COMERICA REPORTS THIRD QUARTER 2014 NET INCOME OF $154 MILLION,
OR 82 CENTS PER SHARE
Broad-Based Growth in Average Loans and Deposits Compared to Third Quarter 2013:
Average Loans Up $3.1 Billion, or 7 Percent
Average Noninterest-Bearing Deposits Increase $2.9 Billion, or 13 Percent
DALLAS/October 17, 2014 -- Comerica Incorporated (NYSE: CMA) today reported third quarter 2014 net income of $154 million, compared to $151 million for the second quarter 2014 and $147 million for the third quarter 2013. Earnings per diluted share were 82 cents for the third quarter 2014, compared to 80 cents for the second quarter 2014 and 78 cents for the third quarter 2013. Third quarter results reflected a net benefit of $5 million, after tax, or 3 cents per share, from certain actions including a $32 million gain on the early redemption of debt, a $9 million contribution to the Comerica Charitable Foundation and other charges totaling $15 million (see "Noninterest Expenses" section for further details).
(dollar amounts in millions, except per share data) | 3rd Qtr '14 | 2nd Qtr '14 | 3rd Qtr '13 | |||||||||
Net interest income (a) | $ | 414 | $ | 416 | $ | 412 | ||||||
Provision for credit losses | 5 | 11 | 8 | |||||||||
Noninterest income | 215 | 220 | 228 | |||||||||
Noninterest expenses | 397 | (b) | 404 | 417 | ||||||||
Provision for income taxes | 73 | 70 | 68 | |||||||||
Net income | 154 | 151 | 147 | |||||||||
Net income attributable to common shares | 152 | 149 | 145 | |||||||||
Diluted income per common share | 0.82 | 0.80 | 0.78 | |||||||||
Average diluted shares (in millions) | 185 | 186 | 187 | |||||||||
Tier 1 common capital ratio (d) | 10.69 | % | (c) | 10.50 | % | 10.72 | % | |||||
Basel III common equity Tier 1 capital ratio (d) (e) | 10.4 | 10.3 | 10.4 | |||||||||
Tangible common equity ratio (d) | 9.94 | 10.39 | 9.87 | |||||||||
(a) | Included accretion of the purchase discount on the acquired loan portfolio of $3 million, $10 million and $8 million in the third quarter 2014, second quarter 2014 and third quarter 2013, respectively. |
(b) | Reflected a net benefit of $8 million from certain actions, including a $32 million gain on the early redemption of debt, a $9 million contribution to the Comerica Charitable Foundation and other charges totaling $15 million. See "Noninterest Expenses" section for further details. |
(c) | September 30, 2014 ratio is estimated. |
(d) | See Reconciliation of Non-GAAP Financial Measures. |
(e) | Estimated ratios based on the standardized approach in the final rule, as fully phased-in, and excluding most elements of accumulated other comprehensive income (AOCI). |
"The third quarter reflected broad-based average loan growth as well as significant deposit growth across virtually all business lines," said Ralph W. Babb Jr., chairman and chief executive officer. "We also had solid credit quality and expenses that continue to be well controlled.
"Average total loans were up $3 billion, or 7 percent on a year-over-year basis, and were up $434 million, or 1 percent, compared to the second quarter. The pace of loan growth declined relative to the second quarter due to the typical seasonality, such as model changeover in our dealer services business and summer slowdown, as well as moderating growth in the overall economy. It is clear that our customers are becoming stronger and more confident, however, they remain somewhat cautious and continue to build liquidity. This is reflected in the $2.9 billion, or 13 percent, year-over-year increase in average noninterest-bearing deposits and the $1.3 billion, or 5 percent, increase over the second quarter.
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COMERICA REPORTS THIRD QUARTER 2014 NET INCOME OF $154 MILLION - 2
"With the continued low interest rate environment and rising regulatory and technology demands, we took certain actions in the third quarter intended to assist us in partially offsetting these headwinds. As a result, our third quarter expenses included charges associated with a number of projects focused on further efficiency as well as a donation to our charitable foundation.
"We are focused on the long-term and building enduring customer relationships. Our customers appreciate the value proposition we provide, with products and services that meet their needs. We continue to be well positioned for rising rates and to benefit as the economy improves."
Third Quarter 2014 Compared to Second Quarter 2014
• | Average total loans increased $434 million, or 1 percent, to $47.2 billion, reflecting broad-based increases led by Mortgage Banker Finance ($276 million), Technology and Life Sciences ($110 million) and Energy ($95 million), partially offset by decreases in National Dealer Services ($178 million) and general Middle Market ($142 million). Period-end total loans decreased $174 million, to $47.7 billion, primarily reflecting declines in National Dealer Services ($356 million), general Middle Market ($246 million) and Mortgage Banker Finance ($102 million), partially offset by increases in almost all other lines of business. |
• | Average total deposits increased $1.8 billion, or 3 percent, to $55.2 billion, reflecting increases in noninterest-bearing deposits of $1.3 billion and interest-bearing deposits of $515 million. Average deposits increased in almost all lines of business, led by Middle Market. Period-end deposits increased $3.4 billion, to $57.6 billion, reflecting increases in noninterest-bearing deposits of $2.7 billion and interest-bearing deposits of $695 million. |
• | Net interest income decreased $2 million to $414 million in the third quarter 2014, compared to $416 million in the second quarter 2014, primarily reflecting a $7 million decline in accretion of the purchase discount on the acquired loan portfolio partially offset by the benefit from an increase in loan volume. |
• | The provision for credit losses decreased $6 million to $5 million in the third quarter 2014, compared to $11 million in the second quarter 2014. Net charge-offs were $3 million, or 0.03 percent of average loans, in the third quarter 2014, compared to $9 million, or 0.08 percent, in the second quarter 2014. |
• | Noninterest income decreased $5 million to $215 million in the third quarter 2014, reflecting a $3 million decrease in customer-driven fee income and a $2 million decrease in noncustomer-driven income. |
• | Noninterest expenses decreased $7 million to $397 million in the third quarter 2014, primarily reflecting a net benefit of $8 million as a result of certain actions taken in the current quarter, which included a $32 million gain on the early redemption of debt, a $9 million contribution to the Comerica Charitable Foundation and other charges totaling $15 million. Expenses were stable excluding the impact of these actions. |
• | Capital remained solid at September 30, 2014, as evidenced by an estimated Tier 1 common capital ratio of 10.69 percent and a tangible common equity ratio of 9.94 percent. |
• | Comerica repurchased approximately 1.2 million shares of common stock during third quarter 2014 under the repurchase program. Together with dividends of $0.20 per share, $95 million was returned to shareholders. |
Third Quarter 2014 Compared to Third Quarter 2013
• | Average total loans increased $3.1 billion, or 7 percent, reflecting increases in almost all lines of business. |
• | Average total deposits increased $3.3 billion, or 6 percent, driven by an increase in noninterest-bearing deposits of $2.9 billion, or 13 percent. |
• | Net income increased $7 million, or 4 percent, primarily reflecting decreases in noninterest expenses, reflecting lower pension expense, and the provision for credit losses, partially offset by a decrease in noninterest income. |
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COMERICA REPORTS THIRD QUARTER 2014 NET INCOME OF $154 MILLION - 3
Net Interest Income
(dollar amounts in millions) | 3rd Qtr '14 | 2nd Qtr '14 | 3rd Qtr '13 | ||||||||
Net interest income | $ | 414 | $ | 416 | $ | 412 | |||||
Net interest margin | 2.67 | % | 2.78 | % | 2.79 | % | |||||
Selected average balances: | |||||||||||
Total earning assets | $ | 61,672 | $ | 60,148 | $ | 58,892 | |||||
Total loans | 47,159 | 46,725 | 44,094 | ||||||||
Total investment securities | 9,388 | 9,364 | 9,380 | ||||||||
Federal Reserve Bank deposits | 4,877 | 3,801 | 5,156 | ||||||||
Total deposits | 55,163 | 53,384 | 51,865 | ||||||||
Total noninterest-bearing deposits | 25,275 | 24,011 | 22,379 | ||||||||
• | Net interest income decreased $2 million to $414 million in the third quarter 2014, compared to the second quarter 2014. |
◦ | Interest on loans decreased $4 million, reflecting a decrease in accretion of the purchase discount on the acquired loan portfolio (-$7 million), the impact of a negative residual value adjustment to assets in the leasing portfolio (-$2 million), a decrease in interest recognized on nonaccrual loans (-$1 million), the benefit from an increase in loan balances ($4 million) more than offsetting other loan portfolio dynamics (-$2 million), and the benefit from one additional day in the third quarter ($4 million). |
◦ | Interest on investment securities decreased $1 million, primarily reflecting the second quarter 2014 benefit from a retrospective adjustment to premium amortization on mortgage-backed investment securities related to the slowing of expected future prepayments. |
◦ | Interest on short-term investments increased $1 million compared to the second quarter 2014, due to an increase in Federal Reserve Bank deposits. |
◦ | Interest expense on medium- and long-term debt decreased $2 million, primarily reflecting the net impact of maturities, redemptions and issuances during the second and third quarters. |
• | The net interest margin of 2.67 percent decreased 11 basis points compared to the second quarter 2014, primarily reflecting a decline in accretion of the purchase discount on the acquired loan portfolio (-5 basis points), an increase in Federal Reserve Bank deposits (-4 basis points), other loan portfolio dynamics (-1 basis point), and the impact of the negative leasing residual value adjustment (-1 basis point). |
• | Average earning assets increased $1.5 billion, to $61.7 billion in the third quarter 2014, compared to the second quarter 2014, primarily as a result of increases of $1.1 billion in interest-bearing deposits with banks and $434 million in average loans. |
Noninterest Income
Noninterest income decreased $5 million to $215 million for the third quarter 2014, compared to $220 million for the second quarter 2014, reflecting decreases in customer-driven fee income of $3 million and noncustomer-driven income of $2 million. The decrease in customer-driven fee income primarily reflected decreases in foreign exchange income and investment banking fees, partially offset by an increase in commercial lending fees.
Noninterest Expenses
Noninterest expenses decreased $7 million to $397 million for the third quarter 2014, compared to $404 million for the second quarter 2014, primarily as a result of a net $8 million benefit from certain actions taken in the third quarter 2014. Excluding these actions, the $1 million increase in noninterest expenses primarily reflected the impact of one additional day in salaries and benefits expense and small increases in net occupancy expense and several other categories, partially offset by lower litigation-related expenses.
