Comerica Reports First Quarter 2012 Results Net Income of $130 Million Up 36 Percent From Fourth Quarter 2011

Average Total Loans Increased - Driven by a $1.2 Billion, 5 Percent Increase in Commercial Loans

Customer-Driven Fee Income Increased 6 Percent

DALLAS, April 17, 2012 /PRNewswire/ -- Comerica Incorporated (NYSE: CMA) today reported first quarter 2012 net income of $130 million, an increase of $34 million compared to $96 million for the fourth quarter 2011.

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(dollar amounts in millions, except per share data)

1st Qtr '12


4th Qtr '11


1st Qtr '11

Net interest income

$

443



$

444



$

395


Provision for loan losses

23



19



49


Noninterest income

206



182



207


Noninterest expenses

448



478


(a)

415


Provision for income taxes

48



33



35








Net income

130



96



103








Net income attributable to common shares

129



95



102








Diluted income per common share

0.66



0.48


(a)

0.57








Average diluted shares (in millions)

196



197



178








Tier 1 common capital ratio (c)

10.33

%

(b)

10.37

%


10.35

%

Tangible common equity ratio (c)

10.21



10.27



10.43




(a)

Included restructuring expenses of $37 million ($23 million, after tax; $0.12 per diluted share) in fourth quarter 2011, associated with the acquisition of Sterling on July 28, 2011.

(b)

March 31, 2012 ratio is estimated.

(c)

See Reconciliation of Non-GAAP Financial Measures.

"We were pleased by the continued growth in average total loans in the first quarter, driven by a $1.2 billion, or 5 percent, increase in average commercial loans," said Ralph W. Babb Jr., chairman and chief executive officer. "The increase in average commercial loans, when compared to the fourth quarter of 2011, was broad-based, across a majority of business lines and all major markets.

"Noninterest income increased $24 million, driven by a $10 million, or 6 percent, increase in customer-driven fees, offsetting the headwinds of regulatory reform.

"We continue to approach capital management from a position of strength," said Babb. "As we announced on March 14, 2012, the Federal Reserve did not object to our capital plan and the capital distributions contemplated in the plan. The capital plan, which was approved by our board of directors, provides for up to $375 million in equity repurchases from the first quarter 2012 through the first quarter 2013. We had $33 million in equity repurchases under the share repurchase program in the first quarter 2012. A dividend proposal that would increase the quarterly dividend 50 percent, from 10 cents per share to 15 cents per share, will be considered by our board at its next meeting on April 24, 2012."

First Quarter 2012 Highlights Compared to Fourth Quarter 2011

  • Net income of $130 million, or $0.66 per fully diluted share, increased 36 percent compared to fourth quarter 2011.
  • Average total loans increased $815 million, or 2 percent, primarily reflecting an increase of $1.2 billion, or 5 percent, in commercial loans, partially offset by a decrease of $352 million, or 3 percent, in commercial real estate loans (commercial mortgage and real estate construction loans). The increase in commercial loans was broad-based, primarily driven by increases in National Dealer Services, Energy, Global Corporate Banking, Middle Market Banking, and Technology and Life Sciences.
  • Period-end loans increased $333 million, or 1 percent, from December 31, 2011 to March 31, 2012, primarily reflecting an increase of $644 million, or 3 percent, in commercial loans, partially offset by a $276 million, or 2 percent, decrease in commercial real estate loans. The increase in period-end commercial loans was primarily driven by increases in National Dealer Services, Middle Market Banking, Global Corporate Banking and Energy, partially offset by decreases in Mortgage Banker Finance and Small Business Banking.
  • Average deposits increased $532 million, or 1 percent, primarily reflecting an increase of $461 million in noninterest-bearing deposits. Period end deposits increased $1.5 billion from December 31, 2011 to a record $49.3 billion at March 31, 2012, while funding costs continued to decline. The increase in average deposits primarily reflected increases in Global Corporate Banking, the Financial Services Division, Technology and Life Sciences, and Private Banking, partially offset by decreases in Small Business Banking and Energy.
  • Credit quality continued to improve in the first quarter 2012. Net credit-related charge-offs of $45 million decreased for the eleventh consecutive quarter. The provision for loan losses was $23 million in the first quarter 2012, compared to $19 million in the fourth quarter 2011.
  • Noninterest income increased to $206 million in the first quarter 2012, compared to $182 million for the fourth quarter 2011. The $24 million increase in large part resulted from increases in customer-driven fee income categories.
  • Noninterest expenses decreased $30 million to $448 million in the first quarter 2012, compared to the fourth quarter 2011. The decrease was primarily due to a $37 million decrease in merger and restructuring charges related to the Sterling acquisition.
  • As previously announced, the Federal Reserve completed its review of Comerica's 2012 Capital Plan in the first quarter 2012 and did not object to the capital distributions contemplated in the plan, including up to $375 million of equity repurchases in the five-quarter period ending March 31, 2013 and a 50 percent increase in the quarterly dividend. Comerica repurchased 1.1 million shares of common stock under the share repurchase program in the first quarter 2012.

