DALLAS, April 21 /PRNewswire-FirstCall/ -- Comerica Incorporated (NYSE: CMA) today reported first quarter 2010 net income of $52 million, compared to a net loss of $29 million for the fourth quarter 2009.  After preferred dividends on the fully redeemed $2.25 billion of preferred stock issued to the U.S. Treasury under its Capital Purchase Program of $123 million, or $0.79 per share, the net loss attributable to common shares was $71 million, or $0.46 per diluted common share, compared to a net loss per diluted common share of $0.42 for the fourth quarter 2009.  Preferred dividends included $24 million of cash dividends, non-cash discount accretion of $5 million and a one-time, non-cash charge of $94 million related to the full redemption of the preferred stock in March 2010. First quarter 2010 net income also included a $17 million after-tax gain from the cash settlement of a note receivable related to the 2006 sale of an investment advisory subsidiary, recorded in "income from discontinued operations, net of tax."

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"The encouraging signs we saw in the fourth quarter of 2009 continued in the first quarter of 2010," said Ralph W. Babb Jr., chairman and chief executive officer.  "Our credit quality continued to improve, reflecting the strong credit underwriting and processes we have in place.  Our net interest margin expanded further in the first quarter.  We fully redeemed the preferred stock issued to the U.S. Treasury and with our solid capital position and strong liquidity are ideally positioned for future growth.  We have a consistent strategy for success that is based on relationships and skill, with a dedicated workforce to deliver the quality products and services that are our hallmark.

"Our customers continue to convey a more positive and upbeat tone, and this is reflected in the increased number of loans in the pipeline.  The decline in loan outstandings we saw in the fourth quarter of 2009 slowed further in the first quarter of 2010, and the pace of decline moderated in each successive month of the first quarter. All of these positive trends lead us to believe our operating fundamentals will show improvement in 2010.  We are moving forward with confidence in our people and our ability to grow as the economy continues its recovery."

First Quarter 2010 Highlights Compared to Fourth Quarter 2009

• Net interest income increased five percent, or $19 million, to $415 million for the first quarter 2010 compared to $396 million for the fourth quarter 2009. The net interest margin of 3.18 percent increased 24 basis points, from 2.94 percent in the fourth quarter 2009.
• Net credit-related charge-offs decreased $52 million to $173 million, or 1.68 percent of average total loans, for the first quarter 2010, compared to $225 million, or 2.10 percent of average total loans, for the fourth quarter 2009.
• The provision for credit losses decreased $77 million to $182 million for the first quarter 2010, compared to $259 million for the fourth quarter 2009.
• In March 2010, Comerica fully redeemed $2.25 billion of preferred stock issued to the U.S. Treasury. The redemption was funded by the net proceeds from an $880 million common stock offering completed in March 2010 and from excess liquidity at the parent company. Liquidity at the parent company remained strong after the redemption of the preferred stock.  
• The tangible common equity ratio was 9.68 percent at March 31, 2010, an increase of 169 basis points from December 31, 2009. The estimated Tier 1 common ratio was 9.58 percent and the estimated Tier 1 capital ratio was 10.40 percent at March 31, 2010, an increase of 140 basis points and a decrease of 206 basis points, respectively, from December 31, 2009.

Net Interest Income and Net Interest Margin

• The $19 million increase in net interest income in the first quarter 2010, when compared to fourth quarter 2009, resulted primarily from an increase in the net interest margin.
• The net interest margin of 3.18 percent increased 24 basis points, compared to fourth quarter 2009, primarily from improved loan spreads, a less costly blend of core deposits, and maturing higher-cost wholesale funding. The net interest margin was reduced by approximately 24 basis points in the first quarter 2010 from excess liquidity, which was represented by $4.1 billion of average balances deposited with the Federal Reserve Bank, compared to a reduction of 13 basis points from $2.5 billion of average balances in the fourth quarter 2009. At March 31, 2010, excess liquidity was represented by $3.8 billion of balances deposited with the Federal Reserve Bank, compared to $4.8 billion at December 31, 2009.
• Average earning assets decreased $1.0 billion, due to a $1.4 billion decrease in average loans, partially offset by an increase of $428 million in other earning assets. The decline in loans of $1.4 billion in the first quarter 2010 continued to slow, compared to declines of $2.0 billion and $2.9 billion in the fourth quarter and third quarters of 2009, respectively, and reflected subdued demand from customers in a modestly recovering economic environment.  
• First quarter 2010 average core deposits increased $494 million compared to fourth quarter 2009, including a $942 million increase in money market and NOW deposits and a $194 million increase in noninterest-bearing deposits, partially offset by a $650 million decrease in higher-cost customer certificates of deposit.

