Nisei war heroes gave rise to ‘people’s bank’ 60 years ago

Central Pacific Bank celebrated its 60th anniversary this year. It was founded by returning World War II nisei veterans, meeting over plate lunches at Ala Moana Beach Park. It’s an interesting story.

In the early 1950s much of Hawaii was controlled by the large landowners that ran the island’s plantations. For the many immigrant laborers struggling to leave the plantations to make a better life for their families, it was nearly impossible to obtain financing to start a business or buy a home.

A group of young nisei World War II veterans of the 100th Infantry Battalion, 442nd Regimental Combat Team, and Military Intelligence Service, including Daniel Inouye, Sakae Takahashi, Elton Sakamoto and others, refused to accept the social inequities and economic status quo that prevailed in the territory of Hawaii after the war.

They started meeting regularly at Ala Moana Beach Park, says Wayne Kirihara, CPB chief marketing officer, over 50-cent plate lunches to realize their new dream: creating a bank that would serve all of the people of Hawaii.

The name "Central Pacific Bank" was an extension of Pacific Bank, a Japanese-managed bank that was shut down when the war started.

Owning not much more than their dream and the "Go for Broke" spirit that earned them the distinction of true heroes during WWII, these young nisei veterans turned to the community for support. To their surprise, the grass-roots campaign to raise capital was met with such overwhelming support throughout the state, they nearly doubled the amount of capital that was raised in the first effort.

The next hurdle was to convince the state bank examiner that a need existed for a new bank. The principal argument was that the Chinese community, which represented 10 percent to 15 percent of the total population, had three banks: Liberty Bank, American Security Bank and Finance Factors.

The Japanese community, which represented 40 percent of the total population, had none. "All three Japanese-managed banks that operated before the war were shut down by the Office of the Alien Property Custodian after the bombing of Pearl Harbor," Kirihara says.

When they needed a qualified bank manager, Sumitomo Bank agreed to "loan" someone to help the fledgling bank in Hawaii. Kazuo Ishii, who had just established the Sumitomo Bank of California a year before, arrived in Hawaii in May 1953. He quickly assembled a local management team and established an operating system for the bank.

The bank opened for business on Feb. 15, 1954, on the corner of King and Smith streets. It was the first bank to open in Hawaii since 1935.

The first year of business generated more than $5 million in deposits, $6.4 million in assets and a very small profit. Koichi Iida, a prominent issei merchant in Honolulu and one of the founders of the bank, served as the first CEO and was succeeded by Ishii.

The Sumitomo "connection" was so successful that the next two CEOs of the bank were seasoned executives from the Sumitomo Bank Ltd. system Yoshiharu Satoh and Joichi Saito Kirihara recalls.

It wasn’t until 2002 that a non-Sumitomo CEO, Clint Arnoldus, took over the reins at Central Pacific Bank. Shortly thereafter, Central Pacific Financial Corp.’s stock was listed on the New York Stock Exchange. In 2004, Central Pacific Bank merged with City Bank, another local bank with similar roots in Hawaii, to become a $5 billion institution.

The recession of 2007 hurt the bank severely. Eight consecutive quarters of record earnings after the merger turned into losses from 2008 to 2010. The bank was particularly vulnerable to the crash in the real estate market because of high concentrations of construction and development loans.

In an effort to prevent Central Pacific Bank from failing, John C. Dean, who had successfully turned around three banks during his 30-year banking career, was recruited and appointed CEO in March 2010.

By the end of 2010, Dean and his new executive management team had secured $325 million in new capital from private investors and had cut the bank’s nonperforming loans in half. CPB returned to profitability in the first quarter in 2011, and has consistently improved its performance since then. In 2014 a stock buyback program was initiated for $125 million in CPF shares.

"From its humble beginnings," Kirihara concludes, "conceived under the banyan trees at Ala Moana Beach Park in 1953, the people’s bank’ beat formidable odds. Throughout its storied history, Central Pacific Bank remained true to its core values of serving their customers and community, and by 2014 had grown to be a $4.7 billion bank with 36 branch offices in the state of Hawaii."

Bob Sigall, author of the “Companies We Keep” books, looks through his collection of old photos to tell stories each Friday of Hawaii people, places and companies. Email him at Sigall@yahoo.com.