-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SAxPSgkgtd9s913JXaTk7pwlsP4ie8BGyfFaNsUdq0lK5VXx+WwxVd0lHqb3IE56 YegD5sNGbL0fzoDNttznjQ== 0000028412-95-000044.txt : 19951102 0000028412-95-000044.hdr.sgml : 19951102 ACCESSION NUMBER: 0000028412-95-000044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951101 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMERICA INC /NEW/ CENTRAL INDEX KEY: 0000028412 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 381998421 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10706 FILM NUMBER: 95586459 BUSINESS ADDRESS: STREET 1: 100 RENAISCANCE CTR STREET 2: SUITE 3800 CITY: DETROIT STATE: MI ZIP: 48243 BUSINESS PHONE: 3132224000 MAIL ADDRESS: STREET 1: 411 W LAFAYETTE MAIL CODE 3415 STREET 2: ATTN JAY K OBERG CITY: DETROIT STATE: MI ZIP: 48226 FORMER COMPANY: FORMER CONFORMED NAME: DETROITBANK CORP DATE OF NAME CHANGE: 19850311 10-Q 1 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-10706 Comerica Incorporated (Exact name of registrant as specified in its charter) Delaware 38-1998421 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Comerica Tower at Detroit Center Detroit, Michigan 48226 (Address of principal executive offices) (Zip Code) (313) 222-3300 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. $5 par value common stock: outstanding as of September 30, 1995: 114,556,000 shares 2 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements CONSOLIDATED BALANCE SHEETS Comerica Incorporated and Subsidiaries
Sept. 30, Dec. 31, Sept. 30, (In thousands, except per share data) 1995 1994 1994 ----------- ------------ ----------- ASSETS Cash and due from banks $ 1,523,520 $ 1,822,313 $ 1,410,911 Interest-bearing deposits with banks 52,442 378,873 275,361 Federal funds sold and securities purchased under agreements to resell 733,200 46,000 50,499 Trading account securities 4,783 4,332 8,473 Mortgages held for sale 138,741 91,547 108,565 Investment securities available for sale 2,779,920 2,906,296 3,047,713 Investment securities held to maturity (estimated fair value of $4,534,625 at 9/30/95, $4,659,317 at 12/31/94 and $4,864,287 at 9/30/94) 4,591,928 4,970,165 5,081,797 ----------- ----------- ----------- Total investment securities 7,371,848 7,876,461 8,129,510 Commercial loans 11,679,983 10,633,808 9,787,241 International loans 1,400,513 1,195,328 1,167,371 Real estate construction loans 574,208 413,987 398,557 Commercial mortgage loans 3,200,054 3,056,337 3,008,809 Residential mortgage loans 2,451,943 2,436,445 2,289,889 Consumer loans 4,734,944 4,214,716 3,942,077 Lease financing 305,425 258,625 222,807 ----------- ----------- ----------- Total loans 24,347,070 22,209,246 20,816,751 Less allowance for loan losses (342,914) (326,195) (327,962) ----------- ----------- ----------- Net loans 24,004,156 21,883,051 20,488,789 Premises and equipment 456,424 437,757 440,254 Customers' liability on acceptances outstanding 34,336 33,632 38,502 Accrued income and other assets 1,029,076 855,936 852,725 ----------- ----------- ----------- TOTAL ASSETS $35,348,526 $33,429,902 $31,803,589 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Demand deposits (noninterest-bearing) $ 5,180,358 $ 5,257,396 $ 4,617,674 Interest-bearing deposits 15,098,517 14,741,438 14,886,757 Deposits in foreign offices 1,732,254 2,433,482 820,265 ----------- ----------- ----------- Total deposits 22,011,129 22,432,316 20,324,696 Federal funds purchased and securities sold under agreements to repurchase 763,882 2,594,189 1,655,471 Other borrowed funds 4,665,515 1,611,219 3,528,471 Acceptances outstanding 34,336 33,632 38,502 Accrued expenses and other liabilities 372,102 268,823 268,353 Medium- and long-term debt 4,948,576 4,097,943 3,602,381 ----------- ----------- ----------- Total liabilities 32,795,540 31,038,122 29,417,874 Common stock - $5 par value: Authorized - 250,000,000 shares Issued-115,094,531 shares at 9/30/95, 119,294,531 shares at 12/31/94 and 9/30/94 575,473 596,473 596,473 Capital surplus 414,672 525,052 524,915 Unrealized gains and losses on investment securities available for sale 2,719 (55,039) (33,772) Retained earnings 1,574,639 1,390,405 1,331,379 Less cost of common stock in treasury-538,453 shares at 9/30/95, 2,382,333 shares at 12/31/94 and 1,193,179 shares at 9/30/94 (14,517) (65,111) (33,280) ----------- ----------- ----------- Total shareholders' equity 2,552,986 2,391,780 2,385,715 ----------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $35,348,526 $33,429,902 $31,803,589 =========== =========== =========== /TABLE 3 CONSOLIDATED STATEMENTS OF INCOME Comerica Incorporated and Subsidiaries
Three Months Ended Nine Months Ended September 30 September 30 -------------------- ------------------------ (In thousands, except per share data) 1995 1994 1995 1994 -------- -------- ---------- ---------- INTEREST INCOME Interest and fees on loans $532,490 $408,709 $1,550,093 $1,129,270 Interest on investment securities: Taxable 115,225 117,805 353,639 327,425 Exempt from federal income tax 6,390 7,358 20,214 23,445 -------- -------- ---------- ---------- Total interest on investment securities 121,615 125,163 373,853 350,870 Trading account interest 15 52 169 (18) Interest on federal funds sold and securities purchased under agreements to resell 3,405 642 6,041 4,095 Interest on time deposits with banks 1,099 3,646 7,550 17,204 Interest on mortgages held for sale 3,054 2,722 5,586 8,965 -------- -------- ---------- ---------- Total interest income 661,678 540,934 1,943,292 1,510,386 INTEREST EXPENSE Interest on deposits 183,958 141,129 538,194 389,231 Interest on short-term borrowings: Federal funds purchased and securities sold under agreements to repurchase 35,876 33,241 117,928 81,092 Other borrowed funds 41,301 16,880 112,050 60,894 Interest on medium- and long-term debt 76,607 41,741 211,133 89,418 Net interest rate swap (income)/expense 612 (5,056) 5,126 (28,093) -------- -------- ---------- ---------- Total interest expense 338,354 227,935 984,431 592,542 -------- -------- ---------- ---------- Net interest income 323,324 312,999 958,861 917,844 Provision for loan losses 26,000 14,000 53,500 44,000 -------- -------- ---------- ---------- Net interest income after provision for loan losses 297,324 298,999 905,361 873,844 NONINTEREST INCOME Income from fiduciary activities 31,129 29,019 93,863 91,738 Service charges on deposit accounts 33,150 32,029 97,138 91,456 Customhouse broker fees 8,789 10,201 27,137 30,481 Revolving credit fees 13,699 10,200 37,636 28,557 Securities gains 516 1,581 788 2,363 Other noninterest income 40,831 33,608 113,006 99,415 -------- -------- ---------- ---------- Total noninterest income 128,114 116,638 369,568 344,010 NONINTEREST EXPENSES Salaries and employee benefits 142,507 138,456 420,374 406,407 Net occupancy expense 24,649 25,188 73,306 74,881 Equipment expense 16,787 16,313 50,670 49,570 FDIC insurance expense (500) 11,106 21,418 33,129 Telecommunications expense 7,230 6,748 22,027 18,869 Other noninterest expenses 74,223 65,304 221,582 196,842 -------- -------- ---------- ---------- Total noninterest expenses 264,896 263,115 809,377 779,698 -------- -------- ---------- ---------- Income before income taxes 160,542 152,522 465,552 438,156 Provision for income taxes 55,240 51,918 158,696 147,511 -------- -------- ---------- ---------- NET INCOME $105,302 $100,604 $ 306,856 $ 290,645 ======== ======== ========== ========== NET INCOME PER SHARE: Primary $0.91 $0.84 $2.62 $2.46 Fully diluted $0.91 $0.84 $2.61 $2.46 Primary average shares 115,993 119,436 117,199 118,148 Cash dividends declared $40,089 $37,897 $118,237 $107,724 Dividends per share $0.35 $0.32 $1.02 $0.92
4 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Comerica Incorporated and Subsidiaries
Unrealized Total Common Capital Gains/ Retained Treasury Shareholders' (in thousands) Stock Surplus (Losses) Earnings Stock Equity --------- --------- ---------- ---------- --------- ------------- BALANCES AT JANUARY 1, 1994 $596,473 $524,186 $ 27,473 $1,155,280 $(121,754) $2,181,658 Net income for 1994 - - - 290,645 - 290,645 Cash dividends declared - - - (107,724) - (107,724) Purchase of 1,601,164 shares - - - - (43,892) (43,892) Issuance of shares: Employee stock plans - 318 - (2,964) 7,145 4,499 Acquisition of Pacific Western - - - (3,858) 125,221 121,363 Amortization of deferred compensation - 411 - - - 411 Change in unrealized gains/(losses) on investment securities available for sale - - (61,245) - - (61,245) -------- -------- -------- ---------- --------- ---------- BALANCES AT SEPTEMBER 30, 1994 $596,473 $524,915 $(33,772) $1,331,379 $ (33,280) $2,385,715 ======== ======== ======== ========== ========= ========== BALANCES AT JANUARY 1, 1995 $596,473 $525,052 $(55,039) $1,390,405 $ (65,111) $2,391,780 Net income for 1995 - - - 306,856 - 306,856 Cash dividends declared - - - (118,237) - (118,237) Purchase of 1,405,500 shares - - - - (38,725) (38,725) Purchase and retirement of 4,200,000 shares (21,000) (112,691) - - - (133,691) Issuance of shares: Employee stock plans - 191 - (4,385) 13,669 9,475 Acquisitions - 1,450 - - 75,650 77,100 Amortization of deferred compensation - 670 - - - 670 Change in unrealized gains/(losses) on investment securities available for sale - - 57,758 - - 57,758 -------- -------- -------- ---------- --------- ---------- BALANCES AT SEPTEMBER 30, 1995 $575,473 $414,672 $ 2,719 $1,574,639 $ (14,517) $2,552,986 ======== ======== ======== ========== ========= ==========
5 CONSOLIDATED STATEMENTS OF CASH FLOWS Comerica Incorporated and Subsidiaries
