Form 8-K COMERICA INC /NEW/ For: Jul 19
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 19, 2016
COMERICA INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware ------------ | 1-10706 ---------- | 38-1998421 --------------- |
(State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
Comerica Bank Tower
1717 Main Street, MC 6404
Dallas, Texas 75201
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(Address of principal executive offices) (zip code)
(214) 462-6831
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEMS 2.02 and 7.01 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION AND REGULATION FD DISCLOSURE |
Comerica Incorporated (“Comerica”) today released its earnings for the quarter ended June 30, 2016 and announced details of its “GEAR Up” initiative. A copy of the press release and the presentation slides which will be discussed on Comerica's webcast earnings call are filed herewith as Exhibits 99.1 and 99.2, respectively, and a copy of a fact sheet related to the initiative is filed herewith as Exhibit 99.3.
The information reported in Items 2.02, 7.01 and 9.01 of this report (including Exhibits 99.1, 99.2 and 99.3 hereto) is being "furnished" and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, is not subject to the liabilities of that section and is not deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such a filing.
ITEM 2.05 | COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES |
In April 2016, Comerica announced the launch of a comprehensive review of its expense and revenue base with the objective to meaningfully enhance profitability, resulting in the Growth in Efficiency and Revenue (“GEAR Up”) initiative.
On July 19, 2016, Comerica announced initial actions related to the initiative. These actions consist of expected revenue enhancements (through expanded product offerings, enhanced sales tools and training, re-aligned employee incentives and enhanced customer analytics to drive opportunities) and expense reductions (through a reduction in workforce, streamlining of operational processes, real estate optimization including consolidating banking centers, selective outsourcing of technology functions and reduction of technology system applications). These initial actions are expected to be completed by year-end 2018, but full run-rate savings is expected to be recognized over a longer time horizon. Comerica committed to these actions in June 2016, but is still in the process of finalizing certain aspects of the initiative, including notifying some of the impacted employees.
The following table provides a summary of restructuring charges recorded in second quarter 2016 relating to the initial actions under the GEAR Up initiative:
Type of Cost | Amount (in millions) | ||
Severance-related expenses | $ | 46 | |
Professional services and other charges | $ | 7 |
Related to the initial GEAR Up initiative, Comerica expects to incur estimated total restructuring charges in the range of $140 - $160 million (pre-tax) through 2018 (including the restructuring charges already recorded in second quarter 2016). The following table provides a summary of Comerica's estimated restructuring charges (pre-tax) by major type of cost:
Type of Cost | Amount (in millions) |
Employee-related expenses (cash severance payments) | $65 - $70 |
Facilities expenses | |
Non-cash (such as accelerated depreciation, facilities charges and impairments) | $10 - $11 |
Cash (such as decommission costs, remaining lease obligations and lease termination charges) | $25 - $29 |
Technology expenses (including non-cash impairments) | $10 - $15 |
Professional services and other charges (cash) | $30 - $35 |
The initial GEAR Up initiative includes approximately $140 million in pre-tax benefits expected to be achieved by fiscal year-end 2017 and an anticipated annual run-rate benefit of approximately $230 million by year-end 2018. Management will continue to identify additional opportunities to further enhance profitability.
Comerica will amend this Current Report on Form 8-K, or disclose in another periodic filing with the Securities and Exchange Commission, its commitment to further parts of the initiative within the timelines required by Securities and Exchange Commission rules and regulations.
The GEAR Up initiative is ongoing and the actual total costs and timing of the actions identified to-date may vary from those estimated due to changes in the scope or assumptions underlying the initiative.
Forward Looking Statements
Any statements in this filing 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 filing 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, including the GEAR Up initiative, 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 the economic benefits of the GEAR Up initiative, 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; changes in regulation or oversight; Comerica's ability to maintain adequate sources of funding and liquidity; the effects of more stringent capital or liquidity requirements; declines or other changes in the businesses or industries of Comerica's customers, in particular the energy industry; unfavorable developments
concerning credit quality; operational difficulties, failure of technology infrastructure or information security incidents; reliance on other companies to provide certain key components of business infrastructure; factors impacting noninterest expenses which are beyond Comerica's control; changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing; reductions in Comerica's credit rating; 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; the interdependence of financial service companies; the implementation of Comerica's strategies and business initiatives; 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; 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, droughts and floods; changes in accounting standards and the critical nature of Comerica's accounting policies. Comerica cautions that the foregoing list of factors is not exclusive. For discussion of factors that may cause actual results to differ from expectations, please refer to our filings with the Securities and Exchange Commission. In particular, please refer to “Item 1A. Risk Factors” beginning on page 12 of Comerica's Annual Report on Form 10-K for the year ended December 31, 2015 and “Item 1A. Risk Factors” beginning on page 54 of Comerica’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. 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 filing 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.
ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
(d) Exhibits
99.1 Press Release dated July 19, 2016
99.2 Earnings Presentation Slides
99.3 GEAR Up Fact Sheet
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
COMERICA INCORPORATED
By: /s/ John D. Buchanan
Name: John D. Buchanan
Title: Executive Vice President - Governance,
Regulatory Relations and Legal Affairs,
and Corporate Secretary
July 19, 2016
EXHIBIT INDEX
Exhibit No. | Description |
99.1 | Press Release dated July 19, 2016 |
99.2 | Earnings Presentation Slides |
99.3 | GEAR Up Fact Sheet |
COMERICA REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS
Launched Growth in Efficiency and Revenue Initiative
Actions Identified To-Date Expected to Drive an Additional $230 Million
in Annual Pre-Tax Income by Year-End 2018
Related Estimated Total Pre-Tax Restructuring Charges of $140 Million to $160 Million
Net Income of $104 Million or 58 Cents Per Share
Includes After-Tax Impact of Restructuring Charge of $34 Million, or 19 Cents Per Share
Average Loan Growth of $1.1 Billion, or 2 Percent, Compared to First Quarter 2016
DALLAS/July 19, 2016 -- Comerica Incorporated (NYSE: CMA) today reported second quarter 2016 net income of $104 million, compared to $60 million for the first quarter 2016 and $135 million for the second quarter 2015. Earnings per diluted share were 58 cents for second quarter 2016 compared to 34 cents for first quarter 2016 and 73 cents for second quarter 2015. Comerica also announced the implementation of its efficiency and revenue initiative ("GEAR Up"), which is expected to drive additional annual pre-tax income of approximately $230 million by year-end 2018 from the actions identified to-date. Second quarter results include after-tax restructuring charges of $34 million, or 19 cents per share, associated with the initial phase of this initiative.
"Our second quarter results were solid with a $1.1 billion increase in average loans, improved credit quality in our energy portfolio as well as increases in most fee-based noninterest income categories,” said Ralph W. Babb, Jr., chairman and chief executive officer. "Noninterest expenses were well controlled. Through share repurchases of $65 million and an increase in our dividend, we returned $103 million to shareholders in the second quarter 2016, compared to $79 million in the first quarter.”
Growth in Efficiency and Revenue Initiative
"Based on our initial extensive review, we are announcing the actions we are taking through Gear Up that are expected to deliver additional annual pre-tax income of approximately $230 million by year-end 2018. This initiative fundamentally transforms the way we operate to drive further efficiency and revenue growth. We are confident the initiative will improve profitability, despite current market conditions and a tough banking environment," said Babb. "We expect our efficiency ratio to improve, declining to the low 60 percent range by the end of 2017, and at or below 60 percent by year-end 2018, without any increase in interest rates. The initial actions will take us a long way to achieving a double-digit return on equity and enhanced shareholder value. Management will continue to identify additional opportunities to further enhance profitability."
The initial GEAR Up initiative includes approximately $140 million in pre-tax benefits expected to be achieved by fiscal year-end 2017 and an anticipated annual run-rate benefit of approximately $230 million by year-end 2018.
• | Revenue enhancements expected to be approximately $30 million by year-end 2017, which increase to approximately $70 million by year-end 2018, through expanded product offerings, enhanced sales tools and training, re-aligned employee incentives and enhanced customer analytics to drive opportunities. |
• | Expense reductions targeted to be approximately $110 million, which increases to approximately $160 million by year-end 2018. This is to be achieved through an approximately 9 percent reduction in workforce, streamlining operational processes, real estate optimization including consolidating about 40 banking centers, selective outsourcing of technology functions and reduction of technology system applications. |
• | Pre-tax restructuring charges of $140 million to $160 million in total are expected to be incurred through 2018. |
• | For further information, see the accompanying Fact Sheet. |
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COMERICA REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS - 2
(dollar amounts in millions, except per share data) | 2nd Qtr '16 | 1st Qtr '16 | 2nd Qtr '15 | |||||||||
Net interest income | $ | 445 | $ | 447 | $ | 421 | ||||||
Provision for credit losses | 49 | 148 | 47 | |||||||||
Noninterest income | 269 | 246 | 258 | |||||||||
Noninterest expenses | 519 | (a) | 460 | 433 | (b) | |||||||
Pre-tax income | 146 | 85 | 199 | |||||||||
Provision for income taxes | 42 | 25 | 64 | |||||||||
Net income | $ | 104 | $ | 60 | $ | 135 | ||||||
Net income attributable to common shares | $ | 103 | $ | 59 | $ | 134 | ||||||
Diluted income per common share | 0.58 | 0.34 | 0.73 | |||||||||
Average diluted shares (in millions) | 177 | 176 | 182 | |||||||||
Common equity Tier 1 capital ratio (c) | 10.48 | % | 10.58 | % | 10.40 | % | ||||||
Common equity ratio | 10.79 | 11.08 | 10.76 | |||||||||
Tangible common equity ratio (d) | 9.98 | 10.23 | 9.92 |
(a) | Included restructuring charge of $53 million in the second quarter 2016. |
(b) | Included net release of litigation reserves of $30 million in the second quarter 2015. |
(c) | June 30, 2016 ratio is estimated. |
(d) | See Reconciliation of Non-GAAP Financial Measures. |
Second Quarter 2016 Compared to First Quarter 2016
Average total loans increased $1.1 billion, or 2 percent, to $49.5 billion.
• | Primarily reflected continued growth in Commercial Real Estate and seasonal increases in Mortgage Banker Finance and National Dealer Services; partially offset by an expected decline in Energy. The growth in Commercial Real Estate primarily reflected construction draws and term financing, mainly with existing customers who are proven developers on projects with favorable risk profiles. |
• | Period-end total loans increased $1.0 billion to $50.4 billion. |
Average total deposits decreased $187 million to $56.5 billion.
• | Driven by a $511 million decrease in interest-bearing deposits, partially offset by a $324 million increase in noninterest-bearing deposits. |
• | Average total deposits increased seasonally in the Retail Bank; this was more than offset by a seasonal decrease in Municipalities and purposeful pricing in Corporate Banking. |
• | Period-end deposits were unchanged at $56.4 billion. |
Net interest income decreased $2 million to $445 million.
• | Primarily the result of the impact of nonaccrual loans and higher funding costs, partially offset by the benefit from the increase in average loans. |
The provision for credit losses decreased $99 million to $49 million.
• | Net credit-related charge-offs were $47 million, or 0.38 percent of average loans, compared to $58 million, or 0.49 percent, in the first quarter 2016. Energy net credit-related charge-offs were $32 million compared to $42 million in the first quarter 2016. |
• | The allowance for loan losses increased $5 million to $729 million, or 1.45 percent of total loans. The reserve allocation for Energy exceeded 8 percent of loans in the Energy business line. |
Noninterest income increased $23 million to $269 million.
• | Noninterest income increased $13 million, or 5 percent, excluding a $10 million increase in deferred compensation asset returns (offset by an increase in deferred compensation plan expense in noninterest expense). |
• | Fee-based income increased $11 million, primarily attributed to increases of $3 million each in card fees, fiduciary income and customer derivative income, as well as a $2 million increase in commercial lending fees. The increase in commercial lending fees resulted primarily from higher syndication agent fees. |
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COMERICA REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS - 3
Noninterest expenses increased $59 million to $519 million.
• | Second quarter restructuring charges of $53 million related to the initiatives previously discussed included $46 million of severance-related expenses and $7 million of professional services and other charges. |
• | Excluding the $53 million restructuring charge, noninterest expenses increased $6 million, primarily including a $10 million increase in deferred compensation plan expense (offset by an increase in deferred compensation asset returns in noninterest income), partially offset by an $8 million gain from the sale of leased assets, as well as increases of $5 million in outside processing fees, $3 million in FDIC insurance premiums and $2 million in advertising expense. |
• | Salaries and benefits expense decreased $1 million, primarily reflecting seasonal decreases in share-based compensation and payroll taxes, partially offset by the $10 million increase in deferred compensation plan expense noted above, the impact of merit increases, a seasonal increase in 401(k) contributions and incentive compensation tied to revenue growth. |
Capital position remained solid at June 30, 2016.
• | Repurchased approximately 1.5 million shares of common stock under the equity repurchase program. |
• | Including dividends, returned a total of $103 million to shareholders. |
• | Dividend increased 5 percent to 22 cents per share. |
• | As announced on June 29, 2016, the Federal Reserve did not object to Comerica’s 2016 capital plan which includes equity repurchases up to $440 million for the four-quarter period ending in the second quarter 2017. The timing and ultimate amount of equity repurchases will be subject to various factors, including the Company’s capital position, financial performance and market conditions, including interest rates. Restructuring charges associated with the GEAR Up initiative are not expected to impact the pace of repurchases. In addition, at its meeting on July 26, 2016, Comerica's board of directors will consider increasing the quarterly dividend to 23 cents per common share. |
Second Quarter 2016 Compared to Second Quarter 2015
Average total loans increased $636 million, or 1 percent.
• | Primarily reflected continued growth in Commercial Real Estate and National Dealer Services, partially offset by declines in Energy and general Middle Market. |
Average total deposits decreased $877 million, or 2 percent.
• | Primarily driven by decreases in Municipalities, Corporate Banking and the Financial Services Division. |
Net interest income increased $24 million, or 6 percent.
• | Primarily due to higher yields on loans and Federal Reserve Bank deposits, as well as earning asset growth; partially offset by an increase in funding costs. |
The provision for credit losses increased $2 million, or 5 percent.
Noninterest income increased $11 million, or 4 percent.
• | Excluding a $4 million increase in deferred compensation asset returns, noninterest income increased $7 million, or 3 percent. Fee-based income increased $6 million, primarily reflecting an $8 million increase in card fees, mostly due to increased revenue from merchant payment processing services and government card programs, and smaller increases in most other fee-based categories; partially offset by a decrease of $4 million in investment banking fees. |
Noninterest expense increased $86 million.
• | Noninterest expense increased $3 million excluding the second quarter 2016 restructuring charges of $53 million and the impact of a $30 million net release of litigation reserves in second quarter 2015. The remaining increase primarily reflected increases of $6 million in software expense and $5 million in FDIC insurance premiums, partially offset by a decrease of $4 million in salaries and benefits and an $8 million benefit from the sale of leased assets in the second quarter 2016. |
◦ | Salaries and benefits expense primarily reflected decreases of $8 million in pension expense and $4 million in share-based compensation, partially offset by a $4 million increase in deferred compensation plan expense (offset by an increase in deferred compensation asset |
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COMERICA REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS - 4
returns in noninterest income) and an increase of $4 million in regular salaries, mostly due to the impact of merit raises.
Net Interest Income
(dollar amounts in millions) | 2nd Qtr '16 | 1st Qtr '16 | 2nd Qtr '15 | ||||||||
Net interest income | $ | 445 | $ | 447 | $ | 421 | |||||
Net interest margin | 2.74 | % | 2.81 | % | 2.65 | % | |||||
Selected average balances: | |||||||||||
Total earning assets | $ | 65,597 | $ | 64,123 | $ | 63,981 | |||||
Total loans | 49,469 | 48,392 | 48,833 | ||||||||
Total investment securities | 12,334 | 12,357 | 9,936 | ||||||||
Federal Reserve Bank deposits | 3,495 | 3,071 | 4,968 | ||||||||
Total deposits | 56,521 | 56,708 | 57,398 | ||||||||
Total noninterest-bearing deposits | 28,376 | 28,052 | 27,365 | ||||||||
Medium- and long-term debt | 5,072 | 3,093 | 2,661 |
Net interest income decreased $2 million to $445 million in the second quarter 2016, compared to the first quarter 2016.