The actions taken in the third quarter 2014 included:
• | Gain on early redemption of debt of $32 million. |
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COMERICA REPORTS THIRD QUARTER 2014 NET INCOME OF $154 MILLION - 4
• | Contribution to the Comerica Charitable Foundation of $9 million, included in other noninterest expenses. |
• | Other charges totaling $15 million associated with real estate optimization and several other efficiency-related actions, which included $6 million in salaries and benefits expense (severance-related) and $5 million in occupancy expense. |
Credit Quality
(dollar amounts in millions) | 3rd Qtr '14 | 2nd Qtr '14 | 3rd Qtr '13 | ||||||||
Net credit-related charge-offs | $ | 3 | $ | 9 | $ | 19 | |||||
Net credit-related charge-offs/Average total loans | 0.03 | % | 0.08 | % | 0.18 | % | |||||
Provision for credit losses | $ | 5 | $ | 11 | $ | 8 | |||||
Nonperforming loans (a) | 346 | 347 | 459 | ||||||||
Nonperforming assets (NPAs) (a) | 357 | 360 | 478 | ||||||||
NPAs/Total loans and foreclosed property | 0.75 | % | 0.75 | % | 1.08 | % | |||||
Loans past due 90 days or more and still accruing | $ | 13 | $ | 7 | $ | 25 | |||||
Allowance for loan losses | 592 | 591 | 604 | ||||||||
Allowance for credit losses on lending-related commitments (b) | 43 | 42 | 34 | ||||||||
Total allowance for credit losses | 635 | 633 | 638 | ||||||||
Allowance for loan losses/Period-end total loans | 1.24 | % | 1.23 | % | 1.37 | % | |||||
Allowance for loan losses/Nonperforming loans | 171 | 170 | 131 | ||||||||
(a) | Excludes loans acquired with credit impairment. |
(b) | Included in "Accrued expenses and other liabilities" on the consolidated balance sheets. |
• | Net charge-offs decreased $6 million to $3 million, or 0.03 percent of average loans, in the third quarter 2014, compared to $9 million, or 0.08 percent, in the second quarter 2014. |
• | Criticized loans decreased $94 million to $2.1 billion at September 30, 2014, compared to $2.2 billion at June 30, 2014. |
Balance Sheet and Capital Management
Total assets and common shareholders' equity were $68.9 billion and $7.4 billion, respectively, at September 30, 2014, compared to $65.3 billion and $7.4 billion, respectively, at June 30, 2014.
There were approximately 180 million common shares outstanding at September 30, 2014. Share repurchases of $59 million (1.2 million shares) under the repurchase program, combined with dividends, returned 62 percent of third quarter 2014 net income to shareholders.
In the third quarter 2014, Comerica early redeemed $150 million of 8.375% subordinated notes, at par, and issued $250 million of 3.80% subordinated notes due in July 2026. The early redemption resulted in a $32 million gain in the third quarter 2014.
Comerica's tangible common equity ratio was 9.94 percent at September 30, 2014, a decrease of 45 basis points from June 30, 2014. The estimated Tier 1 common capital ratio increased 19 basis points, to 10.69 percent at September 30, 2014, from June 30, 2014. The estimated common equity Tier 1 ratio under fully phased-in Basel III capital rules and excluding most elements of AOCI was 10.4 percent at September 30, 2014.
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COMERICA REPORTS THIRD QUARTER 2014 NET INCOME OF $154 MILLION - 5
Full-Year and Fourth Quarter 2014 Outlook
Management expectations for full-year 2014 compared to full-year 2013 have not changed from the previously provided outlook, with the exception of the following:
• | Average loans - previous outlook was for growth in average loans of 4 percent to 6 percent and now growth is expected to be in the middle of the range, or about 5 percent. |
• | Net interest income - previous outlook for purchase accounting accretion was $25 million to $30 million and now accretion is expected to be at the upper end of the range, or about $30 million. |
For fourth quarter 2014 compared to third quarter 2014, management expects the following, assuming a continuation of the current economic and low-rate environment:
• | Slight growth in average loans, reflecting a seasonal decline in Mortgage Banker Finance, a seasonal increase in National Dealer Services, and slight growth in our remaining business lines similar to the third quarter, with continued focus on pricing and structure discipline. |
• | Slight growth in net interest income, reflecting fourth quarter purchase accounting accretion of about $5 million. Loan growth approximately offsets continued pressure from low rate environment. |
• | Provision for credit losses to remain low, similar to the provisions in the first half of 2014. |
• | Noninterest income relatively stable, with stable customer-driven income and lower noncustomer-driven income. |
• | Noninterest expenses higher, reflecting higher technology and consulting expenses, a seasonal increase in benefits expense and certain fourth quarter actions expected to result in additional charges of about $5 million to $7 million. Third quarter included a net benefit of $8 million from actions taken. |
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COMERICA REPORTS THIRD QUARTER 2014 NET INCOME OF $154 MILLION - 6
Business Segments
Comerica's operations are strategically aligned into three major business segments: the Business Bank, the Retail Bank and Wealth Management. The Finance Division is also reported as a segment. The financial results below are based on the internal business unit structure of the Corporation and methodologies in effect at September 30, 2014 and are presented on a fully taxable equivalent (FTE) basis. The accompanying narrative addresses third quarter 2014 results compared to second quarter 2014.
In the second quarter 2014, Comerica enhanced the approach used to determine the standard reserve factors used in estimating the allowance for credit losses, which had the effect of capturing certain elements in the quantitative component of the reserve that had formerly been included in the qualitative assessment. The impact of the change was largely neutral to the total allowance for loan losses at June 30, 2014. However, because standard reserves are allocated to the segments at the loan level, while qualitative reserves are allocated at the portfolio level, the impact of the methodology change on the allowance of each segment reflected the characteristics of the individual loans within each segment's portfolio, causing segment reserves to increase or decrease accordingly.
The following table presents net income (loss) by business segment.
(dollar amounts in millions) | 3rd Qtr '14 | 2nd Qtr '14 | 3rd Qtr '13 | ||||||||||||||
Business Bank | $ | 210 | 91 | % | $ | 195 | 82 | % | $ | 209 | 91 | % | |||||
Retail Bank | 7 | 3 | 15 | 6 | 6 | 3 | |||||||||||
Wealth Management | 13 | 6 | 28 | 12 | 15 | 6 | |||||||||||
230 | 100 | % | 238 | 100 | % | 230 | 100 | % | |||||||||
Finance | (73 | ) | (91 | ) | (87 | ) | |||||||||||
Other (a) | (3 | ) | 4 | 4 | |||||||||||||
Total | $ | 154 | $ | 151 | $ | 147 | |||||||||||
(a) Includes items not directly associated with the three major business segments or the Finance Division.
Business Bank
(dollar amounts in millions) | 3rd Qtr '14 | 2nd Qtr '14 | 3rd Qtr '13 | ||||||||
Net interest income (FTE) | $ | 377 | $ | 376 | $ | 368 | |||||
Provision for credit losses | (4 | ) | 32 | (1 | ) | ||||||
Noninterest income | 94 | 95 | 103 | ||||||||
Noninterest expenses | 152 | 143 | 153 | ||||||||
Net income | 210 | 195 | 209 | ||||||||
Net credit-related charge-offs (recoveries) | (2 | ) | 7 | 9 | |||||||
Selected average balances: | |||||||||||
Assets | 37,898 | 37,467 | 35,295 | ||||||||
Loans | 36,894 | 36,529 | 34,178 | ||||||||
Deposits | 28,841 | 27,382 | 26,284 | ||||||||
• | Average loans increased $365 million, reflecting increases in most lines of business, led by Mortgage Banker Finance, Technology and Life Sciences, Commercial Real Estate and Corporate Banking, partially offset by decreases in National Dealer Services and general Middle Market. |
• | Average deposits increased $1.5 billion, primarily reflecting increases in noninterest-bearing deposits in almost all lines of business. |
• | Net interest income increased $1 million, primarily due to the benefit from an increase in average loan balances and one additional day in the quarter, as well as an increase in net funds transfer pricing (FTP) credits, largely due to the increase in average deposits, partially offset by a decrease in purchase accounting accretion, the impact of a negative leasing residual value adjustment and lower loan yields. |
• | The provision for credit losses decreased $36 million, primarily due to impact on the second quarter provision of enhancements made to the approach utilized to determine the allowance for credit losses, as well as improvements in credit quality. |
• | Noninterest income decreased $1 million, primarily due to decreases in foreign exchange income and warrant income, partially offset by an increase in commercial lending fees. |
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COMERICA REPORTS THIRD QUARTER 2014 NET INCOME OF $154 MILLION - 7
• | Noninterest expenses increased $9 million, primarily due to an increase in allocated corporate overhead expenses related to certain actions taken in the third quarter 2014 including a contribution to the Comerica Charitable Foundation, charges associated with real estate optimization and several other efficiency-related actions. |
Retail Bank
(dollar amounts in millions) | 3rd Qtr '14 | 2nd Qtr '14 | 3rd Qtr '13 | ||||||||
Net interest income (FTE) | $ | 150 | $ | 149 | $ | 151 | |||||
Provision for credit losses | — | (4 | ) | 10 | |||||||
Noninterest income | 41 | 41 | 45 | ||||||||
Noninterest expenses | 181 | 171 | 177 | ||||||||
Net income | 7 | 15 | 6 | ||||||||
Net credit-related charge-offs | — | 4 | 7 | ||||||||
Selected average balances: | |||||||||||
Assets | 6,117 | 6,051 | 5,967 | ||||||||
Loans | 5,452 | 5,385 | 5,285 | ||||||||
Deposits | 21,785 | 21,648 | 21,257 | ||||||||
• | Average loans increased $67 million, reflecting increases in both Small Business and Retail Banking. |
• | Average deposits increased $137 million, primarily reflecting an increase in noninterest-bearing deposits, partially offset by a decline in Retail Banking certificates of deposit. |
• | Net interest income increased $1 million, primarily due to the benefit provided by an increase in average loan balances and the impact of one additional day in the quarter. |
• | The provision for credit losses increased $4 million, primarily due to the impact on the second quarter 2014 provision of enhancements to the approach utilized to determine the allowance for credit losses. |
• | Noninterest expenses increased $10 million, primarily due to an increase in allocated corporate overhead expenses, for the same reasons as described above in the Business Bank section. |
Wealth Management
(dollar amounts in millions) | 3rd Qtr '14 | 2nd Qtr '14 | 3rd Qtr '13 | ||||||||
Net interest income (FTE) | $ | 47 | $ | 46 | $ | 45 | |||||
Provision for credit losses | 7 | (9 | ) | 1 | |||||||
Noninterest income | 63 | 67 | 61 | ||||||||
Noninterest expenses | 82 | 79 | 81 | ||||||||
Net income | 13 | 28 | 15 | ||||||||
Net credit-related charge-offs (recoveries) | 5 | (2 | ) | 3 | |||||||
Selected average balances: | |||||||||||
Assets | 5,007 | 4,996 | 4,789 | ||||||||
Loans | 4,813 | 4,811 | 4,631 | ||||||||
Deposits | 4,155 | 3,827 | 3,782 | ||||||||
• | Average deposits increased $328 million, primarily reflecting an increase in interest-bearing balances. |
• | Net interest income increased $1 million due to an increase in net FTP credits, largely due to the increase in average deposits. |
• | The provision for loan losses increased $16 million, primarily due to the impact on the second quarter 2014 provision of enhancements to the approach utilized to determine the allowance for credit losses. |
• | Noninterest income decreased $4 million, primarily reflecting a decrease in investment banking fees and small decreases in several other categories. |
• | Noninterest expenses increased $3 million, primarily reflecting an increase in allocated corporate overhead related to certain actions taken in the third quarter 2014 including a contribution to the Comerica Charitable Foundation, charges associated with real estate optimization and several other efficiency-related actions, as well as increases in salaries and benefits expense and occupancy expenses, primarily |
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COMERICA REPORTS THIRD QUARTER 2014 NET INCOME OF $154 MILLION - 8
the result of other efficiency-related actions in the third quarter, partially offset by a decrease in litigation-related expenses.
Geographic Market Segments
Comerica also provides market segment results for three primary geographic markets: Michigan, California and Texas. In addition to the three primary geographic markets, Other Markets is also reported as a market segment. Other Markets includes Florida, Arizona, the International Finance division and businesses that have a significant presence outside of the three primary geographic markets. The tables below present the geographic market results based on the methodologies in effect at September 30, 2014 and are presented on a fully taxable equivalent (FTE) basis.
The following table presents net income (loss) by market segment.
