Bank of Hawaii Corp., navigating through a difficult economic environment, said yesterday its net income dipped 0.8 percent in the third quarter as lending decreased, but earnings per share rose 3.1 percent and matched analysts' expectations.

The bank also increased its dividend 2.3 percent - a move that comes at a time when many other banks are cutting their quarterly payouts - and boosted its share buyback program by $50 million.

Bankoh had net income of $47.4 million, or 99 cents a share, compared with $47.8 million, or 96 cents a share, a year ago. Last quarter included an $8.9 million net credit related to the company's pending resolution of sale in/lease out, or SILO, leases with the Internal Revenue Service.

Bankoh previously paid the IRS back taxes over the disputed complex leasing strategy, and the $8.9 million credit reflected excess money that the bank put aside that wasn't needed to pay the IRS.

Despite the lower net income from the year-earlier period, Bankoh's earnings per share rose 3.1 percent due to the bank spending $16.2 million to repurchase 332,200 shares during the quarter at an average price of $48.74 a share. Revenue edged up 0.5 percent to $160.6 million from $160 million.

The company also set aside $20.4 million during the quarter for potential loan losses due to “;heightened risk”; in three mainland transactions and due to general risk from the weakening Hawaii and mainland economy, the bank said. The loan-loss provision was an increase from $7.2 million in the second quarter and $4.1 million in the third quarter of 2007.

Bankoh had net charge-offs last quarter of $7.4 million.

Total nonperforming assets were $5.9 million at the end of the quarter, up from $4.3 million a year ago but down from $6.7 million at the end of the second quarter.

Bankoh Chairman and Chief Executive Al Landon said the bank has been well prepared for the economic downturn.

“;We've been conservative, so (the bank's credit quality) aligns pretty well with where we thought the economy might go in terms of impact,”; he said. “;We're seeing reduced demand for borrowing, and the uncertainty of the national market has created customer anxiety here.”;

Analyst Brett Rabatin of FTN MidWest Research said Bankoh's credit quality remains impressive in light of the economic situation.

“;Overall, they're being conservative and addressing credit quality and don't have any meaningful credit-quality issues to speak of. In this environment, that's fantastic to hear,”; Rabatin said.

Net interest income, which reflects the difference between what Bankoh pays depositors and what it brings in from loans, rose 5.1 percent to $103.6 million from $98.6 million. The net interest margin increased to 4.33 percent from 4.03 percent a year ago.

Noninterest income, which includes fees and service charges, declined 6.9 percent to $57 million from $61.2 million.

Bankoh's dividend of 45 cents a share - up from 44 cents a share - will be payable Dec. 12 to shareholders of record at the close of business on Nov. 28.