Dallas, TX/July 17, 2018
COMERICA REPORTS SECOND QUARTER 2018 NET INCOME OF $326 MILLION,
$1.87 PER SHARE
Earnings Per Share Increased 18 Percent Compared to First Quarter 2018
Revenue Increased 6 Percent Compared to First Quarter 2018, Driving Efficiency Ratio to 53 Percent
Margin Expanded 21 Basis Points to 3.62 Percent
Managed Loan and Deposit Pricing as Rates Increased Along With Higher Interest Recoveries
Strong Credit Quality Led to Reduction in Allowance for Loan Losses
“Our second quarter results were solid as we continued to manage loan and deposit pricing in a rising rate environment. Loan growth and favorable credit metrics, combined with higher fee income and well-controlled expenses, helped drive an 18 percent increase in our earnings per share relative to the first quarter. The Federal Reserve recently announced we are no longer subject to certain regulations and reporting requirements. We believe we are well positioned to meaningfully increase our capital return to our shareholders. Furthermore, we expect to benefit from additional rate increases and economic growth. We remain focused on maintaining momentum and driving shareholder returns,” said Ralph W. Babb, Jr., chairman and chief executive officer.
| (dollar amounts in millions, except per share data) | 2nd Qtr '18 | 1st Qtr '18 | 2nd Qtr '17 | |||||||||
| Net interest income | $ | 590 | $ | 549 | $ | 500 | ||||||
| Provision for credit losses | (29 | ) | 12 | 17 | ||||||||
| Noninterest income | 248 | 244 | 276 | (a) | ||||||||
| Noninterest expenses | 448 | 446 | 457 | (a) | ||||||||
| Pre-tax income | 419 | 335 | 302 | |||||||||
| Provision for income taxes | 93 | 54 | 99 | |||||||||
| Net income | $ | 326 | $ | 281 | $ | 203 | ||||||
| Diluted income per common share | 1.87 | 1.59 | 1.13 | |||||||||
| Net interest margin | 3.62 | % | 3.41 | % | 3.03 | % | ||||||
| Efficiency ratio (b) | 53.24 | 56.33 | 58.70 | |||||||||
| Common equity Tier 1 capital ratio (c) | 11.90 | 11.98 | 11.51 | |||||||||
| Common equity ratio | 11.22 | 11.06 | 11.18 | |||||||||
| (a) | The new revenue recognition standard became effective January 1, 2018 and is not reflected in second quarter 2017 results. See reconciliation of Non-GAAP Financial Measures for comparative adjusted amounts. |
| (b) | Noninterest expenses as a percentage of net interest income and noninterest income excluding net gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares. |
| (c) | June 30, 2018 ratio is estimated and does not reflect guidance related to high volatility commercial real estate loans as indicated in the recent interagency statement regarding the impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act. |
The following table reconciles items presented on an adjusted basis to facilitate trend analysis.
| (dollar amounts in millions, except per share data) | 2nd Qtr '18 | 1st Qtr '18 | 2nd Qtr '17 | ||||||
| Earnings per share | $ | 1.87 | $ | 1.59 | $ | 1.13 | |||
| Restructuring charges, net of tax | 0.05 | 0.07 | 0.05 | ||||||
| Deferred tax adjustment | — | (0.01 | ) | — | |||||
| Tax benefits from employee stock transactions | (0.02 | ) | (0.11 | ) | (0.03 | ) | |||
| Adjusted earnings per share (a) | $ | 1.90 | $ | 1.54 | $ | 1.15 | |||
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| (dollar amounts in millions, except per share data) | 2nd Qtr '18 | 1st Qtr '18 | 2nd Qtr '17 | ||||||
| Net income | $ | 326 | $ | 281 | $ | 203 | |||
| Restructuring charges, net of tax | 9 | 12 | 9 | ||||||
| Deferred tax adjustment | — | (3 | ) | — | |||||
| Tax benefits from employee stock transactions | (3 | ) | (19 | ) | (5 | ) | |||
| Adjusted net income (a) | $ | 332 | $ | 271 | $ | 207 | |||
| Return on Average Assets (ROA) | 1.85 | % | 1.62 | % | 1.14 | % | |||
| Adjusted ROA (a) | 1.89 | 1.56 | 1.17 | ||||||
| Return on Average Common Shareholders' Equity (ROE) | 16.40 | 14.37 | 10.26 | ||||||
| Adjusted ROE (a) | 16.70 | 13.85 | 10.49 | ||||||
| Efficiency ratio | 53.24 | 56.33 | 58.70 | ||||||
| Adjusted efficiency ratio (a) | 51.90 | 54.32 | 55.25 | ||||||
| (a) | See Reconciliation of Non-GAAP Financial Measures. |
Second Quarter 2018 Compared to First Quarter 2018
Average total loans increased $804 million, or 2 percent, to $49.2 billion.
| • | Primarily reflected seasonal increases in Mortgage Banker Finance and National Dealer Services as well as growth in Technology and Life Sciences (mainly Equity Fund Services) and general Middle Market. |
| • | Loan yields increased 37 basis points to 4.63 percent reflecting an increase in short term rates (+27 basis points), higher interest recoveries (+8 basis points) and other dynamics (+2 basis points). |
Average total deposits decreased $260 million to $55.8 billion.
| • | Driven by a $553 million decrease in noninterest-bearing deposits, partially offset by a $293 million increase in interest-bearing deposits. |
| • | Primarily reflected a decrease in general Middle Market, driven by seasonality in Municipalities, mostly offset by increases in other lines of business. |
| • | Interest-bearing deposit costs increased 17 basis points to 0.42 percent as deposit rates were increased with the faster pace of LIBOR rising. |
Net interest income increased $41 million to $590 million.
| • | Primarily due to a net benefit from higher short-term rates, an increase in average loans, higher interest recoveries and one additional day in the second quarter. |
| • | Net interest margin increased 21 basis points to 3.62 percent. |
Provision for credit losses decreased $41 million to a benefit of $29 million.
| • | Reflected a decline in total criticized loans of $355 million, or 17 percent, and net credit-related recoveries of $3 million. |
Noninterest income increased $4 million.
| • | Primarily reflected an increase of $5 million in commercial lending fees, mostly due to an increase in syndication fees, partially offset by a $2 million charge related to a derivative contract tied to the conversion rate of Visa Class B shares. |
Noninterest expenses increased $2 million.
| • | Excluding the impact of a $5 million business tax refund in the first quarter, noninterest expenses decreased $3 million, primarily reflecting decreases of $5 million each in salaries and benefits expense and restructuring charges, partially offset by increases of $3 million in outside processing expense and $2 million in advertising expense. |
| • | The decrease in salaries and benefits expense primarily reflected seasonal decreases in share-based compensation and payroll taxes, partially offset by the impact of higher incentive compensation tied to financial performance, merit increases, an increase in staff insurance and one additional day in the quarter. |
Provision for income taxes increased $39 million to $93 million.
| • | Due to the tax impact from the $84 million increase in pre-tax earnings and a $16 million decrease in tax benefits from employee stock transactions. |
2
Capital position remained solid at June 30, 2018.
| • | Returned $227 million to shareholders, including dividends and the repurchase of $169 million of common stock (1.8 million shares) under the equity repurchase program. |
| • | Dividend increased 13 percent to 34 cents per share. |
| • | On June 21, 2018, the Federal Reserve announced that bank holding companies with less than $100 billion in total assets are no longer subject to supervisory stress testing, including both the Dodd-Frank Act stress tests and Comprehensive Capital Analysis and Review. As such, at the next scheduled meeting on July 24, 2018, Comerica’s board of directors will discuss capital actions to increase returns to shareholders while continuing to properly manage our capital base and support growth. A press release announcing planned capital actions is expected at that time. |
Second Quarter 2018 Compared to Second Quarter 2017
Management of loan and deposit pricing, strong credit quality and successful execution of GEAR Up initiatives has resulted in a return on equity of 16.40 percent and an efficiency ratio of 53.24 percent, well beyond the GEAR Up financial targets set when the initiative launched in mid-2016.
Average total loans increased $502 million.
| • | Reflected increases in Technology and Life Sciences and National Dealer Services, partially offset by decreases in Corporate Banking and Energy. |
Average total deposits decreased $1.3 billion.
| • | Primarily due to a decrease of $1.4 billion in noninterest-bearing deposits. |
| • | Primarily reflected decreases in general Middle Market (driven by a decrease in Municipalities) and Commercial Real Estate (due to customers using excess liquidity in their operations), partially offset by an increase in Technology and Life Sciences. |
Net interest income increased $90 million.
| • | Driven by the net benefit from higher short-term rates. |
Provision for credit losses decreased $46 million.
| • | Reflected a decline in total criticized loans of $727 million. |
| • | Net credit-related charge-offs decreased $21 million to net recoveries of $3 million from net charge-offs of $18 million. |
Adjusted noninterest income (see Reconciliation of Non-GAAP Financial Measures) was unchanged at $248 million.
| • | Reflected increases of $6 million in card fees, adjusted for the impact of adoption of the new revenue accounting standard, and $1 million in fiduciary income, offset by decreases of $3 million in warrant income and $2 million each in service charges on deposit accounts and customer derivative income. |
Adjusted noninterest expenses (see Reconciliation of Non-GAAP Financial Measures) increased $22 million.
| • | Reflected an increase of $19 million in salaries and benefits expense and an increase of $4 million in outside processing expense. |
| • | The increase in salaries and benefits expense primarily reflected higher share-based and incentive compensation tied to financial performance as well as merit increases. |
Provision for income taxes decreased $6 million.
