FOURTH QUARTER 2020 NET INCOME OF $215 MILLION, $1.49 PER SHARE
Earnings per Share Increased 3 percent Compared to Third Quarter
Revenue Increased 3 percent and Credit Quality Remained Strong
FULL-YEAR 2020 NET INCOME OF $474 MILLION, $3.27 PER SHARE
Loan and Deposit Growth Helped Offset Lower Rates and Increased Credit Reserves
“Our 2020 results included solid loan performance and a record level of deposits, which helped offset the rapid decline in interest rates," said Curt C. Farmer, Comerica Chairman, President and Chief Executive Officer. "Expenses remained well-controlled and included COVID-related costs. In light of the unprecedented environment, we significantly increased our credit allowance in the first quarter. Credit migration was manageable and our full-year net charge-offs were 38 basis points of average loans, 14 basis points ex-Energy, reflective of our relationship banking strategy and deep credit experience. We maintained our strong capital levels and our book value grew 7 percent from 2019 to over $55. In summary, a solid performance, particularly considering the difficult economic conditions.
“With respect to the fourth quarter, we generated earnings per share of $1.49, a 3 percent increase over the third quarter, driven by revenue growth and strong credit quality. Loan activity was muted, but deposits increased nearly $1.5 billion. Customers continued to conserve cash and are cautiously optimistic that the economy will pick up in the second half of 2021. Our CET1 ratio increased to 10.35 percent, above our 10 percent target. As always, our priority is to use capital to support customers and to drive growth, while providing an attractive return to our shareholders.
“I could not be prouder of the unwavering commitment of our team to serve our customers, communities and each other during this challenging time. During the year, we provided $11 million in assistance to local communities and businesses as well as funded $3.9 billion in Paycheck Protection Program loans to small and medium-sized companies. The compassion and tireless efforts of our colleagues allowed Comerica to persevere and remain in a strong position as we move forward.”
(dollar amounts in millions, except per share data)
4th Qtr '20
3rd Qtr '20
2020
2019
FINANCIAL RESULTS
Net interest income
$
469
$
458
$
1,911
$
2,339
Provision for credit losses
(17)
5
537
74
Noninterest income
265
252
1,001
1,010
Noninterest expenses
473
446
1,784
1,743
Pre-tax income
278
259
591
1,532
Provision for income taxes
63
48
117
334
Net income
$
215
$
211
$
474
$
1,198
Diluted earnings per common share
$
1.49
$
1.44
$
3.27
$
7.87
Average loans
51,405
52,013
51,631
50,511
Average deposits
70,243
68,763
65,038
55,481
Return on average assets
1.01
%
0.99
%
0.58
%
1.68
%
Return on average common shareholders' equity
11.14
10.84
6.18
16.39
Net interest margin
2.36
2.33
2.54
3.54
Common equity Tier 1 capital ratio (a)
10.35
10.25
10.35
10.13
Tier 1 capital ratio (a)
10.94
10.84
10.94
10.13
Common equity ratio
8.69
8.94
8.69
9.98
Common shareholders' equity per share of common stock
$
55.01
$
53.78
$
55.01
$
51.57
Tangible common equity per share of common stock (b)
50.43
49.20
50.43
47.07
(a)Estimated for December 31, 2020; For periods in 2020, ratios reflect deferral of CECL model impact as calculated per regulatory guidance.
(b)See Reconciliations of Non-GAAP Financial Measures and Regulatory Ratios.
Fourth Quarter 2020 Compared to Third Quarter 2020 Overview
Balance sheet items discussed in terms of average balances unless otherwise noted.
Loans decreased $608 million to $51.4 billion.
•Increases in Equity Funds Services, Mortgage Banker Finance and National Dealer Services were more than offset by decreases in Corporate Banking, general Middle Market, Energy and Technology and Life Sciences.
◦Period-end Paycheck Protection Program (PPP) loans were $3.5 billion, reflecting repayments of $298 million primarily through the forgiveness process.
•Average yield on loans increased 7 basis points to 3.20 percent, reflecting higher loan fees driven by PPP forgiveness as well as rate and pricing actions.
Securities increased $1.0 billion, or 7 percent, to $14.9 billion.
•Full quarter effect of actions taken in third quarter to invest $2.3 billion of excess liquidity in U.S. Treasury bonds and mortgage-backed securities. Also reinvested $1.0 billion in securities repayments during the fourth quarter.
•Average yield on securities decreased 18 basis points to 1.95 percent, reflecting lower interest rates and an increase in lower-yielding U.S. Treasury securities.
Deposits increased $1.5 billion, or 2 percent, to $70.2 billion.
•Noninterest-bearing and interest-bearing deposits increased $824 million and $656 million, respectively, as customers continued to conserve cash in an uncertain economy.
•The average cost of interest-bearing deposits decreased 6 basis points to 11 basis points, reflecting prudent management of relationship pricing in a lower rate environment.
Net interest income increased $11 million to $469 million.
•Increase driven by higher loan fees primarily related to PPP forgiveness and prudent loan and deposit pricing, partially offset by reduced loan balances.
Provision for credit losses decreased $22 million to a benefit of $17 million.
•The allowance for credit losses decreased $46 million to $992 million, primarily reflecting a reduction in criticized loans as well as a slightly improved economic forecast tempered by near-term economic uncertainty. As a percentage of total loans, the allowance for credit losses remained elevated at 1.90 percent or 2.03 percent excluding PPP loans.
•Net loan charge-offs decreased $4 million to $29 million, or 0.22 percent of average loans.
Noninterest income increased $13 million to $265 million.
•Increases of $8 million in customer derivative income, primarily from a change in the credit valuation adjustment, $5 million in commercial lending fees, $2 million in foreign exchange income as well as smaller increases in other categories, partially offset by a $5 million decrease in securities trading income.
Noninterest expenses increased $27 million to $473 million.
•Increases of $14 million in salaries and benefits expense, $7 million in outside processing fee expense and $2 million each in occupancy expense and advertising expense.
◦The increase in salaries and benefits expense primarily reflected higher performance-based incentives, staff insurance expense, severance and technology-related contract labor.
Capital position remained solid with a common equity Tier 1 capital ratio of 10.35 percent and a Tier 1 capital ratio of 10.94 percent.
•Returned a total of $94 million to common shareholders through dividends.
•Declared dividend of $5 million on preferred stock, payable January 1, 2021.
2
Full-Year 2020 Compared to Full-Year 2019 Overview
Balance sheet items discussed in terms of average balances.
Loans increased $1.1 billion to $51.6 billion.
•Increases of $1.0 billion in Mortgage Banker Finance due to elevated activity, $969 million in Commercial Real Estate and smaller increases in Business, Retail and Corporate Banking more than offset decreases of $1.7 billion in National Dealer Services, as an imbalance in supply and demand resulted in lower inventory, and $428 million in Energy.
◦PPP loans were $2.5 billion.
•Average yield on loans decreased 139 basis points to 3.44 percent, reflecting lower interest rates.
Securities increased $1.3 billion, or 11 percent, to $13.4 billion.