(dollar amounts in millions) | 3rd Qtr '14 | 2nd Qtr '14 | 3rd Qtr '13 | ||||||||||||||
Michigan | $ | 68 | 29 | % | $ | 80 | 34 | % | $ | 75 | 33 | % | |||||
California | 63 | 28 | 63 | 26 | 69 | 30 | |||||||||||
Texas | 40 | 17 | 36 | 15 | 35 | 15 | |||||||||||
Other Markets | 59 | 26 | 59 | 25 | 51 | 22 | |||||||||||
230 | 100 | % | 238 | 100 | % | 230 | 100 | % | |||||||||
Finance & Other (a) | (76 | ) | (87 | ) | (83 | ) | |||||||||||
Total | $ | 154 | $ | 151 | $ | 147 | |||||||||||
(a) Includes items not directly associated with the geographic markets.
• | Average loans increased $181 million and $70 million in Texas and California, respectively, and decreased $234 million in Michigan. The increase in Texas was led by Energy and Private Banking. California increases were led by Commercial Real Estate and general Middle Market, partially offset by decreases in National Dealer Services and Technology and Life Sciences. The decrease in Michigan primarily reflected declines in general Middle Market and National Dealer Services. |
• | Average deposits increased $980 million and $520 million in California and Michigan, respectively, and decreased $91 million in Texas. The increase in California reflected increases in most lines of business and included increases of $432 million and $548 million in noninterest-bearing and interest-bearing deposits, respectively. The increase in Michigan was primarily in general Middle Market noninterest-bearing deposits. |
• | Net interest income increased $6 million in California and decreased $7 million in Texas and $3 million in Michigan. The increase in California primarily reflected an increase in FTP credits, largely due to the increase in average deposits, and the benefit from an increase in average loans. The decrease in Texas was primarily the result of a decrease in the accretion of the purchase discount on the acquired loan portfolio. The decrease in Michigan primarily reflected lower loan yields, in part due to a negative leasing residual adjustment, and the impact of a decrease in average loans. All three markets benefited from the impact of one additional day in the third quarter. |
• | The provision for credit losses decreased $19 million in Texas, decreased $1 million in Michigan and remained flat in California. The decrease in Texas primarily reflected the impact on the second quarter provision of increased reserves on two credits and positive credit quality migration. |
• | Noninterest income decreased $7 million in Michigan and $2 million in California, and increased $1 million in Texas. The decrease in Michigan primarily reflected a decrease in investment banking fees and small decreases in several other noninterest income categories. In California, the decrease was primarily the result of decreases in foreign exchange and warrant income. |
• | Noninterest expenses increased $7 million, $6 million and $2 million in Michigan, Texas and California, respectively, primarily due to increased allocated corporate overhead expenses, for the same reasons as previously described in the Business Bank section. In California, decreases in litigation-related expenses and operational losses partially offset the increase. |
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COMERICA REPORTS THIRD QUARTER 2014 NET INCOME OF $154 MILLION - 9
Michigan Market
(dollar amounts in millions) | 3rd Qtr '14 | 2nd Qtr '14 | 3rd Qtr '13 | ||||||||
Net interest income (FTE) | $ | 179 | $ | 182 | $ | 186 | |||||
Provision for credit losses | (8 | ) | (9 | ) | (11 | ) | |||||
Noninterest income | 87 | 94 | 88 | ||||||||
Noninterest expenses | 166 | 159 | 167 | ||||||||
Net income | 68 | 80 | 75 | ||||||||
Net credit-related charge-offs (recoveries) | 3 | 10 | 1 | ||||||||
Selected average balances: | |||||||||||
Assets | 13,724 | 13,851 | 13,744 | ||||||||
Loans | 13,248 | 13,482 | 13,276 | ||||||||
Deposits | 21,214 | 20,694 | 20,465 | ||||||||
California Market
(dollar amounts in millions) | 3rd Qtr '14 | 2nd Qtr '14 | 3rd Qtr '13 | ||||||||
Net interest income (FTE) | $ | 182 | $ | 176 | $ | 171 | |||||
Provision for credit losses | 14 | 14 | — | ||||||||
Noninterest income | 37 | 39 | 42 | ||||||||
Noninterest expenses | 103 | 101 | 101 | ||||||||
Net income | 63 | 63 | 69 | ||||||||
Net credit-related charge-offs (recoveries) | 6 | 5 | 8 | ||||||||
Selected average balances: | |||||||||||
Assets | 15,768 | 15,721 | 14,250 | ||||||||
Loans | 15,509 | 15,439 | 14,002 | ||||||||
Deposits | 16,350 | 15,370 | 14,567 | ||||||||
Texas Market
(dollar amounts in millions) | 3rd Qtr '14 | 2nd Qtr '14 | 3rd Qtr '13 | ||||||||
Net interest income (FTE) | $ | 130 | $ | 137 | $ | 129 | |||||
Provision for credit losses | 3 | 22 | 17 | ||||||||
Noninterest income | 32 | 31 | 35 | ||||||||
Noninterest expenses | 95 | 89 | 92 | ||||||||
Net income | 40 | 36 | 35 | ||||||||
Net credit-related charge-offs | — | 2 | 4 | ||||||||
Selected average balances: | |||||||||||
Assets | 11,835 | 11,661 | 10,642 | ||||||||
Loans | 11,147 | 10,966 | 9,942 | ||||||||
Deposits | 10,633 | 10,724 | 10,298 | ||||||||
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COMERICA REPORTS THIRD QUARTER 2014 NET INCOME OF $154 MILLION - 10
Conference Call and Webcast
Comerica will host a conference call to review third quarter 2014 financial results at 7 a.m. CT Friday, October 17, 2014. Interested parties may access the conference call by calling (877) 523-5249 or (210) 591-1147 (event ID No. 3671820). The call and supplemental financial information can also be accessed via Comerica's "Investor Relations" page at www.comerica.com. A replay of the Webcast can be accessed via Comerica's “Investor Relations” page at www.comerica.com.
Comerica Incorporated is a financial services company headquartered in Dallas, Texas, and strategically aligned by three major business segments: The Business Bank, The Retail Bank and Wealth Management. Comerica focuses on relationships and helping people and businesses be successful. In addition to Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico.
This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding Comerica's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as a reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
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COMERICA REPORTS THIRD QUARTER 2014 NET INCOME OF $154 MILLION - 11
Forward-looking Statements
Any statements in this news release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “believes,” “contemplates,” “feels,” “expects,” “estimates,” “seeks,” “strives,” “plans,” “intends,” “outlook,” “forecast,” “position,” “target,” “mission,” “assume,” “achievable,” “potential,” “strategy,” “goal,” “aspiration,” “opportunity,” “initiative,” “outcome,” “continue,” “remain,” “maintain,” “on course,” “trend,” “objective,” “looks forward,” "projects," "models" and variations of such words and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions, as they relate to Comerica or its management, are intended to identify forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of Comerica's management based on information known to Comerica's management as of the date of this news release and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of Comerica's management for future or past operations, products or services, and forecasts of Comerica's revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries, estimates of credit trends and global stability. Such statements reflect the view of Comerica's management as of this date with respect to future events and are subject to risks and uncertainties. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, Comerica's actual results could differ materially from those discussed. Factors that could cause or contribute to such differences are changes in general economic, political or industry conditions; changes in monetary and fiscal policies, including changes in interest rates; volatility and disruptions in global capital and credit markets; changes in Comerica's credit rating; the interdependence of financial service companies; changes in regulation or oversight; unfavorable developments concerning credit quality; the effects of more stringent capital or liquidity requirements; declines or other changes in the businesses or industries of Comerica's customers; operational difficulties, failure of technology infrastructure or information security incidents; the implementation of Comerica's strategies and business initiatives; Comerica's ability to utilize technology to efficiently and effectively develop, market and deliver new products and services; changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing; competitive product and pricing pressures among financial institutions within Comerica's markets; changes in customer behavior; any future strategic acquisitions or divestitures; management's ability to maintain and expand customer relationships; management's ability to retain key officers and employees; the impact of legal and regulatory proceedings or determinations; the effectiveness of methods of reducing risk exposures; the effects of terrorist activities and other hostilities; the effects of catastrophic events including, but not limited to, hurricanes, tornadoes, earthquakes, fires and floods; changes in accounting standards and the critical nature of Comerica's accounting policies. Comerica cautions that the foregoing list of factors is not exclusive. For discussion of factors that may cause actual results to differ from expectations, please refer to our filings with the Securities and Exchange Commission. In particular, please refer to “Item 1A. Risk Factors” beginning on page 12 of Comerica's Annual Report on Form 10-K for the year ended December 31, 2013. Forward-looking statements speak only as of the date they are made. Comerica does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. For any forward-looking statements made in this news release or in any documents, Comerica claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Media Contact: | Investor Contacts: |