Nine Months Ended September 30 --------------------------- (in thousands) 1995 1994 ------------ ------------ OPERATING ACTIVITIES: Net income $ 306,856 $ 290,645 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 53,500 44,000 Depreciation 47,355 44,320 Net increase in trading account securities (451) (4,873) Net (increase) decrease in mortgages held for sale (47,194) 222,102 Net increase in accrued income receivable (30,830) (26,289) Net increase (decrease) in accrued expenses 111,488 (20,113) Net amortization of intangibles 21,519 17,994 Funding for employee benefit plans (125,000) (59,719) Other, net (25,607) 35,109 ------------ ------------ Total adjustments 4,780 252,531 ------------ ------------ Net cash provided by operating activities 311,636 543,176 INVESTING ACTIVITIES: Net decrease in interest-bearing deposits with banks 326,431 751,112 Net (increase) decrease in federal funds sold and securities purchased under agreements to resell (651,900) 1,041,290 Proceeds from sale of investment securities available for sale 39,342 1,509 Proceeds from maturity of investment securities available for sale 308,979 455,785 Purchases of investment securities available for sale (31,434) (1,147,791) Proceeds from maturity of investment securities held to maturity 579,776 1,249,296 Purchases of investment securities held to maturity (164,828) (2,125,409) Net increase in loans (other than purchased loans) (1,904,378) (844,671) Purchase of loans (44,110) (227,192) Fixed assets, net (49,166) (65,452) Net increase in customers' liability on acceptances outstanding (704) (290) Net cash provided by acquisitions 28,835 58,626 ------------ ------------ Net cash used in investing activities (1,563,157) (853,187) FINANCING ACTIVITIES: Net decrease in deposits (839,927) (1,802,852) Net increase (decrease) in short-term borrowings 1,223,989 (77,988) Net increase in acceptances outstanding 704 290 Proceeds from issuance of medium- and long-term debt 2,460,000 2,750,000 Repayments and purchases of medium- and long-term debt (1,614,011) (608,175) Proceeds from issuance of common stock and other capital transactions 10,145 4,910 Purchase of common stock for treasury and retirement (172,416) (43,892) Dividends paid (115,756) (102,066) ------------ ------------ Net cash provided by financing activities 952,728 120,227 ------------ ------------ Net decrease in cash and due from banks (298,793) (189,784) Cash and due from banks at beginning of year 1,822,313 1,600,695 ------------ ------------ Cash and due from banks at end of period $ 1,523,520 $ 1,410,911 ============ ============ Interest paid $ 926,747 $ 597,862 ============ ============ Income taxes paid $ 130,629 $ 127,851 ============ ============ Noncash investing and financing activities: Loan transfers to other real estate $ 15,249 $ 12,241 ============ ============ Treasury stock issued for acquisitions $ 77,100 $ 121,363 ============ ============ Loan transfer to investment securities $ - $ 91,538 ============ ============
6 Notes to Consolidated Financial Statements Comerica Incorporated and Subsidiaries Note 1 - Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 1995 are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in the Comerica Incorporated and Subsidiaries' annual report on Form 10-K for the year ended December 31, 1994. Note 2 - Investment Securities At September 30, 1995 investment securities having a carrying value of $5.6 billion were pledged where permitted or required by law to secure liabilities and public and other deposits, including deposits of the State of Michigan of $36 million. Note 3 - Allowance for Loan Losses The following analyzes the changes in the allowance for loan losses included in the consolidated balance sheets:
(in thousands) 1995 1994 --------- --------- Balance at January 1 $ 326,195 $ 298,685 Allowance acquired 3,260 19,467 Loans charged off (73,831) (60,863) Recoveries on loans previously charged off 33,790 26,673 --------- --------- Net loans charged off (40,041) (34,190) Provision for loan losses 53,500 44,000 --------- --------- Balance at September 30 $ 342,914 $ 327,962 ========= =========
A loan is considered impaired if it is probable that interest and principal payments will not be made in accordance with the contractual terms of the loan agreement. Consistent with this definition, all nonaccrual and reduced-rate loans (with the exception of residential mortgage and consumer loans) are impaired. Impaired loans averaged $156 million and $150 million for the quarter and nine months ended September 30, 1995, respectively. Of the $150 million period-end impaired loans, approximately $84 million required an allowance for loan losses of $19 million in accordance with SFAS No. 114. The remaining impaired loan balance represents loans for which the fair value exceeded the recorded investment in the loan. 7 Notes to Consolidated Financial Statements Comerica Incorporated and Subsidiaries Note 4 - Medium- and Long-term Debt Medium- and long-term debt consisted of the following at September 30, 1995 and December 31, 1994:
(in thousands) September 30, 1995 December 31, 1994 ------------------ ----------------- Parent Company 9.75% subordinated notes due 1999 $ 74,669 $ 74,601 10.125% subordinated debentures due 1998 74,781 74,721 7.25% subordinated notes due 2007 148,591 - ---------- ---------- Total parent company 298,041 149,322 Subsidiaries Subordinated notes: 8.375% subordinated notes due 2024 147,762 147,709 7.25% subordinated notes due 2002 148,891 148,777 6.875% subordinated notes due 2008 99,047 98,990 7.125% subordinated notes due 2013 147,972 147,890 FDIC subordinated note due 1995 4,500 4,500 ---------- ---------- Total subordinated notes 548,172 547,866 Medium-term notes: Floating rate based on Treasury bill indices 1,899,600 2,849,205 Floating rate based on Prime indices 550,000 299,988 Floating rate based on LIBOR indices 299,934 25,000 Fixed rate notes with interest rates ranging from 5.65% to 7.5% 1,348,240 224,610 ---------- ---------- Total medium-term notes 4,097,774 3,398,803 Notes payable bearing interest at rates ranging from 7.35% to 8.00% and maturing on dates ranging from 1995 through 2015 4,589 1,952 ---------- ---------- Total subsidiaries 4,650,535 3,948,621 ---------- ---------- Total medium- and long-term debt $4,948,576 $4,097,943 ========== ==========
Note 5 - Income Taxes The provision for income taxes is computed by applying statutory federal income tax rates to income before income taxes as reported in the financial statements after deducting non-taxable items, principally interest income on state and municipal securities. 8 Notes to Consolidated Financial Statements Comerica Incorporated and Subsidiaries Note 6 - Off-Balance-Sheet Derivatives and Foreign Exchange Contracts
September 30, 1995 December 31, 1994 ------------------------------ ------------------------------ Notional/ Notional/ Contract Unrealized Fair Contract Unrealized Fair Amount Gains Losses Value Amount Gains Losses Value (in millions) (1) (2) (3) (1) (2) (3) ------------------------------ ------------------------------ Risk Management Interest rate contracts Swaps (4) $4,224 $34 $(59) $(25) $3,643 $ 4 $(238) $(234) Caps purchased 25 - - - 50 - - - Caps written 178 - - - 198 - (1) (1) Foreign exchange contracts Spot and forwards 124 2 - 2 98 - (1) (1) Swaps 49 7 - 7 25 - - - Commitments To purchase securities 59 - - - - - - - To sell securities 2 - - - - - - - To sell loans 165 - - - 77 - - - ------ --- ---- ---- ------ --- ----- ----- Total risk management 4,826 43 (59) (16) 4,091 4 (240) (236) Customer Initiated and Other Interest rate contracts Caps written 474 - - - 321 - (1) (1) Options purchased 27 - - - - - - - Swaps 4 - - - 7 - - - Foreign exchange contracts Spot, forward, futures and options 552 9 (8) 1 503 5 (4) 1 ------ --- ---- ---- ------ --- ----- ----- Total customer initiated and other 1,057 9 (8) 1 831 5 (5) - ------ --- ---- ---- ------ --- ----- ----- Total derivatives and foreign exchange contracts $5,883 $52 $(67) $(15) $4,922 $ 9 $(245) $(236) ====== === ==== ==== ====== === ===== ===== (1) The notional or contract amounts of derivatives and foreign exchange contracts represent the extent of the Corporation's involvement in such transactions. These amounts are generally used as a point of reference for calculating the amounts to be exchanged in accordance with the terms of the agreement and, therefore, are not reflected in the consolidated balance sheets. The potential for gain or loss associated with the credit or market risks inherent in such transactions is significantly less than the notional or contract amounts. (2) Represents credit risk exposure which is measured as the cost to replace, at current market rates, contracts in a profitable position. Credit risk amounts are calculated before consideration is given to bilateral collateral agreements or master netting arrangements with counterparties that effectively reduce credit risk. (3) The fair values of derivatives and foreign exchange contracts generally represent the estimated amounts the Corporation would receive or pay to terminate or otherwise settle the contracts at the balance sheet date. Futures contracts are subject to daily cash settlements; therefore, the fair value of these instruments is zero. The fair values of customer initiated and other derivatives and foreign exchange contracts are reflected in the consolidated balance sheets. (4) Includes the notional amount of index amortizing swaps of $2,143 million and $1,936 million at September 30, 1995 and December 31, 1994, respectively. These swaps had net unrealized losses of $30 million and $133 million at September 30, 1995 and December 31, 1994, respectively. As of September 30, 1995, index amortizing swaps had an average expected life of approximately 2.05 years with a stated maturity that averaged 3.25 years.
