Dallas, TX/October 16, 2019
THIRD QUARTER 2019 NET INCOME OF $292 MILLION, $1.96 PER SHARE
Broad-based Fee Income Growth and Expense Discipline Kept Efficiency Ratio Below 52 percent
Average Deposits Increased More Than $700 Million During the Quarter
“Throughout our 170-year history, we have managed through many different economic, credit and interest rate cycles,” said Curtis C. Farmer, president and chief executive officer. “Our third quarter results demonstrate our ability to drive a strong return on equity of 16 percent and a return on assets of 1.6 percent, despite recent declines in interest rates. Broad-based fee income growth, solid credit quality, the benefit of discrete tax adjustments and continued active capital management were positive contributors to our performance. In addition, our careful cost control helped keep our efficiency ratio low at under 52 percent. We remain focused on building relationships within our diverse footprint and maintaining our credit and expense discipline in order to continue to produce strong performance metrics.”
(dollar amounts in millions, except per share data) | 3rd Qtr '19 | 2nd Qtr '19 | 3rd Qtr '18 | ||||||||
FINANCIAL RESULTS | |||||||||||
Net interest income | $ | 586 | $ | 603 | $ | 599 | |||||
Provision for credit losses | 35 | 44 | — | ||||||||
Noninterest income | 256 | 250 | 234 | ||||||||
Noninterest expenses | 435 | 424 | 452 | ||||||||
Pre-tax income | 372 | 385 | 381 | ||||||||
Provision for income taxes | 80 | 87 | 63 | ||||||||
Net income | $ | 292 | $ | 298 | $ | 318 | |||||
Diluted earnings per share | $ | 1.96 | $ | 1.94 | $ | 1.86 | |||||
Average loans | 50,887 | 50,963 | 48,584 | ||||||||
Average deposits | 55,716 | 54,995 | 56,093 | ||||||||
Return on average assets | 1.61 | % | 1.68 | % | 1.77 | % | |||||
Return on average shareholders' equity | 15.97 | 16.41 | 16.15 | ||||||||
Efficiency ratio (a) | 51.54 | 49.65 | 52.93 | ||||||||
Net interest margin | 3.52 | 3.67 | 3.60 | ||||||||
Common equity Tier 1 capital ratio (b) | 9.92 | 10.18 | 11.68 | ||||||||
Common equity ratio | 9.88 | 10.10 | 10.90 | ||||||||
Shareholders' equity per share | $ | 49.96 | $ | 48.89 | $ | 46.92 | |||||
Tangible equity per share (c) | 45.52 | 44.61 | 43.05 | ||||||||
(a) | Noninterest expenses as a percentage of net interest income and noninterest income excluding net gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares. |
(b) | September 30, 2019 ratio is estimated. |
(c) See Reconciliation of Non-GAAP Financial Measures
1
Third Quarter 2019 Compared to Second Quarter 2019 Overview
Balance sheet items discussed in terms of average balances.
Loans were stable at $50.9 billion.
• | Change in portfolio mix reflected seasonality, including an increase in Mortgage Banker Finance offset by decreases in National Dealer Services and general Middle Market. Mortgage Banker Finance also benefited from elevated refinancing activity. |
• | Loan yields decreased 17 basis points to 4.83 percent, primarily due to lower short-term interest rates. |
Deposits increased $721 million, or 1 percent, to $55.7 billion.
• | Interest-bearing deposits increased $768 million. Noninterest-bearing deposits were stable. |
• | Interest-bearing deposit costs increased 5 basis points to 99 basis points due to continued growth in relationship-based deposits. |
Net interest income decreased $17 million to $586 million.
• | The benefit from one additional day in the quarter was more than offset by the net impact of lower interest rates. |
Provision for credit losses decreased $9 million to $35 million.
• | Net credit-related charge-offs were $42 million, or 0.33 percent of average loans, including Energy net charge-offs of $34 million. |
• | The allowance for loan losses decreased $5 million to $652 million, or 1.27 percent of total loans. |
Noninterest income increased $6 million to $256 million.
• | Reflected increases of $2 million each in commercial lending fees and card fees, as well as smaller increases in other categories. |
• | Deferred compensation asset returns were $3 million (offset in noninterest expenses) compared to none in second quarter 2019. |
Noninterest expenses increased $11 million to $435 million.
• | Salaries and benefits expense increased $8 million, primarily reflecting increases in deferred compensation expense (offset in noninterest income) and benefits, as well as the impact of one additional day in the quarter. |
• | Also included increases of $2 million each in occupancy and software expenses. |
Provision for income taxes decreased $7 million.
• | Included discrete tax benefits of $5 million primarily resulting from deferred tax adjustments related to annual state tax filings. |
Capital position remained solid with a common equity Tier 1 capital ratio of 9.92 percent.
• | Returned a total of $467 million to shareholders, including dividends and the repurchase of $370 million of common stock (5.7 million shares) under the share repurchase program. |
Third Quarter 2019 Compared to Third Quarter 2018 Overview
Balance sheet items discussed in terms of average balances.
Loans increased $2.3 billion, or 5 percent.
• | Reflected increases in Energy, Mortgage Banker Finance, National Dealer Services and general Middle Market. |
• | Loan yields increased 9 basis points, primarily reflecting higher short-term interest rates. |
Deposits remained stable at $55.7 billion.
• | Interest-bearing deposits increased $2.5 billion, primarily reflecting increases of $1.1 billion in other time deposits, $912 million in money market and interest-bearing checking deposits and $541 million in customer certificates of deposits. |
• | Noninterest-bearing deposits decreased $2.8 billion. The decline in noninterest-bearing deposits was primarily the result of customers shifting balances to interest-bearing deposits and utilizing their deposits to fund growth, acquisitions and capital expenditures as well as choosing other investment options. |
• | Interest-bearing deposit costs increased 48 basis points due to continued management of deposit pricing to attract and retain customers as well as the increase in other time deposits. |
Net interest income decreased $13 million.
• | Included increases due to higher loan balances and the impact of higher short-term rates on loans and securities. |
2
• | The increases were more than offset by higher deposit costs, the impact of lower Federal Reserve Bank deposits as well as higher interest-bearing deposits and debt. |
Provision for credit losses increased $35 million compared to no provision in third quarter 2018.
• | The provision increase resulted from loan growth and a $191 million increase in total criticized loans. |
• | Nonaccrual loans, a component of criticized loans, decreased $10 million. |
Excluding a third quarter 2018 loss of $20 million related to securities repositioning, noninterest income increased $2 million.
• | Primarily reflected increases of $6 million in card fees and $2 million each in fiduciary income and commercial lending fees, partially offset by decreases of $2 million each in customer derivative income and service charges on deposit accounts as well as smaller decreases in other categories. |
Excluding third quarter 2018 restructuring charges of $12 million, noninterest expenses decreased $5 million.
• | Primarily reflected a decrease of $5 million in FDIC insurance expense. |
Provision for income taxes increased $17 million.
• | Included $5 million and $23 million in discrete tax benefits primarily resulting from the adjustments to annual state tax filings in third quarter 2019 and a review of certain tax capitalization and recovery positions in third quarter 2018, respectively. |
3
Net Interest Income
Balance sheet items presented and discussed in terms of average balances.
(dollar amounts in millions) | 3rd Qtr '19 | 2nd Qtr '19 | 3rd Qtr '18 | ||||||||
Net interest income | $ | 586 | $ | 603 | $ | 599 | |||||
Net interest margin | 3.52 | % | 3.67 | % | 3.60 | % | |||||
Selected balances: | |||||||||||
Total earning assets | $ | 66,285 | $ | 65,890 | $ | 65,842 | |||||
Total loans | 50,887 | 50,963 | 48,584 | ||||||||
Total investment securities | 12,203 | 12,091 | 11,761 | ||||||||
Federal Reserve Bank deposits | 2,834 | 2,479 | 5,180 | ||||||||
Total deposits | 55,716 | 54,995 | 56,093 | ||||||||
Total noninterest-bearing deposits | 26,351 | 26,398 | 29,193 | ||||||||
Short-term borrowings | 268 | 927 | 85 | ||||||||
Medium- and long-term debt | 7,100 | 6,712 | 6,153 | ||||||||
Net interest income decreased $17 million, and net interest margin decreased 15 basis points, compared to second quarter 2019.