| • | Due to the decrease in the statutory tax rate in 2018, partially offset by an increase in pre-tax income of $117 million and a $2 million decrease in tax benefits from employee stock transactions. |
3
Net Interest Income
| (dollar amounts in millions) | 2nd Qtr '18 | 1st Qtr '18 | 2nd Qtr '17 | ||||||||
| Net interest income | $ | 590 | $ | 549 | $ | 500 | |||||
| Net interest margin | 3.62 | % | 3.41 | % | 3.03 | % | |||||
| Selected average balances: | |||||||||||
| Total earning assets | $ | 65,114 | $ | 65,012 | $ | 66,310 | |||||
| Total loans | 49,225 | 48,421 | 48,723 | ||||||||
| Total investment securities | 11,799 | 11,911 | 12,232 | ||||||||
| Federal Reserve Bank deposits | 3,717 | 4,315 | 5,043 | ||||||||
| Total deposits | 55,830 | 56,090 | 57,128 | ||||||||
| Total noninterest-bearing deposits | 29,316 | 29,869 | 30,741 | ||||||||
| Medium- and long-term debt | 5,584 | 5,192 | 5,161 | ||||||||
Net interest income increased $41 million to $590 million in the second quarter 2018, compared to the first quarter 2018.
| • | Net increase from higher short-term rates of $21 million, primarily reflecting a $33 million benefit to loan interest partly offset by an $11 million increase to deposit costs. |
| • | Net interest income also benefited $9 million from higher average loan balances, $9 million from higher interest recoveries and $5 million from one additional day in the quarter. |
The net interest margin increased 21 basis points to 3.62 percent in the second quarter 2018, compared to the first quarter 2018.
| • | Net increase from higher short-term rates of 11 basis points, primarily from higher loan yields (+20 basis points), partially offset by higher deposit costs (-7 basis points) and debt costs (-4 basis points). |
| • | The net interest margin also benefited 6 basis points due to higher interest recoveries. |
4
Credit Quality
“Credit quality remains strong,” said Babb. “Gross charge-offs of $20 million were more than offset by recoveries. We had a broad-based decline in problem loans. Criticized loans decreased $355 million, or 17 percent, and now represent less than 4 percent of total loans at quarter end. This included a reduction in nonperforming loans, which comprise 53 basis points of our total loans. Energy criticized and nonaccrual loans continued to decrease. The positive credit migration resulted in a reserve release and a reserve ratio of 1.36 percent.”
| (dollar amounts in millions) | 2nd Qtr '18 | 1st Qtr '18 | 2nd Qtr '17 | ||||||||
| Credit-related charge-offs | $ | 20 | $ | 37 | $ | 39 | |||||
| Recoveries | 23 | 9 | 21 | ||||||||
| Net credit-related (recoveries) charge-offs | (3 | ) | 28 | 18 | |||||||
| Net credit-related (recoveries) charge-offs/Average total loans | (0.02 | )% | 0.23 | % | 0.15 | % | |||||
| Provision for credit losses | $ | (29 | ) | $ | 12 | $ | 17 | ||||
| Nonperforming loans | 262 | 334 | 501 | ||||||||
| Nonperforming assets (NPAs) | 264 | 339 | 519 | ||||||||
| NPAs/Total loans and foreclosed property | 0.53 | % | 0.69 | % | 1.05 | % | |||||
| Loans past due 90 days or more and still accruing | $ | 20 | $ | 36 | $ | 30 | |||||
| Allowance for loan losses | 677 | 698 | 705 | ||||||||
| Allowance for credit losses on lending-related commitments (a) | 34 | 40 | 48 | ||||||||
| Total allowance for credit losses | 711 | 738 | 753 | ||||||||
| Allowance for loan losses/Period-end total loans | 1.36 | % | 1.42 | % | 1.43 | % | |||||
| Allowance for loan losses/Nonperforming loans | 2.6x | 2.1x | 1.4x | ||||||||
| (a) | Included in "Accrued expenses and other liabilities" on the consolidated balance sheets. |
| • | The allowance for loan losses decreased to $677 million at June 30, 2018, or 1.36 percent of total loans, reflecting improvements in credit quality of the portfolio. |
| • | Criticized loans decreased $355 million to $1.8 billion at June 30, 2018, compared to $2.1 billion at March 31, 2018, including a $149 million decrease in Energy. Criticized loans as a percentage of total loans were 3.5 percent at June 30, 2018, compared to 4.3 percent at March 31, 2018. Criticized loans are generally consistent with the Special Mention, Substandard and Doubtful categories defined by regulatory authorities. |
| • | Nonperforming loans decreased $72 million to $262 million at June 30, 2018, compared to $334 million at March 31, 2018. Nonperforming loans as a percentage of total loans decreased to 0.53 percent at June 30, 2018, compared to 0.68 percent at March 31, 2018. |
5
2018 Second-Half Outlook
For the second half of 2018, management expects the following, assuming a continuation of the current economic and rate environment as well as the benefits from the GEAR Up initiative:
| • | Moderate growth in average loans |
| ◦ | Growth in most lines of business with a slower pace in general Middle Market, National Dealer Services and Mortgage Banker Finance due to seasonality. |
| ◦ | Energy and Corporate Banking to remain stable. |
| • | Net interest income higher, reflecting recent rate increases, loan growth and three additional days. |
| ◦ | Full-year 2018 net benefit of $70 million from the first quarter 2018 rate increase and $35 million to $40 million from the second quarter 2018 rate increase. |
| ◦ | Elevated interest recoveries not expected to repeat ($11 million in second quarter 2018). |
| • | Provision for credit losses of $10 million to $20 million per quarter and net charge-offs to remain low. |
| • | Noninterest income growth trend to continue benefiting from the execution of GEAR Up initiatives to help drive growth in treasury management income, card fees and fiduciary income. |
| • | Noninterest expenses modestly higher (excluding restructuring charges) primarily due to additional days. |
◦GEAR Up savings remain on track.
| ◦ | Continued higher technology expenditures. |
| ◦ | Seasonal and typical inflationary pressures leading to higher occupancy and advertising expenses. |
| ◦ | Restructuring charges of $20 million to $25 million. |
| • | Income tax expense to be approximately 23 percent of pre-tax income, excluding any tax impact from employee stock transactions. |
6
Business Segments
Comerica's operations are strategically aligned into three major business segments: the Business Bank, the Retail Bank and Wealth Management. The Finance Division is also reported as a segment. Comerica also provides market segment results for three primary geographic markets: Michigan, California and Texas. In addition to the three primary geographic markets, Other Markets is also reported as a market segment. Other Markets includes Florida, Arizona, the International Finance division and businesses that have a significant presence outside of the three primary geographic markets. For a summary of business segment and geographic market quarterly results, see the Business Segment Financial Results and Market Segment Financial Results tables included later in this report. The financial results provided are based on the internal business unit and geographic market structures of Comerica and methodologies in effect at June 30, 2018. A discussion of business segment and geographic market year-to-date results will be included in Comerica's Second Quarter 2018 Form 10-Q.
Conference Call and Webcast
Comerica will host a conference call to review second quarter 2018 financial results at 7 a.m. CT Tuesday, July 17, 2018. Interested parties may access the conference call by calling (800) 309-2262 or (706) 679-5261 (event ID No. 22791269). 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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Forward-looking Statements
