Dallas, TX/October 16, 2018
COMERICA REPORTS THIRD QUARTER 2018 NET INCOME OF $318 MILLION,
$1.86 PER SHARE
Returned $600 Million to Shareholders Through Share Repurchases and Dividends
Continued Net Interest Income Growth, Strong Credit Quality and Controlled Expenses
Earnings Per Share Increased 48 Percent Compared to Third Quarter 2017
“In the third quarter, we continued to grow revenue, excluding securities losses, as well as maintain favorable credit metrics and well-controlled expenses," said Ralph W. Babb, Jr., chairman and chief executive officer. “We took action to enhance our future returns by significantly increasing our share repurchases and dividend. We expect to continue to return excess capital to shareholders as we work toward a target common equity Tier 1 capital ratio of 9.5 to 10 percent by the end of 2019. In addition, discrete tax benefits provided us the opportunity to reposition a portion of our securities portfolio. With increased loan commitments and seasonal factors, we expect loan growth to trend positive into the end of the year. We remain well positioned to meaningfully benefit from rising rates as we judiciously manage loan and deposit pricing. Our return on assets, return on equity and efficiency ratio clearly demonstrate our commitment to enhancing shareholder value.”
| (dollar amounts in millions, except per share data) | 3rd Qtr '18 | 2nd Qtr '18 | 3rd Qtr '17 | ||||||||
| FINANCIAL RESULTS | |||||||||||
| Net interest income | $ | 599 | $ | 590 | $ | 546 | |||||
| Provision for credit losses | — | (29 | ) | 24 | |||||||
| Noninterest income | 234 | 248 | 275 | ||||||||
| Noninterest expenses | 452 | 448 | 463 | ||||||||
| Pre-tax income | 381 | 419 | 334 | ||||||||
| Provision for income taxes | 63 | 93 | 108 | ||||||||
| Net income | $ | 318 | $ | 326 | $ | 226 | |||||
| Diluted earnings per common share | $ | 1.86 | $ | 1.87 | $ | 1.26 | |||||
| Efficiency ratio (a) | 52.93 | % | 53.24 | % | 56.33 | % | |||||
| Net interest margin | 3.60 | 3.62 | 3.28 | ||||||||
| Common equity Tier 1 capital ratio (b) | 11.66 | 11.89 | 11.51 | ||||||||
| Common equity ratio | 10.90 | 11.22 | 11.16 | ||||||||
| ADJUSTED FINANCIAL RESULTS (c) | |||||||||||
| Net interest income | $ | 599 | $ | 590 | $ | 546 | |||||
| Provision for credit losses | — | (29 | ) | 24 | |||||||
| Noninterest income | 254 | 248 | 245 | ||||||||
| Noninterest expenses | 440 | 437 | 426 | ||||||||
| Pre-tax income | 413 | 430 | 341 | ||||||||
| Provision for income taxes | 94 | 98 | 113 | ||||||||
| Net income | $ | 319 | $ | 332 | $ | 228 | |||||
| Diluted earnings per common share | $ | 1.86 | $ | 1.90 | $ | 1.27 | |||||
| Efficiency ratio | 51.59 | % | 51.90 | % | 53.71 | % | |||||
| (a) | Noninterest expenses as a percentage of net interest income and noninterest income excluding net gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares. |
| (b) | September 30, 2018 ratio is estimated. |
| (c) | Financial results presented on an adjusted basis to facilitate trend analysis. See Reconciliation of Non-GAAP Financial Measures. |
1
The following table includes items used to arrive at adjusted net income in the Adjusted Financial Results (see Reconciliation of Non-GAAP Financial Measures).
| 3rd Qtr '18 | 2nd Qtr '18 | 3rd Qtr '17 | ||||||||||||||||||
| (in millions, except per share data) | Amount | Per Share | Amount | Per Share | Amount | Per Share | ||||||||||||||
| Securities repositioning, net of tax | $ | 15 | $ | 0.09 | $ | — | $ | — | $ | — | $ | — | ||||||||
| Restructuring charges, net of tax | 9 | 0.05 | 9 | 0.05 | 4 | 0.02 | ||||||||||||||
| Discrete tax benefits | (23 | ) | (0.14 | ) | (3 | ) | (0.02 | ) | (2 | ) | (0.01 | ) | ||||||||
Third Quarter 2018 Compared to Second Quarter 2018
Average total loans decreased $641 million to $48.6 billion.
| • | Primarily reflected seasonality, with decreases in National Dealer Services and general Middle Market as well as an increase in Mortgage Banker Finance. |
| • | Also included a decline in Private Banking, partially offset by an increase in Technology and Life Sciences. |
| • | Loan yields increased 11 basis points to 4.74 percent, reflecting increases in short-term rates (+15 basis points), partially offset by a decrease in interest recoveries (-6 basis points). |
Average total deposits increased $263 million to $56.1 billion.
| • | Driven by a $386 million increase in interest-bearing deposits, partially offset by a $123 million decrease in noninterest-bearing deposits. |
| • | Interest-bearing deposit costs increased 9 basis points to 0.51 percent due to continued focus on relationship-based deposit pricing as short-term interest rates increased. |
Net interest income increased $9 million to $599 million.
| • | Includes a net benefit from higher short-term interest rates of $13 million from managing loan and deposit pricing in a rising rate environment. |
| • | Net interest margin decreased 2 basis points to 3.60 percent, including a 8-basis-point increase due to short-term interest rates, offset by decreases from lower interest recoveries and excess liquidity. |
No provision for credit losses in third quarter 2018 compared to $29 million release in second quarter 2018.
| • | Credit quality remains strong as reflected by a decline in total criticized loans of $95 million or 5 percent and net credit-related charge-offs of $15 million. |
Excluding a $20 million loss related to repositioning the securities portfolio, noninterest income increased $6 million.
| • | Primarily reflecting increases of $2 million each in customer derivative and investment banking income, as well as smaller increases in other noninterest income categories, partially offset by decreases of $2 million each in syndication fees (a component of commercial lending fees) and letter of credit fees. |
| • | Additionally reflecting increases of $2 million each in bank-owned life insurance (BOLI) relating to an annual dividend and deferred compensation asset returns (offset in noninterest expenses) as well as an increase of $2 million due to a charge incurred in the second quarter relating to a derivative contract tied to the conversion rate of Visa Class B shares. |
| • | The $20 million loss on sale of securities resulted from repositioning $1.3 billion of treasury securities by purchasing securities yielding approximately $4 million additional interest per quarter while retaining a duration of 3 years. |
Noninterest expenses increased $4 million to $452 million.
| • | Primarily reflecting a $4 million increase in salaries and benefits expense driven by higher contract labor related to technology projects, deferred compensation (offset in noninterest income) and one additional day in the quarter, partly offset by a decrease in workforce. |
Provision for income taxes decreased $30 million to $63 million.
| • | Discrete tax benefit items of $23 million primarily resulting from a review of certain tax capitalization and recovery positions related to software and fixed assets included in the 2017 tax return. |
| • | Also included the impact from lower pre-tax earnings, primarily as a result of the securities losses from repositioning the securities portfolio and the change in the provision for credit losses. |
2
Capital position remained solid at September 30, 2018.
| • | Returned a record $600 million to shareholders, including dividends and the repurchase of $500 million of common stock (5.1 million shares) under the equity repurchase program. |
| • | Dividend increased 76 percent to 60 cents per share. |
Third Quarter 2018 Compared to Third Quarter 2017
Effective January 1, 2018, the Corporation adopted Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers." As a result, revenue from certain products is now presented net of costs. The commentary below discusses noninterest income and noninterest expenses on an adjusted basis to eliminate the variances attributable to the impact of adoption. See Reconciliation of Non-GAAP Financial Measures.
Average total loans remained stable.
| • | Reflected decreases in Corporate Banking, Energy and Private Banking, offset by increases in Technology and Life Sciences, Commercial Real Estate and National Dealer Services. |
Average total deposits decreased $400 million.
| • | Due to a $1.9 billion decrease in noninterest-bearing deposits, offset by a $1.5 billion increase in interest-bearing deposits. |
| • | Primarily reflected a decrease in general Middle Market (nearly $1 billion decrease in Municipalities), partially offset by a $752 million increase in Technology and Life Sciences and smaller increases in other lines of business. |
Net interest income increased $53 million.
| • | Driven by the net benefit from higher short-term rates, partially offset by a $13 million decrease in interest recoveries from elevated third quarter 2017 levels. |
Provision for credit losses decreased $24 million.
| • | Reflected declines in total criticized loans of $764 million and net credit-related charge-offs of $10 million. |
Adjusted noninterest income increased $9 million.
| • | Reflected increases of $5 million in card fees, adjusted for the impact of adoption of the new revenue accounting standard, $3 million in fiduciary income and smaller increases in other noninterest income categories, partially offset by a $3 million decrease in service charges on deposit accounts. |
Adjusted noninterest expenses increased $14 million.
| • | Reflected a $17 million increase in salaries and benefits expense, driven by higher share-based and incentive compensation tied to financial performance as well as merit increases, partially offset by a decrease in workforce. |
| • | Also included decreases of $3 million in software expense and $2 million in FDIC insurance expense, partially offset by a $3 million increase in outside processing expense. |
Provision for income taxes decreased $45 million.
