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The American President

Hawaii's Third-Largest Bank Has a New Leader: Local Girl Connie Lau

American Savings Bank President, Chief Executive Officer and Director Constance "Connie" Lau drives a 7-year-old Buick Park Avenue and flies coach. Not that there’s anything wrong with that. It’s just living proof of Lau’s accessible, low-key and down-home style, which can camouflage the fact that she is very smart, highly educated and among the Hawaii business power elite.

Forty-nine-year-old Connie Lau is not just one of the few women chief executives ever to lead a financial institution in Hawaii, she also is secretary-treasurer for the Kamehameha Schools Board of Trustees, a Punahou School trustee and a director for the Consuelo Zobel Alger and Maunalani Foundations.

Robert Kihune, chairman of the Board of Trustees for Kamehameha Schools, which is the state’s largest landowner, uses superlatives like "amazing" and "outstanding" to describe Lau and her contributions. "When you put all that knowledge and capability together into someone as intelligent as she is - I mean it’s absolutely phenomenal. I look at her as one of the great leaders in Hawaii," Kihune says.

Lau says many of her management philosophies come from the nonprofit sector. "Somehow, in the nonprofit sector people don’t seem to have as much difficulty showing that they care about other people. Sometimes the business world is a little more... cutthroat. That’s a terrible word to use. But you know we’re a small community, too, and because we’re a small community, it’s really important that people work together here," she says.

The former Connie Hee grew up in Kaneohe (Connie-Oh-Hee, people joked) on a house on Kaneohe Bay Drive that her father, Howard Hee, selected for its feng shui attributes. Howard Hee’s father had been the houseboy for Sanford B. Dole, the first governor of the Territory of Hawaii. As a reward for good work, Dole sent Hee to a military school on the U.S. mainland, but Hee soon tired of the military restrictions and ran away to join a Chinese acrobatic troupe. He traveled all over the United States on the vaudeville circuit. The family has pictures of him pulling scarves out of his mouth and riding on elephants.

He returned to honor his father’s deathbed wish that he marry and settle in Hawaii. However, Hee never had a formal education. Instead, he was the state’s fifth recipient of a real-estate brokerage license.

From the time she was little, Lau remembers her father encouraging her to go to both business school and law school. Lau says, "At the time that he grew up in Hawaii, there were limited opportunities for people, and he always felt that if you got a legal degree you would know your rights and you would be able to stand up for yourself and others." The business degree was to make good money. Lau ended up getting both. Her law degree is from the University of California’s Hastings College of the Law. Her MBA is from Stanford.

Meeting Minds: American Savings Bank executives discuss community relations initiatives. From left: Marlene Lum, senior vice president, retail lending; Elaine Hogue, community developement officer; Constance H. Lau, president and chief executive officer; Craig Togami, vice president and director of marketing and communications; and Anna Marie Springer, senior vice president, innovative channels and products .

Prior to that, she attended Punahou School, where she won a state track title in long jump and hurdle. She won the lead female role in the variety show and played the timpani in the band. The summer before the 10th grade, she met her future husband at the United Church of Christ on Judd Street. "She came up to me and she says, ‘Hey, I understand you’re going to be moving over to Punahou School in the 10th grade, and we’re classmates,’" says Russell Lau.

It wasn’t quite love at first sight. "If she wasn’t the damned smartest kid in the class, she was pretty close to it," remembers Russell. "She was too smart for my fragile male high school ego, so I didn’t take her out in high school."

He did take her out later, when he worked in San Francisco, where she was attending law school. They got married in 1977, and their working paths have crisscrossed ever since. Connie later became treasurer of Hawaiian Electric Industries and Russell became treasurer of Finance Factors. He became Finance Factors’ chief financial officer. She became the chief financial officer of HEI Power Corp. Says Russell Lau: "When I came over to Finance Factors to be the head or CEO of this company, I said, ‘Well, it’s just a matter of time before she follows me along, and sure enough...’"

Connie Lau took over the reigns of the state’s third-largest bank in mid-2001, in a planned succession to Wayne Minami, who is credited with overseeing the acquisition of the Bank of America in 1996 and growing the institution’s assets from under $1 billion to more than $6 billion. She had been at American Savings Bank since 1999 as its chief operating officer.

American Savings Bank is a key subsidiary of Hawaiian Electric Industries Inc. (NYSE:HE). Hawaiian Electric topped the Hawaii Business Top 250 rankings last year with $1.7 billion in year 2000 sales. Operating income in 2000 was $155 million, with ASB generating $41 million. That represented a 14.7 percent increase over ASB’s 1999 net income and the bank’s fourth straight year of double-digit net income growth.

Both Lau and Minami are "high-touch" managers, who continually emphasize superior customer service, but Lau has brought a new emphasis on technology. When the CEO’s corner office belonged to Minami, it sported a white board on the wall facing Diamond Head. Today, a state-of-the-art plasma screen programmed through a plethora of wireless devices on Lau’s desk has replaced the white board. "She’s very technology-oriented. She leverages technology to the max," says Ralph Nakatsuka, senior vice president for lending and a 21-year ASB-employee.

Investing in technology, infrastructure and people is one of the core strategies that Lau and her team have developed to build ASB’s value as they press toward their goal of being the top full-service community bank in Hawaii. In 2001, ASB more than doubled the $10 million expended for technology and infrastructure in the previous year. The bank also launched a program called ASB TECHknowledge featuring an up to $1,000 reimbursement per employee toward the purchase of computer or technology-related equipment; high-speed Road Runner on-line home service at an ASB-subsidized price of $20 a month; and special discounts and loan rates.

