Central Pacific Bank's parent, which has suffered hundreds of millions of dollars in losses due to its exposure to the slumping California real estate market, is pulling the plug on its West Coast operations.

In an announcement that one analyst called a formality, Central Pacific Financial Corp. said yesterday it will exit the West Coast and wind down its California operations by 2012. The company has given notice to the 18 staff members who work in its Pasadena, Calif., office.

The bank, which lost $183.1 million in the third quarter after taking two big charges tied to its California and Hawaii real estate operations, has aggressively been reducing its loan portfolio in California since last year and hasn't made a loan in that state in more than 18 months. At the end of the third quarter, Central Pacific had cut its total loans and leases by $622.6 million, or 15.3 percent from a year ago, many of which were in California.

“;Our mainland team continues to reduce our exposure in California as we shift gears to fully concentrate on the Hawaii market,”; said Ronald Migita, chairman, president and chief executive officer of Central Pacific.

At its peak, Central Pacific had more than $1 billion in loans outstanding in its West Coast operations, which included a small presence in Washington state. As of Sept. 30, the bank's mainland construction and commercial real estate loans totaled $865.8 million.

“;It's obvious they've been trying to retrench to Hawaii for some time,”; said Brett Rabatin, senior research analyst of Birmingham, Ala.-based Sterne Agee. “;It's sort of a formal announcement of what everyone knew was going on for some time.”;

Central Pacific gained exposure to the California real estate market in September 2004 when it acquired rival City Bank for $458.6 million and assumed responsibility for City Bank's estimated $300 million in loans there. But Central Pacific's exposure grew significantly under then-CEO Clint Arnoldus, who retired last year.

Rabatin said that as bad as it got for Central Pacific, things could have been worse.

“;They never really had full-service branches; they never had a full-fledged franchise on the mainland,”; he said. “;What they had was loan-production offices, and I think if the prior CEO's timing had been a little better, Central Pacific might have had an actual California bank, which could have ended up being worse (for Central Pacific).”;

Last quarter, Central Pacific set aside $142.5 million for potential loan losses, a 522 percent jump from $22.9 million in the third quarter of 2008 and nearly double the $74.3 million that was set aside in the second quarter of this year. Net loan charge-offs in the third quarter came to $103.7 million, up from $8.7 million in the third quarter of 2008 and up from $30.5 million in the second quarter of 2009.

Migita said that the bank has accelerated its efforts to reduce credit risk by pursuing loan sales, including potential bulk sales, in addition to loan restructuring and pay-downs.

“;The economic conditions in Hawaii remain challenging,”; Migita said. “;The ability to stay focused on our core business is part of an overall strategy to help the bank weather this prolonged downturn and position us to contribute to the recovery of the state's economy.”;

With its financial problems mounting, the bank deferred a $1.9 million interest payment owed last quarter to the U.S. Treasury for the $135 million it received in December as part of the Troubled Asset Relief Program, or TARP.

The bank also said during its third-quarter conference call that the Federal Deposit Insurance Corp. and Hawaii Division of Financial Institutions had reviewed the bank's financials in August and that the bank would need to enter into a formal agreement with the two agencies requiring the company to address its asset quality, capital needs and liquidity. That notice could come as early as tomorrow.

Central Pacific's stock, which hit an all-time low of 81 cents on Dec. 1, closed yesterday up 7 cents to $1.19. The West Coast pullout was announced after the close of trading.