Both companies agreed to reverse their stock transactions as part of the settlement.

"There was a failure to comply with a rule (to disclose) that there was a conflict of interest," said Colin Johnson, the Seattle bank's spokesman.

But Landon, despite resigning from the board, said "categorically, we didn't do anything wrong. It is a timing issue."

He said the Seattle lender announced last September that it would be reducing its dividend effective in November. In October, Bank of Hawaii decided to sell back to the lender shares that it had purchased because the investment didn't look as attractive anymore, Landon said.

In December, the lender said it would cut dividends and restrict stock repurchases from members to shore up its finances.

"After (the board) announced the suspension in December, other members said, 'Hey, did Bank of Hawaii know something that we didn't know?' and right there you've got the appearance" of impropriety, Landon said.

But "we used the same public information that anybody could have used and some did use," he added. "While we disagreed with the conclusions of the Seattle board, we don't want there to be some misperceptions regarding our intentions. By restoring our investment, we were able to eliminate that concern."

The Federal Home Loan Bank of Seattle lends money to member financial institutions who use it to make home loans to the public. Each member is required to buy the lender's shares, which are not publicly traded. The number of shares required depends on how much the member has borrowed and the size of its mortgage portfolio. The member also can buy extra shares.

The investigation of Bank of Hawaii pertains to the sale of additional shares, Johnson said.

The lender also investigated a $229.5 million stock sale by Washington Mutual Bank, but concluded there was "no wrongdoing, policy violation or appearance of impropriety." The thrift's vice chairman, William Longbrake, serves on the lender's board.