| • | Discrete tax benefit items of $23 million, primarily resulting from a review of certain tax capitalization and recovery positions related to software and fixed assets included in the 2017 tax return. |
| • | Also included the impact of the decrease in the statutory tax rate in 2018, partially offset by an increase in pre-tax income. |
3
Net Interest Income
| (dollar amounts in millions) | 3rd Qtr '18 | 2nd Qtr '18 | 3rd Qtr '17 | ||||||||
| Net interest income | $ | 599 | $ | 590 | $ | 546 | |||||
| Net interest margin | 3.60 | % | 3.62 | % | 3.28 | % | |||||
| Selected average balances: | |||||||||||
| Total earning assets | $ | 65,842 | $ | 65,114 | $ | 66,084 | |||||
| Total loans | 48,584 | 49,225 | 48,663 | ||||||||
| Total investment securities | 11,761 | 11,799 | 12,244 | ||||||||
| Federal Reserve Bank deposits | 5,180 | 3,717 | 4,889 | ||||||||
| Total deposits | 56,093 | 55,830 | 56,493 | ||||||||
| Total noninterest-bearing deposits | 29,193 | 29,316 | 31,057 | ||||||||
| Medium- and long-term debt | 6,153 | 5,584 | 4,936 | ||||||||
Net interest income increased $9 million to $599 million in the third quarter 2018, compared to the second quarter 2018.
| • | The net increase from higher short-term rates was $13 million, reflecting interest benefits to loans (+$19 million), short-term investments (+$2 million) and securities (+$2 million), partly offset by increases in deposit (-$6 million) and debt (-$4 million) costs. |
| • | Net interest income also benefited from higher average short-term investments (+$8 million) and one additional day in the quarter (+$6 million), offset by lower interest recoveries (-$8 million), lower average loan balances (-$7 million) and higher wholesale funding (-$5 million). |
The net interest margin decreased 2 basis points to 3.60 percent in the third quarter 2018, compared to the second quarter 2018.
| • | The net benefit from short-term rates (+8 basis points) was more than offset by the expected decrease in interest recoveries from elevated second quarter levels (-5 basis points), higher average debt from a third quarter 2018 issuance (-3 basis points) and an increase in lower-yielding average short-term investments (-3 basis points). |
| • | The net benefit from higher short-term rates primarily reflected higher loan (+12 basis points) and securities yields (+1 basis point), partially offset by higher deposit (-4 basis points) and debt (-2 basis points) costs. |
4
Credit Quality
“With net charge-offs of 13 basis points and a further decline in criticized loans, which now represent 3.4 percent of total loans at quarter end, our credit quality is strong,” said Babb. “Gross charge-offs remained low at $25 million, while recoveries declined to $10 million, following unusually high recoveries in the second quarter. Nonaccrual loans comprised only 47 basis points of our total loans. The positive credit migration resulted in a reserve release and a reserve ratio of 1.35 percent. The economy is strong and our customers are performing well. We remain vigilant; however, at this point, we are not seeing any concerning trends.”
| (dollar amounts in millions) | 3rd Qtr '18 | 2nd Qtr '18 | 3rd Qtr '17 | ||||||||
| Credit-related charge-offs | $ | 25 | $ | 20 | $ | 37 | |||||
| Recoveries | 10 | 23 | 12 | ||||||||
| Net credit-related charge-offs (recoveries) | 15 | (3 | ) | 25 | |||||||
| Net credit-related charge-offs (recoveries)/Average total loans | 0.13 | % | (0.02 | )% | 0.21 | % | |||||
| Provision for credit losses | $ | — | $ | (29 | ) | $ | 24 | ||||
| Nonperforming loans | 239 | 262 | 452 | ||||||||
| Nonperforming assets (NPAs) | 240 | 264 | 458 | ||||||||
| NPAs/Total loans and foreclosed property | 0.49 | % | 0.53 | % | 0.93 | % | |||||
| Loans past due 90 days or more and still accruing | $ | 28 | $ | 20 | $ | 12 | |||||
| Allowance for loan losses | 664 | 677 | 712 | ||||||||
| Allowance for credit losses on lending-related commitments (a) | 33 | 34 | 41 | ||||||||
| Total allowance for credit losses | 697 | 711 | 753 | ||||||||
| Allowance for loan losses/Period-end total loans | 1.35 | % | 1.36 | % | 1.45 | % | |||||
| Allowance for loan losses/Nonperforming loans | 2.8x | 2.6x | 1.6x | ||||||||
| (a) | Included in "Accrued expenses and other liabilities" on the consolidated balance sheets. |
| • | The allowance for loan losses decreased to $664 million at September 30, 2018, or 1.35 percent of total loans, reflecting improvements in credit quality of the portfolio. |
| • | Criticized loans decreased $95 million to $1.7 billion at September 30, 2018, compared to $1.8 billion at June 30, 2018, including a $50 million decrease in Energy. Criticized loans as a percentage of total loans were 3.4 percent at September 30, 2018, compared to 3.5 percent at June 30, 2018. Criticized loans are generally consistent with the Special Mention, Substandard and Doubtful categories defined by regulatory authorities. |
| • | Nonperforming loans decreased $23 million to $239 million at September 30, 2018, compared to $262 million at June 30, 2018. Nonperforming loans as a percentage of total loans decreased to 0.49 percent at September 30, 2018, compared to 0.53 percent at June 30, 2018. |
5
Fourth Quarter 2018 Outlook
For the fourth quarter 2018 compared to the third quarter 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:
| • | Average loans stable with a positive trend, reflecting increases in most lines of business and a seasonal increase in National Dealer Services, mostly offset by a seasonal decrease in Mortgage Banker Finance. |
| • | Continued growth in net interest income from the net benefit due to rising short-term interest rates and repositioning the securities portfolio, partially offset by higher average debt as well as lower interest recoveries and loan fees. |
| • | Provision for credit losses of $10 million to $20 million and net charge-offs to remain low. |
| • | Relatively stable noninterest income, excluding securities losses, BOLI and deferred compensation asset returns. |
| ◦ | Levels of customer derivative and investment banking income may not repeat. |
| ◦ | GEAR Up initiatives continue to help drive growth in card fees and fiduciary income. |
| • | Noninterest expenses modestly higher, excluding approximately $10 million of restructuring charges. |
| ◦ | GEAR Up savings remain on track. |
| ◦ | Continued higher outside processing and technology expenditures. |
| ◦ | Seasonal and typical inflationary pressures. |
| • | 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. From time to time, the Corporation may make reclassifications among the segments to reflect management's current view of the segments, and methodologies may be modified as the management accounting system is enhanced and changes occur in the organizational structure and/or product lines. During the third quarter 2018, the Small Business component was reclassified from Retail Bank to Business Bank. The financial results provided are based on the internal business unit and geographic market structures of Comerica and methodologies in effect at September 30, 2018. A discussion of business segment and geographic market year-to-date results will be included in Comerica's Third Quarter 2018 Form 10-Q.
Conference Call and Webcast
Comerica will host a conference call to review third quarter 2018 financial results at 7 a.m. CT Tuesday, October 16, 2018. Interested parties may access the conference call by calling (800) 309-2262 or (706) 679-5261 (event ID No. 22791270). The call and supplemental financial information can also be accessed via Comerica's "Investor Relations" page at www.comerica.com. A replay of the Webcast can be accessed via Comerica's “Investor Relations” page at www.comerica.com.
Comerica Incorporated is a financial services company headquartered in Dallas, Texas, and strategically aligned by three major business segments: The Business Bank, The Retail Bank and Wealth Management. Comerica focuses on relationships and helping people and businesses be successful. In addition to Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico.