•Invested a portion of excess liquidity in $1.8 billion of U.S. Treasury bonds and $500 million of mortgage-backed securities in third quarter 2020.
•Average yield on securities decreased 23 basis points to 2.21 percent, reflecting lower interest rates and the increase in lower-yielding U.S. Treasury securities.
Deposits increased $9.6 billion, or 17 percent, to $65.0 billion.
•Growth in every business line, including an increase of $6.4 billion in noninterest-bearing deposits, as customers conserve cash in an uncertain economy.
•The average cost of interest-bearing deposits decreased 60 basis points to 31 basis points, reflecting prudent management of relationship pricing in a lower rate environment.
Net interest income decreased $428 million to $1.9 billion.
•Higher loan volumes and lower deposit and wholesale funding costs were more than offset by the impact of lower interest rates on loans.
Provision for credit losses increased $463 million to $537 million.
•The allowance for credit losses, calculated using the current expected credit loss (CECL) model effective January 1, 2020, increased $324 million and 57 basis points as a percentage of total loans. The increase reflected credit migration and the forecasted impact of the COVID-19 pandemic in the first half of 2020, including the economic impacts of social distancing, and pressures on Energy.
•Net loan charge-offs increased $89 million to $196 million, or 0.38 percent of average loans. Excluding Energy, net loan charge-offs totaled 0.14 percent of average loans.
Noninterest income decreased $9 million to $1.0 billion.
•Increases of $14 million in securities trading income, $13 million in card fees and $5 million in investment banking fees were more than offset by decreases of $18 million in service charges on deposit accounts, $14 million in commercial lending fees (syndication agent fees), $7 million in brokerage fees, $5 million in customer derivative income and $4 million each in foreign exchange income and income from principal investing and warrants.
•Also included a $7 million increase in deferred compensation asset returns (offset in noninterest expenses), a $7 million reduction in net securities losses primarily due to a repositioning loss recorded in 2019 and a $6 million decrease from the gain on sale of Comerica's Health Savings Account (HSA) business in the fourth quarter of 2019.
Noninterest expenses increased $41 million to $1.8 billion.
Results include a $33 million reduction to outside processing expense with a corresponding increase to software expense from a change in accounting classification as of January 1, 2020.
•Reflected increases of $16 million in operational losses, $11 million in outside processing expense (net of classification change) and $10 million in FDIC insurance expense, partially offset by a decrease of $10 million in travel and entertainment expense due to the COVID-19 pandemic.
◦Salaries and benefits expense were flat, primarily reflecting lower incentive and annual stock-based compensation, mostly offset by merit increases and higher deferred compensation expense (offset in noninterest income).
◦Expenses included approximately $18 million related to COVID-19, primarily for compensation and stipends to colleagues, charitable contributions, cleaning supplies, personal protective equipment and PPP technology costs.
3
Returned a total of $378 million to common shareholders through dividends, including an increase in the dividend to $2.72 per share and the repurchase of $189 million of common stock (3.2 million shares) prior to the suspension of the repurchase plan in response to the uncertainty of the COVID-19 pandemic environment.
•Issued $400 million of 5.625% non-cumulative perpetual preferred stock, resulting in dividends declared of $13 million on preferred stock.
Net Interest Income
Balance sheet items presented and discussed in terms of average balances.
(dollar amounts in millions)
4th Qtr '20
3rd Qtr '20
2020
2019
Net interest income
$
469
$
458
$
1,911
$
2,339
Net interest margin
2.36
%
2.33
%
2.54
%
3.54
%
Selected balances:
Total earning assets
$
79,557
$
78,555
$
75,419
$
66,134
Total loans
51,405
52,013
51,631
50,511
Total investment securities
14,886
13,850
13,432
12,120
Federal Reserve Bank deposits
12,828
12,260
9,944
3,143
Total deposits
70,243
68,763
65,038
55,481
Total noninterest-bearing deposits
36,758
35,934
33,053
26,644
Short-term borrowings
3
218
314
369
Medium- and long-term debt
5,741
5,940
6,549
6,955
Net interest income increased $11 million, and net interest margin increased 3 basis points, compared to third quarter 2020.
•Interest income on loans increased $6 million and improved net interest margin by 4 basis points, primarily due to the impact of higher fees driven by PPP forgiveness (+$7 million, +3 basis points), rate and pricing actions (+$3 million, +1 basis point) and a smaller increase due to other portfolio dynamics, which were partially offset by lower loan balances (-$5 million).
•Interest income on investment securities decreased $1 million and reduced net interest margin by 3 basis points due to the impact of lower rates (-$6 million, -3 basis points), partially offset by higher balances (+$5 million).
•Higher short-term investment balances reduced net interest margin by 1 basis point.
•Interest expense on deposits decreased $5 million and improved net interest margin by 3 basis points, due to lower pay rates on deposits.
•Interest expense on debt decreased $1 million due to lower rates.
4
Credit Quality
"Our credit metrics remained strong," said Farmer. "Compared to the third quarter, criticized loans declined $459 million, inflows to nonaccrual fell to the lowest level since the pandemic began, and net charge-offs decreased to only 22 basis points. A true testament to our consistent, disciplined credit culture. Positive portfolio migration coupled with continued modest improvement in the economic forecast resulted in a small reduction in our credit reserve and a negative provision expense. As the path of the economic recovery remains uncertain, our reserve for credit losses remains elevated at 1.90 percent, or 2.03 percent excluding PPP loans. We expect charge-offs to increase from the low levels we have seen the past two quarters; however, with our healthy reserve, we believe we are well-positioned to manage through this cycle."
(dollar amounts in millions)
4th Qtr '20
3rd Qtr '20
4th Qtr '19
Credit-related charge-offs
$
39
$
53
$
27
Recoveries
10
20
6
Net credit-related charge-offs
29
33
21
Net credit-related charge-offs/Average total loans
0.22
%
0.26
%
0.16
%
Provision for credit losses
$
(17)
$
5
$
8
Nonperforming loans
350
325
204
Nonperforming assets (NPAs)
359
335
215
NPAs/Total loans and foreclosed property
0.69
%
0.64
%
0.43
%
Loans past due 90 days or more and still accruing
$
45
$
29
$
26
Allowance for loan losses
948
978
637
Allowance for credit losses on lending-related commitments (a)
44
60
31
Total allowance for credit losses
992
1,038
668
Allowance for loan losses/Period-end total loans
1.81
%
1.87
%
1.27
%
Allowance for loan losses/Period-end total loans excluding PPP loans
1.94
2.01
n/a
Allowance for credit losses/Period-end total loans
1.90
1.98
1.33
Allowance for credit losses/Period-end total loans excluding PPP loans
2.03
2.14
n/a
Allowance for credit losses/Nonperforming loans
2.8x
3.2x
3.3x
(a) Included in accrued expenses and other liabilities on the Consolidated Balance Sheets.
n/a - not applicable
•The allowance for credit losses decreased $46 million to $992 million, or 1.90 percent of total loans, primarily reflecting a reduction in criticized loans as well as a slightly improved economic forecast tempered by near-term economic uncertainty. Excluding PPP loans, which are guaranteed by the Small Business Administration, allowance for credit losses totaled 2.03 percent of total loans.