• | Interest on loans was unchanged, as the benefit from an increase in average loan balances (+$8 million) was offset by a decrease in yields. The decrease in loan yields primarily reflected lower nonaccrual interest recoveries in the second quarter 2016, the impact of a negative residual value adjustment to assets in the leasing portfolio and the full-quarter impact of loans transferred to nonaccrual in the first quarter 2016. |
• | Interest expense on debt increased $3 million, primarily due to higher funding costs from new Federal Home Loan Bank (FHLB) borrowings during the quarter. |
The net interest margin of 2.74 percent decreased 7 basis points compared to the first quarter 2016, primarily due to the impact of increased FHLB borrowings (-2 basis points), lower loan yields (-4 basis points) and an increase in lower-yielding Federal Reserve Bank deposit balances (-1 basis point). The impact of lower loan yields included -3 basis points related to nonaccrual loans.
Credit Quality
“Energy loans continue to decline as expected, with a $356 million decrease since the end of the first quarter, as our customers continue to take the necessary actions to reduce their bank debt. We have completed 88 percent of the spring redeterminations for our E&P customers, and borrowing bases have come down about 22 percent on average. Criticized energy loans have declined $281 million to 57 percent of energy loans as of the end of the second quarter,” said Babb. “While oil and gas prices have improved, we remain cautious and believe with our reserve allocation at over 8 percent of energy loans as of June 30, we are adequately reserved. Credit quality in the remainder of the portfolio remains strong.”
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COMERICA REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS - 5
(dollar amounts in millions) | 2nd Qtr '16 | 1st Qtr '16 | 2nd Qtr '15 | ||||||||
Credit-related charge-offs | $ | 59 | $ | 83 | $ | 35 | |||||
Recoveries | 12 | 25 | 17 | ||||||||
Net credit-related charge-offs | 47 | 58 | 18 | ||||||||
Net credit-related charge-offs/Average total loans | 0.38 | % | 0.49 | % | 0.15 | % | |||||
Provision for credit losses | $ | 49 | $ | 148 | $ | 47 | |||||
Nonperforming loans | 613 | 689 | 361 | ||||||||
Nonperforming assets (NPAs) | 635 | 714 | 370 | ||||||||
NPAs/Total loans and foreclosed property | 1.26 | % | 1.45 | % | 0.74 | % | |||||
Loans past due 90 days or more and still accruing | $ | 35 | $ | 13 | $ | 18 | |||||
Allowance for loan losses | 729 | 724 | 618 | ||||||||
Allowance for credit losses on lending-related commitments (a) | 43 | 46 | 50 | ||||||||
Total allowance for credit losses | 772 | 770 | 668 | ||||||||
Allowance for loan losses/Period-end total loans | 1.45 | % | 1.47 | % | 1.24 | % | |||||
Allowance for loan losses/Nonperforming loans | 119 | 105 | 171 |
(a) | Included in "Accrued expenses and other liabilities" on the consolidated balance sheets. |
• | Energy business line loans were $2.7 billion at June 30, 2016 compared to $3.1 billion at March 31, 2016. |
◦ | Criticized Energy loans decreased $281 million, to $1.6 billion, including a $77 million decrease in nonaccrual loans. |
◦ | Energy net charge-offs were $32 million, compared to $42 million in the first quarter 2016. |
◦ | The reserve allocation for loans in the Energy business line exceeded 8 percent at June 30, 2016, up slightly compared to March 31, 2016. |
• | Net charge-offs decreased $11 million to $47 million, or 0.38 percent of average loans, in the second quarter 2016, compared to $58 million, or 0.49 percent, in the first quarter 2016. Aside from Energy, net charge-offs were $15 million, or 13 basis points, for the remainder of the portfolio. |
• | During the second quarter 2016, $107 million of borrower relationships over $2 million were transferred to nonaccrual status, a decrease of $339 million compared to $446 million transferred during the first quarter. Second quarter 2016 transfers to nonaccrual included $51 million from Energy, compared to $349 million in the first quarter. |
• | Criticized loans decreased $377 million to $3.6 billion at June 30, 2016, compared to $3.9 billion at March 31, 2016, primarily as a result of the decrease in criticized Energy loans. Criticized loans are generally consistent with the Special Mention, Substandard and Doubtful categories defined by regulatory authorities. |
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COMERICA REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS - 6
Full-Year 2016 Outlook
Management expectations for full-year 2016 compared to full-year 2015, assuming a continuation of the current economic and low-rate environment, are as follows.
• | Average loans modestly higher, in line with Gross Domestic Product growth, reflecting a continued decline in Energy more than offset by increases in most other lines of business. Seasonality in National Dealer Services, Mortgage Banker and Middle Market to impact the second half of the year. |
• | Net interest income higher, primarily reflecting the benefits from the December 2015 short-term rate increase, loan growth and a larger securities portfolio. |
• | Provision for credit losses higher, reflecting the first quarter 2016 reserve build for Energy, with net charge-offs for the remainder of the year between 35 basis points and 45 basis points. Additional reserve changes dependent on developments in the oil and gas sector. Continued solid credit quality in the remainder of the portfolio, with metrics, absent Energy, better than historical norms. |
• | Noninterest income modestly higher, with continued focus on cross-sell opportunities, including card, fiduciary and brokerage services offset by lower market-driven fees, including commercial lending fees, investment banking fees, derivative income and warrant income. Benefits from GEAR Up expected to begin in early 2017. |
• | Noninterest expenses higher, with an estimated $90 million to $110 million in restructuring expense, related GEAR Up expense savings of approximately $20 million, increased outside processing in line with growing revenue, higher FDIC insurance expense in part due to regulatory surcharge, and typical inflationary pressures. Additionally, 2015 benefited from $33 million in legal reserve releases, which is offset by lower pension expense in 2016. |
• | Income tax expense to approximate 30 percent of pre-tax income. |
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COMERICA REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS - 7
Business Segments
Comerica's operations are strategically aligned into three major business segments: the Business Bank, the Retail Bank and Wealth Management. The Finance Division is also reported as a segment. The financial results below are based on the internal business unit structure of the Corporation and methodologies in effect at June 30, 2016. The accompanying narrative addresses second quarter 2016 results compared to first quarter 2016.
The following table presents net income (loss) by business segment.
(dollar amounts in millions) | 2nd Qtr '16 | 1st Qtr '16 | 2nd Qtr '15 | ||||||||||||||
Business Bank | $ | 154 | 93 | % | $ | 94 | 74 | % | $ | 181 | 81 | % | |||||
Retail Bank | (2 | ) | (1 | ) | 11 | 9 | 18 | 8 | |||||||||
Wealth Management | 13 | 8 | 22 | 17 | 26 | 11 | |||||||||||
165 | 100 | % | 127 | 100 | % | 225 | 100 | % | |||||||||
Finance | (62 | ) | (66 | ) | (89 | ) | |||||||||||
Other (a) | 1 | (1 | ) | (1 | ) | ||||||||||||
Total | $ | 104 | $ | 60 | $ | 135 |
(a) Includes items not directly associated with the three major business segments or the Finance Division.
Business Bank
(dollar amounts in millions) | 2nd Qtr '16 | 1st Qtr '16 | 2nd Qtr '15 | |||||||||
Net interest income | $ | 355 | $ | 362 | $ | 373 | ||||||
Provision for credit losses | 46 | 151 | 61 | |||||||||
Noninterest income | 142 | 135 | 138 | |||||||||
Noninterest expenses | 222 | (a) | 207 | 175 | ||||||||
Net income | 154 | 94 | 181 | |||||||||
Net credit-related charge-offs | 42 | 57 | 23 | |||||||||
Selected average balances: | ||||||||||||
Assets | 39,617 | 38,635 | 39,134 | |||||||||
Loans | 38,574 | 37,561 | 38,109 | |||||||||
Deposits | 28,429 | 29,108 | 30,229 |
(a) | Included restructuring charge of $26 million in the second quarter 2016. |
• | Average loans increased $1.0 billion, primarily reflecting increases in Commercial Real Estate, Mortgage Banker Finance and National Dealer Services, partially offset by a decrease in Energy. |
• | Average deposits decreased $679 million, primarily reflecting decreases in Municipalities and Corporate Banking, partially offset by an increase in Mortgage Banker Finance. |
• | Net interest income decreased $7 million, primarily reflecting the impact of an increase in net funds transfer pricing (FTP) charges and lower loan yields, largely due to the impact of nonaccrual loans and a negative residual value adjustment to assets in the leasing portfolio, partially offset by the benefit from the increase in average loans. The increase in net FTP charges primarily reflected an increase in the cost of funds as well as lower funding credits due to the decrease in average deposits. |
• | The provision for credit losses decreased $105 million, primarily reflecting a decrease in Energy, partially offset by increases in Commercial Real Estate, National Dealer Services, and Technology and Life Sciences. |
• | Noninterest income increased $7 million, primarily due to increases in syndication agent fees, card fees and customer derivative income. |
• | Noninterest expenses increased $15 million, primarily due to second quarter 2016 restructuring charges. Excluding restructuring charges, noninterest expenses decreased $11 million, primarily reflecting an $8 million gain from the sale of leased assets and a decrease in salaries and benefits expense, partially offset by an increase in outside processing fees tied to revenue generating activities. |
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COMERICA REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS - 8
Retail Bank
(dollar amounts in millions) | 2nd Qtr '16 | 1st Qtr '16 | 2nd Qtr '15 | |||||||||
Net interest income | $ | 155 | $ | 156 | $ | 155 | ||||||
Provision for credit losses | 1 | 3 | (8 | ) | ||||||||
Noninterest income | 48 | 43 | 46 | |||||||||
Noninterest expenses | 205 | (a) | 179 | 181 | ||||||||
Net income | (2 | ) | 11 | 18 | ||||||||
Net credit-related charge-offs | 1 | 2 | 1 | |||||||||
Selected average balances: | ||||||||||||
Assets | 6,557 | 6,544 | 6,459 | |||||||||
Loans | 5,879 | 5,867 | 5,770 | |||||||||
Deposits | 23,546 | 23,110 | 22,747 |
(a) | Included restructuring charge of $19 million in the second quarter 2016. |
• | Average deposits increased $436 million, primarily reflecting seasonal increases. Balances increased in both interest-bearing and noninterest-bearing deposits. |
• | Net interest income decreased $1 million, primarily due to lower loan yields, partially offset by the benefit provided by the increase in average deposits. |
• | The provision for credit losses decreased $2 million, primarily due to a decrease in Small Business. |
• | Noninterest income increased $5 million, primarily reflecting the impact of a securities loss in the first quarter 2016 and an increase in card fees. |
• | Noninterest expenses increased $26 million, primarily due to second quarter 2016 restructuring charges. Excluding restructuring charges, noninterest expenses increased $7 million, primarily reflecting an increase in outside processing expenses and smaller increases in several other categories. |
Wealth Management
(dollar amounts in millions) | 2nd Qtr '16 | 1st Qtr '16 | 2nd Qtr '15 | |||||||||
Net interest income | $ | 42 | $ | 43 | $ | 45 | ||||||
Provision for credit losses | 3 | (5 | ) | (9 | ) | |||||||
Noninterest income | 62 | 59 | 60 | |||||||||
Noninterest expenses | 81 | (a) | 73 | 74 | ||||||||
Net income | 13 | 22 | 26 | |||||||||
Net credit-related charge-offs (recoveries) | 4 | (1 | ) | (5 | ) | |||||||
Selected average balances: | ||||||||||||
Assets | 5,215 | 5,162 | 5,153 | |||||||||
Loans | 5,016 | 4,964 | 4,954 | |||||||||
Deposits | 4,213 | 4,171 | 4,060 |
(a) | Included restructuring charge of $8 million in the second quarter 2016. |
• | Average loans increased $52 million, primarily reflecting an increase in Private Banking. |
• | Average deposits increased $42 million, primarily reflecting increases in money market and checking deposits as well as noninterest-bearing deposits. |
• | The provision for credit losses increased $8 million, from a negative provision of $5 million in the first quarter 2016 to a provision of $3 million in the second quarter 2016. |
• | Noninterest income increased $3 million, primarily due to an increase in fiduciary income. |
• | Noninterest expenses increased $8 million, primarily due to second quarter 2016 restructuring charges. Excluding restructuring charges, noninterest expenses were stable. |
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COMERICA REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS - 9
Geographic Market Segments
Comerica also provides market segment results for three primary geographic markets: Michigan, California and Texas. In addition to the three primary geographic markets, Other Markets is also reported as a market segment. Other Markets includes Florida, Arizona, the International Finance division and businesses that have a significant presence outside of the three primary geographic markets. The tables below present the geographic market results based on the methodologies in effect at June 30, 2016.
The following table presents net income (loss) by market segment.
(dollar amounts in millions) | 2nd Qtr '16 | 1st Qtr '16 | 2nd Qtr '15 | ||||||||||||||
Michigan | $ | 57 | 34 | % | $ | 71 | 56 | % | $ | 98 | 44 | % | |||||
California | 50 | 30 | 73 | 58 | 71 | 31 | |||||||||||
Texas | 3 | 2 | (76 | ) | (60 | ) | 14 | 6 | |||||||||
Other Markets | 55 | 34 | 59 | 46 | 42 | 19 | |||||||||||
165 | 100 | % | 127 | 100 | % | 225 | 100 | % | |||||||||
Finance & Other (a) | (61 | ) | (67 | ) | (90 | ) | |||||||||||
Total | $ | 104 | $ | 60 | $ | 135 |
(a) Includes items not directly associated with the geographic markets.
