First Commerce Corp. said it will take an after-tax loss of $13.3 million in the third quarter because-of securities sales, a move that will push earnings per share below consensus estimates.
First Commerce, which is based in New Orleans, said it expected to report fully diluted earnings per share of 33 cents after taking a loss on its sale of $500 million in Treasury securities. The First Call consensus estimate on First Commerce for the third quarter is 78 cents.
Louisiana's largest bank, with assets of $6.3 billion, will release its third-quarter earnings on Oct. 13. First Commerce's announcement on Monday came only days after another southeastern bank, Memphis-based Union Planters Corp., said it would take a number of special charges over the next few quarters, including one totaling $4.5 million to cover losses on the sale of $425 million in investment securities.
First Commerce also took a $4.3 million after-tax loss on securities sales in the second quarter.
"For some time, they've had an overliquid, limited-duration portfolio and they've had plans to lengthen maturities and restructure it a bit," said Henry J. Coffey Jr., banking analyst with J.C. Bradford & Co. in Nashville. "The bad news is, they're doing it in a rising-rate environment, so every time they sell securities they have to book losses."
First Commerce said the securities it sold this time had an average maturity of 2.18 years and an average yield of 4.58%; those purchased had an average maturity of 2.51 years and an average yield of 6.77%. The impact of the change on First Commerce's total securities portfolio will be to improve the yield by 37 basis points and to increase the average maturity by less than one month to 3.62 years.
"In response to rising interest rates, we're repositioning a certain portion of our investment portfolio to improve net interest income in future periods by attempting to keep the portfolio yield closer to the market," said chief administrative officer Michael A. Flick.
First Commerce also said its third-quarter earnings will be affected by two other items: an $800,000 after-tax writedown on the sale of some 30-year, fixedrate mortgage loans, and a negative loan-loss provision expected to be "significantly smaller" than the $4.8 million pretax negative provision reported in the second quarter.