THIRD QUARTER 2020 NET INCOME OF $211 MILLION, $1.44 PER SHARE
Earnings per Share Increased 80 percent Compared to Second Quarter
Net Income Increased $98 Million, or 87%
Deposit Growth Continued As Customers Conserved Cash
Average Noninterest-Bearing Deposits Increased $3.2 Billion
Credit Quality Remained Strong
Net Charge-offs of 26 Basis Points and Nonperforming Assets Below Historic Levels
“Our third quarter earnings of $211 million, or $1.44 per share, reflected the resiliency of our relationship-focused business model,” said Curt C. Farmer, Comerica Chairman, President and Chief Executive Officer. “Our customers are acting prudently by conserving cash and adjusting their operations, which resulted in a reduction in loans and continued deposit growth. The allowance for credit losses remained near 2 percent of total loans, resulting in a provision of $5 million, and reflected lower loan balances, along with our portfolio’s stable performance and an improving, yet uncertain, economic path. The impact from lower interest rates on net interest income waned, card fees remained robust and other fee income categories began to recover. Expenses were well-controlled and included a $4 million increase in charitable contributions. Our book value per share grew to $53.78, the seventh consecutive quarterly increase, and we remain focused on continuing to enhance shareholder value.
“The unwavering dedication of our team to provide a high-level of customer service as well as support each other and our communities during this unprecedented time continues to be a source of pride. As previously announced, we have significantly increased our commitment to help small businesses and communities that have been impacted by the pandemic. Since early March, Comerica, together with the Comerica Charitable Foundation, has distributed over $9 million to over 150 non-profit and other community service organizations. With strong liquidity and capital levels, together with our experience and deep expertise, we are well-positioned to assist our customers and communities, as we continue to build and solidify enduring relationships.”
(dollar amounts in millions, except per share data)
3rd Qtr '20
2nd Qtr '20
3rd Qtr '19
FINANCIAL RESULTS
Net interest income
$
458
$
471
$
586
Provision for credit losses
5
138
35
Noninterest income
252
247
256
Noninterest expenses
446
440
435
Pre-tax income
259
140
372
Provision for income taxes
48
27
80
Net income
$
211
$
113
$
292
Diluted earnings per common share
$
1.44
$
0.80
$
1.96
Average loans
52,013
53,498
50,887
Average deposits
68,763
64,282
55,716
Return on average assets
0.99
%
0.55
%
1.61
%
Return on average common shareholders' equity
10.84
6.09
15.97
Net interest margin
2.33
2.50
3.52
Common equity Tier 1 capital ratio (a)
10.26
9.99
9.96
Tier 1 capital ratio (a)
10.86
10.58
9.96
Common equity ratio
8.94
8.78
9.88
Common shareholders' equity per share of common stock
$
53.78
$
53.28
$
49.96
Tangible common equity per share of common stock (b)
49.20
48.69
45.52
(a)Estimated for September 30, 2020; reflects deferral of CECL model impact as calculated per regulatory guidance.
(b)See Reconciliations of Non-GAAP Financial Measures and Regulatory Ratios.
Third Quarter 2020 Compared to Second Quarter 2020 Overview
Balance sheet items discussed in terms of average balances.
Loans decreased $1.5 billion, or 3 percent, to $52.0 billion.
•Increase of $307 million in Mortgage Banker Finance primarily due to elevated activity was more than offset by decreases of $910 million in National Dealer Services due to an imbalance in supply and demand resulting in lower inventory, $476 million in Corporate Banking as customers reduced liquidity safeguards and $384 million in General Middle Market related to lower working capital and capital expenditure needs.
◦The average balance of Paycheck Protection Program (PPP) loans increased $1.2 billion to $3.8 billion, reflecting the full impact of the prior quarter's origination activity.
•Average yield on loans decreased 13 basis points to 3.13 percent, reflecting lower interest rates.
Securities increased $1.2 billion, or 10 percent, to $13.9 billion.
•Invested a portion of excess liquidity in $1.8 billion of U.S. Treasury bonds and $500 million of mortgage-backed securities, and reinvested $1.0 billion in securities repayments during the third quarter.
•Average yield on securities decreased 28 basis points to 2.13 percent, reflecting lower interest rates and the increase in lower-yielding U.S. Treasury securities.
Deposits increased $4.5 billion, or 7 percent, to $68.8 billion.
•Growth in nearly every business line, including an increase of $3.2 billion in noninterest-bearing deposits as customers conserve cash in an uncertain economy.
•The average cost of interest-bearing deposits decreased 9 basis points to 17 basis points, reflecting prudent management of relationship pricing in a lower rate environment.
Net interest income decreased $13 million to $458 million.
•The benefit from lower wholesale funding and deposit costs, as well as higher loan fees and one additional day in the quarter, was more than offset by the impact from loans due to the decline in interest rates and reduced balances.
Provision for credit losses decreased $133 million to $5 million.
•The allowance for credit losses decreased $28 million to $1.0 billion, primarily reflecting a decline in period-end loan balances. As a percentage of total loans, the allowance for credit losses was relatively stable at 1.98 percent as the uncertainty of the COVID-19 pandemic impact remained unchanged. Excluding PPP loans, allowance for credit losses totaled 2.14 percent of total loans.
•Net loan charge-offs decreased $17 million to $33 million, or 0.26 percent of average loans.
Noninterest income increased $5 million to $252 million.