Of course, this puts pressure on the bank’s efficiency ratio, or the amount of money it takes for the bank to make $1 in revenue. That’s held constant at 57 percent for the last two years, high for any bank. Lau hopes to get it to the low 50s in the next several years through increased revenues from the higher productivity that should result from these investments.

Arlene Nakamoto, executive vice president for customer delivery, says Lau truly believes that the almost 1,300 ASB employees are critical to the bank’s success. Says Nakamoto: "I think we will be a financial institution that people will seek employment at as well as customers seeking their financial relationship with." The bank has hired key personnel in the business banking and commercial real estate area, as well as a new chief information officer and treasurer in the last couple of years.

Waiting in the Wings

Hawaii’s big banks are going through some major changes, creating opportunities for the smaller guys and gals waiting in the wings.

First Hawaiian Bank’s parent company BancWest Corp. (NYSE:BWE) was bought out by large French BNP Paribas at the end of 2001. BancWest Chairman and Chief Executive Officer Walter A. Dods Jr., said in a statement that it will still be business as usual for Hawaii customers. While local management is supposed to remain the same, Dods has been thinking about his eventual retirement activities (he’s mentioned philanthropy). He and his wife made a $1 million donation to the University of Hawaii last year, too. According to the FDIC, as of June 30, 2001, based on deposits, First Hawaiian Bank’s market share was 30 percent.

Bank of Hawaii, former Pacific Century (NYSE:BOH), was to have completed the first phase of its latest restructuring effort by divesting its operations in Asia and the Pacific by the end of 2001. The reorganization and downsizing continues with a refocus on Hawaii and a target of 2003. New chairman and chief executive officer Mike O’Neill has been on the job for a little more than a year now and has been reorganizing some top managers. According to the FDIC, Bank of Hawaii’s market share was almost 30 percent as of June.

American Savings Bank President and Chief Executive Officer Connie Lau told analysts in December that triggering events, such as the changes at the two biggest bank’s present American with "the perfect opportunity to build market share," As of June, American Savings Bank’s market share was 19.7 percent.

-KAT

David Parker, director of research for Robert W. Baird, says investing in technology and people (in terms of more competitive salaries) is a long-term strategy that Wall Street doesn’t always embrace. "I think savvy managers walk that tight line very effectively and get near-term benefits. But the strategy always has to be very long term, and so I think it’s a good long-term decision and obviously results [in 2001] have proven that the bank can make and does make good money."

Besides investing in people and technology, Lau and her team are focusing on several other areas, including: building the business customer base and growing and diversifying ASB’s loan portfolio. Lau says before ASB acquired Bank of America in 1996, 90 percent of lending was residential and 10 percent was consumer. Through September 2001, after securing a portion of the residential loan portfolio, about 82 percent of ASB’s loan portfolio was residential, 8 percent was consumer and two relatively new segments — corporate and commercial real estate — were each about 5 percent. The corporate lending portfolio has grown more than tenfold from $16 million in 1996 to $180 million in 2001.

Lau says as a former Hawaiian Electric Industries treasurer she is always challenging ASB’s business bankers to think about the customer’s perspective. "I’ll tell the lending guys, ‘Well, you need to bring value to your customers. When I was treasurer I used to look for bankers who would come and bring me ideas on how I could lower my financing costs or run my business better. And so when you guys go out and you work with our customers, you need to bring them ideas.’"

She has three other key messages for her management team: 1) Mentor everybody 2) What you don’t do is sometimes more important than what you do do, so focus on where you can add value and 3) Be willing to reinvent the business everyday, because it makes you a good listener who is open to new ideas and keeps you from getting provincial.

Lau is putting her stamp on the bank in terms of a new strategic plan and marketing campaign developed by senior management. The slogan hadn’t been determined at the time of this writing, but Lau says the 2002 campaign will involve a new logo and a refreshed look and feel in advertisements and at the bank’s 68 branches.

"We’re very local and people expect us to be very good at what we do, but we’re not the kind of institution that particularly toots our own horn. We tend to be in that sense – local people tend to be pretty low key. You’re just good, but you don’t say you’re good. Now the marketing people don’t like that," says Lau.

But according to Lau, ASB has already managed a pretty even split of the retail market with the two biggest Hawaii banks, First Hawaiian and Bank of Hawaii. She believes that many of ASB’s customers are quintessential "locals," who are also relatively wealthy. "We probably all have uncles and parents that have done very well. But they don’t particularly toot their own horns and they still do their own yard work and rake leaves and prune their trees, maybe even in their BVDs," she says with a contagious laugh.

When you talk to people who know Lau, one recurring theme is that this woman is busy. She does a lot. But Lau says it is simply a matter of focusing on knowing when people need you and being there when they do.

"I guess I was blessed to be relatively smart," says Lau, "but what really made the difference was I was also willing to work hard. Now that doesn’t mean that I’m a workaholic by any means, because one of the early lessons I learned was working smart, that you don’t waste effort on things you cannot affect. You need to figure out where you can add value and focus your efforts in those areas."

Lau’s "hobby" outside of work is her three children ages 15, 13 and 10. "Right now, everything is focused around my kids. I think that’s pretty common for working moms, especially when kids are young. I mean maybe I can take something up when they grow up, but right now my hobby is chauffeuring," says Lau with a laugh.

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