• | Interest on loans decreased $16 million and reduced net interest margin by 13 basis points. The impact of lower short-term rates (-$26 million, -15 basis points) was partially offset by one additional day in the quarter (+$6 million), negative residual value adjustments to assets in the leasing portfolio in second quarter 2019 (+$2 million, +1 basis point) and an increase in loan fees (+$2 million, +1 basis point). |
• | Interest on short-term investments was unchanged and reduced net interest margin by 2 basis points, primarily reflecting lower rates (-$2 million, -1 basis point), partially offset by an increase in lower-yielding deposits with the Federal Reserve Bank (+$2 million, -1 basis point). |
• | Interest expense on deposits increased $6 million and reduced net interest margin by 3 basis points, due to higher deposit costs ($4 million, 2 basis points) and higher deposit balances ($2 million, 1 basis point). |
• | Interest expense on debt decreased $5 million and increased net interest margin by 3 basis points, due to lower rates ($5 million, 3 basis points). |
4
Credit Quality
“Credit quality remained solid with net charge-offs of $42 million, or 33 basis points, which is within our historical norm of 20 to 40 basis points,” said Farmer. “While charge-offs were higher compared to recent quarters, we do not see this as a trend. Charge-offs of $34 million were a result of additional valuation impairments on select energy credits as capital markets remained soft. Problem assets remained relatively low, with nonperforming assets at only 44 basis points and criticized loans less than 4 percent of total loans. We continue to maintain a reserve of 1.27 percent, including healthy reserves for Energy.”
(dollar amounts in millions) | 3rd Qtr '19 | 2nd Qtr '19 | 3rd Qtr '18 | ||||||||
Credit-related charge-offs | $ | 61 | $ | 44 | $ | 25 | |||||
Recoveries | 19 | 11 | 10 | ||||||||
Net credit-related charge-offs | 42 | 33 | 15 | ||||||||
Net credit-related charge-offs/Average total loans | 0.33 | % | 0.26 | % | 0.13 | % | |||||
Provision for credit losses | $ | 35 | $ | 44 | $ | — | |||||
Nonperforming loans | 226 | 230 | 239 | ||||||||
Nonperforming assets (NPAs) | 229 | 233 | 240 | ||||||||
NPAs/Total loans and foreclosed property | 0.44 | % | 0.45 | % | 0.49 | % | |||||
Loans past due 90 days or more and still accruing | $ | 31 | $ | 17 | $ | 28 | |||||
Allowance for loan losses | 652 | 657 | 664 | ||||||||
Allowance for credit losses on lending-related commitments (a) | 29 | 31 | 33 | ||||||||
Total allowance for credit losses | 681 | 688 | 697 | ||||||||
Allowance for loan losses/Period-end total loans | 1.27 | % | 1.27 | % | 1.35 | % | |||||
Allowance for loan losses/Nonperforming loans | 2.9x | 2.9x | 2.8x | ||||||||
(a) | Included in accrued expenses and other liabilities on the Consolidated Balance Sheets. |
• | The allowance for loan losses decreased $5 million to $652 million at September 30, 2019, or 1.27 percent of total loans, reflecting increased Energy reserves offset by continued strong credit quality in the remainder of the portfolio. |
• | Criticized loans were $1.9 billion, or 3.6 percent of total loans, at September 30, 2019. Criticized loans are generally consistent with the Special Mention, Substandard and Doubtful categories defined by regulatory authorities. |
• | Net charge-offs of $42 million or 33 basis points of average loans. |
◦ | Net charge-offs from Energy loans were $34 million, compared to $25 million in the second quarter. |
◦ | Excluding Energy, net charge-offs as a percentage of average loans were 6 basis points |
• | Nonperforming assets decreased $4 million to $229 million at September 30, 2019, compared to $233 million at June 30, 2019. Nonperforming assets as a percentage of total loans and foreclosed property decreased to 0.44 percent, compared to 0.45 percent at June 30, 2019. |
• | Energy business line loans were $2.4 billion, or 4.70 percent of total loans at September 30, 2019. |
5
Fourth Quarter 2019 Outlook
For the fourth quarter 2019 compared to third quarter 2019, management expects the following:
• | Average loans stable, reflecting growth in several lines of business, including a seasonal increase in National Dealer Services, offset by a decrease in Mortgage Banker Finance due to seasonality and lower refinancing activity. |
• | Average deposits stable with continued focus on attracting and retaining relationship-based deposits. |
• | Decline in net interest income due to the net impact of lower interest rates of approximately $35 million (includes a 25 basis point anticipated reduction in the federal funds rate in December 2019), as well as lower interest recoveries and loan fees from elevated third quarter levels. |
• | Provision for credit losses of $25 million to $45 million and net charge-offs to remain low, with continued solid credit quality. |
• | Noninterest income relatively stable, excluding the impact of deferred compensation asset returns, with higher syndication fees and fiduciary income in third quarter 2019 that are unlikely to repeat. |
• | Noninterest expenses modestly higher, reflecting higher outside processing expenses, technology expenditures as well as seasonal and inflationary pressures. |
• | Income tax expense to be approximately 23 percent of pre-tax income. |
• | Common equity Tier 1 capital ratio target of approximately 10 percent with continued active capital management. |
Full-Year 2019 Outlook Update
Consistent with the fourth quarter outlook, management now expects the following for full-year 2019 compared to full-year 2018:
• | Growth in average loans of 4 percent. |
• | Decline in average deposits of 1 to 2 percent. |
• | Net interest income stable to 1 percent lower (includes a 25 basis point anticipated reduction in the federal funds rate in December 2019). |
• | Provision for credit losses of 15 to 20 basis points of total loans. |
• | Growth in noninterest income of greater than 2 percent. |
• | Stable noninterest expenses excluding 2018 restructuring charges of $53 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. 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. For a summary of business segment and geographic market quarterly results, see the Business Segment Financial Results and Market Segment Financial Results tables included later in this report. From time to time, Comerica may make reclassifications among the segments to reflect management's current view of the segments, and methodologies may be modified as the management accounting system is enhanced and changes occur in the organizational structure and/or product lines. The financial results provided are based on the internal business unit and geographic market structures of Comerica and methodologies in effect at September 30, 2019. A discussion of business segment and geographic market year-to-date results will be included in Comerica's Third Quarter 2019 Form 10-Q.
Conference Call and Webcast
Comerica will host a conference call to review third quarter 2019 financial results at 7 a.m. CT Wednesday, October 16, 2019. Interested parties may access the conference call by calling (800) 309-2262 or (706) 679-5261 (Event ID No. 9596359). 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.
7
