Comerica Reports Second Quarter 2013 Net Income Of $143 Million Earnings Per Share 76 Cents, Up 9 Percent from First Quarter 2013

Average Total Loan Growth Continues - Driven by a $337 Million Increase in Commercial Loans

Noninterest Income Up $8 Million, or 5 Percent, from First Quarter 2013

Share Repurchases, Combined with Dividends, Returned 72 Percent of Second Quarter 2013 Net Income to Shareholders

DALLAS, July 16, 2013 /PRNewswire/ -- Comerica Incorporated (NYSE: CMA) today reported second quarter 2013 net income of $143 million, compared to $134 million for the first quarter 2013. Earnings per diluted share were 76 cents for the second quarter 2013, compared to 70 cents for the first quarter 2013.

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(dollar amounts in millions, except per share data)

2nd Qtr '13


1st Qtr '13


2nd Qtr '12


Net interest income (a)

$

414



$

416



$

435



Provision for credit losses

13



16



19



Noninterest income

208



200



211



Noninterest expenses

416



416



434


(b)

Provision for income taxes

50



50



50










Net income

143



134



143










Net income attributable to common shares

141



132



141










Diluted income per common share

0.76



0.70



0.73










Average diluted shares (in millions)

187



187



194










Tier 1 common capital ratio (d)

10.41

%

(c)

10.37

%


10.39

%


Basel III Tier 1 common capital ratio (d) (e)

10.1



10.1



10.0



Tangible common equity ratio (d)

10.04



9.86



10.31





(a)

Included accretion of the purchase discount on the acquired loan portfolio of $7 million ($4 million, after tax), $11 million ($7 million, after tax) and $18 million ($11 million, after tax) in the second quarter 2013, first quarter 2013 and second quarter 2012, respectively.

(b)

Included restructuring expenses of $8 million ($5 million, after tax), associated with the 2011 acquisition of Sterling Bancshares, Inc.

(c)

June 30, 2013 ratio is estimated.

(d)

See Reconciliation of Non-GAAP Financial Measures.

(e)

Estimated ratios based on the standardized approach in the final rule and assuming the election to exclude most elements of accumulated other comprehensive income (AOCI).

 

"Average loan growth and fee growth, expense control and continued solid credit quality, contributed to our 9 percent increase in earnings per share in the second quarter," said Ralph W. Babb Jr., chairman and chief executive officer. "Average total loans grew $276 million compared to the first quarter, and reflected an increase of $337 million, or 1 percent, in commercial loans. Our Middle Market business lines across all three of our major geographies were a key contributor to our loan growth in the second quarter. Overall, customers remain cautious, but relatively more positive, in this slow growing economy.

"Economic indicators in Texas and California are positive, with job growth in both markets above the U.S. average, while increased auto production and sales have strengthened the Michigan economy. We are well positioned in our primary markets, where our relationship-based approach and experience combine to make a positive difference for our customers.

"Our capital position continues to be a source of strength to support our growth. We repurchased 1.9 million shares in the second quarter under the share repurchase program and combined with dividends, returned 72 percent of second quarter net income to shareholders."

Second Quarter 2013 Compared to First Quarter 2013

  • Average total loans increased $276 million, or 1 percent, to $44.9 billion, primarily reflecting an increase of $337 million, or 1 percent, in commercial loans, partially offset by a decrease of $67 million, or 1 percent, in combined commercial mortgage and real estate construction loans. The increase in commercial loans was primarily driven by increases in general Middle Market and National Dealer Services, partially offset by a decrease in Corporate Banking. Period-end total loans increased $392 million to $45.5 billion, primarily reflecting a $678 million increase in commercial loans, partially offset by a $227 million decrease in combined commercial mortgage and real estate construction loans.
  • Average investment securities available-for-sale decreased $228 million, or 2 percent, to $9.8 billion, primarily reflecting a slowing of reinvestments related to paydowns on mortgage-backed investment securities. Period-end investment securities decreased $655 million, or 6 percent, to $9.6 billion, primarily reflecting both a slowing of reinvestments related to paydowns and a $219 million decrease in net unrealized gains on mortgage-backed investment securities due to rising interest rates during the period.
  • Average total deposits increased $756 million, or 1 percent, to $51.4 billion, primarily reflecting increases of $570 million, or 3 percent, in noninterest-bearing deposits and $250 million, or 1 percent, in money market and interest-bearing checking accounts. The increase in average noninterest-bearing deposits primarily reflected increases in Corporate Banking and the Financial Services Division. Period-end total deposits decreased $862 million to $51.3 billion, reflecting a decrease of $907 million in noninterest-bearing deposits.
  • Net interest income remained relatively stable at $414 million in the second quarter 2013, compared to $416 million in the first quarter 2013, as one additional day in the second quarter and loan growth partially offset a decrease in accretion and lower loan yields due to shifts in the loan portfolio mix.
  • The provision for credit losses decreased $3 million to $13 million in the second quarter 2013, compared to $16 million in the first quarter 2013, reflecting strong credit quality.
  • Noninterest income increased $8 million to $208 million in the second quarter 2013, compared to $200 million in the first quarter 2013, reflecting broad-based growth in several categories as well as an annual incentive received from our third-party credit card provider.
  • Noninterest expenses of $416 million in the second quarter 2013 were unchanged compared to the first quarter 2013, primarily reflecting a $6 million decrease in salaries expense, offset by a $4 million write-down on other foreclosed assets and a $2 million increase in outside processing fee expense.
  • The provision for income taxes was stable at $50 million for the second quarter 2013. The effective tax rate decreased to 25.8 percent for the second quarter 2013, compared to 27.1 percent in the first quarter 2013, primarily reflecting a $2 million net benefit in the second quarter 2013 from certain discrete tax items.
  • Comerica repurchased 1.9 million shares of common stock ($72 million) in the second quarter 2013 under the share repurchase program. Combined with dividends, 72 percent of net income was returned to shareholders in the second quarter 2013.
  • Capital remained solid at June 30, 2013, as evidenced by an estimated Tier 1 common capital ratio of 10.41 percent and a tangible common equity ratio of 10.04 percent.