◦Energy loans totaled $1.6 billion, or 3 percent of total loans at December 31, 2020. The allocation of reserves for Energy loans was approximately 8 percent.
•Criticized loans decreased $459 million to $2.9 billion, or 6 percent of total loans. Criticized loans are generally consistent with the Special Mention, Substandard and Doubtful categories defined by regulatory authorities.
◦Criticized Energy loans decreased $124 million to $596 million, or 20 percent of total criticized loans; 37 percent of Energy loans are criticized.
•Nonperforming assets increased $24 million to $359 million. Nonperforming assets as a percentage of total loans and foreclosed property increased to 0.69 percent compared to 0.64 percent in third quarter 2020.
◦Loans transferred to nonaccrual decreased $73 million compared to third quarter 2020.
◦Nonperforming Energy loans decreased $27 million to $114 million.
•Net charge-offs were $29 million, or 0.22 percent of average loans.
◦Energy net charge-offs totaled $4 million, compared to $9 million in third quarter 2020.
•Pandemic-related payment deferrals totaled $141 million, or 0.27 percent of total loans at December 31, 2020, with over half in retail loans.
5
Outlook for First Quarter 2021 Compared to Fourth Quarter 2020
This outlook is based on management expectations for gradual improvement in economic conditions.
•Decline in average loans reflects decreases in Mortgage Banker Finance and Energy, partially offset by growth in National Dealer Services and general Middle Market. PPP loan forgiveness potentially exceeds additional advances.
•Average deposits to remain strong.
•Decline in net interest income with lower average loan balances, LIBOR and security yields as well as two fewer days in the quarter, partially offset by careful management of loan and deposit pricing.
•Provision for credit losses reflects pace of economic recovery; net charge-offs modestly higher.
•Decrease in noninterest income as fourth quarter levels of deferred compensation asset returns, card fees, warrants and securities trading income not expected to repeat, as well as a seasonal reduction in syndication fees; partly offset by increases in service charges on deposit accounts, fiduciary income and brokerage fees.
•Decrease in noninterest expenses reflects lower deferred compensation and pension expenses, seasonal reduction in occupancy, staff insurance and advertising, as well as a two less days in the quarter; partially offset by higher annual stock-based compensation.
•Income tax expense to be approximately 22 percent of pre-tax income, excluding discrete items.
•Maintain strong capital levels. Preferred stock dividends of $6 million.
6
Strategic Lines of Business and Markets
Comerica's operations are strategically aligned into three major business segments: the Commercial Bank, the Retail Bank and Wealth Management. The Finance Division is also reported as a segment. Comerica also provides market segment results for three primary geographic markets: Michigan, California and Texas. In addition to the three primary geographic markets, Other Markets is also reported as a market segment. Other Markets includes Florida, Arizona, the International Finance division and businesses that have a significant presence outside of the three primary geographic markets. For a summary of business segment and geographic market quarterly results, see the Business Segment Financial Results and Market Segment Financial Results tables included later in this report. From time to time, Comerica may make reclassifications among the segments to reflect management's current view of the segments, and methodologies may be modified as the management accounting system is enhanced and changes occur in the organizational structure and/or product lines. The financial results provided are based on the internal business unit and geographic market structures of Comerica and methodologies in effect at December 31, 2020. A discussion of business segment and geographic market year-to-date results will be included in Comerica's 2020 Form 10-K.
Conference Call and Webcast
Comerica will host a conference call to review fourth quarter 2020 financial results at 7 a.m. CT Tuesday, January 19, 2021. Interested parties may access the conference call by calling (800) 309-2262 or (706) 679-5261 (Event ID No. 8597162). 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 Commercial Bank, The Retail Bank and Wealth Management. Comerica focuses on relationships and helping people and businesses be successful. In addition to Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico.
This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding Comerica's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as a reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
7
Forward-looking Statements
Any statements in this news release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “believes,” “contemplates,” “feels,” “expects,” “estimates,” “seeks,” “strives,” “plans,” “intends,” “outlook,” “forecast,” “position,” “target,” “mission,” “assume,” “achievable,” “potential,” “strategy,” “goal,” “aspiration,” “opportunity,” “initiative,” “outcome,” “continue,” “remain,” “maintain,” “on track,” “trend,” “objective,” “looks forward,” “projects,” “models” and variations of such words and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions, as they relate to Comerica or its management, are intended to identify forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of Comerica's management based on information known to Comerica's management as of the date of this news release and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of Comerica's management for future or past operations, products or services, and forecasts of Comerica's revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries as well as estimates of credit trends and global stability. Such statements reflect the view of Comerica's management as of this date with respect to future events and are subject to risks and uncertainties. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, Comerica's actual results could differ materially from those discussed. Factors that could cause or contribute to such differences include credit risks (unfavorable developments concerning credit quality; declines or other changes in the businesses or industries of Comerica's customers, in particular the energy industry; and changes in customer behavior); market risks (changes in monetary and fiscal policies; fluctuations in interest rates and their impact on deposit pricing; and transitions away from LIBOR towards new interest rate benchmarks); liquidity risks (Comerica's ability to maintain adequate sources of funding and liquidity; reductions in Comerica's credit rating; and the interdependence of financial service companies); technology risks (cybersecurity risks and heightened legislative and regulatory focus on cybersecurity and data privacy); operational risks (operational, systems or infrastructure failures; reliance on other companies to provide certain key components of business infrastructure; the impact of legal and regulatory proceedings or determinations; losses due to fraud; and controls and procedures failures); compliance risks (changes in regulation or oversight; the effects of stringent capital requirements; and the impacts of future legislative, administrative or judicial changes to tax regulations); financial reporting risks (changes in accounting standards and the critical nature of Comerica's accounting policies); strategic risks (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 implementation of Comerica's strategies and business initiatives; management's ability to maintain and expand customer relationships; management's ability to retain key officers and employees; and any future strategic acquisitions or divestitures); and other general risks (changes in general economic, political or industry conditions; the effectiveness of methods of reducing risk exposures; the effects of catastrophic events; impacts from the COVID-19 global pandemic; and the volatility of Comerica’s stock price). Comerica cautions that the foregoing list of factors is not all-inclusive. For discussion of factors that may cause actual results to differ from expectations, please refer to our filings with the Securities and Exchange Commission. In particular, please refer to “Item 1A. Risk Factors” beginning on page 12 of Comerica's Annual Report on Form 10-K for the year ended December 31, 2019 and "Item 1A. Risk Factors" beginning on page 67 of Comerica's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. Forward-looking statements speak only as of the date they are made. Comerica does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. For any forward-looking statements made in this news release or in any documents, Comerica claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Media Contacts:
Investor Contacts:
Wendy Bridges
Darlene P. Persons
(214) 462-4443
(214) 462-6831
Louis H. Mora
Amanda Perkins
(214) 462-6669
(214) 462-6731
8
CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
Comerica Incorporated and Subsidiaries
Three Months Ended
Years Ended
December 31,
September 30,
December 31,
December 31,
(in millions, except per share data)
2020
2020
2019
2020
2019
PER COMMON SHARE AND COMMON STOCK DATA
Diluted earnings per common share
$
1.49
$
1.44
$
1.85
$
3.27
$
7.87
Cash dividends declared
0.68
0.68
0.67
2.72
2.68
Average diluted shares (in thousands)
140,159
139,673
144,566
140,216
151,293
PERFORMANCE RATIOS
Return on average common shareholders' equity
11.14
%
10.84
%
14.74
%
6.18
%
16.39
%
Return on average assets
1.01
0.99
1.46
0.58
1.68
Efficiency ratio (a)
64.27
62.79
55.46
61.15
51.82
CAPITAL
Common equity tier 1 capital (b), (c)
$
6,919
$
6,805
$
6,919
Tier 1 capital (b), (c)
7,313
7,199
6,919
Risk-weighted assets (b)
66,833
66,405
68,273
Common equity tier 1 capital ratio (b), (c)
10.35
%
10.25
%
10.13
%
Tier 1 capital ratio (b), (c)
10.94
10.84
10.13
Total capital ratio (b)
13.21
13.12
12.13
Leverage ratio (b)
8.63
8.60
9.51
Common shareholders' equity per share of common stock
$
55.01
$
53.78
$
51.57
Tangible common equity per share of common stock (c)
50.43
49.20
47.07
Common equity ratio
8.69
%
8.94
%
9.98
%
Tangible common equity ratio (c)
8.02
8.24
9.19
AVERAGE BALANCES
Commercial loans
$
31,713
$
32,226
$
31,808
$
32,144
$
32,053
Real estate construction loans
4,157
4,037
3,398
3,912
3,325
Commercial mortgage loans
9,938
9,978
9,356
9,839
9,170
Lease financing
600
601
586
594
557
International loans
918
1,052
1,030
1,028
1,019
Residential mortgage loans
1,908
1,961
1,887
1,905
1,929
Consumer loans
2,171
2,158
2,440
2,209
2,458
Total loans
51,405
52,013
50,505
51,631
50,511
Earning assets
79,557
78,555
67,710
75,419
66,134
Total assets
85,328
84,268
73,151
81,146
71,488
Noninterest-bearing deposits
36,758
35,934
26,966
33,053
26,644
Interest-bearing deposits
33,485
32,829
30,212
31,985
28,837
Total deposits
70,243
68,763
57,178
65,038
55,481
Common shareholders' equity
7,501
7,439
7,237
7,453
7,308
Total shareholders' equity
7,895
7,834
7,237
7,691
7,308
NET INTEREST INCOME
Net interest income
$
469
$
458
$
544
$
1,911
$
2,339
Net interest margin
2.36
%
2.33
%
3.20
%
2.54
%
3.54
%
CREDIT QUALITY
Nonperforming assets
$
359
$
335
$
215
Loans past due 90 days or more and still accruing
45
29
26
Net credit-related charge-offs
29
33
21
$
196
$
107
Allowance for loan losses
948
978
637
Allowance for credit losses on lending-related commitments
44
60
31
Total allowance for credit losses (d)
992
1,038
668
Allowance for credit losses as a percentage of total loans
1.90
%
1.98
%
1.33
%
Net credit-related charge-offs as a percentage of average total loans
0.22
0.26
0.16
0.38
%
0.21
%
Nonperforming assets as a percentage of total loans and foreclosed property
0.69
0.64
0.43
Allowance for credit losses as a multiple of total nonperforming loans
2.8x
3.2x
3.3x
OTHER KEY INFORMATION
Number of banking centers
433
433
436
Number of employees - full time equivalent
7,681
7,738
7,747
(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) Estimated for December 31, 2020, 2020 reflects deferral of CECL model impact as calculated per regulatory guidance.
(c) See Reconciliations of Non-GAAP Financial Measures and Regulatory Ratios.
(d) Allowance for credit losses for December 31, 2020 and September 30, 2020 calculated using the CECL model effective first quarter 2020.
9
CONSOLIDATED BALANCE SHEETS
Comerica Incorporated and Subsidiaries
December 31,
September 30,
December 31,
(in millions, except share data)
2020
2020
2019
(unaudited)
(unaudited)
ASSETS
Cash and due from banks
$
1,031
$
988
$
973
Interest-bearing deposits with banks
14,736
10,153
4,845
Other short-term investments
172
160
155
Investment securities available-for-sale
15,028
15,090
12,398
Commercial loans
32,753
32,604
31,473
Real estate construction loans
4,082
4,146
3,455
Commercial mortgage loans
9,912
10,002
9,559
Lease financing
594
601
588
International loans
926
923
1,009
Residential mortgage loans
1,830
1,927
1,845
Consumer loans
2,194
2,166
2,440
Total loans
52,291
52,369
50,369
Less allowance for loan losses
(948)
(978)
(637)
Net loans
51,343
51,391
49,732
Premises and equipment
459
456
457
Accrued income and other assets
5,360
5,393
4,842
Total assets
$
88,129
$
83,631
$
73,402
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits
$
39,420
$
36,533
$
27,382
Money market and interest-bearing checking deposits
28,540
26,948
24,527
Savings deposits
2,710
2,588
2,184
Customer certificates of deposit
2,133
2,300
2,978
Other time deposits
—
—
133
Foreign office time deposits
66
90
91
Total interest-bearing deposits
33,449
31,926
29,913
Total deposits
72,869
68,459
57,295
Short-term borrowings
—
10
71
Accrued expenses and other liabilities
1,482
1,534
1,440
Medium- and long-term debt
5,728
5,754
7,269
Total liabilities
80,079
75,757
66,075
Fixed-rate reset non-cumulative perpetual preferred stock, series A, no par value, $100,000 liquidation preference per share:
Authorized - 4,000 shares
Issued - 4,000 shares at 12/31/20 and 9/30/20
394
394
—
Common stock - $5 par value:
Authorized - 325,000,000 shares
Issued - 228,164,824 shares
1,141
1,141
1,141
Capital surplus
2,185
2,179
2,174
Accumulated other comprehensive income (loss)
168
116
(235)
Retained earnings
9,623
9,511
9,538
Less cost of common stock in treasury - 88,997,430 shares at 12/31/20, 89,095,470 shares at 9/30/20 and 86,069,234 shares at 12/31/19
(5,461)
(5,467)
(5,291)
Total shareholders' equity
8,050
7,874
7,327
Total liabilities and shareholders' equity
$
88,129
$
83,631
$
73,402
10
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Comerica Incorporated and Subsidiaries
Three Months Ended
Years Ended
December 31,
December 31,
(in millions, except per share data)
2020
2019
2020
2019
(unaudited)
(unaudited)
(unaudited)
INTEREST INCOME
Interest and fees on loans
$
414
$
564
$
1,773
$
2,439
Interest on investment securities
71
75
291
297
Interest on short-term investments
4
20
29
71
Total interest income
489
659
2,093
2,807
INTEREST EXPENSE
Interest on deposits
10
70
101
262
Interest on short-term borrowings
—
—
1
9
Interest on medium- and long-term debt
10
45
80
197
Total interest expense
20
115
182
468
Net interest income
469
544
1,911
2,339
Provision for credit losses
(17)
8
537
74
Net interest income after provision for credit losses
486
536
1,374
2,265
NONINTEREST INCOME
Card fees
72
62
270
257
Fiduciary income
52
52
209
206
Service charges on deposit accounts
47
50
185
203
Commercial lending fees
24
25
77
91
Bank-owned life insurance
11
10
44
41
Foreign exchange income
11
11
40
44
Letter of credit fees
10
9
37
38
Brokerage fees
4
7
21
28
Net securities gains (losses)
—
1
—
(7)
Other noninterest income
34
39
118
109
Total noninterest income
265
266
1,001
1,010
NONINTEREST EXPENSES
Salaries and benefits expense
271
257
1,019
1,020
Outside processing fee expense (a)
65
70
242
264
Occupancy expense
42
41
156
154
Software expense (a)
39
30
154
117
Equipment expense
13
13
49
50
Advertising expense
11
10
35
34
FDIC insurance expense
9
6
33
23
Other noninterest expenses
23
24
96
81
Total noninterest expenses
473
451
1,784
1,743
Income before income taxes
278
351
591
1,532
Provision for income taxes
63
82
117
334
NET INCOME
215
269
474
1,198
Less:
Income allocated to participating securities
1
2
2
7
Preferred stock dividends
5
—
13
—
Net income attributable to common shares
$
209
$
267
$
459
$
1,191
Earnings per common share:
Basic
$
1.50
$
1.87
$
3.29
$
7.95
Diluted
1.49
1.85
3.27
7.87
Comprehensive income
267
370
877
1,572
Cash dividends declared on common stock
94
96
378
398
Cash dividends declared per common share
0.68
0.67
2.72
2.68
(a)Includes classification adjustments related to costs incurred in cloud computing arrangements of $9 million and $33 million for the three and twelve months ended December 31, 2020, respectively. These adjustments reduce outside processing fee expense and increase software expense due to the prospective adoption of ASU No. 2018-15, effective January 1, 2020.
