Comerica Reports Third Quarter 2013 Net Income Of $147 Million, Or 78 Cents Per Share

EPS Up 3 Percent from Second Quarter 2013 and 28 Percent Over Third Quarter 2012

Net Interest Income Stable; Loan Volume Impacted by Economic Uncertainty and Seasonality

Noninterest Income Up $6 Million, or 3 Percent

Continued Discipline Reflected in Noninterest Expenses

16 Oct, 2013, 06:40 ET from Comerica Incorporated

DALLAS, Oct. 16, 2013 /PRNewswire/ -- Comerica Incorporated (NYSE: CMA) today reported third quarter 2013 net income of $147 million, compared to $143 million for the second quarter 2013 and $117 million for the third quarter 2012. Earnings per diluted share were 78 cents for the third quarter 2013, compared to 76 cents for the second quarter 2013 and 61 cents for the third quarter 2012.

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(dollar amounts in millions, except per share data)

3rd Qtr '13

2nd Qtr '13

3rd Qtr '12

Net interest income (a)

$

412

$

414

$

427

Provision for credit losses

8

13

22

Noninterest income

214

208

197

Noninterest expenses

417

416

449

(b)

Provision for income taxes

54

50

36

Net income

147

143

117

Net income attributable to common shares

145

141

116

Diluted income per common share

0.78

0.76

0.61

Average diluted shares (in millions)

187

187

191

Tier 1 common capital ratio (d)

10.74

%

(c)

10.43

%

10.37

%

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

10.4

10.1

10.0

Tangible common equity ratio (d)

9.87

10.04

10.30

(a)

Included accretion of the purchase discount on the acquired loan portfolio of $8 million, $7 million and $15 million in the third quarter 2013, second quarter 2013 and third quarter 2012, respectively.

(b)

Included restructuring expenses of $25 million associated with the 2011 acquisition of Sterling Bancshares, Inc.

(c)

September 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 excluding most elements of accumulated other comprehensive income (AOCI).

"Fee income growth, expense control and continued solid credit quality contributed to our 28 percent year-over-year increase in earnings per share," said Ralph W. Babb Jr., chairman and chief executive officer. "Average total loans were up $497 million, or 1 percent, on a year-over-year basis, but decreased $799 million, or 2 percent, compared to the second quarter. Loan volume in the third quarter compared to the second quarter was impacted by the continued economic uncertainty and the understandable caution of our customers, as well as seasonality in auto-dealer floor plan loans and a decline in refinance volumes impacting our mortgage warehouse business.

"Average total deposits increased $2 billion, or 4 percent, year-over-year, and $417 million, or 1 percent over second quarter, to $51.9 billion. Net interest income remained relatively stable, credit quality continued to be strong, and noninterest income grew quarter over quarter, reflecting an increase in customer-driven fee income. Our capital position continued to be a source of strength to support our growth.

"We believe our footprint is well situated in Texas, California and Michigan, and that our relationship banking strategy contributes to our continued success."

Third Quarter 2013 Compared to Third Quarter 2012 

  • Average total loans increased $497 million, or 1 percent, primarily reflecting an increase of $1.1 billion, or 4 percent, in commercial loans, partially offset by a decrease of $594 million, or 5 percent, in combined commercial mortgage and real estate construction loans. The increase in commercial loans was primarily driven by increases in National Dealer Services, general Middle Market and Energy, partially offset by a decrease in Corporate Banking.
  • Average total deposits increased $2.0 billion, or 4 percent, primarily reflecting increases of $1.1 billion, or 4 percent, in interest-bearing deposits and $910 million, or 4 percent, in noninterest-bearing deposits.
  • Net income increased by $30 million, or 25 percent, primarily as a result of improving credit quality reflected in lower provision for credit losses, higher customer-driven fees and lower noninterest expenses, partially offset by a decrease in net interest income. The decrease in net interest income was primarily due to a decrease in loan yields and a decrease in accretion on the acquired loan portfolio, partially offset by loan growth and a decrease in funding costs.

Third Quarter 2013 Compared to Second Quarter 2013

  • Average total loans decreased $799 million, or 2 percent, to $44.1 billion, primarily reflecting decreases of $634 million, or 2 percent, in commercial loans and $180 million, or 2 percent, in combined commercial mortgage and real estate construction loans. The decrease in commercial loans was primarily driven by decreases in general Middle Market, National Dealer Services and Mortgage Banker Finance, partially offset by an increase in Technology and Life Sciences. The declines generally reflected subdued demand due to economic uncertainty, a seasonal decline in auto dealer floor plan loans and a decrease in mortgage refinancing activity. Period-end total loans decreased $1.3 billion to $44.2 billion, primarily reflecting a $1.3 billion decrease in commercial loans. The decrease in commercial loans was primarily driven by decreases in Mortgage Banker Finance and National Dealer Services.
  • Investment securities available-for-sale decreased $413 million, or 4 percent, to $9.4 billion on an average basis and decreased $143 million, or 1 percent, to $9.5 billion on period-end basis as a result of a full quarter impact of the decline in the fair value of the portfolio due to the rise in long-term rates and a slowdown in the pace of purchases to replace repayments.
  • Average total deposits increased $417 million, or 1 percent, to $51.9 billion, reflecting increases in most lines of business. Period-end deposits increased $1.7 billion, primarily reflecting an increase of $2.0 billion in noninterest-bearing deposits.
  • Net interest income remained relatively stable at $412 million in the third quarter 2013, compared to $414 million in the second quarter 2013, as the benefit from one additional day in the third quarter and improved yields in the securities portfolio was more than offset by the impact of a decline in loan balances and lower loan yields.
  • The provision for credit losses decreased $5 million to $8 million in the third quarter 2013, compared to $13 million in the second quarter 2013, reflecting continued strong credit quality and decreases in loan balances.
  • Noninterest income increased $6 million to $214 million in the third quarter 2013 primarily reflecting an increase in customer-driven income of $4 million.
  • Noninterest expenses increased $1 million to $417 million in the third quarter 2013, primarily reflecting a $10 million increase in salaries and employee benefits expense, partially offset by a $6 million decrease in litigation-related expenses and a $4 million decrease in write-downs on other foreclosed assets.
  • Comerica repurchased 1.7 million shares of common stock ($72 million) in the third quarter 2013 under the share repurchase program. Combined with dividends, 70 percent of net income was returned to shareholders in the third quarter 2013.
  • Capital remained solid at September 30, 2013, as evidenced by an estimated Tier 1 common capital ratio of 10.74 percent and a tangible common equity ratio of 9.87 percent.

 

Net Interest Income

(dollar amounts in millions)

3rd Qtr '13

2nd Qtr '13

3rd Qtr '12

Net interest income

$

412

$

414

$

427

Net interest margin

2.79

%

2.83

%

2.96

%

Selected average balances:

Total earning assets

$

58,892

$

58,928

$

57,801

Total loans

44,094

44,893

43,597

Total investment securities

9,380

9,793

9,791

Federal Reserve Bank deposits (excess liquidity)

5,156

3,968

4,160

Total deposits

51,865

51,448

49,845

Total noninterest-bearing deposits

22,379

22,076

21,469

  • Net interest income of $412 million in the third quarter 2013 decreased $2 million compared to the second quarter 2013.
    • Interest on loans decreased by $7 million, primarily reflecting a decrease in loan volumes, including volume shifts in business mix ($6 million); lower loan yields due to a decline in LIBOR ($1 million); and other loan portfolio dynamics, reflecting positive credit migration and other shifts in portfolio mix ($5 million); partially offset by one additional day in the third quarter ($4 million) and an increase in the accretion of the purchase discount on the acquired loan portfolio ($1 million).
    • Interest on mortgage-backed investment securities increased net interest income by $2 million, primarily as a result of improvement in yields due to slowing prepayment speeds ($4 million), partially offset by a decrease in average balances ($2 million).
    • Interest on other short-term investments increased net interest income by $1 million as a result of an increase in balances deposited with the Federal Reserve Bank.
    • A decrease in funding costs increased net interest income by $2 million, primarily reflecting lower deposit pricing and a shift in the deposit mix, as well as a lower interest expense as a result of a full-quarter impact from the maturity of debt in the second quarter 2013.
  • The net interest margin of 2.79 percent decreased 4 basis points compared to the second quarter 2013. The decrease in net interest margin was primarily due to an increase in excess liquidity (-5 basis points) and lower loan yields (-3 basis points), partially offset by the impact of yield improvements on mortgage-backed securities (+3 basis points) and lower funding costs (+1 basis point).
  • Average earning assets remained stable at $58.9 billion in the third quarter 2013, compared to the second quarter 2013, as an increase of $1.2 billion in excess liquidity offset decreases of $799 million in average loans and $413 million in average investment securities available-for-sale.