Any statements in this news release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “believes,” “contemplates,” “feels,” “expects,” “estimates,” “seeks,” “strives,” “plans,” “intends,” “outlook,” “forecast,” “position,” “target,” “mission,” “assume,” “achievable,” “potential,” “strategy,” “goal,” “aspiration,” “opportunity,” “initiative,” “outcome,” “continue,” “remain,” “maintain,” “on track,” “trend,” “objective,” “looks forward,” “projects,” “models” and variations of such words and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions, as they relate to Comerica or its management, are intended to identify forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of Comerica's management based on information known to Comerica's management as of the date of this news release and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of Comerica's management for future or past operations, products or services, 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; 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; operational difficulties, failure of technology infrastructure or information security incidents; reliance on other companies to provide certain key components of business infrastructure; 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; unfavorable developments concerning credit quality; changes in regulation or oversight; changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing; transitions away from LIBOR towards new interest rate benchmarks; reductions in Comerica's credit rating; damage to Comerica's reputation; Comerica's ability to utilize technology to efficiently and effectively develop, market and deliver new products and services; competitive product and pricing pressures among financial institutions within Comerica's markets; the interdependence of financial service companies; the implementation of Comerica's strategies and business initiatives; changes in customer behavior; management's ability to maintain and expand customer relationships; the effectiveness of methods of reducing risk exposures; the effects of catastrophic events including, but not limited to, hurricanes, tornadoes, earthquakes, fires, droughts and floods; the effects of recent tax reform and potential legislative, administrative or judicial changes or interpretations related to these and other tax regulations; any future strategic acquisitions or divestitures; management's ability to retain key officers and employees; the impact of legal and regulatory proceedings or determinations; the effects of terrorist activities and other hostilities; changes in accounting standards; the critical nature of Comerica's accounting policies and the volatility of Comerica’s stock price. Comerica cautions that the foregoing list of factors is not all-inclusive. For discussion of factors that may cause actual results to differ from expectations, please refer to our filings with the Securities and Exchange Commission. In particular, please refer to “Item 1A. Risk Factors” beginning on page 11 of Comerica's Annual Report on Form 10-K for the year ended December 31, 2017. 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: |
| Yolanda Y. Walker | Darlene P. Persons |
| (214) 462-4443 | (214) 462-6831 |
| Chloe E. Dankworth | |
| (214) 462-4132 | |
| 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) | 2018 | 2018 | 2017 | 2018 | 2017 | |||||||||||
| PER COMMON SHARE AND COMMON STOCK DATA | ||||||||||||||||
| Diluted net income | $ | 1.87 | $ | 1.59 | $ | 1.13 | $ | 3.46 | $ | 2.24 | ||||||
| Cash dividends declared | 0.34 | 0.30 | 0.26 | 0.64 | 0.49 | |||||||||||
| Average diluted shares (in thousands) | 173,601 | 175,144 | 178,923 | 174,351 | 179,652 | |||||||||||
| KEY RATIOS | ||||||||||||||||
| Return on average common shareholders' equity | 16.40 | % | 14.37 | % | 10.26 | % | 15.39 | % | 10.34 | % | ||||||
| Return on average assets | 1.85 | 1.62 | 1.14 | 1.74 | 1.14 | |||||||||||
| Common equity tier 1 and tier 1 risk-based capital ratio (a) | 11.90 | 11.98 | 11.51 | |||||||||||||
| Total risk-based capital ratio (a) | 13.96 | 14.12 | 13.66 | |||||||||||||
| Leverage ratio (a) | 11.35 | 11.24 | 10.80 | |||||||||||||
| Common equity ratio | 11.22 | 11.06 | 11.18 | |||||||||||||
| Tangible common equity ratio (b) | 10.42 | 10.26 | 10.37 | |||||||||||||
| AVERAGE BALANCES | ||||||||||||||||
| Commercial loans | $ | 30,966 | $ | 30,145 | $ | 30,632 | $ | 30,556 | $ | 30,166 | ||||||
| Real estate construction loans | 3,189 | 3,067 | 2,910 | 3,129 | 2,934 | |||||||||||
| Commercial mortgage loans | 9,174 | 9,217 | 9,012 | 9,195 | 8,994 | |||||||||||
| Lease financing | 457 | 464 | 526 | 461 | 548 | |||||||||||
| International loans | 981 | 996 | 1,139 | 989 | 1,174 | |||||||||||
| Residential mortgage loans | 1,993 | 2,011 | 1,975 | 2,002 | 1,969 | |||||||||||
| Consumer loans | 2,465 | 2,521 | 2,529 | 2,493 | 2,528 | |||||||||||
| Total loans | 49,225 | 48,421 | 48,723 | 48,825 | 48,313 | |||||||||||
| Earning assets | 65,114 | 65,012 | 66,310 | 65,063 | 66,477 | |||||||||||
| Total assets | 70,520 | 70,326 | 71,346 | 70,423 | 71,581 | |||||||||||
| Noninterest-bearing deposits | 29,316 | 29,869 | 30,741 | 29,591 | 30,601 | |||||||||||
| Interest-bearing deposits | 26,514 | 26,221 | 26,387 | 26,368 | 26,851 | |||||||||||
| Total deposits | 55,830 | 56,090 | 57,128 | 55,959 | 57,452 | |||||||||||
| Common shareholders' equity | 7,977 | 7,927 | 7,944 | 7,952 | 7,905 | |||||||||||
| NET INTEREST INCOME | ||||||||||||||||
| Net interest income | $ | 590 | $ | 549 | $ | 500 | $ | 1,139 | $ | 970 | ||||||
| Net interest margin | 3.62 | % | 3.41 | % | 3.03 | % | 3.52 | % | 2.94 | % | ||||||
| CREDIT QUALITY | ||||||||||||||||
| Total nonperforming assets | $ | 264 | $ | 339 | $ | 519 | ||||||||||
| Loans past due 90 days or more and still accruing | 20 | 36 | 30 | |||||||||||||
| Net credit-related (recoveries) charge-offs | (3 | ) | 28 | 18 | $ | 25 | $ | 51 | ||||||||
| Allowance for loan losses | 677 | 698 | 705 | |||||||||||||
| Allowance for credit losses on lending-related commitments | 34 | 40 | 48 | |||||||||||||
| Total allowance for credit losses | 711 | 738 | 753 | |||||||||||||
| Allowance for loan losses as a percentage of total loans | 1.36 | % | 1.42 | % | 1.43 | % | ||||||||||
| Net credit-related (recoveries) charge-offs as a percentage of average total loans | (0.02 | ) | 0.23 | 0.15 | 0.10 | % | 0.21 | % | ||||||||
| Nonperforming assets as a percentage of total loans and foreclosed property | 0.53 | 0.69 | 1.05 | |||||||||||||
| Allowance for loan losses as a percentage of total nonperforming loans | 2.6x | 2.1x | 1.4x | |||||||||||||
| (a) | June 30, 2018 ratios are estimated and do not reflect guidance related to high volatility commercial real estate loans as indicated in the recent interagency statement regarding the impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act. |
| (b) | See Reconciliation of Non-GAAP Financial Measures. |
9
| CONSOLIDATED BALANCE SHEETS | ||||||||||||
| Comerica Incorporated and Subsidiaries | ||||||||||||
| June 30, | March 31, | December 31, | June 30, | |||||||||
| (in millions, except share data) | 2018 | 2018 | 2017 | 2017 | ||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
| ASSETS | ||||||||||||
| Cash and due from banks | $ | 1,424 | $ | 1,173 | $ | 1,438 | $ | 1,372 | ||||
| Interest-bearing deposits with banks | 4,236 | 5,663 | 4,407 | 4,259 | ||||||||
| Other short-term investments | 134 | 133 | 96 | 90 | ||||||||
| Investment securities available-for-sale | 11,915 | 11,971 | 10,938 | 10,944 | ||||||||
| Investment securities held-to-maturity | — | — | 1,266 | 1,430 | ||||||||
| Commercial loans | 31,530 | 30,909 | 31,060 | 31,449 | ||||||||
| Real estate construction loans | 3,257 | 3,114 | 2,961 | 2,857 | ||||||||
| Commercial mortgage loans | 9,124 | 9,272 | 9,159 | 8,974 | ||||||||
| Lease financing | 458 | 464 | 468 | 472 | ||||||||
| International loans | 993 | 964 | 983 | 1,145 | ||||||||
| Residential mortgage loans | 1,954 | 2,003 | 1,988 | 1,976 | ||||||||
| Consumer loans | 2,476 | 2,514 | 2,554 | 2,535 | ||||||||
| Total loans | 49,792 | 49,240 | 49,173 | 49,408 | ||||||||
| Less allowance for loan losses | (677 | ) | (698 | ) | (712 | ) | (705 | ) | ||||
| Net loans | 49,115 | 48,542 | 48,461 | 48,703 | ||||||||
| Premises and equipment | 467 | 468 | 466 | 484 | ||||||||
| Accrued income and other assets | 4,696 | 4,385 | 4,495 | 4,165 | ||||||||
| Total assets | $ | 71,987 | $ | 72,335 | $ | 71,567 | $ | 71,447 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
| Noninterest-bearing deposits | $ | 30,316 | $ | 30,961 | $ | 32,071 | $ | 31,210 | ||||
| Money market and interest-bearing checking deposits | 22,544 | 22,355 | 21,500 | 20,952 | ||||||||
| Savings deposits | 2,227 | 2,233 | 2,152 | 2,158 | ||||||||
| Customer certificates of deposit | 2,089 | 2,071 | 2,165 | 2,438 | ||||||||