11
CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
Comerica Incorporated and Subsidiaries
Fourth
Third
Second
First
Fourth
Fourth Quarter 2020 Compared to:
Quarter
Quarter
Quarter
Quarter
Quarter
Third Quarter 2020
Fourth Quarter 2019
(in millions, except per share data)
2020
2020
2020
2020
2019
Amount
Percent
Amount
Percent
INTEREST INCOME
Interest and fees on loans
$
414
$
408
$
434
$
517
$
564
$
6
1
%
$
(150)
(27)
%
Interest on investment securities
71
72
74
74
75
(1)
(1)
(4)
(4)
Interest on short-term investments
4
4
3
18
20
—
—
(16)
(81)
Total interest income
489
484
511
609
659
5
1
(170)
(26)
INTEREST EXPENSE
Interest on deposits
10
15
20
56
70
(5)
(34)
(60)
(87)
Interest on short-term borrowings
—
—
1
—
—
—
—
—
—
Interest on medium- and long-term debt
10
11
19
40
45
(1)
(10)
(35)
(77)
Total interest expense
20
26
40
96
115
(6)
(23)
(95)
(83)
Net interest income
469
458
471
513
544
11
2
(75)
(14)
Provision for credit losses
(17)
5
138
411
8
(22)
n/m
(25)
n/m
Net interest income after provision
for credit losses
486
453
333
102
536
33
7
(50)
(9)
NONINTEREST INCOME
Card fees
72
71
68
59
62
1
3
10
16
Fiduciary income
52
51
52
54
52
1
1
—
—
Service charges on deposit accounts
47
47
42
49
50
—
—
(3)
(7)
Commercial lending fees
24
19
17
17
25
5
22
(1)
(3)
Bank-owned life insurance
11
12
9
12
10
(1)
(16)
1
1
Foreign exchange income
11
9
9
11
11
2
17
—
—
Letter of credit fees
10
9
9
9
9
1
9
1
1
Brokerage fees
4
5
5
7
7
(1)
(12)
(3)
(40)
Net securities gains (losses)
—
—
1
(1)
1
—
—
(1)
n/m
Other noninterest income
34
29
35
20
39
5
22
(5)
(9)
Total noninterest income
265
252
247
237
266
13
5
(1)
(1)
NONINTEREST EXPENSES
Salaries and benefits expense
271
257
249
242
257
14
6
14
5
Outside processing fee expense (a)
65
58
62
57
70
7
12
(5)
(7)
Occupancy expense
42
40
37
37
41
2
4
1
2
Software expense (a)
39
39
39
37
30
—
—
9
33
Equipment expense
13
12
12
12
13
1
2
—
—
Advertising expense
11
9
8
7
10
2
8
1
1
FDIC insurance expense
9
8
8
8
6
1
16
3
54
Other noninterest expenses
23
23
25
25
24
—
—
(1)
(1)
Total noninterest expenses
473
446
440
425
451
27
6
22
5
Income (loss) before income taxes
278
259
140
(86)
351
19
8
(73)
(20)
Provision (benefit) for income taxes
63
48
27
(21)
82
15
32
(19)
(23)
NET INCOME (LOSS)
215
211
113
(65)
269
4
2
(54)
(20)
Less:
Income allocated to participating securities
1
—
1
—
2
1
5
(1)
(35)
Preferred stock dividends
5
8
—
—
—
(3)
(28)
5
n/m
Net income (loss) attributable to common shares
$
209
$
203
$
112
$
(65)
$
267
$
6
4
%
$
(58)
(22)
%
Earnings (losses) per common share:
Basic
$
1.50
$
1.45
$
0.81
$
(0.46)
$
1.87
$
0.05
4
%
$
(0.37)
(20)
%
Diluted
1.49
1.44
0.80
(0.46)
1.85
0.05
3
(0.36)
(19)
Comprehensive income
267
169
97
344
370
98
58
(103)
(28)
Cash dividends declared on common stock
94
94
96
94
96
—
—
(2)
(2)
Cash dividends declared per common share
0.68
0.68
0.68
0.68
0.67
—
—
0.01
1
(a)Includes classification adjustments related to costs incurred in cloud computing arrangements of $9 million, $9 million, $8 million and $7 million during the fourth, third, second and first quarters 2020, respectively. These adjustments reduce outside processing fee expense and increase software expense due to the prospective adoption of ASU No. 2018-15, effective January 1, 2020.