Noninterest Income

Noninterest income was $194 million for the first quarter 2010, compared to $214 million for the fourth quarter 2009. The $20 million decrease in noninterest income in the first quarter 2010, compared to the fourth quarter 2009, reflected an $8 million decrease in net securities gains, a $6 million decrease in gains related to the repurchase of debt and small decreases in several categories of noninterest income.  

Noninterest Expenses

Noninterest expenses were $404 million for the first quarter 2010, compared to $425 million for the fourth quarter 2009. The $21 million decrease in noninterest expenses in the first quarter 2010, compared to the fourth quarter 2009, was primarily due to decreases in other real estate expense ($10 million), pension expense ($9 million) and salaries expense ($5 million), partially offset by an increase in the provision for credit losses on lending-related commitments ($4 million).  Full-time equivalent staff decreased by approximately 115 employees from December 31, 2009 and 481 employees, or five percent, from March 31, 2009.  Certain categories of noninterest expenses are highlighted in the table below.  

Discontinued Operations

Income from discontinued operations in the first quarter 2010 included a $17 million after-tax gain resulting from a successfully negotiated cash settlement of a note receivable related to the 2006 sale of Munder Capital Management, an investment advisor. The cash received of $35 million paid the note in full and concluded our commitments and financial arrangements with Munder.

Credit Quality

"We were pleased that credit quality improved at a faster pace than we had expected.  This reflects our continued efforts to quickly and proactively identify and work through problem loans.  We saw broad-based improvement in credit quality across all business lines, including significant declines in net charge-offs and provision for loan losses.  The Commercial Real Estate business line experienced an increase in net charge-offs but saw declines in nonperforming and watch list loans.  We have updated our credit outlook for full-year 2010 to reflect the significant improvement we saw in the first quarter."

• The provision for loan losses decreased $81 million, with declines in all major markets.
• Net loan charge-offs decreased $51 million to $173 million in the first quarter 2010, from $224 million in the fourth quarter 2009. Excluding the Commercial Real Estate business line, net loan charge-offs decreased $75 million, primarily in the Middle Market and Global Corporate Banking business lines. Net loan charge-offs in the Commercial Real Estate business line in the first quarter 2010 increased to $86 million, from $62 million in the fourth quarter 2009, with increases in the Texas, Florida and Other markets partially offset by decreases in the Midwest and Western markets.
• Nonperforming assets decreased $41 million to $1.3 billion, or 3.06 percent of total loans and foreclosed property, at March 31, 2010.  
• During the first quarter 2010, $245 million of loan relationships greater than $2 million were transferred to nonaccrual status, a decrease of $21 million from the fourth quarter 2009.  Of the transfers of loan relationships greater than $2 million to nonaccrual in the first quarter 2010, $129 million were in the Commercial Real Estate business line and $63 million were in Middle Market.
• Nonaccrual loans were charged down 44 percent as of March 31, 2010 and December 31, 2009, compared to 36 percent one year ago.
• Foreclosed property decreased $22 million to $89 million at March 31, 2010, from $111 million at December 31, 2009.
• Loans past due 90 days or more and still accruing were $83 million at March 31, 2010, a decrease of $18 million compared to December 31, 2009.
• The allowance for loan losses to total loans ratio increased to 2.42 percent at March 31, 2010, from 2.34 percent at December 31, 2009.