9 Notes to Consolidated Financial Statements Comerica Incorporated and Subsidiaries Note 6 - Off-Balance-Sheet Derivatives and Foreign Exchange Contracts (Continued) Risk Management - --------------- Interest rate risk arises in the normal course of business to the extent there is a difference between the repricing and maturity characteristics of interest-earning assets and interest-bearing liabilities. This gap in the balance sheet structure reflects the sensitivity of the Corporation's net interest income to a change in interest rates. Foreign exchange rate risk arises from changes in the value of certain assets and liabilities denominated in foreign currencies. The Corporation employs off-balance sheet derivative financial instruments and foreign exchange contracts, in addition to certain on-balance sheet instruments, to manage exposure to these and other risks, including liquidity risk. The Corporation principally uses off-balance sheet derivatives as an end-user in connection with asset and liability management activities. The main objective of asset and liability management is to maximize net interest income while operating within acceptable ranges of interest rate sensitivity and providing adequate levels of liquidity and funding. The Corporation's use of derivatives takes place predominately in the interest rate markets and mainly involves interest rate swaps, both amortizing and non-amortizing. Interest rate swaps are primarily used to alter the interest rate characteristics of certain assets and liabilities in order to provide a more precise match between their rate maturities. The following table summarizes the expected maturity distribution of the notional amount of interest rate swaps used for risk management purposes. The table also indicates the weighted average interest rates associated with amounts to be received or paid on interest rate swap agreements as of September 30, 1995. The swaps are grouped by the assets or liabilities to which they have been designated. Various other types of off-balance sheet financial instruments may also be used for risk management purposes, including interest rate caps, forward and futures interest and foreign exchange rate contracts, foreign exchange rate swaps, commitments to purchase and sell securities and commitments to sell mortgage loans. Customer Initiated and Other - ----------------------------- The Corporation earns additional income by executing various transactions, primarily foreign exchange contracts and interest rate caps, at the request of customers. The average fair value of customer initiated and other foreign exchange contracts was $1 million for both the nine months ended September 30, 1995 and the year ended December 31, 1994. Foreign exchange contracts generated $5 million of income for the nine months ended September 30, 1995, compared to $3 million for the same period a year earlier and $5 million for the year ended December 31, 1994. The risks associated with customer initiated foreign exchange contracts are generally reduced by entering into offsetting foreign exchange contracts. Customer initiated interest rate caps generally are not offset by other on- or off-balance sheet financial instruments; however, diminutive authority limits have been established for engaging in these transactions in order to minimize risk exposure. As a result, average fair values and income from this activity were not significant for the nine-month period ended September 30, 1995 and for the year ended December 31, 1994. 10 Notes to Consolidated Financial Statements Comerica Incorporated and Subsidiaries Note 6 - Off-Balance-Sheet Derivatives and Foreign Exchange Contracts (Continued) Available credit lines on fixed rate credit card and check product accounts, which expose the Corporation to the risk of a reduction in net interest income as rates increase, totaled approximately $2.0 billion and $1.9 billion at September 30, 1995 and December 31, 1994, respectively. Market risk exposure arising from these revolving credit commitments is very limited, however, since it is unlikely that a significant number of customers with these accounts will simultaneously borrow up to their maximum available credit lines.
- ----------------------------------------------------------------------------------------- Remaining Expected Maturity of Risk Management Interest Rate Swaps: 2000- Dec. 31, (dollar amounts in millions) 1995 1996 1997 1998 1999 2014 Total 1994 ----------------------------------------------------------------------------------------- Variable rate asset designation: Receive fixed swaps Generic $ - $ 50 $ - $ - $ - $ - $ 50 $ 50 Amortizing 21 16 84 100 - - 221 297 Index Amortizing 281 361 961 175 130 235 2,143 1,936 Weighted average: (1) Receive rate 6.42% 5.76% 5.23% 5.70% 6.20% 5.83% 5.64% 5.38% Pay rate 5.88% 5.88% 5.91% 5.85% 5.83% 5.81% 5.88% 5.78% Fixed rate asset designation: Generic pay fixed swaps $ 98 $ 35 $ - $ - $ 2 $ - $ 135 $ 185 Weighted average: (1) Receive rate 5.91% 5.91% -% -% 5.83% -% 5.95% 5.91% Pay rate 6.31% 7.05% -% -% 8.73% -% 6.56% 7.43% Medium- and long-term debt designation: Generic receive fixed swaps $ - $ 600 $ 50 $ - $ - $700 $1,350 $ 675 Weighted average: (1) Receive rate -% 6.27% 9.35% -% -% 7.65% 7.10% 7.37% Pay rate - 5.88% 5.89% -% -% 5.96% 5.92% 5.73% Generic pay fixed swaps $ - $ 25 $ - $ - $ - $ - $ 25 $ 25 Weighted average: (1) Receive rate -% 5.88% -% -% -% -% 5.88% 6.89% Pay rate -% 8.28% -% -% -% -% 8.28% 8.28% Basis swaps $ - $ 300 $ - $ - $ - $ - $ 300 $ 475 Weighted average: (1) Receive rate -% 5.80% -% -% -% -% 5.80% 6.01% Pay rate -% 5.80% -% -% -% -% 5.80% 5.80% Total notional amount $400 $1,387 $1,095 $275 $132 $935 $4,224 $3,643 - ----------------------------------------------------------------------------------------- (1) Variable rates are based on those rates paid or received at September 30, 1995. Variable rates paid or received are based on LIBOR. - -----------------------------------------------------------------------------------------
11 Notes to Consolidated Financial Statements Comerica Incorporated and Subsidiaries Note 6 - Off-Balance-Sheet Derivatives and Foreign Exchange Contracts (Continued) Off-Balance-Sheet Derivative and Foreign Exchange Activity - ---------------------------------------------------------- The following table provides a reconciliation of the beginning and ending notional amounts for interest rate derivatives and foreign exchange contracts.