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 track,” “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 as well as 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; operational, systems or infrastructure failures; reliance on other companies to provide certain key components of business infrastructure; cybersecurity risks; whether Comerica may achieve opportunities for revenue enhancements and efficiency improvements under the GEAR Up initiative, or changes in the scope or assumptions underlying the GEAR Up initiative; Comerica's ability to maintain adequate sources of funding and liquidity; the effects of more stringent capital requirements; declines or other changes in the businesses or industries of Comerica's customers; unfavorable developments concerning credit quality; changes in regulation or oversight; heightened legislative and regulatory focus on cybersecurity and data privacy; fluctuations in interest rates and their impact on deposit pricing; transitions away from LIBOR towards new interest rate benchmarks; reductions in Comerica's credit rating; damage to Comerica's reputation; Comerica's ability to utilize technology to efficiently and effectively develop, market and deliver new products and services; competitive product and pricing pressures among financial institutions within Comerica's markets; the interdependence of financial service companies; the implementation of Comerica's strategies and business initiatives; changes in customer behavior; management's ability to maintain and expand customer relationships; the effectiveness of methods of reducing risk exposures; the effects of catastrophic events including, but not limited to, hurricanes, tornadoes, earthquakes, fires, droughts and floods; the impacts of future legislative, administrative or judicial changes to tax regulations; any future strategic acquisitions or divestitures; management's ability to retain key officers and employees; the impact of legal and regulatory proceedings or determinations; losses due to fraud; the effects of terrorist activities and other hostilities; changes in accounting standards; the critical nature of Comerica's accounting policies; controls and procedures failures; and the volatility of Comerica’s stock price. Comerica cautions that the foregoing list of factors is not all-inclusive. 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, 2018. 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 Contacts: | Investor Contacts: |
Wendy Bridges | Darlene P. Persons |
(214) 462-4443 | (214) 462-6831 |
Louis H. Mora | Chelsea R. Smith |
(214) 462-6669 | (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) | 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||
PER COMMON SHARE AND COMMON STOCK DATA | ||||||||||||||||
Diluted net income | $ | 1.96 | $ | 1.94 | $ | 1.86 | $ | 6.02 | $ | 5.32 | ||||||
Cash dividends declared | 0.67 | 0.67 | 0.60 | 2.01 | 1.24 | |||||||||||
Average diluted shares (in thousands) | 148,079 | 153,189 | 170,057 | 153,562 | 172,862 | |||||||||||
PERFORMANCE RATIOS | ||||||||||||||||
Return on average common shareholders' equity | 15.97 | % | 16.41 | % | 16.15 | % | 16.94 | % | 15.64 | % | ||||||
Return on average assets | 1.61 | 1.68 | 1.77 | 1.75 | 1.75 | |||||||||||
Efficiency ratio (a) | 51.54 | 49.65 | 52.93 | 50.66 | 54.12 | |||||||||||
CAPITAL | ||||||||||||||||
Common equity tier 1 capital (b) | $ | 6,892 | $ | 7,060 | $ | 7,750 | ||||||||||
Risk-weighted assets (b) | 69,479 | 69,371 | 66,344 | |||||||||||||
Common shareholders' equity per share of common stock | 49.96 | 48.89 | 46.92 | |||||||||||||
Tangible common equity per share of common stock | 45.52 | 44.61 | 43.05 | |||||||||||||
Common equity tier 1 and tier 1 risk-based capital ratio (b) | 9.92 | % | 10.18 | % | 11.68 | % | ||||||||||
Total risk-based capital ratio (b) | 11.91 | 12.17 | 13.76 | |||||||||||||
Leverage ratio (b) | 9.61 | 9.90 | 10.85 | |||||||||||||
Common equity ratio | 9.88 | 10.10 | 10.90 | |||||||||||||
Tangible common equity ratio (c) | 9.09 | 9.30 | 10.09 | |||||||||||||
AVERAGE BALANCES | ||||||||||||||||
Commercial loans | $ | 32,329 | $ | 32,607 | $ | 30,371 | $ | 32,135 | $ | 30,494 | ||||||
Real estate construction loans | 3,344 | 3,319 | 3,198 | 3,301 | 3,152 | |||||||||||
Commercial mortgage loans | 9,264 | 9,060 | 9,084 | 9,108 | 9,158 | |||||||||||
Lease financing | 578 | 546 | 464 | 548 | 462 | |||||||||||
International loans | 1,007 | 1,025 | 1,072 | 1,015 | 1,017 | |||||||||||
Residential mortgage loans | 1,920 | 1,943 | 1,962 | 1,943 | 1,988 | |||||||||||
Consumer loans | 2,445 | 2,463 | 2,433 | 2,464 | 2,473 | |||||||||||
Total loans | 50,887 | 50,963 | 48,584 | 50,514 | 48,744 | |||||||||||
Earning assets | 66,285 | 65,890 | 65,842 | 65,604 | 65,326 | |||||||||||
Total assets | 71,736 | 71,252 | 71,210 | 70,927 | 70,689 | |||||||||||
Noninterest-bearing deposits | 26,351 | 26,398 | 29,193 | 26,539 | 29,457 | |||||||||||
Interest-bearing deposits | 29,365 | 28,597 | 26,900 | 28,370 | 26,547 | |||||||||||
Total deposits | 55,716 | 54,995 | 56,093 | 54,909 | 56,004 | |||||||||||
Common shareholders' equity | 7,254 | 7,285 | 7,817 | 7,332 | 7,907 | |||||||||||
NET INTEREST INCOME | ||||||||||||||||
Net interest income | $ | 586 | $ | 603 | $ | 599 | $ | 1,795 | $ | 1,738 | ||||||
Net interest margin | 3.52 | % | 3.67 | % | 3.60 | % | 3.66 | % | 3.54 | % | ||||||
CREDIT QUALITY | ||||||||||||||||
Total nonperforming assets | $ | 229 | $ | 233 | $ | 240 | ||||||||||
Loans past due 90 days or more and still accruing | 31 | 17 | 28 | |||||||||||||
Net credit-related charge-offs | 42 | 33 | 15 | $ | 86 | $ | 40 | |||||||||
Allowance for loan losses | 652 | 657 | 664 | |||||||||||||
Allowance for credit losses on lending-related commitments | 29 | 31 | 33 | |||||||||||||
Total allowance for credit losses | 681 | 688 | 697 | |||||||||||||
Allowance for loan losses as a percentage of total loans | 1.27 | % | 1.27 | % | 1.35 | % | ||||||||||
Net credit-related charge-offs as a percentage of average total loans | 0.33 | 0.26 | 0.13 | 0.22 | % | 0.11 | % | |||||||||
Nonperforming assets as a percentage of total loans and foreclosed property | 0.44 | 0.45 | 0.49 | |||||||||||||
Allowance for loan losses as a percentage of total nonperforming loans | 2.9x | 2.9x | 2.8x | |||||||||||||
OTHER KEY INFORMATION | ||||||||||||||||
Number of banking centers | 436 | 436 | 435 | |||||||||||||
Number of employees - full time equivalent | 7,725 | 7,693 | 7,834 | |||||||||||||
(a) | Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares. |
(b) | September 30, 2019 ratios are estimated. |
(c) | See Reconciliation of Non-GAAP Financial Measures. |
9
CONSOLIDATED BALANCE SHEETS | ||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||
September 30, | June 30, | December 31, | September 30, | |||||||||
(in millions, except share data) | 2019 | 2019 | 2018 | 2018 | ||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||
ASSETS | ||||||||||||
Cash and due from banks | $ | 1,229 | $ | 1,029 | $ | 1,390 | $ | 945 | ||||
Interest-bearing deposits with banks | 2,888 | 2,552 | 3,171 | 4,894 | ||||||||
Other short-term investments | 146 | 140 | 134 | 136 | ||||||||
Investment securities available-for-sale | 12,429 | 12,338 | 12,045 | 11,862 | ||||||||
Commercial loans | 32,890 | 33,326 | 31,976 | 30,889 | ||||||||
Real estate construction loans | 3,377 | 3,292 | 3,077 | 3,158 | ||||||||