Noninterest Income

Noninterest income increased $6 million to $214 million for the third quarter 2013, compared to $208 million for the second quarter 2013. Customer-driven fee income increased $4 million and noncustomer-driven income increased $2 million. The increase in customer-driven fee income was primarily due to an increase in commercial lending fees of $6 million. The increase in noncustomer-driven income was primarily due to a $5 million increase in warrant income, partially offset by a decrease in income recognized from our third-party credit card provider reflecting a change in the timing of the recognition of incentives from annually to quarterly in the third quarter.

Noninterest Expenses

Noninterest expenses of $417 million in the third quarter 2013 remained relatively stable compared to the second quarter 2013, as a $10 million increase in salaries and employee benefits expense was largely offset by a $6 million decrease in litigation-related expenses as well as a $4 million decrease in write-downs on other foreclosed assets. The increase in salaries and employee benefits reflected one additional day in the third quarter 2013 and year-to-date adjustments to incentive compensation based on favorable performance relative to peers.

Credit Quality

"Credit quality continued to be strong resulting in an $8 million provision," said Babb. "Net charge-offs increased slightly from their low level, while nonperforming assets and watch list loans declined."

(dollar amounts in millions)

3rd Qtr '13

2nd Qtr '13

3rd Qtr '12

Net credit-related charge-offs

$

19

$

17

$

43

Net credit-related charge-offs/Average total loans

0.18

%

0.15

%

0.39

%

Provision for credit losses

$

8

$

13

$

22

Nonperforming loans (a)

459

471

692

Nonperforming assets (NPAs) (a)

478

500

755

NPAs/Total loans and foreclosed property

1.08

%

1.10

%

1.71

%

Loans past due 90 days or more and still accruing

$

25

$

20

$

36

Allowance for loan losses

604

613

647

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

34

36

35

Total allowance for credit losses

638

649

682

Allowance for loan losses/Period-end total loans

1.37

%

1.35

%

1.46

%

Allowance for loan losses/Nonperforming loans

131

130

94

(a)

Excludes loans acquired with credit impairment.

(b)

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

  • Nonaccrual loans decreased $12 million, to $437 million at September 30, 2013, compared to $449 million at June 30, 2013.
  • Internal watch list loans decreased $210 million, to $2.7 billion at September 30, 2013, compared to $2.9 billion at June 30, 2013.
  • During the third quarter 2013, $50 million of borrower relationships over $2 million were transferred to nonaccrual status, an increase of $13 million from the second quarter 2013.

Balance Sheet and Capital Management

Total assets and common shareholders' equity were $64.7 billion and $7.0 billion, respectively, at September 30, 2013, compared to $62.9 billion and $6.9 billion, respectively, at June 30, 2013. The $1.8 billion increase in total assets primarily reflected an increase of $2.9 billion in excess liquidity, partially offset by a decrease in loans of $1.3 billion.

There were approximately 184 million common shares outstanding at September 30, 2013. Diluted weighted average shares of 187 million at September 30, 2013 were unchanged compared to June 30, 2013, as the impact of the repurchase of $72 million of common stock (1.7 million shares) under the share repurchase program during the third 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 70 percent of third quarter 2013 net income to shareholders.

Comerica's tangible common equity ratio was 9.87 percent at September 30, 2013, a decrease of 17 basis points from June 30, 2013. The estimated Tier 1 common capital ratio increased 31 basis points, to 10.74 percent at September 30, 2013, from June 30, 2013. The estimated Tier 1 common ratio under fully phased-in Basel III capital rules and excluding most elements of AOCI was 10.4 percent percent at September 30, 2013.

Full-Year and Fourth Quarter 2013 Outlook

Management expectations for full-year 2013 compared to full-year 2012 have not changed from the previously provided outlook, with the exception of customer-driven fees, which are expected to be modestly higher based on strong third quarter results.

For fourth quarter 2013, management expects the following, assuming a continuation of the current slow growing economic environment:

  • Average loans for the fourth quarter 2013 are expected to be stable compared to third quarter 2013, reflecting auto-dealer floor plan loans rebounding from seasonal low along with continued decline in mortgage warehouse lending and economic uncertainty impacting demand.
  • Net interest income is expected to be lower for the fourth quarter 2013, compared to third quarter 2013, due to the continued impact from the low rate environment and a decrease in purchase accounting accretion.
  • The provision for credit losses for the fourth quarter 2013 is expected to remain low, similar to the levels in previous 2013 quarters.
  • Customer-driven noninterest income for the fourth quarter 2013 is expected to be relatively stable compared to third quarter 2013, while noncustomer-driven noninterest income is expected to be lower.
  • Fourth quarter 2013 noninterest expense is expected to be slightly lower compared to third quarter 2013, reflecting continued tight expense control.

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 September 30, 2013 and are presented on a fully taxable equivalent (FTE) basis. The accompanying narrative addresses third quarter 2013 results compared to second quarter 2013.

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

(dollar amounts in millions)

3rd Qtr '13

2nd Qtr '13

3rd Qtr '12

Business Bank

$

209

91

%

$

207

85

%

$

207

88

%

Retail Bank

6

3

11

5

10

4

Wealth Management

15

6

24

10

18

8

230

100

%

242

100

%

235

100

%

Finance

(87)

(98)

(100)

Other (a)

4

(1)

(18)

     Total

$

147

$

143

$

117

(a)

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

Business Bank

(dollar amounts in millions)

3rd Qtr '13

2nd Qtr '13

3rd Qtr '12

Net interest income (FTE)

$

368

$

372

$

380

Provision for credit losses

(1)

10

15

Noninterest income

89

80

76

Noninterest expenses

153

147

145

Net income

209

207

207

Net credit-related charge-offs

9

11

27

Selected average balances:

Assets

35,298

36,017

34,861

Loans

34,178

34,955

33,856

Deposits

26,284

25,987

25,142

  • Average loans decreased $777 million, primarily reflecting decreases in general Middle Market, National Dealer Services and Mortgage Banker Finance, partially offset by an increase in Technology and Life Sciences.
  • Average deposits increased $297 million, primarily reflecting increases in general Middle Market and Commercial Real Estate.
  • Net interest income decreased $4 million, primarily due to a decrease in average loans and lower loan yields, partially offset by the benefit provided by one additional day in the quarter and higher purchase accounting accretion.
  • The provision for credit losses decreased $11 million, primarily reflecting improved credit quality and decreases in loan balances.
  • Noninterest income increased $9 million, primarily due to an increase in commercial lending fees and income from principal investments and warrants.
  • Noninterest expenses increased $6 million, primarily due to an increase in salaries expense and corporate overhead expenses, partially offset by a decrease in write-downs on other foreclosed assets.