• | Average loans increased $689 million in Other Markets, primarily reflecting an increase in Mortgage Banker Finance; $425 million in California, primarily reflecting increases in Commercial Real Estate and National Dealer Services; and $77 million in Texas, mostly due to increases in Commercial Real Estate and Private Banking, partially offset by a decrease in Energy. Average loans decreased $114 million in Michigan. |
• | Average deposits decreased $322 million in Texas and $143 million in Michigan, with both markets primarily reflecting decreases in Municipalities and Corporate Banking, partially offset by an increase in Retail Banking. Average deposits increased $279 million in California, reflecting increases in most lines of business. |
• | Net interest income decreased $9 million in Michigan and $4 million in Texas, and increased $1 million in California. The decrease in Michigan primarily reflected a decrease in loan yields, largely due to the impact of the negative residual value adjustment to assets in the leasing portfolio and lower nonaccrual interest recoveries in the second quarter, lower FTP credits resulting from a decrease in average deposits, and the impact of a decrease in average loans. The decrease in Texas primarily reflected lower FTP credits resulting from a decrease in average deposits and lower loan yields, largely due to the full quarter impact of loans transferred to nonaccrual in the first quarter 2016 and a decrease in accretion on the acquired loan portfolio. In California, the benefit from an increase in average loans was partially offset by an increase in net FTP charges, reflecting an increase in the cost of funds and a decrease in the deposit crediting rate. |
• | The provision for credit losses decreased $137 million in Texas, and increased $23 million California and $9 million in Michigan. The decrease in Texas primarily reflected the impact of the reserve build for Energy in the first quarter 2016. In California, the increased provision primarily reflected increases in National Dealer Services, Private Banking and general Middle Market. The increase in Michigan primarily reflected an increased provision in Commercial Real Estate. |
• | Noninterest income increased $5 million in Michigan, $1 million in Texas and $1 million in California. The increase in Michigan was primarily due to the impact of a securities loss in the first quarter 2016, an increase in customer derivative income and smaller increases in several other categories. |
• | Noninterest expenses increased $16 million in California, $13 million in Texas and $8 million in Michigan. Excluding restructuring charges, noninterest expenses were unchanged in California, and decreased $2 million in Texas and $7 million in Michigan. The decrease in Michigan primarily reflected an $8 million gain from the sale of leased assets in the second quarter. |
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COMERICA REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS - 10
Michigan Market
(dollar amounts in millions) | 2nd Qtr '16 | 1st Qtr '16 | 2nd Qtr '15 | |||||||||
Net interest income | $ | 166 | $ | 175 | $ | 178 | ||||||
Provision for credit losses | 3 | (6 | ) | (13 | ) | |||||||
Noninterest income | 81 | 76 | 86 | |||||||||
Noninterest expenses | 159 | (a) | 151 | 129 | ||||||||
Net income | 57 | 71 | 98 | |||||||||
Net credit-related charge-offs (recoveries) | — | 5 | (1 | ) | ||||||||
Selected average balances: | ||||||||||||
Assets | 13,299 | 13,402 | 13,851 | |||||||||
Loans | 12,660 | 12,774 | 13,290 | |||||||||
Deposits | 21,553 | 21,696 | 21,706 |
(a) | Included restructuring charge of $15 million in the second quarter 2016. |
California Market
(dollar amounts in millions) | 2nd Qtr '16 | 1st Qtr '16 | 2nd Qtr '15 | |||||||||
Net interest income | $ | 178 | $ | 177 | $ | 180 | ||||||
Provision for credit losses | 17 | (6 | ) | 4 | ||||||||
Noninterest income | 39 | 38 | 36 | |||||||||
Noninterest expenses | 120 | (a) | 104 | 99 | ||||||||
Net income | 50 | 73 | 71 | |||||||||
Net credit-related charge-offs | 17 | 8 | 6 | |||||||||
Selected average balances: | ||||||||||||
Assets | 17,997 | 17,541 | 16,696 | |||||||||
Loans | 17,708 | 17,283 | 16,429 | |||||||||
Deposits | 16,933 | 16,654 | 17,275 |
(a) | Included restructuring charge of $16 million in the second quarter 2016. |
Texas Market
(dollar amounts in millions) | 2nd Qtr '16 | 1st Qtr '16 | 2nd Qtr '15 | |||||||||
Net interest income | $ | 119 | $ | 123 | $ | 130 | ||||||
Provision for credit losses | 32 | 169 | 43 | |||||||||
Noninterest income | 31 | 30 | 30 | |||||||||
Noninterest expenses | 113 | (a) | 100 | 93 | ||||||||
Net income (loss) | 3 | (76 | ) | 14 | ||||||||
Net credit-related charge-offs | 31 | 47 | 5 | |||||||||
Selected average balances: | ||||||||||||
Assets | 11,287 | 11,295 | 11,878 | |||||||||
Loans | 10,840 | 10,763 | 11,254 | |||||||||
Deposits | 10,052 | 10,374 | 10,959 |
(a) | Included restructuring charge of $15 million in the second quarter 2016. |
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COMERICA REPORTS SECOND QUARTER 2016 FINANCIAL RESULTS - 11
Conference Call and Webcast
Comerica will host a conference call to review second quarter 2016 financial results at 7 a.m. CT Tuesday, July 19, 2016. Interested parties may access the conference call by calling (877) 523-5249 or (210) 591-1147 (event ID No. 22809119). 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 SECOND QUARTER 2016 FINANCIAL RESULTS - 12
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, including the GEAR Up initiative, 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 the economic benefits of the GEAR Up initiative, 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; changes in regulation or oversight; Comerica's ability to maintain adequate sources of funding and liquidity; the effects of more stringent capital or liquidity requirements; declines or other changes in the businesses or industries of Comerica's customers, in particular the energy industry; unfavorable developments concerning credit quality; operational difficulties, failure of technology infrastructure or information security incidents; reliance on other companies to provide certain key components of business infrastructure; factors impacting noninterest expenses which are beyond Comerica's control; changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing; reductions in Comerica's credit rating; 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; the interdependence of financial service companies; the implementation of Comerica's strategies and business initiatives; 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; 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, droughts and floods; changes in accounting standards and the critical nature of Comerica's accounting policies. Comerica cautions that the foregoing list of factors is not exclusive. For discussion of factors that may cause actual results to differ from expectations, please refer to our filings with the Securities and Exchange Commission. In particular, please refer to “Item 1A. Risk Factors” beginning on page 12 of Comerica's Annual Report on Form 10-K for the year ended December 31, 2015 and “Item 1A. Risk Factors” beginning on page 54 of Comerica’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. 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 |
Chelsea R. Smith | |
(214) 462-6834 |
CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | March 31, | June 30, | June 30, | |||||||||||||
(in millions, except per share data) | 2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||
PER COMMON SHARE AND COMMON STOCK DATA | ||||||||||||||||
Diluted net income | $ | 0.58 | $ | 0.34 | $ | 0.73 | $ | 0.92 | $ | 1.46 | ||||||
Cash dividends declared | 0.22 | 0.21 | 0.21 | 0.43 | 0.41 | |||||||||||
Average diluted shares (in thousands) | 177,240 | 176,055 | 182,422 | 176,614 | 182,281 | |||||||||||
KEY RATIOS | ||||||||||||||||
Return on average common shareholders' equity | 5.44 | % | 3.13 | % | 7.21 | % | 4.28 | % | 7.20 | % | ||||||
Return on average assets | 0.59 | 0.34 | 0.79 | 0.47 | 0.78 | |||||||||||
Common equity tier 1 and tier 1 risk-based capital ratio (a) | 10.48 | 10.58 | 10.40 | |||||||||||||
Total risk-based capital ratio (a) | 12.73 | 12.84 | 12.38 | |||||||||||||
Leverage ratio (a) | 10.41 | 10.60 | 10.56 | |||||||||||||
Common equity ratio | 10.79 | 11.08 | 10.76 | |||||||||||||
Tangible common equity ratio (b) | 9.98 | 10.23 | 9.92 | |||||||||||||
AVERAGE BALANCES | ||||||||||||||||
Commercial loans | $ | 31,511 | $ | 30,814 | $ | 31,788 | $ | 31,162 | $ | 31,442 | ||||||
Real estate construction loans | 2,429 | 2,114 | 1,807 | 2,272 | 1,872 | |||||||||||
Commercial mortgage loans | 9,033 | 8,961 | 8,672 | 8,997 | 8,627 | |||||||||||
Lease financing | 730 | 726 | 795 | 728 | 796 | |||||||||||
International loans | 1,396 | 1,419 | 1,453 | 1,408 | 1,482 | |||||||||||
Residential mortgage loans | 1,880 | 1,892 | 1,877 | 1,886 | 1,866 | |||||||||||
Consumer loans | 2,490 | 2,466 | 2,441 | 2,478 | 2,409 | |||||||||||
Total loans | 49,469 | 48,392 | 48,833 | 48,931 | 48,494 | |||||||||||
Earning assets | 65,597 | 64,123 | 63,981 | 64,860 | 63,732 | |||||||||||
Total assets | 70,668 | 69,228 | 68,963 | 69,948 | 68,852 | |||||||||||
Noninterest-bearing deposits | 28,376 | 28,052 | 27,365 | 28,214 | 27,033 | |||||||||||
Interest-bearing deposits | 28,145 | 28,656 | 30,033 | 28,401 | 30,163 | |||||||||||
Total deposits | 56,521 | 56,708 | 57,398 | 56,615 | 57,196 | |||||||||||
Common shareholders' equity | 7,654 | 7,632 | 7,512 | 7,643 | 7,482 | |||||||||||
NET INTEREST INCOME | ||||||||||||||||
Net interest income | $ | 445 | $ | 447 | $ | 421 | $ | 892 | $ | 834 | ||||||
Net interest margin (fully taxable equivalent) | 2.74 | % | 2.81 | % | 2.65 | % | 2.78 | % | 2.65 | % | ||||||
CREDIT QUALITY | ||||||||||||||||
Total nonperforming assets | $ | 635 | $ | 714 | $ | 370 | ||||||||||
Loans past due 90 days or more and still accruing | 35 | 13 | 18 | |||||||||||||
Net credit-related charge-offs | 47 | 58 | 19 | $ | 105 | $ | 27 | |||||||||
Allowance for loan losses | 729 | 724 | 618 | |||||||||||||
Allowance for credit losses on lending-related commitments | 43 | 46 | 50 | |||||||||||||
Total allowance for credit losses | 772 | 770 | 668 | |||||||||||||
Allowance for loan losses as a percentage of total loans | 1.45 | % | 1.47 | % | 1.24 | % | ||||||||||
Net credit-related charge-offs as a percentage of average total loans | 0.38 | 0.49 | 0.15 | 0.43 | % | 0.11 | % | |||||||||
Nonperforming assets as a percentage of total loans and foreclosed property | 1.26 | 1.45 | 0.74 | |||||||||||||
Allowance for loan losses as a percentage of total nonperforming loans | 119 | 105 | 171 |
(a) | June 30, 2016 ratios are estimated. |
(b) | See Reconciliation of Non-GAAP Financial Measures. |
13
CONSOLIDATED BALANCE SHEETS | ||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||
June 30, | March 31, | December 31, | June 30, | |||||||||
(in millions, except share data) | 2016 | 2016 | 2015 | 2015 | ||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||
ASSETS | ||||||||||||
Cash and due from banks | $ | 1,172 | $ | 977 | $ | 1,157 | $ | 1,148 | ||||
Interest-bearing deposits with banks | 2,938 | 2,025 | 4,990 | 4,817 | ||||||||
Other short-term investments | 100 | 94 | 113 | 119 | ||||||||
Investment securities available-for-sale | 10,712 | 10,607 | 10,519 | 8,267 | ||||||||
Investment securities held-to-maturity | 1,807 | 1,907 | 1,981 | 1,952 | ||||||||
Commercial loans | 32,360 | 31,562 | 31,659 | 32,723 | ||||||||
Real estate construction loans | 2,553 | 2,290 | 2,001 | 1,795 | ||||||||
Commercial mortgage loans | 9,038 | 8,982 | 8,977 | 8,674 | ||||||||
Lease financing | 684 | 731 | 724 | 786 | ||||||||
International loans | 1,365 | 1,455 | 1,368 | 1,420 | ||||||||
Residential mortgage loans | 1,856 | 1,874 | 1,870 | 1,865 | ||||||||
Consumer loans | 2,524 | 2,483 | 2,485 | 2,478 | ||||||||
Total loans | 50,380 | 49,377 | 49,084 | 49,741 | ||||||||
Less allowance for loan losses | (729 | ) | (724 | ) | (634 | ) | (618 | ) | ||||
Net loans | 49,651 | 48,653 | 48,450 | 49,123 | ||||||||
Premises and equipment | 544 | 541 | 550 | 541 | ||||||||
Accrued income and other assets | 4,356 | 4,203 | 4,117 | 3,978 | ||||||||
Total assets | $ | 71,280 | $ | 69,007 | $ | 71,877 | $ | 69,945 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
Noninterest-bearing deposits | $ | 28,559 | $ | 28,025 | $ | 30,839 | $ | 28,167 | ||||
Money market and interest-bearing checking deposits | 22,539 | 22,872 | 23,532 | 23,786 | ||||||||
Savings deposits | 2,022 | 2,006 | 1,898 | 1,841 | ||||||||
Customer certificates of deposit | 3,230 | 3,401 | 3,552 | 4,367 | ||||||||
Foreign office time deposits | 24 | 47 | 32 | 99 | ||||||||
Total interest-bearing deposits | 27,815 | 28,326 | 29,014 | 30,093 | ||||||||
Total deposits | 56,374 | 56,351 | 59,853 | 58,260 | ||||||||
Short-term borrowings | 12 | 514 | 23 | 56 | ||||||||
Accrued expenses and other liabilities | 1,279 | 1,389 | 1,383 | 1,265 | ||||||||
Medium- and long-term debt | 5,921 | 3,109 | 3,058 | 2,841 | ||||||||
Total liabilities | 63,586 | 61,363 | 64,317 | 62,422 | ||||||||
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 | 2,165 | 2,158 | 2,173 | 2,158 | ||||||||
Accumulated other comprehensive loss | (295 | ) | (328 | ) | (429 | ) | (396 | ) | ||||
Retained earnings | 7,157 | 7,097 | 7,084 | 6,908 | ||||||||
Less cost of common stock in treasury - 54,247,325 shares at 6/30/16, 53,086,733 shares at 3/31/16, 52,457,113 shares at 12/31/15, and 49,803,515 shares at 6/30/15 | (2,474 | ) | (2,424 | ) | (2,409 | ) | (2,288 | ) | ||||
Total shareholders' equity | 7,694 | 7,644 | 7,560 | 7,523 | ||||||||
Total liabilities and shareholders' equity | $ | 71,280 | $ | 69,007 | $ | 71,877 | $ | 69,945 |
14
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | |||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
(in millions, except per share data) | 2016 | 2015 | 2016 | 2015 | |||||||||
INTEREST INCOME | |||||||||||||
Interest and fees on loans | $ | 406 | $ | 388 | $ | 812 | $ | 766 | |||||
Interest on investment securities | 62 | 53 | 124 | 106 | |||||||||
Interest on short-term investments | 5 | 3 | 9 | 7 | |||||||||
Total interest income | 473 | 444 | 945 | 879 | |||||||||
INTEREST EXPENSE | |||||||||||||
Interest on deposits | 10 | 11 | 20 | 22 | |||||||||
