annual meeting - bank of guam · standards, but provides additional strength to the bank's...

Annual MeetingThe 2002 annual meeting of shareholders will be held at 7:00pm on Wednesday, May 1, 2002 at the Bank of GuamHeadquarters in Hagåtña.

Independent AccountantsPriceWaterhouseCoopers LLP333 Market Street • San Francisco, CA 94105

Tax ConsultantRobert J. Steffy, CPA210 Archbishop Flores Street • Suite 100Hagåtña, Guam 96910 • Tel: (671) 477-7829

General CounselArriola, Cowan & ArriolaP.O. Box X • Hagåtña, Guam 96932 •Tel: (671) 477-9731

StocksOn August 7, 2000, Bank of Guam stocks were listed and eligible for trading in the Pacific Exchange. As of August 4, 2000,Bank of Guam retained the Bank of New York as its new Registrar, Stock Transfer and Dividend Disbursing Agent. TheBank of New York is responsible for all activities relating to the servicing of Bank of Guam's common stock, such as stocktransfers, dividend payments, address changes and lost certificate replacement.

The Bank of New York Company, Inc.One Wall Street • New York, NY 10286Tel: (212) 495-1784 • www.bankofny.com

FacilitiesTraveling Mobile Bank serving the villages of GuamPalikir Pohnpei Facility, FSM • Roi-Namur Facility, RMI

Food Stamp FacilitiesCost - U - Less in Tamuning and Harmon • Guam Supermarket in Chalan Pago • Hafa Adai Market in Yigo

Other Financial ServicesBank of Guam Financial Services • 6th Floor, Headquarters Bldg.111 Chalan Santo Papa • Hagåtña, Guam 96910Tel: (671) 472-5490 • Fax: (671) 472-5527

BankGuam Insurance Underwriters, Ltd.1st Floor, Headquarters Bldg.111 Chalan Santo Papa • Hagåtña, Guam 96910Tel: (671) 479-2265 • Fax: (671) 479-2266

MemberFederal Deposit Insurance Corporation • American Bankers Association • Independent Bankers Association • BankMarketing Association • Guam Bankers Association • California Bankers Association • Western States Bankers Association• Territorial Bankers Association • Saipan Bankers Association

Government SupervisionFederal Deposit Insurance Corporation • Government of Guam • State of California • Government of Japan • Governmentof the Commonwealth of the Northern Mariana Islands • Government of the Federated States of Micronesia • Governmentof the Republic of Belau • Government of the Republic of the Marshall Islands

Chairman’s Message...................................................................................................

President’s Message...................................................................................................

Financial Highlights......................................................................................................

State of Economy.........................................................................................................

Technology...................................................................................................................

Customer Service........................................................................................................

Community Service......................................................................................................

Report of Independent Accountants............................................................................

Consolidated Statements of Condition........................................................................

Consolidated Statements of Income...........................................................................

Consolidated Statements of Comprehensive Income and Consolidated Statements of Changes in Shareholders’ Equity...................................

Consolidated Statements of Cash Flows....................................................................

Notes to Consolidated Financial Statements........................................................

Summary of Operations..............................................................................................

Summary of Financial Condition.................................................................................

Summary of Average Balances and Interest Rates....................................................

Management's Discussion and Analysisof Financial Condition and Results of Operations.......................................................

Senior Management and Headquarters Officials........................................................

Board of Directors.......................................................................................................

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Jesus S. Leon GuerreroFounder and Chairman of the Board

To Our Valued Shareholders:

From the outset, I want to thank you for your continued support for Bank of Guam, and I particularly want to thank you for thehonor and privilege of being the Chairman of such a successful, dynamic and fascinating organization. I am humbled by yourconfidence in me and in our other Board members, yet at the same time I am inspired each day to maintain your trust andloyalty by ensuring that our Bank is as safe, strong and profitable as possible.

These past few years, and especially 2001, have been difficult in Guam and throughout the region. Economic conditions havebeen unfavorable, and have taken their toll on businesses and governments as well as the individuals and families in our com-munities. As always, though, the strength of our islands is in our people and our ability to help one another through timesof trouble. It is somehow comforting to know that, by banding together, we can resolve whatever problems ariseand pull through adverse circumstances with relative ease.

I have seen the same kind of collaboration within the microcosm of the Bank recently.In response to our region's prolonged recession, we have reduced our staffinglevels significantly by attrition while continuing to maintain our extensivebranch network and the same quality of customer service to which wehave all become accustomed. Part of this has been accomplishedthrough the adoption of advanced technology, replacing labor-intensive processes with automation. The greatest part of this im-provement in efficiency has been accomplished by our staff, workingtogether in a well-organized institution where cooperative effortshave been rewarded with positive net profits and quarterly dividends.

For many years, I have envisioned a similar kind of collaborationamong the islands and the communities of our region. As has beenproven so many times in the past, we can achieve far more throughcooperation than we ever could while acting independently. Individually,we are just small islands with limited populations, scattered like so manypearls across the vast Pacific Ocean. Alone, none of us can make too

great of an impression on the major economic and political powers, let alone exercisemuch influence over activities that would be beneficial. Acting together in synchronousunity, though, we would be strengthened and could accomplish great things, both inter-nal to our region and in relation to the rest of the world.

While there are many factors involved in achieving regionalization, perhaps the mostimportant is within ourselves. It is the attitude that each of us holds that will make the dif-ference between success and mere survival on a regional scale. We firmly believe that oureconomies can grow, that our political systems can effectively and efficiently meet the needsof our people, and that our standards of living can far surpass what we have today; and assert that acting from this attidude ofoptimism can make these things happen. We will find a way to make them happen and regional cooperation will make themhappen all the more quickly.

It is also an attitude that has allowed Bank of Guam to remain strong and continue its profitability during the past few years,with the economy in recession and so many other businesses failing. We are confident in our communities.We have almost limitless faith in our people. We are self-assured of our judgment and our abilities asmanagers and as financiers. We know that we can provide exactly the right service for our clients, doso at a fair price and still turn a profit. We have accomplished great things, and we have providedexceptional value to our shareholders in the process.

Through a combination of factors, the Bank's profitability decreased in 2001, but we were neverthelessable to generate $7.14 million in profits, for a return on average assets of 1.00% and a return on aver-age equity of 7.01%. Under the circumstances, this performance should be viewed as very good,given both the economic conditions throughout the region and the unprecedented reduction in interestrates during the year, and the heavy legal costs defending a minority suit which has already been set-tled out of court. In any event, looking forward, I am very optimistic about the Bank's prospects in the near term as interestrates recover, and even more so on the long term as the economies of our market area, including the return of the military andfederal government support, resume the strong growth that characterized our region just a few years ago.

Again, I would like to thank each of the Bank's shareholders for your continuing confidence and support. In our own way, ourcooperation and collaboration has helped to build Bank of Guam into the strong Bank that it is today.

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Dear Shareholders:

It has been eleven years since the Japanese financial and real estate "bubbles" burst, almost instantaneously causing outside invest-ment in the western Pacific islands to dry up and economic activity to stagnate. Five years ago, our principal market in Guam was hitwith the triple adversities of the Korean Air Lines crash, the Asian financial collapse and Supertyphoon Paka, sending our economyinto recession. Other, less severe complications have assaulted us as well, and Bank of Guam has not been exempt from the diffi-culties that have befallen the region.

However, in the face of one problem after another, Bank of Guam has stood strong, just like the Ifit tree associated with our nick-name. When outside investment disappeared from our shores, we expanded and modernized our branch network and implemented

new technologies to improve the services we deliver to our customers. When a powerful earthquake rattled ourHeadquarters building, we rolled up our sleeves and continued our business while more than a year's worth of

repairs were underway. When our primary private industry, tourism, was shaken by a series of misfor-tunes, we found ways to modify our approach to marketing and actually expand our

market share. When there were upheavals in financial markets, both internationallyand in the U.S., we adapted our lending and investment processes quickly in

order to turn threats into opportunities. The bottom line is that the people inour organization are responsible for continuing success of the Bank; they

are the true source of our strength and the meaning of "Bangkon Ifit."

In 2001, as global demand for new computer and communica-tions technology waned, the world slipped into recession and ourregion suffered once again. Visitor arrivals fell, resulting in the lay-off of thousands of workers, a reduction in incomes, and theinevitable rising delinquencies on loans. Fortunately, the Bank's

loan underwriting criteria are sufficiently strong to ensure that ourlosses have been kept to a minimum. Acknowledging the unfavorable

economic conditions in our region and working closely with our customersto resolve sometimes overwhelming financial obstacles, we were even able

to reduce our gross and net charge-offs in comparison to the previous year, drop-ping them by 20.1% and 24.5%, respectively. Despite complications in almost every aspect of busi-ness and every industry in the region, Bank of Guam's loan portfolio remains strong.

Conditions have taken their toll, though. During 2001, the Bank's net loan portfolio fell by 9.0%, from$435.6 million to $396.4 million, while total deposits dropped by just 1.0%, from $566.7 million to$561.2 million. Notably, the decline in deposits occurred almost entirely in interest bearing accounts

as market interest rates declined throughout the year.

The successive rounds of interest rate cuts during 2001 negatively affected the Bank's earnings by squeezing the spread betweenthe interest earned on loans and the interest paid on deposits. The primary reason for this is that most of the Bank's commercialloan interest rates reprice monthly whenever our reference rate changes, while deposit interest rates change far more gradually.Since the dominant majority of Bank of Guam's loan portfolio is in commercial accounts, the impact of the falling prime rate last yearwas especially acute. In response, we took action during the year, reducing our concentration in commercial loans from 56.8% to

55.5% of gross loans. In contrast, the concentration in consumer loans increased from 19.2% to 22.2% of grossloans, reflecting the Bank's efforts to help households through these financially challenging times. At the

same time, the Bank increased its allowance for loan losses by nearly one-sixth, from 2.2% at the endof 2000 to 2.5% at the end of 2001. This allowance ratio is exceptionally high in relation to industrystandards, but provides additional strength to the Bank's capital position, protecting shareholdersand depositors alike in the event of unexpected loan losses.

Another impact of the recession in the region has been a reduction in the Bank's total resourcesby 3.8%, from $695.3 million to $668.6 million. This is primarily the result of stricter limits on the

Bank's lending activity in recognition of the increased risks that accompany recession, but thedecline in loans was partially offset by increases in liquid assets and non-earning assets. Nonetheless,

it was the reduction in net loans outstanding, combined with a drastically reduced interest rate spread, which causeda significant decline in the Bank's net income for the year. Bank of Guam's net profits for 2001 were $7.14 million, 22.1% below the$9.17 million earned the previous year. The Bank's profits for the year translate into a return on average assets (ROA) of 1.00%,compared to our peer group in the States at 1.22%, and a return on average equity (ROE) of 7.01%, compared to our peers at13.65%.

Turning to the non-financial aspects of the Bank's performance in 2001, we were able to improve our efficiency once more, reducingour number of personnel to its lowest level in more than a decade, despite the fact that we are operating more than a half dozenmore branches and we are offering several additional major products. This, along with a salary freeze and curtailed bonuses, hasallowed to us to keep the expense of salaries and employee benefits as low as possible. Tighter management standards have cer-tainly played a role in this, but much of the result has also been based upon the aggressive application of advanced technologies tothe work that we do.

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The world is a changing place, and Bank of Guam is changing right along with it. We are constantly finding ways to improvethe service that we provide to our customers, and that often means improving our internal capacity to process transactionsand to share information among the hundreds of points of contact we have with the consuming public. Unlike many otherbanks, which must rely upon slower methods, if a customer cashes a check in Palau, that information is reflected instanta-neously in their account balance in San Francisco, rather than showing up a day or two later. This improvement in accuracyis costly, but we have determined that it is worthwhile in terms of customer service.

Bank of Guam has offered Internet banking for more than a year, and will soon be offering on-line bill payment capabilities.We have recently started another technology initiative that allows us to extract a digital image of a check or any other trans-action document, index and archive the image for future reference, and print the image directly on the customer's accountstatement rather than sending the physical item back to the customer every month. This will improve customers' recordkeeping abilities and will save the Bank substantial postage costs as well. Later, if there is any need to retrieve the checkimage for any reason, it will be far easier to accomplish electronically than it was using microfilm or other methods in thepast. As you might expect, other applications of this technology will be implemented in the future as the Bank moves awayfrom processing tens of millions of pieces of paper each year.