Balance Sheet and Capital Management

Total assets and common shareholders' equity were $57.1 billion and $5.7 billion, respectively, at March 31, 2010, compared to $59.2 billion and $4.9 billion, respectively, at December 31, 2009. There were approximately 176 million common shares outstanding at March 31, 2010.  

In March 2010, Comerica fully redeemed $2.25 billion of preferred stock issued to the U.S. Treasury. The redemption was partially funded by the net proceeds from an $880 million common stock offering. Preferred stock dividends in the first quarter 2010 included cash dividends of $24 million, non-cash discount accretion of $5 million and a one-time, non-cash redemption charge of $94 million, reflecting the accelerated accretion of the remaining discount. Comerica elected not to repurchase a related warrant for 11.5 million shares of common stock issued to the U.S. Treasury.

Comerica's tangible common equity ratio was 9.68 percent at March 31, 2010, an increase of 169 basis points from December 31, 2009. The estimated Tier 1 common ratio was 9.58 percent and the estimated Tier 1 capital ratio was 10.40 percent at March 31, 2010, an increase of 140 basis points and a decrease of 206 basis points, respectively, from December 31, 2009.  The increase in the tangible common equity ratio and the estimated Tier 1 common ratio reflected the increase in common shareholders' equity from the common stock offering, while the decrease in the estimated Tier 1 capital ratio reflected the net decrease in total shareholders' equity after the redemption of the preferred stock.

Full-Year 2010 Outlook

For full-year 2010, management expects the following, based on a modestly improving economic environment.

• Management expects low single-digit loan growth from period-end March 31, 2010 to period-end December 31, 2010.  Investment securities are expected to remain at a level similar to March 31, 2010.
• Based on no increase in the Federal Funds rate, management expects an average net interest margin between 3.25 percent and 3.35 percent for full-year 2010, reflecting the benefit, compared to 2009, from improved loan pricing, lower funding costs and a lower level of excess liquidity.
• Management expects net credit-related charge-offs between $675 million and $725 million for full-year 2010. The provision for credit losses is expected to be consistent with net credit-related charge-offs.
• Management expects flat to low single-digit decline in noninterest income compared to 2009, after excluding $243 million of 2009 net securities gains.
• Management expects a low single-digit decrease in noninterest expenses compared to 2009.
• Management expects income tax expense to approximate 35 percent of income before income taxes less approximately $60 million of permanent differences related to low-income housing and bank-owned life insurance.

Business Segments

Comerica's continuing operations are strategically aligned into three major business segments: the Business Bank, the Retail Bank, and Wealth & Institutional Management.  The Finance Division also is included as a segment. The financial results below are based on the internal business unit structure of the Corporation and methodologies in effect at March 31, 2010 and are presented on a fully taxable equivalent (FTE) basis. The accompanying narrative addresses first quarter 2010 results compared to fourth quarter 2009.

The following table presents net income (loss) by business segment.

Business Bank

• Average loans decreased $1.4 billion, reflecting declines across all markets and all business lines except National Dealer Services. The decline in loans slowed in the first quarter 2010.
• Average deposits increased $806 million, reflecting increases across all markets, primarily in Global Corporate Banking, Commercial Real Estate and Mortgage Banker Finance.
• The net interest margin of 4.48 percent increased 27 basis points, primarily due to an increase in loan spreads and an increase in noninterest-bearing deposits.
• The provision for loan losses decreased $42 million, reflecting decreases in most business lines, partially offset by increases in Middle Market and Commercial Real Estate.
• Noninterest expenses decreased $3 million, primarily due to decreases in other real estate and salaries and employee benefits expense, partially offset by an increase in the provision for credit losses on lending-related commitments.