Interest on medium- and long-term debt | 18 | 12 | 33 | 23 | |||||||||
Total interest expense | 28 | 23 | 53 | 45 | |||||||||
Net interest income | 445 | 421 | 892 | 834 | |||||||||
Provision for credit losses | 49 | 47 | 197 | 61 | |||||||||
Net interest income after provision for credit losses | 396 | 374 | 695 | 773 | |||||||||
NONINTEREST INCOME | |||||||||||||
Card fees | 77 | 69 | 151 | 132 | |||||||||
Service charges on deposit accounts | 55 | 56 | 110 | 111 | |||||||||
Fiduciary income | 49 | 48 | 95 | 95 | |||||||||
Commercial lending fees | 22 | 22 | 42 | 47 | |||||||||
Letter of credit fees | 13 | 13 | 26 | 26 | |||||||||
Bank-owned life insurance | 9 | 10 | 18 | 19 | |||||||||
Foreign exchange income | 11 | 9 | 21 | 19 | |||||||||
Brokerage fees | 5 | 4 | 9 | 8 | |||||||||
Net securities losses | (1 | ) | — | (3 | ) | (2 | ) | ||||||
Other noninterest income | 29 | 27 | 46 | 54 | |||||||||
Total noninterest income | 269 | 258 | 515 | 509 | |||||||||
NONINTEREST EXPENSES | |||||||||||||
Salaries and benefits expense | 247 | 251 | 495 | 504 | |||||||||
Outside processing fee expense | 84 | 83 | 163 | 156 | |||||||||
Net occupancy expense | 39 | 39 | 77 | 77 | |||||||||
Equipment expense | 14 | 13 | 27 | 26 | |||||||||
Restructuring charges | 53 | — | 53 | — | |||||||||
Software expense | 30 | 24 | 59 | 47 | |||||||||
FDIC insurance expense | 14 | 9 | 25 | 18 | |||||||||
Advertising expense | 6 | 5 | 10 | 11 | |||||||||
Litigation-related expense | — | (30 | ) | — | (29 | ) | |||||||
Other noninterest expenses | 32 | 39 | 70 | 78 | |||||||||
Total noninterest expenses | 519 | 433 | 979 | 888 | |||||||||
Income before income taxes | 146 | 199 | 231 | 394 | |||||||||
Provision for income taxes | 42 | 64 | 67 | 125 | |||||||||
NET INCOME | 104 | 135 | 164 | 269 | |||||||||
Less income allocated to participating securities | 1 | 1 | 2 | 3 | |||||||||
Net income attributable to common shares | $ | 103 | $ | 134 | $ | 162 | $ | 266 | |||||
Earnings per common share: | |||||||||||||
Basic | $ | 0.60 | $ | 0.76 | $ | 0.94 | $ | 1.51 | |||||
Diluted | 0.58 | 0.73 | 0.92 | 1.46 | |||||||||
Comprehensive income | 137 | 109 | 298 | 285 | |||||||||
Cash dividends declared on common stock | 38 | 37 | 75 | 73 | |||||||||
Cash dividends declared per common share | 0.22 | 0.21 | 0.43 | 0.41 |
15
CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | |||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||||||
Second | First | Fourth | Third | Second | Second Quarter 2016 Compared To: | ||||||||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Quarter | First Quarter 2016 | Second Quarter 2015 | |||||||||||||||||||||
(in millions, except per share data) | 2016 | 2016 | 2015 | 2015 | 2015 | Amount | Percent | Amount | Percent | ||||||||||||||||||
INTEREST INCOME | |||||||||||||||||||||||||||
Interest and fees on loans | $ | 406 | $ | 406 | $ | 395 | $ | 390 | $ | 388 | $ | — | — | % | $ | 18 | 5 | % | |||||||||
Interest on investment securities | 62 | 62 | 56 | 54 | 53 | — | — | 9 | 18 | ||||||||||||||||||
Interest on short-term investments | 5 | 4 | 6 | 4 | 3 | 1 | 10 | 2 | 44 | ||||||||||||||||||
Total interest income | 473 | 472 | 457 | 448 | 444 | 1 | — | 29 | 7 | ||||||||||||||||||
INTEREST EXPENSE | |||||||||||||||||||||||||||
Interest on deposits | 10 | 10 | 10 | 11 | 11 | — | — | (1 | ) | (11 | ) | ||||||||||||||||
Interest on medium- and long-term debt | 18 | 15 | 14 | 15 | 12 | 3 | 20 | 6 | 49 | ||||||||||||||||||
Total interest expense | 28 | 25 | 24 | 26 | 23 | 3 | 10 | 5 | 22 | ||||||||||||||||||
Net interest income | 445 | 447 | 433 | 422 | 421 | (2 | ) | — | 24 | 6 | |||||||||||||||||
Provision for credit losses | 49 | 148 | 60 | 26 | 47 | (99 | ) | (67 | ) | 2 | 5 | ||||||||||||||||
Net interest income after provision for credit losses | 396 | 299 | 373 | 396 | 374 | 97 | 33 | 22 | 6 | ||||||||||||||||||
NONINTEREST INCOME | |||||||||||||||||||||||||||
Card fees | 77 | 74 | 75 | 72 | 69 | 3 | 4 | 8 | 11 | ||||||||||||||||||
Service charges on deposit accounts | 55 | 55 | 55 | 57 | 56 | — | — | (1 | ) | (3 | ) | ||||||||||||||||
Fiduciary income | 49 | 46 | 45 | 47 | 48 | 3 | 6 | 1 | 1 | ||||||||||||||||||
Commercial lending fees | 22 | 20 | 30 | 22 | 22 | 2 | 9 | — | — | ||||||||||||||||||
Letter of credit fees | 13 | 13 | 14 | 13 | 13 | — | — | — | — | ||||||||||||||||||
Bank-owned life insurance | 9 | 9 | 11 | 10 | 10 | — | — | (1 | ) | (4 | ) | ||||||||||||||||
Foreign exchange income | 11 | 10 | 11 | 10 | 9 | 1 | 3 | 2 | 16 | ||||||||||||||||||
Brokerage fees | 5 | 4 | 4 | 5 | 4 | 1 | 16 | 1 | 6 | ||||||||||||||||||
Net securities losses | (1 | ) | (2 | ) | — | — | — | 1 | 89 | (1 | ) | n/m | |||||||||||||||
Other noninterest income | 29 | 17 | 23 | 26 | 27 | 12 | 70 | 2 | 12 | ||||||||||||||||||
Total noninterest income | 269 | 246 | 268 | 262 | 258 | 23 | 9 | 11 | 4 | ||||||||||||||||||
NONINTEREST EXPENSES | |||||||||||||||||||||||||||
Salaries and benefits expense | 247 | 248 | 262 | 243 | 251 | (1 | ) | (1 | ) | (4 | ) | (2 | ) | ||||||||||||||
Outside processing fee expense | 84 | 79 | 81 | 84 | 83 | 5 | 7 | 1 | 2 | ||||||||||||||||||
Net occupancy expense | 39 | 38 | 41 | 41 | 39 | 1 | 4 | — | — | ||||||||||||||||||
Equipment expense | 14 | 13 | 14 | 13 | 13 | 1 | 6 | 1 | 7 | ||||||||||||||||||
Restructuring charges | 53 | — | — | — | — | 53 | n/m | 53 | n/m | ||||||||||||||||||
Software expense | 30 | 29 | 26 | 26 | 24 | 1 | 7 | 6 | 28 | ||||||||||||||||||
FDIC insurance expense | 14 | 11 | 10 | 9 | 9 | 3 | 14 | 5 | 55 | ||||||||||||||||||
Advertising expense | 6 | 4 | 7 | 6 | 5 | 2 | 93 | 1 | 22 | ||||||||||||||||||
Litigation-related expense | — | — | — | (3 | ) | (30 | ) | — | — | 30 | n/m | ||||||||||||||||
Other noninterest expenses | 32 | 38 | 43 | 40 | 39 | (6 | ) | (17 | ) | (7 | ) | (19 | ) | ||||||||||||||
Total noninterest expenses | 519 | 460 | 484 | 459 | 433 | 59 | 13 | 86 | 20 | ||||||||||||||||||
Income before income taxes | 146 | 85 | 157 | 199 | 199 | 61 | 73 | (53 | ) | (27 | ) | ||||||||||||||||
Provision for income taxes | 42 | 25 | 41 | 63 | 64 | 17 | 68 | (22 | ) | (34 | ) | ||||||||||||||||
NET INCOME | 104 | 60 | 116 | 136 | 135 | 44 | 74 | (31 | ) | (23 | ) | ||||||||||||||||
Less income allocated to participating securities | 1 | 1 | 1 | 2 | 1 | — | — | — | — | ||||||||||||||||||
Net income attributable to common shares | $ | 103 | $ | 59 | $ | 115 | $ | 134 | $ | 134 | $ | 44 | 74 | % | $ | (31 | ) | (23 | )% | ||||||||
Earnings per common share: | |||||||||||||||||||||||||||
Basic | $ | 0.60 | $ | 0.34 | $ | 0.65 | $ | 0.76 | $ | 0.76 | $ | 0.26 | 76 | % | $ | (0.16 | ) | (21 | )% | ||||||||
Diluted | 0.58 | 0.34 | 0.64 | 0.74 | 0.73 | 0.24 | 71 | (0.15 | ) | (21 | ) | ||||||||||||||||
Comprehensive income | 137 | 161 | 32 | 187 | 109 | (24 | ) | (15 | ) | 28 | 27 | ||||||||||||||||
Cash dividends declared on common stock | 38 | 37 | 37 | 37 | 37 | 1 | 4 | 1 | 7 | ||||||||||||||||||
Cash dividends declared per common share | 0.22 | 0.21 | 0.21 | 0.21 | 0.21 | 0.01 | 5 | 0.01 | 5 |
n/m - not meaningful
16
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
2016 | 2015 | |||||||||||||||
(in millions) | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | |||||||||||
Balance at beginning of period | $ | 724 | $ | 634 | $ | 622 | $ | 618 | $ | 601 | ||||||
Loan charge-offs: | ||||||||||||||||
Commercial | 48 | 72 | 73 | 30 | 17 | |||||||||||
Commercial mortgage | — | — | 1 | — | 2 | |||||||||||
Lease financing | — | — | — | — | 1 | |||||||||||
International | 4 | 3 | — | 1 | 11 | |||||||||||
Residential mortgage | — | — | — | — | 1 | |||||||||||
Consumer | 2 | 2 | 2 | 3 | 3 | |||||||||||
Total loan charge-offs | 54 | 77 | 76 | 34 | 35 | |||||||||||
Recoveries on loans previously charged-off: | ||||||||||||||||
Commercial | 9 | 12 | 6 | 8 | 10 | |||||||||||
Real estate construction | — | — | — | — | 1 | |||||||||||
Commercial mortgage | 2 | 12 | 11 | 2 | 5 | |||||||||||
Residential mortgage | — | — | 1 | — | — | |||||||||||
Consumer | 1 | 1 | 7 | 1 | 1 | |||||||||||
Total recoveries | 12 | 25 | 25 | 11 | 17 | |||||||||||
Net loan charge-offs | 42 | 52 | 51 | 23 | 18 | |||||||||||
Provision for loan losses | 47 | 141 | 63 | 28 | 35 | |||||||||||
Foreign currency translation adjustment | — | 1 | — | (1 | ) | — | ||||||||||
Balance at end of period | $ | 729 | $ | 724 | $ | 634 | $ | 622 | $ | 618 | ||||||
Allowance for loan losses as a percentage of total loans | 1.45 | % | 1.47 | % | 1.29 | % | 1.27 | % | 1.24 | % | ||||||
Net loan charge-offs as a percentage of average total loans | 0.34 | 0.43 | 0.42 | 0.19 | 0.15 |
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LENDING-RELATED COMMITMENTS (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
2016 | 2015 | |||||||||||||||
(in millions) | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | |||||||||||
Balance at beginning of period | $ | 46 | $ | 45 | $ | 48 | $ | 50 | $ | 39 | ||||||
Charge-offs on lending-related commitments (a) | (5 | ) | (6 | ) | — | — | (1 | ) | ||||||||
Provision for credit losses on lending-related commitments | 2 | 7 | (3 | ) | (2 | ) | 12 | |||||||||
Balance at end of period | $ | 43 | $ | 46 | $ | 45 | $ | 48 | $ | 50 | ||||||
Unfunded lending-related commitments sold | $ | 12 | $ | 11 | $ | — | $ | — | $ | 12 |
(a) | Charge-offs result from the sale of unfunded lending-related commitments. |
17
NONPERFORMING ASSETS (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
2016 | 2015 | |||||||||||||||
(in millions) | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | |||||||||||
SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS | ||||||||||||||||
Nonaccrual loans: | ||||||||||||||||
Business loans: | ||||||||||||||||
Commercial | $ | 482 | $ | 547 | $ | 238 | $ | 214 | $ | 186 | ||||||
Real estate construction | — | — | 1 | 1 | 1 | |||||||||||
Commercial mortgage | 44 | 47 | 60 | 66 | 77 | |||||||||||
Lease financing | 6 | 6 | 6 | 8 | 11 | |||||||||||
International | 18 | 27 | 8 | 8 | 9 | |||||||||||
Total nonaccrual business loans | 550 | 627 | 313 | 297 | 284 | |||||||||||
Retail loans: | ||||||||||||||||
Residential mortgage | 26 | 26 | 27 | 31 | 35 | |||||||||||
Consumer: | ||||||||||||||||
Home equity | 28 | 27 | 27 | 28 | 29 | |||||||||||
Other consumer | 1 | 1 | — | 1 | 1 | |||||||||||
Total consumer | 29 | 28 | 27 | 29 | 30 | |||||||||||
Total nonaccrual retail loans | 55 | 54 | 54 | 60 | 65 | |||||||||||
Total nonaccrual loans | 605 | 681 | 367 | 357 | 349 | |||||||||||
Reduced-rate loans | 8 | 8 | 12 | 12 | 12 | |||||||||||
Total nonperforming loans | 613 | 689 | 379 | 369 | 361 | |||||||||||
Foreclosed property | 22 | 25 | 12 | 12 | 9 | |||||||||||
Total nonperforming assets | $ | 635 | $ | 714 | $ | 391 | $ | 381 | $ | 370 | ||||||
Nonperforming loans as a percentage of total loans | 1.22 | % | 1.40 | % | 0.77 | % | 0.75 | % | 0.72 | % | ||||||
Nonperforming assets as a percentage of total loans and foreclosed property | 1.26 | 1.45 | 0.80 | 0.78 | 0.74 | |||||||||||
Allowance for loan losses as a percentage of total nonperforming loans | 119 | 105 | 167 | 169 | 171 | |||||||||||
Loans past due 90 days or more and still accruing | $ | 35 | $ | 13 | $ | 17 | $ | 5 | $ | 18 | ||||||
ANALYSIS OF NONACCRUAL LOANS | ||||||||||||||||
Nonaccrual loans at beginning of period | $ | 681 | $ | 367 | $ | 357 | $ | 349 | $ | 266 | ||||||
Loans transferred to nonaccrual (a) | 107 | 446 | 105 | 69 | 145 | |||||||||||
Nonaccrual business loan gross charge-offs (b) | (52 | ) | (75 | ) | (49 | ) | (31 | ) | (31 | ) | ||||||
Nonaccrual business loans sold (c) | (40 | ) | (21 | ) | — | — | (1 | ) | ||||||||
Payments/Other (d) | (91 | ) | (36 | ) | (46 | ) | (30 | ) | (30 | ) | ||||||
Nonaccrual loans at end of period | $ | 605 | $ | 681 | $ | 367 | $ | 357 | $ | 349 | ||||||
(a) Based on an analysis of nonaccrual loans with book balances greater than $2 million. | ||||||||||||||||
(b) Analysis of gross loan charge-offs: | ||||||||||||||||
Nonaccrual business loans | $ | 52 | $ | 75 | $ | 49 | $ | 31 | $ | 31 | ||||||
Performing business loans | — | — | 25 | — | — | |||||||||||
Consumer and residential mortgage loans | 2 | 2 | 2 | 3 | 4 | |||||||||||
Total gross loan charge-offs | $ | 54 | $ | 77 | $ | 76 | $ | 34 | $ | 35 | ||||||
(c) Analysis of loans sold: | ||||||||||||||||
Nonaccrual business loans | $ | 40 | $ | 21 | $ | — | $ | — | $ | 1 | ||||||
Performing criticized loans | — | — | 3 | — | — | |||||||||||
Total criticized loans sold | $ | 40 | $ | 21 | $ | 3 | $ | — | $ | 1 | ||||||
(d) 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. |
18
ANALYSIS OF NET INTEREST INCOME (unaudited) | |||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||
Six Months Ended | |||||||||||||||||
June 30, 2016 | June 30, 2015 | ||||||||||||||||
Average | Average | Average | Average | ||||||||||||||
(dollar amounts in millions) | Balance | Interest | Rate (a) | Balance | Interest | Rate (a) | |||||||||||
Commercial loans | $ | 31,162 | $ | 500 | 3.24 | % | $ | 31,442 | $ | 475 | 3.06 | % | |||||
Real estate construction loans | 2,272 | 41 | 3.64 | 1,872 | 32 | 3.43 | |||||||||||
Commercial mortgage loans | 8,997 | 158 | 3.53 | 8,627 | 146 | 3.41 | |||||||||||
Lease financing | 728 | 10 | 2.66 | 796 | 12 | 3.12 | |||||||||||
International loans | 1,408 | 26 | 3.64 | 1,482 | 27 | 3.69 | |||||||||||
Residential mortgage loans | 1,886 | 36 | 3.85 | 1,866 | 35 | 3.77 | |||||||||||
Consumer loans | 2,478 | 41 | 3.35 | 2,409 | 39 | 3.23 | |||||||||||
Total loans | 48,931 | 812 | 3.34 | 48,494 | 766 | 3.19 | |||||||||||
Mortgage-backed securities (b) | 9,341 | 102 | 2.21 | 9,064 | 101 | 2.24 | |||||||||||
Other investment securities | 3,004 | 22 | 1.50 | 858 | 5 | 1.13 | |||||||||||
Total investment securities (b) | 12,345 | 124 | 2.04 | 9,922 | 106 | 2.15 | |||||||||||
Interest-bearing deposits with banks | 3,478 | 9 | 0.50 | 5,216 | 7 | 0.25 | |||||||||||
Other short-term investments | 106 | — | 0.76 | 100 | — | 0.75 | |||||||||||
Total earning assets | 64,860 | 945 | 2.94 | 63,732 | 879 | 2.79 | |||||||||||
Cash and due from banks | 1,071 | 1,034 | |||||||||||||||
Allowance for loan losses | (714 | ) | (607 | ) | |||||||||||||
Accrued income and other assets | 4,731 | 4,693 | |||||||||||||||
Total assets | $ | 69,948 | $ | 68,852 | |||||||||||||
Money market and interest-bearing checking deposits | $ | 22,989 | 13 | 0.11 | $ | 23,809 | 13 | 0.11 | |||||||||
Savings deposits | 1,973 | — | 0.02 | 1,810 | — | 0.02 | |||||||||||