This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding Comerica's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as a reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
7
Forward-looking Statements
Any statements in this news release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “believes,” “contemplates,” “feels,” “expects,” “estimates,” “seeks,” “strives,” “plans,” “intends,” “outlook,” “forecast,” “position,” “target,” “mission,” “assume,” “achievable,” “potential,” “strategy,” “goal,” “aspiration,” “opportunity,” “initiative,” “outcome,” “continue,” “remain,” “maintain,” “on track,” “trend,” “objective,” “looks forward,” “projects,” “models” and variations of such words and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions, as they relate to Comerica or its management, are intended to identify forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of Comerica's management based on information known to Comerica's management as of the date of this news release and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of Comerica's management for future or past operations, products or services, 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 and "Item 1A. Risk Factors" beginning on page 59 of Comerica's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018. Forward-looking statements speak only as of the date they are made. Comerica does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. For any forward-looking statements made in this news release or in any documents, Comerica claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
| Media Contact: | Investor Contacts: |
| Yolanda Y. Walker | Darlene P. Persons |
| (214) 462-4443 | (214) 462-6831 |
| Chelsea R. Smith | |
| (214) 462-6834 | |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited) | ||||||||||||||||
| Comerica Incorporated and Subsidiaries | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | June 30, | September 30, | September 30, | |||||||||||||
| (in millions, except per share data) | 2018 | 2018 | 2017 | 2018 | 2017 | |||||||||||
| PER COMMON SHARE AND COMMON STOCK DATA | ||||||||||||||||
| Diluted net income | $ | 1.86 | $ | 1.87 | $ | 1.26 | $ | 5.32 | $ | 3.50 | ||||||
| Cash dividends declared | 0.60 | 0.34 | 0.30 | 1.24 | 0.79 | |||||||||||
| Average diluted shares (in thousands) | 170,057 | 173,601 | 177,411 | 172,862 | 178,899 | |||||||||||
| PERFORMANCE RATIOS | ||||||||||||||||
| Return on average common shareholders' equity | 16.15 | % | 16.40 | % | 11.17 | % | 15.64 | % | 10.62 | % | ||||||
| Return on average assets | 1.77 | 1.85 | 1.25 | 1.75 | 1.18 | |||||||||||
| Efficiency ratio (a) | 52.93 | 53.24 | 56.33 | 54.12 | 58.82 | |||||||||||
| CAPITAL | ||||||||||||||||
| Common equity tier 1 capital (b) | $ | 7,750 | $ | 8,026 | $ | 7,752 | ||||||||||
| Risk-weighted assets (b) | 66,476 | 67,508 | 67,341 | |||||||||||||
| Common shareholders' equity per share of common stock | 46.92 | 47.27 | 46.09 | |||||||||||||
| Tangible common equity per share of common stock | 43.05 | 43.51 | 42.39 | |||||||||||||
| Common equity tier 1 and tier 1 risk-based capital ratio (b) | 11.66 | % | 11.89 | % | 11.51 | % | ||||||||||
| Total risk-based capital ratio (b) | 13.74 | 13.96 | 13.65 | |||||||||||||
| Leverage ratio (b) | 10.85 | 11.36 | 10.87 | |||||||||||||
| Common equity ratio | 10.90 | 11.22 | 11.16 | |||||||||||||
| Tangible common equity ratio (c) | 10.09 | 10.42 | 10.35 | |||||||||||||
| AVERAGE BALANCES | ||||||||||||||||
| Commercial loans | $ | 30,371 | $ | 30,966 | $ | 30,603 | $ | 30,494 | $ | 30,313 | ||||||
| Real estate construction loans | 3,198 | 3,189 | 2,933 | 3,152 | 2,934 | |||||||||||
| Commercial mortgage loans | 9,084 | 9,174 | 8,977 | 9,158 | 8,988 | |||||||||||
| Lease financing | 464 | 457 | 470 | 462 | 522 | |||||||||||
| International loans | 1,072 | 981 | 1,156 | 1,017 | 1,168 | |||||||||||
| Residential mortgage loans | 1,962 | 1,993 | 2,005 | 1,988 | 1,981 | |||||||||||
| Consumer loans | 2,433 | 2,465 | 2,519 | 2,473 | 2,525 | |||||||||||
| Total loans | 48,584 | 49,225 | 48,663 | 48,744 | 48,431 | |||||||||||
| Earning assets | 65,842 | 65,114 | 66,084 | 65,326 | 66,346 | |||||||||||
| Total assets | 71,210 | 70,520 | 71,251 | 70,689 | 71,470 | |||||||||||
| Noninterest-bearing deposits | 29,193 | 29,316 | 31,057 | 29,457 | 30,754 | |||||||||||
| Interest-bearing deposits | 26,900 | 26,514 | 25,436 | 26,547 | 26,374 | |||||||||||
| Total deposits | 56,093 | 55,830 | 56,493 | 56,004 | 57,128 | |||||||||||
| Common shareholders' equity | 7,817 | 7,977 | 8,008 | 7,907 | 7,939 | |||||||||||
| NET INTEREST INCOME | ||||||||||||||||
| Net interest income | $ | 599 | $ | 590 | $ | 546 | $ | 1,738 | $ | 1,516 | ||||||
| Net interest margin | 3.60 | % | 3.62 | % | 3.28 | % | 3.54 | % | 3.05 | % | ||||||
| CREDIT QUALITY | ||||||||||||||||
| Total nonperforming assets | 240 | 264 | 458 | |||||||||||||
| Loans past due 90 days or more and still accruing | 28 | 20 | 12 | |||||||||||||
| Net credit-related charge-offs (recoveries) | 15 | (3 | ) | 25 | $ | 40 | $ | 76 | ||||||||
| Allowance for loan losses | 664 | 677 | 712 | |||||||||||||
| Allowance for credit losses on lending-related commitments | 33 | 34 | 41 | |||||||||||||
| Total allowance for credit losses | 697 | 711 | 753 | |||||||||||||
| Allowance for loan losses as a percentage of total loans | 1.35 | % | 1.36 | % | 1.45 | % | ||||||||||
| Net credit-related charge-offs (recoveries) as a percentage of average total loans | 0.13 | (0.02 | ) | 0.21 | 0.11 | % | 0.21 | % | ||||||||
| Nonperforming assets as a percentage of total loans and foreclosed property | 0.49 | 0.53 | 0.93 | |||||||||||||
| Allowance for loan losses as a percentage of total nonperforming loans | 2.8x | 2.6x | 1.6x | |||||||||||||
| OTHER KEY INFORMATION | ||||||||||||||||
| Number of banking centers | 435 | 438 | 439 | |||||||||||||
| Number of employees - full time equivalent | 7,834 | 7,868 | 7,974 | |||||||||||||
| (a) | Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares. |
| (b) | September 30, 2018 ratios are estimated. |
| (c) | See Reconciliation of Non-GAAP Financial Measures. |
9
| CONSOLIDATED BALANCE SHEETS | ||||||||||||
| Comerica Incorporated and Subsidiaries | ||||||||||||
| September 30, | June 30, | December 31, | September 30, | |||||||||
| (in millions, except share data) | 2018 | 2018 | 2017 | 2017 | ||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
| ASSETS | ||||||||||||
| Cash and due from banks | $ | 945 | $ | 1,424 | $ | 1,438 | $ | 1,351 | ||||
| Interest-bearing deposits with banks | 4,894 | 4,236 | 4,407 | 4,853 | ||||||||
| Other short-term investments | 136 | 134 | 96 | 92 | ||||||||
| Investment securities available-for-sale | 11,862 | 11,915 | 10,938 | 10,998 | ||||||||
| Investment securities held-to-maturity | — | — | 1,266 | 1,344 | ||||||||
| Commercial loans | 30,889 | 31,530 | 31,060 | 31,062 | ||||||||
| Real estate construction loans | 3,158 | 3,257 | 2,961 | 3,018 | ||||||||
| Commercial mortgage loans | 9,019 | 9,124 | 9,159 | 8,985 | ||||||||
| Lease financing | 471 | 458 | 468 | 475 | ||||||||
| International loans | 1,090 | 993 | 983 | 1,159 | ||||||||
| Residential mortgage loans | 1,947 | 1,954 | 1,988 | 1,999 | ||||||||
| Consumer loans | 2,436 | 2,476 | 2,554 | 2,511 | ||||||||
| Total loans | 49,010 | 49,792 | 49,173 | 49,209 | ||||||||
| Less allowance for loan losses | (664 | ) | (677 | ) | (712 | ) | (712 | ) | ||||
