American Savings Bank posted a 16.5 percent increase in third-quarter earnings but saw its loans dip from the year-earlier period.

The state’s third-largest bank said Monday it shifted away from national pooled commercial loans during the quarter to focus more on local lending.

“We felt like it’s appropriate for us to preserve our lending capacity for Hawaii,” American Savings President and CEO Rich Wacker said in a phone interview.

American Savings reported that net income rose to $17.6 million from $15.1 million. Deposits increased 6.9 percent to $5.75 billion, and net interest income — the difference between what the bank pays its customers on deposits and the interest customers pay it on loans — gained 8.2 percent to $56.1 million. Net income also greatly benefited by the bank setting aside just $490,000 for potential loan losses compared with $5.7 million in the year-­earlier period.

American Savings’ decision to reduce its national pooled commercial segment resulted in overall loans declining 1.3 percent to $4.68 billion from the year-earlier quarter. That decrease left the bank’s loans down 1.3 percent since the start of the year.

“Overall loan growth lagged (in the third quarter) as we continued to reduce our commercial lending exposure to national syndicated credits (a package of multiple loans sold and bought on the secondary market) and resolve specific problem loans that (were paid off),” Wacker said.

He said the bank cut its exposure to national syndicated credits by $80 million, or roughly half, from the year-earlier quarter.

“As we looked at the overall balance of risk and return in the national credits, we just felt that it was time to scale back,” Wacker said. “Their terms have gotten more and more aggressive, pricing has gotten very tight on them and we felt it was in the bank’s interest to scale back on that exposure. Those are generally participations in national borrowing, deals to customers who generally are not in Hawaii.”

American Savings said the decrease in its commercial loan portfolio was partially offset by growth in home equity lines of credit, and the bank’s consumer and residential loan portfolios.

“We feel like we’re doing exactly what we need to for the bank and for our customers,” he said. “We don’t grow just to grow. We grow because we think it’s good business, and we’re growing in all the areas we think are good business. The earnings power of the bank keeps improving as we go. Deposit growth continues to be strong, and we deploy that into loans and the investment portfolio.”

Noninterest income, which includes service charges and fees, dropped 17.7 percent to $15.2 million last quarter as mortgage banking income plunged 77.8 percent to $520,000 from $2.3 million in the year-earlier quarter. Another reason for the drop in noninterest income was that there were no real estate sales last quarter compared with a $1 million gain on the sale of real estate in the third quarter of 2016.

American Savings’ assets increased 4.5 percent to $6.62 billion.

Separately, Wacker said construction of the bank’s $100 million Chinatown headquarters across from Aala Park is progressing and that the company is less than a year away from roughly 600 employees beginning their move into the building.

“We hope to move in during late 2018 and early 2019,” he said. “We’re moving people from several locations, so it will take place over a several-week period.”

Parent company Hawaiian Electric Industries Inc., which owns the bank and the state’s largest utility, plans to announce its earnings before the stock market opens Thursday.