Bank of Hawaii Corp.’s earnings jumped 15.9 percent in the second quarter as deposits soared and it set aside less money to cover potential loan losses.

The state’s second-largest bank said Monday it had net income of $40.7 million, or 90 cents a share, to beat analysts’ forecast of 87 cents. Deposits climbed 15.7 percent to $11.5 billion while loans and leases rose 6 percent to $5.7 billion.

Credit quality improved as the bank’s loan-loss provision of $628,000 was considerably less than the $3.6 million in the second quarter of 2011. Net charge-offs, or debt considered uncollectible, decreased to $3.8 million from $6 million.

In addition, the number of checking accounts the bank opened grew 8 percent from a year ago.

"It was another good quarter," said Peter Ho, Bankoh’s chairman, president and CEO. "The one thing that we did see in the quarter that was not so good was our net interest margin (the spread between lending rates and deposit rates) declined to 2.98 percent from 3.16 percent. As rates fall, the yields we get on our investments come down. It’s not anything we can control, but it’s where interest rates are in the world today."

Nashville, Tenn.-based analyst Brett Rabatin acknowledged that banks across the country are being squeezed by low interest rates.

"Bankoh continues to have pretty strong profitability, and the loan portfolio grew nicely — mostly commercial real estate and residential lending — and expense management was very impressive," said Rabatin of brokerage firm Sterne Agee. "It’s definitely a difficult environment for any bank with a large securities portfolio like Bankoh, but it’s doing very well despite the low interest-rate backdrop, which is pressuring all banks’ net interest margins. So the outlook is not necessarily one of strong growth, but the results show they continue to do very well vis-a-vis most banks out there."

Non-interest expense for Bankoh last quarter was $80.7 million, down $13 million from $93.8 million in the year-earlier quarter, which included a $9 million litigation settlement related to overdraft claims. The bank’s non-interest expense also was down $4.5 million from the first quarter of this year.

"It’s really just trying to be as efficient as possible," Ho said.

"We don’t have any broad-based corporate expense program. We’re just asking people to be aware of trying to be efficient and, where they have opportunities to reduce expenses or generate more revenue, trying to take advantage of it. What we’re really talking about is exceptional execution in all that we do."

Bankoh ended the quarter with assets of $13.9 billion, up 5.7 percent from $13.2 billion a year. Although the bank’s revenue fell 3.2 percent to $142.2 million, Ho said Bankoh was able to boost its earnings by cutting its loan-loss provision and reducing overall costs.

Ho said construction remains the lagging sector of the economy, but he is encouraged by condominium developments and single-family home projects on Oahu that are in the planning stages, as well as the potential of the rail project, which not only would bring construction jobs, but also transit-oriented development with retail and housing close to transit stops.

"We’re seeing record levels in the visitor industry, and it looks like defense spending is at least stable, so our view at Bank of Hawaii is that for us to see improvement from where the economy is today, we need to see construction spending and construction activity begin to pick up," Ho said. "We’ve seen a bottoming in construction spending in the state. The peak was in 2007 and construction expenditures fell through 2010, and I think since then things have flattened out."

The bank’s stock closed Monday down 68 cents, or 1.5 percent, at $45.65 on the New York Stock Exchange. Results were released before the market opened.

Separately, Bankoh maintained its quarterly dividend at 45 cents a share. It will be payable Sept. 17 to shareholders of record at the close of business Aug. 31.