Central Pacific Financial Corp.'s stock suffered its largest decline in more than two decades on news of a large second quarter loss and a new stock offering.

The parent of Central Pacific Bank said yesterday that it expects to report a net loss of $33 million to $37 million, or $1.22 per share to $1.35 per share, during the quarter ending June 30 due to increased loan and lease losses.

The company — which lost $146 million in the second quarter of 2008 — also said it plans to issue up to $100 million in new stock, which is more than the company's current market capitalization of $75.3 million.

Shares of Central Pacific fell 91 cents yesterday to close at $2.62 on the New York Stock Exchange. The 25.8 percent decline was the largest single-day percentage drop since at least September 1987 when the company began trading on a major market.

Analysts polled by SNL Financial had been expecting a loss of 58 cents per share for the second quarter.

"The loss was higher than expected, and it looks like the offering could be very dilutive if it gets done," Albert Savastano, an analyst at Fox-Pitt Kelton Cochran Caronia Waller, told Bloomberg News.

The company said it is taking prudent steps to manage its portfolio in a weak economic climate.

"While we are actively managing our credit portfolio in a diligent and focused manner, the ongoing economic downturn and the resultant deterioration in the Hawai'i and California commercial real estate markets is adversely impacting our quarterly results," said Ronald Migita, Central Pacific's chairman and CEO.

"We expect these challenging conditions to persist over the coming quarters."

According to the bank, total credit costs are expected to rise from the year-earlier's $29.6 million to $77 million to $83 million.

The company said its nonperforming assets will jump to $256 million to $266 million, which is up sharply from the year-earlier's $159.9 million.

Assets placed on nonperforming status during the recent quarter included four Hawai'i residential construction loans worth $36.4 million, five Hawai'i commercial construction loans valued at $30.3 million and four California commercial construction loans totaling $25.1 million, Central Pacific said.

As for the company's stock offering, the company said it will use the proceeds to strengthen its capital position and for general corporate purposes.

"Although we are 'well capitalized' for regulatory purposes, the proposed public offering is a prudent measure based on our expectations that the tough economic climate in Hawai'i and California will continue in the coming quarters," Migita said.

Founded in 1954, Central Pacific is the state's third-largest financial institution with $5.5 billion in assets and $4 billion in deposits.

The forecasted loss comes a year after Central Pacific reported a record $146 million loss for its second quarter 2008. That loss was due to troubled loans to California homebuilders hard-hit by the subprime lending crisis.

The 2008 losses led to the ouster of the company's charismatic CEO Clint Arnoldus and prompted the bank to seek a $135 million capital infusion from the federal government.

The bailout money was approved after a member of U.S. Sen. Daniel K. Inouye's staff contacted the Federal Deposit Insurance Corp. about Central Pacific's application with the federal government's Troubled Assets Relief Program, or TARP, according to the Washington Post and ProPublica, a New York-based nonprofit investigative newsroom.

The FDIC didn't give the bank a favorable recommendation but two weeks after the call by the Inouye staffer, the U.S Treasury Department approved the bailout money, the Post and ProPublica said.

Inouye, who owns between $350,000 and $700,000 in Central Pacific stock according to his financial disclosure filings, said he did not attempt to influence the outcome but that an aide had left a voice mail with the FDIC to clarify if it received Central Pacific's application, the Post and ProPublica said.

Both the FDIC and the Treasury said their decisions were not affected by the involvement of Inouye's office. Experts contacted by the Post and ProPublica said that even if Inouye were directly involved in the contacts with the FDIC, he would not have violated rules that the Senate sets for itself.