The Seattle FHLBank is one of 12 regional home-loan institutions that make up the Federal Home Loan Bank System, a co-op owned by the commercial banks, thrifts and credit unions that are members of the system. Board members represent those institutions in the co-op.

The Seattle board said directors Allan Landon, chairman, president and chief executive of the Bank of Hawaii, and Roy Whitehead, vice chairman, president and chief executive officer of Washington Federal Savings, agreed to step down and to repurchase the stock to settle any questions of wrongdoing.

The board said that Landon and Whitehead didn't intend to improperly benefit from the transactions. But its independent review committee determined that "there was the appearance of impropriety" when the Bank of Hawaii and Washington Federal asked respectively to redeem $25.4 million and $48 million of stock in the Seattle FHLBank last October.

The Seattle FHLBank disclosed in early December that it was cutting its dividend and would restrict future redemptions by member banks as part of a remedial plan with its regulator, the Federal Housing Finance Board, to shore up its internal controls and profitability.

Finance Board Chairman Ronald Rosenfeld said the agency was "pleased to see that the Seattle board took the necessary and appropriate steps to resolve the situation."

The Seattle FHLBank said it has also "enhanced" its policies covering stock repurchase requests for member institutions that have executives on the board.