| Net loans | 48,346 | 49,115 | 48,461 | 48,497 | ||||||||
| Premises and equipment | 472 | 467 | 466 | 467 | ||||||||
| Accrued income and other assets | 4,793 | 4,696 | 4,495 | 4,415 | ||||||||
| Total assets | $ | 71,448 | $ | 71,987 | $ | 71,567 | $ | 72,017 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
| Noninterest-bearing deposits | $ | 29,301 | $ | 30,316 | $ | 32,071 | $ | 32,391 | ||||
| Money market and interest-bearing checking deposits | 22,449 | 22,544 | 21,500 | 20,869 | ||||||||
| Savings deposits | 2,192 | 2,227 | 2,152 | 2,147 | ||||||||
| Customer certificates of deposit | 2,051 | 2,089 | 2,165 | 2,342 | ||||||||
| Foreign office time deposits | 13 | 34 | 15 | 70 | ||||||||
| Total interest-bearing deposits | 26,705 | 26,894 | 25,832 | 25,428 | ||||||||
| Total deposits | 56,006 | 57,210 | 57,903 | 57,819 | ||||||||
| Short-term borrowings | 84 | 58 | 10 | 509 | ||||||||
| Accrued expenses and other liabilities | 1,154 | 1,057 | 1,069 | 1,018 | ||||||||
| Medium- and long-term debt | 6,418 | 5,583 | 4,622 | 4,637 | ||||||||
| Total liabilities | 63,662 | 63,908 | 63,604 | 63,983 | ||||||||
| 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 | 2,144 | 2,122 | 2,112 | ||||||||
| Accumulated other comprehensive loss | (611 | ) | (589 | ) | (451 | ) | (359 | ) | ||||
| Retained earnings | 8,587 | 8,374 | 7,887 | 7,746 | ||||||||
| Less cost of common stock in treasury - 62,224,198 shares at 9/30/18, 57,254,526 shares at 6/30/18, 55,306,483 shares at 12/31/17 and 53,835,135 shares at 9/30/17 | (3,475 | ) | (2,991 | ) | (2,736 | ) | (2,606 | ) | ||||
| Total shareholders' equity | 7,786 | 8,079 | 7,963 | 8,034 | ||||||||
| Total liabilities and shareholders' equity | $ | 71,448 | $ | 71,987 | $ | 71,567 | $ | 72,017 | ||||
10
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | |||||||||||||
| Comerica Incorporated and Subsidiaries | |||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||
| September 30, | September 30, | ||||||||||||
| (in millions, except per share data) | 2018 | 2017 | 2018 | 2017 | |||||||||
| INTEREST INCOME | |||||||||||||
| Interest and fees on loans | $ | 581 | $ | 500 | $ | 1,658 | $ | 1,374 | |||||
| Interest on investment securities | 66 | 63 | 194 | 186 | |||||||||
| Interest on short-term investments | 28 | 16 | 63 | 44 | |||||||||
| Total interest income | 675 | 579 | 1,915 | 1,604 | |||||||||
| INTEREST EXPENSE | |||||||||||||
| Interest on deposits | 35 | 11 | 79 | 29 | |||||||||
| Interest on short-term borrowings | 1 | 3 | 1 | 3 | |||||||||
| Interest on medium- and long-term debt | 40 | 19 | 97 | 56 | |||||||||
| Total interest expense | 76 | 33 | 177 | 88 | |||||||||
| Net interest income | 599 | 546 | 1,738 | 1,516 | |||||||||
| Provision for credit losses | — | 24 | (17 | ) | 57 | ||||||||
| Net interest income after provision for credit losses | 599 | 522 | 1,755 | 1,459 | |||||||||
| NONINTEREST INCOME | |||||||||||||
| Card fees | 61 | 85 | 180 | 242 | |||||||||
| Service charges on deposit accounts | 53 | 57 | 160 | 172 | |||||||||
| Fiduciary income | 51 | 48 | 155 | 148 | |||||||||
| Commercial lending fees | 21 | 21 | 62 | 63 | |||||||||
| Letter of credit fees | 9 | 11 | 30 | 34 | |||||||||
| Bank-owned life insurance | 11 | 12 | 29 | 31 | |||||||||
| Foreign exchange income | 12 | 11 | 36 | 33 | |||||||||
| Brokerage fees | 7 | 6 | 20 | 17 | |||||||||
| Net securities losses | (20 | ) | — | (19 | ) | — | |||||||
| Other noninterest income | 29 | 24 | 73 | 82 | |||||||||
| Total noninterest income | 234 | 275 | 726 | 822 | |||||||||
| NONINTEREST EXPENSES | |||||||||||||
| Salaries and benefits expense | 254 | 237 | 759 | 713 | |||||||||
| Outside processing fee expense | 65 | 92 | 190 | 267 | |||||||||
| Net occupancy expense | 38 | 38 | 113 | 114 | |||||||||
| Equipment expense | 12 | 12 | 34 | 34 | |||||||||
| Restructuring charges | 12 | 7 | 39 | 32 | |||||||||
| Software expense | 32 | 35 | 95 | 95 | |||||||||
| FDIC insurance expense | 11 | 13 | 36 | 38 | |||||||||
| Advertising expense | 8 | 8 | 22 | 19 | |||||||||
| Litigation-related expense | — | — | — | (2 | ) | ||||||||
| Other noninterest expenses | 20 | 21 | 58 | 67 | |||||||||
| Total noninterest expenses | 452 | 463 | 1,346 | 1,377 | |||||||||
| Income before income taxes | 381 | 334 | 1,135 | 904 | |||||||||
| Provision for income taxes | 63 | 108 | 210 | 273 | |||||||||
| NET INCOME | 318 | 226 | 925 | 631 | |||||||||
| Less income allocated to participating securities | 2 | 2 | 6 | 5 | |||||||||
| Net income attributable to common shares | $ | 316 | $ | 224 | $ | 919 | $ | 626 | |||||
| Earnings per common share: | |||||||||||||
| Basic | $ | 1.89 | $ | 1.29 | $ | 5.41 | $ | 3.58 | |||||
| Diluted | 1.86 | 1.26 | 5.32 | 3.50 | |||||||||
| Comprehensive income | 296 | 228 | 764 | 655 | |||||||||
| Cash dividends declared on common stock | 100 | 53 | 210 | 141 | |||||||||
| Cash dividends declared per common share | 0.60 | 0.30 | 1.24 | 0.79 | |||||||||
11
| CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | |||||||||||||||||||||||||||
| Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||||||
| Third | Second | First | Fourth | Third | Third Quarter 2018 Compared to: | ||||||||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | Second Quarter 2018 | Third Quarter 2017 | |||||||||||||||||||||
| (in millions, except per share data) | 2018 | 2018 | 2018 | 2017 | 2017 | Amount | Percent | Amount | Percent | ||||||||||||||||||
| INTEREST INCOME | |||||||||||||||||||||||||||
| Interest and fees on loans | $ | 581 | $ | 568 | $ | 509 | $ | 498 | $ | 500 | $ | 13 | 2 | % | $ | 81 | 16 | % | |||||||||
| Interest on investment securities | 66 | 64 | 64 | 64 | 63 | 2 | 2 | 3 | 5 | ||||||||||||||||||
| Interest on short-term investments | 28 | 18 | 17 | 16 | 16 | 10 | 52 | 12 | 71 | ||||||||||||||||||
| Total interest income | 675 | 650 | 590 | 578 | 579 | 25 | 4 | 96 | 16 | ||||||||||||||||||
| INTEREST EXPENSE | |||||||||||||||||||||||||||
| Interest on deposits | 35 | 28 | 16 | 13 | 11 | 7 | 24 | 24 | N/M | ||||||||||||||||||
| Interest on short-term borrowings | 1 | — | — | — | 3 | 1 | 74 | (2 | ) | (82 | ) | ||||||||||||||||
| Interest on medium- and long-term debt | 40 | 32 | 25 | 20 | 19 | 8 | 28 | 21 | N/M | ||||||||||||||||||
| Total interest expense | 76 | 60 | 41 | 33 | 33 | 16 | 26 | 43 | N/M | ||||||||||||||||||
| Net interest income | 599 | 590 | 549 | 545 | 546 | 9 | 1 | 53 | 10 | ||||||||||||||||||
| Provision for credit losses | — | (29 | ) | 12 | 17 | 24 | 29 | N/M | (24 | ) | (98 | ) | |||||||||||||||
Net interest income after provision for credit losses | 599 | 619 | 537 | 528 | 522 | (20 | ) | (3 | ) | 77 | 15 | ||||||||||||||||
| NONINTEREST INCOME | |||||||||||||||||||||||||||
| Card fees | 61 | 60 | 59 | 91 | 85 | 1 | 1 | (24 | ) | (28 | ) | ||||||||||||||||
| Service charges on deposit accounts | 53 | 53 | 54 | 55 | 57 | — | — | (4 | ) | (7 | ) | ||||||||||||||||
| Fiduciary income | 51 | 52 | 52 | 50 | 48 | (1 | ) | (4 | ) | 3 | 4 | ||||||||||||||||
| Commercial lending fees | 21 | 23 | 18 | 22 | 21 | (2 | ) | (8 | ) | — | — | ||||||||||||||||
| Letter of credit fees | 9 | 11 | 10 | 11 | 11 | (2 | ) | (7 | ) | (2 | ) | (8 | ) | ||||||||||||||
| Bank-owned life insurance | 11 | 9 | 9 | 12 | 12 | 2 | 26 | (1 | ) | (9 | ) | ||||||||||||||||
| Foreign exchange income | 12 | 12 | 12 | 12 | 11 | — | — | 1 | 6 | ||||||||||||||||||
| Brokerage fees | 7 | 6 | 7 | 6 | 6 | 1 | 14 | 1 | 19 | ||||||||||||||||||