•Increases of $5 million in service charges on deposit accounts and $3 million in card fees, as well as smaller increases in other categories, partially offset by decreases of $10 million in customer derivative income and $2 million each in securities trading and investment banking fees.
•Additionally, included increases of $6 million from deferred compensation asset returns (offset in noninterest expenses) and $3 million from bank-owned life insurance.
Noninterest expenses increased $6 million to $446 million.
•Increases of $8 million in salaries and benefits expense, $4 million in charitable contributions and $3 million in occupancy expense, partially offset by decreases of $4 million in outside processing fee expense and $3 million in operational and litigation-related costs.
◦The increase in salaries and benefits expense primarily reflected higher staff insurance expense and a $6 million increase in deferred compensation expense (offset in noninterest income).
Capital position remained solid with a common equity Tier 1 capital ratio of 10.26 percent and a Tier 1 capital ratio of 10.86 percent.
•Returned a total of $94 million to common shareholders through dividends.
•Declared dividend of $8 million on preferred stock, payable October 1, 2020, for the long first dividend period from May 26, 2020 to October 1, 2020.
2
Third Quarter 2020 Compared to Third Quarter 2019 Overview
Balance sheet items discussed in terms of average balances.
Loans increased $1.1 billion, or 2 percent.
•Increases in Mortgage Banker Finance, Commercial Real Estate, Business Banking and Personal Banking were partially offset by decreases in National Dealer Services and Energy.
•Average yield on loans declined 170 basis points, consistent with the lower interest rate environment.
Deposits increased $13.0 billion, or 23 percent.
•Included $9.6 billion, or 36 percent, increase in noninterest-bearing deposits.
•Interest-bearing deposit costs declined 82 basis points, with prudent management of relationship pricing in a lower rate environment.
Net interest income decreased $128 million.
•Primarily due to the impact of lower short-term rates.
Provision for credit losses, calculated using the CECL model effective first quarter 2020, decreased $30 million.
•Allowance for credit losses increased $357 million, or 66 basis points as a percentage of total loans, reflecting the expected impact of the COVID-19 pandemic and sustained pressures on Energy.
Noninterest income decreased $4 million.
•Increases in securities trading income, deferred compensation asset returns (offset in noninterest expenses) and card fees were more than offset by decreases in customer derivative income, service charges on deposit accounts, commercial lending fees (primarily syndication fees), brokerage service fees, fiduciary income and income on principal investing and warrants.
Noninterest expenses increased $11 million.
•Increases in software expense, which included a $9 million reclassification from outside processing fee expense due to a change in accounting classification effective first quarter 2020, salaries and benefits expense and charitable contributions as well as smaller increases in various categories.
3
Net Interest Income
Balance sheet items presented and discussed in terms of average balances.
(dollar amounts in millions)
3rd Qtr '20
2nd Qtr '20
3rd Qtr '19
Net interest income
$
458
$
471
$
586
Net interest margin
2.33
%
2.50
%
3.52
%
Selected balances:
Total earning assets
$
78,555
$
75,989
$
66,285
Total loans
52,013
53,498
50,887
Total investment securities
13,850
12,642
12,203
Federal Reserve Bank deposits
12,260
9,483
2,834
Total deposits
68,763
64,282
55,716
Total noninterest-bearing deposits
35,934
32,686
26,339
Short-term borrowings
218
882
268
Medium- and long-term debt
5,940
7,206
7,100
Net interest income decreased $13 million, and net interest margin decreased 17 basis points, compared to second quarter 2020.
•Interest income on loans decreased $26 million and reduced net interest margin by 13 basis points, primarily due to the impact of lower short-term rates (-$21 million, -11 basis points) and lower loan balances (-$14 million, -4 basis points), which were partially offset by higher loan fees (+$5 million, +2 basis points) and one more day in the quarter (+$4 million).
•Interest income on investment securities decreased $2 million and reduced net interest margin by 2 basis points primarily due to the impact of lower rates. The increase in securities to invest excess liquidity contributed $1 million in interest income but reduced margin by 1 basis point.
•Interest income on short-term investments increased $1 million and reduced net interest margin by 9 basis points, reflecting an increase in lower-yielding deposits with the Federal Reserve Bank.
•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 $9 million due to reduced balances (+$5 million, +2 basis points) and lower rates (+$4 million, +2 basis points).
The net impact of lower rates, including the change to deposit rates, to the third quarter of 2020 net interest income was a reduction of $15 million and 7 basis points to the net interest margin.
4
Credit Quality
"Comerica has a strong credit culture with conservative underwriting standards which has served us well in times of economic stress," said Farmer. "We are leveraging our experience and deep expertise, working closely with our customers, reviewing their financial performance and assessing their financial needs. During the current period of unprecedented disruption, our portfolio has performed well. Nonaccrual loans remain well below historic norms and net charge-offs were only 26 basis points in the third quarter. However, while the economy has been improving, given the uncertainty regarding the pace of recovery, our credit reserves remain at over $1.0 billion, resulting in a coverage ratio of close to 2 percent."