Retail Bank

(dollar amounts in millions)

3rd Qtr '13

2nd Qtr '13

3rd Qtr '12

Net interest income (FTE)

$

151

$

154

$

161

Provision for credit losses

10

5

6

Noninterest income

45

46

41

Noninterest expenses

177

178

181

Net income

6

11

10

Net credit-related charge-offs

7

4

13

Selected average balances:

Assets

5,967

5,962

5,964

Loans

5,285

5,271

5,265

Deposits

21,257

21,241

20,682

  • Average loans increased $14 million, primarily due to an increase in Small Business, partially offset by a decrease in Retail Banking.
  • Average deposits increased $16 million, primarily due to an increase in Small Business, largely offset by a decrease in Retail Banking.
  • Net interest income decreased $3 million, primarily due to decreases in funds transfer pricing (FTP) credits and purchase accounting accretion, partially offset by the benefit provided by one additional day in the quarter.
  • The provision for credit losses increased $5 million, primarily due to an increase in specific reserves for individually evaluated loans.
  • Noninterest income remained relatively stable, primarily due to a decrease in incentive payments received from Comerica's third-party credit card provider, partially offset by a decrease in net securities losses.

Wealth Management

(dollar amounts in millions)

3rd Qtr '13

2nd Qtr '13

3rd Qtr '12

Net interest income (FTE)

$

45

$

46

$

47

Provision for credit losses

1

(3)

4

Noninterest income

61

65

62

Noninterest expenses

81

77

77

Net income

15

24

18

Net credit-related charge-offs

3

2

3

Selected average balances:

Assets

4,789

4,828

4,566

Loans

4,631

4,667

4,476

Deposits

3,782

3,701

3,667

  • Average loans decreased $36 million, primarily due to a decrease in Private Banking.
  • Average deposits increased $81 million, primarily due to an increase in Private Banking.
  • The provision for credit losses increased $4 million, primarily due to an increase in specific reserves pertaining to a small number of individually evaluated loans.
  • Noninterest income decreased $4 million, primarily reflecting decreases in fiduciary income, investment banking fees and other small decreases in several categories.
  • Noninterest expenses increased $4 million, primarily due to an increase in salaries expense and corporate overhead expenses.

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 September 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)

3rd Qtr '13

2nd Qtr '13

3rd Qtr '12

Michigan

$

73

32

%

$

77

32

%

$

71

30

%

California

71

31

65

27

67

29

Texas

35

15

46

19

44

19

Other Markets

51

22

54

22

53

22

230

100

%

242

100

%

235

100

%

Finance & Other (a)

(83)

(99)

(118)

     Total

$

147

$

143

$

117

(a)

Includes items not directly associated with the geographic markets.

  • Average loans decreased $322 million and $237 million in Michigan and Texas, respectively, and increased $90 million in California. Decreases in Michigan and Texas primarily reflected decreases in Middle Market loans. The increase in California was primarily due to increases in Commercial Real Estate and Private Banking.
  • Average deposits increased $306 million in Michigan primarily due to an increase in general Middle Market, partially offset by a decrease in Retail Banking. In California, average deposits decreased $111 million primarily reflecting a decrease in Corporate Banking, partially offset by an increase in Commercial Real Estate. The increase in Texas of $104 million was primarily due to an increase in Corporate Banking, partially offset by a decrease in general Middle Market.
  • Credit quality improved in all geographic markets resulting in decreases to the provision for credit losses in Michigan and California. The increase in the provision for credit losses in Texas was primarily due to an increase in specific reserves pertaining to a small number of individually evaluated loans.

Michigan Market

(dollar amounts in millions)

3rd Qtr '13

2nd Qtr '13

3rd Qtr '12

Net interest income (FTE)

$

186

$

187

$

193

Provision for credit losses

(8)

(4)

2

Noninterest income

88

88

95

Noninterest expenses

167

161

175

Net income

73

77

71

Net credit-related charge-offs

1

4

12

Selected average balances:

Assets

13,744

14,022

13,785

Loans

13,276

13,598

13,475

Deposits

20,465

20,159

19,628

 

California Market

(dollar amounts in millions)

3rd Qtr '13

2nd Qtr '13

3rd Qtr '12

Net interest income (FTE)

$

171

$

173

$

176

Provision for credit losses

(3)

7

6

Noninterest income

42

36

33

Noninterest expenses

101

100

98

Net income

71

65

67

Net credit-related charge-offs

8

12

11

Selected average balances:

Assets

14,245

14,155

13,171

Loans

14,002

13,912

12,915

Deposits

14,567

14,671

14,964

 

Texas Market

(dollar amounts in millions)

3rd Qtr '13

2nd Qtr '13

3rd Qtr '12

Net interest income (FTE)

$

129

$

131

$

138

Provision for credit losses

17

6

10

Noninterest income

35

34

30

Noninterest expenses

92

89

89

Net income

35

46

44

Net credit-related charge-offs

4

(3)

7

Selected average balances:

Assets

10,642

10,886

10,324

Loans

9,942

10,179

9,585

Deposits

10,298

10,187

9,941

Conference Call and Webcast

Comerica will host a conference call to review third quarter 2013 financial results at 7 a.m. CT Wednesday, October 16, 2013. Interested parties may access the conference call by calling (800) 309-2262 or (706) 679-5261 (event ID No. 60015337). 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 and on page 68 of the Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013. 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

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

(in millions, except per share data)

2013

2013

2012

2013

2012

PER COMMON SHARE AND COMMON STOCK DATA

Diluted net income

$

0.78

$

0.76

$

0.61

$

2.23

$

2.00

Cash dividends declared

0.17

0.17

0.15

0.51

0.40

Common shareholders' equity (at period end)

37.94

37.32

37.01

Tangible common equity (at period end) (a)

34.38

33.79

33.56

Average diluted shares (in thousands)

187,104

186,998

191,492

187,180

193,991

KEY RATIOS

Return on average common shareholders' equity

8.50

%

8.23

%

6.67

%

8.14

%

7.46

%

Return on average assets

0.92

0.90

0.75

0.89

0.84

Tier 1 common capital ratio (a) (b)

10.74

10.43

10.37

Tier 1 risk-based capital ratio (b)

10.74

10.43

10.37

Total risk-based capital ratio (b)

13.44

13.29

13.69

Leverage ratio (b)

10.88

10.81

10.78

Tangible common equity ratio (a)

9.87

10.04

10.30

AVERAGE BALANCES

Commercial loans

$

27,759

$

28,393

$

26,700

$

28,069

$

25,810

Real estate construction loans:

Commercial Real Estate business line (c)

1,263

1,218

999

1,199

1,029

Other business lines (d)

259

235

390

231

391

     Total real estate construction loans

1,522

1,453

1,389

1,430

1,420

Commercial mortgage loans:

Commercial Real Estate business line (c)

1,714

1,798

2,140

1,782

2,367

Other business lines (d)

7,229

7,394

7,530

7,395

7,584

     Total commercial mortgage loans

8,943

9,192

9,670

9,177

9,951

Lease financing

839

855

852

850

873

International loans

1,252

1,262

1,302

1,265

1,257

Residential mortgage loans

1,642

1,602

1,488

1,600

1,498

Consumer loans

2,137

2,136

2,196

2,142

2,225

Total loans

44,094

44,893

43,597

44,533

43,034

Earning assets

58,892

58,928

57,801

58,810

56,883

Total assets

63,660

63,709

62,984

63,710

62,008

Noninterest-bearing deposits

22,379

22,076

21,469

21,991

20,415

Interest-bearing deposits

29,486

29,372

28,376

29,364

28,532

Total deposits

51,865

51,448

49,845

51,355

48,947

Common shareholders' equity

6,923

6,982

7,045

6,953

6,996

NET INTEREST INCOME

Net interest income (fully taxable equivalent basis)

$

413

$

415

$

428

$

1,244

$

1,306

Fully taxable equivalent adjustment

1

1

1

2

2

Net interest margin (fully taxable equivalent basis)

2.79

%

2.83

%

2.96

%

2.83

%

3.08

%

CREDIT QUALITY

Nonaccrual loans

$

437

$

449

$

665

Reduced-rate loans

22

22

27

Total nonperforming loans (e)

459

471

692

Foreclosed property

19

29

63

Total nonperforming assets (e)

478

500

755

Loans past due 90 days or more and still accruing

25

20

36

Gross loan charge-offs

39

35

59

$

112

$

185

Loan recoveries

20

18

16

52

52

Net loan charge-offs

19

17

43

60

133

Allowance for loan losses

604

613

647

Allowance for credit losses on lending-related commitments

34

36

35

Total allowance for credit losses

638

649

682

Allowance for loan losses as a percentage of total loans

1.37

%

1.35

%

1.46

%

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

0.18

0.15

0.39

0.18

%

0.41

%

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

1.08

1.10

1.71

Allowance for loan losses as a percentage of total nonperforming loans

131

130

94

(a)

See Reconciliation of Non-GAAP Financial Measures.