Customer Initiated Risk Management and Other ----------------------- ----------------------- Interest Foreign Interest Foreign Rate Exchange Rate Exchange (in millions) Contracts Contracts Contracts Contracts ----------------------- ----------------------- Balances at December 31, 1994 $ 3,891 $ 123 $ 328 $ 503 Additions 1,678 1,817 427 26,367 Maturities/amortizations (1,142) (1,767) (250) (26,318) Terminations - - - - ------- ------- ----- -------- Balances at September 30, 1995 $ 4,427 $ 173 $ 505 $ 552 ======= ======= ===== ========
Additional information regarding the nature, terms and attendant risks of the above off-balance sheet derivatives and foreign exchange contracts, along with information on derivative accounting policies, can be found in the Corporation's 1994 annual report on Form 10-K on pages 33 through 37 and in Notes 1 and 17 to the consolidated financial statements. 12 ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition ----------------------- Results of Operations - --------------------- Comerica Incorporated reported net income of $105 million for the quarter ended September 30, 1995, an increase of nearly $5 million, or 5 percent, over the amount reported for the third quarter of 1994. Net income per share increased 8 percent to $0.91 from $0.84 a year ago. Return on average common shareholders' equity was 16.81 percent and return on average assets was 1.22 percent, compared to 17.11 percent and 1.27 percent, respectively, for the comparable quarter last year. For the nine months ended September 30, 1995, net income rose 6 percent to $307 million, or $2.62 per share, compared to net income of $291 million, or $2.46 per share, reported for the same period in 1994. Return on average common shareholders' equity was 16.45 percent and return on average assets was 1.20 percent for the year-to-date period, compared to 16.94 percent and 1.24 percent, respectively, a year earlier. Acquisitions - ------------ On October 27, 1995, the Corporation completed the acquisition of QuestStar Bank, N.A. (QuestStar) in Houston, Texas, for approximately $25 million in cash. At September 30, 1995, QuestStar had approximately $200 million in total assets. The transaction was accounted for as a purchase. In May 1995, the Corporation entered into an Agreement and Plan of Merger to acquire Metrobank, headquartered in Los Angeles, California, for approximately 4.2 million shares of common stock then valued at $120 million. At March 31, 1995 Metrobank had approximately $1.3 billion in total assets. The transaction will be accounted for as a purchase and, subject to regulatory approval, is expected to be completed in the first quarter of 1996. Net Interest Income - ------------------- The Rate-Volume Analyses in Tables I and II detail the components of the change in net interest income (FTE) for the quarter and nine months ended September 30, 1995. On a fully taxable equivalent (FTE) basis, net interest income was $329 million for the three months ended September 30, 1995, up $10 million, or 3 percent, from $319 million reported for the comparable quarter in 1994. This increase, primarily the result of acquisitions and continued expansion in the loan portfolio, was partially offset by the utilization of wholesale funds to support loan growth and customers shifting deposits from NOW, savings and money market accounts to higher-paying certificates of deposit. Growth in commercial and consumer loan balances accounted for more than 75 percent of the overall increase in average total loans. For the third quarter of 1995, average commercial loans rose $1.9 billion, or 19 percent, over the prior year, reflecting continued strong loan demand by corporate customers. Average consumer loans increased $842 million, or 22 percent, over the comparable period a year earlier, due to rapid growth in the revolving credit portfolio. This growth resulted as customers responded to bankcard promotions begun in the third quarter of 1994. Investments in other earning assets were reduced in order to partially fund loan growth. 13 The net interest margin for the three months ended September 30, 1995, was 4.10 percent, a decline of 5 basis points from 4.15 percent for the second quarter of 1995, and 25 basis points from 4.35 percent for the third quarter of 1994. Continued margin compression is an indication of market pressure to maintain competitive pricing on loan and deposit products and the Corporation's increased use of purchased funds, a more expensive funding vehicle. For the nine months ended September 30, 1995, net interest income (FTE) totaled $976 million, an increase of $40 million, or 4 percent, over the amount reported for the same period a year ago. This increase in net interest income, led by acquisitions and growth in commercial and consumer loans, was partially offset by a rise in purchased funds used to support loan growth as well as an overall increase in interest-bearing deposits as customers invested more funds in certificates of deposit. Average commercial loans grew $1.8 billion, or 19 percent, while average consumer loans rose $784 million, or 21 percent. The average balances of investment securities and temporary investments were reduced to facilitate loan growth. The net interest margin for the nine months ended September 30, 1995, was 4.14 percent, a decrease of 2 basis points from 4.16 percent for the six months ended June 30, 1995, and 20 basis points from 4.34 percent for the first nine months of 1994. Continued compression in the margin for the year-to-date period is attributable to the same factors discussed above for the third quarter. Net interest income growth for the quarter and nine months ended September 30, 1995, was also partially offset as the Corporation's risk management interest rate swap portfolio continued to generate net interest expense. These interest rate swaps are designated against certain assets and liabilities, therefore, the impact on net interest income attributable to these off-balance sheet instruments is generally offset by net interest income generated by on-balance sheet assets and liabilities. In addition to using interest rate swaps and other off-balance sheet instruments to control the Corporation's exposure to interest rate risk, management attempts to minimize the effect of movements in interest rates on net interest income by regularly performing interest sensitivity gap and earnings simulation analyses. At September 30, 1995, the Corporation was in an asset sensitive position of approximately $542 million (on an elasticity-adjusted basis), or 1.66 percent of earning assets. The earnings simulation analysis performed at September 30, 1995, indicated forecasted net interest income is at risk by less than 4 percent if short-term interest rates decreased 200 basis points or could increase by less than 1 percent if short-term interest rates rose 200 basis points. These results are within established corporate policy guidelines. Provision for Loan Losses - ------------------------- The provision for loan losses for the third quarter of 1995 was $26 million, up $12 million from the third quarter of 1994. For the nine months ended September 30, 1995, the provision for loan losses was $54 million, an increase of $10 million over the provision for the same period a year ago. The provision is predicated upon maintaining an adequate allowance for loan losses, which is further discussed in the section entitled "Financial Condition." 14 TABLE I - QUARTERLY ANALYSIS OF NET INTEREST INCOME & RATE/VOLUME (FTE)
Three Months Ended ------------------------------------------------------------- September 30, 1995 September 30, 1994 ----------------------------- ----------------------------- Average Average Average Average (in millions) Balance Interest Rate Balance Interest Rate - ---------------------------------------------------------------------------------------------- Loans $23,984 $ 534 8.86% $20,463 $ 411 7.99% Investment securities 7,534 125 6.63 8,228 129 6.24 Other earning assets 451 8 6.67 479 7 5.86 - ---------------------------------------------------------------------------------------------- Total earning assets 31,969 667 8.30 29,170 547 7.45 Interest-bearing deposits 16,926 184 4.31 16,743 141 3.34 Short-term borrowings 5,280 77 5.80 4,361 50 4.56 Medium- and long-term debt 4,779 77 6.37 3,185 42 5.24 Net interest rate swap (income)/expense (1) - - - - (5) - - ---------------------------------------------------------------------------------------------- Total interest-bearing sources $26,985 338 4.98 $24,289 228 3.73 ----------------- ----------------- Net interest income/ Rate spread (FTE) $ 329 3.32 $ 319 3.72 ====== ====== FTE adjustment $ 5 $ 6 ====== ====== Impact of net noninterest- bearing sources of funds 0.78 0.63 - ---------------------------------------------------------------------------------------------- Net interest margin as a percent of average earning assets (FTE) 4.10% 4.35% ============================================================================================== (1) After allocation of the income or expense generated by interest rate swaps for the three months ended September 30, 1995, to the related assets and liabilities, the average yield on total loans was 8.85 percent as of September 30, 1995, compared to 8.08 percent a year ago. The average cost of funds for medium- and long-term debt was 6.14 percent as of September 30, 1995, compared to 4.97 percent a year earlier. Increase Increase (Decrease) (Decrease) Net Due to Due to Increase Rate Volume* (Decrease) ---------- ---------- ---------- (in millions) Loans $ 45 $ 78 $ 123 Investment securities 7 (11) (4) Other earning assets 1 - 1 ------------------------------ Total earning assets 53 67 120 Interest-bearing deposits 36 7 43 Short-term borrowings 14 13 27 Medium- and long-term debt 9 26 35 Net interest rate swap (income)/expense 5 - 5 ------------------------------ Total interest-bearing sources 64 46 110 ------------------------------ Net interest income/Rate spread (FTE) $ (11) $ 21 $ 10 ============================== * Rate/Volume variances are allocated to variances due to volume. /TABLE 15 TABLE II - YEAR-TO-DATE ANALYSIS OF NET INTEREST INCOME & RATE/VOLUME (FTE)