Net Interest Income














(dollar amounts in millions)

1st Qtr '12


4th Qtr '11


1st Qtr '11

Net interest income

$

443



$

444



$

395








Net interest margin

3.19

%


3.19

%


3.25

%







Selected average balances:






Total earning assets

$

56,186



$

55,676



$

49,347


Total investment securities

9,889



9,781



7,311


Total loans

42,269



41,454



39,551








Total deposits

48,311



47,779



40,598


Total noninterest-bearing deposits

19,637



19,176



15,459


  • Net interest income of $443 million in the first quarter 2012 decreased $1 million compared to the fourth quarter 2011, as the benefit from a $510 million increase in average earning assets ($7 million) and lower funding costs ($2 million) was offset by lower loan yields ($5 million) and one less day in the quarter ($5 million). The lower loan yields reflected a shift in the average loan portfolio mix, largely due to the decrease in average commercial real estate loans and the increase in average commercial loans. Accretion of the purchase discount on the acquired Sterling loan portfolio was $25 million in the first quarter 2012, compared to $26 million in the fourth quarter 2011. For the remainder of 2012, $35 million to $45 million of accretion is expected to be recognized.
  • Average earning assets increased $510 million in the first quarter 2012 compared to the fourth quarter 2011, primarily reflecting increases of $815 million in average loans and $108 million in average investment securities available-for-sale, partially offset by a $417 million decrease in average Federal Reserve Bank deposits.
  • Average deposits increased $532 million in the first quarter 2012, compared to the fourth quarter 2011, primarily due to a $461 million increase in average noninterest-bearing deposits.

Noninterest Income

Noninterest income was $206 million for the first quarter 2012, compared to $182 million for the fourth quarter 2011. The $24 million increase primarily resulted from a $10 million, or 6 percent, increase in customer-driven fee income and a $9 million increase in net securities gains. The increase in customer-driven fee income included increases in service charges on deposit accounts ($4 million), investment banking fees ($3 million), fiduciary income ($2 million) and commercial lending fees ($2 million). The increase in net securities gains reflected an increase of $4 million in gains from redemptions of auction-rate securities in the first quarter 2012, when compared to fourth quarter 2011, and $5 million in charges in the fourth quarter 2011 related to a derivative contract tied to the conversion rate of Visa Class B shares.

Noninterest Expenses

Noninterest expenses totaled $448 million in the first quarter 2012, a decrease of $30 million compared to $478 million in the fourth quarter 2011. The decrease in noninterest expenses was primarily due to decreases in merger and restructuring charges ($37 million), net occupancy expense ($6 million), and salaries expense ($4 million), partially offset by increases in employee benefits expense ($8 million), primarily due to an increase in pension expense, and litigation and legal expenses ($5 million), included in other noninterest expenses. The decrease in net occupancy expense in part reflected savings related to increased efficiency in space utilization. Restructuring charges of approximately $40 million are expected to be incurred for the remainder of 2012, with $5 million to $10 million expected in second quarter 2012.

Credit Quality














(dollar amounts in millions)

1st Qtr '12


4th Qtr '11


1st Qtr '11

Net credit-related charge-offs

$

45



$

60



$

101


Net credit-related charge-offs/Average total loans

0.43

%


0.57

%


1.03

%







Provision for loan losses

$

23



$

19



$

49


Provision for credit losses on lending-related commitments

(1)



(1)



(3)


Total provision for credit losses

22



18



46








Nonperforming loans (a)

856



887



1,030


Nonperforming assets (NPAs) (a)

923



981



1,104


NPAs/Total loans and foreclosed property

2.14

%


2.29

%


2.81

%







Loans past due 90 days or more and still accruing

$

50



$

58



$

72








Allowance for loan losses

704



726



849


Allowance for credit losses on lending-related commitments (b)

25



26



32


Total allowance for credit losses

729



752



881








Allowance for loan losses/Total loans (c)

1.64

%


1.70

%


2.17

%

Allowance for loan losses/Nonperforming loans

82



82



82




(a)

Excludes loans acquired with credit impairment.

(b)

Included in "Accrued expenses and other liabilities" on the consolidated balance sheets.

(c)

Reflects the impact of acquired loans, which were initially recorded at fair value, with no related allowance for loan losses.