All told, despite the decrease in the Bank's profits in 2001, our performance was still quite strong in light of surrounding cir-cumstances. With the return of the U.S. military to Guam in the wake of the unfortunate events of September 11, 2001, andthe gradual recovery in tourism that is expected the further we get from that fateful day, we look forward to substantialimprovements in our financial performance in 2002. Our future perspective tells us that the economy in Guam and through-out the region will improve gradually throughout the year, and we are expecting improved interest rate margins as the U.S.Federal Reserve raises its interest rate targets later this year. The return to growth and prosperity in the region after a breakof more than a decade is a welcome turn of events, and a resumption of increasing profitability for the Bank will be closelytied with that eventuality.

With all of the hardship that we have all had to suffer through these troubled times, I feel compelled to thank our Board ofDirectors for their patience and their invaluable guidance. Their support has been reassuring. I would also like to thank themanagement and staff of the Bank for their tireless efforts, their undying loyalty and their generous understanding in the faceof personnel reductions and the increasing individual workloads that it has caused. Most of all, though, I would like to thankour shareholders and customers for their continuing confidence and support through what has been the worst period in theregional economy since Bank of Guam was founded.

Thank You and Dungkalu Si Yu'us Ma'ase!

Anthony A. Leon GuerreroPresident and Chief Executive Officer

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At December 31, Change in Change in 2001 2000 Amount % 1999

Total Assets $ 668,565 $ 695,259 $ (26,694) -3.8% $ 696,720Total Deposits $ 561,210 $ 566,721 $ (5,511) -1.0% $ 573,743Net Loans $ 396,403 $ 435,606 $ (39,203) -9.0% $ 445,862Reserve for Loan Losses $ 10,176 $ 9,640 $ 536 5.6% $ 9,272Investment Securities $ 169,250 $ 153,554 $ 15,696 10.2% $ 133,139Common Shareholders' Equity $ 87,197 $ 99,958 $ (12,761) -12.8% $ 95,040Net Income $ 7,141 $ 9,171 $ (2,030) -22.1% $ 9,681Cash Dividends Declared

Common Stock $ 4,781 $ 4,455 $ 326 7.3% $ 3,956

Per ShareNet Income per Common Share (Basic) $ 0.74 $ 0.93 $ (0.19) -20.4% $ 0.98Net Income per Common Share (Diluted) $ 0.72 $ 0.90 $ (0.18) -20.0% $ 0.96

Cash Dividends Declared: Common Stock $ 0.50 $ 0.45 $ 0.05 11.1% $ 0.40

Book Value per Common Share(9,919,087 shares issued8,525,326 shares outstanding) $ 10.23 $ 10.09 $ 0.14 1.4% $ 9.61

Cash Dividends Declared Per QuarterYear 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Total per Year

2001 Common Stock $ 0.125 $ 0.125 $ 0.125 $ 0.125 $ 0.50

2000 Common Stock $ 0.100 $ 0.100 $ 0.125 $ 0.125 $ 0.45

[$ in thousands, except per share amounts]

Financial Highlights

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Stock Market InformationBank of Guam’s common stock trades on the Pacific Exchange under the symbol “BKG.” Quarterly dividends for 2000were $0.10 per share for the first two quarters and $0.125 per share for the final two quarters, and 2001 were $0.125 pershare. The price range of the common stock, as reported on the Pacific Exchange, was as follows:

Fiscal Year 2001 Fiscal Year 2000High Low High Low

First Quarter $ 7.00 $ 6.00 N/A N/ASecond Quarter $ 7.00 $ 6.00 N/A N/AThird Quarter $ 6.50 $ 5.50 $ 10.875 $ 8.000Fourth Quarter $ 6.20 $ 5.50 $ 9.000 $ 6.875

t is no secret that the economies of Bank of Guam'smarket region have been doing poorly for the past sev-eral years. This is primarily because of our reliance onJapanese investment and tourism, but has been exacer-bated by typhoons and earthquakes, an airline crash andfailures in financial markets, and traveler warinessbecause of foreign wars and international terrorism.Unemployment has risen, incomes have fallen, and manyhave left the region altogether, seeking a better life else-where. External forces beyond our control heavily influ-ence the small island economies on the western Pacific,and a series of unfortunate events has conspired to cre-ate the worst economic conditions experienced in theregion for decades.

Fortunately, this is all coming to an end. Just as we havelearned to diversify our industries and seek sources ininvestment beyond Japan, so have the interests of inter-national commerce changed and several other nations inAsia come of age economically. Telecommunicationshas become a far more important industry in the pastdecade with the advent of the Internet and the revolutionin personal communications. Our region as a whole, andthe Marianas in particular, is in a very good position totake advantage of developments in this industry becauseof our location, both physically and in terms of timezones. A whole new era of development is upon us, cre-ating new employment opportunities and holding thepotential to generate levels of income well beyond any-thing we have experienced in the past.

Similarly, transportation is changing. Trade patterns areshifting southward in the region as more goods are beingmanufactured in Indonesia, the Philippines and Malaysiathan ever before. This brings more movement of cargothrough our region, whether eastbound to the Americasor westbound in response to increasing affluence insoutheastern Asia. Further, the supposed efficiencies of

physically larger modes of sea and air transport are beingreassessed, with the conclusion being that bigger is not nec-essarily better. Many shipping lines are opting for smallercargo vessels that can meet specific load factors in specificmarkets, just as many airlines are flying smaller aircraft tostabilize their revenue streams. These factors also bodewell for the economies of Bank of Guam's market.

The length and severity of our recent recession have beenwithout parallel in modern times. The impacts on individuals,families and entire communities have exacted many sacri-fices and ruined many dreams. However, perspectives andperceptions have been irrevocably altered, and ingrainedinstitutions have been irretrievably changed. We havelearned a certain familiarity with adversity and have de-veloped innovative ways to cope with the unexpected.

The recession has not killed us. It has made us strong.

It is with this newfound strength that we enter the nextupswing in the economic cycle. Inefficient firms and unpro-ductive business practices have been wrung from our sys-tem, and we have become lean, mean competitors, readyfor the next stage of the contest in the global economy. Newtechnologies and methodologies have developed whileexpectations and standards of living have adjusted to a newset of realities. Moving forward, we will be far better pre-pared for what lies ahead, and we will once again experi-ence a wave of prosperity unlike any we have seen before.

Just as economies of our region have adapted and adjustedto changes in the international arena, so too has Bank ofGuam. We have learned the lessons of efficiency, producingmore with fewer resources, and we have learned to leverageour advantages into successes. Bank of Guam hasachieved a renewed strength and vitality that will accelerateour profitability and performance as the economies of ourregion participate in the exceptional growth and prosperitythat is to come.

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ank of Guam continues its commitment to provide thebest in customer service available anywhere, from any bank-ing institution. Aligned with this commitment is our pledge toadapt and adopt the most advanced appropriate technolo-gies to generate new, unique and innovative solutions to themultitude of practical issues facing bankers and their cus-tomers on a day-to-day basis. Throughout the history of theBank, we have actively pursued elegant answers to the mostfundamental problems in the financial industry. In theprocess of finding these answers, we have brought simpli-city, speed and convenience to our customers in meetingtheir banking needs, as well as accuracy, security and costeffectiveness to satisfy our accountants, regulators andshareholders. Our concentration on technology as a meansto an end has underscored the Bank's devotion to an ideal orparamount customer service. It has allowed us to bringmoney center products to small communities at a reasonablecost, and has created the best of all possible worlds for ourclients.

The Bank's investment in technology over the years hasdone more than improve services and reduce costs. It hasalso allowed us to survive in the worst of times and prosperin the best of times. It has given the Bank a certain strengthand consistency, and has helped us to persevere under themost difficult circumstances. It gives us speed and accuracyin processing transactions and interpreting incidents and

trends. It gives us a remark-able marketing appeal to ourcustomers, many of whomare fascinated by the appli-cations of science in practi-cal settings. It provides theopportunity to replace costlyand often unreliable laborwith inexpensive machines.It reduces risk and the cor-responding securityexpenses that are facedby more traditional institu-tions.

Although Bank of Guam

brought no major new systems into service during 2001, ourfocus on technology has not been idle. One of the primaryprojects that was underway was check imaging, which willimprove customer service while simultaneously automatingone of the most tedious processes in banking today. As apart of the check clearing process, individual pieces of papermust be photographed, then manually encoded with thecheck amount, then "read" by high-speed capture machinesfor accounting entries and sorting. The individual items arethen filed by account number in preparation for matching withprinted, consolidated statements each month, stuffed intoenvelopes and mailed to each customer. The processesinvolved are labor intensive and subject to several types oferrors. Conservatively speaking, the costs of processingchecks this way are high - very high.

Using newly available digital technology, Bank of Guam willnow be streamlining the check processing routine. Checkswill no longer be photographed in the traditional sense,where tiny images were stored sequentially and in no parti-cular order on microfilm; they will be scanned electronicallyand their images stored digitally, where they are accuratelyindexed and easy to retrieve. A secondary reconciliation ofthe check amount isalso possible using thisnew technology, sinceoptical character recog-nition techniques canactually "read" theamount of the checkand compare it with theamount encoded on thelower edge of the item.Accuracy is improveddramatically, and pro-cessing time is signifi-cantly reduced. How-ever, the advantages donot end there. Rather than stuffing checks into envelopes formailing each month, the images of the checks will be printeddirectly onto the statement, eliminating the need for humanintervention and reducing the weight and correspondingpostage fee of each statement prepared; the statementsthemselves can be placed into envelopes by machine, takingeven that labor cost out of the equation. As an added bene-fit, the research costs of reproducing a lost item will be sub-stantially reduced, since the image database can be easilysearched and an individual item retrieved providing theBank's customers with a far more timely service than couldbe given previously.

As time progresses, the strength of Bank of Guam's tech-nology becomes more and more evident. In 2002, we areworking on enhancing our Internet banking service deliverysystem to make it even more convenient by adding the capa-bility for customers to pay their bills on-line. Soon, Bank ofGuam customers will even be able to receive their routinebills on-line, allowing them, too, to automate their financialtransactions and free their time for other activities.

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Technology

which the Bank's services are delivered in each locationare at least as important, and Bank of Guam clearlyexcels in that dimension, too. We brought automatedteller machines to the islands, and were the first inalmost every market we serve; we brought credit cardsto thousands of households that had always beenforced to use cash, checks or travelers checks in thepast; we provide point-of-sale and merchant services tohundreds of businesses throughout the region; we offeron-line cash management and payroll services to busi-nesses and governments. Through advanced methodsof traffic analysis, training and branch staffing, weensure that our customers obtain the information theyneed and have their transactions processed as quicklyas possible regardless of the point of contact theychoose for conducting their banking business. Ourtellers are courteous, fast and responsive.

Customer service does not end in the realm of tradi-tional banking services, though. Since the mid-1980s,Bank of Guam has offered comprehensive trust ser-vices, meeting the needs of governments and privatecustomers who require more financial and fiduciaryservices than a traditional bank can offer. In the mid-1990s we added the convenience of a one-stop financialservices supermarket when we started offering securi-t ies investment services in collaboration withPrimeVest SM. In the late 1990s, we took the next step byproviding a convenient outlet insurance services to ourcustomers through our wholly-owned subsidiary,BankGuam Insurance Underwriters, Inc. In years tocome, we will be offering other services, as well, andbringing more value to our customers as we generategreater profits for our shareholders.

At Bank of Guam, customer service is not an after-thought; it is our primary objective, the principal reasonthat we are in business and the driving force behindeverything that we do. It has been that way since thevery beginning, and will continue to be that way into theforeseeable future and beyond. It is our strength and itis our passion. It is what truly makes us, "The People'sBank."

any years ago, businesses looked at customer ser-vice as being a tradeoff against profitability; the commonbelief was that customer service represented anexpense, which by definition reduced profits. Whatmany disregarded in those days was that customerservice also affects revenues, and often offsets the cor-responding expenses in a way that actually improvesprofitability. This, though, is not a lesson that Bank ofGuam ever had to learn; this attitude about customerservice dominated the Bank's philosophy long beforethe first day we opened our doors, and has only grownand become stronger since that day.

There are many reasons that Bank of Guam is called,"The People's Bank." One of these reasons, certainly, isthat the Bank has more than 3,500 shareholders, so it iswidely held by the people of the region. The primary rea-son that we are The People's Bank, though, is that weare in business to serve the people - all of the people -with the best financial services offered to anyone, any-where on the face of the globe. That is our strength andthat is our commitment. We offer a full range of financialservices and instruments, we offer them in the most con-venient way possible, and we offer them at a fair andreasonable price. In 1972, we brought high end bankingto the average person on Guam. In the 1980s, weexpanded our market coverage to include theCommonwealth of the Northern Mariana Islands, theRepublic of Palau, the Federated States of Micronesiaand the Republic of the Marshall Islands. We alsoopened a branch in San Francisco to accommodate theneeds of our customers when they travel to the Statesand to ensure ready access to the Federal Reserve andinter-bank services. During the 1990s, we reinforced ourbranch network with additional locations for the conven-ience of our customers, and since the turn of the millen-nium we have opened a virtual bank in cyberspace.

