Problem loans nearly led to the demise of Central Pacific Bank three years ago.

But now loans are helping fuel its recovery as the state’s fourth-largest bank boosts lending in Hawaii, sells or restructures nonperforming assets and acquires packaged loan portfolios.

Parent company Central Pacific Financial Corp. said a 19.4 percent increase in loans and leases in the October-to-December period helped propel the bank to its 12th straight quarter of profitability since its $325 million recapitalization by private investors in February 2011.

The bank’s earnings, though, fell 27.3 percent to $9 million from $12.4 million in the year-earlier period partly due to lower gains on the sale of residental mortgage loans and foreclosed assets to the secondary market. That contributed to an overall $4.7 million decline in noninterest income during the quarter from the year-earlier period.

Central Pacific also took a $777,000 expense that it added to its loan-loss reserve compared with a year ago when it took a $2.3 million credit to reduce its reserve. The bank’s quarterly net income has been "lumpy," according to President and Chief Executive Officer John Dean, because the bank has returned loan-loss reserves to its income over the past 11 quarters in amounts ranging from $200,000 to $19.1 million.

Dean said earnings should become more "normalized" in upcoming quarters as the bank’s nonperforming assets — loans delinquent by 90 days or more — and loan-loss reserves stabilize. He said he’s also encouraged by the progress the bank is making in its loan portfolio. Loans and leases increased to $2.63 billion at the end of last year from $2.20 billion at year-end 2012.

"We’ve had excellent loan growth within the state, but half of that 20 percent loan growth at the end of the fourth quarter was at the national level," Dean said Wednesday ahead of today’s scheduled earnings release. "We’re participating in some large national credits (packaged loan portfolios) that accounted for some of the growth."

Dean said the bank shifted some of its assets from its investment portfolio, which purchases U.S. Treasury securities and municipal bonds, to its loan portfolio to get a higher yield through loan production and buying shared national credits. The national credits, or packaged loan portfolios, are a pool of loans underwritten by other entities and put on the investment market to purchase.

The bank, which lost more than $703 million from 2008 to 2010, also continued reducing its nonperforming assets. At the end of the fourth quarter, it was down to $47 million from $90 million in the year-earlier period and $496 million when Dean took the reins of the bank in the first quarter of 2010.

At the end of last quarter, Central Pacific had $152 million in outstanding loans on the mainland, with $9 million nonperforming. In Hawaii, the bank had $2.48 billion in loans, with $38 million of those delinquent. Of that $38 million, $20 million of that amount were residential mortgages — the majority from 2008 and earlier.

The bank also showed improvement in deposits (up 6.9 percent to $3.9 billion), assets (up 8.5 percent to $4.7 billion), net interest income (up 20.8 percent $35.5 million) and net interest margin, which rose to 3.29 percent from 3.00 percent in the year-earlier quarter. The bank’s efficiency ratio, which measures how much it costs the bank to make a dollar of revenue, also improved to 72.5 percent from 81.7 percent a year ago.

"We’ve got a lot of work still ahead of us," Dean said. "The efficiency ratio is a good indicator of a bank’s progress and we’ve shown good progress but we still need to do a better job. We’d like to be in the 60 to 65 percent range in the next three years."

For the year, Central Pacific’s net income more than tripled to $170.8 million, or $4.04 a share, from $47.4 million, or $1.13 a share. The net income in the first quarter of 2013 included a one-time $119.8 million tax benefit.

In the fourth quarter, the bank had earnings per share of 21 cents compared with 29 cents in the year-earlier period.

Central Pacific, which opened a branch in Kapaa, Kauai, last week, said it hopes to open a new branch in Manoa Marketplace in the fourth quarter that would go into the site now occupied by Bank of the Orient, which will vacate at the end of February. Central Pacific, however, still needs public comment, state and federal regulatory approvals and a signed lease to proceed with what would be its 37th branch in the state.

The bank’s stock closed down 46 cents, or 2.4 percent, to $19.05 Wednesday on the New York Stock Exchange.