Comerica Inc.'s (CMA) first-quarter net income plunged 92% on rising credit costs and falling interest income.

Net interest margin, the difference between what banks pay in interest and receive from loans, fell to 2.53% from 3.22% as interest rates continue to fall.

Meanwhile, Chairman and Chief Executive Ralph W. Babb Jr. said the company intends to redeem the $2.25 billion in preferred stock bought by the Treasury Department when the economic environment allows it. He cited strong capital levels, rising deposits and a 5% work force reduction in the quarter as signs the company is "well-positioned" to weather the economic downturn.

Regional banks, like Comerica, are tied to the housing market and are more dependent on an improvement in the economy, as the firms derive significant loan revenue from small businesses and local construction. Weak jobs reports have been particularly damaging for regional banks including Dallas-based Comerica, which has banking units in Michigan, Arizona, Florida and California. Those four states are among the hardest hit in the recession in the wake of the housing bubble.

The company reported net income of $9 million, down from $109 million. On a per-share basis, which includes preferred-stock divideds, the company posted a 16-cent loss, compared with prior-year earnings of 73 cents.

Revenue decreased 15% to $607 million.

Analysts polled by Thomson Reuters expected a per-share loss of 9 cents on revenue of $625 million.

Comerica's credit-loss provision was $203 million, up 28% from a year ago and 5.7% from the fourth quarter. Net loan charge-offs - loans the bank doesn't think are collectible - rose to 1.26% of average total loans from 1.04% and 0.85%, respectvely. Nonperforming assets - those near default - climbed to 2.2% from 1.94% and 1.07% a year ago.

Tangible common equity, which measures how much of a bank's hard assets its common shareholders actually own, was 7.27%, compared with 7.21% and 7.62%, respectively.

Shares closed Monday at $18.67 and were inactive premarket. The stock is down two-thirds since September.

    -By John Kell and Mike Barris, Dow Jones Newswires, 201-938-5285, john.kell@dowjones.com