Location, though, is not the only dimension of customerservice. The convenience, speed and accuracy with

Customer Service

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any of the businesses operating in the westernPacific have their principal headquarters somewhereelse. Their primary purpose for engaging in trade in theislands is to generate profits by expanding their marketsto the greatest possible extent. There is nothing wrongwith that approach to commerce from a purely businessperspective, but it begs the question of communityinvolvement and the ideal of returning something ofvalue to the communities that support the bottom line.

Bank of Guam has always gone beyond a purely busi-ness perspective in each of the communities we serve.Our interest in the western Pacific is based in profits,certainly; after all, the Bank is, first and foremost, a busi-ness. However, we are also interested in the long-termhealth and viability of the island economies, just as weare in our island neighbors, to whom wehave been so closely allied since longbefore the Bank was ever formed. Theisland way is a practice of sharing and mu-tual prosperity, with each individual andinstitution helping every other so that all canadvance in a cooperative manner. Often,this involves selfless sacrifice in order toensure that no one is left behind.

In pursuit of these ideals, the Bank itself,along with each of its officers and most of itsemployees, is involved in innumerable com-munity groups and projects, donating time,materials, expertise and money to a widerange of worthy causes throughout the island communi-ties. Most of the Bank's officers are on one or moreBoards of non-profit organizations, and all devote a partof their time to volunteer work, raising funds or providingdirect services and assistance to those among us whoare less fortunate or in sudden need of help.

The list of organizations that are assisted by the Bankand its officers is far too long to replicate here, but suf-fice it to say that their objectives range from health andeducation to poverty and recovery from trauma. Whenprivate individuals need assistance, we do whatever ispossible to help; even governments sometimes callupon our assistance in providing expertise in financial or

economic matters, as in the aftermath of the events ofSeptember 11, 2001, when the island economies expe-rienced the sudden shock of a dropout in tourism andthe related revenues it brings to the region.

The Bank also provides the use of its facilities to civicgroups so that they can minimize the costs of conduct-ing their own operations. We establish accounts toreceive relief funds in the wake of disasters throughoutAsia; we provide a consolidation point for items donatedto the needy; we provide meeting rooms for groupsinvolved in such activities as Junior Achievement andhistoric preservation societies, as well as tabulatingcontest results for the International Reading Foundation.Our officers and staff perform auditable money countingservices for religious and civic fund drives...the list goeson and on.

Bank of Guam does all of these things because we area part of each of the communities we serve. Our offi-cers and staff are typically permanent residents of theislands in which they work, rather than temporary expa-triates anxiously awaiting their next relocation orders.

At Bank of Guam, our objectives extend well beyond thebasic goals of business. We truly care about the indivi-duals, families and communities wherever we happen tobe, and want to ensure the optimum quality of life for

people everywhere we operate. In part, this is becauseof compassion for the human condition, but it is also justgood business. It shows in the success of the Bank ineach of the communities we serve; it shows in our rela-tionships with churches, schools, community groups andgovernments throughout the region; it also shows in ourprofitability, though, and the loyalty and high regard ofour customers.

Community service is more than just a passing fad toBank of Guam. It is a source of enduring pride and it isone of the greatest strengths that we have as a modern,progressive business organization.

Community Service

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To the Board of Directors andShareholders of the Bank of Guam:

In our opinion, the accompanying consolidated statements of condition and the related consolidated

statements of income, comprehensive income, changes in shareholders’ equity and cash flows present

fairly, in all material respects, the financial position of the Bank of Guam and its subsidiaries at

December 31, 2001 and 2000, and the results of operations and their cash flows for each of the three

years in the period ended December 31, 2001 in conformity with accounting principles generally accepted

in the United States of America. These financial statements are the responsibility of the Bank’s manage-

ment; our responsibility is to express an opinion on these financial statements based on our audits. We

conducted our audits of these statements in accordance with auditing standards generally accepted in the

United States of America, which require that we plan and perform the audit to obtain reasonable

assurance about whether the financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,

assessing the accounting principles used and significant estimates made by management, and evaluating

the overall financial statement presentation. We believe that our audits provide a reasonable basis for our

opinion.

San Francisco, California

February 15, 2002

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Report of Independent Accountants

AssetsCash and due from banks

Interest-bearing deposits in other banks

Federal funds sold

Investment securities

Loans

Less allowance for loan losses

Net loans

Accrued interest receivable

Premises and equipment, net

Other assets

Total assets

Liabilities and Shareholders’ EquityDeposits

Non-interest bearing

Interest bearing

Total deposits

Accrued interest payable

FHLB advance

Long-term borrowings

Other liabilities

Total liabilities

Commitments and contingencies

Shareholders' equity:

Capital stock, $.2083 par value; authorized 48,000,000 shares;

issued 9,919,087 shares in 2001 and 9,902,569 shares in 2000;

Paid-in surplus

Treasury stock (1,393,761 shares)

Accumulated other comprehensive income

Retained earnings

Total shareholders’ equity

Total liabilities and shareholders’ equity

2000

$ 41,836

5,499

6,000

153,554

445,246

9,640

435,606

4,252

32,398

16,114

$ 695,259

$ 134,575

432,146

566,721

2,822

15,000

10,000

758

$ 595,301

-

2,063

13,775

-

47

84,073

99,958

$ 695,259

2001

$ 39,347

5,151

1,720

169,250

406,579

10,176

396,403

2,965

31,094

22,635

$ 668,565

$ 134,480

426,730

561,210

1,184

10,000

8,000

974

$ 581,368

-

2,067

13,867

(15,331)

161

86,433

87,197

$ 668,565

[$ in thousands]

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

11

Consolidated Statements of ConditionDecember 31,

12

2001

$ 39,237

241

19

8,119

651

48,267

7,409

7,113

1,178

15,700

32,567

3,571

28,996

4,202

5,132

9,334

14,604

4,240

3,144

9,465

31,453

6,877

(264)

$ 7,141

$ .74

$ .72

2000

$ 47,065

342

34

9,775

670

57,886

9,712

8,889

1,671

20,272

37,614

4,387

33,227

3,964

4,426

8,390

15,466

4,249

2,974

10,371

33,060

8,557

(614)

$ 9,171

$ .93

$ .90

1999

$ 43,407

248

43

7,709

546

51,953

6,215

8,962

1,654

16,831

35,122

3,400

31,722

3,729

5,082

8,811

15,538

4,198

2,912

7,614

30,262

10,271

590

$ 9,681

$ .98

$ .96


Interest income

Loans receivable

Deposits in other banks

Investment securities

Taxable

Exempt from income tax

Interest on Federal funds sold

Total interest income

Interest expense

Time deposits

Savings deposits

Other borrowed funds

Total interest expense

Net interest income

Provision for loan losses

Net interest income after provision for loan losses

Other operating income

Service charges and fees

Other income

Total other operating income

Other operating expenses

Salaries and employee benefits

Occupancy

Furniture and equipment

General, administrative and other

Total other operating expenses

Income before income taxes

Provision (benefit) for income taxes

Net income

Basic earnings per common share

Diluted earnings per common share


Consolidated Statements of Income

Years Ended December 31,

Years ended December 31,

2001 2000 1999

Net income $ 7,141 $ 9,171 $ 9,681

Other comprehensive income, net of tax:Unrealized holding gains (losses) arising during the period, net of tax 136 139 (123)

Less: Reclassification adjustment for gains included in net income (22) 1 3

Other comprehensive income 114 140 (120)

Comprehensive income $ 7,255 $ 9,311 $ 9,561

Years ended December 31,2001 2000 1999

Common stockBalance at beginning of year (9,902,569,

9,894,226 and 9,885,803 shares, respectively) $ 2,063 $ 2,062 $ 2,060Exercise of stock options and grant of stock bonus

(16,518, 7,543, and 7,831, shares issued, respectively) 4 1 2

Balance at end of year (9,919,087, 9,902,569, and9,894,226 shares, respectively) 2,067 2,063 2,062

Paid-in surplusBalance at beginning of year 13,775 13,714 13,652Exercise of stock options and grant of stock bonus 92 61 62

Balance at end of year 13,867 13,775 13,714

Treasury stock (1,393,761, 0, and 0 shares, respectively) (15,331) - -

Accumulated other comprehensive incomeBalance at beginning of year 47 (93) 27Unrealized gain (loss) on securities available forsale, net of tax and reclassification adjustment 114 140 (120)

Balance at end of year 161 47 (93)

Retained earningsBalance at beginning of year 84,073 79,357 73,632Net income 7,141 9,171 9,681Cash dividends - Common (4,781) (4,455) (3,956)

Balance end of year 86,433 84,073 79,357

Total shareholders’ equity $ 87,197 $ 99,958 $ 95,040

[$ in thousands]

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Shareholders’ Equity


13

[$ in thousands]


Years ended December 31,2001 2000 1999

Increase (decrease) in cash and cash equivalents:Cash flows from operating activities:

Net income $ 7,141 $ 9,171 $ 9,681Adjustments to reconcile net income to net cashprovided by operating activities:

Provision for loan losses 3,571 4,387 3,400Depreciation and amortization of bankpremises and equipment 3,196 2,942 2,791Amortization of acquisition costs and excessof cost over fair value of assets acquired 43 43 45Amortization of fees, discounts and premiums (6,480) (7,546) (5,405)(Gain) on sale of securities (34) (1) (3)Loss on foreign exchange valuation 13 9 4(Gain) loss on sale of asset (13) (2) 2Decrease in accrued interest receivable 1,287 43 965(Increase) decrease in other assets (1,745) (588) 260(Decrease) increase in accrued interest payable (1,638) 1,214 (339)Increase (decrease) in other liabilities 157 (571) 595

Net cash provided by operating activities 5,498 9,101 11,996

Cash flows from investing activities:Purchase of investment securities (529,225) (438,750) (547,033)Proceeds from sale of investment securities 29,790 19,396 15,800Maturity of investment securities 490,212 406,301 563,847Net decrease (increase) in loans 22,198 (2,421) (37,340)

Proceeds from sales of loans 8,816 8,563 17,126Purchase of bank premises and equipment (1,899) (1,672) (1,672)Proceeds from sale of bank premises and equipment 19 2 10

Net cash provided by (used in) investing activities 19,911 (8,581) 10,738

Cash flows from financing activities:Net (decrease) in deposits (5,510) (7,023) (18,428)Payment of subordinated debt (2,000) - -Payment of FHLB advance (5,000) - -Proceeds from issuance of common stock 96 63 64Purchase of treasury stock (15,331) - -Dividends paid (4,781) (4,455) (3,956)

Net cash used in financing activities (32,526) (11,415) (22,320)

Net (decrease) increase in cash and cash equivalents (7,117) (10,895) 414Cash and cash equivalents at beginning of year 53,335 64,230 63,816

Cash and cash equivalents at end of year $ 46,218 $ 53,335 $ 64,230

14

Consolidated Statements ofCash Flows

Years Ended December 31, 2001, 2000, and 1999

note 1Summary of Significant Accounting Policies


Principles of Consolidation and Basis of PresentationThe consolidated financial statements include the accountsof the Bank of Guam (the Bank) and its subsidiaries,BankGuam Properties, Inc. and BankGuam InsuranceUnderwriters, Ltd. All significant intercompany and inter-branch balances and transactions have been eliminated.

The Bank’s headquarters is located in Hagatna, Guam andoperates branches located on Guam, the Islands ofMicronesia and the Commonwealth of the Northern MarianaIslands. The Bank currently has branches in Guam (14),Saipan (4), Pohnpei (2), Kwajalein (2), Chuuk, Majuro,Ebeye, Belau, Rota, Tinian, and in San Francisco, and a rep-resentative office in Tokyo.

Assets held by the Bank’s Trust department in a fiduciarycapacity are not assets of the Bank and, accordingly, are notincluded in the accompanying consolidated financial state-ments.

Risks and UncertaintiesIn the normal course of its business, the Bank encounterstwo significant types of risks: economic and regulatory. Thereare three main components of economic risks: interest raterisk, credit risk and market risk. The Bank is subject to inter-est rate risk to the degree that its interest-bearing liabilitiesmature or re-price at different speeds, or on a different basis,than its interest-earning assets. Incorporated into interestrate risk is prepayment risk. Prepayment risk is the risk asso-ciated with the prepayment of assets, and the write-off ofpremiums associated with those assets, if any, should inter-est rates fall significantly. Credit risk is the risk of default, pri-marily in the Bank’s loan portfolio that results from the bor-rowers’ inability or unwillingness to make contractuallyrequired payments. Market risk reflects changes in the valueof securities, the value of collateral underlying loans receiv-able and valuation of real estate owned. Credit and marketrisks can be affected by a concentration of business in thePacific Rim.