n/m - not meaningful
12
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES (unaudited)
Comerica Incorporated and Subsidiaries
2020
2019
(in millions)
4th Qtr
3rd Qtr
2nd Qtr
1st Qtr
4th Qtr
Balance at beginning of period:
Allowance for loan losses
$
978
$
1,007
$
916
$
637
$
652
Allowance for credit losses on lending-related commitments
60
59
62
31
29
Allowance for credit losses
1,038
1,066
978
668
681
Cumulative effect of change in accounting principle
—
—
—
(17)
—
Loan charge-offs:
Commercial
37
53
55
87
24
Commercial mortgage
—
—
1
—
2
Consumer
2
—
1
2
1
Total loan charge-offs
39
53
57
89
27
Recoveries on loans previously charged-off:
Commercial
9
17
5
3
3
Commercial mortgage
—
1
1
2
1
International
—
—
—
—
1
Consumer
1
2
1
—
1
Total recoveries
10
20
7
5
6
Net loan charge-offs
29
33
50
84
21
Provision for credit losses:
Provision for loan losses
(1)
4
141
380
6
Provision for credit losses on lending-related commitments
(16)
1
(3)
31
2
Provision for credit losses
(17)
5
138
411
8
Balance at end of period:
Allowance for loan losses
948
978
1,007
916
637
Allowance for credit losses on lending-related commitments
44
60
59
62
31
Allowance for credit losses
$
992
$
1,038
$
1,066
$
978
$
668
Allowance for loan losses as a percentage of total loans
1.81
%
1.87
%
1.88
%
1.71
%
1.27
%
Allowance for loan losses as a percentage of total loans excluding PPP loans
1.94
2.01
2.03
n/a
n/a
Allowance for credit losses as a percentage of total loans
1.90
1.98
1.99
1.83
1.33
Allowance for credit losses as a percentage of total loans excluding PPP loans
2.03
2.14
2.15
n/a
n/a
Net loan charge-offs as a percentage of average total loans
0.22
0.26
0.37
0.68
0.16
n/a - not applicable
13
NONPERFORMING ASSETS (unaudited)
Comerica Incorporated and Subsidiaries
2020
2019
(in millions)
4th Qtr
3rd Qtr
2nd Qtr
1st Qtr
4th Qtr
SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS
Nonaccrual loans:
Business loans:
Commercial
$
252
$
241
$
200
$
173
$
148
Real estate construction
1
—
—
—
—
Commercial mortgage
29
20
21
19
14
Lease financing
1
1
1
1
—
Total nonaccrual business loans
283
262
222
193
162
Retail loans:
Residential mortgage
47
40
24
20
20
Consumer:
Home equity
17
20
21
22
17
Total nonaccrual retail loans
64
60
45
42
37
Total nonaccrual loans
347
322
267
235
199
Reduced-rate loans
3
3
4
4
5
Total nonperforming loans
350
325
271
239
204
Foreclosed property
8
10
11
11
11
Other repossessed assets
1
—
—
—
—
Total nonperforming assets
$
359
$
335
$
282
$
250
$
215
Nonperforming loans as a percentage of total loans
0.67
%
0.62
%
0.51
%
0.45
%
0.40
%
Nonperforming assets as a percentage of total loans and foreclosed property
0.69
0.64
0.53
0.47
0.43
Allowance for credit losses as a multiple of total nonperforming loans
2.8x
3.2x
3.9x
4.1x
3.3x
Loans past due 90 days or more and still accruing
$
45
$
29
$
41
$
64
$
26
ANALYSIS OF NONACCRUAL LOANS
Nonaccrual loans at beginning of period
$
322
$
267
$
235
$
199
$
220
Loans transferred to nonaccrual (a)
88
161
96
137
48
Nonaccrual loan gross charge-offs
(39)
(53)
(57)
(89)
(27)
Loans transferred to accrual status (a)
(3)
—
—
—
(7)
Nonaccrual loans sold
—
(14)
—
—
(10)
Payments/other (b)
(21)
(39)
(7)
(12)
(25)
Nonaccrual loans at end of period
$
347
$
322
$
267
$
235
$
199
(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 or equal to $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
Years Ended
December 31, 2020
December 31, 2019
Average
Average
Average
Average
(dollar amounts in millions)
Balance
Interest
Rate
Balance
Interest
Rate
Commercial loans (a)
$
32,144
$
1,099
3.42
%
$
32,053
$
1,544
4.81
%
Real estate construction loans
3,912
147
3.76
3,325
184
5.54
Commercial mortgage loans
9,839
320
3.25
9,170
447
4.88
Lease financing
594
20
3.37
557
19
3.44
International loans
1,028
37
3.61
1,019
52
5.13
Residential mortgage loans
1,905
66
3.45
1,929
74
3.85
Consumer loans
2,209
84
3.80
2,458
119
4.85
Total loans
51,631
1,773
3.44
50,511
2,439
4.83
Mortgage-backed securities (b)
9,820
221
2.30
9,348
230
2.44
U.S. Treasury securities (c)
3,612
70
1.98
2,772
67
2.43
Total investment securities
13,432
291
2.21
12,120
297
2.44
Interest-bearing deposits with banks
10,203
28
0.27
3,360
69
2.05
Other short-term investments
153
1
0.72
143
2
1.26
Total earning assets
75,419
2,093
2.79
66,134
2,807
4.24
Cash and due from banks
878
887
Allowance for loan losses
(900)
(667)
Accrued income and other assets
5,749
5,134
Total assets
$
81,146
$
71,488
Money market and interest-bearing checking deposits
$
26,798
72
0.27
$
23,417
214
0.91
Savings deposits
2,454
1
0.03
2,166
1
0.05
Customer certificates of deposit
2,626
27
1.02
2,522
30
1.18
Other time deposits
17
—
2.00
705
17
2.44
Foreign office time deposits
90
1
0.42
27
—
1.39
Total interest-bearing deposits
31,985
101
0.31
28,837
262
0.91
Short-term borrowings
314
1
0.32
369
9
2.39
Medium- and long-term debt
6,549
80
1.23
6,955
197
2.82
Total interest-bearing sources
38,848
182
0.47
36,161
468
1.29
Noninterest-bearing deposits
33,053
26,644
Accrued expenses and other liabilities
1,554
1,375
Shareholders' equity
7,691
7,308
Total liabilities and shareholders' equity
$
81,146
$
71,488
Net interest income/rate spread
$
1,911
2.32
$
2,339
2.95
Impact of net noninterest-bearing sources of funds
0.22
0.59
Net interest margin (as a percentage of average earning assets)
2.54
%
3.54
%
(a)Includes PPP loans with average balance of $2.5 billion, interest income of $63 million and average yield of 2.49% for the year ended December 31, 2020.
(b)Average balances included $213 million and $(36) million of unrealized gains and losses for the years ended December 31, 2020 and 2019, respectively; yields calculated gross of these unrealized gains and losses.
(c)Average balances included $90 million and $30 million of unrealized gains and losses for the years ended December 31, 2020 and 2019, respectively; yields calculated gross of these unrealized gains and losses.