Customer certificates of deposit | 3,399 | 7 | 0.40 | 4,423 | 8 | 0.37 | |||||||||||
Foreign office time deposits | 40 | — | 0.34 | 121 | 1 | 1.36 | |||||||||||
Total interest-bearing deposits | 28,401 | 20 | 0.14 | 30,163 | 22 | 0.14 | |||||||||||
Short-term borrowings | 262 | — | 0.45 | 94 | — | 0.05 | |||||||||||
Medium- and long-term debt | 4,083 | 33 | 1.62 | 2,675 | 23 | 1.78 | |||||||||||
Total interest-bearing sources | 32,746 | 53 | 0.32 | 32,932 | 45 | 0.28 | |||||||||||
Noninterest-bearing deposits | 28,214 | 27,033 | |||||||||||||||
Accrued expenses and other liabilities | 1,345 | 1,405 | |||||||||||||||
Total shareholders' equity | 7,643 | 7,482 | |||||||||||||||
Total liabilities and shareholders' equity | $ | 69,948 | $ | 68,852 | |||||||||||||
Net interest income/rate spread | $ | 892 | 2.62 | $ | 834 | 2.51 | |||||||||||
Impact of net noninterest-bearing sources of funds | 0.16 | 0.14 | |||||||||||||||
Net interest margin (as a percentage of average earning assets) | 2.78 | % | 2.65 | % |
(a) | Fully taxable equivalent. |
(b) | Includes investment securities available-for-sale and investment securities held-to-maturity. |
19
ANALYSIS OF NET INTEREST INCOME (unaudited) | ||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | ||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||
(dollar amounts in millions) | Balance | Interest | Rate (a) | Balance | Interest | Rate (a) | Balance | Interest | Rate (a) | |||||||||||||||||
Commercial loans | $ | 31,511 | $ | 251 | 3.23 | % | $ | 30,814 | $ | 249 | 3.25 | % | $ | 31,788 | $ | 242 | 3.07 | % | ||||||||
Real estate construction loans | 2,429 | 22 | 3.62 | 2,114 | 19 | 3.66 | 1,807 | 16 | 3.51 | |||||||||||||||||
Commercial mortgage loans | 9,033 | 78 | 3.47 | 8,961 | 80 | 3.59 | 8,672 | 73 | 3.38 | |||||||||||||||||
Lease financing | 730 | 4 | 1.98 | 726 | 6 | 3.33 | 795 | 6 | 3.19 | |||||||||||||||||
International loans | 1,396 | 13 | 3.63 | 1,419 | 13 | 3.65 | 1,453 | 13 | 3.68 | |||||||||||||||||
Residential mortgage loans | 1,880 | 17 | 3.76 | 1,892 | 19 | 3.94 | 1,877 | 18 | 3.78 | |||||||||||||||||
Consumer loans | 2,490 | 21 | 3.37 | 2,466 | 20 | 3.33 | 2,441 | 20 | 3.25 | |||||||||||||||||
Total loans | 49,469 | 406 | 3.31 | 48,392 | 406 | 3.38 | 48,833 | 388 | 3.20 | |||||||||||||||||
Mortgage-backed securities (b) | 9,326 | 51 | 2.21 | 9,356 | 51 | 2.22 | 9,057 | 50 | 2.23 | |||||||||||||||||
Other investment securities | 3,008 | 11 | 1.50 | 3,001 | 11 | 1.50 | 879 | 3 | 1.16 | |||||||||||||||||
Total investment securities (b) | 12,334 | 62 | 2.03 | 12,357 | 62 | 2.05 | 9,936 | 53 | 2.13 | |||||||||||||||||
Interest-bearing deposits with banks | 3,690 | 5 | 0.50 | 3,265 | 4 | 0.50 | 5,110 | 3 | 0.25 | |||||||||||||||||
Other short-term investments | 104 | — | 0.58 | 109 | — | 0.93 | 102 | — | 0.42 | |||||||||||||||||
Total earning assets | 65,597 | 473 | 2.91 | 64,123 | 472 | 2.97 | 63,981 | 444 | 2.79 | |||||||||||||||||
Cash and due from banks | 1,074 | 1,068 | 1,041 | |||||||||||||||||||||||
Allowance for loan losses | (749 | ) | (680 | ) | (613 | ) | ||||||||||||||||||||
Accrued income and other assets | 4,746 | 4,717 | 4,554 | |||||||||||||||||||||||
Total assets | $ | 70,668 | $ | 69,228 | $ | 68,963 | ||||||||||||||||||||
Money market and interest-bearing checking deposits | $ | 22,785 | 6 | 0.11 | $ | 23,193 | 6 | 0.11 | $ | 23,659 | 6 | 0.11 | ||||||||||||||
Savings deposits | 2,010 | — | 0.02 | 1,936 | — | 0.02 | 1,834 | — | 0.02 | |||||||||||||||||
Customer certificates of deposit | 3,320 | 4 | 0.40 | 3,477 | 4 | 0.40 | 4,422 | 4 | 0.37 | |||||||||||||||||
Foreign office time deposits | 30 | — | 0.35 | 50 | — | 0.33 | 118 | 1 | 1.26 | |||||||||||||||||
Total interest-bearing deposits | 28,145 | 10 | 0.14 | 28,656 | 10 | 0.14 | 30,033 | 11 | 0.14 | |||||||||||||||||
Short-term borrowings | 159 | — | 0.45 | 365 | — | 0.45 | 78 | — | 0.04 | |||||||||||||||||
Medium- and long-term debt | 5,072 | 18 | 1.42 | 3,093 | 15 | 1.94 | 2,661 | 12 | 1.83 | |||||||||||||||||
Total interest-bearing sources | 33,376 | 28 | 0.33 | 32,114 | 25 | 0.32 | 32,772 | 23 | 0.28 | |||||||||||||||||
Noninterest-bearing deposits | 28,376 | 28,052 | 27,365 | |||||||||||||||||||||||
Accrued expenses and other liabilities | 1,262 | 1,430 | 1,314 | |||||||||||||||||||||||
Total shareholders' equity | 7,654 | 7,632 | 7,512 | |||||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 70,668 | $ | 69,228 | $ | 68,963 | ||||||||||||||||||||
Net interest income/rate spread | $ | 445 | 2.58 | $ | 447 | 2.65 | $ | 421 | 2.51 | |||||||||||||||||
Impact of net noninterest-bearing sources of funds | 0.16 | 0.16 | 0.14 | |||||||||||||||||||||||
Net interest margin (as a percentage of average earning assets) | 2.74 | % | 2.81 | % | 2.65 | % |
(a) | Fully taxable equivalent. |
(b) | Includes investment securities available-for-sale and investment securities held-to-maturity. |
20
CONSOLIDATED STATISTICAL DATA (unaudited) | |||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||
(in millions, except per share data) | 2016 | 2016 | 2015 | 2015 | 2015 | ||||||||||
Commercial loans: | |||||||||||||||
Floor plan | $ | 4,120 | $ | 3,902 | $ | 3,939 | $ | 3,538 | $ | 3,840 | |||||
Other | 28,240 | 27,660 | 27,720 | 28,239 | 28,883 | ||||||||||
Total commercial loans | 32,360 | 31,562 | 31,659 | 31,777 | 32,723 | ||||||||||
Real estate construction loans | 2,553 | 2,290 | 2,001 | 1,874 | 1,795 | ||||||||||
Commercial mortgage loans | 9,038 | 8,982 | 8,977 | 8,787 | 8,674 | ||||||||||
Lease financing | 684 | 731 | 724 | 751 | 786 | ||||||||||
International loans | 1,365 | 1,455 | 1,368 | 1,382 | 1,420 | ||||||||||
Residential mortgage loans | 1,856 | 1,874 | 1,870 | 1,880 | 1,865 | ||||||||||
Consumer loans: | |||||||||||||||
Home equity | 1,779 | 1,738 | 1,720 | 1,714 | 1,682 | ||||||||||
Other consumer | 745 | 745 | 765 | 777 | 796 | ||||||||||
Total consumer loans | 2,524 | 2,483 | 2,485 | 2,491 | 2,478 | ||||||||||
Total loans | $ | 50,380 | $ | 49,377 | $ | 49,084 | $ | 48,942 | $ | 49,741 | |||||
Goodwill | $ | 635 | $ | 635 | $ | 635 | $ | 635 | $ | 635 | |||||
Core deposit intangible | 9 | 9 | 10 | 10 | 11 | ||||||||||
Other intangibles | 3 | 4 | 4 | 4 | 4 | ||||||||||
Common equity tier 1 capital (a) | 7,346 | 7,331 | 7,350 | 7,327 | 7,280 | ||||||||||
Risk-weighted assets (a) | 70,097 | 69,319 | 69,731 | 69,718 | 69,967 | ||||||||||
Common equity tier 1 and tier 1 risk-based capital ratio (a) | 10.48 | % | 10.58 | % | 10.54 | % | 10.51 | % | 10.40 | % | |||||
Total risk-based capital ratio (a) | 12.73 | 12.84 | 12.69 | 12.82 | 12.38 | ||||||||||
Leverage ratio (a) | 10.41 | 10.60 | 10.22 | 10.28 | 10.56 | ||||||||||
Common equity ratio | 10.79 | 11.08 | 10.52 | 10.73 | 10.76 | ||||||||||
Tangible common equity ratio (b) | 9.98 | 10.23 | 9.70 | 9.91 | 9.92 | ||||||||||
Common shareholders' equity per share of common stock | $ | 44.24 | $ | 43.66 | $ | 43.03 | $ | 43.02 | $ | 42.18 | |||||
Tangible common equity per share of common stock (b) | 40.52 | 39.96 | 39.33 | 39.36 | 38.53 | ||||||||||
Market value per share for the quarter: | |||||||||||||||
High | 47.55 | 41.74 | 47.44 | 52.93 | 53.45 | ||||||||||
Low | 36.27 | 30.48 | 39.52 | 40.01 | 44.38 | ||||||||||
Close | 41.13 | 37.87 | 41.83 | 41.10 | 51.32 | ||||||||||
Quarterly ratios: | |||||||||||||||
Return on average common shareholders' equity | 5.44 | % | 3.13 | % | 6.08 | % | 7.19 | % | 7.21 | % | |||||
Return on average assets | 0.59 | 0.34 | 0.64 | 0.76 | 0.79 | ||||||||||
Efficiency ratio (c) | 72.48 | 66.07 | 69.00 | 66.98 | 63.49 | ||||||||||
Number of banking centers | 473 | 477 | 477 | 477 | 477 | ||||||||||
Number of employees - full time equivalent | 8,792 | 8,869 | 8,880 | 8,941 | 8,901 |
(a) | June 30, 2016 amounts and 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). |
21
PARENT COMPANY ONLY BALANCE SHEETS (unaudited) | |||||||||
Comerica Incorporated | |||||||||
June 30, | December 31, | June 30, | |||||||
(in millions, except share data) | 2016 | 2015 | 2015 | ||||||
ASSETS | |||||||||
Cash and due from subsidiary bank | $ | 8 | $ | 4 | $ | 7 | |||
Short-term investments with subsidiary bank | 563 | 569 | 861 | ||||||
Other short-term investments | 87 | 89 | 94 | ||||||
Investment in subsidiaries, principally banks | 7,666 | 7,523 | 7,500 | ||||||
Premises and equipment | 2 | 3 | 2 | ||||||
Other assets | 163 | 137 | 122 | ||||||
Total assets | $ | 8,489 | $ | 8,325 | $ | 8,586 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
Medium- and long-term debt | $ | 632 | $ | 608 | $ | 903 | |||
Other liabilities | 163 | 157 | 160 | ||||||
Total liabilities | 795 | 765 | 1,063 | ||||||
Common stock - $5 par value: | |||||||||
Authorized - 325,000,000 shares | |||||||||
Issued - 228,164,824 shares | 1,141 | 1,141 | 1,141 | ||||||
Capital surplus | 2,165 | 2,173 | 2,158 | ||||||
Accumulated other comprehensive loss | (295 | ) | (429 | ) | (396 | ) | |||
Retained earnings | 7,157 | 7,084 | 6,908 | ||||||
Less cost of common stock in treasury - 54,247,325 shares at 6/30/16, 52,457,113 shares at 12/31/15 and 49,803,515 shares at 6/30/15 | (2,474 | ) | (2,409 | ) | (2,288 | ) | |||
Total shareholders' equity | 7,694 | 7,560 | 7,523 | ||||||
Total liabilities and shareholders' equity | $ | 8,489 | $ | 8,325 | $ | 8,586 |
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, 2014 | 179.0 | $ | 1,141 | $ | 2,188 | $ | (412 | ) | $ | 6,744 | $ | (2,259 | ) | $ | 7,402 | |||||
Net income | — | — | — | — | 269 | — | 269 | |||||||||||||
Other comprehensive income, net of tax | — | — | — | 16 | — | — | 16 | |||||||||||||
Cash dividends declared on common stock ($0.41 per share) | — | — | — | — | (73 | ) | — | (73 | ) | |||||||||||
Purchase of common stock | (2.5 | ) | — | — | — | — | (115 | ) | (115 | ) | ||||||||||
Purchase and retirement of warrants | — | — | (10 | ) | — | — | — | (10 | ) | |||||||||||
Net issuance of common stock under employee stock plans | 0.9 | — | (23 | ) | — | (10 | ) | 43 | 10 | |||||||||||
Net issuance of common stock for warrants | 1.0 | — | (21 | ) | — | (22 | ) | 43 | — | |||||||||||
Share-based compensation | — | — | 24 | — | — | — | 24 | |||||||||||||
BALANCE AT JUNE 30, 2015 | 178.4 | $ | 1,141 | $ | 2,158 | $ | (396 | ) | $ | 6,908 | $ | (2,288 | ) | $ | 7,523 | |||||
BALANCE AT DECEMBER 31, 2015 | 175.7 | $ | 1,141 | $ | 2,173 | $ | (429 | ) | $ | 7,084 | $ | (2,409 | ) | $ | 7,560 | |||||
Net income | — | — | — | — | 164 | — | 164 | |||||||||||||
Other comprehensive income, net of tax | — | — | — | 134 | — | — | 134 | |||||||||||||
Cash dividends declared on common stock ($0.43 per share) | — | — | — | — | (75 | ) | — | (75 | ) | |||||||||||
Purchase of common stock | (2.9 | ) | — | — | — | — | (114 | ) | (114 | ) | ||||||||||
Net issuance of common stock under employee stock plans | 1.1 | — | (33 | ) | — | (16 | ) | 49 | — | |||||||||||
Share-based compensation | — | — | 25 | — | — | — | 25 | |||||||||||||
BALANCE AT JUNE 30, 2016 | 173.9 | $ | 1,141 | $ | 2,165 | $ | (295 | ) | $ | 7,157 | $ | (2,474 | ) | $ | 7,694 |
22
BUSINESS SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||
(dollar amounts in millions) | Business | Retail | Wealth | ||||||||||||||||||||
Three Months Ended June 30, 2016 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 355 | $ | 155 | $ | 42 | $ | (111 | ) | $ | 4 | $ | 445 | ||||||||||
Provision for credit losses | 46 | 1 | 3 | — | (1 | ) | 49 | ||||||||||||||||
Noninterest income | 142 | 48 | 62 | 13 | 4 | 269 | |||||||||||||||||
Noninterest expenses | 222 | 205 | 81 | 2 | 9 | 519 | |||||||||||||||||
Provision (benefit) for income taxes | 75 | (1 | ) | 7 | (38 | ) | (1 | ) | 42 | ||||||||||||||
Net income (loss) | $ | 154 | $ | (2 | ) | $ | 13 | $ | (62 | ) | $ | 1 | $ | 104 | |||||||||
Net credit-related charge-offs | $ | 42 | $ | 1 | $ | 4 | $ | — | $ | — | $ | 47 | |||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 39,617 | $ | 6,557 | $ | 5,215 | $ | 14,135 | $ | 5,144 | $ | 70,668 | |||||||||||
Loans | 38,574 | 5,879 | 5,016 | — | — | 49,469 | |||||||||||||||||
Deposits | 28,429 | 23,546 | 4,213 | 62 | 271 | 56,521 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 1.55 | % | (0.03 | )% | 1.02 | % | N/M | N/M | 0.59 | % | |||||||||||||
Efficiency ratio (b) | 44.46 | 101.12 | 77.65 | N/M | N/M | 72.48 | |||||||||||||||||
Business | Retail | Wealth | |||||||||||||||||||||
Three Months Ended March 31, 2016 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 362 | $ | 156 | $ | 43 | $ | (118 | ) | $ | 4 | $ | 447 | ||||||||||
Provision for credit losses | 151 | 3 | (5 | ) | — | (1 | ) | 148 | |||||||||||||||
Noninterest income | 135 | 43 | 59 | 14 | (5 | ) | 246 | ||||||||||||||||
Noninterest expenses | 207 | 179 | 73 | 2 | (1 | ) | 460 | ||||||||||||||||
Provision (benefit) for income taxes | 45 | 6 | 12 | (40 | ) | 2 | 25 | ||||||||||||||||
Net income (loss) | $ | 94 | $ | 11 | $ | 22 | $ | (66 | ) | $ | (1 | ) | $ | 60 | |||||||||
Net credit-related charge-offs (recoveries) | $ | 57 | $ | 2 | $ | (1 | ) | $ | — | $ | — | $ | 58 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 38,635 | $ | 6,544 | $ | 5,162 | $ | 14,162 | $ | 4,725 | $ | 69,228 | |||||||||||
Loans | 37,561 | 5,867 | 4,964 | — | — | 48,392 | |||||||||||||||||
Deposits | 29,108 | 23,110 | 4,171 | 103 | 216 | 56,708 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 0.97 | % | 0.19 | % | 1.69 | % | N/M | N/M | 0.34 | % | |||||||||||||
Efficiency ratio (b) | 41.62 | 88.91 | 71.47 | N/M | N/M | 66.07 | |||||||||||||||||
Business | Retail | Wealth | |||||||||||||||||||||
Three Months Ended June 30, 2015 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 373 | $ | 155 | $ | 45 | $ | (154 | ) | $ | 2 | $ | 421 | ||||||||||
Provision for credit losses | 61 | (8 | ) | (9 | ) | — | 3 | 47 | |||||||||||||||
Noninterest income | 138 | 46 | 60 | 14 | — | 258 | |||||||||||||||||
Noninterest expenses | 175 | 181 | 74 | 2 | 1 | 433 | |||||||||||||||||
Provision (benefit) for income taxes | 94 | 10 | 14 | (53 | ) | (1 | ) | 64 | |||||||||||||||
Net income (loss) | $ | 181 | $ | 18 | $ | 26 | $ | (89 | ) | $ | (1 | ) | $ | 135 | |||||||||
Net credit-related charge-offs (recoveries) | $ | 23 | $ | 1 | $ | (5 | ) | $ | — | $ | — | $ | 19 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 39,134 | $ | 6,459 | $ | 5,153 | $ | 11,697 | $ | 6,520 | $ | 68,963 | |||||||||||
Loans | 38,109 | 5,770 | 4,954 | — | — | 48,833 | |||||||||||||||||
