Finance Factors Ltd. is looking to convert into a commercial bank in a move that will allow the company to offer more banking products and services to its customers.

Finance Factors now operates as a Hawai'i depository financial services loan company, meaning it can offer loans, mortgages and savings accounts but can't offer checking services, debit cards and lines of credit for business customers.

The company's parent, Finance Enterprises Ltd., recently told shareholders in a proxy statement that it is considering seeking approval from the Board of Governors of the Federal Reserve to convert Finance Factors into a state-chartered bank.

The change, which would require approval of Finance Enterprises' shareholders at a June 7 annual meeting, would allow Finance Factors to offer many of the same products and services that banks such as First Hawaiian Bank and Bank of Hawaii offer.

The bank will be called Finance Factors Bank.

"The new charter designation will allow us to expand our products and services we can offer our customers," said Russell Lau, president and CEO of Finance Enterprises.

"The time has come for Finance Factors to build on our rich history and legacy and to launch an exciting new era in the company."

The move comes as consumers have faced fewer choices with consolidation in the local banking industry.

Since 1990, the number of banks and thrifts operating in Hawai'i has declined from 26 to nine because of bank mergers and acquisitions.

"There's been consolidation in our market, and it's a great time for a community bank to fill that gap," said Maureen Lichter, Finance Factors' vice president of marketing.

In its proxy statement, Finance Enterprises said the conversion is part of a company-wide restructuring in which it will spin off its real-estate holdings and Finance Insurance Ltd. unit into a separate company called Finance Realty Ltd.

The real estate included in the spinoff will include the Liliha Square retail center, the Makakilo Shopping Center, downtown's McCandless Building and the Union Plaza building next to Finance Factors' headquarters on Bishop Street, Lichter said.

The company's headquarters will continue to be owned by Finance Factors, Lichter said.

Established in 1952, Finance Factors is a closely held company that made its mark in commercial lending and real-estate loans to working-class customers.

The company was founded by a group of prominent residents of Chinese ancestry including former U.S. Sen. Hiram Fong and local businessmen Mun On Chun and Daniel Lau.

With assets of $655.6 million, Finance Factors earned $4.7 million in 2005, according to company filings with the Federal Deposit Insurance Corp.

The recent profits are in contrast to losses posted by the company in the late 1990s. Those losses prompted the FDIC to issue a cease-and-desist order after conducting a bank audit in 1998.

The audit also said that Finance Factors operated without sufficient capital, had "lax" lending standards and operated with a large volume of poor-quality loans.

The FDIC lifted the order in 2001 after Finance Factors took corrective action.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.