Commercial mortgage loans | 9,234 | 9,217 | 9,106 | 9,019 | ||||||||
Lease financing | 578 | 575 | 507 | 471 | ||||||||
International loans | 1,055 | 1,024 | 1,013 | 1,090 | ||||||||
Residential mortgage loans | 1,906 | 1,924 | 1,970 | 1,947 | ||||||||
Consumer loans | 2,451 | 2,443 | 2,514 | 2,436 | ||||||||
Total loans | 51,491 | 51,801 | 50,163 | 49,010 | ||||||||
Less allowance for loan losses | (652 | ) | (657 | ) | (671 | ) | (664 | ) | ||||
Net loans | 50,839 | 51,144 | 49,492 | 48,346 | ||||||||
Premises and equipment | 467 | 470 | 475 | 472 | ||||||||
Accrued income and other assets | 4,850 | 4,864 | 4,111 | 4,793 | ||||||||
Total assets | $ | 72,848 | $ | 72,537 | $ | 70,818 | $ | 71,448 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
Noninterest-bearing deposits | $ | 27,134 | $ | 27,001 | $ | 28,690 | $ | 29,301 | ||||
Money market and interest-bearing checking deposits | 23,992 | 22,195 | 22,560 | 22,449 | ||||||||
Savings deposits | 2,156 | 2,162 | 2,172 | 2,192 | ||||||||
Customer certificates of deposit | 2,853 | 2,441 | 2,131 | 2,051 | ||||||||
Other time deposits | 647 | 1,726 | — | — | ||||||||
Foreign office time deposits | 27 | 12 | 8 | 13 | ||||||||
Total interest-bearing deposits | 29,675 | 28,536 | 26,871 | 26,705 | ||||||||
Total deposits | 56,809 | 55,537 | 55,561 | 56,006 | ||||||||
Short-term borrowings | 51 | 1,733 | 44 | 84 | ||||||||
Accrued expenses and other liabilities | 1,477 | 1,386 | 1,243 | 1,154 | ||||||||
Medium- and long-term debt | 7,311 | 6,558 | 6,463 | 6,418 | ||||||||
Total liabilities | 65,648 | 65,214 | 63,311 | 63,662 | ||||||||
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 | 2,172 | 2,168 | 2,148 | 2,144 | ||||||||
Accumulated other comprehensive loss | (336 | ) | (382 | ) | (609 | ) | (611 | ) | ||||
Retained earnings | 9,369 | 9,176 | 8,781 | 8,587 | ||||||||
Less cost of common stock in treasury - 84,028,400 shares at 9/30/19, 78,367,534 shares at 6/30/19, 68,081,176 shares as 12/31/18 and 62,224,198 shares at 9/30/18 | (5,146 | ) | (4,780 | ) | (3,954 | ) | (3,475 | ) | ||||
Total shareholders' equity | 7,200 | 7,323 | 7,507 | 7,786 | ||||||||
Total liabilities and shareholders' equity | $ | 72,848 | $ | 72,537 | $ | 70,818 | $ | 71,448 | ||||
10
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) | 2019 | 2018 | 2019 | 2018 | |||||||||
INTEREST INCOME | |||||||||||||
Interest and fees on loans | $ | 619 | $ | 581 | $ | 1,875 | $ | 1,658 | |||||
Interest on investment securities | 75 | 66 | 222 | 194 | |||||||||
Interest on short-term investments | 17 | 28 | 51 | 63 | |||||||||
Total interest income | 711 | 675 | 2,148 | 1,915 | |||||||||
INTEREST EXPENSE | |||||||||||||
Interest on deposits | 73 | 35 | 192 | 79 | |||||||||
Interest on short-term borrowings | 2 | 1 | 9 | 1 | |||||||||
Interest on medium- and long-term debt | 50 | 40 | 152 | 97 | |||||||||
Total interest expense | 125 | 76 | 353 | 177 | |||||||||
Net interest income | 586 | 599 | 1,795 | 1,738 | |||||||||
Provision for credit losses | 35 | — | 66 | (17 | ) | ||||||||
Net interest income after provision for credit losses | 551 | 599 | 1,729 | 1,755 | |||||||||
NONINTEREST INCOME | |||||||||||||
Card fees | 67 | 61 | 195 | 180 | |||||||||
Service charges on deposit accounts | 51 | 53 | 153 | 160 | |||||||||
Fiduciary income | 53 | 51 | 154 | 155 | |||||||||
Commercial lending fees | 23 | 21 | 66 | 62 | |||||||||
Foreign exchange income | 11 | 12 | 33 | 36 | |||||||||
Letter of credit fees | 10 | 9 | 29 | 30 | |||||||||
Bank-owned life insurance | 11 | 11 | 31 | 29 | |||||||||
Brokerage fees | 7 | 7 | 21 | 20 | |||||||||
Net securities losses | — | (20 | ) | (8 | ) | (19 | ) | ||||||
Other noninterest income | 23 | 29 | 70 | 73 | |||||||||
Total noninterest income | 256 | 234 | 744 | 726 | |||||||||
NONINTEREST EXPENSES | |||||||||||||
Salaries and benefits expense | 253 | 254 | 763 | 759 | |||||||||
Outside processing fee expense | 66 | 65 | 194 | 190 | |||||||||
Occupancy expense | 39 | 38 | 113 | 113 | |||||||||
Software expense | 30 | 32 | 87 | 95 | |||||||||
Equipment expense | 13 | 12 | 37 | 34 | |||||||||
FDIC insurance expense | 6 | 11 | 17 | 36 | |||||||||
Advertising expense | 10 | 8 | 24 | 22 | |||||||||
Restructuring charges | — | 12 | — | 39 | |||||||||
Other noninterest expenses | 18 | 20 | 57 | 58 | |||||||||
Total noninterest expenses | 435 | 452 | 1,292 | 1,346 | |||||||||
Income before income taxes | 372 | 381 | 1,181 | 1,135 | |||||||||
Provision for income taxes | 80 | 63 | 252 | 210 | |||||||||
NET INCOME | 292 | 318 | 929 | 925 | |||||||||
Less income allocated to participating securities | 2 | 2 | 5 | 6 | |||||||||
Net income attributable to shares | $ | 290 | $ | 316 | $ | 924 | $ | 919 | |||||
Earnings per share: | |||||||||||||
Basic | $ | 1.98 | $ | 1.89 | $ | 6.08 | $ | 5.41 | |||||
Diluted | 1.96 | 1.86 | 6.02 | 5.32 | |||||||||
Comprehensive income | 338 | 296 | 1,202 | 764 | |||||||||
Cash dividends declared on stock | 97 | 100 | 302 | 210 | |||||||||
Cash dividends declared per share | 0.67 | 0.60 | 2.01 | 1.24 | |||||||||
11
CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | |||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||||||
Third | Second | First | Fourth | Third | Third Quarter 2019 Compared to: | ||||||||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Quarter | Second Quarter 2019 | Third Quarter 2018 | |||||||||||||||||||||
(in millions, except per share data) | 2019 | 2019 | 2019 | 2018 | 2018 | Amount | Percent | Amount | Percent | ||||||||||||||||||
INTEREST INCOME | |||||||||||||||||||||||||||
Interest and fees on loans | $ | 619 | $ | 635 | $ | 621 | $ | 604 | $ | 581 | $ | (16 | ) | (3 | )% | $ | 38 | 7 | % | ||||||||
Interest on investment securities | 75 | 75 | 72 | 71 | 66 | — | — | 9 | 13 | ||||||||||||||||||
Interest on short-term investments | 17 | 17 | 17 | 29 | 28 | — | — | (11 | ) | (40 | ) | ||||||||||||||||
Total interest income | 711 | 727 | 710 | 704 | 675 | (16 | ) | (2 | ) | 36 | 5 | ||||||||||||||||
INTEREST EXPENSE | |||||||||||||||||||||||||||
Interest on deposits | 73 | 67 | 52 | 43 | 35 | 6 | 9 | 38 | n/m | ||||||||||||||||||
Interest on short-term borrowings | 2 | 6 | 1 | — | 1 | (4 | ) | (72 | ) | 1 | n/m | ||||||||||||||||
Interest on medium- and long-term debt | 50 | 51 | 51 | 47 | 40 | (1 | ) | (2 | ) | 10 | 23 | ||||||||||||||||
Total interest expense | 125 | 124 | 104 | 90 | 76 | 1 | 1 | 49 | 64 | ||||||||||||||||||
Net interest income | 586 | 603 | 606 | 614 | 599 | (17 | ) | (3 | ) | (13 | ) | (2 | ) | ||||||||||||||
Provision for credit losses | 35 | 44 | (13 | ) | 16 | — | (9 | ) | (21 | ) | 35 | n/m | |||||||||||||||
Net interest income after provision for credit losses | 551 | 559 | 619 | 598 | 599 | (8 | ) | (1 | ) | (48 | ) | (8 | ) | ||||||||||||||
NONINTEREST INCOME | |||||||||||||||||||||||||||
Card fees | 67 | 65 | 63 | 64 | 61 | 2 | 2 | 6 | 10 | ||||||||||||||||||
Service charges on deposit accounts | 51 | 51 | 51 | 51 | 53 | — | — | (2 | ) | (4 | ) | ||||||||||||||||
Fiduciary income | 53 | 52 | 49 | 51 | 51 | 1 | 2 | 2 | 5 | ||||||||||||||||||
Commercial lending fees | 23 | 21 | 22 | 23 | 21 | 2 | 8 | 2 | 9 | ||||||||||||||||||
Foreign exchange income | 11 | 11 | 11 | 11 | 12 | — | — | (1 | ) | (6 | ) | ||||||||||||||||