The Bank is subject to the regulations of various governmentagencies. These regulations may change significantly fromperiod to period. Such regulations can also restrict thegrowth of the Bank as a result of capital requirements. TheBank also undergoes periodic examinations by the regulato-ry agencies which may subject it to further changes withrespect to asset valuations, amounts of required lossallowances and operating restrictions. Such changes mayresult from the regulators’ judgments based on information

available to them at the time of their examination.

Use of EstimatesThe accounting and reporting policies and practices of theBank conform to generally accepted accounting principlesand, where applicable, to accounting and reporting guide-lines prescribed by banking regulatory authorities. Thepreparation of financial statements in accordance withaccounting principles generally accepted in the United Statesof America requires management to make estimates andassumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities atthe date of the financial statements and the reportedamounts of income and expenses during the periods pre-sented.

Actual results could differ from those estimates. Material esti-mates that are particularly susceptible to significant changein the near term relate to the determination of the allowancefor loan losses, and the valuation of foreclosed real estateand deferred tax assets.

BusinessThe Bank provides a variety of financial services to individu-als and small businesses through its branches in Guam, theIslands of Micronesia and the Commonwealth of theNorthern Mariana Islands. Its primary deposit products aresavings and term certificate accounts and its primary lendingproducts are consumer and commercial mortgages.

Investment SecuritiesThe Bank accounts for investment securities based on theirclassification as Trading, Available-for-Sale or Held-to-Maturity. Securities are classified in accordance with man-agement’s intention regarding their retention. Accounting foreach group of securities follows the requirements ofStatement of Financial Accounting Standards (SFAS) 115Accounting for Certain Investments in Debt and EquitySecurities. Investments in the Trading category are carried atfair value with unrealized gains and losses included inincome. Investments in the Available-for-Sale category arecarried at fair value with unrealized gains and losses record-ed as a separate component of shareholders’ equity. Gainsand losses recognized on the sale of investment securitiesare based upon the adjusted cost and determined using thespecific identification method. Investments in the Held-to-Maturity category are carried at amortized cost. For invest-ments classified as Held-to-Maturity, premiums and dis-counts are initially recorded as part of the investment securi-

15

Notes toConsolidated Financial Statements


1. Summary of Significant Accounting Policies (continued)

ties’ balance, and are amortized or accreted, respectively, tointerest income on the straight-line method, which approxi-mates the interest yield method, over the period to maturity(call dates, if earlier, with respect to premiums) of the relatedsecurities.

LoansLoans are carried at face amount, less payments collected,unamortized deferred fees and unearned discount, if any.Interest income on loans is recognized based on loan princi-pal amounts outstanding. Loan origination fees and loancommitment fees are deferred and accounted for as anadjustment of the yield.

The Bank accounts for impaired loans in accordance withSFAS 114 Accounting by Creditors for Impairment of a Loan.SFAS 114 requires that impaired loans be measured basedon the present value of expected future cash flows discount-ed at the loan’s effective interest rate, or as a practical expe-dient, at the loan’s observable market price or the fair valueof the collateral if the loan is collateral dependent. When themeasure of the impaired loan is less than the recorded bal-ance of the loan, the impairment is recorded through a valua-tion allowance included in the allowance for loan losses. TheBank considers a loan to be impaired when, based on cur-rent information and events, it is probable the Bank will beunable to collect all amounts due (principal and interest)according to the contractual terms.

Loans are placed on a nonaccrual basis when principal orinterest is past due on a contractual basis 90 days or moreand the loan is not fully collateralized or when, in the opinionof management, principal or interest is not likely to be paid inaccordance with its terms. At the time the loan is placed on anonaccrual basis, interest previously recorded but not col-lected is reversed and charged against current income.Loans are returned to an accrual status when the collectabili-ty of both principal and interest on a timely basis is reason-ably assured and all delinquent interest and principal isbrought current, or the loan becomes sufficiently securedand is in the process of collection.

Allowance for Loan LossesThe allowance for loan losses is maintained at a level con-sidered adequate to provide for losses that can reasonablybe anticipated. The allowance for loan losses is increased byprovisions charged to expense and decreased by charge-offs, net of recoveries. The provision for loan losses is basedon management’s evaluation of the adequacy of theallowance for loan losses. Such evaluation encompassesconsideration of past loss experience and other factors,including changes in composition and volume of the loanportfolio, the relationship of the allowance to the portfolio andother economic conditions. The allowance is based on esti-mates and ultimate losses may differ from current estimates.

Premises and EquipmentPremises and equipment are reported at cost less accumu-lated depreciation and amortization. Depreciation and amor-tization are computed on the straight-line method over theestimated useful lives of the related assets. Depreciationexpense has been computed principally using estimatedlives of 15 to 40 years for premises and 5 to 10 years for fur-niture and equipment. Leasehold improvements are amor-tized ratably over the shorter of the respective lease term orthe estimated useful lives of the improvements.Construction-in-progress consists of accumulated directand indirect costs associated with the Bank’s construc-tion of premises and equipment which have not beenplaced in service and, accordingly, have not been sub-jected to depreciation. Such assets are depreciated overtheir estimated useful lives when completed and placedin service.

Other Real Estate OwnedProperties acquired through foreclosure are stated at the fairvalue of the property reduced by estimated selling costs.Write-downs of the asset at, or prior to, the date of foreclo-sure are charged to the allowance for losses on loans.Subsequent write-downs, income and expense incurred inconnection with holding such assets, and gains and lossesrealized from the sales of such assets are included in otherincome and expense.

Excess of Cost Over Fair Value of Assets AcquiredThe excess of cost over the fair value of assets of branchesacquired (goodwill), which is reported in other assets (seeNote 6), is being amortized on the straight-line method overthe estimated period of benefit, ranging from 15 to 40 years.Intangible assets are reviewed each year to determine if cir-cumstances indicate that they may not be recoverable. Noreduction of goodwill for impairment was necessary in 2001or in previous years.

Treasury stockIn October of 2001, the bank repurchased 1,393,761shares of common stock in accordance with the terms ofa litigation settlement (See Note 16). The Bank’s repur-chased shares of common stock are recorded as“Treasury Stock” and result in a reduction of sharehold-ers’ equity. Pursuant to the approval terms of the bank’sprimary regulator the shares have to be reissued withinfive years.

Income TaxesIncome taxes represent taxes recognized under laws of theGovernment of Guam which generally conform to U.S. taxlaws. Foreign income taxes result from payments of taxeswith effective rates ranging from 2% to 6% of gross incomeof the Commonwealth of the Northern Mariana Islands,Chuuk, Majuro, Ebeye, Pohnpei and Belau branches to theirrespective government jurisdiction. U.S. Federal andCalifornia income taxes have been reflected as foreign taxes

16




for financial reporting purposes.

The Bank accounts for income taxes in accordance withSFAS 109, Accounting for Income Taxes. SFAS 109 is anasset and liability approach that requires the recognition ofdeferred tax assets and liabilities for the expected future taxconsequences of events that have been recognized in theBank’s financial statements or tax returns. In estimatingfuture tax consequences, SFAS 109 generally considers allexpected future events other than enactment of changes intax laws or rates.

Statement of Cash Flows and Supplemental DisclosuresFor the purpose of the statement of cash flows, the Bankconsiders cash and due from banks, interest-bearingdeposits in other banks and Federal funds sold to be cashequivalents.

The Bank made no income tax payments during the yearsended December 31, 2001, 2000, and 1999. Interest pay-ments of $17,338, $19,058, and $17,171 were made duringthe years ended December 31, 2001, 2000, and 1999,respectively.

During the years ended December 31, 2001 and 2000, theBank issued new loans totaling $979 and $518 in connectionwith the sale of other real estate owned. Additionally, duringthe years ended December 31, 2001 and 2000, the Bankrecorded $7,612 and $2,779 of other real estate owned inconnection with the acquisition of foreclosed properties.

Comprehensive IncomeAccounting principles generally require that recognized rev-enue, expenses, gains and losses be included in net income.Although certain changes in assets and liabilities, such asunrealized gains and losses on available-for-sale securities,are reported as a separate component of the equity sectionof the balance sheet, such items, along with net income, arecomponents of comprehensive income.

ReclassificationsCertain reclassifications have been made to conform previ-ously reported data to the current presentation.

Adoption of SFAS No. 133In June 1998, the Financial Accounting Standards Board(“FASB”) issued SFAS No. 133, Accounting for DerivativeInstruments and Hedging Activities, as amended by SFAS137 and SFAS 138. SFAS 133 establishes accounting andreporting standards for derivative financial instruments.SFAS 133 requires recognition of derivatives in the state-ment of financial position, to be measured at fair value.Gains or losses resulting from changes in the value of deriv-atives would be accounted for depending on the intendeduse of the derivative and whether it qualifies for hedgeaccounting. SFAS 133 was effective for the first quarter in2001. On January 1, 2001, the Bank adopted the provisions

of SFAS 133. The Bank does not use any kind of derivativefinancial instruments, therefore, adoption of SFAS 133 didnot have an impact on the Bank’s consolidated statements ofcondition, financial position, or cash flows.

New Accounting PronouncementsIn June 2001, the Financial Accounting Standards Board(FASB or the "Board") issued Statement of FinancialAccounting Standards No. 142 (SFAS 142), Goodwill andOther Intangible Assets. SFAS 142 supersedes APB 17,Intangible Assets, and is effective for fiscal years beginningafter December 15, 2001. SFAS 142 primarily addresses theaccounting for goodwill and intangible assets subsequent totheir initial recognition. The provisions of SFAS 142 (1) pro-hibit the amortization of goodwill and indefinite-lived intangi-ble assets, (2) require that goodwill and indefinite-lived intan-gibles assets be tested annually for impairment (and in inter-im periods if certain events occur indicating that the carryingvalue of goodwill and/or indefinite-lived intangible assets maybe impaired), (3) require that reporting units be identified forthe purpose of assessing potential future impairments ofgoodwill, and (4) remove the forty-year limitation on theamortization period of intangible assets that have finite lives.SFAS 142 is effective for fiscal years beginning afterDecember 15, 2001, and the Bank will adopt the provisionsof SFAS 142 in its first quarter ended January 1, 2002. TheBank has insignificant balances related to goodwill and/orintangibles assets and does not expect the adoption ofSFAS 142 to have a material impact on the results of itsoperations.

In June 2001, the FASB has also issued SFAS 144Accounting for the Impairment or Disposal of Long-LivedAssets. SFAS 144 requires the recognition of an impairmentloss on long-lived assets if the carrying amount exceeds itsfair value, as determined using undiscounted cash flowsexpected to result from the use and eventual disposition ofthe asset. SFAS 144 is effective for the Bank’s fiscal yearbeginning on January 1, 2001. The Bank does not expectthe adoption of SFAS 144 to have a material impact on theresults of its operations.

Per share dataBasic earnings per share is computed by dividing incomeavailable to common shareholders by the weighted averagenumber of shares outstanding during the period. Dilutedearnings per share is computed using the weighted averagenumber of shares determined for the basic computation plusthe number of shares of common stock that would be issuedassuming all potential common shares having a dilutiveeffect on earnings per share were outstanding for the period.Potential common shares that may be issued by the Bankrelate solely to outstanding stock options, and are deter-mined using the treasury stock method.

17



note 2

The Bank is required to maintain non-interest bearing compensating balances with United CaliforniaBank (formerly Sanwa Bank California) in consideration for the Federal Funds purchased and Letters ofCredit facilities with the institution. The average balance required to be maintained for such purposes for2001 and 2000 was $250.

18

The weighted average number of common shares outstanding for basic and dilutive earnings per share computationare as follows:

Years Ended December 31,2001 2000 1999

Numerator:

Net income $ 7,141 $ 9,171 $ 9,681Less: preferred stock dividend - - -Net income available for commonstock (basic) 7,141 9,171 9,681

Effect of dilutive securities - - -

Net income (dilutive) $ 7,141 $ 9,171 $ 9,681

Denominator:

Weighted average common stockoutstanding (basic) 9,630 9,898 9,890Dilutive effect of employee stock purchase plan 231 244 200Weighted average common stockoutstanding (dilutive) 9,861 10,142 10,090

EPS:

Basic $ .74 $ .93 $ .98Dilutive $ .72 $ .90 $ .96

Compensating Balances

note 3

Available-for-sale

Amortized cost and estimated fair values of investment securities available-for-sale at December 31,2001 and 2000 were as follows. The Bank did not have a held-to-maturity or trading portfolio as ofDecember 31, 2001 and 2000.

