First Hawaiian Bank posted a 2.3 percent decline in third-quarter earnings but reached a milestone as its deposits topped $10 billion for the first time in its 150-year history.

The state's oldest bank, and largest in terms of assets, said today it had net income of $54.1 million compared with $55.4 million a year ago. The bank said its revenue was relatively flat from the preceding quarter.

“;Despite the challenging economic environment, our overall core earnings, capital and credit quality remained strong,”; said Don Horner, chairman and chief executive officer of First Hawaiian.

“;Our customer-focused relationship strategy continues to serve us well. The bank remains well positioned and committed to assist our customers through the difficult economic cycle.”;

At a time when there's been a renewed push by banks nationwide to preserve capital in a down economy, Horner said First Hawaiian is different in that it's been in capital preservation mode since the bank's founding.

“;You look at our tier one capital ratio and it's one of the strongest in the United States of America at well over 15 percent compared with 6 percent for banks nationally,”; he said. “;Our capital position (assets minus liabilities) is $2.5 billion.”;

First Hawaiian's efficiency ratio, which measures in percentage terms how much it costs the bank to make a dollar of revenue, was 43.2 percent at the end of the quarter, making First Hawaiian the most productive bank in Hawaii. The bank's nonperforming assets, as a percentage of total assets, remained one of the lowest in the U.S. at 0.26 percent — well ahead of the national average of 2.23 percent.

“;We've been very consistent in our lending philosophy over a long period of time,”; Horner said. “;In this difficult economy, we haven't changed our underwriting at all. Not one policy has been changed in the way we underwrite today compared with the way we did three years ago when the market was more robust. Our policy is we loan money to folks who have the capacity to pay us back.”;

Horner said the bank has increased its loan-loss reserve by 9 percent since the start of the year “;to be prudent”; and has seen no significant change in charges, with net charge-offs last quarter of about $9.5 million following charge-offs of about $10.6 million in the preceding quarter.

The bank's net interest margin, the difference between what it charges for loans and pays for deposits, was 4.23 percent last quarter and has averaged about 4.40 percent this year. Last year the bank's net interest margin averaged about 4.60 percent.

Horner attributes the lower margin to the bank shortening the maturities in its investment portfolio in anticipation that it expects interest rates to rise in the fourth quarter of next year.

“;It's prudent to have short maturities in our investment portfolio, but overall our margin remains strong,”; he said.

First Hawaiian's assets rose 8 percent in the third quarter to $13.8 billion from $12.8 billion a year ago. Deposits increased 13.2 percent from $8.9 billion. And loans and leases edged up 0.7 percent to $7.8 billion from $7.7 billion.

The bank, founded in 1858, has 58 branches in Hawaii, three on Guam and two on Saipan. It is a sister bank of San Francisco-based Bank of the West, and the two banks' holding company, Honolulu-based BancWest Corp., is owned by French banking giant BNP Paribas.