15
ANALYSIS OF NET INTEREST INCOME (unaudited)
Comerica Incorporated and Subsidiaries
Three Months Ended
December 31, 2020
September 30, 2020
December 31, 2019
Average
Average
Average
Average
Average
Average
(dollar amounts in millions)
Balance
Interest
Rate
Balance
Interest
Rate
Balance
Interest
Rate
Commercial loans (a)
$
31,713
$
259
3.26
%
$
32,226
$
255
3.15
%
$
31,808
$
353
4.38
%
Real estate construction loans
4,157
35
3.40
4,037
34
3.35
3,398
44
5.16
Commercial mortgage loans
9,938
72
2.86
9,978
71
2.85
9,356
105
4.45
Lease financing
600
5
3.56
601
5
2.94
586
5
3.72
International loans
918
7
3.23
1,052
9
3.25
1,030
12
4.73
Residential mortgage loans
1,908
16
3.24
1,961
16
3.41
1,887
18
3.79
Consumer loans
2,171
20
3.50
2,158
18
3.45
2,440
27
4.48
Total loans
51,405
414
3.20
52,013
408
3.13
50,505
564
4.43
Mortgage-backed securities (b)
10,220
53
2.13
9,759
54
2.28
9,431
58
2.45
U.S. Treasury securities (c)
4,666
18
1.57
4,091
18
1.77
2,794
17
2.46
Total investment securities
14,886
71
1.95
13,850
72
2.13
12,225
75
2.45
Interest-bearing deposits with banks
13,105
4
0.10
12,534
4
0.10
4,828
20
1.64
Other short-term investments
161
—
0.99
158
—
0.29
152
—
1.11
Total earning assets
79,557
489
2.46
78,555
484
2.47
67,710
659
3.87
Cash and due from banks
915
911
861
Allowance for loan losses
(972)
(1,002)
(663)
Accrued income and other assets
5,828
5,804
5,243
Total assets
$
85,328
$
84,268
$
73,151
Money market and interest-bearing checking deposits
$
28,521
7
0.10
$
27,671
8
0.12
$
24,629
57
0.91
Savings deposits
2,657
—
0.02
2,560
1
0.02
2,169
—
0.06
Customer certificates of deposit
2,215
2
0.43
2,495
6
0.87
2,935
11
1.42
Other time deposits
—
—
—
—
—
—
410
2
2.33
Foreign office time deposits
92
1
0.09
103
—
0.10
69
—
1.33
Total interest-bearing deposits
33,485
10
0.11
32,829
15
0.17
30,212
70
0.92
Short-term borrowings
3
—
0.06
218
—
0.25
60
—
1.60
Medium- and long-term debt
5,741
10
0.72
5,940
11
0.78
7,305
45
2.41
Total interest-bearing sources
39,229
20
0.20
38,987
26
0.27
37,577
115
1.21
Noninterest-bearing deposits
36,758
35,934
26,966
Accrued expenses and other liabilities
1,446
1,513
1,371
Shareholders' equity
7,895
7,834
7,237
Total liabilities and shareholders' equity
$
85,328
$
84,268
$
73,151
Net interest income/rate spread
$
469
2.26
$
458
2.20
$
544
2.66
Impact of net noninterest-bearing sources of funds
0.10
0.13
0.54
Net interest margin (as a percentage of average earning assets)
2.36
%
2.33
%
3.20
%
(a)Includes PPP loans with average balance of $3.7 billion and $3.8 billion, interest income of $27 million and $22 million and average yields of 2.88% and 2.31% for the three months ended December 31, 2020 and September 30, 2020, respectively.
(b)Average balances included $215 million, $254 million and $41 million of unrealized gains and losses for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively; yields calculated gross of these unrealized gains and losses.
(c)Average balances included $80 million, $99 million and $50 million of unrealized gains and losses for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively; yields calculated gross of these unrealized gains and losses.
16
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
Comerica Incorporated and Subsidiaries
Accumulated
Nonredeemable
Common Stock
Other
Total
Preferred
Shares
Capital
Comprehensive
Retained
Treasury
Shareholders'
(in millions, except per share data)
Stock
Outstanding
Amount
Surplus
Income (Loss)
Earnings
Stock
Equity
BALANCE AT SEPTEMBER 30, 2019
$
—
144.1
$
1,141
$
2,172
$
(336)
$
9,369
$
(5,146)
$
7,200
Net income
—
—
—
—
—
269
—
269
Other comprehensive income, net of tax
—
—
—
—
101
—
—
101
Cash dividends declared on common stock ($0.67 per share)
—
—
—
—
—
(96)
—
(96)
Purchase of common stock
—
(2.1)
—
—
—
—
(151)
(151)
Net issuance of common stock under employee stock plans
—
0.1
—
—
—
(4)
6
2
Share-based compensation
—
—
—
2
—
—
—
2
BALANCE AT DECEMBER 31, 2019
$
—
142.1
$
1,141
$
2,174
$
(235)
$
9,538
$
(5,291)
$
7,327
BALANCE AT SEPTEMBER 30, 2020
$
394
139.1
$
1,141
$
2,179
$
116
$
9,511
$
(5,467)
$
7,874
Net income
—
—
—
—
—
215
—
215
Other comprehensive income, net of tax
—
—
—
—
52
—
—
52
Cash dividends declared on common stock ($0.68 per share)
—
—
—
—
—
(94)
—
(94)
Cash dividends declared on preferred stock
—
—
—
—
—
(5)
—
(5)
Net issuance of common stock under employee stock plans
—
0.1
—
—
—
(4)
6
2
Share-based compensation
—
—
—
6
—
—
—
6
BALANCE AT DECEMBER 31, 2020
$
394
139.2
$
1,141
$
2,185
$
168
$
9,623
$
(5,461)
$
8,050
BALANCE AT DECEMBER 31, 2018
$
—
160.1
$
1,141
$
2,148
$
(609)
$
8,781
$
(3,954)
$
7,507
Cumulative effect of change in accounting principle
—
—
—
—
—
(14)
—
(14)
Net income
—
—
—
—
—
1,198
—
1,198
Other comprehensive income, net of tax
—
—
—
—
374
—
—
374
Cash dividends declared on common stock ($2.68 per share)
—
—
—
—
—
(398)
—
(398)
Purchase of common stock
—
(18.7)
—
—
—
—
(1,380)
(1,380)
Net issuance of common stock under employee stock plans
—
0.7
—
(13)
—
(29)
43
1
Share-based compensation
—
—
—
39
—
—
—
39
BALANCE AT DECEMBER 31, 2019
$
—
142.1
$
1,141
$
2,174
$
(235)
$
9,538
$
(5,291)
$
7,327
Cumulative effect of change in accounting principle
—
—
—
—
—
13
—
13
Net income
—
—
—
—
—
474
—
474
Other comprehensive income, net of tax
—
—
—
—
403
—
—
403
Cash dividends declared on common stock ($2.72 per share)
—
—
—
—
—
(378)
—
(378)
Cash dividends declared on preferred stock
—
—
—
—
—
(13)
—
(13)
Purchase of common stock
—
(3.4)
—
—
—
—
(194)
(194)
Issuance of preferred stock
394
—
—
—
—
—
—
394
Net issuance of common stock under employee stock plans
—
0.5
—
(13)
—
(11)
24
—
Share-based compensation
—
—
—
24
—
—
—
24
BALANCE AT DECEMBER 31, 2020
$
394
139.2
$
1,141
$
2,185
