Bancorp Hawaii's new CEO has a jovial reputation, but that won't stop him from shaking up the low-key institution.

Ask people about Lawrence M. Johnson, the incoming chairman and chief executive of Bancorp Hawaii, and the person they describe could be the guy next door - if your neighbor just happens to have been named head of one of the nation's most successful banks.

Colleagues call the man who in August will take the helm of Hawaii's largest financial institution a classic "people person" who shines in the company of others. A man with few airs, he is quick to place a bet on the golf course or make a joke at his own expense, as warm and relaxed as the islands from which he comes.

When he is not at the office, you might find the 53-year-old Mr. Johnson playing first base for the softball team of the Sunset Grill, a Honolulu restaurant.

People still talk about his Halloween stunt back in the 1960s when, as manager of Bank of Hawaii's Waikiki office, Mr. Johnson dressed everybody in the branch in costumes. Even as president of the company, he still prowls the office corridors wearing a gorilla suit on October 31.

Contrasting Styles

"Some CEOs have too much polish, but that's not [Larry Johnson's] style," says Thomas K. Brown, an analyst with Donaldson, Lufkin & Jenrette Securities Corp. "He's completely down-to-earth."

Or, as Mr. Johnson himself put it when interviewed during a recent visit to San Francisco: "My college friends can't believe that Larry Johnson runs one of the country's biggest financial institutions."

Mr. Johnson's style contrasts with that of the man he will replace, H. Howard Stephenson, Bancorp Hawaii's chairman and CEO for the last five years. Mr. Stephenson is gracious, but is staid and aloof compared with Mr. Johnson.

"Larry is a little more jovial, Howard a little more serious," says Peter D. Baldwin, one of the company's directors.

Planning a Shake-Up

But don't be deceived by his easy manner. When it comes to business, Mr. Johnson can be hard-nosed.

He believes it is essential for Bancorp Hawaii to shake up its laid-back culture. As a new CEO, he intends to set tighter deadlines on projects and make sure people meet them.

"We've had the luxury of not needing a sense of urgency," he explained. "We always seemed to have plenty of time to get 0hings done. We don't have that luxury anymore."

Raised on Oahu, the son of a doctor who moved to Honolulu before World War II, Mr. Johnson joined Bancorp Hawaii 36 years ago when he took a $50-per-month summer teller job.

After college, in 1963, he entered a management training program and from there rose steadily through a series of retail banking jobs culminating in his appointment as the company's president five years ago.

Mr. Johnson is known for his obsession with taking care of customers. In 1988, he launched an "I'm for Quality" program to recognize employees who provide extraordinary service. His marketing and organizational skills have helped make the company the Aloha State's consumer banking powerhouse.

The organization he inherits, founded 97 years ago, is one of the nation's top regional bank franchises, dominant in its core market of Hawaii.

Conservatively managed and consistently profitable, Bancorp Hawaii, with $12.9 billion in assets, is almost twice the size of First Hawaiian, its only big commercial banking rival.

The company holds more than 30% of all bank and thrift deposits in the state, has the most extensive branch and automated teller networks and does business with seven out of 10 households on the islands.

Interstate Challenge

But Bancorp Hawaii faces an unprecedented set of challenges as its once-protected market is breached.

Hawaii is the last state to bar outside bank companies. Bank-America Corp. snuck in three years ago with the purchase of a thrift.

But with Congress poised to bring down the barriers to interstate expansion, Hawaii's status as a banking backwater will abruptly end, subjecting the islands' banks to the pressures of competition and consolidation that have buffeted their mainland peers.

BankAmerica undoubtedly would like to build on its thrift base. Several other mainland bank companies may be eyeing the Hawaiian market. Meanwhile, nonbank competitors in the mortgage, leasing and securities businesses have been setting up shop on the islands.

Bancorp Hawaii has thrived in a protected environment. How it will fare in a more open market is an unanswered question.

Although Hawaiian operations provide more than three-quarters of the company's profits, Bancorp Hawaii in recent years has expanded outside its home base.