Wayne J. Mielke | Darlene P. Persons |
(214) 462-4463 | (214) 462-6831 |
Brittany L. Butler | |
(214) 462-6834 | |
CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | June 30, | September 30, | September 30, | |||||||||||||
(in millions, except per share data) | 2014 | 2014 | 2013 | 2014 | 2013 | |||||||||||
PER COMMON SHARE AND COMMON STOCK DATA | ||||||||||||||||
Diluted net income | $ | 0.82 | $ | 0.80 | $ | 0.78 | $ | 2.35 | $ | 2.23 | ||||||
Cash dividends declared | 0.20 | 0.20 | 0.17 | 0.59 | 0.51 | |||||||||||
Average diluted shares (in thousands) | 185,401 | 186,108 | 187,104 | 186,064 | 187,180 | |||||||||||
KEY RATIOS | ||||||||||||||||
Return on average common shareholders' equity | 8.29 | % | 8.27 | % | 8.50 | % | 8.08 | % | 8.14 | % | ||||||
Return on average assets | 0.93 | 0.93 | 0.92 | 0.91 | 0.89 | |||||||||||
Tier 1 common capital ratio (a) (b) | 10.69 | 10.50 | 10.72 | |||||||||||||
Tier 1 risk-based capital ratio (b) | 10.69 | 10.50 | 10.72 | |||||||||||||
Total risk-based capital ratio (b) | 12.95 | 12.52 | 13.42 | |||||||||||||
Leverage ratio (b) | 10.80 | 10.93 | 10.88 | |||||||||||||
Tangible common equity ratio (a) | 9.94 | 10.39 | 9.87 | |||||||||||||
AVERAGE BALANCES | ||||||||||||||||
Commercial loans | $ | 30,188 | $ | 29,890 | $ | 27,759 | $ | 29,487 | $ | 28,069 | ||||||
Real estate construction loans | 1,973 | 1,913 | 1,522 | 1,905 | 1,430 | |||||||||||
Commercial mortgage loans | 8,698 | 8,749 | 8,943 | 8,739 | 9,177 | |||||||||||
Lease financing | 823 | 850 | 839 | 840 | 850 | |||||||||||
International loans | 1,417 | 1,328 | 1,252 | 1,349 | 1,265 | |||||||||||
Residential mortgage loans | 1,792 | 1,773 | 1,642 | 1,763 | 1,600 | |||||||||||
Consumer loans | 2,268 | 2,222 | 2,137 | 2,244 | 2,142 | |||||||||||
Total loans | 47,159 | 46,725 | 44,094 | 46,327 | 44,533 | |||||||||||
Earning assets | 61,672 | 60,148 | 58,892 | 60,585 | 58,810 | |||||||||||
Total assets | 66,401 | 64,879 | 63,657 | 65,336 | 63,707 | |||||||||||
Noninterest-bearing deposits | 25,275 | 24,011 | 22,379 | 24,182 | 21,991 | |||||||||||
Interest-bearing deposits | 29,888 | 29,373 | 29,486 | 29,599 | 29,364 | |||||||||||
Total deposits | 55,163 | 53,384 | 51,865 | 53,781 | 51,355 | |||||||||||
Common shareholders' equity | 7,411 | 7,331 | 6,920 | 7,324 | 6,950 | |||||||||||
NET INTEREST INCOME (fully taxable equivalent basis) | ||||||||||||||||
Net interest income | $ | 415 | $ | 417 | $ | 413 | $ | 1,243 | $ | 1,244 | ||||||
Net interest margin | 2.67 | % | 2.78 | % | 2.79 | % | 2.74 | % | 2.83 | % | ||||||
CREDIT QUALITY | ||||||||||||||||
Total nonperforming assets (c) | $ | 357 | $ | 360 | $ | 478 | ||||||||||
Loans past due 90 days or more and still accruing | 13 | 7 | 25 | |||||||||||||
Net loan charge-offs | 3 | 9 | 19 | $ | 24 | $ | 60 | |||||||||
Allowance for loan losses | 592 | 591 | 604 | |||||||||||||
Allowance for credit losses on lending-related commitments | 43 | 42 | 34 | |||||||||||||
Total allowance for credit losses | 635 | 633 | 638 | |||||||||||||
Allowance for loan losses as a percentage of total loans | 1.24 | % | 1.23 | % | 1.37 | % | ||||||||||
Net loan charge-offs as a percentage of average total loans (d) | 0.03 | 0.08 | 0.18 | 0.07 | % | 0.18 | % | |||||||||
Nonperforming assets as a percentage of total loans and foreclosed property (c) | 0.75 | 0.75 | 1.08 | |||||||||||||
Allowance for loan losses as a percentage of total nonperforming loans | 171 | 170 | 131 | |||||||||||||
(a) | See Reconciliation of Non-GAAP Financial Measures. |
(b) | September 30, 2014 ratios are estimated. |
(c) | Excludes loans acquired with credit-impairment. |
(d) | Lending-related commitment charge-offs were zero in all periods presented. |
12
CONSOLIDATED BALANCE SHEETS | ||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||
September 30, | June 30, | December 31, | September 30, | |||||||||
(in millions, except share data) | 2014 | 2014 | 2013 | 2013 | ||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||
ASSETS | ||||||||||||
Cash and due from banks | $ | 1,039 | $ | 1,226 | $ | 1,140 | $ | 1,384 | ||||
Interest-bearing deposits with banks | 6,748 | 2,668 | 5,311 | 5,704 | ||||||||
Other short-term investments | 112 | 109 | 112 | 106 | ||||||||
Investment securities available-for-sale | 9,468 | 9,534 | 9,307 | 9,488 | ||||||||
Commercial loans | 30,759 | 30,986 | 28,815 | 27,897 | ||||||||
Real estate construction loans | 1,992 | 1,939 | 1,762 | 1,552 | ||||||||
Commercial mortgage loans | 8,603 | 8,747 | 8,787 | 8,785 | ||||||||
Lease financing | 805 | 822 | 845 | 829 | ||||||||
International loans | 1,429 | 1,352 | 1,327 | 1,286 | ||||||||
Residential mortgage loans | 1,797 | 1,775 | 1,697 | 1,650 | ||||||||
Consumer loans | 2,323 | 2,261 | 2,237 | 2,152 | ||||||||
Total loans | 47,708 | 47,882 | 45,470 | 44,151 | ||||||||
Less allowance for loan losses | (592 | ) | (591 | ) | (598 | ) | (604 | ) | ||||
Net loans | 47,116 | 47,291 | 44,872 | 43,547 | ||||||||
Premises and equipment | 524 | 562 | 594 | 604 | ||||||||
Accrued income and other assets | 3,880 | 3,935 | 3,888 | 3,834 | ||||||||
Total assets | $ | 68,887 | $ | 65,325 | $ | 65,224 | $ | 64,667 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
Noninterest-bearing deposits | $ | 27,490 | $ | 24,774 | $ | 23,875 | $ | 23,896 | ||||
Money market and interest-bearing checking deposits | 23,523 | 22,555 | 22,332 | 21,697 | ||||||||
Savings deposits | 1,753 | 1,731 | 1,673 | 1,645 | ||||||||
Customer certificates of deposit | 4,698 | 4,962 | 5,063 | 5,180 | ||||||||
Foreign office time deposits | 117 | 148 | 349 | 491 | ||||||||
Total interest-bearing deposits | 30,091 | 29,396 | 29,417 | 29,013 | ||||||||
Total deposits | 57,581 | 54,170 | 53,292 | 52,909 | ||||||||
Short-term borrowings | 202 | 176 | 253 | 226 | ||||||||
Accrued expenses and other liabilities | 1,002 | 990 | 986 | 1,001 | ||||||||
Medium- and long-term debt | 2,669 | 2,620 | 3,543 | 3,565 | ||||||||
Total liabilities | 61,454 | 57,956 | 58,074 | 57,701 | ||||||||
Common stock - $5 par value: | ||||||||||||
Authorized - 325,000,000 shares | ||||||||||||
Issued - 228,164,824 shares | 1,141 | 1,141 | 1,141 | 1,141 | ||||||||
Capital surplus | 2,183 | 2,175 | 2,179 | 2,171 | ||||||||
Accumulated other comprehensive loss | (317 | ) | (304 | ) | (391 | ) | (541 | ) | ||||
Retained earnings | 6,631 | 6,520 | 6,318 | 6,236 | ||||||||
Less cost of common stock in treasury - 47,992,721 shares at 9/30/14; 47,194,492 shares at 6/30/14; 45,860,786 shares at 12/31/13 and 44,483,659 shares at 9/30/13 | (2,205 | ) | (2,163 | ) | (2,097 | ) | (2,041 | ) | ||||
Total shareholders' equity | 7,433 | 7,369 | 7,150 | 6,966 | ||||||||
Total liabilities and shareholders' equity | $ | 68,887 | $ | 65,325 | $ | 65,224 | $ | 64,667 | ||||
13
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | |||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
(in millions, except per share data) | 2014 | 2013 | 2014 | 2013 | |||||||||
INTEREST INCOME | |||||||||||||
Interest and fees on loans | $ | 381 | $ | 381 | $ | 1,142 | $ | 1,159 | |||||
Interest on investment securities | 52 | 54 | 160 | 159 | |||||||||
Interest on short-term investments | 3 | 4 | 9 | 10 | |||||||||
Total interest income | 436 | 439 | 1,311 | 1,328 | |||||||||
INTEREST EXPENSE | |||||||||||||
Interest on deposits | 11 | 13 | 33 | 43 | |||||||||
Interest on medium- and long-term debt | 11 | 14 | 38 | 43 | |||||||||
Total interest expense | 22 | 27 | 71 | 86 | |||||||||
Net interest income | 414 | 412 | 1,240 | 1,242 | |||||||||
Provision for credit losses | 5 | 8 | 25 | 37 | |||||||||
Net interest income after provision for credit losses | 409 | 404 | 1,215 | 1,205 | |||||||||
NONINTEREST INCOME | |||||||||||||
Service charges on deposit accounts | 54 | 53 | 162 | 161 | |||||||||
Fiduciary income | 44 | 41 | 133 | 128 | |||||||||
Commercial lending fees | 26 | 28 | 69 | 71 | |||||||||
Card fees | 20 | 20 | 59 | 55 | |||||||||
Letter of credit fees | 14 | 17 | 43 | 49 | |||||||||
Bank-owned life insurance | 11 | 12 | 31 | 31 | |||||||||
Foreign exchange income | 9 | 9 | 30 | 27 | |||||||||
Brokerage fees | 4 | 4 | 13 | 14 | |||||||||
Net securities (losses) gains | (1 | ) | 1 | — | (1 | ) | |||||||
Other noninterest income | 34 | 43 | 103 | 128 | |||||||||
Total noninterest income | 215 | 228 | 643 | 663 | |||||||||
NONINTEREST EXPENSES | |||||||||||||
Salaries and benefits expense | 248 | 255 | 735 | 751 | |||||||||
Net occupancy expense | 46 | 41 | 125 | 119 | |||||||||
Equipment expense | 14 | 15 | 43 | 45 | |||||||||
Outside processing fee expense | 31 | 31 | 89 | 89 | |||||||||
Software expense | 25 | 22 | 72 | 66 | |||||||||
Litigation-related expense | (2 | ) | (4 | ) | 4 | — | |||||||
FDIC insurance expense | 9 | 9 | 25 | 26 | |||||||||
Advertising expense | 5 | 6 | 16 | 18 | |||||||||
Gain on debt redemption | (32 | ) | — | (32 | ) | (1 | ) | ||||||
Other noninterest expenses | 53 | 42 | 130 | 136 | |||||||||