| Foreign office time deposits | 34 | 15 | 15 | 23 | ||||||||
| Total interest-bearing deposits | 26,894 | 26,674 | 25,832 | 25,571 | ||||||||
| Total deposits | 57,210 | 57,635 | 57,903 | 56,781 | ||||||||
| Short-term borrowings | 58 | 48 | 10 | 541 | ||||||||
| Accrued expenses and other liabilities | 1,057 | 1,058 | 1,069 | 997 | ||||||||
| Medium- and long-term debt | 5,583 | 5,594 | 4,622 | 5,143 | ||||||||
| Total liabilities | 63,908 | 64,335 | 63,604 | 63,462 | ||||||||
| 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 | 2,144 | 2,134 | 2,122 | 2,110 | ||||||||
| Accumulated other comprehensive loss | (589 | ) | (553 | ) | (451 | ) | (361 | ) | ||||
| Retained earnings | 8,374 | 8,110 | 7,887 | 7,580 | ||||||||
| Less cost of common stock in treasury - 57,254,526 shares at 6/30/18, 55,690,402 shares at 3/31/18, 55,306,483 shares at 12/31/17, and 52,252,023 shares at 6/30/17 | (2,991 | ) | (2,832 | ) | (2,736 | ) | (2,485 | ) | ||||
| Total shareholders' equity | 8,079 | 8,000 | 7,963 | 7,985 | ||||||||
| Total liabilities and shareholders' equity | $ | 71,987 | $ | 72,335 | $ | 71,567 | $ | 71,447 | ||||
10
| 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) | 2018 | 2017 | 2018 | 2017 | |||||||||
| INTEREST INCOME | |||||||||||||
| Interest and fees on loans | $ | 568 | $ | 453 | $ | 1,077 | $ | 874 | |||||
| Interest on investment securities | 64 | 62 | 128 | 123 | |||||||||
| Interest on short-term investments | 18 | 14 | 35 | 28 | |||||||||
| Total interest income | 650 | 529 | 1,240 | 1,025 | |||||||||
| INTEREST EXPENSE | |||||||||||||
| Interest on deposits | 28 | 9 | 44 | 18 | |||||||||
| Interest on medium- and long-term debt | 32 | 20 | 57 | 37 | |||||||||
| Total interest expense | 60 | 29 | 101 | 55 | |||||||||
| Net interest income | 590 | 500 | 1,139 | 970 | |||||||||
| Provision for credit losses | (29 | ) | 17 | (17 | ) | 33 | |||||||
| Net interest income after provision for credit losses | 619 | 483 | 1,156 | 937 | |||||||||
| NONINTEREST INCOME | |||||||||||||
| Card fees | 60 | 80 | 119 | 157 | |||||||||
| Service charges on deposit accounts | 53 | 57 | 107 | 115 | |||||||||
| Fiduciary income | 52 | 51 | 104 | 100 | |||||||||
| Commercial lending fees | 23 | 22 | 41 | 42 | |||||||||
| Letter of credit fees | 11 | 11 | 21 | 23 | |||||||||
| Bank-owned life insurance | 9 | 9 | 18 | 19 | |||||||||
| Foreign exchange income | 12 | 11 | 24 | 22 | |||||||||
| Brokerage fees | 6 | 6 | 13 | 11 | |||||||||
| Net securities gains | — | — | 1 | — | |||||||||
| Other noninterest income | 22 | 29 | 44 | 58 | |||||||||
| Total noninterest income (a) | 248 | 276 | 492 | 547 | |||||||||
| NONINTEREST EXPENSES | |||||||||||||
| Salaries and benefits expense | 250 | 231 | 505 | 476 | |||||||||
| Outside processing fee expense | 64 | 88 | 125 | 175 | |||||||||
| Net occupancy expense | 37 | 38 | 75 | 76 | |||||||||
| Equipment expense | 11 | 11 | 22 | 22 | |||||||||
| Restructuring charges | 11 | 14 | 27 | 25 | |||||||||
| Software expense | 32 | 31 | 63 | 60 | |||||||||
| FDIC insurance expense | 12 | 12 | 25 | 25 | |||||||||
| Advertising expense | 8 | 7 | 14 | 11 | |||||||||
| Litigation-related expense | — | — | — | (2 | ) | ||||||||
| Other noninterest expenses | 23 | 25 | 38 | 46 | |||||||||
| Total noninterest expenses (a) | 448 | 457 | 894 | 914 | |||||||||
| Income before income taxes | 419 | 302 | 754 | 570 | |||||||||
| Provision for income taxes | 93 | 99 | 147 | 165 | |||||||||
| NET INCOME | 326 | 203 | 607 | 405 | |||||||||
| Less income allocated to participating securities | 2 | 1 | 4 | 3 | |||||||||
| Net income attributable to common shares | $ | 324 | $ | 202 | $ | 603 | $ | 402 | |||||
| Earnings per common share: | |||||||||||||
| Basic | $ | 1.90 | $ | 1.15 | $ | 3.52 | $ | 2.30 | |||||
| Diluted | 1.87 | 1.13 | 3.46 | 2.24 | |||||||||
| Comprehensive income | 291 | 221 | 469 | 427 | |||||||||
| Cash dividends declared on common stock | 58 | 46 | 110 | 88 | |||||||||
| Cash dividends declared per common share | 0.34 | 0.26 | 0.64 | 0.49 | |||||||||
| (a) | The new revenue recognition standard became effective January 1, 2018 and is not reflected in 2017 results. See reconciliation of Non-GAAP Financial Measures for comparative adjusted amounts. |
11
| CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | |||||||||||||||||||||||||||
| Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||||||
| Second | First | Fourth | Third | Second | Second Quarter 2018 Compared to: | ||||||||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | First Quarter 2018 | Second Quarter 2017 | |||||||||||||||||||||
| (in millions, except per share data) | 2018 | 2018 | 2017 | 2017 | 2017 | Amount | Percent | Amount | Percent | ||||||||||||||||||
| INTEREST INCOME | |||||||||||||||||||||||||||
| Interest and fees on loans | $ | 568 | $ | 509 | $ | 498 | $ | 500 | $ | 453 | $ | 59 | 12 | % | $ | 115 | 25 | % | |||||||||
| Interest on investment securities | 64 | 64 | 64 | 63 | 62 | — | — | 2 | 2 | ||||||||||||||||||
| Interest on short-term investments | 18 | 17 | 16 | 16 | 14 | 1 | 3 | 4 | 32 | ||||||||||||||||||
| Total interest income | 650 | 590 | 578 | 579 | 529 | 60 | 10 | 121 | 23 | ||||||||||||||||||
| INTEREST EXPENSE | |||||||||||||||||||||||||||
| Interest on deposits | 28 | 16 | 13 | 11 | 9 | 12 | 73 | 19 | N/M | ||||||||||||||||||
| Interest on short-term borrowings | — | — | — | 3 | — | — | — | — | — | ||||||||||||||||||
| Interest on medium- and long-term debt | 32 | 25 | 20 | 19 | 20 | 7 | 25 | 12 | 65 | ||||||||||||||||||
| Total interest expense | 60 | 41 | 33 | 33 | 29 | 19 | 44 | 31 | N/M | ||||||||||||||||||
| Net interest income | 590 | 549 | 545 | 546 | 500 | 41 | 8 | 90 | 18 | ||||||||||||||||||
| Provision for credit losses | (29 | ) | 12 | 17 | 24 | 17 | (41 | ) | N/M | (46 | ) | N/M | |||||||||||||||
Net interest income after provision for credit losses | 619 | 537 | 528 | 522 | 483 | 82 | 15 | 136 | 28 | ||||||||||||||||||
| NONINTEREST INCOME | |||||||||||||||||||||||||||
| Card fees | 60 | 59 | 91 | 85 | 80 | 1 | 1 | (20 | ) | (25 | ) | ||||||||||||||||
| Service charges on deposit accounts | 53 | 54 | 55 | 57 | 57 | (1 | ) | (1 | ) | (4 | ) | (7 | ) | ||||||||||||||
| Fiduciary income | 52 | 52 | 50 | 48 | 51 | — | — | 1 | 5 | ||||||||||||||||||
| Commercial lending fees | 23 | 18 | 22 | 21 | 22 | 5 | 31 | 1 | 3 | ||||||||||||||||||
| Letter of credit fees | 11 | 10 | 11 | 11 | 11 | 1 | 2 | — | — | ||||||||||||||||||
| Bank-owned life insurance | 9 | 9 | 12 | 12 | 9 | — | — | — | — | ||||||||||||||||||
| Foreign exchange income | 12 | 12 | 12 | 11 | 11 | — | — | 1 | 11 | ||||||||||||||||||
| Brokerage fees | 6 | 7 | 6 | 6 | 6 | (1 | ) | (18 | ) | — | — | ||||||||||||||||
| Net securities gains | — | 1 | — | — | — | (1 | ) | (62 | ) | — | — | ||||||||||||||||
| Other noninterest income | 22 | 22 | 26 | 24 | 29 | — | — | (7 | ) | (24 | ) | ||||||||||||||||
| Total noninterest income | 248 | 244 | 285 | 275 | 276 | 4 | 1 | (28 | ) | (10 | ) | ||||||||||||||||
| NONINTEREST EXPENSES | |||||||||||||||||||||||||||
| Salaries and benefits expense | 250 | 255 | 248 | 237 | 231 | (5 | ) | (2 | ) | 19 | 8 | ||||||||||||||||
| Outside processing fee expense | 64 | 61 | 99 | 92 | 88 | 3 | 4 | (24 | ) | (28 | ) | ||||||||||||||||
| Net occupancy expense | 37 | 38 | 40 | 38 | 38 | (1 | ) | — | (1 | ) | — | ||||||||||||||||
| Equipment expense | 11 | 11 | 11 | 12 | 11 | — | — | — | — | ||||||||||||||||||
| Restructuring charges | 11 | 16 | 13 | 7 | 14 | (5 | ) | (29 | ) | (3 | ) | (21 | ) | ||||||||||||||
| Software expense | 32 | 31 | 31 | 35 | 31 | 1 | 1 | 1 | 3 | ||||||||||||||||||
| FDIC insurance expense | 12 | 13 | 13 | 13 | 12 | (1 | ) | (14 | ) | — | — | ||||||||||||||||
| Advertising expense | 8 | 6 | 9 | 8 | 7 | 2 | 25 | 1 | 2 | ||||||||||||||||||
| Other noninterest expenses | 23 | 15 | 19 | 21 | 25 | 8 | 50 | (2 | ) | (5 | ) | ||||||||||||||||
| Total noninterest expenses | 448 | 446 | 483 | 463 | 457 | 2 | — | (9 | ) | (2 | ) | ||||||||||||||||
| Income before income taxes | 419 | 335 | 330 | 334 | 302 | 84 | 25 | 117 | 39 | ||||||||||||||||||
| Provision for income taxes | 93 | 54 | 218 | 108 | 99 | 39 | 74 | (6 | ) | (5 | ) | ||||||||||||||||
| NET INCOME | 326 | 281 | 112 | 226 | 203 | 45 | 16 | 123 | 60 | ||||||||||||||||||