Investment Securities



Gross Gross Gross EstimatedAmortized Unrealized Unrealized Fair

Cost Gains Losses Value

U.S. Treasury $ 105,782 $ 50 $ 5 $ 105,927

U.S. Government Agencies 59,844 140 3 59,981

Other securities 3,379 - 37 3,342

$ 169,005 $ 290 $ 45 $ 169,250

Gross Gross Gross EstimatedAmortized Unrealized Unrealized Fair

Cost Gains Losses Value

U.S. Treasury $ 50,582 $ 74 $ - $ 50,656

U.S. Government Agencies 99,625 53 10 99,668

Other securities 3,276 1 47 3,230

$ 153,483 $ 128 $ 57 $ 153,554

The amortized cost and estimated fair values of debt securities at December 31, 2001, by contractual maturity were as

follows:Estimated

Amortized FairCost Value

Due within one year $ 168,648 $ 168,929

Due after one but within five years 59 56

Due after one but within ten years 148 137

Due after ten years 150 128

$ 169,005 $ 169,250

Proceeds from the sales and maturities of investment securities during 2001, 2000, and 1999 were $520,002, $425,697,

and $579,647. Net realized gains on sales of investment securities during 2001, 2000, and 1999 totaled $34, $1, and $3.

Investment securities with a carrying value of $87,695 and $98,023 at December 31, 2001 and 2000, respectively, were

pledged as collateral to secure various Government deposits and other public requirements.


3. Investment Securities (continued)

19

2001

2000



Loansnote 4

The Bank’s loan portfolio included the following:December 31,

2001 2000

Commercial $ 225,598 $ 252,779Consumer 90,336 85,680Real Estate 90,532 92,333Government - 14,337Other 113 117

Gross Loans 406,579 445,246Less - Allowance for loan losses 10,176 9,640

Net Loans $ 396,403 $ 435,606

Loans to directors and executive officers of the Bank at December 31, 2001 and 2000, totaled $21,412 and $22,613,respectively. These loans were extended in the normal course of business and at the prevailing interest rates.

At December 31, 2001, loans outstanding were comprised of 76% variable rate loans and 24% fixed rate loans.

A summary of the changes in the allowance for loan losses follows:

December 31,

2001 2000 1999

Balance at beginning of year $ 9,640 $ 9,272 $ 8,483Provision charged to expenses 3,571 4,387 3,400

13,211 13,659 11,883

Charge-offs 4,055 5,076 3,816Less recoveries 1,020 1,057 1,205

Net charge-offs 3,035 4,019 2,611

Balance at end of year $ 10,176 $ 9,640 $ 9,272

At December 31, 2001 and 2000, the Bank’s recorded investment in impaired loans totaled $30,473 and $37,956, respec-tively. Of the impaired loans, $21,784 and $34,235 had related allowance for loan losses of $9,714 and $9,435, at December31, 2001 and 2000, respectively. Impaired loans without a related allowance for loans losses are generally collateralized byassets with fair values in excess of the recorded investment in the loans.

The average recorded investment in impaired loans for 2001, 2000 and 1999 was $34,215, $33,185 and $28,414, respec-tively, interest income recognized on loans identified as impaired was $1,644, $2,868 and $2,034, respectively.

20



Premises and Equipmentnote 5A summary of premises and equipment is as follows:

December 31,

2001 2000

Buildings $ 27,942 $ 28,461

Furniture and equipment 21,893 21,259

Automobiles and mobile facilities 1,017 1,196

Leasehold improvements 3,695 3,850

54,547 54,766

Less accumulated depreciation and amortization 24,882 23,154

29,665 31,612

Construction-in-progress 1,429 786

$ 31,094 $ 32,398

Depreciation and amortization expense for the years ended December 31, 2001, 2000, and 1999 amounted to$3,196, $2,942, and $2,791, respectively.

Other Assetsnote 6A summary of other assets is as follows:

December 31,

2001 2000

Deferred tax asset $ 4,409 $ 3,781Prepaid income tax 2,188 2,648Prepaid expenses 4,093 4,212Other real estate owned, net 7,612 2,779Excess of cost over fair value of assets acquired, net 789 833Other 3,544 1,861

Total $ 22,635 $ 16,114

21


Depositsnote 7A summary of deposits is as follows: December 31,

2001 2000

Non-interest bearing deposits $ 134,480 $ 134,575Interest bearing deposits:

Demand deposits 49,676 45,035Regular savings 170,138 156,765Time deposits:

$100,000 or more 100,624 127,221Less than $100,000 28,474 47,904

Other interest-bearing deposits 77,818 55,221

426,730 432,146

Total $ 561,210 $ 566,721

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

Year ending December 31,2002 $ 127,2362003 6562004 3562005 2992006 300Thereafter 251

$ 129,098


Borrowingsnote 8Federal Home Loan Bank (FHLB) advancesThe Bank had outstanding advances from the FHLBunder Blanket Agreements for Advances and SecurityAgreements (the Agreements) of $10,000 and $15,000at December 31, 2001 and 2000. The Agreementsenable the Bank to borrow funds from the FHLB to fundmortgage loan programs and to satisfy certain otherfunding needs. The weighted average rate of interestapplicable to the advance was 5.02% and 5.01% atDecember 31, 2001 and 2000. The advances outstand-ing at December 31, 2001 are due to mature betweenOctober 2003 and 2005, with principal repaymentsscheduled to be $5,000 due each in October 2003through 2005. The value of the mortgage-backed securi-ties and mortgage loans pledged under the Agreementsmust be maintained at not less than 115% and 150%,respectively, of the advances outstanding.

Long-term debtDuring 1996, the Bank exchanged all outstanding sharesof its 11% Cumulative Perpetual Preferred Stock, SeriesA and its 9.8% Cumulative Perpetual Preferred Stock,

Series B for $10,000 of subordinated debt. The indentureprovides for the payment of interest each quarter begin-ning March 31, 1996, at a rate of 8.625% per annumthrough December 31, 2000, thereafter interest accruesat the rate of LIBOR plus .375%. Principal repaymentsscheduled in quarterly installments of $500 commencedon March 31, 2001.

Line of creditThe Bank has a $5,000 line of credit agreement withUnited California Bank (formerly Sanwa Bank California).Extensions of credit are limited to the following types ofcredit facilities: Commercial letters of credit, standby let-ters of credit, and back-up line for federal funds bor-rowed. None of the sublimits for the above facilities canexceed the $5,000 total principal limit.

In addition, at December 31, 2001 and 2000, the Bankhad $65,000 in federal funds lines of credit available withits correspondent banks, respectively. At December 31,2001 and 2000, there were no outstanding borrowingsagainst any of these lines.

22


Income Taxesnote 9The income tax provision (benefit) includes the following components:

December 31,2001 2000 1999

Government of Guam income taxes:Current $ - $ - $ 367Deferred (628) (1,061) (161)

Foreign income taxes (including U.S. income taxes) 364 447 384

Total (benefit) provisions for income taxes $ (264) $ (614) $ 590

The components of deferred income taxes are as follows:December 31,

2001 2000 1999

Loan loss provision $ (182) $ (125) $ (235) Foreign tax credit carryforward (364) (447) -NOL carryforward (205) (618) -Depreciation, accelerated for tax purposes 98 98 98Deferred loan origination fees 28 10 (28)Other, net (3) 21 4

Deferred tax benefits $ (628) $ (1,061) $ (161)

The components of the net deferred tax assets are as follows:

December 31,2001 2000 1999

Deferred tax assets:Loan loss reserve $ 3,460 $ 3,278 $ 3,152Foreign tax credit carryforward 811 447 -NOL carryforward 823 618 -OREO 47 47 47Loan origination fees 415 443 453

Total deferred tax asset 5,556 4,833 3,652

Deferred tax liability: Depreciation (1,140) (1,042) (944)Other (7) (10) (13)

Total deferred tax liability (1,147) (1,052) (957)

Net deferred tax asset $ 4,409 $ 3,781 $ 2,695


23


24

Stock Purchase PlanThe Bank’s stock purchase plan adopted in 1991 expired onApril 30, 2001. On May 1, 2001,the Bank adopted a newstock purchase plan that covers substantially all employeesmeeting the minimum service requirements. Under the plan,qualified employees are allowed to participate in the pur-chase of designated shares of the Bank’s common stock at85% of fair market value at date of exercise. A maximum of1,946,608 shares are authorized for issuance. As ofDecember 31, 2001, 1,559,640 right to purchase shareshave been granted to employees. Right to purchase sharesare exercisable for a ten-year period from the date of grant.During 2001, 2000, and 1999 shares totaling 15,068, 7,543and 7,831, respectively, were issued under the plan at aver-age prices of $5.74, $7.22 and $7.25 per share, respectively.

Executive employment agreementsThe Chairman, President and Executive Vice President areemployed under agreements terminating on December 31,2004, December 31, 2006 and May 31, 2003, respectively.Under the agreements, each receives a specified basesalary which is adjusted annually for changes in the GuamConsumer Price Index plus an incentive bonus. TheChairman’s bonus is based on the level of qualified assets orprofitability, within a defined limit. The President’s and theExecutive Vice President’s bonuses are based on profitabili-ty, also within a defined limit, subject to adjustments basedon the Bank meeting certain performance criteria.

Under a Phantom Stock unit and stock option plan, theBank’s Chairman, President and Executive Vice Presidentmay elect to receive up to $100 each in Phantom Stock unitsin lieu of an equal amount of incentive bonus as computed intheir respective employment agreements. These nonvotingPhantom Stock units may be held for receipt of dividends

equal to the dividend rate of the Bank’s common stock ormay be redeemed at a price equal to the market value of theBank’s common stock. In addition, for each Phantom Stockunit received, the executive employee receives options topurchase three shares of the common stock of the Bank at aprice equal to the market value of the stock at the date theoptions are granted. The redemption of the Phantom Stockor the exercise of the options will result in the forfeiture bythe executive employee of any rights under the other. AtDecember 31, 2001 and 2000, there were no PhantomStock units outstanding under the plan.

The employment agreements between the Bank and theChairman, President and the Executive Vice President pro-vide, in the event of their death during the term of theirrespective employment contracts, for the continuation of thepayment of certain compensation amounts to designatedsurvivors for a period of five years.

The employment agreements between the Bank and theChairman, President and the Executive Vice President pro-vide, in the event of their death during the term of theirrespective employment contracts, for the continuation of thepayment of certain compensation amounts to designatedsurvivors for a period of five years.

Employee retirement savings planThe Bank operates an employee savings plan under Section401(k) of the Internal Revenue Code. All employees with atleast one year of continuous service are eligible for the plan.The Bank matches employee contributions of up to 6% ofcompensation at a rate of 50%. Bank contributions are 100%vested after five years of service. The amount chargedagainst income in 2001, 2000, and 1999 for such contribu-tions was $194, $220, and $208, respectively.

The Bank has also recorded a prepaid income tax asset of $2,188 and $2,648 at December 31, 2001 and 2000,respectively, relating to amounts due from the Government of Guam Department of Revenue and Taxation (see Note16).

No valuation allowance was provided to reduce the deferred tax asset because, in management’s opinion, it is morelikely than not that the entire amount will be realized. The total net deferred tax asset is included in Other Assets inthe Consolidated Statements of Condition.

A reconciliation between income tax expense computed at the Guam statutory rate and the effective income tax ratesis summarized as follows:

December 31,2001 2000 1999

Statutory Guam income tax rate 34.00 % 34.00 % 34.00 %Nontaxable interest income (37.83)% (41.18)% (29.90)%

Effective tax rate (3.83)% (7.18)% 4.10 %

Nontaxable interest income is related to net interest income earned on U.S. Treasury and other U.S. GovernmentObligations. The Bank has received a Final Notice of Deficiency (“90 Day Letter”) for tax years 1992 through 1994from the Guam Department of Revenue and Taxation asserting that this interest is subject to tax (see Note 16).


9. Income Taxes (continued)

Employee Benefit Plansnote 10


25

Lease Commitmentsnote 11

The Bank utilizes facilities, equipment and land under various operating leases with terms ranging from 1 to 99 years.Additionally, the Bank leases office space to third parties, with terms ranging from 3 to 5 years with option periodsranging up to 15 years.