Letter of credit fees | 10 | 10 | 9 | 10 | 9 | — | — | 1 | 2 | ||||||||||||||||||
Bank-owned life insurance | 11 | 11 | 9 | 10 | 11 | — | — | — | — | ||||||||||||||||||
Brokerage fees | 7 | 7 | 7 | 7 | 7 | — | — | — | — | ||||||||||||||||||
Net securities losses | — | — | (8 | ) | — | (20 | ) | — | — | 20 | n/m | ||||||||||||||||
Other noninterest income | 23 | 22 | 25 | 23 | 29 | 1 | 6 | (6 | ) | (18 | ) | ||||||||||||||||
Total noninterest income | 256 | 250 | 238 | 250 | 234 | 6 | 3 | 22 | 10 | ||||||||||||||||||
NONINTEREST EXPENSES | |||||||||||||||||||||||||||
Salaries and benefits expense | 253 | 245 | 265 | 250 | 254 | 8 | 4 | (1 | ) | (1 | ) | ||||||||||||||||
Outside processing fee expense | 66 | 65 | 63 | 65 | 65 | 1 | 1 | 1 | 1 | ||||||||||||||||||
Occupancy expense | 39 | 37 | 37 | 39 | 38 | 2 | 6 | 1 | 3 | ||||||||||||||||||
Software expense | 30 | 28 | 29 | 30 | 32 | 2 | 6 | (2 | ) | (6 | ) | ||||||||||||||||
Equipment expense | 13 | 12 | 12 | 14 | 12 | 1 | 1 | 1 | 1 | ||||||||||||||||||
FDIC insurance expense | 6 | 6 | 5 | 6 | 11 | — | — | (5 | ) | (45 | ) | ||||||||||||||||
Advertising expense | 10 | 9 | 5 | 8 | 8 | 1 | 19 | 2 | 21 | ||||||||||||||||||
Restructuring charges | — | — | — | 14 | 12 | — | — | (12 | ) | n/m | |||||||||||||||||
Other noninterest expenses | 18 | 22 | 17 | 22 | 20 | (4 | ) | (15 | ) | (2 | ) | (1 | ) | ||||||||||||||
Total noninterest expenses | 435 | 424 | 433 | 448 | 452 | 11 | 3 | (17 | ) | (4 | ) | ||||||||||||||||
Income before income taxes | 372 | 385 | 424 | 400 | 381 | (13 | ) | (3 | ) | (9 | ) | (2 | ) | ||||||||||||||
Provision for income taxes | 80 | 87 | 85 | 90 | 63 | (7 | ) | (7 | ) | 17 | 28 | ||||||||||||||||
NET INCOME | 292 | 298 | 339 | 310 | 318 | (6 | ) | (2 | ) | (26 | ) | (8 | ) | ||||||||||||||
Less income allocated to participating securities | 2 | 1 | 2 | 2 | 2 | 1 | 2 | — | — | ||||||||||||||||||
Net income attributable to shares | $ | 290 | $ | 297 | $ | 337 | $ | 308 | $ | 316 | $ | (7 | ) | (2 | )% | $ | (26 | ) | (8 | )% | |||||||
Earnings per share: | |||||||||||||||||||||||||||
Basic | $ | 1.98 | $ | 1.95 | $ | 2.14 | $ | 1.91 | $ | 1.89 | $ | 0.03 | 1 | % | $ | 0.09 | 5 | % | |||||||||
Diluted | 1.96 | 1.94 | 2.11 | 1.88 | 1.86 | 0.02 | 1 | 0.10 | 5 | ||||||||||||||||||
Comprehensive income | 338 | 429 | 435 | 312 | 296 | (91 | ) | (21 | ) | 42 | 14 | ||||||||||||||||
Cash dividends declared on stock | 97 | 100 | 105 | 99 | 100 | (3 | ) | (3 | ) | (3 | ) | (3 | ) | ||||||||||||||
Cash dividends declared per share | 0.67 | 0.67 | 0.67 | 0.60 | 0.60 | — | — | 0.07 | 12 | ||||||||||||||||||
n/m - not meaningful
12
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(in millions) | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | |||||||||||
Balance at beginning of period | $ | 657 | $ | 647 | $ | 671 | $ | 664 | $ | 677 | ||||||
Loan charge-offs: | ||||||||||||||||
Commercial | 59 | 42 | 18 | 19 | 23 | |||||||||||
Commercial mortgage | — | — | 1 | 2 | — | |||||||||||
International | — | 1 | — | — | 1 | |||||||||||
Residential mortgage | 1 | — | — | — | — | |||||||||||
Consumer | 1 | 1 | 1 | — | 1 | |||||||||||
Total loan charge-offs | 61 | 44 | 20 | 21 | 25 | |||||||||||
Recoveries on loans previously charged-off: | ||||||||||||||||
Commercial | 17 | 7 | 8 | 8 | 8 | |||||||||||
Commercial mortgage | — | 3 | — | — | 1 | |||||||||||
Residential mortgage | 1 | — | — | 1 | — | |||||||||||
Consumer | 1 | 1 | 1 | 1 | 1 | |||||||||||
Total recoveries | 19 | 11 | 9 | 10 | 10 | |||||||||||
Net loan charge-offs | 42 | 33 | 11 | 11 | 15 | |||||||||||
Provision for loan losses | 37 | 43 | (13 | ) | 19 | 1 | ||||||||||
Foreign currency translation adjustment | — | — | — | (1 | ) | 1 | ||||||||||
Balance at end of period | $ | 652 | $ | 657 | $ | 647 | $ | 671 | $ | 664 | ||||||
Allowance for loan losses as a percentage of total loans | 1.27 | % | 1.27 | % | 1.29 | % | 1.34 | % | 1.35 | % | ||||||
Net loan charge-offs as a percentage of average total loans | 0.33 | 0.26 | 0.08 | 0.09 | 0.13 | |||||||||||
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LENDING-RELATED COMMITMENTS (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(in millions) | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | |||||||||||
Balance at beginning of period | $ | 31 | $ | 30 | $ | 30 | $ | 33 | $ | 34 | ||||||
Add: Provision for credit losses on lending-related commitments | (2 | ) | 1 | — | (3 | ) | (1 | ) | ||||||||
Balance at end of period | $ | 29 | $ | 31 | $ | 30 | $ | 30 | $ | 33 | ||||||
13
NONPERFORMING ASSETS (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(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 | $ | 152 | $ | 155 | $ | 114 | $ | 141 | $ | 149 | ||||||
Commercial mortgage | 13 | 12 | 16 | 20 | 22 | |||||||||||
Lease financing | — | 1 | 2 | 2 | 2 | |||||||||||
International | 2 | 3 | 3 | 3 | 4 | |||||||||||
Total nonaccrual business loans | 167 | 171 | 135 | 166 | 177 | |||||||||||
Retail loans: | ||||||||||||||||
Residential mortgage | 36 | 35 | 37 | 36 | 34 | |||||||||||
Consumer: | ||||||||||||||||
Home equity | 17 | 18 | 19 | 19 | 19 | |||||||||||
Total nonaccrual retail loans | 53 | 53 | 56 | 55 | 53 | |||||||||||
Total nonaccrual loans | 220 | 224 | 191 | 221 | 230 | |||||||||||
Reduced-rate loans | 6 | 6 | 7 | 8 | 9 | |||||||||||
Total nonperforming loans | 226 | 230 | 198 | 229 | 239 | |||||||||||
Foreclosed property | 3 | 3 | 1 | 1 | 1 | |||||||||||
Total nonperforming assets | $ | 229 | $ | 233 | $ | 199 | $ | 230 | $ | 240 | ||||||
Nonperforming loans as a percentage of total loans | 0.44 | % | 0.44 | % | 0.39 | % | 0.46 | % | 0.49 | % | ||||||
Nonperforming assets as a percentage of total loans and foreclosed property | 0.44 | 0.45 | 0.40 | 0.46 | 0.49 | |||||||||||
Allowance for loan losses as a multiple of total nonperforming loans | 2.9x | 2.9x | 3.3x | 2.9x | 2.8x | |||||||||||
Loans past due 90 days or more and still accruing | $ | 31 | $ | 17 | $ | 24 | $ | 16 | $ | 28 | ||||||
ANALYSIS OF NONACCRUAL LOANS | ||||||||||||||||
Nonaccrual loans at beginning of period | $ | 224 | $ | 191 | $ | 221 | $ | 230 | $ | 254 | ||||||
Loans transferred to nonaccrual (a) | 85 | 93 | 4 | 42 | 35 | |||||||||||
Nonaccrual loan gross charge-offs | (61 | ) | (44 | ) | (20 | ) | (21 | ) | (25 | ) | ||||||
Loans transferred to accrual status (a) | — | — | — | (3 | ) | — | ||||||||||
Nonaccrual loans sold | — | (5 | ) | — | (5 | ) | (9 | ) | ||||||||
Payments/Other (b) | (28 | ) | (11 | ) | (14 | ) | (22 | ) | (25 | ) | ||||||
Nonaccrual loans at end of period | $ | 220 | $ | 224 | $ | 191 | $ | 221 | $ | 230 | ||||||
(a) Based on an analysis of nonaccrual loans with book balances greater than $2 million. | ||||||||||||||||
(b) 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. | ||||||||||||||||
14
ANALYSIS OF NET INTEREST INCOME (unaudited) | |||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||
Nine Months Ended | |||||||||||||||||
September 30, 2019 | September 30, 2018 | ||||||||||||||||
Average | Average | Average | Average | ||||||||||||||
(dollar amounts in millions) | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||
Commercial loans | $ | 32,135 | $ | 1,191 | 4.97 | % | $ | 30,494 | $ | 1,037 | 4.54 | % | |||||
Real estate construction loans | 3,301 | 140 | 5.67 | 3,152 | 120 | 5.08 | |||||||||||