Retail Bank

• Average loans decreased $134 million, across all markets. The decline in loans slowed in the first quarter 2010.
• Average deposits decreased $302 million, primarily in the Midwest market, reflecting a decrease in higher-cost customer certificates of deposit, partially offset by an increase in money market and NOW deposits.
• The net interest margin of 3.18 percent increased 16 basis points, due to an increase in loan spreads and an increase in deposit spreads related to maturing higher-cost customer certificates of deposit and an increase in NOW balances.
• The provision for loan losses decreased $5 million.
• Noninterest income decreased $4 million, primarily due to decreased service charges on deposit accounts.
• Noninterest expenses decreased $7 million, primarily due to decreases in salaries and employee benefits expense and other real estate expense.

Wealth and Institutional Management

• Average loans increased $43 million.
• Average deposits decreased $58 million, primarily in the Western market, reflecting decreases in noninterest-bearing deposits, money market deposits and higher-cost customer certificates of deposit, partially offset by an increase in NOW deposits.
• The net interest margin of 3.53 percent increased three basis points, primarily due to increases in loan and deposit spreads.
• The provision for loan losses decreased $7 million.
• Noninterest expenses decreased $3 million, primarily due to a decrease in salaries and employee benefits expense.

Geographic Market Segments

Comerica also provides market segment results for four primary geographic markets: Midwest, Western, Texas and Florida.  In addition to the four primary geographic markets, Other Markets and International are also reported as market segments.  The financial results below are based on methodologies in effect at March 31, 2010 and are presented on a fully taxable equivalent (FTE) basis. The accompanying narrative addresses first quarter 2010 results compared to fourth quarter 2009.

The following table presents net income (loss) by market segment.

Midwest Market

• Average loans decreased $479 million, reflecting declines across most business lines. The decline in loans slowed in the first quarter 2010.
• Average deposits decreased $132 million, due to a decrease in the Retail Bank, partially offset by an increase in Global Corporate Banking.
• The net interest margin of 4.86 percent increased 13 basis points, primarily due to an increase in loan spreads and an increase in deposit spreads related to maturing higher-cost customer certificates of deposit and an increase in money market and NOW deposits.
• The provision for loan losses decreased $20 million, primarily due to decreases in Leasing and Personal Banking.
• Noninterest income decreased $4 million, reflecting small decreases in several categories.
• Noninterest expenses decreased $8 million, due to decreases in salaries and employee benefits expense and other real estate expense, partially offset by an increase in the provision for credit losses on lending-related commitments.

Western Market

• Average loans decreased $309 million, primarily due to declines in Commercial Real Estate, Technology and Life Sciences and Middle Market.  The decline in loans slowed in the first quarter 2010.
• Average deposits increased $28 million, primarily due to increases in Commercial Real Estate and Technology and Life Sciences, partially offset by a decrease in the Financial Services Division.
• The net interest margin of 5.04 percent increased 19 basis points, primarily due to an increase in loan spreads and an increase in deposit spreads related to maturing higher-cost customer certificates of deposit and an increase in NOW balances.
• The provision for loan losses decreased $20 million, reflecting decreases in Global Corporate Banking, Commercial Real Estate, Technology and Life Sciences, National Dealer Services and Leasing, partially offset by increased provisions for Middle Market, Specialty Businesses and Personal Banking.
• Noninterest income increased $3 million, primarily due to an increase in commercial lending fees
• Noninterest expenses decreased $5 million, primarily due to decreases in other real estate expense, net occupancy expense and salaries and employee benefits expense.

Texas Market

• Average loans decreased $230 million, reflecting declines across all business lines.  The decline in loans slowed in the first quarter 2010.
• Average deposits increased $220 million, primarily due to an increase in Global Corporate Banking.
• The net interest margin of 4.79 percent increased 33 basis points, primarily due to an increase in loan and deposit spreads and the benefit provided by an increase in noninterest-bearing and NOW deposits.
• The provision for loan losses decreased $3 million, due to declines in Middle Market and Energy Lending, partially offset by an increase in Commercial Real Estate.
• Noninterest income decreased $3 million, partially due to a decrease in commercial lending fees.