| Less income allocated to participating securities | 2 | 2 | — | 2 | 1 | — | — | 1 | 10 | ||||||||||||||||||
| Net income attributable to common shares | $ | 324 | $ | 279 | $ | 112 | $ | 224 | $ | 202 | $ | 45 | 16 | % | $ | 122 | 61 | % | |||||||||
| Earnings per common share: | |||||||||||||||||||||||||||
| Basic | $ | 1.90 | $ | 1.62 | $ | 0.65 | $ | 1.29 | $ | 1.15 | $ | 0.28 | 17 | % | $ | 0.75 | 65 | % | |||||||||
| Diluted | 1.87 | 1.59 | 0.63 | 1.26 | 1.13 | 0.28 | 18 | 0.74 | 65 | ||||||||||||||||||
| Comprehensive income | 291 | 178 | 107 | 228 | 221 | 113 | 63 | 70 | 31 | ||||||||||||||||||
| Cash dividends declared on common stock | 58 | 52 | 52 | 53 | 46 | 6 | 12 | 12 | 27 | ||||||||||||||||||
| Cash dividends declared per common share | 0.34 | 0.30 | 0.30 | 0.30 | 0.26 | 0.04 | 13 | 0.08 | 31 | ||||||||||||||||||
N/M - Not Meaningful
12
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES (unaudited) | ||||||||||||||||
| Comerica Incorporated and Subsidiaries | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| (in millions) | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | |||||||||||
| Balance at beginning of period | $ | 698 | $ | 712 | $ | 712 | $ | 705 | $ | 708 | ||||||
| Loan charge-offs: | ||||||||||||||||
| Commercial | 17 | 36 | 26 | 35 | 34 | |||||||||||
| Commercial mortgage | 1 | — | 1 | — | 1 | |||||||||||
| Lease financing | — | — | — | 1 | — | |||||||||||
| International | — | — | 1 | — | 2 | |||||||||||
| Consumer | 2 | 1 | 1 | 1 | 2 | |||||||||||
| Total loan charge-offs | 20 | 37 | 29 | 37 | 39 | |||||||||||
| Recoveries on loans previously charged-off: | ||||||||||||||||
| Commercial | 20 | 8 | 7 | 6 | 17 | |||||||||||
| Real estate construction | — | — | — | 1 | — | |||||||||||
| Commercial mortgage | 1 | — | 2 | 2 | 3 | |||||||||||
| International | 1 | — | 2 | 1 | — | |||||||||||
| Residential mortgage | — | — | 1 | — | — | |||||||||||
| Consumer | 1 | 1 | 1 | 2 | 1 | |||||||||||
| Total recoveries | 23 | 9 | 13 | 12 | 21 | |||||||||||
| Net loan (recoveries) charge-offs | (3 | ) | 28 | 16 | 25 | 18 | ||||||||||
| Provision for loan losses | (23 | ) | 14 | 16 | 31 | 15 | ||||||||||
| Foreign currency translation adjustment | (1 | ) | — | — | 1 | — | ||||||||||
| Balance at end of period | $ | 677 | $ | 698 | $ | 712 | $ | 712 | $ | 705 | ||||||
| Allowance for loan losses as a percentage of total loans | 1.36 | % | 1.42 | % | 1.45 | % | 1.45 | % | 1.43 | % | ||||||
| Net loan (recoveries) charge-offs as a percentage of average total loans | (0.02 | ) | 0.23 | 0.13 | 0.21 | 0.15 | ||||||||||
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LENDING-RELATED COMMITMENTS (unaudited) | ||||||||||||||||
| Comerica Incorporated and Subsidiaries | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| (in millions) | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | |||||||||||
| Balance at beginning of period | $ | 40 | $ | 42 | $ | 41 | $ | 48 | $ | 46 | ||||||
| Add: Provision for credit losses on lending-related commitments | (6 | ) | (2 | ) | 1 | (7 | ) | 2 | ||||||||
| Balance at end of period | $ | 34 | $ | 40 | $ | 42 | $ | 41 | $ | 48 | ||||||
13
| NONPERFORMING ASSETS (unaudited) | ||||||||||||||||
| Comerica Incorporated and Subsidiaries | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| (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 | $ | 171 | $ | 242 | $ | 309 | $ | 345 | $ | 379 | ||||||
| Commercial mortgage | 29 | 29 | 31 | 35 | 41 | |||||||||||
| Lease financing | 2 | 3 | 4 | 8 | 8 | |||||||||||
| International | 4 | 4 | 6 | 6 | 6 | |||||||||||
| Total nonaccrual business loans | 206 | 278 | 350 | 394 | 434 | |||||||||||
| Retail loans: | ||||||||||||||||
| Residential mortgage | 29 | 29 | 31 | 28 | 36 | |||||||||||
| Consumer: | ||||||||||||||||
| Home equity | 19 | 19 | 21 | 22 | 23 | |||||||||||
| Total nonaccrual retail loans | 48 | 48 | 52 | 50 | 59 | |||||||||||
| Total nonaccrual loans | 254 | 326 | 402 | 444 | 493 | |||||||||||
| Reduced-rate loans | 8 | 8 | 8 | 8 | 8 | |||||||||||
| Total nonperforming loans | 262 | 334 | 410 | 452 | 501 | |||||||||||
| Foreclosed property | 2 | 5 | 5 | 6 | 18 | |||||||||||
| Total nonperforming assets | $ | 264 | $ | 339 | $ | 415 | $ | 458 | $ | 519 | ||||||
| Nonperforming loans as a percentage of total loans | 0.53 | % | 0.68 | % | 0.83 | % | 0.92 | % | 1.01 | % | ||||||
| Nonperforming assets as a percentage of total loans and foreclosed property | 0.53 | 0.69 | 0.84 | 0.93 | 1.05 | |||||||||||
| Allowance for loan losses as a percentage of total nonperforming loans | 2.6x | 2.1x | 1.7x | 1.6x | 1.4x | |||||||||||
| Loans past due 90 days or more and still accruing | $ | 20 | $ | 36 | $ | 35 | $ | 12 | $ | 30 | ||||||
| ANALYSIS OF NONACCRUAL LOANS | ||||||||||||||||
| Nonaccrual loans at beginning of period | $ | 326 | $ | 402 | $ | 444 | $ | 493 | $ | 521 | ||||||
| Loans transferred to nonaccrual (a) | 49 | 71 | 73 | 66 | 54 | |||||||||||
| Nonaccrual loan gross charge-offs | (20 | ) | (37 | ) | (29 | ) | (37 | ) | (39 | ) | ||||||
| Loans transferred to accrual status (a) | — | (3 | ) | — | — | — | ||||||||||
| Nonaccrual loans sold | (15 | ) | (10 | ) | (22 | ) | (10 | ) | — | |||||||
| Payments/Other (b) | (86 | ) | (97 | ) | (64 | ) | (68 | ) | (43 | ) | ||||||
| Nonaccrual loans at end of period | $ | 254 | $ | 326 | $ | 402 | $ | 444 | $ | 493 | ||||||
(a) Based on an analysis of nonaccrual loans with book balances greater than $2 million. | ||||||||||||||||
| (b) Includes net changes related to nonaccrual loans with balances less than $2 million, payments on nonaccrual loans with book balances greater than $2 million and transfers of nonaccrual loans to foreclosed property. | ||||||||||||||||
14
| ANALYSIS OF NET INTEREST INCOME (unaudited) | |||||||||||||||||
| Comerica Incorporated and Subsidiaries | |||||||||||||||||
| Six Months Ended | |||||||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||||||
| Average | Average | Average | Average | ||||||||||||||
| (dollar amounts in millions) | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||
| Commercial loans | $ | 30,556 | $ | 672 | 4.44 | % | $ | 30,166 | $ | 539 | 3.61 | % | |||||
| Real estate construction loans | 3,129 | 77 | 4.93 | 2,934 | 57 | 3.95 | |||||||||||
| Commercial mortgage loans | 9,195 | 205 | 4.49 | 8,994 | 170 | 3.81 | |||||||||||
| Lease financing | 461 | 9 | 3.93 | 548 | 6 | 2.00 | |||||||||||
| International loans | 989 | 24 | 4.81 | 1,174 | 23 | 3.88 | |||||||||||
| Residential mortgage loans | 2,002 | 38 | 3.78 | 1,969 | 35 | 3.59 | |||||||||||
| Consumer loans | 2,493 | 52 | 4.24 | 2,528 | 44 | 3.52 | |||||||||||
| Total loans | 48,825 | 1,077 | 4.45 | 48,313 | 874 | 3.65 | |||||||||||
| Mortgage-backed securities | 9,133 | 104 | 2.23 | 9,321 | 99 | 2.16 | |||||||||||
| Other investment securities | 2,722 | 24 | 1.71 | 2,894 | 24 | 1.63 | |||||||||||
| Total investment securities | 11,855 | 128 | 2.11 | 12,215 | 123 | 2.03 | |||||||||||
| Interest-bearing deposits with banks | 4,251 | 35 | 1.68 | 5,857 | 28 | 0.92 | |||||||||||
| Other short-term investments | 132 | — | 0.84 | 92 | — | 0.63 | |||||||||||
| Total earning assets | 65,063 | 1,240 | 3.83 | 66,477 | 1,025 | 3.11 | |||||||||||
| Cash and due from banks | 1,248 | 1,164 | |||||||||||||||
| Allowance for loan losses | (713 | ) | (733 | ) | |||||||||||||
| Accrued income and other assets | 4,825 | 4,673 | |||||||||||||||
| Total assets | $ | 70,423 | $ | 71,581 | |||||||||||||
| Money market and interest-bearing checking deposits | $ | 22,039 | 40 | 0.37 | $ | 22,066 | 14 | 0.13 | |||||||||
| Savings deposits | 2,205 | — | 0.03 | 2,114 | — | 0.02 | |||||||||||
| Customer certificates of deposit | 2,092 | 4 | 0.36 | 2,621 | 4 | 0.37 | |||||||||||
| Foreign office time deposits | 32 | — | 1.13 | 50 | — | 0.55 | |||||||||||
| Total interest-bearing deposits | 26,368 | 44 | 0.34 | 26,851 | 18 | 0.14 | |||||||||||
| Short-term borrowings | 45 | — | 1.63 | 85 | — | 1.07 | |||||||||||
| Medium- and long-term debt | 5,390 | 57 | 2.11 | 5,159 | 37 | 1.39 | |||||||||||
| Total interest-bearing sources | 31,803 | 101 | 0.64 | 32,095 | 55 | 0.35 | |||||||||||
| Noninterest-bearing deposits | 29,591 | 30,601 | |||||||||||||||
| Accrued expenses and other liabilities | 1,077 | 980 | |||||||||||||||
