CRAIG T. KOJIMA / CKOJIMA@STARBULLETIN.COM Clint Arnoldus plans to retire on Dec. 31.

Central Pacific CEO retiring

Clint Arnoldus wants to spend more time with his grandchildren

Clint Arnoldus, president and chief executive of Central Pacific Bank and its holding company, said yesterday he will retire on Dec. 31 and relocate to Arizona to spend more time with his family. He will get a retirement package of about $5 million.

"Everyone in the company knows I'm really focused on my family and my wife and I want to be a bigger part of their lives. ... I also wanted to make sure I gave the board plenty of time so we could make this transition," Arnoldus said.

Notable accomplishments

2004: Led Central Pacific's acquisition of City Bank and its holding company, CB Bancshares Inc., for $458.6 million in a deal that closed in September.

2005: Directed Central Pacific's acquisition of Hawaii HomeLoans in a $9 million deal that closed in August.

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STAR-BULLETIN Clint Arnoldus, president and CEO of Central Pacific Financial Corp., popularized the bank's fiercely loyal campaign with frontman Alex. Above, Alex and Arnoldus at a Hawaii Society of Corporate Planners luncheon at the Prince hotel in August 2002.

CLINT Arnoldus, who orchestrated the $458.6 million acquisition of rival City Bank and its holding company in September 2004, said yesterday he will retire on Dec. 31 as president and chief executive of Central Pacific Financial Corp.

Arnoldus, 61, said he wanted to spend more time with his six children and 14 grandchildren and would be relocating to Carefree, Ariz., in north Scottsdale. He will receive a lump sum of about $5 million that will include his salary, bonus, relocation expenses and retirement benefits.

The outgoing CEO, who in January 2002 became the first non-Japanese-American to lead the state's fourth-largest bank, said he would help Chairman Ronald Migita and the Central Pacific Bank board of directors in ensuring a smooth and seamless transition. A search for a new president and CEO is expected to begin immediately. Migita, the former CEO of City Bank and its parent, CB Bancshares Inc., said he is not a candidate.

"I felt like right now is the time for me to retire," Arnoldus said. "I've always wanted to retire at a relatively early age and I think everyone in the company knows I'm really focused on my family and my wife and I want to be a bigger part of their lives as the grandchildren are growing up. I also wanted to make sure I gave the board plenty of time so we could make this transition in a very orderly manner. It's 10 months from now, so that will allow adequate time to consider internal and external candidates and get them transitioned in."

Arnoldus created a stir in the local banking community in 2003 when he initiated a hostile takeover of City Bank. Ironically, then-City Bank CEO Migita and the bank's board fought the takeover both in court and in the media with Central Pacific raising its offer price several times before City Bank finally agreed to the merger. As part of the deal, Arnoldus became CEO of the combined bank while Migita became non-executive chairman. Arnoldus later added the title of president when Neal Kanda left the bank in 2006.

Migita said yesterday that Arnoldus' retirement package was negotiated prior to the merger becoming final. Arnoldus currently earns a base salary of $630,000.

Arnoldus also was instrumental in leading Central Pacific's $9 million acquisition of residential mortgage broker Hawaii HomeLoans Inc. in August 2005.

On a lighter side, Arnoldus and the bank's marketing team popularized the much-publicized bank mascot, Alex the dog, and "fiercely loyal banking" in 2002 shortly after Arnoldus arrived at the bank from his top position at Community Bank in Pasadena, Calif.

Brett Rabatin, an analyst who covers Central Pacific for FTN MidWest Research in Nashville, Tenn., said Arnoldus' shoes will be hard to fill.

"It's a bit unexpected, but given the timeline, it's obvious it was a personal decision and he's going to stay around and help with the transition to a new CEO," Rabatin said. "He's accomplished a lot while he was CEO. He managed to get City Bank to merge with them and create one of the premier companies in Hawaii. So there's going to be a transition, but he's leaving a void given his leadership."

Arnoldus said he would have left earlier but decided to stay on given the subprime situation that's affected the bank's real estate construction operations in California. It was that business, which the bank acquired as part of the City Bank deal, that led to Central Pacific losing $44.5 million in the fourth quarter after revising its earnings to account for a $48 million "goodwill impairment charge" associated with its buyout of City Bank.

That particular accounting charge is taken when some facet of a business has diminished in value since an acquisition -- in this case, the buyout of City Bank.

The goodwill impairment charge follows Central Pacific's announcements in the third and fourth quarters of 2007 that it set aside $49.4 million during the second half of the year as a provision for potential loan losses.

With the accounting charge, Central Pacific restated its 2007 earnings to show narrower net income of $5.8 million compared with its previously reported profit of $53.8 million. The bank, which has broadened its client base since being founded in 1954 specifically for the Japanese-American community, ended 2007 with $5.7 billion in assets.

"I really would have liked to retire at age 60, but I stayed on a little longer than my initial thinking," he said. "But now I feel we have a very solid plan working with the real estate portfolio in California. We've got good people in place -- both employees of ours and we've brought in outside experts. We have a plan of having less exposure in that market and we've got the plan and the people to execute it. Now all we need is for that (subprime) market to settle down, and there's not a bank in the country that can say when that will happen."

Migita, 66, said the search for a new president and CEO won't be limited to Hawaii and that the bank is looking for the best possible candidate. He dispelled the idea of himself getting back into management.

"I made it clear at the outset of the merger that I'm really out of management from this point on," he said.

Arnoldus, who has seen the bank's stock lose about half of its value over the last year, said the $489 million market capitalization of the bank today is "not a fair measure of how beneficial this merger has been."

"When the City Bank merger was initially announced, we felt this transition would be a great benefit to this community, the shareholders, the customers and our employees, and it has certainly matched those expectations," Arnoldus said. "The shareholders have been very patient as we've gone through this national real estate challenge that virtually every bank is working through right now. Once this challenge is over, our stock should return to a more realistic level.

"What we wanted with this merger was a certain asset base size and the opportunity for us to be a full-fledged competitor with a full array of products and services. We've certainly become that."

Arnoldus said the acquisition of Hawaii HomeLoans, now called Central Pacific HomeLoans, also has been beneficial.

"It's certainly been a challenging environment, but I'm happy to say through Central Pacific HomeLoans that we have absolutely no exposure to the subprime market," he said. "They operate only within the state of Hawaii, and we have been, mercifully, relatively unaffected by subprime. So in an area where the rest of the country is really suffering and other mortgage companies are suffering, our mortgage company is thriving. Our business is solid.

"And when several national mortgage companies that had offices here ran into difficulty with the subprime situation and either downsized or closed their office in Hawaii, we've been able to pick up very skilled mortgage brokers. Because of that, our mortgage business is performing better than ever and we're constantly improving the quality of the mortgage brokers we have."