(dollar amounts in millions)
3rd Qtr '20
2nd Qtr '20
3rd Qtr '19
Credit-related charge-offs
$
53
$
57
$
61
Recoveries
20
7
19
Net credit-related charge-offs
33
50
42
Net credit-related charge-offs/Average total loans
0.26
%
0.37
%
0.33
%
Provision for credit losses
$
5
$
138
$
35
Nonperforming loans
325
271
226
Nonperforming assets (NPAs)
335
282
229
NPAs/Total loans and foreclosed property
0.64
%
0.53
%
0.44
%
Loans past due 90 days or more and still accruing
$
29
$
41
$
31
Allowance for loan losses
978
1,007
652
Allowance for credit losses on lending-related commitments (a)
60
59
29
Total allowance for credit losses
1,038
1,066
681
Allowance for loan losses/Period-end total loans
1.87
%
1.88
%
1.27
%
Allowance for loan losses/Period-end total loans excluding PPP loans
2.01
2.03
n/a
Allowance for credit losses/Period-end total loans
1.98
1.99
1.32
Allowance for credit losses/Period-end total loans excluding PPP loans
2.14
2.15
n/a
Allowance for credit losses/Nonperforming loans
3.2x
3.9x
3.0x
(a) Included in accrued expenses and other liabilities on the Consolidated Balance Sheets.
n/a - not applicable
•The allowance for credit losses decreased $28 million to $1.0 billion, or 1.98 percent of total loans, primarily reflecting a decline in period-end loans. Additionally, the uncertainty of the COVID-19 pandemic, including the economic impacts of social distancing, remained unchanged. Excluding PPP loans, which are guaranteed by the Small Business Administration, allowance for credit losses totaled 2.14 percent of total loans.
◦Energy loans totaled $1.8 billion, or 4 percent of total loans at September 30, 2020. The allocation of reserves for Energy loans remained over 10 percent.
•Criticized loans remained at $3.4 billion, or 7 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 $102 million to $720 million, or 21 percent of total criticized loans; 39 percent of Energy loans are criticized.
•Nonperforming assets increased $53 million to $335 million. Nonperforming assets as a percentage of total loans and foreclosed property increased to 0.64 percent compared to 0.53 percent in second quarter 2020.
◦Nonperforming Energy loans increased $39 million to $141 million.
•Net charge-offs were $33 million, or 0.26 percent of average loans.
◦Energy net charge-offs, which included $14 million in recoveries, totaled $9 million, compared to $45 million in second quarter 2020.
•Pandemic-related payment deferrals totaled $385 million, or 0.74 percent of total loans at September 30, 2020, primarily in commercial loans.
5
Outlook for Fourth Quarter 2020 Compared to Third Quarter 2020
This outlook is based on management expectations for gradual improvement in economic conditions. While some modest forgiveness of PPP loans is expected by the end of the year, given the current level of uncertainty, any impact from loan forgiveness on loans, net interest income and expenses is excluded from this outlook.
•Decline in average loans reflects decreases in Mortgage Banker Finance due to a reduction in activity and the cyclical impacts on Middle Market, Large Corporate and Energy, partially offset by growth in National Dealer Services as inventory levels begin to slowly rebuild.
•Average deposits to remain strong and relatively stable (excluding the benefit of possible additional fiscal stimulus).
•Net interest income relatively stable with lower loan balances as well as the impact of lower LIBOR and securities yields, mostly offset by careful management of loan and deposit pricing, the full quarter benefit of the larger securities portfolio and lower wholesale funding.
•Provision for credit losses reflects pace of economic recovery; net charge-offs modestly higher.
•Decrease in noninterest income as third quarter levels of deferred compensation, securities trading income and bank-owned life insurance not to repeat. Reduced card fees as economic stimulus benefits recede, offset by growth in several fee categories due to improving economic conditions.
•Increase in noninterest expenses reflects technology projects and seasonal impact of staff insurance, mostly offset by third quarter levels of deferred compensation and charitable contributions not expected to repeat.
•Maintain strong capital levels with a focus on supporting growth as well as providing an attractive return to our shareholders.
6
Business Segments
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 September 30, 2020. A discussion of business segment and geographic market year-to-date results will be included in Comerica's Third Quarter 2020 Form 10-Q.
Conference Call and Webcast
Comerica will host a conference call to review third quarter 2020 financial results at 7 a.m. CT Tuesday, October 20, 2020. Interested parties may access the conference call by calling (800) 309-2262 or (706) 679-5261 (Event ID No. 4658569). 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 65 of Comerica's Quarterly Report on Form 10-Q for the quarter ended June 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
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)
2020
2020