Nine Months Ended ------------------------------------------------------------- September 30, 1995 September 30, 1994 ----------------------------- ----------------------------- Average Average Average Average (in millions) Balance Interest Rate Balance Interest Rate - ---------------------------------------------------------------------------------------------- Loans $23,291 $1,556 8.93% $19,825 $1,135 7.65% Investment securities 7,721 385 6.62 7,996 363 6.06 Other earning assets 389 19 6.67 931 30 4.34 - ---------------------------------------------------------------------------------------------- Total earning assets 31,401 1,960 8.33 28,752 1,528 7.10 Interest-bearing deposits 16,875 538 4.26 16,641 389 3.13 Short-term borrowings 5,200 230 5.91 4,948 142 3.84 Medium- and long-term debt 4,393 211 6.42 2,298 89 5.19 Net interest rate swap (income)/expense (1) - 5 - - (28) - - ---------------------------------------------------------------------------------------------- Total interest-bearing sources $26,468 984 4.97 $23,887 592 3.32 ----------------- ------------------ Net interest income/ Rate spread (FTE) $ 976 3.36 $ 936 3.78 ====== ====== FTE adjustment $ 17 $ 18 ====== ====== Impact of net noninterest-bearing sources of funds 0.78 0.56 - ---------------------------------------------------------------------------------------------- Net interest margin as a percent of average earning assets (FTE) 4.14% 4.34% ============================================================================================== (1) After allocation of the income or expense generated by interest rate swaps for the nine months ended September 30, 1995, to the related assets and liabilities, the average yield on total loans was 8.83 percent as of September 30, 1995, compared to 7.77 percent a year ago. The average cost of funds for medium- and long-term debt was 6.16 percent as of September 30, 1995, compared to 4.71 percent a year earlier. Increase Increase (Decrease) (Decrease) Net Due to Due to Increase Rate Volume* (Decrease) ---------- ---------- ---------- (in millions) Loans $ 189 $ 232 $ 421 Investment securities 35 (13) 22 Other earning assets 16 (27) (11) ------------------------------ Total earning assets 240 192 432 Interest-bearing deposits 130 19 149 Short-term borrowings 77 11 88 Medium- and long-term debt 21 101 122 Net interest rate swap (income)/expense 33 - 33 ------------------------------ Total interest-bearing sources 261 131 392 ------------------------------ Net interest income/Rate spread (FTE) $ (21) $ 61 $ 40 ============================== * Rate/Volume variances are allocated to variances due to volume. /TABLE 16 Noninterest Income - ------------------ After adjusting for acquisitions, noninterest income rose $10 million to $127 million for the three months ended September 30, 1995, a 9 percent increase from the corresponding period in 1994. This growth in noninterest income, primarily attributable to an escalation in revenue within the other noninterest income category and a $3 million increase in revolving credit fees resulting from new credit card balances, was partially offset by decreases in customhouse brokerage fees and securities gains. Other noninterest income grew $7 million, or 21 percent, from the third quarter of 1994, benefiting principally from increases in fees and commissions generated by the investment management, securities brokerage and insurance businesses. For the nine months ended September 30, 1995, noninterest income totaled $361 million, excluding the effects of acquisitions, an increase of $17 million, or 5 percent, over the comparable period in 1994. Growth in noninterest income primarily resulted from an $8 million boost in revolving credit fees arising directly from growth in the bankcard portfolio and an increase in other noninterest income. Reductions in income associated with customhouse brokerage fees and securities gains partially offset the rise in noninterest income. Other noninterest income for the first nine months of 1995 reached $112 million, an increase of $12 million, or 13 percent, over the same period a year earlier. Earnings from investment management activities contributed $6 million to other noninterest income for the nine-month period, while the securities brokerage and insurance areas generated over $5 million in additional fees and commissions. A decline in income from mortgage-related activities, particularly gains from bulk sales of mortgage servicing rights, partially offset the increase in other noninterest income. Noninterest Expenses - -------------------- Noninterest expenses for the three months ending September 30, 1995, rose 3 percent, or $8 million, from the corresponding period in 1994, excluding the effects of acquisitions and a $12 million rebate received in connection with a lower FDIC insurance rate. This nominal increase in noninterest expenses was the result of normal business growth. For the nine months ended September 30, 1995, noninterest expenses were well-controlled, rising less than 2 percent from the same period a year ago, excluding the expenses associated with acquisitions and the aforementioned FDIC insurance premium rebate. Provision for Income Taxes - -------------------------- The provision for income taxes for the nine months ended September 30, 1995, totaled $159 million, an increase of 8 percent compared to $148 million reported for the same period a year ago. The effective tax rate was 34 percent for the first nine months of both 1995 and 1994. 17 Financial Condition - ------------------- Total assets at September 30, 1995 were $35.3 billion, up $2 billion or 6 percent since December 31, 1994. Earning assets growth of $2 billion, or 7 percent, to $32.6 billion since year-end 1994 was mainly caused by a $2.1 billion, or 10 percent, increase in total loans. This increase was partially funded by a decline in the investment securities portfolio of $505 million. Since December 31, 1994, loan growth has remained strong as a result of both acquisitions and continued expansion in the commercial and consumer loan portfolios. Commercial loans showed the strongest improvement, increasing $1.0 billion, or 10 percent, reflecting prolonged customer demand in the Corporation's markets. Consumer loans followed with an increase of $520 million, or 12 percent, largely due to growth in revolving credit loans. Total liabilities increased $1.8 billion, or 6 percent, to $32.8 billion since December 31, 1994, primarily due to the addition of $1.2 billion in short-term borrowings and an increase of $850 million in medium- and long-term debt. The rise in medium- and long-term debt reflects the net result of the issuance of $2.4 billion of medium- and long-term notes and the maturity of approximately $1.6 billion of medium- term notes since December 31, 1994. Refer to the notes to the consolidated financial statements for an analysis of medium- and long-term debt. As the deposit base remains relatively flat, greater reliance on federal funds purchased, other short-term borrowings, and medium- and long-term debt is necessary to support expanding loan volumes. Allowance for Loan Losses and Nonperforming Assets - -------------------------------------------------- Management determines the adequacy of the allowance for loan losses by applying projected loss ratios to the risk-ratings of loans, both individually and by category. The projected loss ratios incorporate such factors as recent loan loss experience, current economic conditions and trends, geographic dispersion of borrowers, trends in past due and nonaccrual amounts, risk characteristics of various categories and concentrations of loans, and transfer risks. At September 30, 1995, the allowance for loan losses was $343 million, an increase of $17 million, or 5 percent, since December 31, 1994. Due to the magnitude of loan growth during 1995, the allowance as a percentage of total loans declined slightly to 1.41 percent from 1.47 percent at December 31, 1994. However, the allowance as a percentage of total nonperforming assets increased from 160 percent at year-end 1994 to 178 percent at September 30, 1995. Net charge-offs for the third quarter of 1995 were $21 million, or 0.35 percent of average total loans, compared with $11 million, or 0.21 percent of average total loans in the third quarter of 1994. The level of charge-offs, while still below historical norms, has increased relative to the extremely low levels experienced over the past year due to credit card loans. For the first nine months of both 1995 and 1994, net charge-offs of $40 million and $34 million, respectively, represented just 0.23 percent of average total loans. An analysis of the allowance for loan losses is presented in the notes to the consolidated financial statements. 18 Nonperforming assets declined 6 percent since December 31, 1994, and were categorized as follows:
September 30, December 31, (in thousands) 1995 1994 ------------- ------------ Nonaccrual loans: Commercial $ 98,653 $ 88,514 Real estate construction 9,788 16,941 Commercial mortgage 35,408 47,152 Residential mortgage 7,933 9,116 ------------- ------------ Total nonaccrual loans 151,782 161,723 Reduced-rate loans 4,137 2,299 ------------- ------------ Total nonperforming loans 155,919 164,022 Other real estate 36,941 40,462 ------------- ------------ Total nonperforming assets $ 192,860 $ 204,484 ============= ============ Loans past due 90 days or more $ 71,924 $ 39,161 ============= ============
Nonperforming assets as a percentage of total loans and other real estate at September 30, 1995 and December 31, 1994, were 0.79 percent and 0.92 percent, respectively. The $33 million increase in loans past due 90 days or more since year-end 1994 is related principally to credit card loans. Capital - ------- Shareholders' equity increased $161 million from December 31, 1994 to September 30, 1995, principally through retention of $189 million in earnings, the issuance of $76 million of common stock in connection with the acquisition of University Bank & Trust (University) in March 1995, and a $58 million decrease in unrealized losses on investment securities available for sale. The repurchase of 1.4 million shares, or $39 million, of common stock related to the acquisition of University partially offset the rise in shareholders' equity, along with the repurchase and retirement of 4.2 million shares, or $134 million, of common stock related to the impending Metrobank acquisition. Capital ratios continue to comfortably exceed minimum regulatory requirements as follows:
September 30, December 31, 1995 1994 ------------- ------------ Leverage ratio (3.00 - minimum) 6.72% 6.93% Tier 1 risk-based capital ratio (4.0 - minimum) 7.75 8.13 Total risk-based capital ratio (8.0 - minimum) 11.47 11.68
19 At September 30, 1995, the capital ratios of all the Corporation's banking subsidiaries exceeded the minimum ratios required of a "well capitalized" institution as defined in the final rule under FDICIA. Other Matters - ------------- As disclosed in Part I, Item 3 of Form 10-K for the year ended December 31, 1994, a lawsuit was filed on July 24, 1990, by the State of Michigan against a subsidiary bank involving hazardous waste issues. The Corporation's motion for summary judgment was granted in January 1993, however, the State of Michigan has filed an appeal that is still pending. Management believes that even if the summary judgment is not upheld on appeal, the results of this action will not have a materially adverse effect on the Corporation's consolidated financial position. Although, depending upon the amount of the ultimate liability, if any, and the consolidated results of operations in the year of final resolution, the legal action may have a materially adverse effect on the consolidated results of operation in that year. 20 PART II. OTHER INFORMATION ITEM 2. Changes in Securities (a) Changes in documents defining rights of security holders. On July 21, 1995, the Corporation made several amendments to its bylaws. Among other things, these amendments modified the procedure for holders of its Common Stock, $5.00 par value per share, to make director nominations and added procedures regarding shareholder requests for business to be conducted at a shareholder meeting. Advance notice of director nominations must be given by a shareholder not less than 60 days nor more than 90 days prior to the anniversary date of the immediately preceding annual meeting of shareholders; previously, such notice had to be given at least 30 days prior to such anniversary date. In addition, shareholders who desire to