reported a wider than expected loss for the first quarter after the payment of preferred dividends but shares were higher as credit quality improved on a number of fronts.
The company lost $71 million or 46 cents a share, for the latest quarter, beyond the average analysts' estimate for a loss of 28 cents per share. The latest results reflected the impact of $123 million paid to the U.S. Treasury in mid-March when Comerica paid back $2.25 billion in bailout money received via the Troubled Assets Relief Program, or TARP. The payments to the Treasury included $24 million in cash dividends on the preferred shares, along with non-cash charges of $99 million, and had a per share impact of 79 cents a share.
The stock was up 2.9% to $43.43 in midday action. Volume of 6.6 million was almost double the issue's trailing three-month daily average of 3.5 million. The move comes with the shares already up about 43% year-to-date through Tuesday's close.
The first-quarter loss was wider than both Comerica's fourth-quarter loss of $62 million, or 42 cents a share, and its loss of $24 million, or 16 cents a share, in the first quarter last year.
Netting out the TARP-related dividends and charges, none of which will need to be paid going forward, first quarter net income would have been $52 million.
Continuing the pattern of large regional holding companies reducing provisions for loan loss reserves as credit quality shows signs of improvement, Comerica's provision for loan loss reserves for the first quarter was $175 million, declining from $256 million in the fourth quarter and $203 million a year earlier.
The quarterly reserve provision exceeded net loan charge-offs, which totaled $173 million during the first quarter, down from $225 million the previous quarter, although they were up from $157 million during the first quarter of 2009.
Nonperforming assets declined slightly during the quarter to $1.25 billion, although the ratio of nonperformers to total assets increased slightly to 2.19%, as Comerica's balance sheet continued to shrink. Total assets were $57.1 billion as of March 31, down 15% over the past year.
The annualized ratio of net charge-offs to average loans for the first quarter was 1.68%, down from 2.09% in the fourth quarter but up year-over-year from 1.26%. While aggregate figures for the industry weren't yet available for the first quarter, Comerica's charge-off ratio measured up quite well compared to the fourth-quarter industry aggregate ratio of 2.89%, as reported by the Federal Deposit Insurance Corporation.
Another positive development following the trend for many large regional banks over the past year as low interest rates have improved the deposit pricing environment, Comerica's net interest margin -- the difference between a bank's average yield on loans and investments and its average cost of funds -- improved to 3.18% for the first quarter, from 2.94% in the fourth quarter and 2.53% a year earlier.
In addition to the low short-term rates, Comercia's margin improvement was fed by a very large increase in the bank's non-interest bearing deposits, which grew 29% over the past year to $14.6 billion - quite an achievement while the company reduced its asset size significantly, and an improvement in the liability mix that will continue to bear fruit regardless of how the economic recovery proceeds.
CEO Ralph Babb Jr., said the company was well-position for growth and touted Comerica's "solid capital position and strong liquidity."
Written by Philip van Doorn in Jupiter Fla.
Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.