| Total shareholders' equity | 7,952 | 7,905 | |||||||||||||||
| Total liabilities and shareholders' equity | $ | 70,423 | $ | 71,581 | |||||||||||||
| Net interest income/rate spread | $ | 1,139 | 3.19 | $ | 970 | 2.76 | |||||||||||
| Impact of net noninterest-bearing sources of funds | 0.33 | 0.18 | |||||||||||||||
| Net interest margin (as a percentage of average earning assets) | 3.52 | % | 2.94 | % | |||||||||||||
15
| ANALYSIS OF NET INTEREST INCOME (unaudited) | ||||||||||||||||||||||||||
| Comerica Incorporated and Subsidiaries | ||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||
| June 30, 2018 | March 31, 2018 | June 30, 2017 | ||||||||||||||||||||||||
| Average | Average | Average | Average | Average | Average | |||||||||||||||||||||
| (dollar amounts in millions) | Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||
| Commercial loans | $ | 30,966 | $ | 357 | 4.64 | % | $ | 30,145 | $ | 315 | 4.24 | % | $ | 30,632 | $ | 283 | 3.71 | % | ||||||||
| Real estate construction loans | 3,189 | 41 | 5.12 | 3,067 | 36 | 4.74 | 2,910 | 29 | 4.08 | |||||||||||||||||
| Commercial mortgage loans | 9,174 | 107 | 4.65 | 9,217 | 98 | 4.32 | 9,012 | 87 | 3.88 | |||||||||||||||||
| Lease financing | 457 | 4 | 3.65 | 464 | 5 | 4.22 | 526 | 1 | 0.60 | |||||||||||||||||
| International loans | 981 | 13 | 5.02 | 996 | 11 | 4.60 | 1,139 | 12 | 3.99 | |||||||||||||||||
| Residential mortgage loans | 1,993 | 20 | 3.88 | 2,011 | 18 | 3.67 | 1,975 | 18 | 3.61 | |||||||||||||||||
| Consumer loans | 2,465 | 26 | 4.35 | 2,521 | 26 | 4.13 | 2,529 | 23 | 3.62 | |||||||||||||||||
| Total loans | 49,225 | 568 | 4.63 | 48,421 | 509 | 4.26 | 48,723 | 453 | 3.73 | |||||||||||||||||
| Mortgage-backed securities | 9,098 | 52 | 2.25 | 9,168 | 52 | 2.21 | 9,336 | 50 | 2.17 | |||||||||||||||||
| Other investment securities | 2,701 | 12 | 1.71 | 2,743 | 12 | 1.72 | 2,896 | 12 | 1.67 | |||||||||||||||||
| Total investment securities | 11,799 | 64 | 2.12 | 11,911 | 64 | 2.09 | 12,232 | 62 | 2.05 | |||||||||||||||||
| Interest-bearing deposits with banks | 3,957 | 18 | 1.82 | 4,548 | 17 | 1.55 | 5,263 | 14 | 1.03 | |||||||||||||||||
| Other short-term investments | 133 | — | 0.94 | 132 | — | 0.60 | 92 | — | 0.58 | |||||||||||||||||
| Total earning assets | 65,114 | 650 | 3.98 | 65,012 | 590 | 3.66 | 66,310 | 529 | 3.21 | |||||||||||||||||
| Cash and due from banks | 1,235 | 1,261 | 1,148 | |||||||||||||||||||||||
| Allowance for loan losses | (708 | ) | (718 | ) | (726 | ) | ||||||||||||||||||||
| Accrued income and other assets | 4,879 | 4,771 | 4,614 | |||||||||||||||||||||||
| Total assets | $ | 70,520 | $ | 70,326 | $ | 71,346 | ||||||||||||||||||||
| Money market and interest-bearing checking deposits | $ | 22,187 | 26 | 0.47 | $ | 21,891 | 14 | 0.26 | $ | 21,661 | 7 | 0.13 | ||||||||||||||
| Savings deposits | 2,231 | — | 0.04 | 2,177 | — | 0.03 | 2,142 | — | 0.02 | |||||||||||||||||
| Customer certificates of deposit | 2,063 | 2 | 0.38 | 2,122 | 2 | 0.34 | 2,527 | 2 | 0.36 | |||||||||||||||||
| Foreign office time deposits | 33 | — | 1.13 | 31 | — | 1.14 | 57 | — | 0.60 | |||||||||||||||||
| Total interest-bearing deposits | 26,514 | 28 | 0.42 | 26,221 | 16 | 0.25 | 26,387 | 9 | 0.15 | |||||||||||||||||
| Short-term borrowings | 56 | — | 1.74 | 35 | — | 1.47 | 147 | — | 1.12 | |||||||||||||||||
| Medium- and long-term debt | 5,584 | 32 | 2.24 | 5,192 | 25 | 1.96 | 5,161 | 20 | 1.48 | |||||||||||||||||
| Total interest-bearing sources | 32,154 | 60 | 0.74 | 31,448 | 41 | 0.53 | 31,695 | 29 | 0.37 | |||||||||||||||||
| Noninterest-bearing deposits | 29,316 | 29,869 | 30,741 | |||||||||||||||||||||||
| Accrued expenses and other liabilities | 1,073 | 1,082 | 966 | |||||||||||||||||||||||
| Total shareholders' equity | 7,977 | 7,927 | 7,944 | |||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 70,520 | $ | 70,326 | $ | 71,346 | ||||||||||||||||||||
| Net interest income/rate spread | $ | 590 | 3.24 | $ | 549 | 3.13 | $ | 500 | 2.84 | |||||||||||||||||
| Impact of net noninterest-bearing sources of funds | 0.38 | 0.28 | 0.19 | |||||||||||||||||||||||
| Net interest margin (as a percentage of average earning assets) | 3.62 | % | 3.41 | % | 3.03 | % | ||||||||||||||||||||
16
| CONSOLIDATED STATISTICAL DATA (unaudited) | |||||||||||||||
| Comerica Incorporated and Subsidiaries | |||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||
| (in millions, except per share data) | 2018 | 2018 | 2017 | 2017 | 2017 | ||||||||||
| Commercial loans: | |||||||||||||||
| Floor plan | $ | 4,239 | $ | 4,302 | $ | 4,359 | $ | 3,960 | $ | 4,346 | |||||
| Other | 27,291 | 26,607 | 26,701 | 27,102 | 27,103 | ||||||||||
| Total commercial loans | 31,530 | 30,909 | 31,060 | 31,062 | 31,449 | ||||||||||
| Real estate construction loans | 3,257 | 3,114 | 2,961 | 3,018 | 2,857 | ||||||||||
| Commercial mortgage loans | 9,124 | 9,272 | 9,159 | 8,985 | 8,974 | ||||||||||
| Lease financing | 458 | 464 | 468 | 475 | 472 | ||||||||||
| International loans | 993 | 964 | 983 | 1,159 | 1,145 | ||||||||||
| Residential mortgage loans | 1,954 | 2,003 | 1,988 | 1,999 | 1,976 | ||||||||||
| Consumer loans: | |||||||||||||||
| Home equity | 1,731 | 1,763 | 1,816 | 1,790 | 1,796 | ||||||||||
| Other consumer | 745 | 751 | 738 | 721 | 739 | ||||||||||
| Total consumer loans | 2,476 | 2,514 | 2,554 | 2,511 | 2,535 | ||||||||||
| Total loans | $ | 49,792 | $ | 49,240 | $ | 49,173 | $ | 49,209 | $ | 49,408 | |||||
| Goodwill | $ | 635 | $ | 635 | $ | 635 | $ | 635 | $ | 635 | |||||
| Core deposit intangible | 5 | 5 | 6 | 6 | 7 | ||||||||||
| Other intangibles | 2 | 2 | 2 | 2 | 2 | ||||||||||
| Common equity tier 1 capital (a) | 8,026 | 7,911 | 7,773 | 7,752 | 7,705 | ||||||||||
| Risk-weighted assets (a) | 67,468 | 66,039 | 66,575 | 67,341 | 66,928 | ||||||||||
| Common equity tier 1 and tier 1 risk-based capital ratio (a) | 11.90 | % | 11.98 | % | 11.68 | % | 11.51 | % | 11.51 | % | |||||
| Total risk-based capital ratio (a) | 13.96 | 14.12 | 13.84 | 13.65 | 13.66 | ||||||||||
| Leverage ratio (a) | 11.35 | 11.24 | 10.89 | 10.87 | 10.80 | ||||||||||
| Common equity ratio | 11.22 | 11.06 | 11.13 | 11.16 | 11.18 | ||||||||||
| Tangible common equity ratio (b) | 10.42 | 10.26 | 10.32 | 10.35 | 10.37 | ||||||||||
| Common shareholders' equity per share of common stock | $ | 47.27 | $ | 46.38 | $ | 46.07 | $ | 46.09 | $ | 45.39 | |||||
| Tangible common equity per share of common stock (b) | 43.51 | 42.66 | 42.34 | 42.39 | 41.73 | ||||||||||
| Market value per share for the quarter: | |||||||||||||||
| High | 101.05 | 102.66 | 88.22 | 76.76 | 75.30 | ||||||||||
| Low | 90.40 | 86.02 | 74.16 | 64.04 | 64.75 | ||||||||||
| Close | 90.92 | 95.93 | 86.81 | 76.26 | 73.24 | ||||||||||
| Quarterly ratios: | |||||||||||||||
| Return on average common shareholders' equity | 16.40 | % | 14.37 | % | 5.58 | % | 11.17 | % | 10.26 | % | |||||
| Return on average assets | 1.85 | 1.62 | 0.62 | 1.25 | 1.14 | ||||||||||
| Efficiency ratio (c) | 53.24 | 56.33 | 58.14 | 56.33 | 58.70 | ||||||||||
| Number of banking centers | 438 | 438 | 438 | 439 | 439 | ||||||||||
| Number of employees - full time equivalent | 7,868 | 7,942 | 7,999 | 7,974 | 8,017 | ||||||||||
| (a) | June 30, 2018 amounts and ratios are estimated and do not reflect guidance related to high volatility commercial real estate loans as indicated in the recent interagency statement regarding the impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act. |
| (b) | See Reconciliation of Non-GAAP Financial Measures. |
| (c) | Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares. |
17
| 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, 2016 | 175.3 | $ | 1,141 | $ | 2,135 | $ | (383 | ) | $ | 7,331 | $ | (2,428 | ) | $ | 7,796 | |||||
| Cumulative effect of change in accounting principle | — | — | 3 | — | (2 | ) | — | 1 | ||||||||||||
| Net income | — | — | — | — | 405 | — | 405 | |||||||||||||
| Other comprehensive income, net of tax | — | — | — | 22 | — | — | 22 | |||||||||||||
| Cash dividends declared on common stock ($0.49 per share) | — | — | — | — | (88 | ) | — | (88 | ) | |||||||||||
| Purchase of common stock | (3.7 | ) | — | — | — | — | (257 | ) | (257 | ) | ||||||||||