2019
2020
2019
PER COMMON SHARE AND COMMON STOCK DATA
Diluted earnings per common share
$
1.44
$
0.80
$
1.96
$
1.78
$
6.02
Cash dividends declared
0.68
0.68
0.67
2.04
2.01
Average diluted shares (in thousands)
139,673
139,453
148,079
140,243
153,562
PERFORMANCE RATIOS
Return on average common shareholders' equity
10.84
%
6.09
%
15.97
%
4.50
%
16.94
%
Return on average assets
0.99
0.55
1.61
0.43
1.75
Efficiency ratio (a)
62.79
61.14
51.54
60.10
50.66
CAPITAL
Common equity tier 1 capital (b), (c)
$
6,805
$
6,698
$
6,892
Tier 1 capital (b), (c)
7,199
7,093
6,892
Risk-weighted assets (b)
66,299
67,052
69,223
Common equity tier 1 capital ratio (b), (c)
10.26
%
9.99
%
9.96
%
Tier 1 capital ratio (b), (c)
10.86
10.58
9.96
Total capital ratio (b)
13.14
12.95
11.95
Leverage ratio (b)
8.59
8.75
9.63
Common shareholders' equity per share of common stock
$
53.78
$
53.28
$
49.96
Tangible common equity per share of common stock (c)
49.20
48.69
45.52
Common equity ratio
8.94
%
8.78
%
9.88
%
Tangible common equity ratio (c)
8.24
8.08
9.09
AVERAGE BALANCES
Commercial loans
$
32,226
$
33,944
$
32,329
$
32,289
$
32,135
Real estate construction loans
4,037
3,887
3,344
3,830
3,301
Commercial mortgage loans
9,978
9,800
9,264
9,806
9,108
Lease financing
601
592
578
592
548
International loans
1,052
1,137
1,007
1,064
1,015
Residential mortgage loans
1,961
1,895
1,920
1,904
1,943
Consumer loans
2,158
2,243
2,445
2,221
2,464
Total loans
52,013
53,498
50,887
51,706
50,514
Earning assets
78,555
75,989
66,285
74,030
65,604
Total assets
84,268
81,644
71,736
79,742
70,927
Noninterest-bearing deposits
35,934
32,686
26,339
31,809
26,535
Interest-bearing deposits
32,829
31,596
29,377
31,482
28,374
Total deposits
68,763
64,282
55,716
63,291
54,909
Common shareholders' equity
7,439
7,436
7,254
7,438
7,332
Total shareholders' equity
7,834
7,592
7,254
7,622
7,332
NET INTEREST INCOME
Net interest income
$
458
$
471
$
586
$
1,442
$
1,795
Net interest margin
2.33
%
2.50
%
3.52
%
2.61
%
3.65
%
CREDIT QUALITY
Nonperforming assets
$
335
$
282
$
229
Loans past due 90 days or more and still accruing
29
41
31
Net credit-related charge-offs
33
50
42
$
167
$
86
Allowance for loan losses
978
1,007
652
Allowance for credit losses on lending-related commitments
60
59
29
Total allowance for credit losses (d)
1,038
1,066
681
Allowance for credit losses as a percentage of total loans
1.98
%
1.99
%
1.32
%
Net credit-related charge-offs as a percentage of average total loans
0.26
0.37
0.33
0.43
%
0.22
%
Nonperforming assets as a percentage of total loans and foreclosed property
0.64
0.53
0.44
Allowance for credit losses as a multiple of total nonperforming loans
3.2x
3.9x
3.0x
OTHER KEY INFORMATION
Number of banking centers
433
434
436
Number of employees - full time equivalent
7,738
7,777
7,725
(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 September 30, 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 September 30, 2020 and June 30, 2020 calculated using the CECL model effective first quarter 2020.
9
CONSOLIDATED BALANCE SHEETS
Comerica Incorporated and Subsidiaries
September 30,
June 30,
December 31,
September 30,
(in millions, except share data)
2020
2020
2019
2019
(unaudited)
(unaudited)
(unaudited)
ASSETS
Cash and due from banks
$
988
$
1,048
$
973
$
1,229
Interest-bearing deposits with banks
10,153
12,263
4,845
2,888
Other short-term investments
160
153
155
146
Investment securities available-for-sale
15,090
12,759
12,398
12,429
Commercial loans
32,604
33,826
31,473
32,890
Real estate construction loans
4,146
3,952
3,455
3,377
Commercial mortgage loans
10,002
9,925
9,559
9,234
Lease financing
601
589
588
578
International loans
923
1,104
1,009
1,055
Residential mortgage loans
1,927
1,886
1,845
1,906
Consumer loans
2,166
2,164
2,440
2,451
Total loans
52,369
53,446
50,369
51,491
Less allowance for loan losses
(978)
(1,007)
(637)
(652)
Net loans
51,391
52,439
49,732
50,839
Premises and equipment
456
450
457
467
Accrued income and other assets
5,393
5,285
4,842
4,850
Total assets
$
83,631
$
84,397
$
73,402
$
72,848
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits
$
36,533
$
35,582
$
27,382
$
27,134
Money market and interest-bearing checking deposits
26,948
26,895
24,527
23,992
Savings deposits
2,588
2,500
2,184
2,156
Customer certificates of deposit
2,300
2,656
2,978
2,853
Other time deposits
—
—
133
647
Foreign office time deposits
90
87
91
27
Total interest-bearing deposits
31,926
32,138
29,913
29,675
Total deposits
68,459
67,720
57,295
56,809
Short-term borrowings
10
752
71
51
Accrued expenses and other liabilities
1,534
1,602
1,440
1,477
Medium- and long-term debt
5,754
6,521
7,269
7,311
Total liabilities
75,757
76,595
66,075
65,648
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 9/30/20 and 6/30/20
394
395
—
—
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
2,179
2,173
2,174
2,172
Accumulated other comprehensive income (loss)
116
158
(235)
(336)
Retained earnings
9,511
9,404
9,538
9,369
Less cost of common stock in treasury - 89,095,470 shares at 9/30/20, 89,124,560 shares at 6/30/20, 86,069,234 shares at 12/31/19 and 84,028,400 shares at 9/30/19