Florida Market

• Average loans decreased $37 million, primarily due to a decrease in Middle Market.  The decline in loans slowed in the first quarter 2010.
• Average deposits increased $28 million, primarily due to an increase in Global Corporate Banking.
• The net interest margin of 2.54 percent decreased three basis points.
• The provision for loan losses increased $3 million, primarily due to increases in Commercial Real Estate and Middle Market, partially offset by a decrease in Private Banking.

Conference Call and Webcast

Comerica will host a conference call to review first quarter 2010 financial results at 7 a.m. CT Wednesday, April 21, 2010. Interested parties may access the conference call by calling (800) 309-2262 or (706) 679-5261 (event ID No. 63304761). The call and supplemental financial information can also be accessed on the Internet at www.comerica.com.  A replay will be available approximately two hours following the conference call through April 30, 2010. The conference call replay can be accessed by calling (800) 642-1687 or (706) 645-9291 (event ID No. 63304761). A replay of the Webcast can also be accessed via Comerica's "Investor Relations" page at www.comerica.com.

Comerica Incorporated is a financial services company headquartered in Dallas, Texas, and strategically aligned by three major business segments: the Business Bank, the Retail Bank, and Wealth & Institutional Management. Comerica focuses on relationships and helping people and businesses be successful. In addition to Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico.

This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding Comerica's results of operations or financial position.  Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconcilement to the comparable GAAP financial measure, can be found in this press release.  These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Forward-looking Statements

Any statements in this news release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as "anticipates," "believes," "feels," "expects," "estimates," "seeks," "strives," "plans," "intends," "outlook," "forecast," "position," "target," "mission," "assume," "achievable," "potential," "strategy," "goal," "aspiration," "outcome," "continue," "remain," "maintain," "trend," "objective" and variations of such words and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "might," "can," "may" or similar expressions, as they relate to Comerica or its management, are intended to identify forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of Comerica's management based on information known to Comerica's management as of the date of this news release and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of Comerica's management for future or past operations, products or services, and forecasts of Comerica's revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries, estimates of credit trends and global stability. Such statements reflect the view of Comerica's management as of this date with respect to future events and are subject to risks and uncertainties. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, Comerica's actual results could differ materially from those discussed.  Factors that could cause or contribute to such differences are further economic downturns, changes in the pace of an economic recovery and related changes in employment levels, changes in real estate values, fuel prices, energy costs or other events that could affect customer income levels or general economic conditions, the effects of recently enacted legislation, actions taken by or proposed by the U.S. Department of Treasury, the Board of Governors of the Federal Reserve System, the Texas Department of Banking and the Federal Deposit Insurance Corporation, legislation enacted in the future, and the impact and expiration of such legislation and regulatory actions, the effects of war and other armed conflicts or acts of terrorism, the effects of natural disasters including, but not limited to, hurricanes, tornadoes, earthquakes, fires, droughts and floods, the disruption of private or public utilities, the implementation of Comerica's strategies and business models, management's ability to maintain and expand customer relationships, changes in customer borrowing, repayment, investment and deposit practices, management's ability to retain key officers and employees, changes in the accounting treatment of any particular item, the impact of regulatory examinations, declines or other changes in the businesses or industries in which Comerica has a concentration of loans, including, but not limited to, the automotive production industry and the real estate business lines, the anticipated performance of any new banking centers, the entry of new competitors in Comerica's markets, changes in the level of fee income, changes in applicable laws and regulations, including those concerning taxes, banking, securities and insurance, changes in trade, monetary and fiscal policies, including the interest rate policies of the Board of Governors of the Federal Reserve System, fluctuations in inflation or interest rates, changes in general economic, political or industry conditions and related credit and market conditions, the interdependence of financial service companies and adverse conditions in the stock market. Comerica cautions that the foregoing list of factors is not exclusive. For discussion of factors that may cause actual results to differ from expectations, please refer to our filings with the Securities and Exchange Commission. In particular, please refer to "Item 1A. Risk Factors" beginning on page 11 of Comerica's Annual Report on Form 10-K for the year ended December 31, 2009. Forward-looking statements speak only as of the date they are made. Comerica does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. For any forward-looking statements made in this news release or in any documents, Comerica claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.