The company, Hawai'i's second-largest bank holding company, said operating income for the three months that ended Sept. 30 was $34.4 million, or 49 cents per diluted share, up from $31.4 million, or 38 cents, in the same year-ago quarter.

But net income fell 2.7 percent to $30.2 million, or 43 cents per diluted share, from $31.1 million, or 37 cents, in the same year-ago quarter. The bank said this was because of a one-time charge of $6.6 million for its information technology project during the most recent quarter and a one-time gain of $400,000 for the sale of assets during the third quarter of 2001.

The company said it had a very strong quarter financially and year-over-year comparisons may be "difficult and perhaps meaningless" right now.

"We continued to make progress on several key initiatives in the third quarter of 2002," Michael O'Neill, the bank's chairman, president and chief executive officer, said in a statement today. "We are encouraged by the strengthening economy in Hawai'i, which is being led by the construction and real estate sectors."

For the nine months that ended on Sept. 30, net income was $92.3 million, up slightly from $91.5 million for the same period last year. Diluted earnings per share was $1.26 for the first nine months of 2002, an increase of 13.5 percent from $1.11 per share a year ago, partially because there are fewer shares outstanding.

Bank of Hawaii's chief economist, Paul Brewbaker, said Hawai'i tourism has returned to near normal levels just one year after the Sept. 11 attacks.

Brewbaker said visitor spending has been fairly stable and may have even been stronger among Japanese tourists over the past year because of an improving yen exchange rate.

The improving economy is being felt especially strong in the construction and real estate markets, the bank said.

Bank of Hawaii is in the process of restructuring its business, an effort that started last April and has included closing branches, bringing in new technology and cleaning up asset quality problems.

Total assets at the bank stood at $9.7 billion at the end of September, down 18 percent from $11.9 billion at the same time last year, mostly because of reductions in commercial and foreign loans lost during the divestiture and risk reductions in its portfolio.

Bank of Hawaii met Wall Street estimates of 43 cents a share. It's stock price rose 7 cents to close at $29.49, near a 52-week high.

Nonperforming assets were $63.3 million at the end of the third quarter, down 19.7 percent from $78.8 million from the second quarter, the company said. The decline was primarily because of the return to accrual and payoff of loans to two Hawai'i borrowers. Compared to a year ago, nonperforming assets declined $43.1 million or 40.5 percent.

The companies exposure to syndicated commercial loans was $312 million, down from $1.1 billion at the end June. The largest single loan was a $27.1 million to a local shopping mall operator. The company said it was making progress in reducing its exposure to the struggling airline industry, $144 million at the end of September compared to $154 million in June, but was concerned about a $7.8 million in equity interest in the leverage to an airline that said it may be facing bankruptcy. The bank, however, said it had resources available to cover the exposure.

Total deposits were $6.6 billion, down less than one percentage point from the third quarter of 2001, primarily because of divested foreign operations. The company also said it planned to close four branches in the Western Pacific that have about $37 million in deposits related to its planned merger of its Guam savings and loan subsidiary into the Bank of Hawaii.

Reach Frank Cho at 525-8088, or at fcho@honoluluadvertiser.com