| Net issuance of common stock under employee stock plans | 2.8 | — | (26 | ) | — | (20 | ) | 128 | 82 | |||||||||||
| Net issuance of common stock for warrants | 1.5 | — | (25 | ) | — | (46 | ) | 71 | — | |||||||||||
| Share-based compensation | — | — | 24 | — | — | — | 24 | |||||||||||||
| Other | — | — | (1 | ) | — | — | 1 | — | ||||||||||||
| BALANCE AT JUNE 30, 2017 | 175.9 | $ | 1,141 | $ | 2,110 | $ | (361 | ) | $ | 7,580 | $ | (2,485 | ) | $ | 7,985 | |||||
| BALANCE AT DECEMBER 31, 2017 | 172.9 | $ | 1,141 | $ | 2,122 | $ | (451 | ) | $ | 7,887 | $ | (2,736 | ) | $ | 7,963 | |||||
| Cumulative effect of change in accounting principles | — | — | — | 1 | 14 | — | 15 | |||||||||||||
| Net income | — | — | — | — | 607 | — | 607 | |||||||||||||
| Other comprehensive loss, net of tax | — | — | — | (139 | ) | — | — | (139 | ) | |||||||||||
| Cash dividends declared on common stock ($0.64 per share) | — | — | — | — | (110 | ) | — | (110 | ) | |||||||||||
| Purchase of common stock | (3.4 | ) | — | — | — | — | (328 | ) | (328 | ) | ||||||||||
| Net issuance of common stock under employee stock plans | 1.3 | — | (11 | ) | — | (21 | ) | 69 | 37 | |||||||||||
| Net issuance of common stock for warrants | 0.1 | — | (1 | ) | — | (3 | ) | 4 | — | |||||||||||
| Share-based compensation | — | — | 34 | — | — | — | 34 | |||||||||||||
| BALANCE AT JUNE 30, 2018 | 170.9 | $ | 1,141 | $ | 2,144 | $ | (589 | ) | $ | 8,374 | $ | (2,991 | ) | $ | 8,079 | |||||
18
| BUSINESS SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||
| Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||
| (dollar amounts in millions) | Business | Retail | Wealth | ||||||||||||||||||||
| Three Months Ended June 30, 2018 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
| Earnings summary: | |||||||||||||||||||||||
| Net interest income | $ | 341 | $ | 169 | $ | 40 | $ | 26 | $ | 14 | $ | 590 | |||||||||||
| Provision for credit losses | (17 | ) | (9 | ) | 1 | — | (4 | ) | (29 | ) | |||||||||||||
| Noninterest income | 126 | 42 | 67 | 12 | 1 | 248 | |||||||||||||||||
| Noninterest expenses | 182 | 178 | 75 | (1 | ) | 14 | 448 | ||||||||||||||||
| Provision for income taxes | 68 | 10 | 7 | 6 | 2 | (a) | 93 | ||||||||||||||||
| Net income | $ | 234 | $ | 32 | $ | 24 | $ | 33 | $ | 3 | $ | 326 | |||||||||||
| Net credit-related charge-offs (recoveries) | $ | — | $ | (4 | ) | $ | 1 | $ | — | $ | — | $ | (3 | ) | |||||||||
| Selected average balances: | |||||||||||||||||||||||
| Assets | $ | 39,961 | $ | 6,412 | $ | 5,260 | $ | 13,735 | $ | 5,152 | $ | 70,520 | |||||||||||
| Loans | 38,332 | 5,766 | 5,127 | — | — | 49,225 | |||||||||||||||||
| Deposits | 26,582 | 24,161 | 3,852 | 1,093 | 142 | 55,830 | |||||||||||||||||
| Statistical data: | |||||||||||||||||||||||
| Return on average assets (b) | 2.34 | % | 0.52 | % | 1.90 | % | N/M | N/M | 1.85 | % | |||||||||||||
| Efficiency ratio (c) | 39.00 | 84.05 | 69.03 | N/M | N/M | 53.24 | |||||||||||||||||
| Business | Retail | Wealth | |||||||||||||||||||||
| Three Months Ended March 31, 2018 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
| Earnings summary: | |||||||||||||||||||||||
| Net interest income | $ | 330 | $ | 165 | $ | 41 | $ | 1 | $ | 12 | $ | 549 | |||||||||||
| Provision for credit losses | 10 | 4 | (4 | ) | — | 2 | 12 | ||||||||||||||||
| Noninterest income | 121 | 42 | 68 | 11 | 2 | 244 | |||||||||||||||||
| Noninterest expenses | 184 | 177 | 72 | (1 | ) | 14 | 446 | ||||||||||||||||
| Provision (benefit) for income taxes | 59 | 6 | 10 | 1 | (22 | ) | (a) | 54 | |||||||||||||||
| Net income | $ | 198 | $ | 20 | $ | 31 | $ | 12 | $ | 20 | $ | 281 | |||||||||||
| Net credit-related charge-offs (recoveries) | $ | 18 | $ | 12 | $ | (2 | ) | $ | — | $ | — | $ | 28 | ||||||||||
| Selected average balances: | |||||||||||||||||||||||
| Assets | $ | 38,911 | $ | 6,427 | $ | 5,373 | $ | 13,779 | $ | 5,836 | $ | 70,326 | |||||||||||
| Loans | 37,368 | 5,807 | 5,246 | — | — | 48,421 | |||||||||||||||||
| Deposits | 27,314 | 24,064 | 3,796 | 823 | 93 | 56,090 | |||||||||||||||||
| Statistical data: | |||||||||||||||||||||||
| Return on average assets (b) | 2.07 | % | 0.33 | % | 2.30 | % | N/M | N/M | 1.62 | % | |||||||||||||
| Efficiency ratio (c) | 40.72 | 85.03 | 67.10 | N/M | N/M | 56.33 | |||||||||||||||||
| Business | Retail | Wealth | |||||||||||||||||||||
| Three Months Ended June 30, 2017 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
| Earnings summary: | |||||||||||||||||||||||
| Net interest income (expense) | $ | 336 | $ | 162 | $ | 42 | $ | (49 | ) | $ | 9 | $ | 500 | ||||||||||
| Provision for credit losses | 12 | 5 | (2 | ) | — | 2 | 17 | ||||||||||||||||
| Noninterest income | 152 | 48 | 64 | 10 | 2 | 276 | |||||||||||||||||
| Noninterest expenses | 196 | 180 | 71 | (1 | ) | 11 | 457 | ||||||||||||||||
| Provision (benefit) for income taxes | 100 | 9 | 14 | (17 | ) | (7 | ) | (a) | 99 | ||||||||||||||
| Net income (loss) | $ | 180 | $ | 16 | $ | 23 | $ | (21 | ) | $ | 5 | $ | 203 | ||||||||||
| Net credit-related charge-offs (recoveries) | $ | 10 | $ | 9 | $ | (1 | ) | $ | — | $ | — | $ | 18 | ||||||||||
| Selected average balances: | |||||||||||||||||||||||
| Assets | $ | 38,881 | $ | 6,487 | $ | 5,432 | $ | 13,936 | $ | 6,610 | $ | 71,346 | |||||||||||
| Loans | 37,580 | 5,865 | 5,278 | — | — | 48,723 | |||||||||||||||||
| Deposits | 28,748 | 23,935 | 4,106 | 156 | 183 | 57,128 | |||||||||||||||||
| Statistical data: | |||||||||||||||||||||||
| Return on average assets (b) | 1.85 | % | 0.27 | % | 1.76 | % | N/M | N/M | 1.14 | % | |||||||||||||
| Efficiency ratio (c) | 40.25 | 84.80 | 66.44 | N/M | N/M | 58.70 | |||||||||||||||||
| (a) | Included tax benefits of $3 million, $19 million and $5 million from employee stock transactions for the second and first quarters 2018 and second quarter 2017, respectively. |
| (b) | Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity. |
| (c) | Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares. |
N/M - Not Meaningful
19
| MARKET SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||
| Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||
| (dollar amounts in millions) | Other | Finance | |||||||||||||||||||||
| Three Months Ended June 30, 2018 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
| Earnings summary: | |||||||||||||||||||||||
| Net interest income | $ | 167 | $ | 183 | $ | 117 | $ | 83 | $ | 40 | $ | 590 | |||||||||||
| Provision for credit losses | 1 | (9 | ) | (15 | ) | (2 | ) | (4 | ) | (29 | ) | ||||||||||||
| Noninterest income | 73 | 42 | 30 | 90 | 13 | 248 | |||||||||||||||||
| Noninterest expenses | 144 | 105 | 92 | 94 | 13 | 448 | |||||||||||||||||
| Provision (benefit) for income taxes | 22 | 32 | 16 | 15 | 8 | (a) | 93 | ||||||||||||||||
| Net income | $ | 73 | $ | 97 | $ | 54 | $ | 66 | $ | 36 | $ | 326 | |||||||||||
| Net credit-related charge-offs (recoveries) | $ | — | $ | — | $ | 3 | $ | (6 | ) | $ | — | $ | (3 | ) | |||||||||
| Selected average balances: | |||||||||||||||||||||||
| Assets | $ | 13,427 | $ | 18,697 | $ | 10,439 | $ | 9,070 | $ | 18,887 | $ | 70,520 | |||||||||||
| Loans | 12,641 | 18,435 | 9,862 | 8,287 | — | 49,225 | |||||||||||||||||
| Deposits | 20,904 | 16,642 | 8,967 | 8,082 | 1,235 | 55,830 | |||||||||||||||||
| Statistical data: | |||||||||||||||||||||||
| Return on average assets (b) | 1.37 | % | 2.06 | % | 2.08 | % | 2.93 | % | N/M | 1.85 | % | ||||||||||||
| Efficiency ratio (c) | 59.77 | 46.94 | 62.17 | 53.72 | N/M | 53.24 | |||||||||||||||||
| Other | Finance | ||||||||||||||||||||||
| Three Months Ended March 31, 2018 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
| Earnings summary: | |||||||||||||||||||||||
| Net interest income (expense) | $ | 169 | $ | 180 | $ | 109 | $ | 78 | $ | 13 | $ | 549 | |||||||||||
| Provision for credit losses | 33 | (2 | ) | (13 | ) | (8 | ) | 2 | 12 | ||||||||||||||
| Noninterest income | 73 | 39 | 31 | 88 | 13 | 244 | |||||||||||||||||
| Noninterest expenses | 144 | 106 | 92 | 91 | 13 | 446 | |||||||||||||||||
| Provision for income taxes | 16 | 30 | 14 | 15 | (21 | ) | (a) | 54 | |||||||||||||||
| Net income (loss) | $ | 49 | $ | 85 | $ | 47 | $ | 68 | $ | 32 | $ | 281 | |||||||||||
| Net credit-related charge-offs | $ | (1 | ) | $ | 13 | $ | 5 | $ | 11 | $ | — | $ | 28 | ||||||||||