Deposits | 30,229 | 22,747 | 4,060 | 93 | 269 | 57,398 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 1.86 | % | 0.30 | % | 2.01 | % | N/M | N/M | 0.79 | % | |||||||||||||
Efficiency ratio (b) | 33.96 | 89.88 | 70.28 | N/M | N/M | 63.49 |
(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 (fully taxable equivalent basis) and noninterest income excluding net securities gains. |
N/M - Not Meaningful
23
MARKET SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||
(dollar amounts in millions) | Other | Finance | |||||||||||||||||||||
Three Months Ended June 30, 2016 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 166 | $ | 178 | $ | 119 | $ | 89 | $ | (107 | ) | $ | 445 | ||||||||||
Provision for credit losses | 3 | 17 | 32 | (2 | ) | (1 | ) | 49 | |||||||||||||||
Noninterest income | 81 | 39 | 31 | 101 | 17 | 269 | |||||||||||||||||
Noninterest expenses | 159 | 120 | 113 | 116 | 11 | 519 | |||||||||||||||||
Provision (benefit) for income taxes | 28 | 30 | 2 | 21 | (39 | ) | 42 | ||||||||||||||||
Net income (loss) | $ | 57 | $ | 50 | $ | 3 | $ | 55 | $ | (61 | ) | $ | 104 | ||||||||||
Net credit-related charge-offs (recoveries) | $ | — | $ | 17 | $ | 31 | $ | (1 | ) | $ | — | $ | 47 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 13,299 | $ | 17,997 | $ | 11,287 | $ | 8,806 | $ | 19,279 | $ | 70,668 | |||||||||||
Loans | 12,660 | 17,708 | 10,840 | 8,261 | — | 49,469 | |||||||||||||||||
Deposits | 21,553 | 16,933 | 10,052 | 7,650 | 333 | 56,521 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 1.01 | % | 1.10 | % | 0.11 | % | 2.52 | % | N/M | 0.59 | % | ||||||||||||
Efficiency ratio (b) | 64.13 | 55.30 | 74.91 | 60.98 | N/M | 72.48 | |||||||||||||||||
Other | Finance | ||||||||||||||||||||||
Three Months Ended March 31, 2016 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 175 | $ | 177 | $ | 123 | $ | 86 | $ | (114 | ) | $ | 447 | ||||||||||
Provision for credit losses | (6 | ) | (6 | ) | 169 | (8 | ) | (1 | ) | 148 | |||||||||||||
Noninterest income | 76 | 38 | 30 | 93 | 9 | 246 | |||||||||||||||||
Noninterest expenses | 151 | 104 | 100 | 104 | 1 | 460 | |||||||||||||||||
Provision (benefit) for income taxes | 35 | 44 | (40 | ) | 24 | (38 | ) | 25 | |||||||||||||||
Net income (loss) | $ | 71 | $ | 73 | $ | (76 | ) | $ | 59 | $ | (67 | ) | $ | 60 | |||||||||
Net credit-related charge-offs (recoveries) | $ | 5 | $ | 8 | $ | 47 | $ | (2 | ) | $ | — | $ | 58 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 13,402 | $ | 17,541 | $ | 11,295 | $ | 8,103 | $ | 18,887 | $ | 69,228 | |||||||||||
Loans | 12,774 | 17,283 | 10,763 | 7,572 | — | 48,392 | |||||||||||||||||
Deposits | 21,696 | 16,654 | 10,374 | 7,665 | 319 | 56,708 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 1.26 | % | 1.66 | % | (2.54 | )% | 2.84 | % | N/M | 0.34 | % | ||||||||||||
Efficiency ratio (b) | 59.59 | 48.10 | 65.37 | 58.36 | N/M | 66.07 | |||||||||||||||||
Other | Finance | ||||||||||||||||||||||
Three Months Ended June 30, 2015 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 178 | $ | 180 | $ | 130 | $ | 85 | $ | (152 | ) | $ | 421 | ||||||||||
Provision for credit losses | (13 | ) | 4 | 43 | 10 | 3 | 47 | ||||||||||||||||
Noninterest income | 86 | 36 | 30 | 92 | 14 | 258 | |||||||||||||||||
Noninterest expenses | 129 | 99 | 93 | 109 | 3 | 433 | |||||||||||||||||
Provision (benefit) for income taxes | 50 | 42 | 10 | 16 | (54 | ) | 64 | ||||||||||||||||
Net income (loss) | $ | 98 | $ | 71 | $ | 14 | $ | 42 | $ | (90 | ) | $ | 135 | ||||||||||
Net credit-related charge-offs (recoveries) | $ | (1 | ) | $ | 6 | $ | 5 | $ | 9 | $ | — | $ | 19 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 13,851 | $ | 16,696 | $ | 11,878 | $ | 8,321 | $ | 18,217 | $ | 68,963 | |||||||||||
Loans | 13,290 | 16,429 | 11,254 | 7,860 | — | 48,833 | |||||||||||||||||
Deposits | 21,706 | 17,275 | 10,959 | 7,096 | 362 | 57,398 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 1.73 | % | 1.54 | % | 0.45 | % | 2.03 | % | N/M | 0.79 | % | ||||||||||||
Efficiency ratio (b) | 48.09 | 45.90 | 58.13 | 61.56 | N/M | 63.49 |
(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 (fully taxable equivalent basis) and noninterest income excluding net securities gains. |
N/M - Not Meaningful
24
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited) | |||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||
(dollar amounts in millions) | 2016 | 2016 | 2015 | 2015 | 2015 | ||||||||||
Tangible Common Equity Ratio: | |||||||||||||||
Common shareholders' equity | $ | 7,694 | $ | 7,644 | $ | 7,560 | $ | 7,622 | $ | 7,523 | |||||
Less: | |||||||||||||||
Goodwill | 635 | 635 | 635 | 635 | 635 | ||||||||||
Other intangible assets | 12 | 13 | 14 | 14 | 15 | ||||||||||
Tangible common equity | $ | 7,047 | $ | 6,996 | $ | 6,911 | $ | 6,973 | $ | 6,873 | |||||
Total assets | $ | 71,280 | $ | 69,007 | $ | 71,877 | $ | 71,012 | $ | 69,945 | |||||
Less: | |||||||||||||||
Goodwill | 635 | 635 | 635 | 635 | 635 | ||||||||||
Other intangible assets | 12 | 13 | 14 | 14 | 15 | ||||||||||
Tangible assets | $ | 70,633 | $ | 68,359 | $ | 71,228 | $ | 70,363 | $ | 69,295 | |||||
Common equity ratio | 10.79 | % | 11.08 | % | 10.52 | % | 10.73 | % | 10.76 | % | |||||
Tangible common equity ratio | 9.98 | 10.23 | 9.70 | 9.91 | 9.92 | ||||||||||
Tangible Common Equity per Share of Common Stock: | |||||||||||||||
Common shareholders' equity | $ | 7,694 | $ | 7,644 | $ | 7,560 | $ | 7,622 | $ | 7,523 | |||||
Tangible common equity | 7,047 | 6,996 | 6,911 | 6,973 | 6,873 | ||||||||||
Shares of common stock outstanding (in millions) | 174 | 175 | 176 | 177 | 178 | ||||||||||
Common shareholders' equity per share of common stock | $ | 44.24 | $ | 43.66 | $ | 43.03 | $ | 43.02 | $ | 42.18 | |||||
Tangible common equity per share of common stock | 40.52 | 39.96 | 39.33 | 39.36 | 38.53 |
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.
25
Comerica Incorporated
Second Quarter 2016Financial Review
July 19, 2016
Safe Harbor Statement
Any statements in this presentation 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 presentation 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, including the GEAR Up initiative, 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 the economic benefits of the GEAR Up initiative, 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; changes in regulation or oversight; Comerica's ability to maintain adequate sources of funding and liquidity; the effects of more stringent capital or liquidity requirements; declines or other changes in the businesses or industries of Comerica's customers, in particular the energy industry; unfavorable developments concerning credit quality; operational difficulties, failure of technology infrastructure or information security incidents; reliance on other companies to provide certain key components of business infrastructure; factors impacting noninterest expenses which are beyond Comerica's control; changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing; reductions in Comerica's credit rating; 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; the interdependence of financial service companies; the implementation of Comerica's strategies and business initiatives; 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; 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, droughts and floods; changes in accounting standards and the critical nature of Comerica's accounting policies. Comerica cautions that the foregoing list of factors is not exclusive. For discussion of factors that may cause actual results to differ from expectations, please refer to our filings with the Securities and Exchange Commission. In particular, please refer to “Item 1A. Risk Factors” beginning on page 12 of Comerica's Annual Report on Form 10-K for the year ended December 31, 2015 and “Item 1A. Risk Factors” beginning on page 54 of Comerica’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. 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 presentation 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. 2
Completed initial comprehensive, diagnostic review
Key actions identified to date: over 20 work streams
Implementation underway
Identified additional ~$230MM in annual pre-tax income in FY18
Efficiency ratio ≤60% by FYE18
Driving to a double-digit return on equity (ROE)
2Q16 $53MM
2H16 ~$35MM-$55MM
Total: ~$140MM-$160MM through FY18
Provide quarterly updates on progress
Executive management owns initiative
GEAR Up: Growth in Efficiency And RevenueDrive for enhanced shareholder value
Process
Targets
Restructuring Charges1
Accountability
3
6/30/16 ● Pre-tax $ ● Estimates & outlook as of 7/19/16 ● 1Restructuring charges related to actions identified to date
GEAR Up: Growth in Efficiency and Revenue Initial Financial Targets
Driving to Double-Digit Return on Equity (ROE)
Initial revenue & expense opportunities contribute ~200 bps to ROE which drives ROE well-above peer average1
Management review underway to identify further opportunities in 2017 & beyond
Continued active capital management
~$30MM
FY17
Low 60%range
FY18
Revenue Enhancements
Expense Reductions
Efficiency Ratio
~$230MM Additional Annual Pre-Tax Income in FY18
≤60%
~$160MM
~$70MM
~$110MM
Income
Efficiency Ratio
ReturnonEquity
4
6/30/16 ● Pre-tax $ ● Estimates & outlook as of 7/19/16 ● For illustrative purposes; not drawn to scale ● 1Based on FY15 peer group ROE
Business growth, net of investments
Efficiency Ratio
GEAR Up: Growth in Efficiency and Revenue Key actions identified to date
6/30/16 ● Planned actions as of 7/19/16
Focus
Deepen customer relationships
Expense Reductions
• ~9% reduction of workforce• Remove management layers to get closer to customers• Consolidate key functions & responsibilities
Objective Initiatives
• Expand products, sales tools, training & re-align incentives• Improve analytics to identify opportunities• Leverage technology to increase productivity & reduce time to close
• Standardize approach across all markets for sales, training & performance managementAccelerate growth in Middle Market banking
Revenue Enhancements
Reduce workforce
Streamline credit processes
Enhance IT capabilities
Rationalize real estate
• Increase speed to loan approval through further centralization & digitalization• Eliminate redundancies, enhance data collection & analysis
• Optimize IT infrastructure • Reduce number of IT applications • Further automation of operational processes
• Reduce office & operations space • Consolidate ~40 banking centers (~8% of total)
5
Focus on new products with greater contribution margins
Utilize new data-driven, needs-based customer assessment tool• Successful pilot program in CA • Company-wide implementation started 6/16
Leverage technology to improve delivery & documentation efficiencies
Ensure our most valued clients receive dedicated resources
Comerica Opportunity Optimization(“Co2”)
Realignment of Sales Channels
GEAR Up: Growth in Efficiency and Revenue Revenue Enhancement Goals: Treasury Management
New vendor with robust product & reporting platform (early 2015)
Move focus from conversion of existing Merchant clients to adding new clients
Client penetration up 5% since vendor change• Opportunity: >20,000 clients processing with other vendors
Continue to Ramp Up Merchant Services
Deepen Customer Relationships
$3.4
$5.5 $6.7 $6.7
$8.1
2Q15 3Q15 4Q15 1Q16 2Q16
Increase sales delivery efficiency & productivity
Significantly increase penetration
1
2
3
6/30/16 ● Goals as of 7/19/16
Merchant Services Fees ($ in millions)
6
Financial Summary
2Q16 1Q16 2Q15
Diluted income per common share $0.58 $0.34 $0.73
Net interest income $445 $447 421
Net interest margin 2.74% 2.81% 2.65%
Provision for credit losses 49 148 47
Net credit-related charge-offs to average loans 0.38% 0.49% 0.15%
Noninterest income 269 246 258
Noninterest expenses 519 460 433
Restructuring expenses 53 - -
Net Litigation Reserve Release - - (30)
Net income 104 60 135
Total average loans $49,469 $48,392 $48,833
Total average deposits 56,521 56,708 57,398
Basel III common equity Tier 1 capital ratio 10.48%1 10.58% 10.40%
Average diluted shares (millions) 177 176 182
$ in millions, except per share data ● 1Estimated
7
Second Quarter 2016 Results
$ in millions, except per share data ● 2Q16 compared to 1Q16 ● 1Included restructuring charge of $53 million in 2Q16 & net release of litigation reserves of $30 million in 2Q15 ● 2EPS based on diluted income per share ● 3See Supplemental FinancialData slides for a reconciliation of non-GAAP financial measures ● 42Q16 repurchases under the equity repurchase program
2Q16 Change From1Q16 2Q15Total average loans $49,469 $1,077 $636
Total average deposits 56,521 (187) (877)
Net interest income 445 (2) 24
Provision for credit losses 49 (99) 2
Net credit-related charge-offs 47 (11) 29
Noninterest income 269 23 11
Noninterest expenses1 519 59 86
Net income 104 44 (31)
Earnings per share (EPS)2 0.58 0.24 (0.15)
Book Value Per Share 44.24 0.58 2.06
Tangible Book Value Per Share3 40.52 0.56 1.99
Equity repurchases4 1.5MM sharesor $65MM
Key QoQ Performance Drivers
Strong loan growth of 2%
Deposits stable
Net interest income stable as loan growth was offset by nonaccrual activity & higher funding costs
Provision & net credit-related charge-offs reflect improvement in Energy portfolio
Noninterest income up 5%, excluding deferred comp increase, with broad-based fee growth
Expenses remain well-controlled; includes $53MM restructuring charge
Dividend raised 5% to $0.22 per share
8
Strong Average Loan Growth Increased 2% quarter over quarter
2Q16 compared to 1Q16 ● 1Utilization of commercial commitments as a percentage of total commercial commitments at period-end
Total Loans($ in billions)
48.8 49.0 48.5 48.4
49.5 49.4 50.4
3.20 3.17 3.24
3.38 3.31
2Q15 3Q15 4Q15 1Q16 2Q16 1Q16 2Q16
Loan Yields
Average Balances Period-end
Average loans increased $1.1B
+ Commercial Real Estate+ Mortgage Banker Finance+ National Dealer Services - EnergyPeriod-end loans increased $1.0BLoan yields -7 bps
- Nonaccrual activity - Lease residual value adjustmentCommitments $53.7B
Declined $607MM (-$628MM Energy)
Line utilization1 up to 52.8%, with increases in Mortgage Banker & DealerStrong loan pipeline increase
9
Deposits StableDeposits costs unchanged
2Q16 compared to 1Q16 ● 1Interest costs on interest-bearing deposits ● 2At 6/30/16
Average Balances Period-end
Total Deposits($ in billions)
57.4 59.1 59.7 56.7 56.5 56.4 56.4
0.14 0.14 0.14 0.14 0.14
2Q15 3Q15 4Q15 1Q16 2Q16 1Q16 2Q16