$
168
$
9,623
$
(5,461)
$
8,050
17
BUSINESS SEGMENT FINANCIAL RESULTS (unaudited)
Comerica Incorporated and Subsidiaries
(dollar amounts in millions)
Commercial
Retail
Wealth
Three Months Ended December 31, 2020
Bank
Bank
Management
Finance
Other
Total
Earnings summary:
Net interest income (expense)
$
413
$
130
$
44
$
(120)
$
2
$
469
Provision for credit losses
(32)
1
14
—
—
(17)
Noninterest income
149
30
63
14
9
265
Noninterest expenses
219
162
80
1
11
473
Provision (benefit) for income taxes
88
(1)
3
(25)
(2)
63
Net income (loss)
$
287
$
(2)
$
10
$
(82)
$
2
$
215
Net credit-related charge-offs
$
25
$
—
$
4
$
—
$
—
$
29
Selected average balances:
Assets
$
45,117
$
3,457
$
5,181
$
16,957
$
14,616
$
85,328
Loans
43,722
2,628
5,073
—
(18)
51,405
Deposits
40,256
23,869
4,919
1,013
186
70,243
Statistical data:
Return on average assets (a)
2.53
%
(0.03)
%
0.66
%
n/m
n/m
1.01
%
Efficiency ratio (b)
39.17
101.25
75.16
n/m
n/m
64.27
Commercial
Retail
Wealth
Three Months Ended September 30, 2020
Bank
Bank
Management
Finance
Other
Total
Earnings summary:
Net interest income (expense)
$
413
$
127
$
42
$
(125)
$
1
$
458
Provision for credit losses
14
(2)
(7)
—
—
5
Noninterest income
135
28
64
16
9
252
Noninterest expenses
206
153
76
—
11
446
Provision (benefit) for income taxes
67
—
8
(26)
(1)
48
Net income (loss)
$
261
$
4
$
29
$
(83)
$
—
$
211
Net credit-related charge-offs (recoveries)
$
36
$
(1)
$
(2)
$
—
$
—
$
33
Selected average balances:
Assets
$
45,636
$
3,487
$
5,198
$
15,909
$
14,038
$
84,268
Loans
44,248
2,678
5,094
—
(7)
52,013
Deposits
39,535
23,604
4,439
1,004
181
68,763
Statistical data:
Return on average assets (a)
2.27
%
0.05
%
2.24
%
n/m
n/m
0.99
%
Efficiency ratio (b)
37.60
98.29
71.72
n/m
n/m
62.79
Commercial
Retail
Wealth
Three Months Ended December 31, 2019
Bank
Bank
Management
Finance
Other
Total
Earnings summary:
Net interest income (expense)
$
403
$
134
$
43
$
(48)
$
12
$
544
Provision for credit losses
3
1
(1)
—
5
8
Noninterest income
143
37
69
12
5
266
Noninterest expenses
203
156
75
1
16
451
Provision (benefit) for income taxes
79
3
9
(10)
1
82
Net income (loss)
$
261
$
11
$
29
$
(27)
$
(5)
$
269
Net credit-related charge-offs
$
21
$
—
$
—
$
—
$
—
$
21
Selected average balances:
Assets
$
45,075
$
2,883
$
5,057
$
14,054
$
6,082
$
73,151
Loans
43,514
2,090
4,894
—
7
50,505
Deposits
30,535
21,084
4,015
1,332
212
57,178
Statistical data:
Return on average assets (a)
2.31
%
0.19
%
2.26
%
n/m
n/m
1.46
%
Efficiency ratio (b)
37.03
89.99
66.71
n/m
n/m
55.46
(a)Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(b)Noninterest expenses as a percentage of the sum of net interest income 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 December 31, 2020
Michigan
California
Texas
Markets
& Other
Total
Earnings summary:
Net interest income (expense)
$
170
$
186
$
117
$
114
$
(118)
$
469
Provision for credit losses
12
21
(26)
(24)
—
(17)
Noninterest income
71
42
32
97
23
265
Noninterest expenses
141
111
95
114
12
473
Provision (benefit) for income taxes
18
24
18
30
(27)
63
Net income (loss)
$
70
$
72
$
62
$
91
$
(80)
$
215
Net credit-related charge-offs
$
5
$
—
$
24
$
—
$
—
$
29
Selected average balances:
Assets
$
12,899
$
18,561
$
11,039
$
11,256
$
31,573
$
85,328
Loans
12,225
18,265
10,583
10,350
(18)
51,405
Deposits
25,003
21,457
10,759
11,825
1,199
70,243
Statistical data:
Return on average assets (a)
1.07
%
1.25
%
1.98
%
2.88
%
n/m
1.01
%
Efficiency ratio (b)
58.62
48.96
64.06
54.00
n/m
64.27
Other
Finance
Three Months Ended September 30, 2020
Michigan
California
Texas
Markets
& Other
Total
Earnings summary:
Net interest income (expense)
$
168
$
179
$
117
$
118
$
(124)
$
458
Provision for credit losses
19
11
(25)
—
—
5
Noninterest income
66
33
28
100
25
252
Noninterest expenses
139
102
89
105
11
446
Provision (benefit) for income taxes
13
21
17
24
(27)
48
Net income (loss)
$
63
$
78
$
64
$
89
$
(83)
$
211
Net credit-related charge-offs
$
6
$
16
$
11
$
—
$
—
$
33
Selected average balances:
Assets
$
13,280
$
18,357
$
11,365
$
11,322
$
29,944
$
84,268
Loans
12,607
18,095
10,923
10,399
(11)
52,013
Deposits
24,759
20,130
10,654
12,035
1,185
68,763
Statistical data:
Return on average assets (a)
0.95
%
1.46
%
2.14
%
2.68
%
n/m
0.99
%
Efficiency ratio (b)
59.79
47.98
61.16
48.22
n/m
62.79
Other
Finance
Three Months Ended December 31, 2019
Michigan
California
Texas
Markets
& Other
Total
Earnings summary:
Net interest income (expense)
$
171
$
194
$
120
$
95
$
(36)
$
544
Provision for credit losses
(5)
(22)
31
(1)
5
8
Noninterest income
73
52
31
93
17
266
Noninterest expenses
142
105
90
97
17
451
Provision (benefit) for income taxes
25
41
8
17
(9)
82
Net income (loss)
$
82
$
122
$
22
$
75
$
(32)
$
269
Net credit-related charge-offs (recoveries)
$
1
$
(1)
$
20
$
1
$
—
$
21
Selected average balances:
Assets
$
13,091
$
18,295
$
11,353
$
10,277
$
20,135
$
73,151
Loans
12,399
17,942
10,708
9,449
7
50,505
Deposits
20,443
18,107
9,045
8,039
1,544
57,178
Statistical data:
Return on average assets (a)
1.55
%
2.51
%
0.84
%
2.83
%
n/m
1.46
%
Efficiency ratio (b)
57.21
42.45
59.43
51.97
n/m
55.46
(a)Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(b)Noninterest expenses as a percentage of the sum of net interest income 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
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND REGULATORY RATIOS (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. Tangible common equity is used by Comerica to measure the quality of capital and the return relative to balance sheet risk.
Common equity tier 1 capital ratio removes preferred stock from the Tier 1 capital ratio as defined by and calculated in conformity with bank regulations. 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.