| Net securities (losses) gains | (20 | ) | — | 1 | — | — | (20 | ) | N/M | (20 | ) | N/M | |||||||||||||||
| Other noninterest income | 29 | 22 | 22 | 26 | 24 | 7 | 38 | 5 | 21 | ||||||||||||||||||
| Total noninterest income | 234 | 248 | 244 | 285 | 275 | (14 | ) | (5 | ) | (41 | ) | (15 | ) | ||||||||||||||
| NONINTEREST EXPENSES | |||||||||||||||||||||||||||
| Salaries and benefits expense | 254 | 250 | 255 | 248 | 237 | 4 | 2 | 17 | 7 | ||||||||||||||||||
| Outside processing fee expense | 65 | 64 | 61 | 99 | 92 | 1 | 3 | (27 | ) | (29 | ) | ||||||||||||||||
| Net occupancy expense | 38 | 37 | 38 | 40 | 38 | 1 | 1 | — | — | ||||||||||||||||||
| Equipment expense | 12 | 11 | 11 | 11 | 12 | 1 | 6 | — | — | ||||||||||||||||||
| Restructuring charges | 12 | 11 | 16 | 13 | 7 | 1 | 2 | 5 | 54 | ||||||||||||||||||
| Software expense | 32 | 32 | 31 | 31 | 35 | — | — | (3 | ) | (11 | ) | ||||||||||||||||
| FDIC insurance expense | 11 | 12 | 13 | 13 | 13 | (1 | ) | (1 | ) | (2 | ) | (10 | ) | ||||||||||||||
| Advertising expense | 8 | 8 | 6 | 9 | 8 | — | — | — | — | ||||||||||||||||||
| Other noninterest expenses | 20 | 23 | 15 | 19 | 21 | (3 | ) | (20 | ) | (1 | ) | (14 | ) | ||||||||||||||
| Total noninterest expenses | 452 | 448 | 446 | 483 | 463 | 4 | 1 | (11 | ) | (2 | ) | ||||||||||||||||
| Income before income taxes | 381 | 419 | 335 | 330 | 334 | (38 | ) | (9 | ) | 47 | 14 | ||||||||||||||||
| Provision for income taxes | 63 | 93 | 54 | 218 | 108 | (30 | ) | (33 | ) | (45 | ) | (42 | ) | ||||||||||||||
| NET INCOME | 318 | 326 | 281 | 112 | 226 | (8 | ) | (2 | ) | 92 | 41 | ||||||||||||||||
| Less income allocated to participating securities | 2 | 2 | 2 | — | 2 | — | — | — | — | ||||||||||||||||||
| Net income attributable to common shares | $ | 316 | $ | 324 | $ | 279 | $ | 112 | $ | 224 | $ | (8 | ) | (3 | )% | $ | 92 | 41 | % | ||||||||
| Earnings per common share: | |||||||||||||||||||||||||||
| Basic | $ | 1.89 | $ | 1.90 | $ | 1.62 | $ | 0.65 | $ | 1.29 | $ | (0.01 | ) | (1 | )% | $ | 0.60 | 47 | % | ||||||||
| Diluted | 1.86 | 1.87 | 1.59 | 0.63 | 1.26 | (0.01 | ) | (1 | ) | 0.60 | 48 | ||||||||||||||||
| Comprehensive income | 296 | 290 | 178 | 107 | 228 | 6 | 2 | 68 | 30 | ||||||||||||||||||
| Cash dividends declared on common stock | 100 | 58 | 52 | 52 | 53 | 42 | 72 | 47 | 89 | ||||||||||||||||||
| Cash dividends declared per common share | 0.60 | 0.34 | 0.30 | 0.30 | 0.30 | 0.26 | 76 | 0.30 | N/M | ||||||||||||||||||
N/M - Not Meaningful
12
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES (unaudited) | ||||||||||||||||
| Comerica Incorporated and Subsidiaries | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| (in millions) | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | |||||||||||
| Balance at beginning of period | $ | 677 | $ | 698 | $ | 712 | $ | 712 | $ | 705 | ||||||
| Loan charge-offs: | ||||||||||||||||
| Commercial | 23 | 17 | 36 | 26 | 35 | |||||||||||
| Commercial mortgage | — | 1 | — | 1 | — | |||||||||||
| Lease financing | — | — | — | — | 1 | |||||||||||
| International | 1 | — | — | 1 | — | |||||||||||
| Consumer | 1 | 2 | 1 | 1 | 1 | |||||||||||
| Total loan charge-offs | 25 | 20 | 37 | 29 | 37 | |||||||||||
| Recoveries on loans previously charged-off: | ||||||||||||||||
| Commercial | 8 | 20 | 8 | 7 | 6 | |||||||||||
| Real estate construction | — | — | — | — | 1 | |||||||||||
| Commercial mortgage | 1 | 1 | — | 2 | 2 | |||||||||||
| International | — | 1 | — | 2 | 1 | |||||||||||
| Residential mortgage | — | — | — | 1 | — | |||||||||||
| Consumer | 1 | 1 | 1 | 1 | 2 | |||||||||||
| Total recoveries | 10 | 23 | 9 | 13 | 12 | |||||||||||
| Net loan charge-offs (recoveries) | 15 | (3 | ) | 28 | 16 | 25 | ||||||||||
| Provision for loan losses | 1 | (23 | ) | 14 | 16 | 31 | ||||||||||
| Foreign currency translation adjustment | 1 | (1 | ) | — | — | 1 | ||||||||||
| Balance at end of period | $ | 664 | $ | 677 | $ | 698 | $ | 712 | $ | 712 | ||||||
| Allowance for loan losses as a percentage of total loans | 1.35 | % | 1.36 | % | 1.42 | % | 1.45 | % | 1.45 | % | ||||||
| Net loan charge-offs (recoveries) as a percentage of average total loans | 0.13 | (0.02 | ) | 0.23 | 0.13 | 0.21 | ||||||||||
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LENDING-RELATED COMMITMENTS (unaudited) | ||||||||||||||||
| Comerica Incorporated and Subsidiaries | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| (in millions) | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | |||||||||||
| Balance at beginning of period | $ | 34 | $ | 40 | $ | 42 | $ | 41 | $ | 48 | ||||||
| Add: Provision for credit losses on lending-related commitments | (1 | ) | (6 | ) | (2 | ) | 1 | (7 | ) | |||||||
| Balance at end of period | $ | 33 | $ | 34 | $ | 40 | $ | 42 | $ | 41 | ||||||
13
| NONPERFORMING ASSETS (unaudited) | ||||||||||||||||
| Comerica Incorporated and Subsidiaries | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| (in millions) | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | |||||||||||
| SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS | ||||||||||||||||
| Nonaccrual loans: | ||||||||||||||||
| Business loans: | ||||||||||||||||
| Commercial | $ | 149 | $ | 171 | $ | 242 | $ | 309 | $ | 345 | ||||||
| Commercial mortgage | 22 | 29 | 29 | 31 | 35 | |||||||||||
| Lease financing | 2 | 2 | 3 | 4 | 8 | |||||||||||
| International | 4 | 4 | 4 | 6 | 6 | |||||||||||
| Total nonaccrual business loans | 177 | 206 | 278 | 350 | 394 | |||||||||||
| Retail loans: | ||||||||||||||||
| Residential mortgage | 34 | 29 | 29 | 31 | 28 | |||||||||||
| Consumer: | ||||||||||||||||
| Home equity | 19 | 19 | 19 | 21 | 22 | |||||||||||
| Total nonaccrual retail loans | 53 | 48 | 48 | 52 | 50 | |||||||||||
| Total nonaccrual loans | 230 | 254 | 326 | 402 | 444 | |||||||||||
| Reduced-rate loans | 9 | 8 | 8 | 8 | 8 | |||||||||||
| Total nonperforming loans | 239 | 262 | 334 | 410 | 452 | |||||||||||
| Foreclosed property | 1 | 2 | 5 | 5 | 6 | |||||||||||
| Total nonperforming assets | $ | 240 | $ | 264 | $ | 339 | $ | 415 | $ | 458 | ||||||
| Nonperforming loans as a percentage of total loans | 0.49 | % | 0.53 | % | 0.68 | % | 0.83 | % | 0.92 | % | ||||||
| Nonperforming assets as a percentage of total loans and foreclosed property | 0.49 | 0.53 | 0.69 | 0.84 | 0.93 | |||||||||||
| Allowance for loan losses as a multiple of total nonperforming loans | 2.8x | 2.6x | 2.1x | 1.7x | 1.6x | |||||||||||
| Loans past due 90 days or more and still accruing | $ | 28 | $ | 20 | $ | 36 | $ | 35 | $ | 12 | ||||||
| ANALYSIS OF NONACCRUAL LOANS | ||||||||||||||||
| Nonaccrual loans at beginning of period | $ | 254 | $ | 326 | $ | 402 | $ | 444 | $ | 493 | ||||||
| Loans transferred to nonaccrual (a) | 35 | 49 | 71 | 73 | 66 | |||||||||||
| Nonaccrual loan gross charge-offs | (25 | ) | (20 | ) | (37 | ) | (29 | ) | (37 | ) | ||||||
| Loans transferred to accrual status (a) | — | — | (3 | ) | — | — | ||||||||||
| Nonaccrual loans sold | (9 | ) | (15 | ) | (10 | ) | (22 | ) | (10 | ) | ||||||
| Payments/Other (b) | (25 | ) | (86 | ) | (97 | ) | (64 | ) | (68 | ) | ||||||
| Nonaccrual loans at end of period | $ | 230 | $ | 254 | $ | 326 | $ | 402 | $ | 444 | ||||||
(a) Based on an analysis of nonaccrual loans with book balances greater than $2 million. | ||||||||||||||||
| (b) Includes net changes related to nonaccrual loans with balances less than $2 million, payments on nonaccrual loans with book balances greater than $2 million and transfers of nonaccrual loans to foreclosed property. | ||||||||||||||||
