Exhibit 10.1
 
UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.

HAWAII
DIVISION OF
FINANCIAL INSTITUTIONS
 
 
 
Written Agreement by and among
 
CENTRAL PACIFIC FINANCIAL
CORPORATION                                                                                     Docket
No. 10-136-WA/RB-HC
Honolulu, Hawaii

FEDERAL RESERVE BANK OF
SAN FRANCISCO
San Francisco, California

and
 
HAWAII DIVISION
OF FINANCIAL INSTITUTIONS
Honolulu, Hawaii
 
 
 
WHEREAS, Central Pacific Financial Corporation (“CPFC”), Honolulu, Hawaii, a
registered bank holding company, owns and controls Central Pacific Bank of
Honolulu, Hawaii (the “Bank”), a state-chartered nonmember bank, and several
nonbank subsidiaries;
WHEREAS, it is the common goal of CPFC, the Federal Reserve Bank of San
Francisco (the “Reserve Bank”), and the Hawaii Division of Financial
Institutions (the “HDFI”)  to maintain the financial soundness of CPFC so that
CPFC may serve as a source of strength to the Bank;
WHEREAS, CPFC, the Reserve Bank, and the HDFI have mutually agreed to enter into
this Written Agreement (the “Agreement”); and
WHEREAS, on June 30, 2010, the board of directors of CPFC, at a duly constituted
meeting, adopted a resolution authorizing and directing John C. Dean, as
Executive Chairman to enter into this Agreement on behalf of CPFC, and
consenting to compliance with each and every provision of this Agreement by CPFC
and its institution-affiliated parties, as defined in sections 3(u) and 8(b)(3)
of the Federal Deposit Insurance Act, as amended  (the “FDI Act”) (12 U.S.C. §§
1813(u) and 1818(b)(3)).
NOW, THEREFORE, CPFC, the Reserve Bank, and the HDFI agree as follows:
 
 
 

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Source of Strength
1.           The board of directors of CPFC shall take appropriate steps to
fully utilize CPFC’s financial and managerial resources, pursuant to Section
225.4(a) of Regulation Y of the Board of Governors of the Federal Reserve System
(the “Board of Governors”)  (12 C.F.R. § 225.4(a)), to serve as a source of
strength to the Bank, including but not limited to, taking steps to ensure that
the Bank complies with the Consent Order entered into with the Federal Deposit
Insurance Corporation (the “FDIC”) and the HDFI on December 8, 2009 and any
other supervisory action taken by the Bank’s federal or state regulator.
Dividends and Distributions
2.    (a)           CPFC shall not declare or pay any dividends without the
prior written approval of the Reserve Bank, the Director of the Division of
Banking Supervision and Regulation (the “Director”) of the Board of Governors,
and the HDFI.
               (b)           CPFC shall not directly or indirectly take
dividends or any other form of payment representing a reduction in capital from
the Bank without the prior written approval of the Reserve Bank and the HDFI.
           (c)           CPFC and its nonbank subsidiaries shall not make any
distributions of interest, principal, or other sums on subordinated debentures
or trust preferred securities without the prior written approval of the Reserve
Bank, the Director, and the HDFI.
               (d)           All requests for prior approval shall be received
at least 30 days prior to the proposed dividend declaration date, proposed
distribution on subordinated debentures, and required notice of deferral on
trust preferred securities.  All requests shall contain, at a minimum, current
and projected information on CPFC’s capital, earnings, and cash flow; the Bank’s
capital, asset quality, earnings, and allowance for loan and lease losses
(“ALLL”); and identification of the sources of funds for the proposed payment or
distribution. For requests to declare or pay dividends, CPFC must also
demonstrate that the requested declaration or payment of dividends is consistent
with the Board of Governors’ Policy Statement on the Payment of Cash Dividends
by State Member Banks and Bank Holding Companies, dated November 14, 1985
(Federal Reserve Regulatory Service, 4-877 at page 4-323).
Debt and Stock Redemption
3.           (a)           CPFC and any nonbank subsidiaries shall not, directly
or indirectly, incur, increase, or guarantee any debt without the prior written
approval of the Reserve Bank and the HDFI.  All requests for prior written
approval shall contain, but not be limited to, a statement regarding the purpose
of the debt, the terms of the debt, and the planned source(s) for debt
repayment, and an analysis of the cash flow resources available to meet such
debt repayment.
              (b)           CPFC shall not, directly or indirectly, purchase or
redeem any shares of its stock without the prior written approval of the Reserve
Bank and the HDFI.
 Capital Plan
4.           Within 60 days of this Agreement, CPFC shall submit to the Reserve
Bank and the HDFI an acceptable written plan to maintain sufficient capital at
CPFC on a consolidated basis.  The plan shall, at a minimum, address, consider,
and include:
              (a)           The consolidated organization’s and the Bank’s
current and future capital requirements, including compliance with the Capital
Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1
Leverage Measure, Appendices A and D of Regulation Y of the Board of Governors
(12 C.F.R. Part 225, App. A and D) and the applicable capital adequacy
guidelines for the Bank issued by the FDIC;
 