Total noninterest expenses | 397 | 417 | 1,207 | 1,249 | |||||||||
Income before income taxes | 227 | 215 | 651 | 619 | |||||||||
Provision for income taxes | 73 | 68 | 207 | 195 | |||||||||
NET INCOME | 154 | 147 | 444 | 424 | |||||||||
Less income allocated to participating securities | 2 | 2 | 6 | 6 | |||||||||
Net income attributable to common shares | $ | 152 | $ | 145 | $ | 438 | $ | 418 | |||||
Earnings per common share: | |||||||||||||
Basic | $ | 0.85 | $ | 0.80 | $ | 2.44 | $ | 2.28 | |||||
Diluted | 0.82 | 0.78 | 2.35 | 2.23 | |||||||||
Comprehensive income | 141 | 144 | 518 | 296 | |||||||||
Cash dividends declared on common stock | 36 | 31 | 107 | 95 | |||||||||
Cash dividends declared per common share | 0.20 | 0.17 | 0.59 | 0.51 | |||||||||
14
CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | |||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||||||
Third | Second | First | Fourth | Third | Third Quarter 2014 Compared To: | ||||||||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Quarter | Second Quarter 2014 | Third Quarter 2013 | |||||||||||||||||||||
(in millions, except per share data) | 2014 | 2014 | 2014 | 2013 | 2013 | Amount | Percent | Amount | Percent | ||||||||||||||||||
INTEREST INCOME | |||||||||||||||||||||||||||
Interest and fees on loans | $ | 381 | $ | 385 | $ | 376 | $ | 397 | $ | 381 | $ | (4 | ) | (1 | )% | $ | — | — | % | ||||||||
Interest on investment securities | 52 | 53 | 55 | 55 | 54 | (1 | ) | (2 | ) | (2 | ) | (5 | ) | ||||||||||||||
Interest on short-term investments | 3 | 2 | 4 | 4 | 4 | 1 | 26 | (1 | ) | (10 | ) | ||||||||||||||||
Total interest income | 436 | 440 | 435 | 456 | 439 | (4 | ) | (1 | ) | (3 | ) | (1 | ) | ||||||||||||||
INTEREST EXPENSE | |||||||||||||||||||||||||||
Interest on deposits | 11 | 11 | 11 | 12 | 13 | — | — | (2 | ) | (15 | ) | ||||||||||||||||
Interest on medium- and long-term debt | 11 | 13 | 14 | 14 | 14 | (2 | ) | (12 | ) | (3 | ) | (16 | ) | ||||||||||||||
Total interest expense | 22 | 24 | 25 | 26 | 27 | (2 | ) | (5 | ) | (5 | ) | (16 | ) | ||||||||||||||
Net interest income | 414 | 416 | 410 | 430 | 412 | (2 | ) | (1 | ) | 2 | — | ||||||||||||||||
Provision for credit losses | 5 | 11 | 9 | 9 | 8 | (6 | ) | (58 | ) | (3 | ) | (38 | ) | ||||||||||||||
Net interest income after provision for credit losses | 409 | 405 | 401 | 421 | 404 | 4 | 1 | 5 | 1 | ||||||||||||||||||
NONINTEREST INCOME | |||||||||||||||||||||||||||
Service charges on deposit accounts | 54 | 54 | 54 | 53 | 53 | — | — | 1 | 1 | ||||||||||||||||||
Fiduciary income | 44 | 45 | 44 | 43 | 41 | (1 | ) | (2 | ) | 3 | 6 | ||||||||||||||||
Commercial lending fees | 26 | 23 | 20 | 28 | 28 | 3 | 11 | (2 | ) | (7 | ) | ||||||||||||||||
Card fees | 20 | 19 | 20 | 19 | 20 | 1 | 7 | — | — | ||||||||||||||||||
Letter of credit fees | 14 | 15 | 14 | 15 | 17 | (1 | ) | (2 | ) | (3 | ) | (15 | ) | ||||||||||||||
Bank-owned life insurance | 11 | 11 | 9 | 9 | 12 | — | — | (1 | ) | (15 | ) | ||||||||||||||||
Foreign exchange income | 9 | 12 | 9 | 9 | 9 | (3 | ) | (23 | ) | — | — | ||||||||||||||||
Brokerage fees | 4 | 4 | 5 | 4 | 4 | — | — | — | — | ||||||||||||||||||
Net securities (losses) gains | (1 | ) | — | 1 | — | 1 | (1 | ) | N/M | (2 | ) | N/M | |||||||||||||||
Other noninterest income | 34 | 37 | 32 | 39 | 43 | (3 | ) | (9 | ) | (9 | ) | (22 | ) | ||||||||||||||
Total noninterest income | 215 | 220 | 208 | 219 | 228 | (5 | ) | (2 | ) | (13 | ) | (6 | ) | ||||||||||||||
NONINTEREST EXPENSES | |||||||||||||||||||||||||||
Salaries and benefits expense | 248 | 240 | 247 | 258 | 255 | 8 | 3 | (7 | ) | (3 | ) | ||||||||||||||||
Net occupancy expense | 46 | 39 | 40 | 41 | 41 | 7 | 17 | 5 | 14 | ||||||||||||||||||
Equipment expense | 14 | 15 | 14 | 15 | 15 | (1 | ) | (2 | ) | (1 | ) | (6 | ) | ||||||||||||||
Outside processing fee expense | 31 | 30 | 28 | 30 | 31 | 1 | 2 | — | — | ||||||||||||||||||
Software expense | 25 | 25 | 22 | 24 | 22 | — | — | 3 | 14 | ||||||||||||||||||
Litigation-related expense | (2 | ) | 3 | 3 | 52 | (4 | ) | (5 | ) | N/M | 2 | 64 | |||||||||||||||
FDIC insurance expense | 9 | 8 | 8 | 7 | 9 | 1 | 10 | — | — | ||||||||||||||||||
Advertising expense | 5 | 5 | 6 | 3 | 6 | — | — | (1 | ) | (10 | ) | ||||||||||||||||
Gain on debt redemption | (32 | ) | — | — | — | — | (32 | ) | N/M | (32 | ) | N/M | |||||||||||||||
Other noninterest expenses | 53 | 39 | 38 | 43 | 42 | 14 | 34 | 11 | 24 | ||||||||||||||||||
Total noninterest expenses | 397 | 404 | 406 | 473 | 417 | (7 | ) | (2 | ) | (20 | ) | (5 | ) | ||||||||||||||
Income before income taxes | 227 | 221 | 203 | 167 | 215 | 6 | 2 | 12 | 5 | ||||||||||||||||||
Provision for income taxes | 73 | 70 | 64 | 50 | 68 | 3 | 4 | 5 | 7 | ||||||||||||||||||
NET INCOME | 154 | 151 | 139 | 117 | 147 | 3 | 1 | 7 | 4 | ||||||||||||||||||
Less income allocated to participating securities | 2 | 2 | 2 | 2 | 2 | — | — | — | — | ||||||||||||||||||
Net income attributable to common shares | $ | 152 | $ | 149 | $ | 137 | $ | 115 | $ | 145 | $ | 3 | 1 | % | $ | 7 | 5 | % | |||||||||
Earnings per common share: | |||||||||||||||||||||||||||
Basic | $ | 0.85 | $ | 0.83 | $ | 0.76 | $ | 0.64 | $ | 0.80 | $ | 0.02 | 2 | % | $ | 0.05 | 6 | % | |||||||||
Diluted | 0.82 | 0.80 | 0.73 | 0.62 | 0.78 | 0.02 | 2 | 0.04 | 5 | ||||||||||||||||||
Comprehensive income | 141 | 172 | 205 | 267 | 144 | (31 | ) | (18 | ) | (3 | ) | (2 | ) | ||||||||||||||
Cash dividends declared on common stock | 36 | 36 | 35 | 31 | 31 | — | — | 5 | 16 | ||||||||||||||||||
Cash dividends declared per common share | 0.20 | 0.20 | 0.19 | 0.17 | 0.17 | — | — | 0.03 | 18 | ||||||||||||||||||
N/M - Not Meaningful
15
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
2014 | 2013 | |||||||||||||||
(in millions) | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | |||||||||||
Balance at beginning of period | $ | 591 | $ | 594 | $ | 598 | $ | 604 | $ | 613 | ||||||
Loan charge-offs: | ||||||||||||||||
Commercial | 13 | 19 | 19 | 31 | 20 | |||||||||||
Real estate construction | — | — | — | — | 1 | |||||||||||
Commercial mortgage | 7 | 5 | 8 | 5 | 9 | |||||||||||
Residential mortgage | 1 | — | — | 1 | 1 | |||||||||||
Consumer | 3 | 4 | 3 | 4 | 8 | |||||||||||
Total loan charge-offs | 24 | 28 | 30 | 41 | 39 | |||||||||||
Recoveries on loans previously charged-off: | ||||||||||||||||
Commercial | 6 | 11 | 11 | 17 | 8 | |||||||||||
Real estate construction | 1 | 1 | — | 3 | 2 | |||||||||||
Commercial mortgage | 12 | 3 | 3 | 5 | 7 | |||||||||||
Lease financing | — | — | 2 | — | 1 | |||||||||||
Residential mortgage | 1 | 3 | — | 1 | 1 | |||||||||||
Consumer | 1 | 1 | 2 | 2 | 1 | |||||||||||
Total recoveries | 21 | 19 | 18 | 28 | 20 | |||||||||||
Net loan charge-offs | 3 | 9 | 12 | 13 | 19 | |||||||||||
Provision for loan losses | 4 | 6 | 8 | 7 | 10 | |||||||||||
Balance at end of period | $ | 592 | $ | 591 | $ | 594 | $ | 598 | $ | 604 | ||||||
Allowance for loan losses as a percentage of total loans | 1.24 | % | 1.23 | % | 1.28 | % | 1.32 | % | 1.37 | % | ||||||
Net loan charge-offs as a percentage of average total loans | 0.03 | 0.08 | 0.10 | 0.12 | 0.18 | |||||||||||
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LENDING-RELATED COMMITMENTS (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
2014 | 2013 | |||||||||||||||
(in millions) | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | |||||||||||
Balance at beginning of period | $ | 42 | $ | 37 | $ | 36 | $ | 34 | $ | 36 | ||||||
Add: Provision for credit losses on lending-related commitments | 1 | 5 | 1 | 2 | (2 | ) | ||||||||||
Balance at end of period | $ | 43 | $ | 42 | $ | 37 | $ | 36 | $ | 34 | ||||||
Unfunded lending-related commitments sold | $ | 9 | $ | — | $ | — | $ | 1 | $ | 2 | ||||||
16
NONPERFORMING ASSETS (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
2014 | 2013 | |||||||||||||||
(in millions) | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | |||||||||||
SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS | ||||||||||||||||
Nonaccrual loans: | ||||||||||||||||
Business loans: | ||||||||||||||||
Commercial | $ | 93 | $ | 72 | $ | 54 | $ | 81 | $ | 107 | ||||||
Real estate construction | 18 | 19 | 19 | 21 | 25 | |||||||||||
Commercial mortgage | 144 | 156 | 162 | 156 | 206 | |||||||||||
International | — | — | — | 4 | — | |||||||||||
Total nonaccrual business loans | 255 | 247 | 235 | 262 | 338 | |||||||||||
Retail loans: | ||||||||||||||||
Residential mortgage | 42 | 45 | 48 | 53 | 63 | |||||||||||
Consumer: | ||||||||||||||||
Home equity | 31 | 32 | 32 | 33 | 34 | |||||||||||
Other consumer | 1 | 2 | 2 | 2 | 2 | |||||||||||
Total consumer | 32 | 34 | 34 | 35 | 36 | |||||||||||
Total nonaccrual retail loans | 74 | 79 | 82 | 88 | 99 | |||||||||||
Total nonaccrual loans | 329 | 326 | 317 | 350 | 437 | |||||||||||
Reduced-rate loans | 17 | 21 | 21 | 24 | 22 | |||||||||||
Total nonperforming loans (a) | 346 | 347 | 338 | 374 | 459 | |||||||||||
Foreclosed property | 11 | 13 | 14 | 9 | 19 | |||||||||||
Total nonperforming assets (a) | $ | 357 | $ | 360 | $ | 352 | $ | 383 | $ | 478 | ||||||
Nonperforming loans as a percentage of total loans | 0.73 | % | 0.73 | % | 0.73 | % | 0.82 | % | 1.04 | % | ||||||
Nonperforming assets as a percentage of total loans and foreclosed property | 0.75 | 0.75 | 0.76 | 0.84 | 1.08 | |||||||||||
Allowance for loan losses as a percentage of total nonperforming loans | 171 | 170 | 176 | 160 | 131 | |||||||||||
Loans past due 90 days or more and still accruing | $ | 13 | $ | 7 | $ | 10 | $ | 16 | $ | 25 | ||||||