14
| ANALYSIS OF NET INTEREST INCOME (unaudited) | |||||||||||||||||
| Comerica Incorporated and Subsidiaries | |||||||||||||||||
| Nine Months Ended | |||||||||||||||||
| September 30, 2018 | September 30, 2017 | ||||||||||||||||
| Average | Average | Average | Average | ||||||||||||||
| (dollar amounts in millions) | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||
| Commercial loans | $ | 30,494 | $ | 1,037 | 4.54 | % | $ | 30,313 | $ | 851 | 3.76 | % | |||||
| Real estate construction loans | 3,152 | 120 | 5.08 | 2,934 | 90 | 4.09 | |||||||||||
| Commercial mortgage loans | 9,158 | 315 | 4.61 | 8,988 | 265 | 3.94 | |||||||||||
| Lease financing | 462 | 13 | 3.85 | 522 | 9 | 2.40 | |||||||||||
| International loans | 1,017 | 37 | 4.88 | 1,168 | 35 | 3.96 | |||||||||||
| Residential mortgage loans | 1,988 | 56 | 3.76 | 1,981 | 55 | 3.71 | |||||||||||
| Consumer loans | 2,473 | 80 | 4.32 | 2,525 | 69 | 3.63 | |||||||||||
| Total loans | 48,744 | 1,658 | 4.55 | 48,431 | 1,374 | 3.79 | |||||||||||
| Mortgage-backed securities | 9,109 | 158 | 2.25 | 9,335 | 150 | 2.16 | |||||||||||
| Other investment securities | 2,714 | 36 | 1.72 | 2,890 | 36 | 1.66 | |||||||||||
| Total investment securities | 11,823 | 194 | 2.13 | 12,225 | 186 | 2.04 | |||||||||||
| Interest-bearing deposits with banks | 4,625 | 63 | 1.82 | 5,598 | 44 | 1.03 | |||||||||||
| Other short-term investments | 134 | — | 0.90 | 92 | — | 0.66 | |||||||||||
| Total earning assets | 65,326 | 1,915 | 3.90 | 66,346 | 1,604 | 3.23 | |||||||||||
| Cash and due from banks | 1,200 | 1,187 | |||||||||||||||
| Allowance for loan losses | (702 | ) | (728 | ) | |||||||||||||
| Accrued income and other assets | 4,865 | 4,665 | |||||||||||||||
| Total assets | $ | 70,689 | $ | 71,470 | |||||||||||||
| Money market and interest-bearing checking deposits | $ | 22,219 | 72 | 0.43 | $ | 21,645 | 23 | 0.14 | |||||||||
| Savings deposits | 2,205 | 1 | 0.04 | 2,127 | — | 0.02 | |||||||||||
| Customer certificates of deposit | 2,093 | 6 | 0.40 | 2,543 | 6 | 0.37 | |||||||||||
| Foreign office time deposits | 30 | — | 1.17 | 59 | — | 0.60 | |||||||||||
| Total interest-bearing deposits | 26,547 | 79 | 0.40 | 26,374 | 29 | 0.15 | |||||||||||
| Short-term borrowings | 59 | 1 | 1.79 | 331 | 3 | 1.14 | |||||||||||
| Medium- and long-term debt | 5,647 | 97 | 2.27 | 5,084 | 56 | 1.46 | |||||||||||
| Total interest-bearing sources | 32,253 | 177 | 0.73 | 31,789 | 88 | 0.37 | |||||||||||
| Noninterest-bearing deposits | 29,457 | 30,754 | |||||||||||||||
| Accrued expenses and other liabilities | 1,072 | 988 | |||||||||||||||
| Total shareholders' equity | 7,907 | 7,939 | |||||||||||||||
| Total liabilities and shareholders' equity | $ | 70,689 | $ | 71,470 | |||||||||||||
| Net interest income/rate spread | $ | 1,738 | 3.17 | $ | 1,516 | 2.86 | |||||||||||
| Impact of net noninterest-bearing sources of funds | 0.37 | 0.19 | |||||||||||||||
| Net interest margin (as a percentage of average earning assets) | 3.54 | % | 3.05 | % | |||||||||||||
15
| ANALYSIS OF NET INTEREST INCOME (unaudited) | ||||||||||||||||||||||||||
| Comerica Incorporated and Subsidiaries | ||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||
| September 30, 2018 | June 30, 2018 | September 30, 2017 | ||||||||||||||||||||||||
| Average | Average | Average | Average | Average | Average | |||||||||||||||||||||
| (dollar amounts in millions) | Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||
| Commercial loans | $ | 30,371 | $ | 365 | 4.74 | % | $ | 30,966 | $ | 357 | 4.64 | % | $ | 30,603 | $ | 312 | 4.05 | % | ||||||||
| Real estate construction loans | 3,198 | 43 | 5.38 | 3,189 | 41 | 5.12 | 2,933 | 33 | 4.36 | |||||||||||||||||
| Commercial mortgage loans | 9,084 | 110 | 4.84 | 9,174 | 107 | 4.65 | 8,977 | 95 | 4.20 | |||||||||||||||||
| Lease financing | 464 | 4 | 3.69 | 457 | 4 | 3.65 | 470 | 3 | 3.34 | |||||||||||||||||
| International loans | 1,072 | 13 | 4.99 | 981 | 13 | 5.02 | 1,156 | 12 | 4.13 | |||||||||||||||||
| Residential mortgage loans | 1,962 | 18 | 3.71 | 1,993 | 20 | 3.88 | 2,005 | 20 | 3.95 | |||||||||||||||||
| Consumer loans | 2,433 | 28 | 4.49 | 2,465 | 26 | 4.35 | 2,519 | 25 | 3.84 | |||||||||||||||||
| Total loans | 48,584 | 581 | 4.74 | 49,225 | 568 | 4.63 | 48,663 | 500 | 4.08 | |||||||||||||||||
| Mortgage-backed securities | 9,063 | 54 | 2.30 | 9,098 | 52 | 2.25 | 9,361 | 51 | 2.17 | |||||||||||||||||
| Other investment securities | 2,698 | 12 | 1.72 | 2,701 | 12 | 1.71 | 2,883 | 12 | 1.67 | |||||||||||||||||
| Total investment securities | 11,761 | 66 | 2.17 | 11,799 | 64 | 2.12 | 12,244 | 63 | 2.05 | |||||||||||||||||
| Interest-bearing deposits with banks | 5,362 | 28 | 2.03 | 3,957 | 18 | 1.82 | 5,086 | 16 | 1.26 | |||||||||||||||||
| Other short-term investments | 135 | — | 1.04 | 133 | — | 0.94 | 91 | — | 0.72 | |||||||||||||||||
| Total earning assets | 65,842 | 675 | 4.05 | 65,114 | 650 | 3.98 | 66,084 | 579 | 3.48 | |||||||||||||||||
| Cash and due from banks | 1,107 | 1,235 | 1,234 | |||||||||||||||||||||||
| Allowance for loan losses | (681 | ) | (708 | ) | (718 | ) | ||||||||||||||||||||
| Accrued income and other assets | 4,942 | 4,879 | 4,651 | |||||||||||||||||||||||
| Total assets | $ | 71,210 | $ | 70,520 | $ | 71,251 | ||||||||||||||||||||
| Money market and interest-bearing checking deposits | $ | 22,573 | 32 | 0.56 | $ | 22,187 | 26 | 0.47 | $ | 20,819 | 9 | 0.15 | ||||||||||||||
| Savings deposits | 2,208 | 1 | 0.05 | 2,231 | — | 0.04 | 2,152 | — | 0.02 | |||||||||||||||||
| Customer certificates of deposit | 2,094 | 2 | 0.48 | 2,063 | 2 | 0.38 | 2,390 | 2 | 0.36 | |||||||||||||||||
| Foreign office time deposits | 25 | — | 1.25 | 33 | — | 1.13 | 75 | — | 0.66 | |||||||||||||||||
| Total interest-bearing deposits | 26,900 | 35 | 0.51 | 26,514 | 28 | 0.42 | 25,436 | 11 | 0.16 | |||||||||||||||||
| Short-term borrowings | 85 | 1 | 1.95 | 56 | — | 1.74 | 815 | 3 | 1.15 | |||||||||||||||||
| Medium- and long-term debt | 6,153 | 40 | 2.55 | 5,584 | 32 | 2.24 | 4,936 | 19 | 1.60 | |||||||||||||||||
| Total interest-bearing sources | 33,138 | 76 | 0.90 | 32,154 | 60 | 0.74 | 31,187 | 33 | 0.42 | |||||||||||||||||
| Noninterest-bearing deposits | 29,193 | 29,316 | 31,057 | |||||||||||||||||||||||
| Accrued expenses and other liabilities | 1,062 | 1,073 | 999 | |||||||||||||||||||||||
| Total shareholders' equity | 7,817 | 7,977 | 8,008 | |||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 71,210 | $ | 70,520 | $ | 71,251 | ||||||||||||||||||||
| Net interest income/rate spread | $ | 599 | 3.15 | $ | 590 | 3.24 | $ | 546 | 3.06 | |||||||||||||||||
| Impact of net noninterest-bearing sources of funds | 0.45 | 0.38 | 0.22 | |||||||||||||||||||||||
| Net interest margin (as a percentage of average earning assets) | 3.60 | % | 3.62 | % | 3.28 | % | ||||||||||||||||||||
16
| CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) | ||||||||||||||||||||
| Comerica Incorporated and Subsidiaries | ||||||||||||||||||||
| Accumulated | ||||||||||||||||||||
| Common Stock | Other | Total | ||||||||||||||||||
| Shares | Capital | Comprehensive | Retained | Treasury | Shareholders' | |||||||||||||||
| (in millions, except per share data) | Outstanding | Amount | Surplus | Loss | Earnings | Stock | Equity | |||||||||||||
| BALANCE AT 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 | — | — | — | — | 631 | — | 631 | |||||||||||||
| Other comprehensive income, net of tax | — | — | — | 24 | — | — | 24 | |||||||||||||