Net Interest Income













(dollar amounts in millions)

2nd Qtr '13


1st Qtr '13


2nd Qtr '12

Net interest income

$

414



$

416



$

435








Net interest margin

2.83

%


2.88

%


3.10

%







Selected average balances:






Total earning assets

$

58,928



$

58,607



$

56,652


Total loans

44,893



44,617



43,228


Total investment securities

9,793



10,021



9,728


Federal Reserve Bank deposits (excess liquidity)

3,968



3,669



3,463














Total deposits

51,448



50,692



48,672


Total noninterest-bearing deposits

22,076



21,506



20,128




  • Net interest income of $414 million in the second quarter 2013 decreased $2 million compared to the first quarter 2013.
    • One additional day in the second quarter 2013 increased net interest income by $4 million.
    • An increase in loan volumes increased net interest income by $2 million.
    • A decrease in funding costs increased net interest income by $1 million, primarily reflecting the maturity of debt in the second quarter 2013 and a decline in the rate paid on total average interest-bearing deposits of 2 basis points.
    • A decrease in the accretion of the purchase discount on the acquired loan portfolio decreased net interest income by $4 million.
    • Lower loan yields due to shifts in the loan portfolio mix decreased net interest income by $4 million.
    • Lower reinvestment yields on mortgage-backed investment securities and a decrease in average balances decreased net interest income by $1 million.
  • Average earning assets increased $321 million in the second quarter 2013, compared to the first quarter 2013, primarily reflecting increases of $299 million in excess liquidity and $276 million in average loans, partially offset by a $228 million decrease in average investment securities available-for-sale.
  • The net interest margin of 2.83 percent decreased 5 basis points compared to the first quarter 2013. The decrease in net interest margin was primarily due to lower accretion on the acquired loan portfolio (3 basis points), lower loan yields (2 basis points) and an increase in excess liquidity (1 basis point), partially offset by lower funding costs (1 basis point).

Noninterest Income
Noninterest income increased $8 million to $208 million for the second quarter 2013, compared to $200 million for the first quarter 2013. Customer-driven fee income increased $4 million and noncustomer-driven income increased $4 million. The increase in customer-driven fee income was primarily due to a $3 million increase in customer derivative income and broad-based increases across most customer-driven fee income categories, partially offset by a $2 million decrease in service charges on deposit accounts from high first quarter 2013 levels. The increase in noncustomer-driven income was primarily due to a $6 million annual incentive received in the second quarter 2013 from Comerica's third-party credit card provider, partially offset by a second quarter 2013 securities loss of $2 million.

Noninterest Expenses
Noninterest expenses of $416 million in the second quarter 2013 were unchanged compared to the first quarter 2013, as a $6 million decrease in salaries expense was offset by a $4 million write-down on other foreclosed assets and a $2 million increase in outside processing fee expense. The decrease in salaries expense was primarily due to decreases in incentive and stock based compensation and lower staffing levels, partially offset by the impact of merit increases and one additional day in the quarter.

Credit Quality
"Credit quality was solid in the second quarter, with net charge-offs of 15 basis points, which is the lowest level since the first quarter of 2007," said Babb. "Nonaccrual loans also decreased, as did watch list loans. These positive metrics are indicative of our strong credit culture and have resulted in a $3 million decrease in the provision for credit losses."













