HONOLULU - Bancorp Hawaii Inc. said its nonperforming loans in the fourth quarter would increase by about $58.5 million because of reclassification of two loans.

The parent of Bank of Hawaii, the largest Honolulu-based bank, said $20 million would be charged off against the loan-loss reserve, while the remaining $38.5 million would be placed on non-accrual status.

Any decline in income could be partially offset by a credit of about $10.7 million, result from the company's adoption of Financial Accounting Standard 109, which affects the accounting of income taxes. Bancorp Hawaii did not specify when it would record the gain.

The accounting standard will increase earnings because of its effect on prior-year loan-loss provisions.

Bancorp Hawaii said the new nonperforming loans are secured by commercial leasehold properties and had been considered performing as of Sept. 30. The value of one property, a rental that had been the primary source of repayment, was jeopardized when an arbitration proceeding raised the rent to uncompetitive levels, the bank said.

Bancorp Hawaii, which has $11.7 billion in assets, has posted strong profits in the third quarter despite the recent economic downturn.

Earnings totaled $31.7 million in the third quarter and $94.3 million in the nine months, up 11% and 14%, respectively, from comparable 1991 periods.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.