(5,467)
(5,469)
(5,291)
(5,146)
Total shareholders' equity
7,874
7,802
7,327
7,200
Total liabilities and shareholders' equity
$
83,631
$
84,397
$
73,402
$
72,848
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)
2020
2019
2020
2019
INTEREST INCOME
Interest and fees on loans
$
408
$
619
$
1,359
$
1,875
Interest on investment securities
72
75
220
222
Interest on short-term investments
4
17
25
51
Total interest income
484
711
1,604
2,148
INTEREST EXPENSE
Interest on deposits
15
73
91
192
Interest on short-term borrowings
—
2
1
9
Interest on medium- and long-term debt
11
50
70
152
Total interest expense
26
125
162
353
Net interest income
458
586
1,442
1,795
Provision for credit losses
5
35
554
66
Net interest income after provision for credit losses
453
551
888
1,729
NONINTEREST INCOME
Card fees
71
67
198
195
Fiduciary income
51
53
157
154
Service charges on deposit accounts
47
51
138
153
Commercial lending fees
19
23
53
66
Foreign exchange income
9
11
29
33
Bank-owned life insurance
12
11
33
31
Letter of credit fees
9
10
27
29
Brokerage fees
5
7
17
21
Net securities losses
—
—
—
(8)
Other noninterest income
29
23
84
70
Total noninterest income
252
256
736
744
NONINTEREST EXPENSES
Salaries and benefits expense
257
253
748
763
Outside processing fee expense
58
66
177
194
Occupancy expense
40
39
114
113
Software expense
39
30
115
87
Equipment expense
12
13
36
37
Advertising expense
9
10
24
24
FDIC insurance expense
8
6
24
17
Other noninterest expenses
23
18
73
57
Total noninterest expenses
446
435
1,311
1,292
Income before income taxes
259
372
313
1,181
Provision for income taxes
48
80
54
252
NET INCOME
211
292
259
929
Less:
Income allocated to participating securities
—
2
1
5
Preferred stock dividends
8
—
8
—
Net income attributable to common shares
$
203
$
290
$
250
$
924
Earnings per common share:
Basic
$
1.45
$
1.98
$
1.79
$
6.08
Diluted
1.44
1.96
1.78
6.02
Comprehensive income
169
338
610
1,202
Cash dividends declared on common stock
94
97
284
302
Cash dividends declared per common share
0.68
0.67
2.04
2.01
11
CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
Comerica Incorporated and Subsidiaries
Third
Second
First
Fourth
Third
Third Quarter 2020 Compared to:
Quarter
Quarter
Quarter
Quarter
Quarter
Second Quarter 2020
Third Quarter 2019
(in millions, except per share data)
2020
2020
2020
2019
2019
Amount
Percent
Amount
Percent
INTEREST INCOME
Interest and fees on loans
$
408
$
434
$
517
$
564
$
619
$
(26)
(6)
%
$
(211)
(34)
%
Interest on investment securities
72
74
74
75
75
(2)
(2)
(3)
(3)
Interest on short-term investments
4
3
18
20
17
1
20
(13)
(80)
Total interest income
484
511
609
659
711
(27)
(5)
(227)
(32)
INTEREST EXPENSE
Interest on deposits
15
20
56
70
73
(5)
(31)
(58)
(81)
Interest on short-term borrowings
—
1
—
—
2
(1)
n/m
(2)
n/m
Interest on medium- and long-term debt
11
19
40
45
50
(8)
(41)
(39)
(77)
Total interest expense
26
40
96
115
125
(14)
(36)
(99)
(79)
Net interest income
458
471
513
544
586
(13)
(3)
(128)
(22)
Provision for credit losses
5
138
411
8
35
(133)
(96)
(30)
(86)
Net interest income after provision
for credit losses
453
333
102
536
551
120
37
(98)
(18)
NONINTEREST INCOME
Card fees
71
68
59
62
67
3
3
4
6
Fiduciary income
51
52
54
52
53
(1)
(1)
(2)
(4)
Service charges on deposit accounts
47
42
49
50
51
5
10
(4)
(9)
Commercial lending fees
19
17
17
25
23
2
13
(4)
(17)
Foreign exchange income
9
9
11
11
11
—
—
(2)
(15)
Bank-owned life insurance
12
9
12
10
11
3
29
1
11
Letter of credit fees
9
9
9
9
10
—
—
(1)
(7)
Brokerage fees
5
5
7
7
7
—
—
(2)
(30)
Net securities gains (losses)
—
1
(1)
1
—
(1)
n/m
—
—
Other noninterest income
29
35
20
39
23
(6)
(19)
6
18
Total noninterest income
252
247
237
266
256
5
2
(4)
(2)
NONINTEREST EXPENSES
Salaries and benefits expense
257
249
242
257
253
8
3
4
1
Outside processing fee expense
58
62
57
70
66
(4)
(5)
(8)
(11)
Occupancy expense
40
37
37
41
39
3
9
1
2
Software expense
39
39
37
30
30
—
—
9
33
Equipment expense
12
12
12
13
13
—
—
(1)
(1)
Advertising expense
9
8
7
10
10
1
29
(1)
(4)
FDIC insurance expense
8
8
8
6
6
—
—
2
23
Other noninterest expenses
23
25
25
24
18
(2)
(11)
5
22
Total noninterest expenses
446
440
425
451
435
6
2
11
3
Income (loss) before income taxes
259
140
(86)
351
372
119
85
(113)
(31)
Provision (benefit) for income taxes
48
27
(21)
82
80
21
75
(32)
(41)
NET INCOME (LOSS)
211
113
(65)
269
292
98
87
(81)
(28)
Less:
Income allocated to participating securities
—
1
—
2
2
(1)
n/m
(2)
n/m
Preferred stock dividends
8
—
—
—
—
8
n/m
8
n/m
Net income (loss) attributable to common shares
$
203
$
112
$
(65)
$
267
$
290
$
91
80%
$
(87)
(31)
%
Earnings (losses) per common share:
Basic
$
1.45
$
0.81
$
(0.46)
$
1.87
$
1.98
$
0.64
80
%
$
(0.53)
(27)
%
Diluted
1.44
0.80
(0.46)
1.85
1.96
0.64
80
(0.52)
(26)
Comprehensive income
169
97
344
370
338
72
74
(169)
(50)
Cash dividends declared on common stock
94
98
94
96
97
(4)
(4)
(3)
(3)
Cash dividends declared per common share
0.68
0.68
0.68
0.67
0.67
—
—
0.01
1
n/m - not meaningful
12
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES (unaudited)