(b)

September 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

September 30,

June 30,

December 31,

September 30,

(in millions, except share data)

2013

2013

2012

2012

(unaudited)

(unaudited)

(unaudited)

ASSETS

Cash and due from banks

$

1,384

$

1,016

$

1,395

$

933

Federal funds sold

31

100

Interest-bearing deposits with banks

5,704

2,878

3,039

3,005

Other short-term investments

106

119

125

146

Investment securities available-for-sale

9,488

9,631

10,297

10,569

Commercial loans

27,897

29,186

29,513

27,460

Real estate construction loans

1,552

1,479

1,240

1,392

Commercial mortgage loans

8,785

9,007

9,472

9,559

Lease financing

829

843

859

837

International loans

1,286

1,209

1,293

1,277

Residential mortgage loans

1,650

1,611

1,527

1,495

Consumer loans

2,152

2,124

2,153

2,174

     Total loans

44,151

45,459

46,057

44,194

Less allowance for loan losses

(604)

(613)

(629)

(647)

     Net loans

43,547

44,846

45,428

43,547

Premises and equipment

604

604

622

625

Accrued income and other assets

3,837

3,822

4,063

4,175

     Total assets

$

64,670

$

62,947

$

65,069

$

63,000

LIABILITIES AND SHAREHOLDERS' EQUITY

Noninterest-bearing deposits

$

23,896

$

21,870

$

23,279

$

21,753

Money market and interest-bearing checking deposits

21,697

21,677

21,273

20,397

Savings deposits

1,645

1,677

1,606

1,589

Customer certificates of deposit

5,180

5,594

5,531

5,742

Foreign office time deposits

491

437

502

486

     Total interest-bearing deposits

29,013

29,385

28,912

28,214

     Total deposits

52,909

51,255

52,191

49,967

Short-term borrowings

226

131

110

63

Accrued expenses and other liabilities

1,001

1,049

1,106

1,146

Medium- and long-term debt

3,565

3,601

4,720

4,740

     Total liabilities

57,701

56,036

58,127

55,916

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

2,171

2,160

2,162

2,153

Accumulated other comprehensive loss

(541)

(538)

(413)

(253)

Retained earnings

6,239

6,127

5,931

5,831

Less cost of common stock in treasury - 44,483,659 shares at 9/30/13, 42,999,083 shares at 6/30/13, 39,889,610 shares at 12/31/12 and 36,790,174 shares at 9/30/12

(2,041)

(1,979)

(1,879)

(1,788)

     Total shareholders' equity

6,969

6,911

6,942

7,084

     Total liabilities and shareholders' equity

$

64,670

$

62,947

$

65,069

$

63,000

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

Comerica Incorporated and Subsidiaries

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions, except per share data)

2013

2012

2013

2012

INTEREST INCOME

Interest and fees on loans

$

381

$

400

$

1,159

$

1,219

Interest on investment securities

54

57

159

179

Interest on short-term investments

4

3

10

9

Total interest income

439

460

1,328

1,407

INTEREST EXPENSE

Interest on deposits

13

17

43

54

Interest on medium- and long-term debt

14

16

43

49

Total interest expense

27

33

86

103

Net interest income

412

427

1,242

1,304

Provision for credit losses

8

22

37

63

Net interest income after provision for credit losses

404

405

1,205

1,241

NONINTEREST INCOME

Service charges on deposit accounts

53

53

161

162

Fiduciary income

41

39

128

116

Commercial lending fees

28

22

71

71

Letter of credit fees

17

19

49

54

Card fees

20

16

55

48

Foreign exchange income

9

9

27

29

Bank-owned life insurance

12

10

31

30

Brokerage fees

5

5

14

14

Net securities gains (losses)

1

(1)

11

Other noninterest income

28

24

87

79

Total noninterest income

214

197

622

614

NONINTEREST EXPENSES

Salaries

196

192

566

582

Employee benefits

59

61

185

181

Total salaries and employee benefits

255

253

751

763

Net occupancy expense

41

40

119

121

Equipment expense

15

17

45

50

Outside processing fee expense

31

27

89

79

Software expense

22

23

66

67

Merger and restructuring charges

25

33

FDIC insurance expense

9

9

26

29

Advertising expense

6

7

18

21

Other real estate expense

1

2

3

6

Other noninterest expenses

37

46

132

161

Total noninterest expenses

417

449

1,249

1,330

Income before income taxes

201

153

578

525

Provision for income taxes

54

36

154

134

NET INCOME

147

117

424

391

Less income allocated to participating securities

2

1

6

4

Net income attributable to common shares

$

145

$

116

$

418

$

387

Earnings per common share:

Basic

$

0.80

$

0.61

$

2.28

$

2.00

Diluted

0.78

0.61

2.23

2.00

Comprehensive income

144

165

296

494

Cash dividends declared on common stock

31

29

95

78

Cash dividends declared per common share

0.17

0.15

0.51

0.40

 

CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

Comerica Incorporated and Subsidiaries

Third

Second

First

Fourth

Third

Third Quarter 2013 Compared To:

Quarter

Quarter

Quarter

Quarter

Quarter

Second Quarter 2013

Third Quarter 2012

(in millions, except per share data)

2013

2013

2013

2012

2012

Amount

Percent

Amount

Percent

INTEREST INCOME

Interest and fees on loans

$

381

$

388

$

390

$

398

$

400

$

(7)

(2)%

$

(19)

(5)%

Interest on investment securities

54

52

53

55

57

2

6

(3)

(3)

Interest on short-term investments

4

3

3

3

3

1

25

1

9

Total interest income

439

443

446

456

460

(4)

(1)

(21)

(4)

INTEREST EXPENSE

Interest on deposits

13

15

15

16

17

(2)

(7)

(4)

(23)

Interest on medium- and long-term debt

14

14

15

16

16

(2)

(13)

Total interest expense

27

29

30

32

33

(2)

(5)

(6)

(18)

Net interest income

412

414

416

424

427

(2)

(15)

(3)

Provision for credit losses

8

13

16

16

22

(5)

(42)

(14)

(64)

Net interest income after provision for credit losses

404

401

400

408

405

3

1

(1)

NONINTEREST INCOME

Service charges on deposit accounts

53

53

55

52

53

Fiduciary income

41

44

43

42

39

(3)

(4)

2

6

Commercial lending fees

28

22

21

25

22

6

24

6

27

Letter of credit fees

17

16

16

17

19

1

1

(2)

(12)

Card fees

20

18

17

17

16

2

4

4

20

Foreign exchange income

9

9

9

9

9

Bank-owned life insurance

12

10

9

9

10

2

22

2

23

Brokerage fees

5

4

5

5

5

1

Net securities gains (losses)