At December 31, 2001, annual lease commitments under the above noncancelable operating leases were as follows:

Year Ending December 31,2002 $ 1,8712003 1,8032004 1,6722005 1,3042006 1,075Thereafter 18,888

$ 26,613

The Bank leases certain facilities from two separate entities in which two of its directors have separate ownershipinterests. One of these lease agreements became a related party transaction as a result of one of the owners beingappointed to the Bank’s board of directors during 1998. Lease payments made to these entities during 2001, 2000and 1999 were approximately $283, $300 and $296, respectively.

At December 31. 2001, minimum future rents to be received under noncancelable operating leases were as follows:

Year ending December 31, 2002 $ 2242003 1822004 1192005 262006 -Thereafter -

$ 551

The following schedule show the composition of total rental expense for all operating leases except those with termsof a month or less that were not renewed:

2001 2000 1999

Rent expense $ 2,168 $ 2,113 $ 2,254Less: sublease rentals 356 429 360

$ 1,812 $ 1,684 $ 1,894


Disclosure About Fair Value of Financial Instrumentsnote 12Financial instruments are defined as cash, evidence ofan ownership interest in an entity or a contract that bothimposes contractual obligations and rights to exchangecash and/or other financial instruments on the parties tothe transaction. The following methods and assumptionswere used by the Bank in estimating the fair value ofeach class of financial instruments.

Cash, due from banks, and federal funds soldThe carrying amounts reported in the consolidated bal-ance sheets approximate fair values.

Investment securitiesFair values of investment securities are based on quotedmarket prices, where available. If quoted market prices


are not available, fair values are based on quoted marketprices of comparable securities.

LoansFor variable-rate loans that reprice frequently and withno significant change in credit risk, fair values are basedon carrying values. The fair values of other loans areestimated using discounted cash flow analyses, utilizinginterest rates currently being offered for loans with simi-lar terms to borrowers of similar credit quality. The carry-ing amount of accrued interest approximates its fairvalue.

DepositsThe fair values of demand deposits (e.g., interest andnon-interest checking, passbook savings and certaintypes of money market accounts) are, by definition,equal to the amount payable on demand at the reportingdate (i.e., their carrying amounts). Fair values of fixed-rate certificates of deposit are estimated using a dis-counted cash flow calculation that applies interest rates

currently being offered on certificates to a schedule ofaggregated monthly maturities on time deposits.

Federal Home Loan Bank advancesThe fair value of these advances approximates their car-rying amount as the rate of interest reprices according tothe FHLB quoted rates of borrowing for advances withsimilar terms.

Long-term borrowingsThe fair value of long-term debt was estimated fromdealer quotes on debt with similar terms.

Off-balance sheet commitments and contingent liabilitiesManagement does not believe it is practicable to providean estimate of fair value because of the uncertaintyinvolved in attempting to assess the likelihood and timingof a commitment being drawn upon, coupled with a lackof an established market and the wide diversity of feestructures.

26


The estimated fair values of the Bank’s financial instruments are as follows:

2001 2000 1999Estimated Estimated Estimated

Carrying Fair Carrying Fair Carrying FairAmount Value Amount Value Amount Value

Financial assetsCash and short-term investments $ 46,218 $ 46,218 $ 53,335 $ 53,335 $ 64,230 $ 64,230

Investment securities $ 169,250 $ 169,250 $ 153,554 $153,554 $ 133,139 $ 133,139

Loans $ 406,579 $ 410,264 $ 445,246 $447,800 $ 445,134 $ 457,999

Less allowance for loan losses $ 10,176 $ 10,176 $ 9,640 $ 9,640 $ 9,272 $ 9,272

Loans, net of allowance $ 396,403 $ 400,088 $ 435,606 $438,160 $ 445,862 $ 448,727

Financial LiabilitiesDeposits $ 561,210 $ 560,213 $ 566,721 $567,386 $ 573,743 $ 573,220

Federal Home Loan Bank advances $ 10,000 $ 10,000 $ 15,000 $ 15,000 $ 15,000 $ 15,000

Long-term debt $ 8,000 $ 8,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000

12. Disclosure About Fair Value of Financial Instruments (continued)



27

Capital Adequacynote 13The Bank is subject to various regulatory capital require-ments administered by the United States federal bankingagencies. Failure to meet minimum capital requirementscan initiate certain mandatory and possibly additional dis-cretionary actions by regulators that, if undertaken, couldhave a direct material effect on the Bank’s financial state-ments. Under capital adequacy guidelines and the regu-latory framework for prompt corrective action, the Bankmust meet specific capital guidelines that involve quanti-tative measures of the Bank’s assets, liabilities and cer-tain off-balance-sheet items as calculated under regula-tory accounting practices.

Quantitative measures established by regulation toensure capital adequacy require the Bank to maintainminimum amounts and ratios (set forth in the table

below) of total and Tier 1 Capital (as defined by regula-tions) to risk-weighted assets (as defined) and of Tier 1capital (as defined) to average assets (as defined).Management believes that, as of December 31, 2001,the Bank meets all capital adequacy requirements towhich it is subject.

As of December 31, 2001, the most recent notificationfrom the Federal Deposit Insurance Corporation catego-rized the Bank as well capitalized under the regulatoryframework for prompt corrective action. To be catego-rized as well capitalized, the Bank must maintain mini-mum total risk-based, Tier 1 risk-based and Tier 1 lever-age ratios as set forth in the table below. There are noconditions or events since notification that managementbelieves have changed the Bank’s categories.

To Be WellCapitalized Under

For Capital Prompt CorrectiveActual Adequacy Purposes Action Provision

Amount Ratio Amount Ratio Amount Ratio

As of December 31, 2001:

Total capital

(to Risk Weighted Assets) $ 112,969 24.11% $ 37,478 8% $ 46,848 10%

Tier I capital

(to Risk Weighted Assets) 94,005 20.07% 18,739 4% 28,109 6%

Tier I capital

(to Average Assets) 94,005 13.06% 28,789 4% 35,986 5%

As of December 31, 2000:

Total capital

(to Risk Weighted Assets) $ 113,721 23.87% $ 38,113 8% $ 47,642 10%

Tier I capital

(to Risk Weighted Assets) 97,830 20.80% 18,813 4% 28,220 6%

Tier I capital

(to Average Assets) 97,830 14.07% 27,812 4% 34,765 5%

The following table presents the Bank’s actual capital amounts and ratios along with regulatory required minimums forpurposes of determining capital adequacy and to be considered well capitalized under capital adequacy guidelinesand prompt corrective action provisions:


Financial Instruments with Off-Balance Sheet Risk, Commitments and Contingenciesnote 14The Bank is a party to financial instruments with off-bal-ance-sheet risk in the normal course of business to meetthe financing needs of its customers. These financialinstruments include commitments to extend credit andletters of credit. Such commitments involve, to varyingdegrees, elements of credit and interest rate risk inexcess of the amount reflected in the consolidated finan-cial statements.

The Bank’s exposure to credit loss in the event of non-performance by the other parties to financial instrumentsfor loan commitments and letters of credit is representedby the contractual amount of those instruments. TheBank uses the same credit policies in making commit-ments and conditional obligations as it does for on-bal-ance sheet instruments. The Bank has no significantconcentrations of credit risk with any party to originateloans.


28

A summary of financial instruments with off-balance-sheet risk follows:

December 31,

2001 2000

Commitments to extend credit $ 57,870 $ 55,085

Letters of credit:Standby letters of credit $ 2,219 $ 2,648Other letters of credit 621 2,351

$ 2,840 $ 4,999

Commitments to extend credit are agreements to lend toa customer provided there is no violation of any conditionestablished in the contract. Commitments generally havea fixed expiration date or other termination clauses andmay require payment of a fee. Since certain of the com-mitments are expected to expire without being drawnupon, the total commitment amounts do not necessarilyrepresent future cash requirements. The Bank evaluateseach customer’s credit worthiness on a case-by-casebasis. The amount of collateral obtained, if deemed nec-essary by the Bank upon extension of credit, is based on

management’s credit evaluation of the borrower.

Letters of credit, standby or other, are conditional com-mitments issued by the Bank to guarantee the perform-ance of a customer to a third party or shipment of mer-chandise from a third party. The credit risk involved inissuing letters of credit is essentially the same as thatinvolved in extending loan facilities to customers.Management does not anticipate any material losses asa result of these transactions.

Operating Segmentsnote 15The Bank has determined that its reportable segmentsare those that are based on the Bank’s method of inter-nal reporting, which disaggregates its business on a geo-graphic basis. As of December 31, 2001, the Bank hastwo reportable operating segments: Guam and theCommonwealth of the Northern Mariana Island (“CNMI”)Branches.

The financial results of the Bank’s operating segmentsare presented on an accrual basis. There are no signifi-cant differences among the accounting policies of thesegments as compared to the Bank’s consolidated finan-cial statements. The Bank evaluates the performance ofits segments and allocates resources to them based onnet interest income and net income. There are no materi-al intersegment revenues.



The tables below present information about the Bank’s operating segments as of and for the years endedDecember 31, 2001, 2000 and 1999, respectively.

Reconciling ConsolidatedGuam CNMI Other Items Total

Year Ended December 31, 2001

Net interest income $ 26,783 $ 6,065 $ 2,620 $ (2,901) $ 32,567Provision for loan losses (2,680) (535) (356) - (3,571)Benefit (provision) for income taxes 264 (230) - 230 264 Net income 4,811 1,807 292 231 7,141Segment assets 455,375 145,008 64,753 3,429 668,565


Net interest income $ 31,286 $ 7,753 $ 3,314 $ (4,739) $ 37,614Provision for loan losses (3,769) (240) (378) - (4,387)(Benefit) provision for income taxes 614 (425) - 425 614Net income 4,245 3,444 1,057 425 9,171Segment assets 443,765 172,876 68,109 10,509 695,259


Net interest income $ 28,144 $ 6,886 $ 2,720 $ (2,628) $ 35,122Provision for loan losses (2,822) (380) (198) - (3,400)Provision for income taxes (590) (358) - 358 (590)Net income 6,867 2,176 481 157 9,681Segment assets 494,661 158,780 62,241 (18,962) 696,720

Contingenciesnote 16The Bank is party to legal proceedings arising in theordinary course of business. It is the opinion of manage-ment, based upon present information, including evalua-tions by legal counsel, that the resulting liability, if any,from these actions and other pending claims will notmaterially affect the Bank’s financial position or results ofoperations.

In October 1998, an action was brought against certainofficers and/or directors of the Bank (“the defendants”)by another director of the Bank (“the plaintiff”). The Bankhas been named as a nominal defendant with no directrecovery being sought from the Bank.

In February 2001, the parties involved reached a settle-ment. In accordance with the terms of the settlementagreement, in October 2001 the Bank repurchased1,393,761 shares of Bank stock from the plaintiff at $11per share. The Bank incurred legal fees in the amount of$1,412 and $2,816 during 2001 and 2000, respectively,on behalf of the Bank and the defendants pursuant tothe indemnification provisions of the bylaws of the Bank.

In July 1998, the Guam Department of Revenue andTaxation (the Department) issued a Preliminary Notice

of Deficiency (the Notice) relating to the Bank’s tax fil-ings for tax years 1992 through 1994. The tax resultingfrom this matter could range from zero to a maximum of$6,887. The Bank filed a formal protest to the Notice andsubmitted to the Department all requested documenta-tion supporting the Bank’s position.

In January 2001, the department issued a final Notice ofDeficiency (“90 Day Letter”) informing the Bank that theyhad been unable to reach a satisfactory agreement intheir case. In response, the Bank filed a Petition forRedetermination in Federal District Court of Guam onApril 24, 2001, contesting the allegations. TheDepartment subsequently filed a motion in District Courtto dismiss the Bank’s claim for relief, and the Court iscurrently considering the Department’s motion. TheBank and its attorneys continue to believe the Bank’slegal arguments in favor of its position will have merit,and continue to believe they will ultimately prevail in anyfinal determination of this issue. In addition to tax years1992 through 1994 which are the subject of current liti-gation, tax years 1998 through 2000 are still open toexamination under applicable statutes of limitation, andcould be subject to similar scrutiny by the Department.