| Cash dividends declared on common stock ($0.79 per share) | — | — | — | — | (141 | ) | — | (141 | ) | |||||||||||
| Purchase of common stock | (5.7 | ) | — | — | — | — | (396 | ) | (396 | ) | ||||||||||
| Net issuance of common stock under employee stock plans | 3.0 | — | (26 | ) | — | (22 | ) | 138 | 90 | |||||||||||
| Net issuance of common stock for warrants | 1.7 | — | (28 | ) | — | (51 | ) | 79 | — | |||||||||||
| Share-based compensation | — | — | 29 | — | — | — | 29 | |||||||||||||
| Other | — | — | (1 | ) | — | — | 1 | — | ||||||||||||
| BALANCE AT SEPTEMBER 30, 2017 | 174.3 | $ | 1,141 | $ | 2,112 | $ | (359 | ) | $ | 7,746 | $ | (2,606 | ) | $ | 8,034 | |||||
| BALANCE AT DECEMBER 31, 2017 | 172.9 | $ | 1,141 | $ | 2,122 | $ | (451 | ) | $ | 7,887 | $ | (2,736 | ) | $ | 7,963 | |||||
| Cumulative effect of change in accounting principles | — | — | — | 1 | 14 | — | 15 | |||||||||||||
| Net income | — | — | — | — | 925 | — | 925 | |||||||||||||
| Other comprehensive loss, net of tax | — | — | — | (161 | ) | — | — | (161 | ) | |||||||||||
| Cash dividends declared on common stock ($1.24 per share) | — | — | — | — | (210 | ) | — | (210 | ) | |||||||||||
| Purchase of common stock | (8.7 | ) | — | (7 | ) | — | — | (821 | ) | (828 | ) | |||||||||
| Net issuance of common stock under employee stock plans | 1.5 | — | (9 | ) | — | (24 | ) | 74 | 41 | |||||||||||
| Net issuance of common stock for warrants | 0.2 | — | (3 | ) | — | (5 | ) | 8 | — | |||||||||||
| Share-based compensation | — | — | 41 | — | — | — | 41 | |||||||||||||
| BALANCE AT SEPTEMBER 30, 2018 | 165.9 | $ | 1,141 | $ | 2,144 | $ | (611 | ) | $ | 8,587 | $ | (3,475 | ) | $ | 7,786 | |||||
17
| BUSINESS SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||
| Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||
| (dollar amounts in millions) | Business | Retail | Wealth | ||||||||||||||||||||
| Three Months Ended September 30, 2018 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
| Earnings summary: | |||||||||||||||||||||||
| Net interest income (expense) | $ | 413 | $ | 141 | $ | 46 | $ | (16 | ) | $ | 15 | $ | 599 | ||||||||||
| Provision for credit losses | (1 | ) | 1 | 2 | — | (2 | ) | — | |||||||||||||||
| Noninterest income | 137 | 35 | 66 | (7 | ) | 3 | 234 | ||||||||||||||||
| Noninterest expenses | 210 | 153 | 72 | (1 | ) | 18 | 452 | ||||||||||||||||
| Provision (benefit) for income taxes | 77 | 5 | 9 | (8 | ) | (20 | ) | (a) | 63 | ||||||||||||||
| Net income (loss) | $ | 264 | $ | 17 | $ | 29 | $ | (14 | ) | $ | 22 | $ | 318 | ||||||||||
| Net credit-related charge-offs | $ | 14 | $ | — | $ | 1 | $ | — | $ | — | $ | 15 | |||||||||||
| Selected average balances: | |||||||||||||||||||||||
| Assets | $ | 43,165 | $ | 2,621 | $ | 5,068 | $ | 13,696 | $ | 6,660 | $ | 71,210 | |||||||||||
| Loans | 41,591 | 2,057 | 4,936 | — | — | 48,584 | |||||||||||||||||
| Deposits | 30,286 | 20,765 | 3,988 | 929 | 125 | 56,093 | |||||||||||||||||
| Statistical data: | |||||||||||||||||||||||
| Return on average assets (b) | 2.43 | % | 0.31 | % | 2.28 | % | N/M | N/M | 1.77 | % | |||||||||||||
| Efficiency ratio (c) | 38.24 | 86.81 | 63.93 | N/M | N/M | 52.93 | |||||||||||||||||
| Business | Retail | Wealth | |||||||||||||||||||||
| Three Months Ended June 30, 2018 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
| Earnings summary: | |||||||||||||||||||||||
| Net interest income (expense) | $ | 405 | $ | 135 | $ | 44 | $ | (7 | ) | $ | 13 | $ | 590 | ||||||||||
| Provision for credit losses | (25 | ) | (1 | ) | 1 | — | (4 | ) | (29 | ) | |||||||||||||
| Noninterest income | 135 | 32 | 67 | 12 | 2 | 248 | |||||||||||||||||
| Noninterest expenses | 211 | 149 | 75 | (1 | ) | 14 | 448 | ||||||||||||||||
| Provision (benefit) for income taxes | 81 | 4 | 8 | (2 | ) | 2 | (a) | 93 | |||||||||||||||
| Net income | $ | 273 | $ | 15 | $ | 27 | $ | 8 | $ | 3 | $ | 326 | |||||||||||
| Net credit-related (recoveries) charge-offs | $ | (4 | ) | $ | — | $ | 1 | $ | — | $ | — | $ | (3 | ) | |||||||||
| Selected average balances: | |||||||||||||||||||||||
| Assets | $ | 43,740 | $ | 2,633 | $ | 5,260 | $ | 13,735 | $ | 5,152 | $ | 70,520 | |||||||||||
| Loans | 42,041 | 2,057 | 5,127 | — | — | 49,225 | |||||||||||||||||
| Deposits | 29,735 | 21,008 | 3,852 | 1,093 | 142 | 55,830 | |||||||||||||||||
| Statistical data: | |||||||||||||||||||||||
| Return on average assets (b) | 2.50 | % | 0.28 | % | 2.10 | % | N/M | N/M | 1.85 | % | |||||||||||||
| Efficiency ratio (c) | 39.12 | 87.71 | 66.81 | N/M | N/M | 53.24 | |||||||||||||||||
| Business | Retail | Wealth | |||||||||||||||||||||
| Three Months Ended September 30, 2017 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
| Earnings summary: | |||||||||||||||||||||||
| Net interest income (expense) | $ | 397 | $ | 118 | $ | 45 | $ | (24 | ) | $ | 10 | $ | 546 | ||||||||||
| Provision for credit losses | 12 | 4 | 9 | — | (1 | ) | 24 | ||||||||||||||||
| Noninterest income | 158 | 39 | 62 | 13 | 3 | 275 | |||||||||||||||||
| Noninterest expenses | 227 | 156 | 70 | (1 | ) | 11 | 463 | ||||||||||||||||
| Provision (benefit) for income taxes | 109 | (1 | ) | 10 | (8 | ) | (2 | ) | (a) | 108 | |||||||||||||
| Net income (loss) | $ | 207 | $ | (2 | ) | $ | 18 | $ | (2 | ) | $ | 5 | $ | 226 | |||||||||
| Net credit-related charge-offs (recoveries) | $ | 27 | $ | — | $ | (2 | ) | $ | — | $ | — | $ | 25 | ||||||||||
| Selected average balances: | |||||||||||||||||||||||
| Assets | $ | 42,749 | $ | 2,623 | $ | 5,416 | $ | 13,996 | $ | 6,467 | $ | 71,251 | |||||||||||
| Loans | 41,334 | 2,059 | 5,270 | — | — | 48,663 | |||||||||||||||||
| Deposits | 31,251 | 20,782 | 4,054 | 270 | 136 | 56,493 | |||||||||||||||||
| Statistical data: | |||||||||||||||||||||||
| Return on average assets (b) | 1.92 | % | (0.03 | )% | 1.30 | % | N/M | N/M | 1.25 | % | |||||||||||||
| Efficiency ratio (c) | 40.88 | 99.05 | 64.96 | N/M | N/M | 56.33 | |||||||||||||||||
| (a) | Included discrete tax benefits of $23 million, $3 million and $2 million for the third quarter 2018, second quarter 2018 and third 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
18
| MARKET SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||
| Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||
| (dollar amounts in millions) | Other | Finance | |||||||||||||||||||||
| Three Months Ended September 30, 2018 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
| Earnings summary: | |||||||||||||||||||||||
| Net interest income (expense) | $ | 185 | $ | 199 | $ | 121 | $ | 95 | $ | (1 | ) | $ | 599 | ||||||||||
| Provision for credit losses | 4 | 3 | (9 | ) | 4 | (2 | ) | — | |||||||||||||||
| Noninterest income | 75 | 43 | 33 | 86 | (3 | ) | 234 | ||||||||||||||||
| Noninterest expenses | 143 | 104 | 90 | 98 | 17 | 452 | |||||||||||||||||
| Provision (benefit) for income taxes | 25 | 34 | 16 | 15 | (27 | ) | (a) | 63 | |||||||||||||||
| Net income | $ | 88 | $ | 101 | $ | 57 | $ | 64 | $ | 8 | $ | 318 | |||||||||||
| Net credit-related charge-offs (recoveries) | $ | 8 | $ | 5 | $ | 4 | $ | (2 | ) | $ | — | $ | 15 | ||||||||||
| Selected average balances: | |||||||||||||||||||||||
| Assets | $ | 13,055 | $ | 18,336 | $ | 10,271 | $ | 9,193 | $ | 20,355 | $ | 71,210 | |||||||||||
| Loans | 12,424 | 18,074 | 9,702 | 8,384 | — | 48,584 | |||||||||||||||||
| Deposits | 20,721 | 16,894 | 8,904 | 8,520 | 1,054 | 56,093 | |||||||||||||||||
| Statistical data: | |||||||||||||||||||||||
