Lau joins federal
loan bank board

The Finance Factors chief replaces
the CEO of Bank of Hawaii

Finance Factors Ltd. Chief Executive Russell Lau has been elected as a director of Federal Home Loan Bank of Seattle to fill a position vacated when Bank of Hawaii Corp.'s top official resigned in May over an alleged improper stock redemption.

Lau, a 29-year banking veteran, is one of 15 directors on the board of the regional cooperative. The board, which still has three additional openings, also elected Don Rhodes, chairman and CEO of Heritage Financial Corp. in Olympia, Wash.

The Seattle bank is one of 12 Federal Home Loan Banks that are part of a cooperative system to promote homeownership and loan money to thrifts, credit unions, insurance companies and commercial banks at below market rates.

"Being selected to represent Hawaii, Guam and American Samoa on the board of one of the nation's largest sources of private funding for affordable housing is a tremendous honor," Lau said.

Lau is also vice chairman at Honolulu-based Finance Factors, and was responsible for directing a major strategic restructuring effort at the company, which is one of the largest financial services loan companies in the state.

"Our board wanted to look at a number of candidates from Hawaii and ultimately thought that Mr. Lau had the experience and knowledge that was going to be necessary to serve as a director of the Seattle bank cooperative," Federal Home Loan Bank spokesman Colin Johnson said.

Lau's term will expire on Dec. 31, 2006 while Rhodes' term ends on Dec. 31, 2005.

Bank of Hawaii CEO Allan Landon, who previously held the director's position representing Hawaii, agreed to resign after a five-month review determined that Bankoh improperly sold back $25.4 million of stock it owned in Federal Home Loan Bank of Seattle. An independent committee found there was an appearance of impropriety when Bankoh in October sold stock back to the Seattle bank and that Landon failed to comply with a conflict-of-interest rule requiring disclosure to the board when a director's bank is planning to sell back shares.

The redemption of shares occurred a month after the struggling Seattle bank announced a quarterly dividend cut and two months before it suspended redemptions.

In its most recent financial results, the Seattle bank posted first-quarter net income of $12.3 million, down 29.7 percent from $17.5 million in the fourth quarter of 2004 and off 46.5 percent from $23 million in the year-earlier period.

Landon, who denied any wrongdoing and disagreed with the committee's findings, said he had no idea that redemptions were about to be suspended when he decided to sell back excess shares that Bankoh owned of the Seattle bank. However, Landon agreed to return the $25.4 million Bankoh got from the stock sales, as part of a settlement that included giving up his board position.

Lau, who is a member of the Financial Executives Institute and is secretary for Catholic Charities, is one of 10 directors who was elected by the co-op's member institutions. The remaining eight positions are appointed by the Federal Housing Finance Board.

Rhodes is replacing Washington Federal Savings chairman and CEO Roy Whitehead, who committed the same alleged violations as Landon.