Comerica Incorporated and Subsidiaries
2020
2019
(in millions)
3rd Qtr
2nd Qtr
1st Qtr
4th Qtr
3rd Qtr
Balance at beginning of period:
Allowance for loan losses
$
1,007
$
916
$
637
$
652
$
657
Allowance for credit losses on lending-related commitments
59
62
31
29
31
Allowance for credit losses
1,066
978
668
681
688
Cumulative effect of change in accounting principle
—
—
(17)
—
—
Loan charge-offs:
Commercial
53
55
87
24
59
Commercial mortgage
—
1
—
2
—
Residential mortgage
—
—
—
—
1
Consumer
—
1
2
1
1
Total loan charge-offs
53
57
89
27
61
Recoveries on loans previously charged-off:
Commercial
17
5
3
3
17
Commercial mortgage
1
1
2
1
—
International
—
—
—
1
—
Residential mortgage
—
—
—
—
1
Consumer
2
1
—
1
1
Total recoveries
20
7
5
6
19
Net loan charge-offs
33
50
84
21
42
Provision for credit losses:
Provision for loan losses
4
141
380
6
37
Provision for credit losses on lending-related commitments
1
(3)
31
2
(2)
Provision for credit losses
5
138
411
8
35
Balance at end 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
Allowance for loan losses as a percentage of total loans
1.87
%
1.88
%
1.71
%
1.27
%
1.27
%
Allowance for loan losses as a percentage of total loans excluding PPP loans
2.01
2.03
n/a
n/a
n/a
Allowance for credit losses as a percentage of total loans
1.98
1.99
1.83
1.33
1.32
Allowance for credit losses as a percentage of total loans excluding PPP loans
2.14
2.15
n/a
n/a
n/a
Net loan charge-offs as a percentage of average total loans
0.26
0.37
0.68
0.16
0.33
n/a - not applicable
13
NONPERFORMING ASSETS (unaudited)
Comerica Incorporated and Subsidiaries
2020
2019
(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
$
241
$
200
$
173
$
148
$
152
Commercial mortgage
20
21
19
14
13
Lease financing
1
1
1
—
—
International
—
—
—
—
2
Total nonaccrual business loans
262
222
193
162
167
Retail loans:
Residential mortgage
40
24
20
20
36
Consumer:
Home equity
20
21
22
17
17
Total nonaccrual retail loans
60
45
42
37
53
Total nonaccrual loans
322
267
235
199
220
Reduced-rate loans
3
4
4
5
6
Total nonperforming loans
325
271
239
204
226
Foreclosed property
10
11
11
11
3
Total nonperforming assets
$
335
$
282
$
250
$
215
$
229
Nonperforming loans as a percentage of total loans
0.62
%
0.51
%
0.45
%
0.40
%
0.44
%
Nonperforming assets as a percentage of total loans and foreclosed property
0.64
0.53
0.47
0.43
0.44
Allowance for credit losses as a multiple of total nonperforming loans
3.2x
3.9x
4.1x
3.3x
3.0x
Loans past due 90 days or more and still accruing
$
29
$
41
$
64
$
26
$
31
ANALYSIS OF NONACCRUAL LOANS
Nonaccrual loans at beginning of period
$
267
$
235
$
199
$
220
$
224
Loans transferred to nonaccrual (a)
161
96
137
48
85
Nonaccrual loan gross charge-offs
(53)
(57)
(89)
(27)
(61)
Loans transferred to accrual status (a)
—
—
—
(7)
—
Nonaccrual loans sold
(14)
—
—
(10)
—
Payments/Other (b)
(39)
(7)
(12)
(25)
(28)
Nonaccrual loans at end of period
$
322
$
267
$
235
$
199
$
220
(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, 2020
September 30, 2019
Average
Average
Average
Average
(dollar amounts in millions)
Balance
Interest
Rate
Balance
Interest
Rate
Commercial loans (a)
$
32,289
$
840
3.48
%
$
32,135
$
1,191
4.96
%
Real estate construction loans
3,830
112
3.90
3,301
140
5.67
Commercial mortgage loans
9,806
248
3.38
9,108
342
5.02
Lease financing
592
15
3.30
548
14
3.34
International loans
1,064
30
3.73
1,015
40
5.26
Residential mortgage loans
1,904
50
3.52
1,943
56
3.87
Consumer loans
2,221
64
3.90
2,464
92
4.98
Total loans
51,706
1,359
3.51
50,514
1,875
4.96
Mortgage-backed securities (b)
9,686
168
2.36
9,320
172
2.44
U.S. Treasury securities (c)
3,258
52
2.18
2,764
50
2.42
Total investment securities
12,944
220
2.31
12,084
222
2.43
Interest-bearing deposits with banks
9,229
24
0.35
2,866
49
2.29
Other short-term investments
151
1
0.62
140
2
1.32
Total earning assets
74,030
1,604
2.91
65,604
2,148
4.37
Cash and due from banks
866
896
Allowance for loan losses
(876)
(668)
Accrued income and other assets
5,722
5,095
Total assets
$
79,742
$
70,927
Money market and interest-bearing checking deposits
$
26,220
65
0.33
$
23,010
157
0.91
Savings deposits
2,386
1
0.03
2,164
1
0.04
Customer certificates of deposit
2,764
25
1.18
2,383
19
1.09
Other time deposits
23
—
2.00
804
15
2.45
Foreign office time deposits
89
—
0.54
13
—
1.51
Total interest-bearing deposits
31,482
91
0.39
28,374
192
0.91
Short-term borrowings
418
1
0.32
472
9
2.43
Medium- and long-term debt
6,821
70
1.38
6,837
152
2.97
Total interest-bearing sources
38,721
162
0.56
35,683
353
1.32
Noninterest-bearing deposits
31,809
26,535
Accrued expenses and other liabilities
1,590
1,377
Shareholders' equity
7,622
7,332
Total liabilities and shareholders' equity
$
79,742
$
70,927
Net interest income/rate spread
$
1,442
2.35
$
1,795
3.05
Impact of net noninterest-bearing sources of funds
0.26
0.60
Net interest margin (as a percentage of average earning assets)
2.61
%
3.65
%
(a)Includes PPP loans with average balance of $2.1 billion, interest income of $36 million and average yield of 2.27% for the nine months ended September 30, 2020.