Commercial mortgage loans | 9,108 | 342 | 5.02 | 9,158 | 315 | 4.61 | |||||||||||
Lease financing | 548 | 14 | 3.34 | 462 | 13 | 3.85 | |||||||||||
International loans | 1,015 | 40 | 5.26 | 1,017 | 37 | 4.88 | |||||||||||
Residential mortgage loans | 1,943 | 56 | 3.87 | 1,988 | 56 | 3.76 | |||||||||||
Consumer loans | 2,464 | 92 | 4.98 | 2,473 | 80 | 4.32 | |||||||||||
Total loans | 50,514 | 1,875 | 4.96 | 48,744 | 1,658 | 4.55 | |||||||||||
Mortgage-backed securities | 9,320 | 172 | 2.44 | 9,109 | 158 | 2.25 | |||||||||||
Other investment securities | 2,764 | 50 | 2.42 | 2,714 | 36 | 1.72 | |||||||||||
Total investment securities | 12,084 | 222 | 2.43 | 11,823 | 194 | 2.13 | |||||||||||
Interest-bearing deposits with banks | 2,866 | 49 | 2.29 | 4,625 | 63 | 1.82 | |||||||||||
Other short-term investments | 140 | 2 | 1.32 | 134 | — | 0.90 | |||||||||||
Total earning assets | 65,604 | 2,148 | 4.37 | 65,326 | 1,915 | 3.90 | |||||||||||
Cash and due from banks | 896 | 1,200 | |||||||||||||||
Allowance for loan losses | (668 | ) | (702 | ) | |||||||||||||
Accrued income and other assets | 5,095 | 4,865 | |||||||||||||||
Total assets | $ | 70,927 | $ | 70,689 | |||||||||||||
Money market and interest-bearing checking deposits | $ | 23,006 | 157 | 0.91 | $ | 22,219 | 72 | 0.43 | |||||||||
Savings deposits | 2,164 | 1 | 0.04 | 2,205 | 1 | 0.04 | |||||||||||
Customer certificates of deposit | 2,383 | 19 | 1.09 | 2,090 | 6 | 0.40 | |||||||||||
Other time deposits | 804 | 15 | 2.45 | 3 | — | 1.86 | |||||||||||
Foreign office time deposits | 13 | — | 1.51 | 30 | — | 1.17 | |||||||||||
Total interest-bearing deposits | 28,370 | 192 | 0.91 | 26,547 | 79 | 0.40 | |||||||||||
Short-term borrowings | 472 | 9 | 2.39 | 59 | 1 | 1.79 | |||||||||||
Medium- and long-term debt | 6,837 | 152 | 2.92 | 5,647 | 97 | 2.27 | |||||||||||
Total interest-bearing sources | 35,679 | 353 | 1.31 | 32,253 | 177 | 0.73 | |||||||||||
Noninterest-bearing deposits | 26,539 | 29,457 | |||||||||||||||
Accrued expenses and other liabilities | 1,377 | 1,072 | |||||||||||||||
Total shareholders' equity | 7,332 | 7,907 | |||||||||||||||
Total liabilities and shareholders' equity | $ | 70,927 | $ | 70,689 | |||||||||||||
Net interest income/rate spread | $ | 1,795 | 3.06 | $ | 1,738 | 3.17 | |||||||||||
Impact of net noninterest-bearing sources of funds | 0.60 | 0.37 | |||||||||||||||
Net interest margin (as a percentage of average earning assets) | 3.66 | % | 3.54 | % | |||||||||||||
15
ANALYSIS OF NET INTEREST INCOME (unaudited) | ||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||
September 30, 2019 | June 30, 2019 | September 30, 2018 | ||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||
(dollar amounts in millions) | Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||
Commercial loans | $ | 32,329 | $ | 392 | 4.82 | % | $ | 32,607 | $ | 405 | 5.00 | % | $ | 30,371 | $ | 365 | 4.74 | % | ||||||||
Real estate construction loans | 3,344 | 47 | 5.53 | 3,319 | 47 | 5.74 | 3,198 | 43 | 5.38 | |||||||||||||||||
Commercial mortgage loans | 9,264 | 112 | 4.82 | 9,060 | 116 | 5.12 | 9,084 | 110 | 4.84 | |||||||||||||||||
Lease financing | 578 | 6 | 3.83 | 546 | 3 | 2.32 | 464 | 4 | 3.69 | |||||||||||||||||
International loans | 1,007 | 13 | 5.12 | 1,025 | 14 | 5.30 | 1,072 | 13 | 4.99 | |||||||||||||||||
Residential mortgage loans | 1,920 | 18 | 3.84 | 1,943 | 19 | 3.92 | 1,962 | 18 | 3.71 | |||||||||||||||||
Consumer loans | 2,445 | 31 | 4.92 | 2,463 | 31 | 5.02 | 2,433 | 28 | 4.49 | |||||||||||||||||
Total loans | 50,887 | 619 | 4.83 | 50,963 | 635 | 5.00 | 48,584 | 581 | 4.74 | |||||||||||||||||
Mortgage-backed securities | 9,408 | 58 | 2.45 | 9,326 | 58 | 2.45 | 9,063 | 54 | 2.30 | |||||||||||||||||
Other investment securities | 2,795 | 17 | 2.45 | 2,765 | 17 | 2.47 | 2,698 | 12 | 1.72 | |||||||||||||||||
Total investment securities | 12,203 | 75 | 2.45 | 12,091 | 75 | 2.45 | 11,761 | 66 | 2.17 | |||||||||||||||||
Interest-bearing deposits with banks | 3,049 | 16 | 2.13 | 2,694 | 16 | 2.37 | 5,362 | 28 | 2.03 | |||||||||||||||||
Other short-term investments | 146 | 1 | 1.28 | 142 | 1 | 1.34 | 135 | — | 1.04 | |||||||||||||||||
Total earning assets | 66,285 | 711 | 4.26 | 65,890 | 727 | 4.42 | 65,842 | 675 | 4.05 | |||||||||||||||||
Cash and due from banks | 864 | 900 | 1,107 | |||||||||||||||||||||||
Allowance for loan losses | (673 | ) | (660 | ) | (681 | ) | ||||||||||||||||||||
Accrued income and other assets | 5,260 | 5,122 | 4,942 | |||||||||||||||||||||||
Total assets | $ | 71,736 | $ | 71,252 | $ | 71,210 | ||||||||||||||||||||
Money market and interest-bearing checking deposits | $ | 23,485 | 57 | 0.97 | $ | 22,913 | 53 | 0.93 | $ | 22,573 | 32 | 0.56 | ||||||||||||||
Savings deposits | 2,155 | 1 | 0.04 | 2,169 | — | 0.03 | 2,208 | 1 | 0.05 | |||||||||||||||||
Customer certificates of deposit | 2,627 | 8 | 1.30 | 2,346 | 7 | 1.10 | 2,086 | 2 | 0.48 | |||||||||||||||||
Other time deposits | 1,085 | 7 | 2.46 | 1,156 | 7 | 2.46 | 8 | — | 1.86 | |||||||||||||||||
Foreign office time deposits | 13 | — | 1.45 | 13 | — | 1.54 | 25 | — | 1.25 | |||||||||||||||||
Total interest-bearing deposits | 29,365 | 73 | 0.99 | 28,597 | 67 | 0.94 | 26,900 | 35 | 0.51 | |||||||||||||||||
Short-term borrowings | 268 | 2 | 2.29 | 927 | 6 | 2.42 | 85 | 1 | 1.95 | |||||||||||||||||
Medium- and long-term debt | 7,100 | 50 | 2.71 | 6,712 | 51 | 3.00 | 6,153 | 40 | 2.55 | |||||||||||||||||
Total interest-bearing sources | 36,733 | 125 | 1.33 | 36,236 | 124 | 1.36 | 33,138 | 76 | 0.90 | |||||||||||||||||
Noninterest-bearing deposits | 26,351 | 26,398 | 29,193 | |||||||||||||||||||||||
Accrued expenses and other liabilities | 1,398 | 1,333 | 1,062 | |||||||||||||||||||||||
Total shareholders' equity | 7,254 | 7,285 | 7,817 | |||||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 71,736 | $ | 71,252 | $ | 71,210 | ||||||||||||||||||||
Net interest income/rate spread | $ | 586 | 2.93 | $ | 603 | 3.06 | $ | 599 | 3.15 | |||||||||||||||||
Impact of net noninterest-bearing sources of funds | 0.59 | 0.61 | 0.45 | |||||||||||||||||||||||
Net interest margin (as a percentage of average earning assets) | 3.52 | % | 3.67 | % | 3.60 | % | ||||||||||||||||||||
16
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 JUNE 30, 2018 | 170.9 | $ | 1,141 | $ | 2,144 | $ | (589 | ) | $ | 8,374 | $ | (2,991 | ) | $ | 8,079 | |||||
Net income | — | — | — | — | 318 | — | 318 | |||||||||||||
Other comprehensive loss, net of tax | — | — | — | (22 | ) | — | — | (22 | ) | |||||||||||
Cash dividends declared on common stock ($0.60 per share) | — | — | — | — | (100 | ) | — | (100 | ) | |||||||||||
Purchase of common stock | (5.3 | ) | — | (7 | ) | — | — | (493 | ) | (500 | ) | |||||||||
Net issuance of common stock under employee stock plans | 0.2 | — | 2 | — | (3 | ) | 5 | 4 | ||||||||||||
Net issuance of common stock for warrants | 0.1 | — | (2 | ) | — | (2 | ) | 4 | — | |||||||||||
Share-based compensation | — | — | 7 | — | — | — | 7 | |||||||||||||
BALANCE AT SEPTEMBER 30, 2018 | 165.9 | $ | 1,141 | $ | 2,144 | $ | (611 | ) | $ | 8,587 | $ | (3,475 | ) | $ | 7,786 | |||||
BALANCE AT JUNE 30, 2019 | 149.8 | $ | 1,141 | $ | 2,168 | $ | (382 | ) | $ | 9,176 | $ | (4,780 | ) | $ | 7,323 | |||||
Net income | — | — | — | — | 292 | — | 292 | |||||||||||||
Other comprehensive income, net of tax | — | — | — | 46 | — | — | 46 | |||||||||||||
