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The Honolulu Advertiser
Posted on: Wednesday, March 17, 2010

CPB parent taps turnaround expert


BY Rick Daysog
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

John Dean

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Hawaii news photo - The Honolulu Advertiser

Ronald Migita

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The parent of Central Pacific Bank has named a venture capitalist and bank turnaround expert, John Dean, as its executive chairman as part of a companywide retrenchment.

Dean, 62, replaces Ronald Migita who is retiring as the company's president, chairman and CEO.

Central Pacific Financial Corp. also announced plans to sell about $500 million in investment securities, further reduce its loan exposure in California and lower its expenses to comply with the requirements of a consent order with state and federal regulators.

The company said it also will explore layoffs among several cost-cutting measures.

"We believe that the aggressive and appropriate actions we are taking to turn the company around are realistic and doable," said Paul Kosasa, a Central Pacific director and chairman of the board's recovery committee.

Shares of Central Pacific jumped nearly 18 percent, or 25 cents, to close at $1.64 on the New York Stock Exchange yesterday.

Dean, whose appointment is subject to regulatory approval, lives in Waimānalo and is managing general partner of Startup Capital Ventures, a Palo Alto, Calif.-based venture capital fund.

Between 1993 and 2001, he served as CEO of Silicon Valley Bank where he engineered a turnaround at the Santa Clara, Calif.-based financial institution. During his eight-year tenure, Silicon Valley Bank's market capitalization grew from $65 million to more than $2 billion.

As Central Pacific's executive chairman, Dean said he will be paid $1 a year in salary.

The bank will provide incentive pay in the form of stock. Dean said he will contribute half of the award to a local nonprofit and the other half will go to investors in Startup Capital.

Founded in 1954 by World War II veterans, Central Pacific is one of the state's largest financial institutions.

In recent years, the company has been hard hit by troubled loans to California homebuilders, which led to huge quarterly losses and prompted it to seek $135 million of Troubled Asset Relief Program funding.

In December, Central Pacific agreed to a consent order with the Federal Deposit Insurance Corp. and the state Division of Financial Institutions that requires it to increase its capital position and improve its asset quality.

The bank said it has been pursuing a capital infusion from private equity investors but was unable to reach a deal in time, triggering the downsizing plan.

Central Pacific said it will shed about $900 million worth of its assets over a three-year period to boost its capital position into compliance with the consent order's requirements. The bank also will reduce its commercial loans and non-core deposits.

The scaled-down bank, which will have about $4 billion in assets, will continue to seek outside investors and will focus on its core business of making commercial and residential loans.

Migita, 68, will remain on Central Pacific's board. He said he plans to spend some time on Maui where he owns a home but will remain active in local charities and nonprofits. A former University of Hawai'i regent, Migita is a member of the Boy Scouts of America's national board.

Dean is a co-founder and chairman emeritus of the Entrepreneurs Foundation of Hawaii, which supports small business ventures, and sponsors the Kipapa i ke Ala lecture series at the University of Hawai'i-Mānoa.

KEY EVENTS IN CENTRAL PACIFIC FINANCIALíS HISTORY

February 2005: Central Pacific Financial Corp. acquires CB Bancshares Inc., parent of City Bank.
October 2007: Central Pacific discloses problem loans in California. The company's provision for loan and lease losses soars to $21.2 million, triggering a 55.8 percent decline in its third quarter 2007 earnings.
March 2008: Company takes a $48 million, noncash charge forcing it to restate fourth quarter 2007 earnings. The company reports that it lost $44.5 million, instead of a previously announced profit of $3.6 million for the quarter.
March 2008: CEO Clint Arnoldus, who oversaw the City Bank takeover, announces he is retiring. Under terms of his contract, Arnoldus will get a $5 million payout.
August 2008: Chairman Ronald Migita is named president and CEO.
December 2008: Company received preliminary approval for $135 million from the government's Troubled Asset Relief Program.
October 2009: Central Pacific reports a record $183.1 million loss due to problem Mainland loans and impairment of its goodwill.
December 2009: Company says it will agree to enter into a consent order with the Federal Deposit Insurance Corp. requiring it to boost capital and improve its asset quality.
February 2010: Central Pacific says it is in discussions with private investors to acquire a stake in the company. The disclosure comes as the company reported a record loss of $292.8 million for 2009.
March 2010: Company announces that venture capitalist and Mainland bank turnaround expert John Dean will become the company's executive chairman, replacing Migita, who is retiring. Central Pacific also says it will downsize by selling off some securities, reduce its loan exposure and exit some of its high-cost deposits.
Source: Advertiser research