1

(2)

1

3

N/M

1

N/M

Other noninterest income

28

34

25

27

24

(6)

(10)

4

20

Total noninterest income

214

208

200

204

197

6

3

17

9

NONINTEREST EXPENSES

Salaries

196

182

188

196

192

14

8

4

3

Employee benefits

59

63

63

59

61

(4)

(5)

(2)

(3)

Total salaries and employee benefits

255

245

251

255

253

10

5

2

2

Net occupancy expense

41

39

39

42

40

2

2

1

Equipment expense

15

15

15

15

17

(2)

(8)

Outside processing fee expense

31

30

28

28

27

1

10

4

22

Software expense

22

22

22

23

23

(1)

(5)

Merger and restructuring charges

2

25

(25)

N/M

FDIC insurance expense

9

8

9

9

9

1

10

Advertising expense

6

6

6

6

7

(1)

(15)

Other real estate expense

1

1

1

3

2

(1)

(49)

Other noninterest expenses

37

50

45

44

46

(13)

(26)

(9)

(20)

Total noninterest expenses

417

416

416

427

449

1

1

(32)

(7)

Income before income taxes

201

193

184

185

153

8

4

48

31

Provision for income taxes

54

50

50

55

36

4

7

18

47

NET INCOME

147

143

134

130

117

4

2

30

25

Less income allocated to participating securities

2

2

2

2

1

1

45

Net income attributable to common shares

$

145

$

141

$

132

$

128

$

116

$

4

2

%

$

29

25

%

Earnings per common share:

Basic

$

0.80

$

0.77

$

0.71

$

0.68

$

0.61

$

0.03

4

%

$

0.19

31

%

Diluted

0.78

0.76

0.70

0.68

0.61

0.02

3

0.17

28

Comprehensive income (loss)

144

15

137

(30)

165

129

N/M

(21)

(13)

Cash dividends declared on common stock

31

32

32

28

29

(1)

(1)

2

9

Cash dividends declared per common share

0.17

0.17

0.17

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)

3rd Qtr

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

Balance at beginning of period

$

613

$

617

$

629

$

647

$

667

Loan charge-offs:

Commercial

20

19

21

42

19

Real estate construction:

     Commercial Real Estate business line (a)

1

2

1

2

     Other business lines (b)

          Total real estate construction

1

2

1

2

Commercial mortgage:

     Commercial Real Estate business line (a)

6

2

1

5

12

     Other business lines (b)

3

7

12

6

13

          Total commercial mortgage

9

9

13

11

25

International

1

Residential mortgage

1

1

1

2

6

Consumer

8

4

3

4

6

     Total loan charge-offs

39

35

38

60

59

Recoveries on loans previously charged-off:

Commercial

8

11

6

13

7

Real estate construction

2

1

1

1

3

Commercial mortgage

7

3

5

6

5

Lease financing

1

International

1

Residential mortgage

1

1

1

1

Consumer

1

2

1

1

1

     Total recoveries

20

18

14

23

16

Net loan charge-offs

19

17

24

37

43

Provision for loan losses

10

13

12

19

23

Balance at end of period

$

604

$

613

$

617

$

629

$

647

Allowance for loan losses as a percentage of total loans

1.37

%

1.35

%

1.37

%

1.37

%

1.46

%

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

0.18

0.15

0.21

0.34

0.39

(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)

3rd Qtr

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

Balance at beginning of period

$

36

$

36

$

32

$

35

$

36

Add: Provision for credit losses on lending-related commitments

(2)

4

(3)

(1)

Balance at end of period

$

34

$

36

$

36

$

32

$

35

Unfunded lending-related commitments sold

$

2

$

1

$

2

$

$

 

NONPERFORMING ASSETS (unaudited)

Comerica Incorporated and Subsidiaries

2013

2012

(in millions)

3rd Qtr

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS

Nonaccrual loans:

Business loans:

     Commercial

$

107

$

102

$

102

$

103

$

154

     Real estate construction:

     Commercial Real Estate business line (a)

24

26

30

30

45

          Other business lines (b)

1

2

3

3

6

               Total real estate construction

25

28

33

33

51

     Commercial mortgage:

          Commercial Real Estate business line (a)

67

69

86

94

137

     Other business lines (b)

139

157

178

181

219

               Total commercial mortgage

206

226

264

275

356

     Lease financing

3

3

     Total nonaccrual business loans

338

356

399

414

564

Retail loans:

     Residential mortgage

63

62

65

70

69

     Consumer:

          Home equity

34

28

28

31

28

          Other consumer

2

3

2

4

4

               Total consumer

36

31

30

35

32

     Total nonaccrual retail loans

99

93

95

105

101

Total nonaccrual loans

437

449

494

519

665

Reduced-rate loans

22

22

21

22

27

Total nonperforming loans (c)

459

471

515

541

692

Foreclosed property

19

29

40

54

63

Total nonperforming assets (c)

$

478

$

500

$

555

$

595

$

755

Nonperforming loans as a percentage of total loans

1.04

%

1.04

%

1.14

%

1.17

%

1.57

%

Nonperforming assets as a percentage of total loans and foreclosed property

1.08

1.10

1.23

1.29

1.71

Allowance for loan losses as a percentage of total nonperforming loans

131

130

120

116

94

Loans past due 90 days or more and still accruing

$

25

$

20

$

25

$

23

$

36

ANALYSIS OF NONACCRUAL LOANS

Nonaccrual loans at beginning of period

$

449

$

494

$

519

$

665

$

719

Loans transferred to nonaccrual (d)

50

37

34

36

35

Nonaccrual business loan gross charge-offs (e)

(25)

(25)

(34)

(54)

(46)

Nonaccrual business loans sold (f)

(17)

(9)

(7)

(48)

(20)

Payments/Other (g)

(20)

(48)

(18)

(80)

(23)

Nonaccrual loans at end of period

$

437

$

449

$

494

$

519

$

665

(a) Primarily loans to real estate developers.

(b) Primarily loans secured by owner-occupied real estate.

(c) Excludes loans acquired with credit impairment.

(d) Based on an analysis of nonaccrual loans with book balances greater than $2 million.

(e) Analysis of gross loan charge-offs:

Nonaccrual business loans

$

25

$

25

$

34

$

54

$

46

Performing watch list loans

5

5

1

Consumer and residential mortgage loans

9

5

4

6

12

     Total gross loan charge-offs

$

39

$

35

$

38

$

60

$

59

(f) Analysis of loans sold:

      Nonaccrual business loans

$

17

$

9

$

7

$

48

$

20

      Performing watch list loans

31

40

12

24

42

     Total loans sold

$

48

$

49

$

19

$

72

$

62

(g) Includes net changes related to nonaccrual loans with balances less than $2 million, payments on nonaccrual loans with book balances greater than $2 million and transfers of nonaccrual loans to foreclosed property. Excludes business loan gross charge-offs and business nonaccrual loans sold.