ANALYSIS OF NONACCRUAL LOANS | ||||||||||||||||
Nonaccrual loans at beginning of period | $ | 326 | $ | 317 | $ | 350 | $ | 437 | $ | 449 | ||||||
Loans transferred to nonaccrual (b) | 54 | 53 | 19 | 23 | 50 | |||||||||||
Nonaccrual business loan gross charge-offs (c) | (20 | ) | (24 | ) | (27 | ) | (33 | ) | (25 | ) | ||||||
Nonaccrual business loans sold (d) | (3 | ) | (6 | ) | (3 | ) | (14 | ) | (17 | ) | ||||||
Payments/Other (e) | (28 | ) | (14 | ) | (22 | ) | (63 | ) | (20 | ) | ||||||
Nonaccrual loans at end of period | $ | 329 | $ | 326 | $ | 317 | $ | 350 | $ | 437 | ||||||
(a) Excludes loans acquired with credit impairment. | ||||||||||||||||
(b) Based on an analysis of nonaccrual loans with book balances greater than $2 million. | ||||||||||||||||
(c) Analysis of gross loan charge-offs: | ||||||||||||||||
Nonaccrual business loans | $ | 20 | $ | 24 | $ | 27 | $ | 33 | $ | 25 | ||||||
Performing criticized loans | — | — | — | 3 | 5 | |||||||||||
Consumer and residential mortgage loans | 4 | 4 | 3 | 5 | 9 | |||||||||||
Total gross loan charge-offs | $ | 24 | $ | 28 | $ | 30 | $ | 41 | $ | 39 | ||||||
(d) Analysis of loans sold: | ||||||||||||||||
Nonaccrual business loans | $ | 3 | $ | 6 | $ | 3 | $ | 14 | $ | 17 | ||||||
Performing criticized loans | — | 8 | 6 | 22 | 31 | |||||||||||
Total criticized loans sold | $ | 3 | $ | 14 | $ | 9 | $ | 36 | $ | 48 | ||||||
(e) Includes net changes related to nonaccrual loans with balances less than $2 million, payments on nonaccrual loans with book balances greater than $2 million and transfers of nonaccrual loans to foreclosed property. Excludes business loan gross charge-offs and business nonaccrual loans sold. | ||||||||||||||||
17
ANALYSIS OF NET INTEREST INCOME (FTE) (unaudited) | |||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||
Nine Months Ended | |||||||||||||||||
September 30, 2014 | September 30, 2013 | ||||||||||||||||
Average | Average | Average | Average | ||||||||||||||
(dollar amounts in millions) | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||
Commercial loans | $ | 29,487 | $ | 689 | 3.12 | % | $ | 28,069 | $ | 688 | 3.28 | % | |||||
Real estate construction loans | 1,905 | 49 | 3.42 | 1,430 | 43 | 3.98 | |||||||||||
Commercial mortgage loans | 8,739 | 246 | 3.77 | 9,177 | 271 | 3.95 | |||||||||||
Lease financing | 840 | 20 | 3.23 | 850 | 21 | 3.22 | |||||||||||
International loans | 1,349 | 37 | 3.64 | 1,265 | 35 | 3.73 | |||||||||||
Residential mortgage loans | 1,763 | 50 | 3.81 | 1,600 | 50 | 4.13 | |||||||||||
Consumer loans | 2,244 | 54 | 3.21 | 2,142 | 53 | 3.32 | |||||||||||
Total loans (a) | 46,327 | 1,145 | 3.30 | 44,533 | 1,161 | 3.49 | |||||||||||
Mortgage-backed securities available-for-sale | 8,976 | 159 | 2.36 | 9,339 | 158 | 2.29 | |||||||||||
Other investment securities available-for-sale | 369 | 1 | 0.44 | 390 | 1 | 0.48 | |||||||||||
Total investment securities available-for-sale | 9,345 | 160 | 2.28 | 9,729 | 159 | 2.21 | |||||||||||
Interest-bearing deposits with banks (b) | 4,803 | 9 | 0.25 | 4,433 | 9 | 0.26 | |||||||||||
Other short-term investments | 110 | — | 0.60 | 115 | 1 | 1.38 | |||||||||||
Total earning assets | 60,585 | 1,314 | 2.90 | 58,810 | 1,330 | 3.03 | |||||||||||
Cash and due from banks | 932 | 993 | |||||||||||||||
Allowance for loan losses | (602 | ) | (627 | ) | |||||||||||||
Accrued income and other assets | 4,421 | 4,531 | |||||||||||||||
Total assets | $ | 65,336 | $ | 63,707 | |||||||||||||
Money market and interest-bearing checking deposits | $ | 22,571 | 18 | 0.11 | $ | 21,594 | 22 | 0.13 | |||||||||
Savings deposits | 1,734 | — | 0.03 | 1,654 | — | 0.03 | |||||||||||
Customer certificates of deposit | 4,990 | 13 | 0.36 | 5,603 | 19 | 0.44 | |||||||||||
Foreign office time deposits | 304 | 2 | 0.68 | 513 | 2 | 0.54 | |||||||||||
Total interest-bearing deposits | 29,599 | 33 | 0.15 | 29,364 | 43 | 0.19 | |||||||||||
Short-term borrowings | 209 | — | 0.03 | 189 | — | 0.07 | |||||||||||
Medium- and long-term debt | 3,062 | 38 | 1.67 | 4,109 | 43 | 1.42 | |||||||||||
Total interest-bearing sources | 32,870 | 71 | 0.29 | 33,662 | 86 | 0.34 | |||||||||||
Noninterest-bearing deposits | 24,182 | 21,991 | |||||||||||||||
Accrued expenses and other liabilities | 960 | 1,104 | |||||||||||||||
Total shareholders' equity | 7,324 | 6,950 | |||||||||||||||
Total liabilities and shareholders' equity | $ | 65,336 | $ | 63,707 | |||||||||||||
Net interest income/rate spread (FTE) | $ | 1,243 | 2.61 | $ | 1,244 | 2.69 | |||||||||||
FTE adjustment | $ | 3 | $ | 2 | |||||||||||||
Impact of net noninterest-bearing sources of funds | 0.13 | 0.14 | |||||||||||||||
Net interest margin (as a percentage of average earning assets) (FTE) (a) (b) | 2.74 | % | 2.83 | % | |||||||||||||
(a) Accretion of the purchase discount on the acquired loan portfolio of $25 million and $26 million in the nine months ended September 30, 2014 and 2013, respectively, increased the net interest margin by 6 basis points in each period.
(b) Average balances deposited with the Federal Reserve Bank reduced the net interest margin by 20 basis points in both the nine-month periods ended September 30, 2014 and 2013.
18
ANALYSIS OF NET INTEREST INCOME (FTE) (unaudited) | ||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||
September 30, 2014 | June 30, 2014 | September 30, 2013 | ||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||
(dollar amounts in millions) | Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||
Commercial loans | $ | 30,188 | $ | 236 | 3.11 | % | $ | 29,890 | $ | 231 | 3.10 | % | $ | 27,759 | $ | 226 | 3.25 | % | ||||||||
Real estate construction loans | 1,973 | 17 | 3.41 | 1,913 | 16 | 3.44 | 1,522 | 15 | 3.78 | |||||||||||||||||
Commercial mortgage loans | 8,698 | 76 | 3.45 | 8,749 | 85 | 3.88 | 8,943 | 88 | 3.90 | |||||||||||||||||
Lease financing | 823 | 4 | 2.33 | 850 | 7 | 3.26 | 839 | 7 | 3.21 | |||||||||||||||||
International loans | 1,417 | 13 | 3.59 | 1,328 | 12 | 3.64 | 1,252 | 12 | 3.76 | |||||||||||||||||
Residential mortgage loans | 1,792 | 17 | 3.76 | 1,773 | 17 | 3.82 | 1,642 | 17 | 3.98 | |||||||||||||||||
Consumer loans | 2,268 | 19 | 3.24 | 2,222 | 18 | 3.22 | 2,137 | 17 | 3.27 | |||||||||||||||||
Total loans (a) | 47,159 | 382 | 3.22 | 46,725 | 386 | 3.31 | 44,094 | 382 | 3.44 | |||||||||||||||||
Mortgage-backed securities available-for-sale | 9,020 | 52 | 2.29 | 8,996 | 53 | 2.35 | 8,989 | 54 | 2.41 | |||||||||||||||||
Other investment securities available-for-sale | 368 | — | 0.43 | 368 | — | 0.46 | 391 | — | 0.43 | |||||||||||||||||
Total investment securities available-for-sale | 9,388 | 52 | 2.22 | 9,364 | 53 | 2.28 | 9,380 | 54 | 2.32 | |||||||||||||||||
Interest-bearing deposits with banks (b) | 5,015 | 3 | 0.25 | 3,949 | 2 | 0.25 | 5,308 | 4 | 0.26 | |||||||||||||||||
Other short-term investments | 110 | — | 0.54 | 110 | — | 0.61 | 110 | — | 0.77 | |||||||||||||||||
Total earning assets | 61,672 | 437 | 2.82 | 60,148 | 441 | 2.95 | 58,892 | 440 | 2.97 | |||||||||||||||||
Cash and due from banks | 963 | 921 | 1,027 | |||||||||||||||||||||||
Allowance for loan losses | (601 | ) | (602 | ) | (622 | ) | ||||||||||||||||||||
Accrued income and other assets | 4,367 | 4,412 | 4,360 | |||||||||||||||||||||||
Total assets | $ | 66,401 | $ | 64,879 | $ | 63,657 | ||||||||||||||||||||
Money market and interest-bearing checking deposits | $ | 23,146 | 6 | 0.11 | $ | 22,296 | 6 | 0.10 | $ | 21,894 | 7 | 0.13 | ||||||||||||||
Savings deposits | 1,759 | — | 0.03 | 1,742 | — | 0.03 | 1,680 | — | 0.04 | |||||||||||||||||
Customer certificates of deposit | 4,824 | 4 | 0.36 | 5,041 | 5 | 0.36 | 5,384 | 6 | 0.41 | |||||||||||||||||
Foreign office time deposits | 159 | 1 | 1.43 | 294 | — | 0.68 | 528 | — | 0.48 | |||||||||||||||||
Total interest-bearing deposits | 29,888 | 11 | 0.15 | 29,373 | 11 | 0.15 | 29,486 | 13 | 0.18 | |||||||||||||||||
Short-term borrowings | 231 | — | 0.03 | 210 | — | 0.03 | 249 | — | 0.06 | |||||||||||||||||
Medium- and long-term debt | 2,652 | 11 | 1.75 | 2,999 | 13 | 1.77 | 3,590 | 14 | 1.54 | |||||||||||||||||
Total interest-bearing sources | 32,771 | 22 | 0.28 | 32,582 | 24 | 0.30 | 33,325 | 27 | 0.32 | |||||||||||||||||
Noninterest-bearing deposits | 25,275 | 24,011 | 22,379 | |||||||||||||||||||||||
Accrued expenses and other liabilities | 944 | 955 | 1,033 | |||||||||||||||||||||||
Total shareholders' equity | 7,411 | 7,331 | 6,920 | |||||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 66,401 | $ | 64,879 | $ | 63,657 | ||||||||||||||||||||
Net interest income/rate spread (FTE) | $ | 415 | 2.54 | $ | 417 | 2.65 | $ | 413 | 2.65 | |||||||||||||||||
FTE adjustment | $ | 1 | $ | 1 | $ | 1 | ||||||||||||||||||||
Impact of net noninterest-bearing sources of funds | 0.13 | 0.13 | 0.14 | |||||||||||||||||||||||
Net interest margin (as a percentage of average earning assets) (FTE) (a) (b) | 2.67 | % | 2.78 | % | 2.79 | % | ||||||||||||||||||||
(a) Accretion of the purchase discount on the acquired loan portfolio of $3 million, $10 million and $8 million in the third and second quarters of 2014 and the third quarter of 2013, respectively, increased the net interest margin by 2 basis points, 7 basis points and 5 basis points in each respective period.
(b) Average balances deposited with the Federal Reserve Bank reduced the net interest margin by 21 basis points, 17 basis points and 24 basis points in the third and second quarters of 2014 and the third quarter of 2013, respectively.