(dollar amounts in millions)

2nd Qtr '13


1st Qtr '13


2nd Qtr '12

Net credit-related charge-offs

$

17



$

24



$

45


Net credit-related charge-offs/Average total loans

0.15

%


0.21

%


0.42

%







Provision for credit losses

$

13



$

16



$

19








Nonperforming loans (a)

471



515



747


Nonperforming assets (NPAs) (a)

500



555



814


NPAs/Total loans and foreclosed property

1.10

%


1.23

%


1.85

%







Loans past due 90 days or more and still accruing

$

20



$

25



$

43








Allowance for loan losses

613



617



667


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

36



36



36


Total allowance for credit losses

649



653



703








Allowance for loan losses/Period-end total loans

1.35

%


1.37

%


1.52

%

Allowance for loan losses/Nonperforming loans

130



120



89





(a) Excludes loans acquired with credit impairment.

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

  • Nonaccrual loans decreased $45 million, to $449 million at June 30, 2013, compared to $494 million at March 31, 2013.
  • Internal watch list loans decreased $224 million, to $2.9 billion at June 30, 2013, compared to $3.1 billion at March 31, 2013.
  • During the second quarter 2013, $37 million of borrower relationships over $2 million were transferred to nonaccrual status, an increase of $3 million from the first quarter 2013.

Balance Sheet and Capital Management
Total assets and common shareholders' equity were $62.9 billion and $6.9 billion, respectively, at June 30, 2013, compared to $64.9 billion and $7.0 billion, respectively, at March 31, 2013. The $2.0 billion decrease in total assets primarily reflected decreases of $1.9 billion in excess liquidity and $655 million in investment securities available-for-sale, partially offset by a $392 million increase in loans. Common shareholders' equity included a $128 million increase in accumulated other comprehensive loss, primarily reflecting a temporary unrealized loss on investment securities available-for-sale of $142 million, net of tax, largely due to the impact of rising rates on the fair value of mortgage-backed investment securities.

There were approximately 185 million common shares outstanding at June 30, 2013. Diluted weighted average shares of 187 million at June 30, 2013 were unchanged compared to March 31, 2013, as the impact of the repurchase of $72 million of common stock (1.9 million shares) under the share repurchase program during the second quarter 2013 was offset by the impact of an increase in share dilution from options and warrants due to an increase in Comerica's stock price. Combined with the dividend of $0.17 per share, share repurchases under the share repurchase program and dividends returned 72 percent of second quarter 2013 net income to shareholders.

Comerica's tangible common equity ratio was 10.04 percent at June 30, 2013, an increase of 18 basis points from March 31, 2013. The estimated Tier 1 common capital ratio increased 4 basis points, to 10.41 percent at June 30, 2013, from March 31, 2013. The estimated Tier 1 common ratio under fully phased-in Basel III capital rules was 10.1 percent percent at June 30, 2013, assuming the election to exclude most elements of AOCI. If the option to exclude most elements of AOCI is not elected, the estimated ratio would be 9.3 percent.

Full-Year 2013 Outlook
For full-year 2013, management expects the following compared to full-year 2012, assuming a continuation of the current slow growing economic environment:

  • Continued growth in average loans at a slower pace, with economic uncertainty impacting demand and a continued focus on maintaining pricing and structure discipline in a competitive environment.
  • Lower net interest income, reflecting both a decline in purchase accounting accretion and the effect of continued low rates. Loan growth should partially offset the impact of low rates on loans and securities. Purchase accounting accretion is expected to be $25 million to $30 million for full-year 2013, compared to $71 million in full-year 2012.
  • Provision for credit losses declining, reflecting lower nonperforming loans and net charge-offs, partially offset by loan growth. The provision for credit losses for the second half of 2013 is expected to be similar to the provision for the first six months of 2013.
  • Customer-driven noninterest income relatively stable, reflecting cross-sell initiatives partially offset by regulatory pressures on certain fees. Outlook does not include expectations for non-customer driven income.
  • Lower noninterest expense, reflecting further cost savings due to tight expense control and no restructuring expenses. Full-year 2012 included restructuring expenses of $35 million.
  • Effective tax rate of approximately 27.5 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 June 30, 2013 and are presented on a fully taxable equivalent (FTE) basis. The accompanying narrative addresses second quarter 2013 results compared to first quarter 2013.

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



















(dollar amounts in millions)

2nd Qtr '13


1st Qtr '13


2nd Qtr '12

Business Bank

$

207


85

%


$

198


85

%


$

206


84

%

Retail Bank

11


5



10


4



19


8


Wealth Management

24


10



25


11



20


8



242


100

%


233


100

%


245


100

%

Finance

(98)




(98)




(92)



Other (a)

(1)




(1)




(10)



     Total

$

143




$

134




$

143



(a) Includes items not directly associated with the three major business segments or the Finance Division.

