Central Pacific Bank's parent, which lost about $78 million in the fourth quarter and nearly $293 million in 2009, anticipates more economic challenges this year and will close two Honolulu branches as it looks to cut costs.

Coming out of the worst year in its 56-year history, Central Pacific Financial Corp. executives acknowledged yesterday that they do not expect to see growth in 2010. This year will be about positioning CPB for recovery, said Ronald Migita, the bank's chairman, president and chief executive, during a conference call after the company released its earnings report.

CPB is planning cost-saving initiatives, working on reducing its credit risk, raising capital and improving liquidity, Migita said.

The cost-cutting includes shutting the bank's Bethel Street and Kapiolani Boulevard branches in late April and consolidating them with the King and Keeaumoku street branches, respectively, which will offer extended hours, according to Wayne Kirihara, CPB's director of corporate communications.

No layoffs are expected from the branch closures.

“;Most of the employees will be transferred to these branches,”; Kirihara said. “;Others will be absorbed elsewhere in the company.”;

Kirihara said the bank will achieve $1.9 million in annual savings by closing the two branches along with its Roseville and Pasadena, Calif., loan offices this spring. Loan offices in Newport Beach, Calif., and San Diego will close by 2012, he said.

The bank, which lost hundreds of millions last year due to the slumping California real estate market, saw its losses grow during the fourth quarter as Hawaii's real estate market worsened.

Fourth-quarter net interest income dropped to $38.5 million compared with $49.1 million in the year-ago quarter, the company said. Other operating income fell to $11.7 million from the $16.9 million achieved during the same period in 2008. Total assets for the year ended Dec. 31 fell to $4.9 billion from $5.4 billion in 2008.

  “;While our quarterly results continue to reflect elevated credit costs, we are making progress on our near-term objectives of improving our capital position and reducing credit risk, while maintaining strong liquidity,”; Migita said.

CPB's fourth-quarter nonperforming assets rose to nearly $521 million, equating to 10.6 percent of its total assets. The company wrote off nearly $84 million in loans and leases as Hawaii's construction portfolio deteriorated. Listed among its nonperforming assets are nearly $50 million in commercial loans and more than $57 million in Hawaii residential construction loans.

Customer deposits, which had been growing slightly, fell to $3.6 billion from the year-ago $3.9 billion, while total shareholder's equity fell to nearly $357 million from $526.3 million in 2008.

More than 50 percent of CPB's residential loans were made to investors/second-home buyers, mainly from California, said Mary Weisman, CPB's chief credit officer.

“;Credit quality remains weak as real estate projects continue to experience slow sales and lease absorption, rising vacancies coupled with declining lease rates and lower property valuations, especially in Hawaii,”; Weisman said.

Last year, following a dismal third quarter, regulators levied a consent order against CPB requiring it to improve its capital position, asset quality, liquidity and management oversight.

CPB has reduced its credit risk by selling more than $204 million of its commercial real estate loans.

Now it seeks to raise capital through private equity placements, public offerings and investors, Migita said.

“;Our market opportunities continue to be our leadership in supporting small business and homeownership in Hawaii,”; he said.

In what could be viewed as a return to the bank's roots, Migita said that CPB also will market to the growing number of international residents in Hawaii, particularly from Japan and Korea.

The bank also reduced its loan portfolio by nearly $1 billion, significantly cutting its exposure to riskier commercial real estate loans in California and Hawaii, Kirihara said.

CPB's stock price, which dipped as low as 81 cents in November, closed at $1.62 yesterday, down 2 cents from Thursday's close.