19
CONSOLIDATED STATISTICAL DATA (unaudited) | |||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
(in millions, except per share data) | 2014 | 2014 | 2014 | 2013 | 2013 | ||||||||||
Commercial loans: | |||||||||||||||
Floor plan | $ | 3,183 | $ | 3,576 | $ | 3,437 | $ | 3,504 | $ | 2,869 | |||||
Other | 27,576 | 27,410 | 26,337 | 25,311 | 25,028 | ||||||||||
Total commercial loans | 30,759 | 30,986 | 29,774 | 28,815 | 27,897 | ||||||||||
Real estate construction loans | 1,992 | 1,939 | 1,847 | 1,762 | 1,552 | ||||||||||
Commercial mortgage loans | 8,603 | 8,747 | 8,801 | 8,787 | 8,785 | ||||||||||
Lease financing | 805 | 822 | 849 | 845 | 829 | ||||||||||
International loans | 1,429 | 1,352 | 1,250 | 1,327 | 1,286 | ||||||||||
Residential mortgage loans | 1,797 | 1,775 | 1,751 | 1,697 | 1,650 | ||||||||||
Consumer loans: | |||||||||||||||
Home equity | 1,634 | 1,574 | 1,533 | 1,517 | 1,501 | ||||||||||
Other consumer | 689 | 687 | 684 | 720 | 651 | ||||||||||
Total consumer loans | 2,323 | 2,261 | 2,217 | 2,237 | 2,152 | ||||||||||
Total loans | $ | 47,708 | $ | 47,882 | $ | 46,489 | $ | 45,470 | $ | 44,151 | |||||
Goodwill | $ | 635 | $ | 635 | $ | 635 | $ | 635 | $ | 635 | |||||
Core deposit intangible | 14 | 14 | 15 | 16 | 17 | ||||||||||
Loan servicing rights | 1 | 1 | 1 | 1 | 1 | ||||||||||
Tier 1 common capital ratio (a) (b) | 10.69 | % | 10.50 | % | 10.58 | % | 10.64 | % | 10.72 | % | |||||
Tier 1 risk-based capital ratio (a) | 10.69 | 10.50 | 10.58 | 10.64 | 10.72 | ||||||||||
Total risk-based capital ratio (a) | 12.95 | 12.52 | 13.00 | 13.10 | 13.42 | ||||||||||
Leverage ratio (a) | 10.80 | 10.93 | 10.85 | 10.77 | 10.88 | ||||||||||
Tangible common equity ratio (b) | 9.94 | 10.39 | 10.20 | 10.07 | 9.87 | ||||||||||
Common shareholders' equity per share of common stock | $ | 41.26 | $ | 40.72 | $ | 40.09 | $ | 39.22 | $ | 37.93 | |||||
Tangible common equity per share of common stock (b) | 37.65 | 37.12 | 36.50 | 35.64 | 34.37 | ||||||||||
Market value per share for the quarter: | |||||||||||||||
High | 52.72 | 52.60 | 53.50 | 48.69 | 43.49 | ||||||||||
Low | 48.33 | 45.34 | 43.96 | 38.64 | 38.56 | ||||||||||
Close | 49.86 | 50.16 | 51.80 | 47.54 | 39.31 | ||||||||||
Quarterly ratios: | |||||||||||||||
Return on average common shareholders' equity | 8.29 | % | 8.27 | % | 7.68 | % | 6.66 | % | 8.50 | % | |||||
Return on average assets | 0.93 | 0.93 | 0.86 | 0.72 | 0.92 | ||||||||||
Efficiency ratio (c) | 62.87 | 63.35 | 65.79 | 72.81 | 65.18 | ||||||||||
Number of banking centers | 481 | 481 | 483 | 483 | 484 | ||||||||||
Number of employees - full time equivalent | 8,913 | 8,901 | 8,907 | 8,948 | 8,918 | ||||||||||
(a) September 30, 2014 ratios are estimated.
(b) | See Reconciliation of Non-GAAP Financial Measures. |
(c) | Noninterest expenses as a percentage of the sum of net interest income (FTE) and noninterest income excluding net securities gains (losses). |
20
PARENT COMPANY ONLY BALANCE SHEETS (unaudited) | |||||||||
Comerica Incorporated | |||||||||
September 30, | December 31, | September 30, | |||||||
(in millions, except share data) | 2014 | 2013 | 2013 | ||||||
ASSETS | |||||||||
Cash and due from subsidiary bank | $ | 5 | $ | 31 | $ | 36 | |||
Short-term investments with subsidiary bank | 1,136 | 482 | 480 | ||||||
Other short-term investments | 97 | 96 | 92 | ||||||
Investment in subsidiaries, principally banks | 7,433 | 7,171 | 7,005 | ||||||
Premises and equipment | 2 | 4 | 4 | ||||||
Other assets | 134 | 139 | 134 | ||||||
Total assets | $ | 8,807 | $ | 7,923 | $ | 7,751 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
Medium- and long-term debt | $ | 1,202 | $ | 617 | $ | 620 | |||
Other liabilities | 172 | 156 | 165 | ||||||
Total liabilities | 1,374 | 773 | 785 | ||||||
Common stock - $5 par value: | |||||||||
Authorized - 325,000,000 shares | |||||||||
Issued - 228,164,824 shares | 1,141 | 1,141 | 1,141 | ||||||
Capital surplus | 2,183 | 2,179 | 2,171 | ||||||
Accumulated other comprehensive loss | (317 | ) | (391 | ) | (541 | ) | |||
Retained earnings | 6,631 | 6,318 | 6,236 | ||||||
Less cost of common stock in treasury - 47,992,721 shares at 9/30/14; 45,860,786 shares at 12/31/13 and 44,483,659 shares at 9/30/13 | (2,205 | ) | (2,097 | ) | (2,041 | ) | |||
Total shareholders' equity | 7,433 | 7,150 | 6,966 | ||||||
Total liabilities and shareholders' equity | $ | 8,807 | $ | 7,923 | $ | 7,751 | |||
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) | ||||||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||||||
Accumulated | ||||||||||||||||||||
Common Stock | Other | Total | ||||||||||||||||||
Shares | Capital | Comprehensive | Retained | Treasury | Shareholders' | |||||||||||||||
(in millions, except per share data) | Outstanding | Amount | Surplus | Loss | Earnings | Stock | Equity | |||||||||||||
BALANCE AT DECEMBER 31, 2012 | 188.3 | $ | 1,141 | $ | 2,162 | $ | (413 | ) | $ | 5,928 | $ | (1,879 | ) | $ | 6,939 | |||||
Net income | — | — | — | — | 424 | — | 424 | |||||||||||||
Other comprehensive loss, net of tax | — | — | — | (128 | ) | — | — | (128 | ) | |||||||||||
Cash dividends declared on common stock ($0.51 per share) | — | — | — | — | (95 | ) | — | (95 | ) | |||||||||||
Purchase of common stock | (5.8 | ) | — | — | — | — | (218 | ) | (218 | ) | ||||||||||
Net issuance of common stock under employee stock plans | 1.2 | — | (18 | ) | — | (21 | ) | 56 | 17 | |||||||||||
Share-based compensation | — | — | 27 | — | — | — | 27 | |||||||||||||
BALANCE AT SEPTEMBER 30, 2013 | 183.7 | $ | 1,141 | $ | 2,171 | $ | (541 | ) | $ | 6,236 | $ | (2,041 | ) | $ | 6,966 | |||||
BALANCE AT DECEMBER 31, 2013 | 182.3 | $ | 1,141 | $ | 2,179 | $ | (391 | ) | $ | 6,318 | $ | (2,097 | ) | $ | 7,150 | |||||
Net income | — | — | — | — | 444 | — | 444 | |||||||||||||
Other comprehensive income, net of tax | — | — | — | 74 | — | — | 74 | |||||||||||||
Cash dividends declared on common stock ($0.59 per share) | — | — | — | — | (107 | ) | — | (107 | ) | |||||||||||
Purchase of common stock | (4.1 | ) | — | — | — | — | (200 | ) | (200 | ) | ||||||||||
Net issuance of common stock under employee stock plans | 2.0 | — | (26 | ) | — | (24 | ) | 91 | 41 | |||||||||||
Share-based compensation | — | — | 31 | — | — | — | 31 | |||||||||||||
Other | — | — | (1 | ) | — | — | 1 | — | ||||||||||||
BALANCE AT SEPTEMBER 30, 2014 | 180.2 | $ | 1,141 | $ | 2,183 | $ | (317 | ) | $ | 6,631 | $ | (2,205 | ) | $ | 7,433 | |||||
21
BUSINESS SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||
(dollar amounts in millions) | Business | Retail | Wealth | ||||||||||||||||||||
Three Months Ended September 30, 2014 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) (FTE) | $ | 377 | $ | 150 | $ | 47 | $ | (166 | ) | $ | 7 | $ | 415 | ||||||||||
Provision for credit losses | (4 | ) | — | 7 | — | 2 | 5 | ||||||||||||||||
Noninterest income | 94 | 41 | 63 | 15 | 2 | 215 | |||||||||||||||||
Noninterest expenses | 152 | 181 | 82 | (29 | ) | 11 | 397 | ||||||||||||||||
Provision (benefit) for income taxes (FTE) | 113 | 3 | 8 | (49 | ) | (1 | ) | 74 | |||||||||||||||
Net income (loss) | $ | 210 | $ | 7 | $ | 13 | $ | (73 | ) | $ | (3 | ) | $ | 154 | |||||||||
Net credit-related charge-offs (recoveries) | $ | (2 | ) | $ | — | $ | 5 | $ | — | $ | — | $ | 3 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 37,898 | $ | 6,117 | $ | 5,007 | $ | 11,026 | $ | 6,353 | $ | 66,401 | |||||||||||
Loans | 36,894 | 5,452 | 4,813 | — | — | 47,159 | |||||||||||||||||
Deposits | 28,841 | 21,785 | 4,155 | 128 | 254 | 55,163 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 2.22 | % | 0.12 | % | 1.05 | % | N/M | N/M | 0.93 | % | |||||||||||||
Efficiency ratio (b) | 32.32 | 93.96 | 74.98 | N/M | N/M | 62.87 | |||||||||||||||||
Business | Retail | Wealth | |||||||||||||||||||||
Three Months Ended June 30, 2014 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) (FTE) | $ | 376 | $ | 149 | $ | 46 | $ | (160 | ) | $ | 6 | $ | 417 | ||||||||||
Provision for credit losses | 32 | (4 | ) | (9 | ) | — | (8 | ) | 11 | ||||||||||||||
Noninterest income | 95 | 41 | 67 | 15 | 2 | 220 | |||||||||||||||||
Noninterest expenses | 143 | 171 | 79 | 2 | 9 | 404 | |||||||||||||||||
Provision (benefit) for income taxes (FTE) | 101 | 8 | 15 | (56 | ) | 3 | 71 | ||||||||||||||||
Net income (loss) | $ | 195 | $ | 15 | $ | 28 | $ | (91 | ) | $ | 4 | $ | 151 | ||||||||||
Net credit-related charge-offs (recoveries) | $ | 7 | $ | 4 | $ | (2 | ) | $ | — | $ | — | $ | 9 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 37,467 | $ | 6,051 | $ | 4,996 | $ | 11,056 | $ | 5,309 | $ | 64,879 | |||||||||||
Loans | 36,529 | 5,385 | 4,811 | — | — | 46,725 | |||||||||||||||||
Deposits | 27,382 | 21,648 | 3,827 | 258 | 269 | 53,384 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 2.09 | % | 0.27 | % | 2.24 | % | N/M | N/M | 0.93 | % | |||||||||||||
Efficiency ratio (b) | 30.43 | 89.99 | 69.66 | N/M | N/M | 63.35 | |||||||||||||||||
Business | Retail | Wealth | |||||||||||||||||||||
Three Months Ended September 30, 2013 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) (FTE) | $ | 368 | $ | 151 | $ | 45 | $ | (159 | ) | 8 | $ | 413 | |||||||||||
Provision for credit losses | (1 | ) | 10 | 1 | — | (2 | ) | 8 | |||||||||||||||
Noninterest income | 103 | 45 | 61 | 18 | 1 | 228 | |||||||||||||||||
Noninterest expenses | 153 | 177 | 81 | 2 | 4 | 417 | |||||||||||||||||
Provision (benefit) for income taxes (FTE) | 110 | 3 | 9 | (56 | ) | 3 | 69 | ||||||||||||||||
Net income (loss) | $ | 209 | $ | 6 | $ | 15 | $ | (87 | ) | $ | 4 | $ | 147 | ||||||||||
Net credit-related charge-offs | $ | 9 | $ | 7 | $ | 3 | $ | — | $ | — | $ | 19 | |||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 35,295 | $ | 5,967 | $ | 4,789 | $ | 11,097 | $ | 6,509 | $ | 63,657 | |||||||||||
Loans | 34,178 | 5,285 | 4,631 | — | — | 44,094 | |||||||||||||||||
Deposits | 26,284 | 21,257 | 3,782 | 319 | 223 | 51,865 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 2.38 | % | 0.12 | % | 1.21 | % | N/M | N/M | 0.92 | % | |||||||||||||
Efficiency ratio (b) | 32.49 | 90.27 | 77.22 | N/M | N/M | 65.18 | |||||||||||||||||
(a) Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(b) Noninterest expenses as a percentage of the sum of net interest income (FTE) and noninterest income excluding net securities gains.