 

Business Bank













(dollar amounts in millions)

2nd Qtr '13



1st Qtr '13



2nd Qtr '12


Net interest income (FTE)

$

372



$

375



$

379


Provision for credit losses

10



20



12


Noninterest income

80



77



83


Noninterest expenses

147



146



151


Net income

207



198



206








Net credit-related charge-offs

11



16



26








Selected average balances:






Assets

36,017



35,780



34,373


Loans

34,955



34,753



33,449


Deposits

25,987



25,514



24,143




  • Average loans increased $202 million, primarily reflecting increases in National Dealer Services and general Middle Market, partially offset by a decrease in Corporate Banking.
  • Average deposits increased $473 million, primarily reflecting increases in Corporate Banking and Commercial Real Estate.
  • Net interest income decreased $3 million, primarily due to a decrease in accretion of the purchase discount on the acquired loan portfolio, lower loan yields and a decrease in funds transfer pricing (FTP) credits, partially offset by the benefit provided by an increase in average loans and one additional day in the quarter.
  • The provision for credit losses decreased $10 million, primarily reflecting a decrease in Middle Market, partially offset by an increase in Mortgage Banker Finance. The decrease in Middle Market primarily reflected decreases in Technology and Life Sciences, Environmental Services and Energy.
  • Noninterest income increased $3 million, primarily due to an increase in income from principal investing and warrants and small increases in several other noninterest income categories, partially offset by a decrease in service charges on deposit accounts from high first quarter 2013 levels.
  • Noninterest expenses increased $1 million, primarily due to a $4 million write-down on other foreclosed assets and an increase in outside processing fee expense, partially offset by a decrease in salaries expense.

Retail Bank













(dollar amounts in millions)

2nd Qtr '13



1st Qtr '13



2nd Qtr '12


Net interest income (FTE)

$

154



$

155



$

161


Provision for credit losses

5



6



3


Noninterest income

46



41



47


Noninterest expenses

178



175



177


Net income

11



10



19








Net credit-related charge-offs

4



8



9








Selected average balances:






Assets

5,962



5,973



5,945


Loans

5,271



5,276



5,250


Deposits

21,241



21,049



20,524




  • Average loans decreased $5 million, primarily due to a decrease in Retail Banking, partially offset by an increase in Small Business.
  • Average deposits increased $192 million, primarily due to increases in Retail Banking and Small Business.
  • Noninterest income increased $5 million, primarily due to a $6 million annual incentive received in the second quarter 2013 from Comerica's third-party credit card provider, partially offset by a second quarter 2013 securities loss of $2 million.
  • Noninterest expense increased $3 million, primarily due to small increases in several categories.

Wealth Management













(dollar amounts in millions)

2nd Qtr '13



1st Qtr '13



2nd Qtr '12


Net interest income (FTE)

$

46



$

46



$

46


Provision for credit losses

(3)



(6)



2


Noninterest income

65



65



66


Noninterest expenses

77



79



79


Net income

24



25



20








Net credit-related charge-offs

2





10








Selected average balances:






Assets

4,828



4,738



4,604


Loans

4,667



4,588



4,529


Deposits

3,701



3,682



3,640





  • Average loans increased $79 million, primarily due to an increase in Private Banking.
  • Noninterest expenses decreased $2 million, primarily due to small decreases in several categories.

Geographic Market Segments
Comerica also provides market segment results for three primary geographic markets: Michigan, California and Texas. In addition to the three primary geographic markets, Other Markets is also reported as a market segment. Other Markets includes Florida, Arizona, the International Finance division and businesses that have a significant presence outside of the three primary geographic markets. The tables below present the geographic market results based on the methodologies in effect at June 30, 2013 and are presented on a fully taxable equivalent (FTE) basis.

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



















(dollar amounts in millions)

2nd Qtr '13


1st Qtr '13


2nd Qtr '12

Michigan

$

77


32

%


$

77


34

%


$

81


33

%

California

65


27



56


24



66


27


Texas

46


19



44


18



49


20


Other Markets

54


22



56


24



49


20



242


100

%


233


100

%


245


100

%

Finance & Other (a)

(99)




(99)




(102)



     Total

$

143




$

134




$

143



(a) Includes items not directly associated with the geographic markets.

  • Average loans increased $370 million and $108 million in California and Texas, respectively, and decreased $52 million in Michigan. The increase in California primarily reflected increases in National Dealer Services and Commercial Real Estate. In Texas, the increase was primarily due to an increase in general Middle Market.
  • Average deposits increased $315 million and $228 million in California and Texas, respectively, and decreased $96 million in Michigan. The increase in California primarily reflected increases in general Middle Market and Corporate Banking. In Texas, the increase was primarily due to increases in Corporate Banking, Technology and Life Sciences, and Energy.
  • The provision for credit losses in California decreased $14 million, primarily reflecting decreases in Technology and Life Sciences and general Middle Market.