(b)Average balances included $212 million and $(62) million of unrealized gains and losses for the nine months ended September 30, 2020 and 2019, respectively; yields calculated gross of these unrealized gains and losses.
(c)Average balances included $94 million and $23 million of unrealized gains and losses for the nine months ended September 30, 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
September 30, 2020
June 30, 2020
September 30, 2019
Average
Average
Average
Average
Average
Average
(dollar amounts in millions)
Balance
Interest
Rate
Balance
Interest
Rate
Balance
Interest
Rate
Commercial loans (a)
$
32,226
$
255
3.15
%
$
33,944
$
271
3.22
%
$
32,329
$
392
4.82
%
Real estate construction loans
4,037
34
3.35
3,887
35
3.60
3,344
47
5.53
Commercial mortgage loans
9,978
71
2.85
9,800
76
3.12
9,264
112
4.82
Lease financing
601
5
2.94
592
5
3.34
578
6
3.83
International loans
1,052
9
3.25
1,137
10
3.51
1,007
13
5.12
Residential mortgage loans
1,961
16
3.41
1,895
17
3.49
1,920
18
3.84
Consumer loans
2,158
18
3.45
2,243
20
3.62
2,445
31
4.92
Total loans
52,013
408
3.13
53,498
434
3.26
50,887
619
4.83
Mortgage-backed securities (b)
9,759
54
2.28
9,785
57
2.39
9,408
58
2.45
U.S. Treasury securities (c)
4,091
18
1.77
2,857
17
2.47
2,795
17
2.45
Total investment securities
13,850
72
2.13
12,642
74
2.41
12,203
75
2.45
Interest-bearing deposits with banks
12,534
4
0.10
9,709
2
0.11
3,049
16
2.13
Other short-term investments
158
—
0.29
140
1
0.48
146
1
1.28
Total earning assets
78,555
484
2.47
75,989
511
2.71
66,285
711
4.26
Cash and due from banks
911
848
864
Allowance for loan losses
(1,002)
(932)
(673)
Accrued income and other assets
5,804
5,739
5,260
Total assets
$
84,268
$
81,644
$
71,736
Money market and interest-bearing checking deposits
$
27,671
8
0.12
$
26,320
12
0.18
$
23,497
57
0.97
Savings deposits
2,560
1
0.02
2,394
—
0.02
2,155
1
0.04
Customer certificates of deposit
2,495
6
0.87
2,801
8
1.21
2,627
8
1.30
Other time deposits
—
—
—
—
—
—
1,085
7
2.46
Foreign office time deposits
103
—
0.10
81
—
0.34
13
—
1.45
Total interest-bearing deposits
32,829
15
0.17
31,596
20
0.26
29,377
73
0.99
Short-term borrowings
218
—
0.25
882
1
0.25
268
2
2.33
Medium- and long-term debt
5,940
11
0.78
7,206
19
1.09
7,100
50
2.78
Total interest-bearing sources
38,987
26
0.27
39,684
40
0.41
36,745
125
1.34
Noninterest-bearing deposits
35,934
32,686
26,339
Accrued expenses and other liabilities
1,513
1,682
1,398
Shareholders' equity
7,834
7,592
7,254
Total liabilities and shareholders' equity
$
84,268
$
81,644
$
71,736
Net interest income/rate spread
$
458
2.20
$
471
2.30
$
586
2.92
Impact of net noninterest-bearing sources of funds
0.13
0.20
0.60
Net interest margin (as a percentage of average earning assets)
2.33
%
2.50
%
3.52
%
(a)Includes PPP loans with average balance of $3.8 billion and $2.6 billion, interest income of $22 million and $14 million and average yields of 2.31% and 2.21% for the three months ended September 30, 2020 and June 30, 2020, respectively.
(b)Average balances included $254 million, $278 million and $28 million of unrealized gains and losses for the three months ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively; yields calculated gross of these unrealized gains and losses.