Cash dividends declared on common stock ($0.67 per share) | — | — | — | — | (97 | ) | — | (97 | ) | |||||||||||
Purchase of common stock | (5.7 | ) | — | — | — | — | (370 | ) | (370 | ) | ||||||||||
Net issuance of common stock under employee stock plans | — | — | (1 | ) | — | (2 | ) | 4 | 1 | |||||||||||
Share-based compensation | — | — | 5 | — | — | — | 5 | |||||||||||||
BALANCE AT SEPTEMBER 30, 2019 | 144.1 | $ | 1,141 | $ | 2,172 | $ | (336 | ) | $ | 9,369 | $ | (5,146 | ) | $ | 7,200 | |||||
BALANCE AT DECEMBER 31, 2017 | 172.9 | $ | 1,141 | $ | 2,122 | $ | (451 | ) | $ | 7,887 | $ | (2,736 | ) | $ | 7,963 | |||||
Cumulative effect of change in accounting principles | — | — | — | 1 | 14 | — | 15 | |||||||||||||
Net income | — | — | — | — | 925 | — | 925 | |||||||||||||
Other comprehensive loss, net of tax | — | — | — | (161 | ) | — | — | (161 | ) | |||||||||||
Cash dividends declared on common stock ($1.24 per share) | — | — | — | — | (210 | ) | — | (210 | ) | |||||||||||
Purchase of common stock | (8.7 | ) | — | (7 | ) | — | — | (821 | ) | (828 | ) | |||||||||
Net issuance of common stock under employee stock plans | 1.5 | — | (9 | ) | — | (24 | ) | 74 | 41 | |||||||||||
Net issuance of common stock for warrants | 0.2 | — | (3 | ) | — | (5 | ) | 8 | — | |||||||||||
Share-based compensation | — | — | 41 | — | — | — | 41 | |||||||||||||
BALANCE AT SEPTEMBER 30, 2018 | 165.9 | $ | 1,141 | $ | 2,144 | $ | (611 | ) | $ | 8,587 | $ | (3,475 | ) | $ | 7,786 | |||||
BALANCE AT DECEMBER 31, 2018 | 160.1 | $ | 1,141 | $ | 2,148 | $ | (609 | ) | $ | 8,781 | $ | (3,954 | ) | $ | 7,507 | |||||
Cumulative effect of change in accounting principle | — | — | — | — | (14 | ) | — | (14 | ) | |||||||||||
Net income | — | — | — | — | 929 | — | 929 | |||||||||||||
Other comprehensive income, net of tax | — | — | — | 273 | — | — | 273 | |||||||||||||
Cash dividends declared on common stock ($2.01 per share) | — | — | — | — | (302 | ) | — | (302 | ) | |||||||||||
Purchase of common stock | (16.6 | ) | — | — | — | — | (1,229 | ) | (1,229 | ) | ||||||||||
Net issuance of common stock under employee stock plans | 0.6 | — | (13 | ) | — | (25 | ) | 37 | (1 | ) | ||||||||||
Share-based compensation | — | — | 37 | — | — | — | 37 | |||||||||||||
BALANCE AT SEPTEMBER 30, 2019 | 144.1 | $ | 1,141 | $ | 2,172 | $ | (336 | ) | $ | 9,369 | $ | (5,146 | ) | $ | 7,200 | |||||
17
BUSINESS SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||
(dollar amounts in millions) | Business | Retail | Wealth | ||||||||||||||||||||
Three Months Ended September 30, 2019 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 420 | $ | 142 | $ | 47 | $ | (38 | ) | $ | 15 | $ | 586 | ||||||||||
Provision for credit losses | 39 | (2 | ) | (3 | ) | — | 1 | 35 | |||||||||||||||
Noninterest income | 140 | 31 | 69 | 12 | 4 | 256 | |||||||||||||||||
Noninterest expenses | 199 | 149 | 69 | (1 | ) | 19 | 435 | ||||||||||||||||
Provision (benefit) for income taxes | 74 | 5 | 12 | (8 | ) | (3 | ) | (a) | 80 | ||||||||||||||
Net income (loss) | $ | 248 | $ | 21 | $ | 38 | $ | (17 | ) | $ | 2 | $ | 292 | ||||||||||
Net credit-related charge-offs (recoveries) | $ | 43 | $ | 1 | $ | (2 | ) | $ | — | $ | — | $ | 42 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 45,459 | $ | 2,871 | $ | 5,032 | $ | 14,392 | $ | 3,982 | $ | 71,736 | |||||||||||
Loans | 43,889 | 2,114 | 4,884 | — | — | 50,887 | |||||||||||||||||
Deposits | 28,917 | 20,761 | 3,775 | 2,049 | 214 | 55,716 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (b) | 2.17 | % | 0.39 | % | 3.01 | % | n/m | n/m | 1.61 | % | |||||||||||||
Efficiency ratio (c) | 35.62 | 84.54 | 59.79 | n/m | n/m | 51.54 | |||||||||||||||||
Business | Retail | Wealth | |||||||||||||||||||||
Three Months Ended June 30, 2019 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 420 | $ | 146 | $ | 46 | $ | (24 | ) | $ | 15 | $ | 603 | ||||||||||
Provision for credit losses | 52 | 1 | (5 | ) | — | (4 | ) | 44 | |||||||||||||||
Noninterest income | 136 | 33 | 68 | 14 | (1 | ) | 250 | ||||||||||||||||
Noninterest expenses | 195 | 147 | 67 | — | 15 | 424 | |||||||||||||||||
Provision (benefit) for income taxes | 71 | 7 | 13 | (4 | ) | — | 87 | ||||||||||||||||
Net income (loss) | $ | 238 | $ | 24 | $ | 39 | $ | (6 | ) | $ | 3 | $ | 298 | ||||||||||
Net credit-related charge-offs (recoveries) | $ | 35 | $ | — | $ | (2 | ) | $ | — | $ | — | $ | 33 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 45,321 | $ | 2,839 | $ | 5,071 | $ | 14,242 | $ | 3,779 | $ | 71,252 | |||||||||||
Loans | 43,926 | 2,107 | 4,930 | — | — | 50,963 | |||||||||||||||||
Deposits | 28,251 | 20,649 | 3,740 | 2,174 | 181 | 54,995 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (b) | 2.11 | % | 0.44 | % | 3.10 | % | n/m | n/m | 1.68 | % | |||||||||||||
Efficiency ratio (c) | 34.98 | 82.26 | 58.99 | n/m | n/m | 49.65 | |||||||||||||||||
Business | Retail | Wealth | |||||||||||||||||||||
Three Months Ended September 30, 2018 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 414 | $ | 140 | $ | 46 | $ | (16 | ) | $ | 15 | $ | 599 | ||||||||||
Provision for credit losses | — | 1 | 1 | — | (2 | ) | — | ||||||||||||||||
Noninterest income | 137 | 35 | 66 | (7 | ) | 3 | 234 | ||||||||||||||||
Noninterest expenses | 211 | 153 | 72 | (1 | ) | 17 | 452 | ||||||||||||||||
Provision (benefit) for income taxes | 76 | 5 | 10 | (8 | ) | (20 | ) | (a) | 63 | ||||||||||||||
Net income (loss) | $ | 264 | $ | 16 | $ | 29 | $ | (14 | ) | $ | 23 | $ | 318 | ||||||||||
Net credit-related charge-offs | $ | 14 | $ | — | $ | 1 | $ | — | $ | — | $ | 15 | |||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 43,165 | $ | 2,621 | $ | 5,068 | $ | 13,696 | $ | 6,660 | $ | 71,210 | |||||||||||
Loans | 41,591 | 2,057 | 4,936 | — | — | 48,584 | |||||||||||||||||
Deposits | 30,286 | 20,765 | 3,988 | 929 | 125 | 56,093 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (b) | 2.43 | % | 0.31 | % | 2.28 | % | n/m | n/m | 1.77 | % | |||||||||||||
Efficiency ratio (c) | 38.24 | 86.96 | 63.93 | n/m | n/m | 52.93 | |||||||||||||||||
(a) | Included discrete tax benefits of $5 million and $23 million for the three months ended September 30, 2019 and 2018, respectively. |
(b) | Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity. |
(c) | Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares. |
n/m - not meaningful
18
MARKET SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||
(dollar amounts in millions) | Other | Finance | |||||||||||||||||||||
Three Months Ended September 30, 2019 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 185 | $ | 203 | $ | 125 | $ | 96 | $ | (23 | ) | $ | 586 | ||||||||||
Provision for credit losses | (1 | ) | (6 | ) | 50 | (9 | ) | 1 | 35 | ||||||||||||||
Noninterest income | 74 | 41 | 31 | 94 | 16 | 256 | |||||||||||||||||
Noninterest expenses | 139 | 102 | 86 | 90 | 18 | 435 | |||||||||||||||||
Provision (benefit) for income taxes | 27 | 37 | 5 | 22 | (11 | ) | (a) | 80 | |||||||||||||||
Net income (loss) | $ | 94 | $ | 111 | $ | 15 | $ | 87 | $ | (15 | ) | $ | 292 | ||||||||||
Net credit-related charge-offs (recoveries) | $ | 6 | $ | 5 | $ | 34 | $ | (3 | ) | $ | — | $ | 42 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 13,213 | $ | 18,726 | $ | 11,462 | $ | 9,961 | $ | 18,374 | $ | 71,736 | |||||||||||