| Selected average balances: | |||||||||||||||||||||||
| Assets | $ | 13,395 | $ | 18,581 | $ | 10,373 | $ | 8,362 | $ | 19,615 | $ | 70,326 | |||||||||||
| Loans | 12,604 | 18,347 | 9,830 | 7,640 | — | 48,421 | |||||||||||||||||
| Deposits | 21,227 | 17,091 | 9,188 | 7,668 | 916 | 56,090 | |||||||||||||||||
| Statistical data: | |||||||||||||||||||||||
| Return on average assets (b) | 0.88 | % | 1.86 | % | 1.85 | % | 3.32 | % | N/M | 1.62 | % | ||||||||||||
| Efficiency ratio (c) | 59.61 | 48.39 | 65.63 | 54.97 | N/M | 56.33 | |||||||||||||||||
| Other | Finance | ||||||||||||||||||||||
| Three Months Ended June 30, 2017 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
| Earnings summary: | |||||||||||||||||||||||
| Net interest income (expense) | $ | 167 | $ | 178 | $ | 113 | $ | 82 | $ | (40 | ) | $ | 500 | ||||||||||
| Provision for credit losses | (2 | ) | 24 | (15 | ) | 8 | 2 | 17 | |||||||||||||||
| Noninterest income | 81 | 45 | 33 | 105 | 12 | 276 | |||||||||||||||||
| Noninterest expenses | 145 | 98 | 94 | 110 | 10 | 457 | |||||||||||||||||
| Provision (benefit) for income taxes | 38 | 40 | 25 | 20 | (24 | ) | (a) | 99 | |||||||||||||||
| Net income (loss) | $ | 67 | $ | 61 | $ | 42 | $ | 49 | $ | (16 | ) | $ | 203 | ||||||||||
| Net credit-related charge-offs (recoveries) | $ | (1 | ) | $ | 8 | $ | 5 | $ | 6 | $ | — | $ | 18 | ||||||||||
| Selected average balances: | |||||||||||||||||||||||
| Assets | $ | 13,371 | $ | 18,474 | $ | 10,481 | $ | 8,474 | $ | 20,546 | $ | 71,346 | |||||||||||
| Loans | 12,712 | 18,194 | 10,015 | 7,802 | — | 48,723 | |||||||||||||||||
| Deposits | 21,698 | 17,344 | 9,632 | 8,115 | 339 | 57,128 | |||||||||||||||||
| Statistical data: | |||||||||||||||||||||||
| Return on average assets (b) | 1.20 | % | 1.33 | % | 1.52 | % | 2.24 | % | N/M | 1.14 | % | ||||||||||||
| Efficiency ratio (c) | 58.18 | 43.85 | 64.39 | 58.59 | N/M | 58.70 | |||||||||||||||||
| (a) | Included tax benefits of $3 million, $19 million and $5 million from employee stock transactions for the second and first quarters 2018 and second quarter 2017, respectively. |
| (b) | Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity. |
| (c) | Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares |
N/M - Not Meaningful
20
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited) | |||||
| Comerica Incorporated and Subsidiaries | |||||
Comerica believes non-GAAP measures are meaningful because they reflect adjustments commonly made by management, investors, regulators and analysts to evaluate the adequacy of common equity and our performance trends. Comerica believes adjusted net income, earnings per share, ROA, ROE, noninterest income, noninterest expenses and efficiency ratio provide a greater understanding of ongoing operations and enhances comparability of results with prior periods. Tangible common equity is used by Comerica to measure the quality of capital and the return relative to balance sheet risk.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | March 31, | June 30, | June 30, | |||||||||||||
| (dollar amounts in millions, except per share data) | 2018 | 2018 | 2017 | 2018 | 2017 | |||||||||||
| Adjusted Earnings per Common Share: | ||||||||||||||||
| Net income attributable to common shareholders | $ | 324 | $ | 279 | $ | 202 | $ | 603 | $ | 402 | ||||||
| Restructuring charges, net of tax | 9 | 12 | 9 | 21 | 16 | |||||||||||
| Deferred tax adjustment | — | (3 | ) | — | (3 | ) | — | |||||||||
| Tax benefits from employee stock transactions | (3 | ) | (19 | ) | (5 | ) | (22 | ) | (29 | ) | ||||||
| Adjusted net income attributable to common shareholders | $ | 330 | $ | 269 | $ | 206 | $ | 599 | $ | 389 | ||||||
| Diluted average common shares (in millions) | 174 | 175 | 179 | 174 | 180 | |||||||||||
| Diluted earnings per common share: | ||||||||||||||||
| Reported | $ | 1.87 | $ | 1.59 | $ | 1.13 | $ | 3.46 | $ | 2.24 | ||||||
| Adjusted | 1.90 | 1.54 | 1.15 | 3.44 | 2.17 | |||||||||||
| Adjusted Noninterest Income, Noninterest Expenses and Efficiency Ratio: | ||||||||||||||||
| Noninterest income | $ | 248 | $ | 244 | $ | 276 | $ | 492 | $ | 547 | ||||||
| Proforma effect of adoption of accounting standard | — | — | (28 | ) | — | (54 | ) | |||||||||
| Adjusted noninterest income | $ | 248 | $ | 244 | $ | 248 | $ | 492 | $ | 493 | ||||||
| Noninterest expenses | $ | 448 | $ | 446 | $ | 457 | $ | 894 | $ | 914 | ||||||
| Proforma effect of adoption of accounting standard | — | — | (28 | ) | — | (54 | ) | |||||||||
| Restructuring charges | (11 | ) | (16 | ) | (14 | ) | (27 | ) | (25 | ) | ||||||
| Adjusted noninterest expenses | $ | 437 | $ | 430 | $ | 415 | $ | 867 | $ | 835 | ||||||
| Net interest income | $ | 590 | $ | 549 | $ | 500 | $ | 1,139 | $ | 970 | ||||||
| Efficiency ratio: | ||||||||||||||||
| Reported | 53.24 | % | 56.33 | % | 58.70 | % | 54.74 | % | 60.17 | % | ||||||
| Adjusted | 51.90 | 54.32 | 55.25 | 53.07 | 56.98 | |||||||||||
| Adjusted Net Income, ROA and ROE: | ||||||||||||||||
| Net income | $ | 326 | $ | 281 | $ | 203 | $ | 607 | $ | 405 | ||||||
| Restructuring charges, net of tax | 9 | 12 | 9 | 21 | 16 | |||||||||||
| Deferred tax adjustment | — | (3 | ) | — | (3 | ) | — | |||||||||
| Tax benefits from employee stock transactions | (3 | ) | (19 | ) | (5 | ) | (22 | ) | (29 | ) | ||||||
| Adjusted net income | $ | 332 | $ | 271 | $ | 207 | $ | 603 | $ | 392 | ||||||
| Average assets | $ | 70,520 | $ | 70,326 | $ | 71,346 | $ | 70,423 | $ | 71,581 | ||||||
| ROA: | ||||||||||||||||
| Reported | 1.85 | % | 1.62 | % | 1.14 | % | 1.74 | % | 1.14 | % | ||||||
| Adjusted | 1.89 | 1.56 | 1.17 | 1.73 | 1.11 | |||||||||||
| Average common shareholders' equity | $ | 7,977 | $ | 7,927 | $ | 7,944 | $ | 7,952 | $ | 7,905 | ||||||
| ROE: | ||||||||||||||||
| Reported | 16.40 | % | 14.37 | % | 10.26 | % | 15.39 | % | 10.34 | % | ||||||
| Adjusted | 16.70 | 13.85 | 10.49 | 15.29 | 10.03 | |||||||||||
Adjusted net income, earnings per share, ROA and ROE remove the after tax effect of restructuring charges, the charge to adjust deferred taxes resulting from the Tax Cut and Jobs Act and tax benefits from employee stock transactions from net income and net income available to common shareholders. Adjusted noninterest income, noninterest expenses and efficiency ratio remove the proforma effect of the adoption of the new accounting standard for revenue recognition and restructuring charges from noninterest income and noninterest expenses.
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| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||
| (dollar amounts in millions) | 2018 | 2018 | 2017 | 2017 | 2017 | ||||||||||
| Tangible Common Equity Ratio: | |||||||||||||||
| Common shareholders' equity | $ | 8,079 | $ | 8,000 | $ | 7,963 | $ | 8,034 | $ | 7,985 | |||||
| Less: | |||||||||||||||
| Goodwill | 635 | 635 | 635 | 635 | 635 | ||||||||||
| Other intangible assets | 7 | 7 | 8 | 8 | 9 | ||||||||||
| Tangible common equity | $ | 7,437 | $ | 7,358 | $ | 7,320 | $ | 7,391 | $ | 7,341 | |||||
| Total assets | $ | 71,987 | $ | 72,335 | $ | 71,567 | $ | 72,017 | $ | 71,447 | |||||
| Less: | |||||||||||||||
| Goodwill | 635 | 635 | 635 | 635 | 635 | ||||||||||
| Other intangible assets | 7 | 7 | 8 | 8 | 9 | ||||||||||
| Tangible assets | $ | 71,345 | $ | 71,693 | $ | 70,924 | $ | 71,374 | $ | 70,803 | |||||
| Common equity ratio | 11.22 | % | 11.06 | % | 11.13 | % | 11.16 | % | 11.18 | % | |||||
| Tangible common equity ratio | 10.42 | 10.26 | 10.32 | 10.35 | 10.37 | ||||||||||
| Tangible Common Equity per Share of Common Stock: | |||||||||||||||
| Common shareholders' equity | $ | 8,079 | $ | 8,000 | $ | 7,963 | $ | 8,034 | $ | 7,985 | |||||
| Tangible common equity | 7,437 | 7,358 | 7,320 | 7,391 | 7,341 | ||||||||||
| Shares of common stock outstanding (in millions) | 171 | 172 | 173 | 174 | 176 | ||||||||||
| Common shareholders' equity per share of common stock | $ | 47.27 | $ | 46.38 | $ | 46.07 | $ | 46.09 | $ | 45.39 | |||||
| Tangible common equity per share of common stock | 43.51 | 42.66 | 42.34 | 42.39 | 41.73 | ||||||||||
The tangible common equity ratio removes the effect of intangible assets from capital and 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.
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