Central Pacific Bank is staying close to home when it comes to lending, and the decision to limit its mainland exposure continues to pay off.

The parent of the state’s fourth-largest bank was scheduled to report today that its net income rose slightly in the third quarter amid strong deposit growth, a solid increase in Hawaii loans and another sharp reduction in nonperforming assets.

Central Pacific Financial Corp.’s earnings rose 3 percent to $11.8 million, or 39 cents a share, compared with $11.5 million, or 37 cents a share, in the year-earlier period. Deposits rose 9 percent to $4.93 billion while loans increased 5.7 percent to $3.64 billion. The main driver in the bank’s loan portfolio was the Hawaii market, where loans increased 8.5 percent during the period as the mainland segment was falling 14 percent.

“We’re pleased with what we have seen in growth in the Hawaii portfolio,” Central Pacific President and CEO Catherine Ngo said in a phone interview Tuesday ahead of today’s earnings release. “Having said that, we will continue to replace credit on the mainland that we exit with other good credits on the mainland. … We will continue to have some footprint on the mainland until we’re able to grow the Hawaii portfolio organically. We see the mainland portfolio as an alternative to the investment portfolio. As we have continued strength in Hawaii over the longer term, you will see that mainland portfolio eventually come down.”

Central Pacific has been reducing its exposure to mainland real estate and focusing more on Hawaii after getting hurt during the 2008-2009 recession. At its pre-recession peak at the end of 2007, Central Pacific’s mainland exposure comprised 29.1 percent, or $1.2 billion, of the bank’s total loans. After the recession at the end of 2009, it represented 18.6 percent, or $569 million, of total loans.

As of the end of the third quarter, Central Pacific only had $363.2 million, or 10 percent of its total loan portfolio, tied up on the mainland with $3.27 billion, or 90 percent, of its loans linked to the Hawaii market.

The bank also has been aggressive in reducing its nonperforming assets, which had swelled to $496 million in March 2010 in the wake of the California real estate meltdown. The bank’s nonperforming assets, essentially delinquent loans not accruing interest and foreclosed real estate, were just $6 million last quarter, down 48.8 percent from $11.7 million in the year-earlier period.

“The NPA (nonperforming assets) level is probably as low as you will see it for us,” Ngo said.

Added Chief Credit Officer Anna Hu, “It is really a function of the Hawaii economy.” She said, “A lot of our nonperforming assets are customers who had issues for a long time that are really benefiting from that (economic) turnaround. We’ve been able to restructure or modify them back into performing loans.”

With the lending environment improving, Central Pacific reduced a provision for loan losses during the quarter by $126,000, which was added to the bank’s income statement. A year earlier Central Pacific had a comparable $743,000 benefit from reducing its reserve for loan losses.

Still, the bank’s earnings missed analysts’ average forecast by 2 cents a share.

“Analysts expected slightly stronger loan growth and a slightly wider net interest margin than our actual results,” said Chief Financial Officer David Mori­moto, adding that the bank also had about $600,000 in expenses related to a checking account program that wasn’t accounted for by analysts.

Central Pacific’s stock slipped 9 cents to $32.59 Tuesday. During the third quarter the company repurchased $10.1 million worth of stock at an average price of $30.13 a share.