15. Operating Segments (continued)

29


[$ in thousands, except per share amounts, unaudited]

Years ended December 31,2001 2000 1999 1998 1997

Interest Income

Interest and fees on loans $ 39,237 $ 47,065 $ 43,407 $ 43,892 $ 42,947Interest on deposits in other banks 241 342 248 260 365Interest on investment securities

Taxable 19 34 43 68 85Exempt from income tax 8,119 9,775 7,709 9,915 10,192

Interest on federal funds sold and securitiespurchased under agreement to resell 651 670 546 974 630

Total interest income 48,267 57,886 51,953 55,109 54,219

Interest ExpenseTime deposits 7,409 9,712 6,215 7,906 9,305

Savings deposits 7,113 8,889 8,962 9,419 8,121

Other borrowed funds 1,178 1,671 1,654 1,564 985

Total interest expense 15,700 20,272 16,831 18,889 18,411

Net interest income 32,567 37,614 35,122 36,220 35,808

Provision for Loan Losses 3,571 4,387 3,400 3,005 1,800

Net interest income after provisionfor loan losses 28,996 33,227 31,722 33,215 34,008

Other Operating Income

Service charges and fees 4,202 3,964 3,729 4,005 4,239Investment securities gains (losses), net - - - - -Other income 5,132 4,426 5,082 4,096 4,227

Total other operating income 9,334 8,390 8,811 8,101 8,466

Other Operating ExpensesSalaries and employee benefits 14,604 15,466 15,538 15,699 15,825

Net occupancy 4,240 4,249 4,198 4,132 3,986

Furniture and equipment 3,144 2,974 2,912 2,659 2,704

General, administrative and other expenses 9,465 10,371 7,614 7,519 8,170

Total other operating expenses 31,453 33,060 30,262 30,009 30,685

Income before income taxes 6,877 8,557 10,271 11,307 11,789

Provision Benefit for Income Taxes (264) (614) 590 631 777

Net Income $ 7,141 $ 9,171 $ 9,681 $ 10,676 $ 11,012

Net Income Per ShareBasic earnings per common share $ 0.74 $ 0.93 $ 0.98 $ 1.08 $ 1.12Diluted earnings per common share $ 0.72 $ 0.90 $ 0.96 $ 1.05 $ 1.10

30

Summary of Operations

[$ in thousands, unaudited]

Years ended December 31,2001 2000 1999 1998 1997

AssetsCash and due from banks $ 39,347 $ 41,836 $ 41,431 $ 41,078 $ 51,972 Interest-bearing deposits in other banks 5,151 5,499 5,499 4,738 4,435 Federal funds sold 1,720 6,000 17,300 18,000 53,800 Investment securities 169,250 153,554 133,139 160,904 186,928Loans 406,579 445,246 455,134 437,144 414,719Less allowance for possible loan losses 10,176 9,640 9,272 8,483 7,501

Net loans 396,403 435,606 445,862 428,661 407,218

Bank premises and equipment 31,094 32,398 33,668 34,797 34,298 Accrued interest receivables and other assets 25,600 20,366 19,821 21,046 22,172

Total assets $ 668,565 $ 695,259 $ 696,720 $ 709,224 $ 760,823

Liabilities and Shareholders’ Equity

DepositsNon-interest bearing $ 134,480 $ 134,575 $ 155,710 $ 167,164 $ 218,406Interest bearing 426,730 432,146 418,033 425,007 436,793

Total deposits 561,210 566,721 573,743 592,171 655,199

Accrued interest payables and other liabilities 2,158 3,580 2,937 2,682 3,437 Federal Home Loan Bank advance 10,000 15,000 15,000 15,000 10,000Long-term debt 8,000 10,000 10,000 10,000 10,000

Total liabilities 581,368 595,301 601,680 619,853 678,636

Shareholders’ Equity

Capital stock of $.2083 par valueAuthorized 48,000,000 shares9,919,087 shares issued / 8,525,326 sharesoutstanding in 2001 and 9,902,569 shares in 2000 2,067 2,063 2,062 2,060 2,055

Capital surplus 13,867 13,775 13,714 13,652 13,455Treasury stock (1,393,761 shares) (15,331) - - - -Retained earnings 86,594 84,120 79,264 73,659 66,677

Total shareholders' equity 87,197 99,958 95,040 89,371 82,187

Total liabilities and shareholders' equity $ 668,565 $ 695,259 $ 696,720 $ 709,224 $ 760,823

31

Summary of Financial Condition

2001 2000Avg. Balance Avg. Rate Avg. Balance Avg. Rate

Earning AssetsDue from Banks Time $ 5,572 4.33% $ 5,512 5.93%

SecuritiesU.S. Government Securities 177,643 4.94% 166,185 6.14%Other Securities 406 4.68% 630 7.05%

Total Securities 178,049 4.94% 166,815 6.15%

Federal Funds Sold 16,573 3.93% 10,658 6.33%

Loans:Commercial, Industrial & Government 258,805 8.31% 285,192 10.25%Real Estate 93,404 8.18% 92,049 7.96%Consumer 83,915 12.02% 84,383 11.99%

Total Loans 436,124 9.00% 461,624 10.11%

Total Earning Assets 636,318 7.69% 644,609 8.98%

Non-Earning AssetsCash and Due from Banks Demand 28,527 26,915 Bank Premises and Equipment 31,843 32,859 Other Real Estate Owned 6,209 1,628 Other Assets 24,148 27,907 Reserve for Loan Losses (9,701) (10,137)

Total Assets $ 717,344 $ 723,781

Liabilities and Shareholders’ Equity:Interest Paying Liabilities - Deposits

Demand and Savings 214,893 2.48% 214,123 2.70%Time Certificates 231,985 3.97% 244,211 5.22%

Total Time and Savings Deposits 446,878 3.25% 458,333 4.04%Other Borrowed Funds 15,628 4.61% 15,583 5.01%Subordinated Debt 9,554 3.33% 10,000 8.63%

Total Interest Paying Liabilities 472,060 3.33% 483,917 4.17%

Non-Interest Paying Liabilities and EquityDemand Deposits 132,166 131,721 Other Liabilities 11,193 8,525 Shareholders’ Equity 101,925 99,619

Total Liabilities and Shareholders’ Equity $ 717,344 $ 723,781

Rate Differential 4.36% 4.82%


Summary of Average Balances and Interest Rates

32

1999 1998 1997Avg. Balance Avg. Rate Avg. Balance Avg. Rate Avg. Balance Avg. Rate

Earning Assets:$ 5,197 5.04% $ 5,801 4.48% $ 5,932 5.66%

Securities152,603 5.07% 185,119 5.36% 194,258 5.27%

852 7.05% 902 7.54% 1,216 7.06%153,456 5.06% 186,021 5.37% 195,475 5.06%

13,488 4.97% 24,177 4.03% 12,508 6.12%Loans:

267,528 9.27% 254,198 10.01% 236,613 9.85%84,741 7.52% 72,356 8.79% 57,535 8.38%87,282 12.25% 97,252 12.43% 106,775 12.81%

439,552 10.16% 423,805 10.36% 400,922 10.48%

611,693 8.72% 639,804 8.61% 614,836 8.62%

Asse32,364 40,889 28,44434,009 34,892 33,7521,332 1,475 1,188

25,949 25,836 26,115(9,020) (7,727) ( 7,912)

$ 696,328 $ 735,169 $ 696,422

Equity:Deposits

212,663 2.77% 289,033 2.97% 200,931 2.97%209,737 4.39% 152,988 4.95% 238,550 4.95%

422,400 3.57% 442,022 4.04% 439,481 4.04%16,192 5.01% 12,917 5.69% 2,714 5.69%10,000 8.63% 10,000 8.63% 10,000 8.63%

448,592 3.74% 464,938 4.15% 452,196 4.15%

& Equity146,266 169,291 160,406

9,164 13,919 5,63092,306 87,021 78,190

$ 696,328 $ 735,169 $ 696,422

Rate Di f4.99% 4.55% 4.47%


33

Management's Analysis of Financial Condition Results of OperationsAlthough the depressed economies of the Pacific Islands regionhas severely affected the financial condition and performanceof both public and private sector entities in the region, the Bankof Guam, on the other hand, continues to maintain its solid foot-ings, and strong level of profit performance in its core business-es. The Bank closed the year 2001 with total resources of$668.6 million, down $26.7 million (or 3.8%) from $695.3 millionat the end of 2000. This decline in total resources is primarilyattributed to the $38.7 million drop in total loans (largely due topay-offs of two government loans), offset partially by the $15.7million growth in our investment securities portfolio. Totaldeposits closed the year at $561.2 million, down slightly by $5.5million (or 1.0%) from $566.7 million in 2000.

During 2001, the Bank's net interest margins came undersevere pressure due to the successive rounds of interest ratecuts, which dropped short term interest rates by as much as475 basis points. While these interest rate cuts, coupled withthe continued deterioration in the island economies has nega-tively affected the Bank's net interest margins during 2001, theBank’s overall profitability, however, remains solid with netincome for the year totaling $7.1 million (although lower by $2.1million from $9.2 million in 2000). The decline in net income isprimarily attributed to the $5.0 million drop in net interestincome, which offset partially by the $0.9 million increase inother operating income, and the $1.6 million and $0.8 milliondecrease in other operating expenses and loan loss provisions,respectively.

In the 4th quarter of 2001, the Bank repurchased 1,393,761shares of its common stock in connection with the settlement ofa lawsuit involving the Bank as a nominal defendant. The costof the repurchased shares totaling $15.3 million (recorded asTreasury Stock) caused the reduction in total shareholder'sequity, which closed the year 2001 at $87.2 million, down $12.8million (or 12.8%) from $100.0 million at year-end 2000.Despite the effects of the stock repurchase transaction, howev-er, the Bank's solid profit performance during the year con-tributed to our shareholders' equity base an additional $2.4 mil-lion (net of dividends paid) in the form of retained earnings.Notwithstanding the net reduction in its capital, the Bank's sus-tained profit performance in 2001 has allowed the continuanceof its long-standing practice of declaring regular quarterly divi-dends (of $0.1250 per share) during the year. For the full yearof 2001, the Bank declared and paid a total of $4.8 million individends to its common shareholders, up $0.3 million (or 7.3%)from $4.5 million in 2000.

Loans and DepositsIn recognition of the increased risk that is associated with thecontinued deterioration in the regional economies, the Bankhas instituted stricter limits on its lending activity during 2001.This action, coupled with the pay-off of two large governmentloans is attributable to the substantial reduction in our loan port-folio. At year-end 2001, total loans stood at $406.6 million,down $38.7 million (or 8.7%) from $445.2 million in 2000. Thisdecline is largely concentrated in commercial and governmentloans, which dropped $41.5 million to close the year at $225.6million, down from $267.1 million in 2000. In addition, total realestate loans of $90.5 million, is down $1.8 million from $92.3million last year. Conversely, our consumer loan portfolio regis-tered an increase of $4.6 million to close the year at $90.3 mil-lion, up from $85.7 million in 2000. Although the conditions ofthe regional economies has adversely affected a large number

of the Bank's borrowers, asset quality, however, remains strongas the Bank continues with its firm commitment to maintain thehighest level of underwriting standards and practices, support-ed with an effective collection management process. In addi-tion, as part of its continued firm commitment to preserve thevalue of its shareholders' equity, the Bank increased its loanloss reserves to $10.2 million (or 2.50% of total loans), up fromthe $9.6 million (or 2.17% of total loans) in 2000. While, thisreserve level is exceptionally high as compared to industrystandards, it provides the Bank with additional strength tohedge against the adverse condit ions in our regionaleconomies.

While total loans dropped substantially during the year, theBank's deposit base remains solid, with total deposits droppingby only $5.5 million (or 1.0%) to close the year at $561.2 mil-lion, down from $566.7 million in 2000. The drop in totaldeposits is primarily attributed to the $23.4 million decline intime deposit volumes, which stood at $206.9 million at year-end2001, down from $230.3 million in 2000. However, this wassubstantially offset by the $17.9 million increase in our coredeposit base, which is comprised of our demand and savingsdeposit portfolio. At year-end 2001, total savings depositsincreased by $13.3 million (or 8.5%) to $170.1 million from$156.8 million in 2000. Likewise, total demand depositsincreased by $4.6 million (or 2.6%) to $184.2 million, up from$179.6 million in 2000. Overall, the decline in both our loanand deposit volumes effectively reduced our loan-to-depositratio to 72.5% in 2001, down from 78.6% in 2000.

Liquidity and Investment PortfolioAt year-end 2001, the Bank's investment portfolio, which iscomprised of U.S. treasury and U.S. government agency secu-rities, federal funds sold, and time deposits at other banks,increased by $11.0 million (or 6.7%) to $176.1 million, from$165.1 million at year-end 2000. The increase was primarilyattributed to the $55.2 million increase in short-term U.S. treas-ury securities, which closed the year at $105.9 million, up from$50.7 million last year. The increase in treasury securities, how-ever, was partially offset by the $39.7 million and $4.3 milliondrop in our other U.S. government agency securities and feder-al funds sold portfolio, respectively. Time deposits at otherbanks totaling $5.2 million remained relatively flat to last year'sbalance of $5.5 million. While the successive cuts in interestrates during 2001 increased the market value of our securitiesportfolio, the downside effect resulted in a 140 basis pointsdecline in the average yield of the portfolio, which dropped to4.51% from 5.91% in 2000.