Deposit Rates 1
10
Average deposits declined $187MM
+ Retail Bank
- Municipalities
- Corporate Banking
Interest-bearing declined $511MM
Noninterest-bearing grew $324MM
Period-end deposits stable
Loan to Deposit Ratio2 of 89%
Securities Portfolio($ in billions)
6/30/16 ● 1Estimated as of 6/30/16. Excludes auction rate securities (ARS). ● 2Net unrealized pre-tax gain on the available-for-sale (AFS) portfolio ● 3Net unamortized premium on the MBS portfolio
9.1 9.1 9.2 9.4 9.3 9.5 9.5
9.9 10.2
10.9
12.4 12.3 12.5 12.5
2.13 2.11 2.11 2.05 2.03
2Q15 3Q15 4Q15 1Q16 2Q16 1Q16 2Q16
Treasury Securities & OtherMortgage-backed Securities (MBS)Securities Yields
Average Balances Period-end
Securities Portfolio StableModest pressure on yield
11
Securities portfolio
Duration of 3.1 years1• Extends to 3.9 years under a 200 bps instantaneous rate increase1
Net unrealized pre-tax gain of $219MM2
Net unamortized premium of $32MM3
GNMA ~40% of MBS portfolio
Net Interest Income($ in millions)
Net Interest Income StableNIM decreased 7 bps
2Q16 compared to 1Q16
421 422 433
447 445
2.65 2.54 2.58
2.81 2.74
2Q15 3Q15 4Q15 1Q16 2Q16
NIM
Net Interest Income and Rate NIM
$447MM 1Q16 2.81%
-0- Loan impacts:+$8MM higher volume- $5MM nonaccrual impact- $2MM lease residual value adj.- $1MM lower accretion
-0.04
- 3MM Higher wholesale funding cost -0.02
+1MM Fed balances -0.01
$445MM 2Q16 2.74%
12
349 357 367 681 605
2,361 2,898
3,193 3,928 3,551
4.7 5.9 6.5
8.0 7.0
2Q15 3Q15 4Q15 1Q16 2Q16
NALsCriticized as a % of Total Loans
Criticized Loans2($ in millions)
Credit Quality Reflects Improvement in EnergyEnergy business line reserve allocation1 now over 8%
6/30/16 ●1Bank's entire allowance is available to cover any & all losses. Allocation of allowance for energy loans reflects ourrobust allowance methodology which contains quantitative and qualitative components ● 2Criticized loans are consistent withregulatory defined Special Mention, Substandard, Doubtful & Loss loan classifications ● 3Net credit-related charge-offs
Allowance for Credit Losses($ in millions)
668 670 679 770 772
1.24 1.27 1.29
1.47 1.45
2Q15 3Q15 4Q15 1Q16 2Q16
Allowance for Loan Losses as a % of total loans
$ in millions Ex-Energy TotalTotal loans $47,639 $50,380% of total 95% 100%
Criticized2 1,999 3,551Ratio 4.2% 7.0%Q/Q change (96) (377)
Nonaccrual 259 605Ratio 0.5% 1.2%Q/Q change 1 (76)
Net charge-offs3 15 47Ratio 0.13% 0.38%
$ in millions Loans Criticized NAL 2Q16 NCO3
E&P $1,911 $1,239 $307 $8
Midstream 467 79 12 9
Services 363 234 27 15
Total Energy $2,741 $1,552 $346 $32
Q/Q change (356) (281) (77) (10)
Energy Credit Metrics
Portfolio Credit Metrics
13
Noninterest Income HigherCustomer-driven fees increased 5%
2Q16 compared to 1Q16
258 262 268 246
269
2Q15 3Q15 4Q15 1Q16 2Q16
Noninterest Income ($ in millions)
14
Noninterest income increased $23MM
+ $ 3MM Card fees
+ $ 3MM Fiduciary income
+ $ 3MM Customer derivative income
+ $ 2MM Commercial lending fees
+ $1MM Brokerage fees
+ $1MM Foreign Exchange income
+$10MM Deferred comp (Other noninterest income; offset in noninterest expense)
Noninterest Expenses Well-ControlledIncludes restructuring costs of $53MM
2Q16 compared to 1Q16
Noninterest expenses up $59MM
+ $53MM Restructuring expense
- $1MM Salaries and Benefits
+ $10MM Deferred comp (offset in noninterest income)+ Annual merit+ Seasonal 401k contribution+ Incentives tied to revenue growth- Annual stock compensation- Seasonal payroll taxes
+ $5MM Outside processing fees
+ $3MM FDIC insurance premiums
+ $2MM Advertising
- $8MM Gain on sale of leased assets(other noninterest expenses)
53
433
459
484
460
519
2Q15 3Q15 4Q15 1Q16 2Q16
Restructuring
Noninterest Expenses($ in millions)
15
Active Capital ManagementReceived ‘no objection’ for 2016 Capital Plan
1Shares & warrants repurchased under equity repurchase program ● 2Paid July 1, 2016, to common stock shareholders of record on June 15, 2016 ● 3See Supplemental Financial Data slides for a reconciliation of non-GAAP financial measures
● 4LTM = last twelve months
2016 CCAR Capital Plan
Equity repurchases up to $440 million (3Q16-2Q17)
Consider dividend increase at next Board Meeting
Pace of buyback linked to capital position, financial performance & market conditions2015 CCAR Plan Completed
6.4MM shares & 0.5MM warrants for $290MM1(2Q15-2Q16)
2Q16: 1.5MM shares for $65MM Dividend increased 5% to $0.22/share2
$31.40 $33.36 $35.64
$37.72 $39.33 $40.52$34.79 $39.86
$39.22 $41.35 $43.03 $44.24
2011 2012 2013 2014 2015 2Q16
Tangible Book Value Book Value
Book Value Per Share3 Dividends Per Share Growth
0.40
0.55
0.68 0.79
0.83 0.85
2011 2012 2013 2014 2015 LTM2Q16
197 188 182 179 176 174
2011 2012 2013 2014 2015 2Q16
Common Shares Outstanding(in millions)
4
16
Why is Comerica Asset Sensitive?
6/30/16 ● 1Estimated outlook as of 7/19/16 based on calculations derived from sensitivity results shown in slide 22 ● 2As of 5/31/16
Interest Rate Sensitivity Significant upside in rising rate scenario
Additional Annual Net Interest Income1Estimated Increase From Movement in Fed Rates
Deposit Beta
($ in millions) 0% 25% 50% 75%
+25 bps ~$85 ~$70 ~$55 ~$40
+50 bps ~170 ~140 ~105 ~75
+100 bps ~345 ~280 ~215 ~150
~$90MM expected benefit to FY16 from 12/15 rate rise, if deposit prices remain at current levels Predominately floating rate loans • <2% have floors2
Fixed rate securities < 20% of earning assets
Large non-maturity deposit base
Abnormally low interest rate environment
Fixed Rate~10% Libor-Based~70%Prime-Based~20%
Loan Portfolio ($ in billions, Period-end)
Total $50.4
17
Outlook as of 7/19/16
FY16 compared to FY15
Average loans Modest growth, in line with GDP growth • Continued decline in Energy more than offset by increases in most remaining businesses• Seasonality in National Dealer, Mortgage Banker & Middle Market to impact second half of year
Net interest income
Higher• Benefit from December 2015 rise in short-term rates• Loan growth & larger securities portfolio
Provision Higher, reflecting 1Q16 reserve build for Energy• Continued solid credit quality in the remainder of portfolio• Net charge-offs 35-45 bps (formerly 45-55 bps)• Additional reserve changes dependent on developments in the oil & gas sector
Noninterest income
Modest growth• Continued focus on cross-sell opportunities, including card, fiduciary & brokerage services• Offset by lower market driven fees, including commercial lending fees (primarily energy related) investment banking, derivatives & warrant income • Benefits from GEAR Up expected to begin in early 2017
Noninterest expenses
Higher, with $90MM-$110MM in restructuring expense• GEAR Up expense savings of ~$20MM • Increase in outside processing in line with growing revenue• Increase in FDIC expense in part related to regulatory surcharge • Typical inflationary pressures (merit raises, occupancy, etc.)• FY15 benefitted from $33MM legal reserve release which is offset by lower pension expense
Income Taxes ~30% of pre-tax income
Management 2016 Outlook Assuming continuation of current economic & low rate environment
18
Appendix
19
Loans by Business and Market
Average $ in billions ● 1Other Markets includes Florida, Arizona, the International Finance Division and businesses that have a significant presence outside of the three primary geographic markets
Middle Market: Serving companies with revenues generally between $20-$500MM
Corporate Banking: Serving companies (and their U.S. based subsidiaries) with revenues generally over $500MM
Small Business: Serving companies with revenues generally under $20MM
By Line of Business 2Q16 1Q16 2Q15
Middle MarketGeneralEnergyNational Dealer ServicesEntertainmentTech. & Life SciencesEnvironmental Services
$12.72.96.50.73.30.9
$12.83.16.20.73.30.9
$13.53.46.00.63.00.9
Total Middle Market $27.0 $27.0 $27.4
Corporate BankingUS BankingInternational 2.41.8 2.41.7 2.61.8
Mortgage Banker Finance 2.1 1.7 2.1
Commercial Real Estate 5.3 4.8 4.2
BUSINESS BANK $38.6 $37.6 $38.1
Small Business 3.9 3.9 3.9
Retail Banking 2.0 1.9 1.9
RETAIL BANK $5.9 $5.8 $5.8
Private Banking 5.0 5.0 4.9
WEALTH MANAGEMENT 5.0 5.0 $4.9
TOTAL $49.5 $48.4 $48.8
By Market 2Q16 1Q16 2Q15
Michigan $12.7 $12.8 $13.3
California 17.7 17.3 16.4
Texas 10.8 10.8 11.2
Other Markets1 8.3 7.5 7.9
TOTAL $49.5 $48.4 $48.8
20
Deposits by Business and Market
Average $ in billions ● 1Other Markets includes Florida, Arizona, the International Finance Division and businesses that have a significant presence outside of the three primary geographic markets ● 2Finance/ Other includes items not directly associated with the geographic markets or the three major business segments
Middle Market: Serving companies with revenues generally between $20-$500MM
Corporate Banking: Serving companies (and their U.S. based subsidiaries) with revenues generally over $500MM
Small Business: Serving companies with revenues generally under $20MM
By Line of Business 2Q16 1Q16 2Q15
Middle MarketGeneralEnergyNational Dealer ServicesEntertainmentTech. & Life SciencesEnvironmental Services
$14.50.60.30.16.20.1
$14.90.60.30.26.20.1
$15.70.70.20.16.20.2
Total Middle Market $21.8 $22.3 23.1
Corporate BankingUS BankingInternational $2.12.0 $2.22.3 2.62.0
Mortgage Banker Finance 0.7 0.6 0.6
Commercial Real Estate 1.8 1.7 1.9
BUSINESS BANK $28.4 $29.1 $30.2
Small Business 3.2 3.1 2.9
Retail Banking 20.4 20.0 19.8
RETAIL BANK $23.6 $23.1 $22.7
Private Banking 4.2 4.2 4.1
WEALTH MANAGEMENT $4.2 $4.2 $4.1
Finance/ Other2 0.3 0.3 0.4
TOTAL $56.5 $56.7 $57.4
By Market 2Q16 1Q16 2Q15
Michigan $21.6 $21.7 $21.7
California 16.9 16.7 17.3
Texas 10.1 10.4 11.0
Other Markets1 7.6 7.6 7.0
Finance/ Other2 0.3 0.3 0.4
TOTAL $56.5 $56.7 $57.4
21
Interest Rate SensitivityRemain well positioned for rising rates
6/30/16 ● For methodology see the Company’s Form 10-Q, as filed with the SEC. Estimates are based on simulation modeling analysis.
Estimated Net Interest Income: Annual (12 month) SensitivitiesBased on Various AssumptionsAdditional Scenarios are Relative to 2Q16 Standard Model($ in millions)
~100
~160 ~180
~190 ~200
~245
~300
Up 100bps Addl.$3BDepositDecline
Addl.20%Increasein Beta
Addl.$1BDepositDecline
2Q16StandardModel
Addl.~3%LoanGrowth
Up 300bps
0.1
Interest Rates 200 bps gradual, non-parallel rise
Loan Balances Modest increase
Deposit Balances Moderate decrease
Deposit Pricing (Beta)
Historical price movements with short-term rates
Securities Portfolio Held flat with prepayment reinvestment
Loan Spreads Held at current levels
MBS Prepayments Third-party projections and historical experience
Hedging (Swaps) No additions modeled
Standard Model Assumptions
22
Multifamily48%
Retail11%
Commercial11%
Office7%
Single Family7% Multi use4%
Land Carry5%
Other7%
Dallas 35%
Houston 28%
Austin 24%
San Antonio7%
Other 6%
Commercial Real Estate Line of BusinessLong history of working with well established, proven developers
6/30/16 ● 1Excludes CRE line of business loans not secured by real estate ● 2Includes CRE line of business loans not secured by real estate
CRE by Property Type1($ in millions; Period-end)
Michigan6% California45%
Texas31%Florida1%
Other17%
CRE by Market1($ in millions; Period-end, based on location of property)
Total$4,433
Total$4,433
Total$1,368($ in millions; Period-end) 1Q16 2Q16Real Estate Construction $1,946 38% $2,197 40%Commercial Mortgages 2,168 42% 2,236 41%$4,114 80% $4,433 81%Commercial & Other2 1,023 20% 1,079 19%Total $5,137 100% $5,512 100%
CRE by Loan Type
23
Energy Line of Business & Energy-relatedGranular, contracting portfolios
6/30/16 ● 1As of 7/12/16 ● 2Commitments totaling ~$220MM ● 3Energy-related loans in other businesses that have a sizable portion of their revenue related to energy or could be otherwise disproportionately negatively impacted by prolonged low oil and gas prices ● 4Net credit-related charge-offs
Natural Gas 13% Oil40%
463 481 479 509 467530 513 480 426 363
2,316 2,249 2,111 2,162 1,911
3,309 3,243 3,070 3,097 2,741
2Q15 3Q15 4Q15 1Q16 2Q16
Midstream Services Exploration & Production
Energy Line of Business Loans ($ in millions; Period-end)
Mixed18%
6,624 6,541 6,134 5,573 4,945
48% 48% 49% 54% 54%
2Q15 3Q15 4Q15 1Q16 2Q16
Total Commitments Utilization Rate
Energy Line of Business
Maintain granular portfolio: ~200 customers
E&P companies
Spring redeterminations 88% complete1
Borrowing bases declined ~22% on average
Collateral deficiencies: 10 relationships2totaling ~$47MM
Energy-related3
~100 customers
~55% in Texas Middle Market Lending
$ in millions 4Q15 1Q16 2Q16Total loans $624 $534 $489
Criticized 187 185 182
Nonaccrual 29 33 36
Net charge-offs4 7 3 1
24
6/30/16 ● 1Source: Mortgage Bankers Association (MBA) Mortgage Finance Forecast as of 6/20/16 ● 2$ in billions ● 3Based on MBA annual mortgage origination estimates
614 9
23
1,53
5
1,48
3
1,50
7 1,99
6 2,09
4
1,73
7
1,81
5
1,60
5
1,10
9
886 1,
319 1,5
95
1,39
7
1,39
9 2,
089 2,13
6
1,74
2
1,67
4 2,14
5
200300
400500
600700
800900
2Q1
1
3Q1
1
4Q1
1
1Q1
2
2Q1
2
3Q1
2
4Q1
2
1Q1
3
2Q1
3
3Q1
3
4Q1
3
1Q1
4
2Q1
4
3Q1
4
4Q1
4
1Q1
5
2Q1
5
3Q1
5
4Q1
5
1Q1
6
2Q1
6
Actual MBAMortgageOriginationVolumes
Average Loans($ in millions)
Mortgage Banker Finance50 Years experience with reputation for consistent, reliable approach
MBA Mortgage Originations Forecast1($ in billions)
461 426 405 350
510 460
343 295 380
2Q15Actual 3Q15Actual 4Q15Actual 1Q16Actual 2Q16 3Q16 4Q16 1Q17 2Q17
Purchase Refinance
1,2
Provide warehouse financing: bridge from residential mortgage origination to sale to end market
Extensive backroom provides collateral monitoring and customer service
Focus on full banking relationships
Granular portfolio with 100+ relationships
Market share more than doubled over past six years3
Underlying mortgages are typically related to home purchases as opposed to refinancesAs of 2Q16: • Comerica: ~75% purchase • Industry: 54% purchase1
Strong credit quality• No charge-offs since 2010
25
National Dealer Services65+ years of floor plan lending
Toyota/Lexus16%
Honda/Acura 14%
Ford 11%
GM 8%
Chrysler 10%
Mercedes 3%
Nissan/ Infiniti 6%
Other European 11%
Other Asian 12%
Other19%
Franchise Distribution(Based on period-end loan outstandings)
Geographic DispersionCalifornia 65% Texas 7%Michigan 18% Other 10%
Average Loans($ in billions)
Top tier strategy
Focus on “Mega Dealer” (five or more dealerships in group)
Strong credit quality
Robust monitoring of company inventory and performance
1.7 1.3 1.5 1.9 2.3 2.3 2.5 2.8 3.1 2.9 3.2 3.2 3.5 3.2 3.4 3.5 3.6 3.5 3.7 3.8 4.0
3.6 3.1 3.4
3.8 4.