Michigan Market













(dollar amounts in millions)

2nd Qtr '13



1st Qtr '13



2nd Qtr '12


Net interest income (FTE)

$

187



$

189



$

196


Provision for credit losses

(4)



(8)



(6)


Noninterest income

88



92



96


Noninterest expenses

161



168



175


Net income

77



77



81








Net credit-related charge-offs

4



5



10








Selected average balances:






Assets

14,022



14,042



14,028


Loans

13,598



13,650



13,759


Deposits

20,159



20,255



19,224


 

California Market













(dollar amounts in millions)

2nd Qtr '13



1st Qtr '13



2nd Qtr '12


Net interest income (FTE)

$

173



$

171



$

171


Provision for credit losses

7



21



6


Noninterest income

36



35



37


Noninterest expenses

100



97



97


Net income

65



56



66








Net credit-related charge-offs

12



10



12








Selected average balances:






Assets

14,155



13,795



12,870


Loans

13,912



13,542



12,647


Deposits

14,671



14,356



14,149


 

Texas Market













(dollar amounts in millions)

2nd Qtr '13



1st Qtr '13



2nd Qtr '12


Net interest income (FTE)

$

131



$

135



$

143


Provision for credit losses

6



8



9


Noninterest income

34



31



31


Noninterest expenses

89



91



88


Net income

46



44



49








Net credit-related charge-offs

(3)



6



4








Selected average balances:






Assets

10,886



10,795



10,268


Loans

10,179



10,071



9,506


Deposits

10,187



9,959



10,185


 

Conference Call and Webcast
Comerica will host a conference call to review second quarter 2013 financial results at 7 a.m. CT Tuesday, July 16, 2013. Interested parties may access the conference call by calling (800) 309-2262 or (706) 679-5261 (event ID No. 96351362). The call and supplemental financial information can also be accessed via Comerica's "Investor Relations" page at www.comerica.com. A replay of the Webcast can 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 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 a reconciliation 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," "contemplates," "feels," "expects," "estimates," "seeks," "strives," "plans," "intends," "outlook," "forecast," "position," "target," "mission," "assume," "achievable," "potential," "strategy," "goal," "aspiration," "opportunity," "initiative," "outcome," "continue," "remain," "maintain," "on course," "trend," "objective," "looks forward" 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 changes in general economic, political or industry conditions; changes in monetary and fiscal policies, including the interest rate policies of the Federal Reserve Board; volatility and disruptions in global capital and credit markets; changes in Comerica's credit rating; the interdependence of financial service companies; changes in regulation or oversight; unfavorable developments concerning credit quality; any future acquisitions or divestitures; the effects of more stringent capital or liquidity requirements; declines or other changes in the businesses or industries of Comerica's customers; the implementation of Comerica's strategies and business models; Comerica's ability to utilize technology to efficiently and effectively develop, market and deliver new products and services; operational difficulties, failure of technology infrastructure or information security incidents; changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing; competitive product and pricing pressures among financial institutions within Comerica's markets; changes in customer behavior; management's ability to maintain and expand customer relationships; management's ability to retain key officers and employees; the impact of legal and regulatory proceedings or determinations; the effectiveness of methods of reducing risk exposures; the effects of terrorist activities and other hostilities; the effects of catastrophic events including, but not limited to, hurricanes, tornadoes, earthquakes, fires, droughts and floods; changes in accounting standards and the critical nature of Comerica's accounting policies. 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 13 of Comerica's Annual Report on Form 10-K for the year ended December 31, 2012. 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.

 

CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)

Comerica Incorporated and Subsidiaries









Three Months Ended


Six Months Ended


June 30,

March 31,

June 30,


June 30,

(in millions, except per share data)

2013

2013

2012


2013

2012

PER COMMON SHARE AND COMMON STOCK DATA







Diluted net income

$

0.76


$

0.70


$

0.73



$

1.46


$

1.39


Cash dividends declared

0.17


0.17


0.15



0.34


0.25


Common shareholders' equity (at period end)

37.32


37.41


36.18





Tangible common equity (at period end) (a)

33.79


33.90


32.76












Average diluted shares (in thousands)

186,998


187,442


194,487



187,219


195,254


KEY RATIOS







Return on average common shareholders' equity

8.23

%

7.68

%

8.22

%


7.95

%

7.86

%

Return on average assets

0.90


0.84


0.93



0.87


0.89


Tier 1 common capital ratio (a) (b)

10.41


10.37


10.39





Tier 1 risk-based capital ratio (b)

10.41


10.37


10.39





Total risk-based capital ratio (b)

13.27


13.41


13.91





Leverage ratio (b)

10.81


10.75


10.97





Tangible common equity ratio (a)