"Credit quality continued to improve in the first quarter," said Babb. "Net charge-offs, which decreased $15 million to $45 million in the first quarter, are at the lowest level since the third quarter of 2007. The provision for loan losses was relatively stable. Our expectation is that we will continue to see the provision and net-charge offs at these levels for the remainder of the year assuming the current level of economic growth is sustained."

  • Net credit-related charge-offs decreased $15 million to $45 million in the first quarter 2012, from $60 million in the fourth quarter 2011. The decrease in net credit-related charge-offs was broad-based, spread across many business lines.
  • The provision for loan losses was $23 million in the first quarter 2012, compared to $19 million in the fourth quarter 2011. The change in the provision for loan losses reflects increased loan volumes.
  • Internal watch list loans continued the downward trend, declining $261 million in the first quarter 2012, to $4.2 billion at March 31, 2012. Nonperforming assets decreased $58 million to $923 million at March 31, 2012.
  • During the first quarter 2012, $69 million of borrower relationships over $2 million were transferred to nonaccrual status, a decrease of $30 million from the fourth quarter 2011.
  • The allowance for loan losses to total loans ratio was 1.64 percent and 1.70 percent at March 31, 2012 and December 31, 2011, respectively.

Balance Sheet and Capital Management

Total assets and common shareholders' equity were $62.6 billion and $7.0 billion, respectively, at March 31, 2012, compared to $61.0 billion and $6.9 billion, respectively, at December 31, 2011. There were approximately 197 million common shares outstanding at March 31, 2012. Comerica repurchased $33 million of common stock (1.1 million shares) under the share repurchase program during the first quarter 2012.

The Federal Reserve completed its review of Comerica's 2012 Capital Plan in March 2012 and did not object to the capital distributions contemplated in the plan. The capital plan provides for up to $375 million in equity repurchases for the five-quarter period ending March 31, 2013. The capital plan, which was approved by Comerica's Board of Directors, further contemplates a 50 percent increase in Comerica's quarterly dividend, from 10 cents per share to 15 cents per share. The dividend proposal will be considered by the Board at its April 24, 2012 meeting. In addition, the capital plan includes the authority to redeem the remaining $25 million of trust preferred securities outstanding as of March 31, 2012.

Comerica's tangible common equity ratio was 10.21% at March 31, 2012, a decrease of 6 basis points from December 31, 2011. The estimated Tier 1 common capital ratio decreased 4 basis points, to 10.33% at March 31, 2012, from December 31, 2011.

Full-Year 2012 Outlook Compared to Full-Year 2011

For 2012, management expects the following, assuming a continuation of the current economic environment:

  • Average loans increasing moderately.
  • Net interest income increasing moderately.
  • Net credit-related charge-offs and provision for credit losses declining.
  • Noninterest income relatively stable.
  • Noninterest expenses relatively stable.
  • Effective tax rate of approximately 27 percent.

Business Segments

Comerica's operations are strategically aligned into three major business segments: the Business Bank, the Retail Bank and Wealth Management. The Finance Division is also reported 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, 2012 and are presented on a fully taxable equivalent (FTE) basis. The accompanying narrative addresses first quarter 2012 results compared to fourth quarter 2011.

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




















(dollar amounts in millions)

1st Qtr '12


4th Qtr '11


1st Qtr '11

Business Bank

$

206


89

%


$

201


94

%


$

167


93

%

Retail Bank

14


6



10


4



(2)


(1)


Wealth Management

11


5



5


2



14


8



231


100

%


216


100

%


179


100

%

Finance

(92)




(94)




(75)



Other (a)

(9)




(26)




(1)



    Total

130




$

96




$

103



(a)

Includes discontinued operations and items not directly associated with the three major business segments or the Finance Division.

Business Bank














(dollar amounts in millions)

1st Qtr '12



4th Qtr '11



1st Qtr '11


Net interest income (FTE)

$

379



$

383



$

341


Provision for loan losses

1



(4)



18


Noninterest income

81



73



77


Noninterest expenses

159



161



160


Net income

206



201



167








Net credit-related charge-offs

28



32



73








Selected average balances:






Assets

33,184



32,151



30,092


Loans

32,240



31,257



29,609


Deposits

23,997



23,296



20,084


  • Average loans increased $983 million, primarily due to increases in National Dealer Services, Energy, Global Corporate Banking, Technology and Life Sciences, and Middle Market, partially offset by a decline in Commercial Real Estate.
  • Average deposits increased $701 million, primarily due to increases in the Financial Services Division, Global Corporate Banking, and Technology and Life Sciences, partially offset by a decline in Energy.
  • Net interest income decreased $4 million, primarily due to one less day in the quarter. The benefit from increases in average loan balances and lower deposit rates was offset by an increase in net funds transfer pricing (FTP) funding costs and lower loan yields.
  • The provision for loan losses increased $5 million, primarily reflecting increases in Middle Market and Commercial Real Estate, partially offset by a decrease in Technology and Life Sciences.
  • Noninterest income increased $8 million, primarily reflecting increases in service charges on deposit accounts, commercial lending fees, warrant income and customer derivative income.