3 4.3 4.6
4.9 5.1
4.9 5.
3 5.3 5.7
5.5 5.7
5.9 6.0
6.0 6.2
6.2 6.5
2Q1
1
3Q1
1
4Q1
1
1Q1
2
2Q1
2
3Q1
2
4Q1
2
1Q1
3
2Q1
3
3Q1
3
4Q1
3
1Q1
4
2Q1
4
3Q1
4
4Q1
4
1Q1
5
2Q1
5
3Q1
5
4Q1
5
1Q1
6
2Q1
6
Floor Plan
Total $6.6B
6/30/16 ● 1Other includes obligations where a primary franchise is indeterminable (rental car and leasing companies, heavy truck, recreational vehicles, and non-floor plan loans)
26
0.3 0.4 0.6 1.1 1.4 1.4
1.8 2.0
2.5 3.1
3.3 3.3
2012 2013 2014 2015 1Q16 2Q16
Equity Fund Services
Technology and Life Sciences20+ Years experience provides competitive advantage
Technology & Life Sciences Avg. Loans($ in billions)
Customer Segment Overview(based on period-end loans)
Strong relationships with top-tier investors
Granular portfolio: ~800 customers (including ~190 customers in Equity Fund Services)
Closely monitor cash balances
Numerous verticals, many with concentration limits• Ad tech ● Cyber security• Software ● Life sciences
Net Charge-off Ratio1(In basis points)
Total $3.3B 57 61
89 108 86
45
2012 2013 2014 2015 1Q16 2Q16
Early Stage~10%
Growth~25%
Late Stage~20%
Equity Fund Services~40%
Leveraged Finance~5%
l .2
6/30/16 ● 1TLS net charge-offs to avg. TLS loans
27
Shared National Credit (SNC) Relationships
At 6/30/16 ● SNCs are not a line of business. The balances shown above are included in the line of business balances.
● SNCs are facilities greater than $20 million shared by three or more federally supervised financial institutions which are reviewed by regulatory authorities at the agent bank level
SNC loans stable over 1Q16
SNC relationships included in business line balances
Approximately 740 borrowers
Comerica is agent for approx. 20%
Strategy: Pursue full relationships with ancillary business
Adhere to same credit underwriting standards as rest of loan book
Period-end Loans($ in billions)
Commercial Real Estate$1.0 9%
Corporate Banking$2.3 22%
General$2.0 19%
National Dealer Services$0.5 5%
Energy$2.6 25%
Entertainment$0.3 3%
Environmental Services$0.3 3%
Tech. & Life Sciences$1.0 9%
Mortgage Banker$0.6 5%
= Total Middle Market (64%)
Total$10.6
28
Equity$7.7 11%
Interest-Bearing Deposits$27.8 40%
Noninterest-Bearing Deposits$28.6 41%
Wholesale Debt$5.9 8%
Funding and Maturity Profile
3/31/16 ● 12026 maturity ● 2Face value at maturity
Wholesale debt markets
Federal Home Loan Bank of Dallas• $2.8B outstanding1• $3.2B remaining borrowing capacity
Brokered deposits• $-0-outstanding
Fed funds/ Repo markets
Multiple Funding Sources
Debt Profile by Maturity2($ in millions)
650 500 350
4,225
2016 2017 2019 2020+
Subordinated NotesSenior NotesFHLB Advance
Funding ProfileAt June 30, 2016($ in billions)
1
29
Senior Unsecured/Long-Term Issuer Rating Moody’s S&P Fitch
BB&T A2 A- A+
Cullen Frost A3 A- --
M&T Bank A3 A- A
BOK Financial Corporation A3 BBB+ A
Comerica A3 BBB+ A
Huntington Baa1 BBB A-
Fifth Third Baa1 BBB+ A
KeyCorp Baa1 BBB+ A-
SunTrust Baa1 BBB+ A-
First Horizon National Corp Baa3 BB+ BBB-
Regions Financial Baa3 BBB BBB
Zions Bancorporation Ba1 BBB- BBB-
U.S. Bancorp A1 A+ AA
Wells Fargo & Company A2 A AA-
PNC Financial Services Group A3 A- A+
JP Morgan A3 A- A+
Bank of America Baa1 BBB+ A
Holding Company Debt Rating
As of 7/14/16 ● Source: SNL Financial ● Debt Ratings are not a recommendation to buy, sell, or hold securities
Pee
r Ba
nks
Larg
e Ba
nks
30
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.● The Corporation 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
Supplemental Financial DataReconciliation of non-GAAP financial measures with financial measures defined by GAAP ($ in millions)
6/30/16 3/31/16 12/31/15 06/30/15 12/31/14 12/31/13 12/31/12 12/31/11Common shareholders’ equityLess: GoodwillLess: Other intangible assets
$7,69463512
$7,64463513
$7,56063514
$7,52363515
$7,40263515
$7,15063517
$6,93963522
$6,86563532
Tangible common equity $7,047 $6,966 $6,911 $6,873 $6,752 $6,498 $6,282 $6,198
Total assetsLess: GoodwillLess: Other intangible assets
$71,28063512
$69,00763513
$71,87763514
$69,94563515
$69,18663515
$65,22463517
$65,06663522
$61,00563532
Tangible assets $70,633 $68,359 $71,228 $69,295 $68,536 $64,572 $64,409 $60,338Common equity ratio 10.79% 11.08% 10.52% 10.76 10.70% 10.97% 10.67% 11.26%Tangible common equity ratio 9.98 10.23 9.70 9.92 9.85 10.07 9.76 10.27
Common shareholders’ equity $7,694 $7,644 $7,560 $7,523 $7,402 $7,150 $6,939 $6,865Tangible common equity 7,047 6,996 6,911 6,873 6,752 6,498 6,282 6,198Shares of common stock outstanding (in millions) 174 175 176 178 179 182 188 197Common shareholders’ equity per share of common stock $44.24 $43.66 $43.03 $42.18 $41.35 $39.22 $36.86 $34.79Tangible common equity per share of common stock 40.52 39.96 39.33 38.53 37.72 35.64 33.36 31.40
31
32
Any statements in this document 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 document 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, including the GEAR Up initiative, 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 the economic benefits of the GEAR Up
initiative, 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; changes in
regulation or oversight; Comerica's ability to maintain adequate sources of funding and liquidity; the
effects of more stringent capital or liquidity requirements; declines or other changes in the businesses
or industries of Comerica's customers, in particular the energy industry; unfavorable developments
concerning credit quality; operational difficulties, failure of technology infrastructure or information
security incidents; reliance on other companies to provide certain key components of business
infrastructure; factors impacting noninterest expenses which are beyond Comerica's control; changes
in the financial markets, including fluctuations in interest rates and their impact on deposit pricing;
reductions in Comerica's credit rating; 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; the interdependence of financial service companies;
the implementation of Comerica's strategies and business initiatives; 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; 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, droughts and floods; changes in accounting standards and the critical nature of
Comerica's accounting policies. Comerica cautions that the foregoing list of factors is not exclusive.
For discussion of factors that may cause actual results to differ from expectations, please refer to our
filings with the Securities and Exchange Commission. In particular, please refer to “Item 1A. Risk
Factors” beginning on page 12 of Comerica's Annual Report on Form 10-K for the year ended
December 31, 2015 and “Item 1A. Risk Factors” beginning on page 54 of Comerica’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2016. 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 or in any other documents,
Comerica claims the protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
Safe Harbor Statement
EXPENSE
REDUCTION
EXPECTATIONS
TO DATE
A reduction in expenses of ~$110 million is expected by year-end 2017,
increasing to ~$160 million by year-end 2018.
Consolidate office & operations space
Consolidate ~40 banking centers
(about 8% of total network)
RATIONALIZE REAL ESTATE
Eliminate ~9% of total workforce
over the next year by consolidating
functions and responsibilities
Decrease management layers to
move closer to the customers and
accelerate decision making
REDUCE WORKFORCE
Significantly reduce the number of IT
applications
Optimize infrastructure
Further automate operational processes
ENHANCE INFORMATION
TECHNOLOGY (IT) CAPABILITIES
Increase speed to loan approval through
further centralization and digitalization
Eliminate redundancies and enhance
data collection and analysis
STREAMLINE CREDIT PROCESS
REVENUE
ENHANCEMENT
OPPORTUNITIES
TO DATE
Planned revenue enhancements of ~$30 million are expected by year-end 2017,
increasing to ~$70 million by year-end 2018.
Focus on new products with greater
contribution margins
Expand products, sales tools and
training
Improve customer analytics to identify
opportunities
DEEPEN CUSTOMER RELATIONSHIPS
Leverage technology to increase productivity
and reduce time to close
Ramp-up Merchant Services to significantly
increase customer penetration
Realign incentives
Standardize approach across all markets for sales, training and performance management
ACCELERATE GROWTH IN MIDDLE MARKET BANKING
MEMBER FDIC. EQUAL OPPORTUNITY LENDER.
Estimates and outlook as of July 19, 2016
~$140 million
by year-end 2017
~$230 million (annual run-rate)
by year-end 2018
PRE-TAX BENEFITS
Total pre-tax restructuring charges of ~$140 to $160 million through 2018
RESTRUCTURING CHARGES
Low 60s% by year-end 2017
≤ 60% by mid-year 2018
(assumes no rate increases)
EFFICIENCY RATIO
Through this initiative, our actions will take us a long way toward achieving
a double-digit Return on Equity.INITIAL
FINANCIAL
TARGETS
Through our comprehensive review and analysis
over the past several months, we have identified
20+ work streams focused on enhancing revenue
and reducing expenses. We are moving expeditiously,
and implementation has started. Our executive team,
who owns this initiative, will provide quarterly
updates on our progress towards our financial targets.
PROCESS
Further enhance revenue and
reduce expenses by:
•
•
driving high-growth opportunities; and
supporting speed, simplicity and
agility in decision-making and action.
GOAL
To strengthen our competitive position, and ensure that we remain a strong partner and trusted advisor to our customers, for the
ultimate benefit of our shareholders, we are fundamentally changing the way we operate in many areas of our business. To date
through the GEAR Up initiative, Comerica has already identified efficiency and revenue actions that are expected to drive at least
$230 million in additional pre-tax income. Moreover, we are pursuing additional opportunities that will further enhance our profitability.
Any statements in this document 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 document 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, including the GEAR Up initiative, 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 the economic benefits of the GEAR Up
initiative, 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; changes in
regulation or oversight; Comerica's ability to maintain adequate sources of funding and liquidity; the
effects of more stringent capital or liquidity requirements; declines or other changes in the businesses
or industries of Comerica's customers, in particular the energy industry; unfavorable developments
concerning credit quality; operational difficulties, failure of technology infrastructure or information
security incidents; reliance on other companies to provide certain key components of business
infrastructure; factors impacting noninterest expenses which are beyond Comerica's control; changes
in the financial markets, including fluctuations in interest rates and their impact on deposit pricing;
reductions in Comerica's credit rating; 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; the interdependence of financial service companies;
the implementation of Comerica's strategies and business initiatives; 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; 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, droughts and floods; changes in accounting standards and the critical nature of
Comerica's accounting policies. Comerica cautions that the foregoing list of factors is not exclusive.
For discussion of factors that may cause actual results to differ from expectations, please refer to our
filings with the Securities and Exchange Commission. In particular, please refer to “Item 1A. Risk
Factors” beginning on page 12 of Comerica's Annual Report on Form 10-K for the year ended
December 31, 2015 and “Item 1A. Risk Factors” beginning on page 54 of Comerica’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2016. 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 or in any other documents,
Comerica claims the protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
Safe Harbor Statement
EXPENSE
REDUCTION
EXPECTATIONS
TO DATE
A reduction in expenses of ~$110 million is expected by year-end 2017,
increasing to ~$160 million by year-end 2018.
Consolidate office & operations space
Consolidate ~40 banking centers
(about 7% of total network)
RATIONALIZE REAL ESTATE
Eliminate ~9% of total workforce
over the next year by consolidating
functions and responsibilities
Decrease management layers to
move closer to the customers and
accelerate decision making
REDUCE WORKFORCE
Significantly reduce the number of IT
applications
Optimize infrastructure
Further automate operational processes
ENHANCE INFORMATION
TECHNOLOGY (IT) CAPABILITIES
Increase speed to loan approval through
further centralization and digitalization
Eliminate redundancies and enhance
data collection and analysis
STREAMLINE CREDIT PROCESS
REVENUE
ENHANCEMENT
OPPORTUNITIES
TO DATE
Planned revenue enhancements of ~$30 million are expected by year-end 2017,
increasing to ~$70 million by year-end 2018.
Focus on new products with greater
contribution margins
Expand products, sales tools and
training
Improve customer analytics to identify
opportunities
DEEPEN CUSTOMER RELATIONSHIPS
Leverage technology to increase productivity
and reduce time to close
Ramp-up Merchant Services to significantly
increase customer penetration
Realign incentives
Standardize approach across all markets for sales, training and performance management
ACCELERATE GROWTH IN MIDDLE MARKET BANKING
MEMBER FDIC. EQUAL OPPORTUNITY LENDER.
Estimates and outlook as of July 19, 2016
~$140 million
by year-end 2017
~$230 million (annual run-rate)
by year-end 2018
PRE-TAX BENEFITS
Total pre-tax restructuring charges of ~$140 to $160 million through 2018
RESTRUCTURING CHARGES
Low 60s% by year-end 2017
≤ 60% by mid-year 2018
(assumes no rate increases)
EFFICIENCY RATIO
Through this initiative, our actions will take us a long way toward achieving
a double-digit Return on Equity.INITIAL
FINANCIAL
TARGETS
Through our comprehensive review and analysis
over the past several months, we have identified
20+ work streams focused on enhancing revenue
and reducing expenses. We are moving expeditiously,
and implementation has started. Our executive team,
who owns this initiative, will provide quarterly
updates on our progress towards our financial targets.
PROCESS
Further enhance revenue and
reduce expenses by:
•
•
driving high-growth opportunities; and
supporting speed, simplicity and
agility in decision-making and action.
GOAL
Comerica has already identified opportunities that are expected to drive at least $230 million in additional pre-tax income through
the GEAR Up initiative. Furthermore, we are pursuing additional opportunities that will further enhance our profitability. To achieve
this result, we are fundamentally changing the way we operate in many areas of our business. We believe this positions us to better
compete, despite current market conditions and a tough banking environment, and ensures we remain a strong partner and trusted
advisor to our customers, for the ultimate benefit of our shareholders.
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