Comerica in Dallas is continuing to deal with fallout from depressed oil prices despite what management calls "prudent behavior" from its borrowers.

The $72 billion-asset company has also been allocating more resources to other markets, notably California, to add loans and boost fee income in businesses such as card services and wealth management.

Comerica reported Tuesday that 40% of the loans in its energy book were classified as criticized on Dec. 31. At the same time, Comerica's portfolio of energy loans shrank by 14% from a year earlier to $3.1 billion, as energy borrowers stretched to pay down debt.

Comerica, which charged off $27 million of energy loans during the fourth quarter, is bracing for more of the same this year, Karen Parkhill, the company's chief financial officer, said during a conference call to discuss quarterly results.

"Because prices have dropped precipitously, particularly since year-end, we have done an analysis with oil prices remaining at $30 per barrel for the entire year," Parkhill said. She added that, based on the analysis, the company's energy reserve could rise to a "manageable" $75 million to $125 million.

Still, investors focused on the portfolio's impact on fourth-quarter earnings, which fell 13% from a year earlier to $130 million, though profit of 71 cents a share topped the average estimate of analysts polled by Bloomberg by 2 cents. It was the third straight quarter of year-over-year declines in earnings, and full-year net income fell by 10% to $535 million.

Comerica shares were off $1.11, or 3%, in midday trading.

Comerica's reserve forecast mirrors those of other big energy lenders.

Marianne Lake, JPMorgan Chase's chief financial officer, said during a conference call last week that the $2.4 trillion-asset company would be forced to add up to $750 million to its reserves if oil prices linger near $30 a barrel "for a long time."

While some industry observers, including Lake, predict that oil prices will enjoy a modest recovery starting in the second half of this year, other, more apocalyptic models forecast it dropping as low as $20.

Ralph Babb, Comerica's chairman and chief executive, made it clear during the call that he, too, remains optimistic. "Well into the cycle, we continue to feel comfortable with our energy portfolio," he said.

Outside energy, credit quality remains at Comerica was rock solid. Subtracting energy credits, nonaccrual loans totaled $206 million, or just 0.42% of total loans, on Dec. 31. The percentage increases to 0.75% when $161 million of nonaccrual energy loans are included.

"We're seeing good results outside of energy," Peter Guilfoile, Comerica's chief credit officer, said during Tuesday's conference call.

Comerica is by no means standing still in the face of the disruption to the energy marketplace.

The company has shifted resources to California, where its average loans have grown 8% over the past two years, to $16.6 billion. The company has also invested more in wealth management and card services.

Comerica also expects to see more growth in its national dealer service business line, which has been buoyed by strong automobile sales. Loans to car dealers grew 9% during 2015 to $6.2 billion.

"We are looking at [resource allocation] all the time," Curtis Farmer, Comerica's president, said on the call. "It is a constant process of reviewing our lines of business, the return on equity that are being generated by the respective businesses, and where we think we have the greatest growth opportunities."

After adjusting for a $181 million gain on the accounting treatment of a card program, Comerica's revenue rose 1.4% in 2015 compared with a year earlier to $2.7 billion for 2015. The recent 25-basis-point increase in interest rates should boost interest income by $60 million this year, Parkhill said, adding that 85% of Comerica's $49 billion loan book involves floating-rate credits.

Deposits were another bright spot, increasing 4% last year to a record $59.8 billion. Noninterest deposits jumped by 14% to $30.9 billion.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.