Loans | 12,554 | 18,393 | 10,805 | 9,135 | — | 50,887 | |||||||||||||||||
Deposits | 20,164 | 16,725 | 8,705 | 7,859 | 2,263 | 55,716 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (b) | 1.78 | % | 2.37 | % | 0.48 | % | 3.47 | % | n/m | 1.61 | % | ||||||||||||
Efficiency ratio (c) | 53.31 | 41.64 | 55.57 | 47.19 | n/m | 51.54 | |||||||||||||||||
Other | Finance | ||||||||||||||||||||||
Three Months Ended June 30, 2019 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 186 | $ | 208 | $ | 124 | $ | 94 | $ | (9 | ) | $ | 603 | ||||||||||
Provision for credit losses | (10 | ) | (4 | ) | 49 | 13 | (4 | ) | 44 | ||||||||||||||
Noninterest income | 72 | 40 | 34 | 91 | 13 | 250 | |||||||||||||||||
Noninterest expenses | 134 | 99 | 84 | 92 | 15 | 424 | |||||||||||||||||
Provision (benefit) for income taxes | 30 | 39 | 6 | 16 | (4 | ) | 87 | ||||||||||||||||
Net income (loss) | $ | 104 | $ | 114 | $ | 19 | $ | 64 | $ | (3 | ) | $ | 298 | ||||||||||
Net credit-related charge-offs | $ | — | $ | 7 | $ | 26 | $ | — | $ | — | $ | 33 | |||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 13,239 | $ | 19,228 | $ | 11,342 | $ | 9,422 | $ | 18,021 | $ | 71,252 | |||||||||||
Loans | 12,704 | 18,928 | 10,684 | 8,647 | — | 50,963 | |||||||||||||||||
Deposits | 19,816 | 16,325 | 8,668 | 7,831 | 2,355 | 54,995 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (b) | 2.01 | % | 2.37 | % | 0.69 | % | 2.76 | % | n/m | 1.68 | % | ||||||||||||
Efficiency ratio (c) | 52.04 | 39.96 | 52.86 | 49.56 | n/m | 49.65 | |||||||||||||||||
Other | Finance | ||||||||||||||||||||||
Three Months Ended September 30, 2018 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 185 | $ | 200 | $ | 120 | $ | 95 | $ | (1 | ) | $ | 599 | ||||||||||
Provision for credit losses | 4 | 3 | (9 | ) | 4 | (2 | ) | — | |||||||||||||||
Noninterest income | 76 | 43 | 33 | 86 | (4 | ) | 234 | ||||||||||||||||
Noninterest expenses | 144 | 106 | 89 | 97 | 16 | 452 | |||||||||||||||||
Provision (benefit) for income taxes | 25 | 34 | 16 | 16 | (28 | ) | (a) | 63 | |||||||||||||||
Net income | $ | 88 | $ | 100 | $ | 57 | $ | 64 | $ | 9 | $ | 318 | |||||||||||
Net credit-related charge-offs (recoveries) | $ | 8 | $ | 5 | $ | 3 | $ | (1 | ) | $ | — | $ | 15 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 13,055 | $ | 18,349 | $ | 10,263 | $ | 9,187 | $ | 20,356 | $ | 71,210 | |||||||||||
Loans | 12,424 | 18,074 | 9,694 | 8,392 | — | 48,584 | |||||||||||||||||
Deposits | 20,720 | 16,894 | 8,902 | 8,523 | 1,054 | 56,093 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (b) | 1.63 | % | 2.18 | % | 2.18 | % | 2.74 | % | n/m | 1.77 | % | ||||||||||||
Efficiency ratio (c) | 54.96 | 43.10 | 58.06 | 54.02 | n/m | 52.93 | |||||||||||||||||
(a) | Included discrete tax benefits of $5 million and $23 million for the three months ended September 30, 2019 and 2018, respectively. |
(b) | Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity. |
(c) | Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares. |
n/m - not meaningful
19
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited) | |||||
Comerica Incorporated and Subsidiaries | |||||
Comerica believes non-GAAP measures are meaningful because they reflect adjustments commonly made by management, investors, regulators and analysts to evaluate the adequacy of equity and our performance trends. Comerica believes the adjusted financial results provide a greater understanding of ongoing operations and enhance the comparability of results with prior periods. Tangible equity is used by Comerica to measure the quality of capital and the return relative to balance sheet risk.
ADJUSTED FINANCIAL RESULTS | Three Months Ended | ||||||||
September 30, | June 30, | September 30, | |||||||
(dollar amounts in millions, except per share data) | 2019 | 2019 | 2018 | ||||||
Noninterest Income: | |||||||||
Noninterest income | $ | 256 | $ | 250 | $ | 234 | |||
Securities repositioning | — | — | 20 | ||||||
Adjusted noninterest income | $ | 256 | $ | 250 | $ | 254 | |||
Noninterest Expenses: | |||||||||
Noninterest expenses | $ | 435 | $ | 424 | $ | 452 | |||
Restructuring charges | — | — | (12 | ) | |||||
Adjusted noninterest expenses | $ | 435 | $ | 424 | $ | 440 | |||
Pre-tax Income: | |||||||||
Pre-tax income | $ | 372 | $ | 385 | $ | 381 | |||
Securities repositioning | — | — | 20 | ||||||
Restructuring charges | — | — | 12 | ||||||
Adjusted pre-tax income | $ | 372 | $ | 385 | $ | 413 | |||
Provision for Income Taxes: | |||||||||
Provision for income taxes | $ | 80 | $ | 87 | $ | 63 | |||
Tax on securities repositioning | — | — | 5 | ||||||
Tax on restructuring charges | — | — | 3 | ||||||
Discrete tax items | 5 | — | 23 | ||||||
Adjusted provision for income taxes | $ | 85 | $ | 87 | $ | 94 | |||
Net Income: | |||||||||
Net income | $ | 292 | $ | 298 | $ | 318 | |||
Securities repositioning, net of tax | — | — | 15 | ||||||
Restructuring charges, net of tax | — | — | 9 | ||||||
Discrete tax items | (5 | ) | — | (23 | ) | ||||
Adjusted net income | $ | 287 | $ | 298 | $ | 319 | |||
Diluted Earnings per Share: | |||||||||
Diluted earnings per share | $ | 1.96 | $ | 1.94 | $ | 1.86 | |||
Securities repositioning, net of tax | — | — | 0.09 | ||||||
Restructuring charges, net of tax | — | — | 0.05 | ||||||
Discrete tax items | (0.03 | ) | — | (0.14 | ) | ||||
Adjusted diluted earnings per share | $ | 1.93 | $ | 1.94 | $ | 1.86 | |||
Efficiency Ratio: | |||||||||
Reported | 51.54 | % | 49.65 | % | 52.93 | % | |||
Adjusted | 51.54 | 49.65 | 51.59 | ||||||
Securities repositioning refers to third quarter 2018 losses incurred on the sale of approximately $1.3 billion of treasury securities that were replaced by higher-yielding treasuries with a similar duration of 3 years. Discrete tax items include benefits from state deferred tax adjustments in third quarter 2019 and benefits from a review of certain tax capitalization and recovery positions in third quarter 2018.
20
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited) (Continued) | |||||
Comerica Incorporated and Subsidiaries | |||||
September 30, | June 30, | September 30, | |||||||
(dollar amounts in millions) | 2019 | 2019 | 2018 | ||||||
Tangible Equity Ratio: | |||||||||
Shareholders' equity | $ | 7,200 | $ | 7,323 | $ | 7,786 | |||
Less: | |||||||||
Goodwill | 635 | 635 | 635 | ||||||
Other intangible assets | 4 | 4 | 6 | ||||||
Tangible equity | $ | 6,561 | $ | 6,684 | $ | 7,145 | |||
Total assets | $ | 72,848 | $ | 72,537 | $ | 71,448 | |||
Less: | |||||||||
Goodwill | 635 | 635 | 635 | ||||||
Other intangible assets | 4 | 4 | 6 | ||||||
Tangible assets | $ | 72,209 | $ | 71,898 | $ | 70,807 | |||
Equity ratio | 9.88 | % | 10.10 | % | 10.90 | % | |||
Tangible equity ratio | 9.09 | 9.30 | 10.09 | ||||||
Tangible Equity per Share of Stock: | |||||||||
Shareholders' equity | $ | 7,200 | $ | 7,323 | $ | 7,786 | |||
Tangible equity | 6,561 | 6,684 | 7,145 | ||||||
Shares of stock outstanding (in millions) | 144 | 150 | 166 | ||||||
Shareholders' equity per share of stock | $ | 49.96 | $ | 48.89 | $ | 46.92 | |||
Tangible equity per share of stock | 45.52 | 44.61 | 43.05 | ||||||
The tangible equity ratio removes the effect of intangible assets from capital and total assets. Tangible equity per share of stock removes the effect of intangible assets from shareholders' equity per share of stock.
21
