Central Pacific Bank changes leadership, adopts new plan... - Hawaii News Now - KGMB and KHNL

Central Pacific Bank changes leadership, adopts new plan that could bring layoffs

John Dean John Dean

By Howard Dicus - bio | email

HONOLULU (HawaiiNewsNow) - Central Pacific Bank has announced a new chief executive - and a new strategy to build its cash reserves as required by federal banking regulators. The new strategy includes downsizing, and employees have been told there may be layoffs.

The bank Tuesday announced the retirement of Ron Migita as chairman and CEO - he will remain on the board of directors - and the appointment of venture capitalist John Dean as executive chairman in his place. Dean accepted the position Monday.

Under a December consent order with banking regulators, the bank has to keep more than 10% of its assets in ready cash, twice as much as most banks. It can achieve this by shrinking assets, raising more cash, or a combination of the two.

The deadline for this was the end of this month and the company expects to miss it. More than dozen other banks that missed similar deadlines are still operating normally despite lower reserves than CPB has.

The consent order calls for the bank to either meet the reserve target or develop a plan B. That turned out to be a fresh look at downsizing and a fresh chief executive.

Dean, a Californian with a second home in Waimanalo who taken an active role in the Hawaii venture capital community, was CEO of Silicon Valley Bank for eight years to 2003, quintupling its assets to $5.5 billion.

Central Pacific, which is smaller than First Hawaiian, Bank of Hawaii and American Savings Bank, has assets of $5 billion but might have to shrink to assets of $3.5 billion to meet the FDIC's demands if it raises no new capital.

A combination of downsizing and fresh capital is seen as more likely. Sources within the bank say some prospective investors whose initial terms were rejected have not walked away and might consider a capital infusion under different terms now that Dean is in place.

Under former CEO Clint Arnoldus, who came from the southern California banking community, Central Pacific paid a premium to acquire its nearest rival, City Bank of Hawaii, then aggressively expanded into the California real estate lending market just before its collapse.

Arnoldus retired ahead of schedule and Ron Migita, who had come from City Bank as non-executive chairman, became CEO. Migita immediately refocused on Hawaii operations and began shedding California loans, but the bank entered 2010 still carrying almost $900 million in mainland loans. It has since sold more than $50 million of that.

Bank sources say Central Pacific's health is better than it looks because loyal customers enabled it to grow deposits and because a number of California loans that are being treated as risky are still drawing payments from the borrowers.

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