Bank of Hawaii played it safe in the first quarter.

The state's second-largest bank in terms of assets received nearly $1 billion more in deposits during the period than it had in the fourth quarter and put an average of $913 million into short-term funds paying just 0.25 percent.

Partly as a result of those conservative investments, Bankoh's net income fell 37 percent over the year-ago quarter.

But that was quite acceptable with Bank of Hawaii Chairman and Chief Executive Allan Landon, who has seen what has happened to risk takers in this slumping economy.

“;We weren't very sure where all of this was going to go with economic softening and the economy in Hawaii,”; Landon said yesterday. “;So I asked our guys to keep the durations very short. In fact, we just put it all in overnight money.”;

Bankoh, which didn't participate in the government bailout, ended the quarter with net income of $36 million, or 75 cents a share, compared with $57.2 million, or $1.18 a share, a year ago. Last quarter's earnings included a pretax gain of $10 million related to the company's sale of its equity interest in the leveraged leases of two commercial barges on the mainland. The year-ago results included pretax gains of $25.3 million related to the redemption of Visa shares and the early buyout of an aircraft lease.

The consensus estimate of nine analysts surveyed by Thomson Reuters was for 74 cents a share. Revenue fell 11.1 percent to $167.4 million from $188.3 million.

Shares of the company plunged 9.6 percent to $32.89 on the New York Stock Exchange.

“;I said last January as we started the year that what is most important to us is the soundness of our bank and the consumers' confidence,”; Landon said. “;So we focused on soundness instead of on earnings, and, as a result, we increased our liquidity, our reserve and our capital levels (a measure of financial strength).”;

Brett Rabatin, senior research analyst of Birmingham, Ala.-based Sterne Agee, called Bankoh's results “;solid”; but said that the amount of liquidity in the bank's investments made the results look “;a little bit softer than they actually were.”;

“;They just got a little crazy with liquidity in the quarter,”; he said. “;They got nervous and wanted to improve liquidity, and they maybe went a little too overboard.

“;This just shows you that when the economy started to weaken considerably that management wanted to really make sure that the balance sheet was liquid, and it shows you the level of conservativeness that they run the bank with.”;

Bankoh, whose $11.4 billion in assets ranks second behind First Hawaiian Bank, also set aside $24.9 million to cover potential loan losses versus $14.4 million a year ago and took charge-offs for uncollectable loans of $14 million compared with $5.4 million in the prior-year period.

“;We think the longer the economic recession goes on, the more borrowers are going to have financial difficulties,”; Landon said.

“;We wanted to make sure we have strong reserves to deal with that if it comes to pass.”;

Nonaccrual loans, which pertain to loans upon which interest is overdue and the collection of principal is uncertain, were $40 million at the end of the quarter compared with $5.8 million a year ago. The bank, without identifying the customer, said $17 million of its $27.8 million in nonaccrual loans was related to a large national mall owner with a significant presence in Hawaii. General Growth Properties, which owns Ala Moana Center and Ward centers and filed for bankruptcy last week, is the only mall owner that fits that description. Bankoh also charged off $3 million due to the same mall owner.

Separately, Bankoh maintained its dividend at 45 cents a share. It will be payable June 12 to shareholders of record at the close of business on May 29.