Central Pacific Financial Corp. will receive $135 million under a federal government program designed to increase lending by making $250 billion in share purchases from U.S. banks.

The bank said yesterday it has received preliminary approval to receive the maximum amount it is allowed under the terms of the U.S. Treasury Department's Capital Purchase Program, which is 3 percent of risk-weighted assets. Central Pacific is the first Hawaii financial institution to announce publicly that it has received preliminary approval to participate in the program.

Central Pacific, the state's fourth largest bank in terms of assets, plans to issue $135 million in senior preferred stock, with an option to purchase up to $20 million in common stock, to the Treasury. The sale is expected to close within 30 days and is contingent upon completion of standard closing documents.

David Morimoto, senior vice president and treasurer of Central Pacific, said no Treasury ownership of the bank would be conveyed in the preferred stock because it is a different security instrument but that the Treasury would own about 4 percent of Central Pacific if the common stock warrants were exercised.

Central Pacific Chief Financial Officer Dean Hirata said in October that the bank had applied for additional capital through the program, which evolved from the government's $700 billion bailout plan signed into law by President Bush earlier that month. The money will be used to continue to support lending activities, even though the bank's capital ratios continue to be well capitalized, Hirata said.

“;It's a cheap form of capital, and the way to look at this is it's additional resources for the bank that continue to support what we are already doing here in Hawaii,”; he said in an interview yesterday.

Central Pacific also said yesterday in a regulatory filing that on Friday it entered into a memorandum of understanding with the Federal Deposit Insurance Corp. and Hawaii Division of Financial Institutions to address concerns raised in the bank's most recent annual regulatory examination in August.

Those include reviewing and establishing more comprehensive policies relating to the allowance for loan and lease losses; the re-evaluation, development and implementation of strategic plans; increasing the bank's leverage capital ratio - or stockholder's equity divided by the average assets of the bank - to 9 percent within 120 days; and obtaining approval for the payment of cash dividends by the bank to parent company Central Pacific Financial Corp.

The bank had a leverage capital ratio of 8.3 percent as of Sept. 30, and funds to be received from the Capital Purchase Program will help satisfy the additional $40 million it needs under the new 9 percent requirement. Hirata said the agreement will not affect customers.