FTE - Fully Taxable Equivalent
N/M - Not Meaningful
22
MARKET SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||
(dollar amounts in millions) | Other | Finance | |||||||||||||||||||||
Three Months Ended September 30, 2014 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) (FTE) | $ | 179 | $ | 182 | $ | 130 | $ | 83 | $ | (159 | ) | $ | 415 | ||||||||||
Provision for credit losses | (8 | ) | 14 | 3 | (6 | ) | 2 | 5 | |||||||||||||||
Noninterest income | 87 | 37 | 32 | 42 | 17 | 215 | |||||||||||||||||
Noninterest expenses | 166 | 103 | 95 | 51 | (18 | ) | 397 | ||||||||||||||||
Provision (benefit) for income taxes (FTE) | 40 | 39 | 24 | 21 | (50 | ) | 74 | ||||||||||||||||
Net income (loss) | $ | 68 | $ | 63 | $ | 40 | $ | 59 | $ | (76 | ) | $ | 154 | ||||||||||
Net credit-related charge-offs (recoveries) | $ | 3 | $ | 6 | $ | — | $ | (6 | ) | $ | — | $ | 3 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 13,724 | $ | 15,768 | $ | 11,835 | $ | 7,695 | $ | 17,379 | $ | 66,401 | |||||||||||
Loans | 13,248 | 15,509 | 11,147 | 7,255 | — | 47,159 | |||||||||||||||||
Deposits | 21,214 | 16,350 | 10,633 | 6,584 | 382 | 55,163 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 1.22 | % | 1.46 | % | 1.34 | % | 3.08 | % | N/M | 0.93 | % | ||||||||||||
Efficiency ratio (b) | 62.28 | 46.72 | 58.75 | 41.16 | N/M | 62.87 | |||||||||||||||||
Other | Finance | ||||||||||||||||||||||
Three Months Ended June 30, 2014 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) (FTE) | $ | 182 | $ | 176 | $ | 137 | $ | 76 | $ | (154 | ) | $ | 417 | ||||||||||
Provision for credit losses | (9 | ) | 14 | 22 | (8 | ) | (8 | ) | 11 | ||||||||||||||
Noninterest income | 94 | 39 | 31 | 39 | 17 | 220 | |||||||||||||||||
Noninterest expenses | 159 | 101 | 89 | 44 | 11 | 404 | |||||||||||||||||
Provision (benefit) for income taxes (FTE) | 46 | 37 | 21 | 20 | (53 | ) | 71 | ||||||||||||||||
Net income (loss) | $ | 80 | $ | 63 | $ | 36 | $ | 59 | $ | (87 | ) | $ | 151 | ||||||||||
Net credit-related charge-offs (recoveries) | $ | 10 | $ | 5 | $ | 2 | $ | (8 | ) | $ | — | $ | 9 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 13,851 | $ | 15,721 | $ | 11,661 | $ | 7,281 | $ | 16,365 | $ | 64,879 | |||||||||||
Loans | 13,482 | 15,439 | 10,966 | 6,838 | — | 46,725 | |||||||||||||||||
Deposits | 20,694 | 15,370 | 10,724 | 6,069 | 527 | 53,384 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 1.48 | % | 1.54 | % | 1.23 | % | 3.24 | % | NM | 0.93 | % | ||||||||||||
Efficiency ratio (b) | 57.70 | 46.78 | 52.61 | 38.93 | NM | 63.35 | |||||||||||||||||
Other | Finance | ||||||||||||||||||||||
Three Months Ended September 30, 2013 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) (FTE) | $ | 186 | $ | 171 | $ | 129 | $ | 78 | $ | (151 | ) | $ | 413 | ||||||||||
Provision for credit losses | (11 | ) | — | 17 | 4 | (2 | ) | 8 | |||||||||||||||
Noninterest income | 88 | 42 | 35 | 44 | 19 | 228 | |||||||||||||||||
Noninterest expenses | 167 | 101 | 92 | 51 | 6 | 417 | |||||||||||||||||
Provision (benefit) for income taxes (FTE) | 43 | 43 | 20 | 16 | (53 | ) | 69 | ||||||||||||||||
Net income (loss) | $ | 75 | $ | 69 | $ | 35 | $ | 51 | $ | (83 | ) | $ | 147 | ||||||||||
Net credit-related charge-offs | $ | 1 | $ | 8 | $ | 4 | $ | 6 | $ | — | $ | 19 | |||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 13,744 | $ | 14,250 | $ | 10,642 | $ | 7,415 | $ | 17,606 | $ | 63,657 | |||||||||||
Loans | 13,276 | 14,002 | 9,942 | 6,874 | — | 44,094 | |||||||||||||||||
Deposits | 20,465 | 14,567 | 10,298 | 5,993 | 542 | 51,865 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 1.43 | % | 1.80 | % | 1.20 | % | 2.70 | % | N/M | 0.92 | % | ||||||||||||
Efficiency ratio (b) | 60.89 | 47.38 | 56.52 | 42.04 | N/M | 65.18 | |||||||||||||||||
(a) Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(b) Noninterest expenses as a percentage of the sum of net interest income (FTE) and noninterest income excluding net securities gains.
FTE - Fully Taxable Equivalent
N/M - Not Meaningful
23
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited) | |||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
(dollar amounts in millions) | 2014 | 2014 | 2014 | 2013 | 2013 | ||||||||||
Tier 1 Common Capital Ratio: | |||||||||||||||
Tier 1 and Tier 1 common capital (a) (b) | $ | 7,105 | $ | 7,027 | $ | 6,962 | $ | 6,895 | $ | 6,862 | |||||
Risk-weighted assets (a) (b) | 66,481 | 66,911 | 65,788 | 64,825 | 64,027 | ||||||||||
Tier 1 and Tier 1 common risk-based capital ratio (b) | 10.69 | % | 10.50 | % | 10.58 | % | 10.64 | % | 10.72 | % | |||||
Basel III Common Equity Tier 1 Capital Ratio: | |||||||||||||||
Tier 1 common capital (b) | $ | 7,105 | $ | 7,027 | $ | 6,962 | $ | 6,895 | $ | 6,862 | |||||
Basel III adjustments (c) | (1 | ) | (1 | ) | (2 | ) | (6 | ) | (4 | ) | |||||
Basel III common equity Tier 1 capital (c) | 7,104 | 7,026 | 6,960 | 6,889 | 6,858 | ||||||||||
Risk-weighted assets (a) (b) | $ | 66,481 | $ | 66,911 | $ | 65,788 | $ | 64,825 | $ | 64,027 | |||||
Basel III adjustments (c) | 1,627 | 1,594 | 1,590 | 1,754 | 1,726 | ||||||||||
Basel III risk-weighted assets (c) | $ | 68,108 | $ | 68,505 | $ | 67,378 | $ | 66,579 | $ | 65,753 | |||||
Tier 1 common capital ratio (b) | 10.7 | % | 10.5 | % | 10.6 | % | 10.6 | % | 10.7 | % | |||||
Basel III common equity Tier 1 capital ratio (c) | 10.4 | 10.3 | 10.3 | 10.3 | 10.4 | ||||||||||
Tangible Common Equity Ratio: | |||||||||||||||
Common shareholders' equity | $ | 7,433 | $ | 7,369 | $ | 7,283 | $ | 7,150 | $ | 6,966 | |||||
Less: | |||||||||||||||
Goodwill | 635 | 635 | 635 | 635 | 635 | ||||||||||
Other intangible assets | 15 | 15 | 16 | 17 | 18 | ||||||||||
Tangible common equity | $ | 6,783 | $ | 6,719 | $ | 6,632 | $ | 6,498 | $ | 6,313 | |||||
Total assets | $ | 68,887 | $ | 65,325 | $ | 65,681 | $ | 65,224 | $ | 64,667 | |||||
Less: | |||||||||||||||
Goodwill | 635 | 635 | 635 | 635 | 635 | ||||||||||
Other intangible assets | 15 | 15 | 16 | 17 | 18 | ||||||||||
Tangible assets | $ | 68,237 | $ | 64,675 | $ | 65,030 | $ | 64,572 | $ | 64,014 | |||||
Common equity ratio | 10.79 | % | 11.28 | % | 11.09 | % | 10.97 | % | 10.78 | % | |||||
Tangible common equity ratio | 9.94 | 10.39 | 10.20 | 10.07 | 9.87 | ||||||||||
Tangible Common Equity per Share of Common Stock: | |||||||||||||||
Common shareholders' equity | $ | 7,433 | $ | 7,369 | $ | 7,283 | $ | 7,150 | $ | 6,966 | |||||
Tangible common equity | 6,783 | 6,719 | 6,632 | 6,498 | 6,313 | ||||||||||
Shares of common stock outstanding (in millions) | 180 | 181 | 182 | 182 | 184 | ||||||||||
Common shareholders' equity per share of common stock | $ | 41.26 | $ | 40.72 | $ | 40.09 | $ | 39.22 | $ | 37.93 | |||||
Tangible common equity per share of common stock | 37.65 | 37.12 | 36.50 | 35.64 | 34.37 | ||||||||||
(a) Tier 1 capital and risk-weighted assets as defined by regulation.
(b) September 30, 2014 Tier 1 capital and risk-weighted assets are estimated.
(c) Estimated ratios based on the standardized approach in the final rule for the U.S. adoption of the Basel III regulatory capital framework, as fully phased-in, and excluding most elements of AOCI.
The Tier 1 common capital ratio removes preferred stock and qualifying trust preferred securities from Tier 1 capital as defined by and calculated in conformity with bank regulations. The Basel III common equity Tier 1 capital ratio further adjusts Tier 1 common capital and risk-weighted assets to account for the final rule approved by U.S. banking regulators in July 2013 for the U.S. adoption of the Basel III regulatory capital framework, as fully phased-in. The final Basel III capital rules are effective January 1, 2015 for banking organizations subject to the standardized approach. The tangible common equity ratio removes preferred stock and the effect of intangible assets from capital and the effect of intangible assets from total assets. Tangible common equity per share of common stock removes the effect of intangible assets from common shareholders equity per share of common stock. Comerica believes these measurements are meaningful measures of capital adequacy used by investors, regulators, management and others to evaluate the adequacy of common equity and to compare against other companies in the industry.
24