bring business at a shareholders meeting must comply with the advance notice provisions listed above as well as satisfy certain other technical notice requirements. A copy of the amended bylaws is attached hereto as Exhibit (4). ITEM 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits (4) Instruments Defining the Rights of Security Holders - Corporate Bylaws As Amended on July 21, 1995 (11) Statement re: Computation of Earnings Per Share (b) Reports on Form 8-K None. 21 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COMERICA INCORPORATED -------------------------------------- (Registrant) /s/Ralph W. Babb, Jr. -------------------------------------- Ralph W. Babb, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer) /s/Arthur W. Hermann -------------------------------------- Arthur W. Hermann Senior Vice President and Controller (Principal Accounting Officer) Date: October 31, 1995 EX-4 2 1 Exhibit (4) Instruments Defining the Rights of Security Holders As Amended on July 21, 1995 BYLAWS OF COMERICA INCORPORATED ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS SECTION 1. PLACE OF MEETING. All meetings of the shareholders of this Corporation shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. SECTION 2. ANNUAL MEETING OF SHAREHOLDERS. The annual meeting of shareholders shall be held on the third Friday of May, if not a legal holiday, and if a legal holiday then the next secular day following, at 10:00 a.m., or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. At said meeting, shareholders shall elect by a plurality vote the Directors to be elected at such meeting, and shall transact such other business as may properly be brought before the meeting. SECTION 3. NOTICE OF MEETING OF SHAREHOLDERS. Written notice of every meeting of shareholders stating the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each shareholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting. SECTION 4. LIST OF SHAREHOLDERS ENTITLED TO VOTE. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in 2 the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present. SECTION 5. SPECIAL MEETINGS OF SHAREHOLDERS. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the Chairman of the Board of Directors or, during the absence or disability of the Chairman or while that office is vacant, by the President and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of shareholders owning, in the aggregate, at least seventy-five percent (75%) in amount of the entire capital stock of the Corporation issued and outstanding and entitled to vote at such special meeting. Such request shall state the purpose or purposes of the proposed meeting. SECTION 6. QUORUM OF SHAREHOLDERS. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. SECTION 7. REQUIRED VOTE. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which a different vote is required by statute or by the Certificate of Incorporation. SECTION 8. VOTING. Unless otherwise provided in the Certificate of Incorporation or in a certificate filed pursuant to Section 151(g) of the General Corporation Law of Delaware, as amended, each shareholder shall at every meeting of the shareholders be entitled to one vote, in person or by proxy, for each share of the capital stock having voting power held by such shareholder, but no proxy shall be voted on after three (3) years from its date, unless the proxy provides for a longer period. SECTION 9. NATURE OF BUSINESS. At any meeting of shareholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Board of Directors or by any shareholder who complies with the procedures set forth in this Section 9. No business may be transacted at any meeting of shareholders, other than business that is either: (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof); (b) otherwise properly brought before such meeting of 3 shareholders by or at the direction of the Board of Directors (or any duly authorized committee thereof); or (c) in the case of an annual meeting of shareholders, otherwise properly brought before such meeting by any shareholder (i) who is a shareholder of record on the date of the giving of the notice provided for in this Section 9 and on the record date for the determination of shareholders entitled to vote at such annual meeting of shareholders; and (ii) who complies with the notice procedures set forth in this Section 9. In addition to any other applicable requirements, for business to be properly brought before an annual meeting of shareholders by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a shareholder's notice to the Secretary of the Corporation must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the shareholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting of shareholders was mailed or public disclosure of the date of the annual meeting of shareholders was made, whichever first occurs. To be in proper written form, a shareholder's notice to the Secretary of the Corporation must set forth as to each matter such shareholder proposes to bring before the annual meeting of shareholders: (i) a brief description of the business desired to be brought before the annual meeting of shareholders and the reasons for conducting such business at the annual meeting of shareholders; (ii) the name and record address of such shareholder; (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such shareholder as of the record date for the meeting (if such date shall then have been made publicly available and shall have occurred); (iv) as of the date of such notice, a description of all arrangements or understandings between such shareholder an any other person or persons (including their names) in connection with the proposal of such business by such shareholder and any material interest of such shareholder in such business; (v) any other information which would be required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitation of proxies for the proposal pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder if such shareholder were engaged in such a solicitation; and (vi) a representation that such shareholder intends to appear in person or by proxy at the annual meeting of shareholders to bring such business before the meeting. No business shall be conducted at the annual meeting of shareholders except business brought before the annual meeting of shareholders in accordance with the procedures set forth in this Section 9, provided however, that once business has been properly brought before the annual meeting of shareholders in accordance with such procedures, nothing in this Section 9 shall be deemed to preclude discussion by any shareholder of any such business. If the Chairman of an annual meeting of shareholders determines that business was not properly brought before the annual meeting of shareholders in accordance with the foregoing 4 procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. When a meeting is adjourned to another time or place, notice of the adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken, unless the adjournment is for more than 30 days, or unless after the adjournment a new record date is fixed for the adjourned meeting, in which case notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting as originally notified. ARTICLE III DIRECTORS SECTION 1. POWERS. The business of the Corporation shall be managed by or under the direction of its Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the shareholders. SECTION 2. LOCATION OF MEETINGS. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. SECTION 3. ORGANIZATION MEETING OF BOARD. The first meeting of each newly elected Board of Directors shall be held at the place of holding the annual meeting of shareholders, and immediately following the same, for the purpose of electing officers and transacting any other business properly brought before it, provided that the organization meeting in any year may be held at a different time and place than that herein provided by a consent of a majority of the Directors of such new Board. No notice of such meeting shall be necessary to the newly elected Directors in order legally to constitute the meeting, provided a quorum shall be present, unless said meeting is not held at the place of holding and immediately following the annual meeting of shareholders. SECTION 4. REGULAR MEETINGS OF BOARD. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board. SECTION 5. SPECIAL MEETINGS OF BOARD. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors or, during the absence or disability of the Chairman or while that office is vacant by the President on one (1) day's notice to each director; and special meetings shall be called by the President or Secretary on like notice on the written request of five or more Directors. SECTION 6. QUORUM AND REQUIRED VOTE. At all meetings of the Board of Directors a majority of the total number of Directors shall constitute a quorum for the transaction of business and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. 5 SECTION 7. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any Committee thereof may be taken without a meeting if all members of the Board or Committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or Committee. SECTION 8. COMMITTEES OF DIRECTORS. (a) General Authority. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more Committees, each Committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any Committee, who may replace any absent or disqualified member of any meeting of the Committee. In the absence or disqualification of a member of a Committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such Committee, to the extent provided in the resolution of the Board of Directors, or in these Bylaws shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such Committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws of the Corporation; and, unless the resolution of the Board of Directors or the Certificate of Incorporation expressly so provide, no such Committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. (b) Directors' Committee. The Board of Directors may establish a Directors' Committee of the Board of Directors. The Directors' Committee may: (i) nominate candidates for election as Directors of the Corporation at any meeting of shareholders called for election of Directors (an "Election Meeting"); (ii) nominate candidates to fill any vacancies on the Board of Directors which may exist from time to time; and (iii) have such other powers and authority as the Board of Directors may delegate to it from time to time. (c) MNC Indemnification Committee. Until June 18, 1998, there shall be an MNC Indemnification Committee consisting of all of the directors of Manufacturers National Corporation ("MNC"). The MNC Indemnification Committee shall make all determinations necessary with respect to the Corporation's indemnification obligations pursuant to Section 5.13 of the Agreement and Plan of Merger, dated as of October 27, 1991, between the Corporation and MNC (the "Merger Agreement"). (d) Comerica Indemnification Committee. Until June 18, 1998, there shall be a Comerica Indemnification Committee consisting of all of the directors of the Corporation immediately prior to June 18, 1992. The Comerica Indemnification Committee shall make all determinations necessary with respect to the Corporation's indemnification obligations pursuant to the Corporation's Bylaws prior to June 18, 1992. SECTION 9. COMMITTEE MINUTES. Each Committee shall keep regular 6 minutes of its meetings and report the same to the Board of Directors when required. SECTION 10. COMPENSATION OF DIRECTORS. Unless otherwise restricted by the Certificate of Incorporation, the Board of Directors shall have authority to fix the compensation of Directors. The Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending Committee meetings. SECTION 11. PARTICIPATION IN MEETING BY TELEPHONE. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors or any Committee designated by the Board of Directors may participate in a meeting of the Board of Directors or Committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. SECTION 12. NOMINATIONS OF DIRECTOR CANDIDATES. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of shareholders, or at any special meeting of shareholders called for the purpose of electing directors, shall be made: (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof, including the Directors' Committee); or (b) by any shareholder of the Corporation: (i) who is a shareholder of record on the date of the giving of the notice provided for in this Section 12 and on the record date for the determination of shareholders entitled to vote at such meeting; and (ii) who complies with the notice procedures set forth in this Section 12. In addition to any other applicable requirements, for a nomination to be made by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a shareholder's notice to the Secretary of the Corporation must be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting of shareholders, not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the shareholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting of shareholders was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of shareholders called for the purpose of electing directors, not later than the close of business on the tenth (l0th) day following the day on which notice of the date of the special meeting of shareholders was mailed or public disclosure of the date of the 7 special meeting of shareholders was made, whichever first occurs. To be in proper written form, a shareholder's notice to the Secretary of the Corporation must set forth: (a) as to each person whom the shareholder proposes to nominate for election as a director: (i) the name, age, business address and residence address of the person; (ii) the principal occupation or employment of the person; (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person as of the record date for the meeting (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice; and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to section 14 of the Exchange Act, and the rules and regulations promulgated thereunder; and (b) as to the shareholder giving the notice: (i) the name and record address of such shareholder; (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such shareholder as of the record date for the meeting (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice; (iii) a description of all arrangements or understandings between such shareholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nominations are to be made by such shareholder; (iv) a representation that such shareholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (v) any other information relating to such shareholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by the written consent to such nomination of each person proposed as a nominee and such person's written consent to serve as a director if elected. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 12. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. ARTICLE IV NOTICES SECTION 1. NOTICE. Whenever any notice is required to be given to any director or shareholder under any provision of statute or of the Certificate of Incorporation or of these Bylaws, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or shareholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to Directors may also be given orally in person or by telegram, telex, radiogram or cablegram, and such notice shall be deemed to be given when the recipient receives the notice personally, by telephone or when the notice, addressed as provided above, has been delivered to the company, or to the equipment transmitting such notice. 8 SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be given under any provision of statute or of the Certificate of Incorporation or of these Bylaws, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, Directors, or members of a Committee of Directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE V OFFICERS SECTION 1. SELECTION. The Board of Directors may appoint such officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. The officers so appointed may include a Chairman of the Board, President, one or more Vice Chairmen, one or more Vice Presidents (including Executive, Senior, First, regular and Assistant Vice Presidents), a Secretary and a Treasurer, and one or more lesser officers as may be deemed appropriate. The Chief Executive Officer may also appoint officers of the level of Senior Vice President and below as he shall deem necessary, at any time, which officers shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board or the Chief Executive Officer. Any number of offices may be held by the same person, unless the Certificate of Incorporation otherwise provides. SECTION 2. COMPENSATION. The salaries of all executive officers of the Corporation shall be fixed by the Board of Directors. SECTION 3. TERM, REMOVAL AND VACANCIES. Each officer of the Corporation shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Additionally, any officer of the level of regular Vice President or below may also be removed at any time by the Chief Executive Officer. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors. Any vacancy occurring in any office of the Corporation of the level of regular Vice President or below may also be filled by the Chief Executive Officer. SECTION 4. CHIEF EXECUTIVE OFFICER AND CHIEF OPERATING OFFICER. (a) Chief Executive Officer. At the first meeting of each newly-elected Board of Directors, the Board shall designate the Chairman of the Board or President as the chief executive officer of the Corporation; provided, however, that if a motion is not made and carried to change the designation, the designation shall be same as the designation for the preceding year; provided, further, that the designation of the chief executive officer may be changed at any regular or special meeting of the Board of Directors. The chief executive officer shall be responsible to the Board of Directors for the general supervision and management of the business and affairs of the Corporation. The 9 Chairman of the Board or President who is not the chief executive officer shall be subject to the authority of the chief executive officer, but shall exercise all of the powers and discharge all of the duties of the chief executive officer, during the absence or disability of the chief executive officer. (b) Chief Operating Officer. At any meeting of the Board of Directors, the Board may designate a chief operating officer of the Corporation. The chief operating officer shall perform such duties as may be delegated to him or her by the Board of Directors, the Executive Committee of the Board or the Chairman of the Board. SECTION 5. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of Directors shall be selected by, and from among the membership of, the Board of Directors. He shall preside at all meetings of the shareholders and of the Board of Directors. He shall perform such other duties and functions as shall be assigned to him from time to time by the Board of Directors. He shall be, ex officio, a member of all standing committees except the Select Compensation Committee and the Audit and Legal Committee. Except where by law the signature of the President of this Corporation is required, the Chairman of the Board of Directors shall possess the same power and authority as the President to sign all certificates, contracts, instruments, papers and documents of every conceivable kind and character whatsoever, in the name of and on behalf of this Corporation, which may be authorized by the Board of Directors. During the absence or disability of the President, the Chairman of the Board of Directors shall exercise all of the powers and discharge all of the duties of the President. SECTION 6. PRESIDENT. The President shall be selected by, and from among the membership of, the Board of Directors. During the absence or disability of the Chairman of the Board of Directors, or while such office is vacant, the President shall perform all duties and functions, and while so acting shall have all of the powers and authority, of the Chairman of the Board of Directors. The President shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors. The President shall be, ex officio, a member of all standing committees except the Select Compensation Committee and the Audit and Legal Committee. SECTION 7. VICE CHAIRMEN. One or more Vice Chairmen may be chosen from the membership of the Board. Unless the Board of Directors shall otherwise provide by resolution duly adopted by it, such of the Vice Chairmen who are members of the Board of Directors in the order specified by the Board of Directors shall perform the duties and exercise the powers of the President during the absence or disability of the President. The Vice Chairmen shall perform such other duties as may be delegated to them by the Board of Directors, any executive committee, or the President. SECTION 8. SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and shall record all the proceedings thereof in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, all notices required by statute, Bylaw or resolution, and shall perform such other duties as may be prescribed by the Board of Directors or President. The Secretary shall have custody of the corporate seal of the Corporation and the Secretary and Assistant Secretaries shall have authority to affix the same to any instrument when its use is required or appropriate. SECTION 9. ASSISTANT SECRETARIES. The Assistant Secretary or Assistant Secretaries shall, in the absence of the Secretary or in the 10 event of his or her inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. SECTION 10. TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his or her transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall deliver to the Corporation, and shall keep in force, a bond, in such form, amount, and with such surety or sureties as shall be satisfactory to the Board of Directors, for the faithful performance of the duties of his or her office and for the restoration to the Corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. SECTION 11. ASSISTANT TREASURERS. The Assistant Treasurer or Assistant Treasurers shall, in the absence of the Treasurer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. 