As required by accounting regulations, the Bank accounts for,and classifies its investment securities as "Available-for-Sale","Held-to-Maturity", and "Trading" based on management'sintention regarding its retention. And, while the Bank's policyand practice has traditionally been to hold its investments tomaturity, the Bank has deemed it prudent to classify the portfo-lio as "Available-for-Sale" to provide for unanticipated liquidityneeds. The Bank, however, does not engage in active tradingof securities, therefore, it does not hold any of its securities inthe trading classification.

Net Interest IncomeThe overall effect of the 475 basis points decline in short terminterest rates during 2001, coupled with the $38.7 million dropin our loan portfolio are the primary cause of the Bank's netinterest income to drop by $5.0 million. Net interest income

34

before provision for loan losses totaled $32.6 million during theyear, down $5.0 million or 13.3% from $37.6 million in 2000,largely attributed to the $7.8 million drop in interest incomefrom loans, coupled with the $1.7 million drop in investmentportfolio income. From a portfolio yield standpoint, the averageyield on our earning assets portfolio dropped 129 basis points(to 7.69% in 2001, down from 8.98% in 2000), with the singlelargest drop in portfolio yield attributable to commercial loans,which registered a 194 basis points drop in yields (to 8.31%from 10.25%), followed by 140 basis points drop in investmentportfolio yields (to 4.51% from 5.91%).

The overall decline in interest income from loans and invest-ments, however, was partially offset by the drop in total interestpaid on deposits and other borrowed funds. Total interest paidexpense during 2001 of $15.7 million is $4.6 million (or 22.7%)lower than the $20.3 million in interest expense recorded lastyear, largely attributed to the $2.3 million drop in interest paidon time deposits, which totaled $7.4 million, down from $9.7million in 2000. Likewise, interest paid on Demand andSavings deposits dropped by $1.8 million to $7.1 million from$8.9 million the prior year.

Overall, the Bank's net interest margin for 2001 dropped 72basis points to 5.12%, down from 5.84% in 2000.

Other Operating Income and ExpensesOn a more positive note, the Bank's other operating incomeand expenses registered overall improvements during 2001,contributing an aggregate of $2.5 million to our total operatingrevenues and thus partially offsetting the decline in our netinterest income. More specifically, total other operating incomederived from service charges, fees, and other non-interest rev-enues total $9.3 million for the year, up $0.9 million from the$8.4 million recorded in 2000. This increase is largely attrib-uted to the $0.4 million increase in credit card merchant servic-es and mastercard related fees, and the $0.2 million increasein other fee and commission income from the wide array ofproducts and services we provide our customers. On the otherside of this equation, our total other operating expenses during2001 dropped by $1.6 million to $31.5 million from $33.1 mil-lion in 2000 largely attributed to the $0.9 million reduction insalaries and benefit expenses, followed by legal expenses,which also dropped by $0.9 million. Total salaries and benefitexpenses for the year dropped to $14.6 million, down from$15.5 million in 2000 as the Bank successfully achieved itspersonnel reduction targets through normal attrition. On thelegal expense front, while the Bank incurred an additional $1.4million in legal expenses related to a lawsuit (in which the Bankis a nominal defendant), this lawsuit was fully settled in the 4thquarter of 2001. However, in the aggregate, total legalexpenses during 2001 dropped by $0.9 million to $2.6 million,from $3.5 million in 2000.

Capital ResourcesUnder currently effective capital regulations, the Bank mustmeet a 5.0% Tier One capital (to average assets) ratio and TierOne capital (to risk weighted assets) ratio of 6.0%.Additionally, the Bank's Total Capital (to risk weighted assets)must equal or exceed 10%. At December 31, 2001, the Bankexceeded all of its minimum capital requirements: its Tier Onecapital (to average assets) was 13.06%; its Tier One capital (torisk weighted assets) was 20.07%; and its Total Capital (to riskweighted assets) was 24.11%.

Impact of Inflation and Changing PricesThe Bank's financial statements have been prepared in accor-dance with accounting principles generally accepted in theUnited States of America, which require the measurement offinancial position and operating results in terms of historicaldollars without consideration for changes in the relative pur-chasing power of money over time due to inflation. The impactof inflation can be found in the increased cost of the Bank'soperations. Nearly all of our assets and liabilities are financial,unlike most industrial companies. As a result, the Bank's per-formance is directly impacted by changes in interest rates,which are indirectly influenced by inflationary expectations.Our ability to match the financial assets to the financial liabili-ties in our asset/liability management will tend to minimize thechange of interest rates on our performance.

Forward-Looking StatementsWhen used in this filing and in future filings by the Bank withthe Federal Deposit Insurance Corporation, in our pressreleases or other public or shareholder communications, or inoral statements made with the approval of an authorized exec-utive officer, the words or phrases "would be," "will allow,""intends to," "will likely result," "are expected to," "will contin-ue," "is anticipated," "estimate," "project" or similar expressionsare intended to identify "forward-looking statements" within themeaning of the Private Securities Litigation Reform Act of1995. Such statements are subject to risks and uncertainties,including but not limited to, changes in economic conditions inour market area, changes in policies by regulatory agencies,fluctuations in interest rates, demand for loans in our marketarea and competition, all or some of which could cause actualresults to differ materially from historical earnings and thosepresently anticipated or projected.

The Bank wishes to caution readers not to place unduereliance on any such forward-looking statements, which speakonly as of the date made, and advises readers that various fac-tors, including regional and national economic conditions, sub-stantial changes in levels of market interest rates, credit andother risks of lending and investment activities and competitionand regulatory factors, could affect our financial performanceand could cause our actual results for future periods to differmaterially from those anticipated or projected.

The Bank does not undertake, and specifically disclaims anyobligation, to update any forward-looking statements to reflectoccurrences or unanticipated events or circumstances after thedate of such statements.

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and Results of Operations

Anthony A. Leon GuerreroPresident and Chief Executive Officer

William D. Leon GuerreroExecutive Vice President andChief Operating Officer

Francisco M. AtaligVice President/Chief Financial Officer

Jocelyn B. MiyashitaVice President/Credit Administrator

Josephine L. MarianoVice President/Branch and CentralOperations Administrator

Lolita R. San NicolasVice President/Sales and Customer ServiceOfficer

Danilo M. RapadasVice President/Legal Counsel andCompliance Officer

Joseph P. BradleyVice President/Economic and MarketStatistics Officer

Bridget K. StiversonVice President/Special Assistant to the President

George A. GogueVice President/Acting Information Systems Administrator

Tina D. BernardoAssistant Vice President/Human ResourcesStaff Development Officer

Christopher A. StallingsVice President/Trust Officer

Ann M. RothVice President/Financial Service Manager

Josephine L. BlasVice President/General Auditor

Jacqueline A. MaratiVice President/Corporate Banking Group Manager

Mike W. NaholowaaVice President/Credit Officer

Craig R. WadeVice President/Loan Adjustment Manager

Daniel F. AndersonVice President/Credit Officer

Benjamin C. PabloAssistant Vice President/Consumer Loan Manager

Amoretta P. CarlsonAssistant Vice President/Real Estate Department Manager

Daniel L. PerezVice President/Credit Review Officer

Koichi ImaiVice President/International Department

Carmen M. CruzAssistant Vice President/Loan Supportand Note Department Manager

Luke M. ElliottVice President/EDP Manager

Joseph R. SorianoVice President/Business Services Division Manager

Tosiwo NakayamaVice President/Government Affairs

BRANCH MANAGERS& REPRESENTATIVES

Hagåtña BranchMargaret A. HernandezVice President/Branch Manager

Santa Cruz BranchKathrine C. LujanAssistant Vice President/Branch Manager

Tamuning BranchCarmen G. TajalleAssistant Vice President/Branch Manager

Upper Tumon BranchRichard G. CamachoAssistant Vice President/Branch Manager

Tumon BranchDavid J. ArriolaAssistant Vice President/Branch Manager

Dededo BranchChristine D. BenaventeAssistant Vice President/Branch Manager

Adelup BranchWayne S.N. SantosAssistant Cashier/Branch Manager

Yigo BranchRomeo A. AngelAssistant Vice President/Acting Branch Manager

Mangilao BranchKeven F. CamachoAssistant Cashier/Branch Manager

Harmon BranchElizabeth G. DezellAssistant Cashier/Branch Manager

Malesso BranchBernadette AguonAssistant Cashier/Acting Branch Manager

Anderson Air Force Base BranchNorma I. ArriolaAssistant Cashier/Branch Manager

Naval Activities BranchHelen C. TedpahagoAssistant Cashier/Branch Manager

In-Store Dededo Pay-Less SupermarketDina A. San NicolasAssistant Cashier/Branch Manager

Saipan BranchMerced M. TomokaneVice President/Branch Manager

Tinian FacilityDaria C. CingAssistant Cashier/Facility Manager

San Roque FacilityJeffrey P. DiazAssistant Cashier/Facility Manager

In-Store Branch Saipan Price-CostcoDelcina T. TudelaAssistant Cashier/Facility Manager

San Antonio FacilityIna F. AttaoAssistant Cashier/Facility Manager

Rota BranchBeatrice T. PeredaAssistant Vice President/BranchManager

Pohnpei BranchVida B. RicafrenteAssistant Vice President/BranchManager

Chuuk BranchLarry A. PhilipAssistant Vice President/BranchManager

Belau BranchEmory MesubedAssistant Cashier/Branch Manager

Majuro BranchSoledad KisaAssistant Cashier/Branch Manager

Kwajalein/Ebeye BranchAntonia S. A. RedyAssistant Cashier/Branch Manager

San Francisco BranchShirley N. QuituguaVice President/Branch Manager

CONSULTANTAlexander AflagueBusiness Development Officer

SUBSIDIARYBankGuam Insurance Underwriters, Ltd.Francis E. SantosVice President/General Manager

Senior Management and Headquarters Officials

36

Jesus S. Leon GuerreroBank of Guam Founder

Chairman of the BoardChairman

Executive CommitteeLoan Committee

University of Guam HonoraryDoctorate of Law

Guam Chamber of CommerceHall of Fame

Anthony A. Leon GuerreroBank of Guam PresidentChief Executive OfficerVice Chairman of the BoardVice Chairman

Executive CommitteeLoan Committee

Pacific Islands DevelopmentBank Board of Governors

Roger P. CrouthamelBank of Guam Board SecretaryChairman Stock Option

CommitteeChairman Ad Hoc Compensation

CommitteeVice Chairman Trust CommitteeAttorney at LawDirector Transpacific Travel

dba Travel PacificanaDirector of Guam Fast Foods

dba Kentucky Fried Chicken

Felino B. AmistadBank of Guam Board TreasurerMetropolitan Press

Owner/ManagerHouse of Fabrics

Owner/Manager

Luis G. Camacho, D.D.S., M.S.Bank of Guam DirectorChairman Nominating CommitteeDr. Luis G. Camacho, Inc.

PresidentCamacho Inc., PresidentPacific Financial Corporation

Vice PresidentPacific International Corporation

Vice Chairman

Martin D. Leon GuerreroBank of Guam DirectorChairman Trust CommitteeThe Fifth Wheel Inc., President

and ChairmanIgnacia Corporation Director

Ralph G. Sablan, M.D.Bank of Guam DirectorChairman Audit CommitteePrivate Practice: DermatologyU.S. Navy Captain, RetiredGuam Medical Society

Former President

Pedro P. Ada, Jr.Bank of Guam DirectorAda’s Trust and Investment, Inc.

ChairmanNanbo Insurance Ltd. ChairmanUniversity of Guam Honorary

Doctorate of LawUniversity of St. Thomas

Member, President’s Council

Tosiwo NakayamaBank of Guam DirectorGovernment Affairs

Vice PresidentThe Federated States ofMicronesia First President

Lourdes A. Leon GuerreroBank of Guam DirectorVice Chairman Audit CommitteeSenator - 26th, 24th and 23rd

Guam LegislatureMember, Guam Nurses

AssociationBoard Member, Hope for

RecoveryBoard Member, Saint John’s

School

Joe T. San AgustinBank of Guam DirectorFormer Senator 14th - 23rd

Guam LegislatureFormer Speaker 20th - 22nd

Guam LegislatureUniversity of Guam

Administrator/Instructor

annual meeting - bank of guam · standards, but provides additional strength to the bank's...

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