John Dean, the third CEO at Central Pacific Bank since 2008, says he might relinquish the top post within the next two years but plans to stay closely involved with the company’s turnaround as chairman of the board.
"I fully intend to be here for the next three to five years," Dean said Thursday in a telephone interview after the state’s fourth-largest bank announced a $10.7 million profit in the third quarter.
"The caveat to that is that it may not be as CEO. It may be as (independent) chairman or executive chairman of the bank."
Dean, who was hired as executive chairman in March 2010 before being tapped as president and CEO in April 2011, has been the architect of the bank’s recovery from a near-death experience. He said raising $325 million in capital in February 2011 and posting seven straight profitable quarters after three straight years of losses was just the first of two phases in Central Pacific’s resurrection.
"The second phase is returning the bank to a top-performing bank in the United States, and that’s not a 12- or 18-month process. That needs to be accomplished over a three- to five-year period," Dean said.
Crystal Rose, a board member at the bank since 2005, was named nonexecutive chairwoman in 2011 at the same time that Dean’s title was being redefined. The bank’s corporate governance policy calls for the chairman and CEO positions to be held by separate individuals.
Dean, 65, said he wants his successor to be appreciative and respectful of the Hawaiian community.
"Obviously, anyone with experience, knowledge or roots we would consider a plus in terms of candidates we would look at," he said.
When asked whether he had someone in mind for the top position, Dean said, "No."
"We want a good transition," Dean said. "But I can’t tell you when that (transition) is going to take place. It could be in six, 12, 18 or 24 months."
Central Pacific got itself in trouble when it expanded mortgage operations on the mainland as part of its acquisition of City Bank in September 2004.
"Bank of Hawaii had some trouble doing that many years back before the financial crisis and pulled back and got out of the mainland," said analyst Joe Gladue of Los Angeles-based research and investment bank B. Riley & Co. "Central Pacific Bank was still doing a lot of real estate loans on the mainland — California and Washington — and got into trouble doing that. The loans were lower quality, and that, coupled with the crash in the real estate market, was what really came back to haunt Central Pacific."
Central Pacific needed a $135 million bailout from the U.S. Treasury in January 2009 to buy time before it could find investors willing to put money into the bank.
In February 2011 the bank finalized a deal with its two lead investors, The Carlyle Group and an affiliate of Anchorage Capital Group LLC, which each agreed to invest about $94.6 million. Other institutional investors and some directors and officers of the bank agreed to invest the remaining $135.8 million.
Now, after weeding out many of its delinquent loans and scaling back its mortgage portfolio, the bank is looking to build.
Loans and leases grew 2.5 percent last quarter to $2.11 billion from $2.06 billion in the year-earlier quarter. Of the bank’s total loans, it had $242 million outstanding on the mainland, with $54 million of that amount delinquent for 90 days or more. In Hawaii the bank had $1.9 billion in outstanding loans with $86 million delinquent 90 days or more.
Central Pacific Chief Banking Officer Lance Mizumoto said the bank’s biggest challenge now is getting more active in the marketplace, primarily on the commercial side.
"We’ve made inroads on the consumer loan side," he said. "And certain residential mortgages, given the market, have been very robust. So the outlook on our pipeline is cautiously optimistic, but general loan demand is still weak."
Even though the bank’s nonperforming assets are still high at $140.3 million, or 3.26 percent of total assets, the ratio is much lower than in March 2010 when nonperforming assets totaled $493.8 million, or 11.14 percent of all assets. Gladue said he would like to see the bank get that ratio down closer to 1 percent.
Still, he’s amazed at how far the bank has come in its recovery.
"The turnaround has been remarkable," Gladue said. "The bank is very healthy now. It has lots of capital, and it’s been profitable for a string of quarters but obviously it still has issues to address. It’s a bank that had negative stockholders equity (in September 2010) shortly after Dean took over. There are very few banks in that bad of shape without getting taken over (by federal regulators), and very few of those recover from being in that bad of shape."