It has a toehold on the U.S. mainland in the form of a $100 million-asset bank subsidiary in Arizona. But the key avenues for growth are wholesale and branch banking in the South Pacific and Asia.

"Two-thirds of the world's population surrounds where we are," Mr. Johnson noted. "Hawaii is right in the middle."

Strong capital and credit quality plus tight cost control are Bancorp Hawaii hallmarks. The company has kept up its good marks despite the state's high cost of doing business and its severe recession, which is just now starting to mend.

Recently the company resolved its biggest problem loan, a $58.5 million credit secured by the money-losing Kahala Hilton hotel on Oahu, when the property was sold. As a result, nonperforming assets once again dipped below 1% of total loans and foreclosed property.

Some Weaknesses

But not all the news is good. Earnings growth has slowed during Hawaii's economic slump. Last year's net income of $132.6 million was up only 4% from 1992, the first single-digit annual gain in a decade.

The company's performance ratios have been consistent over time, but are no longer impressive compared with industry norms. Last year's 1.05% return on assets placed it 33d among the nation's top 50 bank companies, according to the brokerage firm Keefe, Bruyette & Woods.

Of course, much of that lackluster result stemmed from the weakness of Hawaii's tourism-based economy. But another culprit was a narrow 4% net interest margin, reflecting a high proportion of low-margin government deposits and interest-rate wars among local deposit-takers.

Care in Transition

Analysts expect Mr. Johnson to be cautious in altering the course the company has set.

Bancorp Hawaii stresses continuity and consistency in management, especially during transitions from one chief executive to another. And decision-making is a team effort supervised by a five-member managing committee.

Changes of command are always carefully choreographed, with the incumbent CEO stepping down at age 65 and the successor, almost always the second-ranking executive, announced months in advance.

With Mr. Johnson's promotion, chief financial officer Richard J. Dahl, 42, was selected as Bancorp Hawaii's new president and presumed heir apparent.

"This company takes management changes very seriously," says Montgomery Securities analyst J. Richard Fredericks. "You will see very little change in direction."

Still. Mr. Johnson intends to leave his mark. He wants to shore up Bancorp Hawaii in several areas, readying it to compete in an era of interstate banking.

Lagging in Technology

The company is investing heavily in data systems, especially in programs that analyze the profitability of individual customer relationships and pinpoint cross-selling opportunities.

"We would consider ourselves somewhat behind in technology and information systems," Mr. Johnson said.

The company has a top-notch automated teller network with some 262 machines scattered throughout the islands. In a market crowded with cash-hungry tourists who pay interchange fees, ATMs are a significant profit center.

Mr. Johnson wants to develop other alternative delivery systems, an area in which Bancorp Hawaii has little experience. It wasn't until this year, for example, that the company opened its first supermarket branch.

Bancorp Hawaii has also been slow to establish itself in the fast-growing investment products area. Taking more steps to rectify that is one of Mr. Johnson's top priorities.

Last year, Bancorp Hawaii bought American Financial Services, a trust company managing $2.8 billion, increasing the company's assets under management by about one-third.

It also set up a special investment and trust group and hired Walter J. Laskey, a regional manager from Merrill Lynch, Pierce, Fenner & Smith, as chief.

At the end of 1993, the company introduced its proprietary Pacific Capital Funds, recruiting former Wells Fargo & Co. mutual funds manager Deborah G. Patterson to run them.

Mr. Johnson said that he doesn't intend to put Bancorp Hawaii up for sale, but that "it is more than likely that an offer to purchase our company will come our way."

The incoming chief said he would "have to consider" a "substantial" offer. But he hastened to add: "Is that what I am looking for as a CEO just coming in? Of course not."

Ultimately, he stressed, any acquirer would have to be sensitive to the company's special role as Hawaii's major financial institution and a paternalistic, community-oriented presence in the islands.

"We are looked upon as good guys here," he explained. "We would like to preserve that status."

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