 

ANALYSIS OF NET INTEREST INCOME (FTE) (unaudited)

Comerica Incorporated and Subsidiaries

Nine Months Ended

September 30, 2013

September 30, 2012

Average

Average

Average

Average

(dollar amounts in millions)

Balance

Interest

Rate

Balance

Interest

Rate

Commercial loans

$

28,069

$

688

3.28

%

$

25,810

$

673

3.48

%

Real estate construction loans

1,430

43

3.98

1,420

47

4.48

Commercial mortgage loans

9,177

271

3.95

9,951

337

4.51

Lease financing

850

21

3.22

873

19

2.92

International loans

1,265

35

3.73

1,257

35

3.73

Residential mortgage loans

1,600

50

4.13

1,498

52

4.66

Consumer loans

2,142

53

3.32

2,225

57

3.44

Total loans (a)

44,533

1,161

3.49

43,034

1,220

3.79

Mortgage-backed securities available-for-sale

9,339

158

2.29

9,317

177

2.60

Other investment securities available-for-sale

390

1

0.48

486

3

0.78

Total investment securities available-for-sale

9,729

159

2.21

9,803

180

2.51

Interest-bearing deposits with banks (b)

4,433

9

0.26

3,908

8

0.26

Other short-term investments

115

1

1.38

138

1

1.80

Total earning assets

58,810

1,330

3.03

56,883

1,409

3.32

Cash and due from banks

993

967

Allowance for loan losses

(627)

(707)

Accrued income and other assets

4,534

4,865

Total assets

$

63,710

$

62,008

Money market and interest-bearing checking deposits

$

21,594

22

0.13

$

20,577

26

0.18

Savings deposits

1,654

0.03

1,589

1

0.06

Customer certificates of deposit

5,603

19

0.44

5,993

25

0.54

Foreign office time deposits

513

2

0.54

373

2

0.64

Total interest-bearing deposits

29,364

43

0.19

28,532

54

0.25

Short-term borrowings

189

0.07

78

0.12

Medium- and long-term debt

4,109

43

1.42

4,846

49

1.36

Total interest-bearing sources

33,662

86

0.34

33,456

103

0.41

Noninterest-bearing deposits

21,991

20,415

Accrued expenses and other liabilities

1,104

1,141

Total shareholders' equity

6,953

6,996

Total liabilities and shareholders' equity

$

63,710

$

62,008

Net interest income/rate spread (FTE)

$

1,244

2.69

$

1,306

2.91

FTE adjustment

$

2

$

2

Impact of net noninterest-bearing sources of funds

0.14

0.17

Net interest margin (as a percentage of average earning assets) (FTE) (a) (b)

2.83

%

3.08

%

(a)

Accretion of the purchase discount on the acquired loan portfolio of $26 million and $58 million in the nine months ended September 30, 2013 and 2012, respectively, increased the net interest margin by 6 basis points and 14 basis points in each respective period.

(b)

Excess liquidity, represented by average balances deposited with the Federal Reserve Bank, reduced the net interest margin by 20 basis points in both the nine months ended September 30, 2013 and 2012.

ANALYSIS OF NET INTEREST INCOME (FTE) (unaudited)

Comerica Incorporated and Subsidiaries

Three Months Ended

September 30, 2013

June 30, 2013

September 30, 2012

Average

Average

Average

Average

Average

Average

(dollar amounts in millions)

Balance

Interest

Rate

Balance

Interest

Rate

Balance

Interest

Rate

Commercial loans

$

27,759

$

226

3.25

%

$

28,393

$

233

3.29

%

$

26,700

$

227

3.38

%

Real estate construction loans

1,522

15

3.78

1,453

15

4.04

1,389

15

4.36

Commercial mortgage loans

8,943

88

3.90

9,192

88

3.86

9,670

106

4.34

Lease financing

839

7

3.21

855

7

3.22

852

4

2.04

International loans

1,252

12

3.76

1,262

12

3.81

1,302

12

3.77

Residential mortgage loans

1,642

17

3.98

1,602

16

4.04

1,488

17

4.67

Consumer loans

2,137

17

3.27

2,136

18

3.30

2,196

19

3.44

Total loans (a)

44,094

382

3.44

44,893

389

3.47

43,597

400

3.66

Mortgage-backed securities available-for-sale

8,989

54

2.41

9,400

51

2.22

9,360

57

2.46

Other investment securities available-for-sale

391

0.43

393

1

0.52

431

1

0.86

Total investment securities available-for-sale

9,380

54

2.32

9,793

52

2.15

9,791

58

2.38

Interest-bearing deposits with banks (b)

5,308

4

0.26

4,125

3

0.26

4,276

3

0.26

Other short-term investments

110

0.77

117

1.05

137

1.88

Total earning assets

58,892

440

2.97

58,928

444

3.02

57,801

461

3.19

Cash and due from banks

1,027

972

971

Allowance for loan losses

(622)

(625)

(673)

Accrued income and other assets

4,363

4,434

4,885

Total assets

$

63,660

$

63,709

$

62,984

Money market and interest-bearing checking deposits

$

21,894

7

0.13

$

21,544

8

0.13

$

20,483

8

0.17

Savings deposits

1,680

0.04

1,658

0.03

1,618

0.04

Customer certificates of deposit

5,384

6

0.41

5,685

6

0.43

5,894

8

0.52

Foreign office time deposits

528

0.48

485

1

0.60

381

1

0.71

Total interest-bearing deposits

29,486

13

0.18

29,372

15

0.19

28,376

17

0.24

Short-term borrowings

249

0.06

193

0.07

89

0.12

Medium- and long-term debt

3,590

14

1.54

4,044

14

1.43

4,745

16

1.35

Total interest-bearing sources

33,325

27

0.32

33,609

29

0.34

33,210

33

0.40

Noninterest-bearing deposits

22,379

22,076

21,469

Accrued expenses and other liabilities

1,033

1,042

1,260

Total shareholders' equity

6,923

6,982

7,045

Total liabilities and shareholders' equity

$

63,660

$

63,709

$

62,984

Net interest income/rate spread (FTE)

$

413

2.65

$

415

2.68

$

428

2.79

FTE adjustment

$

1

$

1

$

1

Impact of net noninterest-bearing sources of funds

0.14

0.15

0.17

Net interest margin (as a percentage of average earning assets) (FTE) (a) (b)

2.79

%

2.83

%

2.96

%

(a)

Accretion of the purchase discount on the acquired loan portfolio of $8 million, $7 million and $15 million in the third and second quarters of 2013 and the third quarter of 2012, respectively, increased the net interest margin by 5 basis points, 5 basis points and 10 basis points in each respective period.

(b)

Excess liquidity, represented by average balances deposited with the Federal Reserve Bank, reduced the net interest margin by 24 basis points and 18 basis points in the third and second quarters of 2013 and 21 basis points in the third quarter of 2012, respectively.

CONSOLIDATED STATISTICAL DATA (unaudited)

Comerica Incorporated and Subsidiaries

September 30,

June 30,

March 31,

December 31,

September 30,

(in millions, except per share data)

2013

2013

2013

2012

2012

Commercial loans:

Floor plan

$

2,869

$

3,241

$

2,963

$

2,939

$

2,276

Other

25,028

25,945

25,545

26,574

25,184

     Total commercial loans

27,897

29,186

28,508

29,513

27,460

Real estate construction loans:

Commercial Real Estate business line (a)

1,283

1,223

1,185

1,049

1,003

Other business lines (b)

269

256

211

191

389

     Total real estate construction loans

1,552

1,479

1,396

1,240

1,392

Commercial mortgage loans:

Commercial Real Estate business line (a)

1,592

1,743

1,812

1,873

2,020

Other business lines (b)

7,193

7,264

7,505

7,599

7,539

     Total commercial mortgage loans

8,785

9,007

9,317

9,472

9,559

Lease financing

829

843

853

859

837

International loans

1,286

1,209

1,269

1,293

1,277

Residential mortgage loans

1,650

1,611

1,568

1,527

1,495

Consumer loans:

Home equity

1,501

1,474

1,498

1,537

1,570

Other consumer

651

650

658

616

604

     Total consumer loans

2,152

2,124

2,156

2,153

2,174

     Total loans

$

44,151

$

45,459

$

45,067

$

46,057

$

44,194

Goodwill

$

635

$

635

$

635

$

635

$

635

Core deposit intangible

17

18

19

20

23

Loan servicing rights

1

2

2

2

2

Tier 1 common capital ratio (c) (d)

10.74

%

10.43

%

10.37

%

10.14

%

10.37

%

Tier 1 risk-based capital ratio (c)

10.74

10.43

10.37

10.14

10.37

Total risk-based capital ratio (c)

13.44

13.29

13.41

13.15

13.69

Leverage ratio (c)

10.88

10.81

10.75

10.57

10.78

Tangible common equity ratio (d)

9.87

10.04

9.86

9.76

10.30

Common shareholders' equity per share of common stock

$

37.94

$

37.32

$

37.41

$

36.87

$

37.01

Tangible common equity per share of common stock (d)

34.38

33.79

33.90

33.38

33.56

Market value per share for the quarter:

High

43.49

40.44

36.99

32.14

33.38

Low

38.56

33.55

30.73

27.72

29.32

Close

39.31

39.83

35.95

30.34

31.05

Quarterly ratios:

Return on average common shareholders' equity

8.50

%

8.23

%

7.68

%

7.36

%

6.67

%

Return on average assets

0.92

0.90

0.84

0.81

0.75

Efficiency ratio (e)

66.66

66.43

67.58

68.08

71.68

Number of banking centers

484

484

487

487

490

Number of employees - full time equivalent

8,918

8,929

9,001

9,035

9,079

(a)

Primarily loans to real estate developers.