Retail Bank














(dollar amounts in millions)

1st Qtr '12



4th Qtr '11



1st Qtr '11


Net interest income (FTE)

$

167



$

176



$

139


Provision for loan losses

4



15



23


Noninterest income

42



35



42


Noninterest expenses

184



182



162


Net income (loss)

14



10



(2)








Net credit-related charge-offs

12



16



23








Selected average balances:






Assets

6,173



6,250



5,558


Loans

5,462



5,571



5,106


Deposits

20,373



20,715



17,360


  • Average loans declined $109 million, primarily due to decreases in Personal Banking and Small Business Banking.
  • Average deposits decreased $342 million, primarily due to a decrease in Small Business Banking.
  • Net interest income decreased $9 million, primarily due to a decrease in FTP funding credits, one less day in the quarter and lower loan yields, partially offset by lower deposit rates.
  • The provision for loan losses decreased $11 million, reflecting declines in both Personal Banking and Small Business Banking.
  • Noninterest income increased $7 million, primarily due to a fourth quarter 2011 charge of $5 million related to a derivative contract tied to the conversion rate of Visa Class B shares.

Wealth Management














(dollar amounts in millions)

1st Qtr '12



4th Qtr '11



1st Qtr '11


Net interest income (FTE)

$

47



$

46



$

44


Provision for loan losses

14



10



8


Noninterest income

65



55



64


Noninterest expenses

81



83



78


Net income

11



5



14








Net credit-related charge-offs

5



12



5








Selected average balances:






Assets

4,636



4,672



4,809


Loans

4,565



4,618



4,807


Deposits

3,611



3,400



2,800


  • Average loans decreased $53 million.
  • Average deposits increased $211 million, primarily reflecting an increase in Private Banking.
  • Net interest income increased $1 million, primarily due to an increase in average deposit balances.
  • The provision for loan losses increased $4 million, primarily due to an increase in the Florida market.
  • Noninterest income increased $10 million, primarily due to increases in gains on the redemption of auction-rate securities, investment banking fees and fiduciary income.

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, 2012 and are presented on a fully taxable equivalent (FTE) basis. The accompanying narrative addresses first quarter 2012 results compared to fourth quarter 2011.

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




















(dollar amounts in millions)

1st Qtr '12


4th Qtr '11


1st Qtr '11

Midwest

$

68


30

%


$

53


25

%


$

53


29

%

Western

65


28



65


30



51


28


Texas

49


21



55


26



29


16


Florida

(1)




(1)


(1)



(4)


(2)


Other Markets

38


16



32


15



38


22


International

12


5



12


5



12


7



231


100

%


216


100

%


179


100

%

Finance & Other Businesses (a)

(101)




(120)




(76)



    Total

$

130




$

96




$

103



(a)

Includes discontinued operations and items not directly associated with the geographic markets.

Midwest Market














(dollar amounts in millions)

1st Qtr '12



4th Qtr '11



1st Qtr '11


Net interest income (FTE)

$

198



$

202



$

203


Provision for loan losses

10



20



34


Noninterest income

98



85



100


Noninterest expenses

183



185



188


Net income

68



53



53








Net credit-related charge-offs

18



32



46








Selected average balances:






Assets

14,095



13,976



14,303


Loans

13,829



13,725



14,104


Deposits

19,415



19,076



18,230


  • Average loans increased $104 million, primarily due to an increase in National Dealer Services.
  • Average deposits increased $339 million, primarily due to increases in Personal Banking and the Financial Services Division.
  • Net interest income decreased $4 million, primarily due one less day in the quarter, lower loan yields, and lower net FTP funding credits, partially offset by an increase in average loan balances and lower deposit rates.
  • The provision for loan losses decreased $10 million, primarily reflecting decreases in Small Business Banking, Commercial Real Estate, Personal Banking and Global Corporate Banking, partially offset by an increase in Middle Market.
  • Noninterest income increased $13 million, primarily due to fourth quarter 2011 charges of $5 million related to a derivative contract tied to the conversion rate of Visa Class B shares and increases in investment banking fees, commercial lending fees, service charges on deposit accounts and fiduciary income.