 

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                             (b)           the adequacy of the Bank’s capital,
taking into account the volume of classified credits, concentrations of credit,
ALLL, current and projected asset growth, and projected retained earnings;
                             (c)           the source and timing of additional
funds necessary to fulfill the consolidated organization’s and the Bank’s future
capital requirements;
                             (d)           supervisory requests for additional
capital at the Bank or the requirements of any supervisory action imposed on the
Bank by the FDIC or the HDFI; and
                             (e)           the requirements of section 225.4(a)
of Regulation Y of the Board of Governors (12 C.F.R. § 225.4(a)) that CPFC serve
as a source of strength to the Bank.
Cash Flow Projections
5.           Within 60 days of this Agreement, CPFC shall submit to the Reserve
Bank and the HDFI a written statement of CPFC’s planned sources and uses of cash
for debt service, operating expenses, and other purposes (“Cash Flow
Projection”) for the remainder of 2010.  CPFC shall submit to the Reserve Bank
and the HDFI a Cash Flow Projection for each calendar year subsequent to 2010 at
least one month prior to the beginning of that calendar year.
Compliance with Laws and Regulations
6.           (a)           In appointing any new director or senior executive
officer, or changing the responsibilities of any senior executive officer so
that the officer would assume a different senior executive officer position,
CPFC shall comply with the notice provisions of section 32 of the FDI Act (12
U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12
C.F.R. §§ 225.71 et seq.) and also provide notice to the HDFI.
              (b)           CPFC shall comply with the restrictions on
indemnification and severance payments of section 18(k) of the FDI Act (12
U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation’s
regulations (12 C.F.R. Part 359).
Progress Reports
7.           Within 30 days after the end of each calendar quarter following the
date of this Agreement, the board of directors shall submit to the Reserve Bank
and the HDFI written progress reports detailing the form and manner of all
actions taken to secure compliance with the provisions of this Agreement and the
results thereof, and a parent company only balance sheet, income statement, and,
as applicable, report of changes in stockholders’ equity.           
Communications
8.           All communications regarding this Agreement shall be sent
to:          
                        

  (a)  Mr. Nestor Lim        Examining Manager        Banking Supervision &
Regulation        Federal Reserve Bank of San Francisco        101 Market
Street, Mail Stop 940        San Francisco, California 94539              (b) 
Ms. Lynne Himeda        Deputy Commissioner of Financial Institutions       
State of Hawaii Division of Financial Institutions        335 Merchant Street,
Room 221        Honolulu, Hawaii 96813   

 
 
 

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  (c)  Mr. John Dean        Executive Chairman        Central Pacific Financial
Corporation        220 South King Street        Honolulu, Hawaii 96813   

       
Miscellaneous
9.             Notwithstanding any provision of this Agreement, the Reserve Bank
and the HDFI may, in their sole discretion, grant written extensions of time to
CPFC to comply with any provision of this Agreement.
10.           The provisions of this Agreement shall be binding upon CPFC and
its institution-affiliated parties, in their capacities as such, and their
successors and assigns.
11.           Each provision of this Agreement shall remain effective and
enforceable until stayed, modified, terminated, or suspended in writing by the
Reserve Bank and the HDFI.
12.           The provisions of this Agreement shall not bar, estop, or
otherwise prevent the Board of Governors, the Reserve Bank, the HDFI, or any
other federal or state agency from taking any other action affecting CPFC, the
Bank, any nonbank subsidiaries of CPFC, or any of their current or former
institution-affiliated parties and their successors and assigns.
                13.           Pursuant to section 50 of the FDI Act (12 U.S.C. §
1831aa), this Agreement is enforceable by the Board of Governors under section 8
of the FDI Act (12 U.S.C. § 1818) and enforceable by the HDFI under Hawaii
Revised Statutes (§§ 412:2-301).
 
        IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the 2 day of July, 2010.

 
CENTRAL PACIFIC FINANCIAL
CORPORATION
 
FEDERAL RESERVE BANK
OF SAN FRANCISCO
      By: /s/ John C. Dean   By: /s/ Kevin Zerbe        John C. Dean         
Kevin Zerbe        Executive Chairman          Vice President                
HAWAII DIVISION OF
FINANCIAL INSTITUTIONS
          By: /s/ D.B. Griffin III            D.B. Griffin III           
Commissioner of Financial Institutions