10.04


9.86


10.31





AVERAGE BALANCES







Commercial loans

$

28,393


$

28,056


$

25,983



$

28,225


$

25,359


Real estate construction loans:







Commercial Real Estate business line (c)

1,218


1,116


1,035



1,167


1,046


Other business lines (d)

235


198


385



217


391


     Total real estate construction loans

1,453


1,314


1,420



1,384


1,437


Commercial mortgage loans:







Commercial Real Estate business line (c)

1,798


1,836


2,443



1,817


2,482


Other business lines (d)

7,394


7,562


7,540



7,478


7,611


     Total commercial mortgage loans

9,192


9,398


9,983



9,295


10,093


Lease financing

855


857


869



856


883


International loans

1,262


1,282


1,265



1,272


1,235


Residential mortgage loans

1,602


1,556


1,487



1,579


1,503


Consumer loans

2,136


2,154


2,221



2,145


2,239


Total loans

44,893


44,617


43,228



44,756


42,749









Earning assets

58,928


58,607


56,652



58,769


56,418


Total assets

63,709


63,451


61,681



63,736


61,513









Noninterest-bearing deposits

22,076


21,506


20,128



21,793


19,882


Interest-bearing deposits

29,372


29,186


28,544



29,302


28,609


Total deposits

51,448


50,692


48,672



51,095


48,491









Common shareholders' equity

6,982


6,956


7,002



6,969


6,971


NET INTEREST INCOME







Net interest income (fully taxable equivalent basis)

$

415


$

416


$

435



$

831


$

878


Fully taxable equivalent adjustment

1





1


1


Net interest margin (fully taxable equivalent basis)

2.83

%

2.88

%

3.10

%


2.86

%

3.14

%

CREDIT QUALITY







Nonaccrual loans

$

449


$

494


$

719





Reduced-rate loans

22


21


28





Total nonperforming loans (e)

471


515


747





Foreclosed property

29


40


67





Total nonperforming assets (e)

500


555


814












Loans past due 90 days or more and still accruing

20


25


43












Gross loan charge-offs

35


38


64



$

73


$

126


Loan recoveries

18


14


19



32


36


Net loan charge-offs

17


24


45



41


90









Allowance for loan losses

613


617


667





Allowance for credit losses on lending-related commitments

36


36


36





Total allowance for credit losses

649


653


703












Allowance for loan losses as a percentage of total loans

1.35

%

1.37

%

1.52

%




Net loan charge-offs as a percentage of average total loans (f)

0.15


0.21


0.42



0.18

%

0.42

%

Nonperforming assets as a percentage of total loans and foreclosed property (e)

1.10


1.23


1.85





Allowance for loan losses as a percentage of total nonperforming loans

130


120


89








(a)

See Reconciliation of Non-GAAP Financial Measures.

(b)

June 30, 2013 ratios are estimated.

(c)

Primarily loans to real estate developers.

(d)

Primarily loans secured by owner-occupied real estate.

(e)

Excludes loans acquired with credit-impairment.

(f)

Lending-related commitment charge-offs were zero in all periods presented.

 

CONSOLIDATED BALANCE SHEETS

Comerica Incorporated and Subsidiaries







June 30,

March 31,

December 31,

June 30,

(in millions, except share data)

2013

2013

2012

2012


(unaudited)

(unaudited)


(unaudited)

ASSETS





Cash and due from banks

$

1,016


$

877


$

1,395


$

1,076







Federal funds sold

31



100



Interest-bearing deposits with banks

2,878


4,720


3,039


3,064


Other short-term investments

119


115


125


170







Investment securities available-for-sale

9,631


10,286


10,297


9,940







Commercial loans

29,186


28,508


29,513


27,016


Real estate construction loans

1,479


1,396


1,240


1,377


Commercial mortgage loans

9,007


9,317


9,472


9,830


Lease financing

843


853


859


858


International loans

1,209


1,269


1,293


1,224


Residential mortgage loans

1,611


1,568


1,527


1,469


Consumer loans

2,124


2,156


2,153


2,218


          Total loans

45,459


45,067


46,057


43,992


Less allowance for loan losses

(613)


(617)


(629)


(667)


          Net loans

44,846


44,450


45,428


43,325







Premises and equipment

604


618


622


667


Accrued income and other assets

3,822


3,819


4,063


4,138


          Total assets

$

62,947


$

64,885


$

65,069


$

62,380







LIABILITIES AND SHAREHOLDERS' EQUITY





Noninterest-bearing deposits

$

21,870


$

22,777


$

23,279


$

21,330







Money market and interest-bearing checking deposits

21,677


21,540


21,273


19,993


Savings deposits

1,677


1,652


1,606


1,629


Customer certificates of deposit

5,594


5,753


5,531


6,045


Foreign office time deposits

437


395


502


376


          Total interest-bearing deposits

29,385


29,340


28,912


28,043


          Total deposits

51,255


52,117


52,191


49,373







Short-term borrowings

131


58


110


83


Accrued expenses and other liabilities

1,049


1,023


1,106


1,154


Medium- and long-term debt

3,601


4,699


4,720


4,742


          Total liabilities

56,036


57,897


58,127


55,352







Common stock - $5 par value:





     Authorized - 325,000,000 shares





     Issued - 228,164,824 shares

1,141


1,141


1,141


1,141


Capital surplus

2,160


2,157


2,162


2,144


Accumulated other comprehensive loss

(538)


(410)


(413)


(301)


Retained earnings

6,127


6,020


5,931


5,744


Less cost of common stock in treasury - 42,999,083 shares at 6/30/13, 41,361,612 shares at 3/31/13, 39,889,610 shares at 12/31/12 and 33,889,392 shares at 6/30/12

(1,979)


(1,920)


(1,879)


(1,700)


          Total shareholders' equity

6,911


6,988


6,942


7,028


          Total liabilities and shareholders' equity

$

62,947


$

64,885


$

65,069


$

62,380


 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

Comerica Incorporated and Subsidiaries








Three Months Ended


Six Months Ended


June 30,


June 30,

(in millions, except per share data)

2013

2012


2013

2012

INTEREST INCOME






Interest and fees on loans

$

388


$

408



$

778


$

819


Interest on investment securities

52


59



105


122


Interest on short-term investments

3


3



6


6


Total interest income

443


470



889


947


INTEREST EXPENSE






Interest on deposits

15


18



30


37


Interest on medium- and long-term debt

14


17



29


33


Total interest expense

29


35



59


70


Net interest income

414


435



830


877


Provision for credit losses

13


19



29


41


Net interest income after provision for credit losses

401


416



801


836


NONINTEREST INCOME






Service charges on deposit accounts

53


53



108


109


Fiduciary income

44


39



87


77


Commercial lending fees

22


24



43


49


Letter of credit fees

16


18



32


35


Card fees

13


12



25


23


Foreign exchange income

9


10



18


20


Bank-owned life insurance

10


10



19


20


Brokerage fees

4


4



9


9


Net securities (losses) gains

(2)


6



(2)


11


Other noninterest income

39


35



69


64


Total noninterest income

208


211



408


417


NONINTEREST EXPENSES






Salaries

182


189



370


390


Employee benefits

63


61



126


120


Total salaries and employee benefits

245


250



496


510


Net occupancy expense

39


40



78


81


Equipment expense

15


16



30


33


Outside processing fee expense

30


26



58


52


Software expense

22


21



44


44


Merger and restructuring charges


8




8


FDIC insurance expense

8


10



17


20


Advertising expense

6


7



12


14


Other real estate expense

1


1



2


4


Other noninterest expenses

50


55



95


115


Total noninterest expenses

416


434



832


881


Income before income taxes

193


193



377


372


Provision for income taxes

50


50



100


98


NET INCOME

143


143



277


274


Less income allocated to participating securities

2


2



4


3


Net income attributable to common shares

$

141


$

141



$

273


$

271


Earnings per common share:






Basic

$

0.77


$

0.73



$

1.48


$

1.39


Diluted

0.76


0.73



1.46


1.39








Comprehensive income

15


169



152


329








Cash dividends declared on common stock

32


29



64


49


Cash dividends declared per common share

0.17


0.15



0.34


0.25


 

CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

Comerica Incorporated and Subsidiaries














Second

First

Fourth

Third

Second


Second Quarter 2013 Compared To:


Quarter

Quarter

Quarter

Quarter

Quarter


First Quarter 2013


Second Quarter 2012

(in millions, except per share data)

2013

2013

2012

2012

2012


Amount

Percent


Amount

Percent

INTEREST INCOME












Interest and fees on loans

$

388


$

390


$

398


$

400


$

408



$

(2)


%


$

(20)


(5)%


Interest on investment securities

52


53


55


57


59



(1)


(3)



(7)


(13)


Interest on short-term investments

3


3


3


3


3








Total interest income

443


446


456


460


470



(3)


(1)



(27)


(6)


INTEREST EXPENSE












Interest on deposits

15


15


16


17


18






(3)


(21)


Interest on medium- and long-term debt

14


15


16


16


17



(1)


(7)



(3)


(15)


Total interest expense

29


30


32


33


35



(1)


(6)



(6)


(18)


Net interest income

414


416


424


427


435



(2)




(21)


(5)


Provision for credit losses

13


16


16


22


19



(3)


(15)



(6)


(30)


Net interest income after provision

for credit losses

401


400


408


405


416



1




(15)


(3)


