for a vote during the fourth quarter of 2000.
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth, as of February 28, 2001, the executive officers of the Company, their positions, principal occupation during the past five years and ages. Each officer is appointed by the Board of Directors of the Company and serves at its pleasure.
Name and Position
Principal Occupation
During Past Five Years
Age
Joichi Saito
Chairman of the Board and
Chief Executive Officer
Chairman of the Board and Chief Executive Officer of the Bank (1996-Present)
Naoaki Shibuya
President
President and Chief Operating Officer of the Bank (1996-Present)
Austin Y. Imamura
Vice President and Secretary
Executive Vice President and Secretary of the Bank (1991-Present)
Neal K. Kanda
Vice President and Treasurer
Executive Vice President of the Bank (1996-Present); Executive Vice President and Controller of the Bank (1993-1996)
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
For information concerning the market for the Company's common stock and related shareholder matters, see "COMMON STOCK PRICE RANGE AND DIVIDENDS" contained in the 2000 Annual Report, which is incorporated herein by reference, and "ITEM 1. BUSINESS-Supervision and Regulation-Restrictions Upon Affiliate Transactions."
In 2000, as part of the Company's stock repurchase program, the Company's board of directors authorized the repurchase and retirement of shares of the Company's common stock up to a total consideration of $25 million. During 1998 and 1999, the Company's board of directors approved stock repurchases up to $32 million. During 2000, 840,579 shares were repurchased for a total consideration of $20.9 million. For the past three years ended December 31, 2000, the Company has repurchased 2,207,127 shares for a total consideration of $47.4 million. On March 20, 2001, the Company repurchased 250,000 shares of its common stock from Sumitomo, a principal shareholder, for $6.8 million. This transaction reduced Sumitomo's common stock holdings to 211,750 shares, or approximately 2.57% of shares outstanding as of that date. Further results and discussion of the Company's stock repurchase program are discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" contained in the 2000 Annual Report, which is incorporated herein by reference.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
For selected financial data concerning the Company, see "SELECTED CONSOLIDATED FINANCIAL DATA" contained in the 2000 Annual Report, which is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For Management's discussion and analysis of financial condition and results of operations, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" contained in the 2000 Annual Report, which is incorporated herein by reference.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK
For quantitative and qualitative disclosures regarding market risk, see "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK," in the 2000 Annual Report, which is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
For financial statements of the Company, see "SUPPLEMENTARY FINANCIAL INFORMATION," and "CONSOLIDATED FINANCIAL STATEMENTS AND NOTES," including the INDEPENDENT AUDITOR'S REPORT" thereon, in the 2000 Annual Report, which is incorporated herein by reference. See "ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K" below for financial statements filed as a part of this report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Except as hereinafter noted, the information concerning directors and executive officers of the Company is incorporated by reference from the section entitled "ELECTION OF DIRECTORS" of the Company's Proxy Statement, which is filed as Exhibit No. 99 to this Annual Report on Form 10-K.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is incorporated by reference from the section entitled "ELECTION OF DIRECTORS-Compensation of Directors and Executive Officers" of the Company's Proxy Statement, which is filed as Exhibit No. 99 to this Annual Report on Form 10-K.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and management is incorporated by reference from the sections entitled "INTRODUCTION-Principal Shareholders," and "ELECTION OF DIRECTORS" of the Company's Proxy Statement, which is filed as Exhibit No. 99 to this Annual Report on Form 10-K.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is incorporated by reference from the section entitled "ELECTION OF DIRECTORS-Certain Transactions" of the Company's Proxy Statement, which is filed as Exhibit No. 99 to this Annual Report on Form 10-K.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. Financial Statements The following financial statements included in the Company's 2000 Annual Report are incorporated herein by reference. Page number references are to page numbers in the 2000 Annual Report.
(a)2. All schedules required by this Item 14(a) 2. are omitted because they are not applicable, not material or because the information is included in the consolidated financial statements or the notes thereto.
(a)3. Exhibits
Exhibit No.
