"This was a great quarter," said Michael O’Neill, chairman and chief executive of Bankoh. "We are being helped by the good Hawai'i economy."

Hawai'i’s largest commercial bank recorded a net income of $39.8 million, or 69 cents a diluted share, compared with $29.8 million, or 47 cents a share, a year ago. Wall Street expected earnings of 66 cents a share, according to Thomson First Call.

Revenue — net interest income and noninterest income — rose by 6.7 percent to $144.9 million from last year’s $135.8 million.

O’Neill said higher revenue and relatively flat operating expenses raised the bottom line. Helping hold down costs was Bank of Hawaii’s

$35 million investment in a system conversion, which was completed in the third quarter of 2003. A part of Bank of Hawaii’s restructuring plan, the upgrade is expected to lead to $17 million a year in savings for seven years, mainly due to outsourcing of information technology functions.

"It’s those cost savings that’s coming through. That’s what has allowed us to keep our expenses flat," O’Neill said.

Michael McMahon, an analyst at Sandler O’Neill & Partners in San Francisco, said it’s Bank of Hawaii’s second straight quarter that has benefited from its three-year restructuring effort led by O’Neill and his management team. Under O’Neill, the bank decided to focus on its core market of Hawai'i and pulled away from other locations.

"The profits of the company have basically doubled since he took over," McMahon said. "It’s a combination of more efficiency, lower credit costs, asset quality trends continuing to improve and higher fee income from their core business."

The return on assets —- net income divided by total assets — has risen to 1.65 percent in the quarter from 0.8 percent three years ago, he said.

In the just-concluded quarter, credit quality improved. Nonperforming assets fell 37 percent from the year before while nonaccrual loans slid 33 percent. The bank did not have a provision for loan losses, its seventh quarter to do so.

Total assets rose to $10 billion from $9.4 billion in the like quarter a year ago. Total deposits went up to $7.4 billion from $7 billion in March 2003.

The bank’s directors also authorized a $50 million stock buyback program. It’s in addition to the nearly $1 billion the bank spent from July 2001 to March 31, 2004, to repurchase its own stock.

"They have excess capital," McMahon said. "They either return it to shareholders or invest it. They decided to return it to shareholders."

The bank also declared a quarterly cash dividend of 30 cents a share, payable on June 14 to shareholders of record as of May 24.

The bank also announced that Allan Landon was named chief operating officer, in addition to his role as president. But he leaves his post as chief financial officer. Former Controller Richard Keene takes over as CFO. In his expanded role, Landon oversees commercial banking, investment services and corporate and regulatory administration for the bank.

"Al has done a terrific job in the four-plus years he’s been here," O’Neill said. "He exceeds our expectations."

Other management changes: Donna Tanoue will become the vice chairman and chief administrative officer, relinquishing her title as vice chairman of the investment services group. Peter Ho steps into her former job; he was group executive vice president of the Hawai'i commercial group.

Shares of Honolulu-based Bankoh rose 9 cents to $43.15 in recent trading.