NONINTEREST INCOME












Service charges on deposit accounts

53


55


52


53


53



(2)


(3)





Fiduciary income

44


43


42


39


39



1


2



5


10


Commercial lending fees

22


21


25


22


24



1


5



(2)


(7)


Letter of credit fees

16


16


17


19


18






(2)


(7)


Card fees

13


12


12


12


12



1


7



1


9


Foreign exchange income

9


9


9


9


10






(1)


(4)


Bank-owned life insurance

10


9


9


10


10



1


15





Brokerage fees

4


5


5


5


4



(1)


(7)





Net securities (losses) gains

(2)



1



6



(2)


N/M



(8)


N/M


Other noninterest income

39


30


32


28


35



9


28



4


11


Total noninterest income

208


200


204


197


211



8


5



(3)


(1)


NONINTEREST EXPENSES












Salaries

182


188


196


192


189



(6)


(3)



(7)


(4)


Employee benefits

63


63


59


61


61






2


3


Total salaries and employee benefits

245


251


255


253


250



(6)


(2)



(5)


(2)


Net occupancy expense

39


39


42


40


40






(1)



Equipment expense

15


15


15


17


16






(1)


(5)


Outside processing fee expense

30


28


28


27


26



2


7



4


12


Software expense

22


22


23


23


21






1


2


Merger and restructuring charges



2


25


8






(8)


N/M


FDIC insurance expense

8


9


9


9


10



(1)


(13)



(2)


(14)


Advertising expense

6


6


6


7


7






(1)


(15)


Other real estate expense

1


1


3


2


1








Other noninterest expenses

50


45


44


46


55



5


10



(5)


(9)


Total noninterest expenses

416


416


427


449


434






(18)


(4)


Income before income taxes

193


184


185


153


193



9


6





Provision for income taxes

50


50


55


36


50








NET INCOME

143


134


130


117


143



9


8





Less income allocated to participating securities

2


2


2


1


2








Net income attributable to common shares

$

141


$

132


$

128


$

116


$

141



$

9


8

%


$


%

Earnings per common share:












Basic

$

0.77


$

0.71


$

0.68


$

0.61


$

0.73



$

0.06


8

%


$

0.04


5

%

Diluted

0.76


0.70


0.68


0.61


0.73



0.06


9



0.03


4














Comprehensive income (loss)

15


137


(30)


165


169



(122)


(89)



(154)


(91)














Cash dividends declared on common stock

32


32


28


29


29






3


8


Cash dividends declared per common share

0.17


0.17


0.15


0.15


0.15






0.02


13


N/M - Not Meaningful

 

ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES (unaudited)


Comerica Incorporated and Subsidiaries









2013


2012

(in millions)

2nd Qtr

1st Qtr


4th Qtr

3rd Qtr

2nd Qtr








Balance at beginning of period

$

617


$

629



$

647


$

667


$

704









Loan charge-offs:







     Commercial

19


21



42


19


26


     Real estate construction:







          Commercial Real Estate business line (a)

2




1


2


2


          Other business lines (b)






1


               Total real estate construction

2




1


2


3


     Commercial mortgage:







          Commercial Real Estate business line (a)

2


1



5


12


16


          Other business lines (b)

7


12



6


13


11


               Total commercial mortgage

9


13



11


25


27


     International





1



     Residential mortgage

1


1



2


6


3


     Consumer

4


3



4


6


5


          Total loan charge-offs

35


38



60


59


64









Recoveries on loans previously charged-off:







     Commercial

11


6



13


7


10


     Real estate construction

1


1



1


3


1


     Commercial mortgage

3


5



6


5


4


     International




1




     Residential mortgage

1


1



1




     Consumer

2


1



1


1


4


          Total recoveries

18


14



23


16


19


Net loan charge-offs

17


24



37


43


45


Provision for loan losses

13


12



19


23


8


Balance at end of period

$

613


$

617



$

629


$

647


$

667









Allowance for loan losses as a percentage of total loans

1.35

%

1.37

%


1.37

%

1.46

%

1.52

%








Net loan charge-offs as a percentage of average total loans

0.15


0.21



0.34


0.39


0.42





(a)

Primarily charge-offs of loans to real estate developers.

(b)

Primarily charge-offs of loans secured by owner-occupied real estate.

 

ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LENDING-RELATED COMMITMENTS (unaudited)

Comerica Incorporated and Subsidiaries









2013


2012

(in millions)

2nd Qtr

1st Qtr


4th Qtr

3rd Qtr

2nd Qtr








Balance at beginning of period

$

36


$

32



$

35


$

36


$

25


Add: Provision for credit losses on lending-related commitments


4



(3)


(1)


11


Balance at end of period

$

36


$

36



$

32


$

35


$

36









Unfunded lending-related commitments sold

$

1


$

2



$


$


$