Posted on: Saturday, September 18, 2004

Eight City Bank branches to close

By Deborah Adamson
Advertiser Staff Writer

Central Pacific Financial Corp. is closing nine branches and moving another in an attempt to meet its promise to Wall Street that its merger with City Bank would result in annual savings of $19.5 million.

Eight of the nine branches that are closing are City Bank branches — on Merchant Street and Bishop Street, and in Waipahu; Hilo and Kona on the Big Island; Kahului and Kihei on Maui; and Lihue, Kaua'i. The Central Pacific branch in Kailua will close. Overall, a fifth of Central Pacific Financial Corp.'s branches will be closed.

The City Bank branch in Kapolei will be moved and Central Pacific also will open a new branch in Wailuku, Maui, as part of a plan to open more branches in underserved areas. At present, the newly merged company has 23 Central Pacific branches and 22 City Bank branches in the state.

In addition, Central Pacific offered a Voluntary Separation Program to employees in certain positions. Workers who take the package will be offered a payout of six months salary plus additional pay depending on how long they've been with the company — with a maximum of two years of service. Medical and dental benefits will last up to 18 months of medical and dental benefits, based on years of service.

Workers were given until Nov. 1 to accept the deal. If not, the company said they will be "subject to the company's commitment to no involuntary layoffs as a result of this merger." It could include relocation or a change of position.

Central Pacific Financial is in a quandary because it told Wall Street analysts that it expects to save $19.5 million a year as a result of its merger with City Bank's parent, CB Bancshares, yet it pledged not to have any involuntary layoffs.

Brett Rabatin, an analyst at Midwest Research, said the $19.5 million annual savings "seemed a little bit high" and a more achievable number is $10 million. He said that the annual savings Central Pacific promised to achieve, on a pre-tax level, is 21 percent of City Bank's expenses. Typically, personnel costs are one of the highest carried by a company. "The assumptions they put forward seem aggressive to me," he said.

Also, Central Pacific estimates that merger and related costs would top $50 million, in addition to the roughly $426 million to buy City Bank.

As part of the merger, the analyst estimated that Central Pacific will issue about 12.5 million more shares. Shares of Central Pacific were up 5 cents to $28 in late trading yesterday.

Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.