(b)

Primarily loans secured by owner-occupied real estate.

(c)

September 30, 2013 ratios are estimated.

(d)

See Reconciliation of Non-GAAP Financial Measures.

(e)

Noninterest expenses as a percentage of the sum of net interest income (FTE) and noninterest income excluding net securities gains.

 

PARENT COMPANY ONLY BALANCE SHEETS (unaudited)

Comerica Incorporated

September 30,

December 31,

September 30,

(in millions, except SHARE data)

2013

2012

2012

ASSETS

Cash and due from subsidiary bank

$

36

$

2

$

13

Short-term investments with subsidiary bank

480

431

418

Other short-term investments

92

88

88

Investment in subsidiaries, principally banks

7,008

7,045

7,200

Premises and equipment

4

4

4

Other assets

134

150

150

      Total assets

$

7,754

$

7,720

$

7,873

LIABILITIES AND SHAREHOLDERS' EQUITY

Medium- and long-term debt

$

620

$

629

$

632

Other liabilities

165

149

157

      Total liabilities

785

778

789

Common stock - $5 par value:

    Authorized - 325,000,000 shares

    Issued - 228,164,824 shares

1,141

1,141

1,141

Capital surplus

2,171

2,162

2,153

Accumulated other comprehensive loss

(541)

(413)

(253)

Retained earnings

6,239

5,931

5,831

Less cost of common stock in treasury - 44,483,659 shares at 9/30/13, 39,889,610 shares at 12/31/12 and 36,790,174 shares at 9/30/12

(2,041)

(1,879)

(1,788)

      Total shareholders' equity

6,969

6,942

7,084

      Total liabilities and shareholders' equity

$

7,754

$

7,720

$

7,873

 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)

Comerica Incorporated and Subsidiaries

Accumulated

Common Stock

Other

Total

Shares

Capital

Comprehensive

Retained

Treasury

Shareholders'

(in millions, except per share data)

 Outstanding

Amount

Surplus

Loss

Earnings

Stock

Equity

BALANCE AT DECEMBER 31, 2011

197.3

$

1,141

$

2,170

$

(356)

$

5,546

$

(1,633)

$

6,868

Net income

391

391

Other comprehensive income, net of tax

103

103

Cash dividends declared on common stock ($0.40 per share)

(78)

(78)

Purchase of common stock

(7.1)

(215)

(215)

Net issuance of common stock under employee stock plans

1.2

(48)

(28)

62

(14)

Share-based compensation

29

29

Other

2

(2)

BALANCE AT SEPTEMBER 30, 2012

191.4

$

1,141

$

2,153

$

(253)

$

5,831

$

(1,788)

$

7,084

BALANCE AT DECEMBER 31, 2012

188.3

$

1,141

$

2,162

$

(413)

$

5,931

$

(1,879)

$

6,942

Net income

424

424

Other comprehensive loss, net of tax

(128)

(128)

Cash dividends declared on common stock ($0.51 per share)

(95)

(95)

Purchase of common stock

(5.8)

(218)

(218)

Net issuance of common stock under employee stock plans

1.2

(18)

(21)

56

17

Share-based compensation

27

27

BALANCE AT SEPTEMBER 30, 2013

183.7

$

1,141

$

2,171

$

(541)

$

6,239

$

(2,041)

$

6,969

 

 BUSINESS SEGMENT FINANCIAL RESULTS (unaudited)

 Comerica Incorporated and Subsidiaries

(dollar amounts in millions)

Business

Retail

Wealth

Three Months Ended September 30, 2013

Bank

Bank

Management

Finance

Other

Total

Earnings summary:

Net interest income (expense) (FTE)

$

368

$

151

$

45

$

(159)

$

8

$

413

Provision for credit losses

(1)

10

1

(2)

8

Noninterest income

89

45

61

18

1

214

Noninterest expenses

153

177

81

2

4

417

Provision (benefit) for income taxes (FTE)

96

3

9

(56)

3

55

Net income (loss)

$

209

$

6

$

15

$

(87)

$

4

$

147

Net credit-related charge-offs

$

9

$

7

$

3

$

19

Selected average balances:

Assets

$

35,298

$

5,967

$

4,789

$

11,097

$

6,509

$

63,660

Loans

34,178

5,285

4,631

44,094

Deposits

26,284

21,257

3,782

319

223

51,865

Statistical data:

Return on average assets (a)

2.38

%

0.12

%

1.21

%

N/M

N/M

0.92

%

Efficiency ratio (b)

33.50

90.27

77.22

N/M

N/M

66.66

Business

Retail

Wealth

Three Months Ended June 30, 2013

Bank

Bank

Management

Finance

Other

Total

Earnings summary:

Net interest income (expense) (FTE)

$

372

$

154

$

46

$

(165)

$

8

$

415

Provision for credit losses

10

5

(3)

1

13

Noninterest income

80

46

65

15

2

208

Noninterest expenses

147

178

77

3

11

416

Provision (benefit) for income taxes (FTE)

88

6

13

(55)

(1)

51

Net income (loss)

$

207

$

11

$

24

$

(98)

$

(1)

$

143

Net credit-related charge-offs

$

11

$

4

$

2

$

17

Selected average balances:

Assets

$

36,017

$

5,962

$

4,828

$

11,514

$

5,388

$

63,709

Loans

34,955

5,271

4,667

44,893

Deposits

25,987

21,241

3,701

283

236

51,448

Statistical data:

Return on average assets (a)

2.30

%

0.20

%

2.00

%

N/M

N/M

0.90

%

Efficiency ratio (b)

32.41

87.98

69.86

N/M

N/M

66.43

Business

Retail

Wealth

Three Months Ended September 30, 2012

Bank

Bank

Management

Finance

Other

Total

Earnings summary:

Net interest income (expense) (FTE)

$

380

$

161

$

47

$

(170)

10

$

428

Provision for credit losses

15

6

4

(3)

22

Noninterest income

76

41

62

14

4

197

Noninterest expenses

145

181

77

3

43

449

Provision (benefit) for income taxes (FTE)

89

5

10

(59)

(8)

37

Net income (loss)

$

207

$

10

$

18

$

(100)

$

(18)

$

117

Net credit-related charge-offs

$

27

$

13

$

3

$

43

Selected average balances:

Assets

$

34,861

$

5,964

$

4,566

$

11,873

$

5,720

$

62,984

Loans

33,856

5,265

4,476

43,597

Deposits

25,142

20,682

3,667

181

173

49,845

Statistical data:

Return on average assets (a)

2.38

%

0.19

%

1.59

%

 N/M

 N/M

0.75

%

Efficiency ratio (b)

31.67

89.07

71.04

 N/M

 N/M

71.68

 

(a)

Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.