Document
3.1
Restated Articles of Incorporation of CPB Inc., as amended(1)
3.2
Amended Bylaws of CPB Inc.(2)
10.1
Limited Partnership Agreement of CKSS Associates Limited Partnership dated July 10, 1981 and among CPB Properties, Inc., Kajima Hawaii Corporation, Sumitomo Corporation and Sumitomo Corporation of America(3)
10.2
CPB Inc. 1986 Stock Option Plan, as amended(4)(9)
10.3
Lease dated February 1, 1983 by and between CKSS Associates and Central Pacific Bank, as amended by First Amendment of Lease between CKSS Associates and Central Pacific Bank dated March 3, 1984, as amended by Second Amendment of Lease between CKSS Associates and Central Pacific Bank dated April 3, 1987, as amended by Third Amendment of Lease between CKSS Associates and Central Pacific Bank dated September 24, 1992(2)
10.4
Share Purchase Agreement dated as of November 20, 1986 by and among the Sumitomo Bank, Limited and CPB Inc.(2)
10.5
Split Dollar Life Insurance Plan(5)(9)
10.6
Common Stock Purchase Warrant issued December 16, 1996 to The Sumitomo Bank, Limited(6)
10.7
Form of Common Stock Purchase Warrant issued July 30, 1997 to the Sumitomo Bank, Limited(1)
10.8
Central Pacific Bank and Subsidiaries 2000 Annual Executive Incentive Plan(9)
10.9
Central Pacific Bank Supplemental Executive Retirement Plan(6)(9)
10.10
CPB Inc. 1997 Stock Option Plan(6)(9)
10.11
License and Service Agreement dated July 30, 1997 by and between Central Pacific Bank and Fiserv Solutions, Inc.(7)
10.12
CPB Inc. Directors Deferred Compensation Plan(9)
Annual Report to Shareholders for the year ended December 31, 2000 (parts not incorporated by reference are furnished for informational purposes and are not filed herewith)
Subsidiaries of CPB Inc.(1)
Consent of KPMG LLP
Proxy Statement for Annual Meeting of Shareholders to be held on April 24, 2001(8)
(1)Filed as Exhibit 3.1, 10.7 and 21 to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, filed with the Securities and Exchange Commission on March 30, 1998.
(2)Filed as Exhibits 3.2, 10.10 and 10.11 to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, filed with the Securities and Exchange Commission on March 17, 1994.
(3)Filed as Exhibit 10.7 to registrant's Registration Statement on Form S-14 (Registration No. 2-76608), filed with the Securities and Exchange Commission on March 23, 1982, which is incorporated herein by this reference.
(4)Filed as Exhibit 28.1 to registrant's Registration Statement on Form S-8 Registration No. 33-11462), filed with the Securities and Exchange Commission on January 22, 1987, which is incorporated herein by this reference.
(5)Filed as Exhibit 10.16 to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, filed with the Securities and Exchange Commission on March 27, 1992.
(6)Filed as Exhibit 10.6, 10.8 and 10.9 to registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, filed with the Securities and Exchange Commission on March 28, 1997.
(7)Filed as Exhibit 10.11 to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, filed with the Securities and Exchange Commission on March 30, 1999.
(8)Filed with the Securities and Exchange Commission on March 19, 2001 and incorporated herein by reference.
(9)Denotes management contract or compensation plan or arrangement.
(b)The Company filed no reports on Form 8-K during the fourth quarter of 2000.
(c)The exhibits listed in Item 14(a)3. are incorporated herein by reference or attached hereto.
(d)All schedules required by this Item 14(d) are omitted because they are not applicable, not material or because the information is included in the consolidated financial statements or the notes thereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 28, 2001
CPB INC.
(REGISTRANT)
/s/ JOICHI SAITO Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ JOICHI SAITO Joichi Saito
Chairman of the Board and Chief Executive Officer (Principal Executive Officer),
Director
March 28, 2001
/s/ NEAL K. KANDA Neal K. Kanda
Vice President, Treasurer
(Principal Financial Officer
Principal Accounting Officer),
March 28, 2001
/s/ PAUL DEVENS Paul Devens
Director
March 28, 2001
/s/ ALICE F. GUILD Alice F. Guild
Director
March 28, 2001
/s/ DENNIS I. HIROTA Dennis I. Hirota, Ph.D.
Director
March 28, 2001
/s/ CLAYTON K. HONBO Clayton K. Honbo
Director
March 28, 2001
/s/ STANLEY W. HONG Stanley W. Hong
Director
March 28, 2001
/s/ DANIEL M. NAGAMINE Daniel M. Nagamine
Director
March 28, 2001
Shunichi Okuyama
Director
/s/ NAOAKI SHIBUYA Naoaki Shibuya
President, Director
March 28, 2001
PART I
Table I. Loans by Categories
Table II. Mortgage Loan Portfolio Composition
Table III. Consumer Loan Portfolio Composition
Table IV. Maturity Distribution of Commercial and Construction Loans
Table V. Maturity Distribution of Fixed and Variable Rate Loans
Table VI. Allowance for Loan Losses
Table VII. Allocation of Allowance for Loan Losses
Table VIII. Distribution of Investment Securities
Table IX. Maturity Distribution of Investment Portfolio
Table X. Average Balances and Average Rates on Deposits
Table XI. Remaining Maturities of Large Certificates of Deposit
PART II
PART III
PART IV
SIGNATURES