11 SECTION 12. INDEMNIFICATION AND INSURANCE. (a) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit, or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Any person who is or was an agent of the Corporation may be indemnified to the same extent as hereinabove provided. In addition, in the event any such action, suit or proceeding is threatened or instituted against a spouse to whom a director or officer is legally married at the time such director or officer is covered under the indemnification provided herein which action, suit or proceeding arises solely out of his or her status as the spouse of a director or officer, including, without limitation, an action, suit or proceeding that seeks damages recoverable from marital community property of the director or officer and his or her spouse, property owned jointly by them or property purported to have been transferred from the director or officer to his or her spouse, the spouse of the director or officer shall be indemnified to the same extent as hereinabove provided. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, raise any inference that he or she had reasonable cause to believe that his or her conduct was unlawful. (b) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. Any person who is or was an agent of the Corporation may be indemnified to the same extent as hereinabove provided. In addition, in the event any such action or suit is threatened or instituted against a spouse to whom a director or officer is legally married at the time such director or officer is covered under the indemnification provided herein which action or suit arises solely out of 12 his or her status as the spouse of a director or officer, including, without limitation, an action or suit that seeks damages recoverable from marital community property of the director or officer and his or her spouse, property owned jointly by them or property purported to have been transferred from the director or officer to his or her spouse, the spouse of the director or officer shall be indemnified to the same extent as hereinabove provided. (c) To the extent that a director, officer, spouse of the director or officer, employee, or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this Section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. (d) Any indemnification under subsections (a) and (b) of this Section (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, spouse of the director or officer, employee, or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in subsections (a) and (b) of this Section. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to the action, suit or proceeding, or (2) if such a quorum is not obtainable, or even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel chosen by the entire Board of Directors, subject to the reasonable satisfaction of the party seeking indemnification, in a written opinion, or (3) by the shareholders. (e) Expenses (including attorney's fees) incurred by an officer, director, or spouse of an officer or director, in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer or spouse to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Section. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. (f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this Section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. (g) The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, spouse of a director or officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Section. (h) For the purposes of this Section, references to "the 13 Corporation" include, in addition to the resulting or surviving corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers, spouses of directors or officers, and employees or agents, so that any person who is or was a director, officer, spouse of a director or officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. (i) For purposes of this Section, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Section. (j) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent, and with respect to any spouse of a director or officer, shall continue following the time the director or officer spouse ceases to be a director or officer even if the marriage of the individuals terminates prior to the end of the period of coverage, and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 13. OFFICERS APPOINTED PURSUANT TO MERGER AGREEMENT. During the period in which the Employment Agreement, dated as of February 20, 1992, between the Corporation and Mr. Gerald V. MacDonald, and the Employment Agreement, entered into as of February 20, 1992, between the Corporation and Mr. Eugene A. Miller (the "Employment Agreements") are in effect, any modification, amendment or failure to honor the terms of either of such Employment Agreements shall require the affirmative vote of 75% of the members of the entire Board of Directors. ARTICLE VI STOCK AND TRANSFERS SECTION 1. CERTIFICATES OF STOCK. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman of the Board of Directors, or the President or a Vice President and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the 14 face or back of the Certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the designations, preferences and relative, participating optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Any of or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 2. LOST CERTIFICATES. The Board of Directors may direct a new certificate to be issued in the place of any certificate theretofore issued by the Corporation, alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing the issuance of a new certificate the Board of Directors may, in its discretion and as a condition present to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against it with respect to the certificate alleged to have been lost, stolen or destroyed. SECTION 3. TRANSFERS OF STOCK. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 4. FIXING RECORD DATE. In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5. REGISTERED SHAREHOLDERS. The Corporation shall have the right to treat the person registered on its books as the owner of shares as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. 15 ARTICLE VII GENERAL PROVISIONS SECTION 1. DIVIDENDS. The Board of Directors, subject to any restrictions contained in its Certificate of Incorporation, may declare and pay any dividends upon the shares of its capital stock either (1) out of surplus as defined in and computed in accordance with the provisions of the governing statute, or (2) in case there shall be no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Dividends may be paid in cash, in property, or in shares of the Corporation's capital stock, subject to the provisions of the statute and of the Certificate of Incorporation. SECTION 2. RESERVES. The Board of Directors shall have power and authority to set apart, out of any funds available for dividends, such reserve or reserves, for any proper purpose, as the Board in its discretion shall approve, and the Board shall have the power and authority to abolish any reserve created by the Board. SECTION 3. VOTING SECURITIES. Unless otherwise directed by the Board, the Chairman of the Board or President, or, in the case of their absence or inability to act, the Vice Presidents, in order of their seniority, shall have full power and authority on behalf of the Corporation to attend and to act and to vote, or to execute in the name or on behalf of the Corporation a proxy authorizing an agent or attorney- in-fact for the Corporation to attend and vote at any meetings of security holders of Corporations in which the Corporation may hold securities, and at such meetings he or his duly authorized agent or attorney-in-fact shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Corporation might have possessed and exercised if present. The Board by resolution from time to time may confer like power upon any other person or persons. SECTION 4. CHECKS. All checks, drafts and orders for the payment of money shall be signed in the name of the Corporation in such manner and by such officer or officers or such other person or persons as the Board of Directors shall from time to time designate for that purpose. SECTION 5. CONTRACTS, CONVEYANCES, ETC. When the execution of any contract, conveyance or other instruments has been authorized without specification of the executing officers, the Chairman of the Board, President or any Vice President, and the Secretary or Assistant Secretary, may execute the same in the name and on behalf of this Corporation and may affix the corporate seal thereto. The Board of Directors shall have power to designate the officers and agents who shall have authority to execute any instrument in behalf of this Corporation. SECTION 6. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SECTION 7. SEAL. The corporate seal shall have inscribed thereon the name of the Corporation and the words "Corporate Seal" and "Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. SECTION 8. MICHIGAN CONTROL SHARE STATUTE. Pursuant to Section 794 of the Michigan Business Corporation Act ("MBCA"), Chapter 7B of the MBCA shall not apply to the Corporation or control share acquisitions (as such term is defined in Section 791 of the MBCA) of the shares of the Corporation's capital stock. 16 ARTICLE VIII AMENDMENTS SECTION 1. AMENDMENT BY REGULAR VOTE. These bylaws may be altered, amended or repealed or new Bylaws may be adopted by the shareholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the Certificate of Incorporation, at any regular meeting of the shareholders or of the Board of Directors or at any special meeting of the shareholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such special meeting. SECTION 2. AMENDMENT BY 75% VOTE. The affirmative vote of 75% of the total Board of Directors is required to alter, amend, repeal, add to or otherwise change the effects of Article III, Sections 8(b), (c) or (d); Article V, Section 13; or this Article VIII, Section 2 of the Corporation's Bylaws. EX-11 3 1 Exhibit (11) - Statement Re: Computation of Earnings Per Share COMPUTATION OF EARNINGS PER SHARE Comerica Incorporated and Subsidiaries
(In thousands, except per share data) Three Months Ended Nine Months Ended September 30 September 30 ------------------- ------------------- 1995 1994 1995 1994 -------- -------- -------- -------- Primary: Average shares outstanding 114,629 118,466 116,207 117,212 Common stock equivalent: Net effect of the assumed exercise of stock options 1,364 970 992 936 -------- -------- -------- -------- Primary average shares 115,993 119,436 117,199 118,148 ======== ======== ======== ======== Net income $105,302 $100,604 $306,856 $290,645 -------- -------- -------- -------- Primary net income per share $0.91 $0.84 $2.62 $2.46 Fully diluted: Average shares outstanding 114,629 118,466 116,207 117,212 Common stock equivalent: Net effect of the assumed exercise of stock options 1,472 971 1,490 940 -------- -------- -------- -------- Fully diluted average shares 116,101 119,437 117,697 118,152 ======== ======== ======== ======== Net income $105,302 $100,604 $306,856 $290,645 -------- -------- -------- -------- Fully diluted net income per share $0.91 $0.84 $2.61 $2.46
EX-27 4
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER 1995 FORM 10Q FOR COMERICA INCORPORATED AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 1,523,520 52,442 733,200 4,783 2,779,920 4,591,928 4,534,625 24,347,070 342,914 35,348,526 22,011,129 5,429,397 372,102 4,948,576 575,473 0 0 1,977,513 35,348,526 1,550,093 373,853 19,346 1,943,292 538,194 984,431 958,861 53,500 788 809,377 465,552 306,856 0 0 306,856 2.62 2.61 4.14 151,782 71,924 4,137 344,114 326,195 73,831 33,790 342,914 294,589 2,296 46,029
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