As a participant in the U.S. Treasury's Capital Purchase Program, Central Pacific Bank wants to make every effort to communicate how taxpayers' dollars invested in our company will benefit Hawaii. Taxpayers have an absolute right to know how their money is used.

From the $700 billion authorized by Congress, $250 billion were allocated to the Capital Purchase Program. With this program, the U.S. Treasury can purchase senior preferred stocks from banks using two basic criteria: 1) the bank must be financially sound and healthy; and 2) the bank must play an important role as an economic stimulus in its community. In return, the bank pays a 5 percent annual dividend back to the government for the first five years and 9 percent per year thereafter. Other terms and conditions include warrants to purchase additional common stock and limitations on executive compensation.

Central Pacific Bank is the first Hawaii bank to receive the CPP funds, and we are pleased to have met the Treasury's criteria. On Jan. 9, we issued $135 million in senior preferred shares to the U.S. Treasury under the terms and conditions outlined above. By virtue of the 5 percent dividend yield on these shares and the warrants for additional stock, it is by no means a “;bailout”; or “;free money.”; It is a fair return for the shareholder (taxpayer) with a compelling incentive for us to buy back these shares within five years, or pay nearly double the dividend from the sixth year forward.

So, how does this capital stimulate Hawaii's economy? Capital is not used dollar-for-dollar to make loans. Capital creates the foundation for loan capacity that translated into more than $2.2 billion in new loan originations at our bank in 2008, including $1.5 billion in residential mortgages, $162 million in consumer loans, and $40 million in small business loans. The real question is: In order to be an effective economic stimulus, what is the bank's commitment to and record of accomplishment in supporting its community?

In 2008, Central Pacific Bank was a market leader in residential mortgages, as well as in financing affordable housing projects. Homeownership is still the American dream, and we have played a significant role in making these dreams come true for so many residents in Hawaii.

Small business is the engine of Hawaii's economy. In 2008, 56 percent of CPB's business loans were made to small businesses with annual revenues under $1 million. In addition, 50 percent of our business loans were made in low-to-moderate income areas throughout our state. Our bank also has received the Small Business Administration's Lender of the Year Award in our size category for the past five consecutive years.

Loans are our business; however, commitment does not end there. Central Pacific Bank currently has almost 1,000 employees, many of whom are actively involved in community service. Our bank contributed more than $1.1 million in community grants and donations to over 200 charities and nonprofit organizations throughout Hawaii in 2008.

Excessive executive compensation has never been an issue at our company. While I still earn director fees as chairman of the board, in accepting the appointment as CEO and president in August 2008, I requested a salary of $1 per year. Since then, our board of directors and members of executive management volunteered to take pay cuts of 20 percent and 10 percent, respectively.

Anyone familiar with the history and local heritage of our company will understand just how deep and longstanding our culture of community support and service is in Hawaii. The Nisei veterans of World War II established the bank in 1954 to fill a dire need to help common folks buy homes and start businesses in their struggle to break free from the plantations. I can assure you that this sense of purpose and loyalty to the people of Hawaii are still at the heart and soul of Central Pacific Bank today.