(b)

Noninterest expenses as a percentage of the sum of net interest income (FTE) and noninterest income excluding net securities gains.

FTE - Fully Taxable Equivalent

N/M - Not Meaningful

 

 

 MARKET SEGMENT FINANCIAL RESULTS (unaudited)

 Comerica Incorporated and Subsidiaries

(dollar amounts in millions)

Other

Finance

Three Months Ended September 30, 2013

Michigan

California

Texas

Markets

&

Other

Total

Earnings summary:

Net interest income (expense) (FTE)

$

186

$

171

$

129

$

78

$

(151)

$

413

Provision for credit losses

(8)

(3)

17

4

(2)

8

Noninterest income

88

42

35

30

19

214

Noninterest expenses

167

101

92

51

6

417

Provision (benefit) for income taxes (FTE)

42

44

20

2

(53)

55

Net income (loss)

$

73

$

71

$

35

$

51

$

(83)

$

147

Net credit-related charge-offs

$

1

$

8

$

4

$

6

$

$

19

Selected average balances:

Assets

$

13,744

$

14,245

$

10,642

$

7,423

$

17,606

$

63,660

Loans

13,276

14,002

9,942

6,874

44,094

Deposits

20,465

14,567

10,298

5,993

542

51,865

Statistical data:

Return on average assets (a)

1.38

%

1.84

%

1.21

%

2.73

%

N/M

0.92

%

Efficiency ratio (b)

60.89

47.37

56.52

47.65

N/M

66.66

Other

Finance

Three Months Ended June 30, 2013

Michigan

California

Texas

Markets

& Other

Total

Earnings summary:

Net interest income (expense) (FTE)

$

187

$

173

$

131

$

81

$

(157)

$

415

Provision for credit losses

(4)

7

6

3

1

13

Noninterest income

88

36

34

33

17

208

Noninterest expenses

161

100

89

52

14

416

Provision (benefit) for income taxes (FTE)

41

37

24

5

(56)

51

Net income (loss)

$

77

$

65

$

46

$

54

$

(99)

$

143

Net credit-related charge-offs

$

4

$

12

$

(3)

$

4

$

$

17

Selected average balances:

Assets

$

14,022

$

14,155

$

10,886

$

7,744

$

16,902

$

63,709

Loans

13,598

13,912

10,179

7,204

44,893

Deposits

20,159

14,671

10,187

5,912

519

51,448

Statistical data:

Return on average assets (a)

1.47

%

1.65

%

1.62

%

2.79

%

N/M

0.90

%

Efficiency ratio (b)

58.17

47.73

53.39

46.04

N/M

66.43

Other

Finance

Three Months Ended September 30, 2012

Michigan

California

Texas

 

Markets

& Other

Total

Earnings summary:

Net interest income (expense) (FTE)

$

193

$

176

$

138

$

81

$

(160)

$

428

Provision for credit losses

2

6

10

7

(3)

22

Noninterest income

95

33

30

21

18

197

Noninterest expenses

175

98

89

41

46

449

Provision (benefit) for income taxes (FTE)

40

38

25

1

(67)

37

Net income (loss)

$

71

$

67

$

44

$

53

$

(118)

$

117

Net credit-related charge-offs

$

12

$

11

$

7

$

13

$

$

43

Selected average balances:

Assets

$

13,785

$

13,171

$

10,324

$

8,111

$

17,593

$

62,984

Loans

13,475

12,915

9,585

7,622

43,597

Deposits

19,628

14,964

9,941

4,958

354

49,845

Statistical data:

Return on average assets (a)

1.39

%

1.69

%

1.62

%

2.53

%

N/M

0.75

%

Efficiency ratio (b)

60.06

46.68

52.96

41.78

N/M

71.68

(a)  

Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.

(b)  

Noninterest expenses as a percentage of the sum of net interest income (FTE) and noninterest income excluding net securities gains.

FTE - Fully Taxable Equivalent

N/M - Not Meaningful

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)

Comerica Incorporated and Subsidiaries

September 30,

June 30,

March 31,

December 31,

September 30,

(dollar amounts in millions)

2013

2013

2013

2012

2012

Tier 1 Common Capital Ratio:

Tier 1 and Tier 1 common capital (a) (b)

$

6,863

$

6,800

$

6,748

$

6,705

$

6,685

Risk-weighted assets (a) (b)

$

63,917

$

65,220

$

65,099

$

66,115

$

64,486

Tier 1 and Tier 1 common risk-based capital ratio (b)

10.74

%

10.43

%

10.37

%

10.14

%

10.37

%

Basel III Tier 1 Common Capital Ratio:

Tier 1 common capital (b)

$

6,863

$

6,800

$

6,748

$

6,705

$

6,685

Basel III adjustments (c)

(1)

(39)

(17)

Basel III Tier 1 common capital (c)

6,863

6,800

6,747

6,666

6,668

Risk-weighted assets (a) (b)

$

63,917

$

65,220

$

65,099

$

66,115

$

64,486

Basel III adjustments (c)

2,295

2,091

1,996

1,854

2,313

Basel III risk-weighted assets (c)

$

66,212

$

67,311

$

67,095

$

67,969

$

66,799

Tier 1 common capital ratio (b)

10.7

%

10.4

%

10.4

%

10.1

%

10.4

%

Basel III Tier 1 common capital ratio (c)

10.4

10.1

10.1

9.8

10.0

Tangible Common Equity Ratio:

Common shareholders' equity

$

6,969

$

6,911

$

6,988

$

6,942

$

7,084

Less:

Goodwill

635

635

635

635

635

Other intangible assets

18

20

21

22

25

Tangible common equity

$

6,316

$

6,256

$

6,332

$

6,285

$

6,424

Total assets

$

64,670

$

62,947

$

64,885

$

65,069

$

63,000

Less:

Goodwill

635

635

635

635

635

Other intangible assets

18

20

21

22

25

Tangible assets

$

64,017

$

62,292

$

64,229

$

64,412

$

62,340

Common equity ratio

10.78

%

10.98

%

10.77

%

10.67

%

11.24

%

Tangible common equity ratio

9.87

10.04

9.86

9.76

10.30

Tangible Common Equity per Share of Common Stock:

Common shareholders' equity

$

6,969

$

6,911

$

6,988

$

6,942

$

7,084

Tangible common equity

6,316

6,256

6,332

6,285

6,424

Shares of common stock outstanding (in millions)

184

185

187

188

191

Common shareholders' equity per share of common stock

$

37.94

$

37.32

$

37.41

$

36.87

$

37.01

Tangible common equity per share of common stock

34.38

33.79

33.90

33.38

33.56

(a)

Tier 1 capital and risk-weighted assets as defined by regulation.

(b)

September 30, 2013 Tier 1 capital and risk-weighted assets are estimated.

(c)

Estimated ratios based on the standardized approach in the final rule for the U.S. adoption of the Basel III regulatory capital framework and excluding most elements of AOCI.

The Tier 1 common capital ratio removes preferred stock and qualifying trust preferred securities from Tier 1 capital as defined by and calculated in conformity with bank regulations. The Basel III Tier 1 common capital ratio further adjusts Tier 1 common capital and risk-weighted assets to account for the final rule approved by U.S. banking regulators in July 2013 for the U.S. adoption of the Basel III regulatory capital framework. The final Basel III capital rules are effective January 1, 2015 for banking organizations subject to the standardized approach. The tangible common equity ratio removes preferred stock and the effect of intangible assets from capital and the effect of intangible assets from total assets. Tangible common equity per share of common stock removes the effect of intangible assets from common shareholders equity per share of common stock. Comerica believes these measurements are meaningful measures of capital adequacy used by investors, regulators, management and others to evaluate the adequacy of common equity and to compare against other companies in the industry.

 

 

SOURCE Comerica Incorporated



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