Central Pacific Bank said it is taking advantage of all-time low interest rates to strengthen its financial position.

The state’s fourth-largest bank, which issued $55 million in subordinated notes last week to qualified institutional buyers and institutional accredited investors, reiterated Tuesday on the eve of its third-quarter earnings results that the capital it raised puts the bank in a strong position to support its customers and provide future capital flexibility as it moves forward with its $40 million RISE2020 infrastructure renovation and technology upgrade project.

Central Pacific was due to announce this morning before the stock market opened that its net income fell 52.9% to $6.9 million, or 24 cents a share, from $14.6 million, or 51 cents a share, in the year- earlier quarter. The bank attributed the drop to setting aside $14.7 million for potential loan losses in the third quarter after reserving just $1.5 million in the year-earlier quarter. Loan-loss provisions are considered an expense because they reduce the company’s income.

“We are actively managing the risks related to the COVID-19 pandemic, including building our credit loss reserves and raising Tier 2 capital through a recent issuance of subordinated debt,” Central Pacific Financial Corp President Catherine Ngo said in a statement. “The Company is well positioned to continue to be a source of strength and liquidity for our customers, employees and shareholders as we all navigate this difficult economic environment.”

Ngo said in an interview Tuesday that the financial results reflected “a strong quarter” because pretax, pre-provision earnings increased 13% to $23.7 million from the year-earlier period.

“An important driver of the strong quarter included the great work of our mortgage banking team generating $4.3 million in the third quarter compared with $2 million in same quarter last year,” Ngo said. “The driver for the decline in net income compared to the year-ago was the increase in the reserves in the current quarter for loan losses. The increased reserves are related to the economic forecast for Hawaii and was not due to any increase in loan losses in the current quarter. In fact, our credit metrics remain strong.”

The loan-loss provision was up from $10.6 million in the second quarter and $9.3 million in the first quarter.

CHIEF FINANCIAL Officer David Morimoto said, excluding Paycheck Protection Program loans, which are 100% guaranteed by the Small Business Administration, that Central Pacific’s allowance for credit losses to total loans ratio last quarter was 1.79% compared with 1.80% for Bank of Hawaii and 1.56% for First Hawaiian Bank.

“For banking purposes, they’re all considered in a similar range,” he said.

Morimoto said the bank’s decision to raise capital through the issuance of subordinated notes was similar to what more than 150 other community banks have done over the last six months.

“We did it to take advantage of the historically low interest rate environment and investor demand,” he said. “It’s the same reason why people are refinancing loan mortgages — to take advantage of low interest rates. It allows us to bolster our balance sheet, provides us regulatory capital at extremely low costs and that positions us well to help our customers and the community, and post-COVID will provide us future capital flexibility.”

Central Pacific’s loans jumped 15.2% to $5.03 billion from the year-earlier quarter driven by the origination of PPP loans totaling $528.6 million. Deposits rose by 12.7% to $5.68 billion aided by the deposit of PPP funds into both new and existing deposit accounts.

The bank said loans on forbearance or deferral declined by 48.8% to $290.8 million, or 5.78% of the total loan portfolio, as of Sept. 30, compared with $567.9 million, or 11.35% of the total loan portfolio, as of June 30.

Revenue for the bank rose 8.5% to $60.9 million.

The bank’s net interest margin, which is the difference between what it generates from loans and pays out in deposits, worsened by 11 basis points to 3.19% from 3.30% in the year-ago quarter and was down by seven basis points from 3.26% in the second quarter.

CENTRAL PACIFIC’S shares closed down 56 cents, or 3.8%, at $14.30 on Tuesday in an overall down day for financial stocks.

Ngo said the bank remains on pace for the renovation of its headquarters branch, which is due to reopen in early January with indoor and outdoor plaza gathering places for customers, nonprofits and the community. In addition, the bank has launched a more user- friendly mobile online platform and is 90% complete with its branch ATM updates (75% complete when including off-site ATMs). The new ATMs enable deposits without envelopes and extended processing hours, and the bank said it will shortly be rolling out multidenominational withdrawals at ATMs.

Morimoto said deposits made at ATMs as late as 8 p.m. Hawaii time will receive same-day credit for that deposit and that the 8 p.m. cutoff time is at least two hours later than any other local branch.

Central Pacific also announced that it is consolidating three in-store branches and one stand-alone branch that will leave the bank with 31 overall by the end of next month. On Sept. 1 the Pearl City Don Quijote branch was consolidated into the Pearl Highlands Branch, the Kahala Times branch was consolidated into the Kahala Branch and the Kaheka Don Quijote branch was consolidated into the Kapiolani branch. The in-store branches were closed because they did not allow for adequate social distancing. On Nov. 15 the Kapahulu branch will consolidate into the Kaimuki branch because of the Kapahulu branch’s inadequate parking and its proximity to other branches.

The bank kept its quarterly dividend at 23 cents a share. It will be payable Dec. 15 to shareholders of record at the close of business Nov. 30. Central Pacific’s dividend yield as of Tuesday’s market close was 6.4%, higher than the next-closest local bank, First Hawaiian, at 6.2%.