| Return on average assets (b) | 1.63 | % | 2.18 | % | 2.18 | % | 2.75 | % | N/M | 1.77 | % | ||||||||||||
| Efficiency ratio (c) | 54.90 | 43.12 | 58.05 | 53.97 | N/M | 52.93 | |||||||||||||||||
| Other | Finance | ||||||||||||||||||||||
| Three Months Ended June 30, 2018 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
| Earnings summary: | |||||||||||||||||||||||
| Net interest income | $ | 181 | $ | 194 | $ | 122 | $ | 86 | $ | 7 | $ | 590 | |||||||||||
| Provision for credit losses | — | (5 | ) | (14 | ) | (6 | ) | (4 | ) | (29 | ) | ||||||||||||
| Noninterest income | 72 | 42 | 31 | 90 | 13 | 248 | |||||||||||||||||
| Noninterest expenses | 144 | 105 | 92 | 93 | 14 | 448 | |||||||||||||||||
| Provision for income taxes | 25 | 34 | 17 | 17 | — | (a) | 93 | ||||||||||||||||
| Net income | $ | 84 | $ | 102 | $ | 58 | $ | 72 | $ | 10 | $ | 326 | |||||||||||
| Net credit-related charge-offs (recoveries) | $ | — | $ | 1 | $ | 2 | $ | (6 | ) | $ | — | $ | (3 | ) | |||||||||
| Selected average balances: | |||||||||||||||||||||||
| Assets | $ | 13,427 | $ | 18,687 | $ | 10,439 | $ | 9,080 | $ | 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) | 1.55 | % | 2.18 | % | 2.22 | % | 3.18 | % | N/M | 1.85 | % | ||||||||||||
| Efficiency ratio (c) | 56.45 | 44.48 | 60.22 | 52.81 | N/M | 53.24 | |||||||||||||||||
| Other | Finance | ||||||||||||||||||||||
| Three Months Ended September 30, 2017 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
| Earnings summary: | |||||||||||||||||||||||
| Net interest income (expense) | $ | 170 | $ | 184 | $ | 122 | $ | 84 | $ | (14 | ) | $ | 546 | ||||||||||
| Provision for credit losses | 8 | 25 | (22 | ) | 14 | (1 | ) | 24 | |||||||||||||||
| Noninterest income | 79 | 41 | 33 | 107 | 15 | 275 | |||||||||||||||||
| Noninterest expenses | 144 | 103 | 92 | 114 | 10 | 463 | |||||||||||||||||
| Provision (benefit) for income taxes | 34 | 37 | 31 | 17 | (11 | ) | (a) | 108 | |||||||||||||||
| Net income | $ | 63 | $ | 60 | $ | 54 | $ | 46 | $ | 3 | $ | 226 | |||||||||||
| Net credit-related charge-offs | $ | 2 | $ | 10 | $ | 9 | $ | 4 | $ | — | $ | 25 | |||||||||||
| Selected average balances: | |||||||||||||||||||||||
| Assets | $ | 13,367 | $ | 18,161 | $ | 10,435 | $ | 8,825 | $ | 20,463 | $ | 71,251 | |||||||||||
| Loans | 12,612 | 17,916 | 9,959 | 8,176 | — | 48,663 | |||||||||||||||||
| Deposits | 21,641 | 17,316 | 9,400 | 7,730 | 406 | 56,493 | |||||||||||||||||
| Statistical data: | |||||||||||||||||||||||
| Return on average assets (b) | 1.11 | % | 1.31 | % | 2.00 | % | 2.07 | N/M | 1.25 | % | |||||||||||||
| Efficiency ratio (c) | 57.78 | 45.62 | 59.46 | 59.82 | N/M | 56.33 | |||||||||||||||||
| (a) | Included discrete tax benefits of $23 million, $3 million and $2 million for the third quarter 2018, second quarter 2018 and third 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
19
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited) | |||||
| Comerica Incorporated and Subsidiaries | |||||
Comerica believes non-GAAP measures are meaningful because they reflect adjustments commonly made by management, investors, regulators and analysts to evaluate the adequacy of common equity and our performance trends. Comerica believes the adjusted financial results provide a greater understanding of ongoing operations and enhance the comparability of results with prior periods. Tangible common equity is used by Comerica to measure the quality of capital and the return relative to balance sheet risk.
| ADJUSTED FINANCIAL RESULTS | Three Months Ended | ||||||||
| September 30, | June 30, | September 30, | |||||||
| (dollar amounts in millions, except per share data) | 2018 | 2018 | 2017 | ||||||
| Noninterest Income: | |||||||||
| Noninterest income | $ | 234 | $ | 248 | $ | 275 | |||
| Securities repositioning | 20 | — | — | ||||||
| Proforma effect of adoption of accounting standard | — | — | (30 | ) | |||||
| Adjusted noninterest income | $ | 254 | $ | 248 | $ | 245 | |||
| Noninterest Expenses: | |||||||||
| Noninterest expenses | $ | 452 | $ | 448 | $ | 463 | |||
| Proforma effect of adoption of accounting standard | — | — | (30 | ) | |||||
| Restructuring charges | (12 | ) | (11 | ) | (7 | ) | |||
| Adjusted noninterest expenses | $ | 440 | $ | 437 | $ | 426 | |||
| Pre-tax Income: | |||||||||
| Pre-tax income | $ | 381 | $ | 419 | $ | 334 | |||
| Securities repositioning | 20 | — | — | ||||||
| Restructuring charges | 12 | 11 | 7 | ||||||
| Adjusted pre-tax income | $ | 413 | $ | 430 | $ | 341 | |||
| Provision for Income Taxes: | |||||||||
| Provision for income taxes | $ | 63 | $ | 93 | $ | 108 | |||
| Discrete tax benefits | 23 | 3 | 2 | ||||||
| Tax on securities repositioning | 5 | — | — | ||||||
| Tax on restructuring charges | 3 | 2 | 3 | ||||||
| Adjusted provision for income taxes | $ | 94 | $ | 98 | $ | 113 | |||
| Net Income: | |||||||||
| Net income | $ | 318 | $ | 326 | $ | 226 | |||
| Discrete tax benefits | (23 | ) | (3 | ) | (2 | ) | |||
| Securities repositioning, net of tax | 15 | — | — | ||||||
| Restructuring charges, net of tax | 9 | 9 | 4 | ||||||
| Adjusted net income | $ | 319 | $ | 332 | $ | 228 | |||
| Diluted Earnings per Common Share: | |||||||||
| Diluted earnings per common share | $ | 1.86 | $ | 1.87 | $ | 1.26 | |||
| Securities repositioning, net of tax | 0.09 | — | — | ||||||
| Restructuring charges, net of tax | 0.05 | 0.05 | 0.02 | ||||||
| Discrete tax benefits | (0.14 | ) | (0.02 | ) | (0.01 | ) | |||
| Adjusted diluted earnings per common share | $ | 1.86 | $ | 1.90 | $ | 1.27 | |||
| Efficiency Ratio: | |||||||||
| Reported | 52.93 | % | 53.24 | % | 56.33 | % | |||
| Adjusted | 51.59 | 51.90 | 53.71 | ||||||
Securities repositioning refers to losses incurred on the sale of $1.3 billion of treasury securities that were replaced by higher-yielding treasuries with a similar duration of 3 years. Proforma effect of the adoption of accounting standard relates to the proforma 2017 impact of the new revenue recognition standard that became effective January 1, 2018 that is not reflected in 2017 results. Discrete tax benefits primarily include tax benefits from the review of tax capitalization and recovery positions on fixed assets and software on the 2017 tax return and from employee stock transactions.
20
| September 30, | June 30, | September 30, | |||||||
| (dollar amounts in millions) | 2018 | 2018 | 2017 | ||||||
| Tangible Common Equity Ratio: | |||||||||
| Common shareholders' equity | $ | 7,786 | $ | 8,079 | $ | 8,034 | |||
| Less: | |||||||||
| Goodwill | 635 | 635 | 635 | ||||||
| Other intangible assets | 6 | 7 | 8 | ||||||
| Tangible common equity | $ | 7,145 | $ | 7,437 | $ | 7,391 | |||
| Total assets | $ | 71,448 | $ | 71,987 | $ | 72,017 | |||
| Less: | |||||||||
| Goodwill | 635 | 635 | 635 | ||||||
| Other intangible assets | 6 | 7 | 8 | ||||||
| Tangible assets | $ | 70,807 | $ | 71,345 | $ | 71,374 | |||
| Common equity ratio | 10.90 | % | 11.22 | % | 11.16 | % | |||
| Tangible common equity ratio | 10.09 | 10.42 | 10.35 | ||||||
| Tangible Common Equity per Share of Common Stock: | |||||||||
| Common shareholders' equity | $ | 7,786 | $ | 8,079 | $ | 8,034 | |||
| Tangible common equity | 7,145 | 7,437 | 7,391 | ||||||
| Shares of common stock outstanding (in millions) | 166 | 171 | 174 | ||||||
| Common shareholders' equity per share of common stock | $ | 46.92 | $ | 47.27 | $ | 46.09 | |||
| Tangible common equity per share of common stock | 43.05 | 43.51 | 42.39 | ||||||
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.
21