(c)Average balances included $99 million, $111 million and $51 million of unrealized gains and losses for the three months ended September 30, 2020, June 30, 2020 and September 30, 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 JUNE 30, 2019
$
—
149.8
$
1,141
$
2,168
$
(382)
$
9,176
$
(4,780)
$
7,323
Net income
—
—
—
—
—
292
—
292
Other comprehensive income, net of tax
—
—
—
—
46
—
—
46
Cash dividends declared on common stock ($0.67 per share)
—
—
—
—
—
(97)
—
(97)
Purchase of common stock
—
(5.7)
—
—
—
—
(370)
(370)
Net issuance of common stock under employee stock plans
—
—
—
(1)
—
(2)
4
1
Share-based compensation
—
—
—
5
—
—
—
5
BALANCE AT SEPTEMBER 30, 2019
$
—
144.1
$
1,141
$
2,172
$
(336)
$
9,369
$
(5,146)
$
7,200
BALANCE AT JUNE 30, 2020
$
395
139.0
$
1,141
$
2,173
$
158
$
9,404
$
(5,469)
$
7,802
Net income
—
—
—
—
—
211
—
211
Other comprehensive loss, net of tax
—
—
—
—
(42)
—
—
(42)
Cash dividends declared on common stock ($0.68 per share)
—
—
—
—
—
(94)
—
(94)
Cash dividends declared on preferred stock
—
—
—
—
—
(8)
—
(8)
Issuance of preferred stock
(1)
—
—
—
—
—
—
(1)
Net issuance of common stock under employee stock plans
—
0.1
—
—
—
(2)
2
—
Share-based compensation
—
—
—
6
—
—
—
6
BALANCE AT SEPTEMBER 30, 2020
$
394
139.1
$
1,141
$
2,179
$
116
$
9,511
$
(5,467)
$
7,874
BALANCE AT DECEMBER 31, 2018
$
—
160.1
$
1,141
$
2,148
$
(609)
$
8,781
$
(3,954)
$
7,507
Cumulative effect of change in accounting principle
—
—
—
—
—
(14)
—
(14)
Net income
—
—
—
—
—
929
—
929
Other comprehensive income, net of tax
—
—
—
—
273
—
—
273
Cash dividends declared on common stock ($2.01 per share)
—
—
—
—
—
(302)
—
(302)
Purchase of common stock
—
(16.6)
—
—
—
—
(1,229)
(1,229)
Net issuance of common stock under employee stock plans
—
0.6
—
(13)
—
(25)
37
(1)
Share-based compensation
—
—
—
37
—
—
—
37
BALANCE AT SEPTEMBER 30, 2019
$
—
144.1
$
1,141
$
2,172
$
(336)
$
9,369
$
(5,146)
$
7,200
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
—
—
—
—
—
259
—
259
Other comprehensive income, net of tax
—
—
—
—
351
—
—
351
Cash dividends declared on common stock ($2.04 per share)
—
—
—
—
—
(284)
—
(284)
Cash dividends declared on preferred stock
—
—
—
—
—
(8)
—
(8)
Purchase of common stock
—
(3.4)
—
—
—
—
(194)
(194)
Issuance of preferred stock
394
—
—
—
—
—
—
394
Net issuance of common stock under employee stock plans
—
0.4
—
(13)
—
(7)
18
(2)
Share-based compensation
—
—
—
18
—
—
—
18
BALANCE AT SEPTEMBER 30, 2020
$
394
139.1
$
1,141
$
2,179
$
116
$
9,511
$
(5,467)
$
7,874
17
BUSINESS SEGMENT FINANCIAL RESULTS (unaudited)
Comerica Incorporated and Subsidiaries
(dollar amounts in millions)
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 June 30, 2020
Bank
Bank
Management
Finance
Other
Total
Earnings summary:
Net interest income (expense)
$
402
$
120
$
40
$
(95)
$
4
$
471
Provision for credit losses
117
5
16
—
—
138
Noninterest income
144
24
66
11
2
247
Noninterest expenses
207
155
73
1
4
440
Provision (benefit) for income taxes
47
(4)
3
(20)
1
27
Net income (loss)
$
175
$
(12)
$
14
$
(65)
$
1
$
113
Net credit-related charge-offs
$
48
$
1
$
1
$
—
$
—
$
50
Selected average balances:
Assets
$
47,392
$
3,306
$
5,191
$
14,500
$
11,255
$
81,644
Loans
45,914
2,479
5,077
—
28
53,498
Deposits
36,318
22,647
4,217
950
150
64,282
Statistical data:
Return on average assets (a)
1.49
%
(0.21
%)
1.00
%
n/m
n/m
0.55
%
Efficiency ratio (b)
37.67
107.15
69.86
n/m
n/m
61.14
Commercial
Retail
Wealth
Three Months Ended September 30, 2019
Bank
Bank
Management
Finance
Other
Total
Earnings summary:
Net interest income (expense)
$
420
$
142
$
47
$
(38)
$
15
$
586
Provision for credit losses
39
(2)
(3)
—
1
35
Noninterest income
140
31
69
12
4
256
Noninterest expenses
199
149
69
(1)
19
435
Provision (benefit) for income taxes
74
5
12
(8)
(3)
80
Net income (loss)
$
248
$
21
$
38
$
(17)
$
2
$
292
Net credit-related charge-offs (recoveries)
$
43
$
1
$
(2)
$
—
$
—
$
42
Selected average balances:
Assets
$
45,460
$
2,871
$
5,032
$
14,061
$
4,312
$
71,736
Loans
43,904
2,114
4,884
—
(15)
50,887
Deposits
28,917
20,761
3,775
2,049
214
55,716
Statistical data:
Return on average assets (a)
2.17
%
0.39
%
3.01
%
n/m
n/m
1.61
%
Efficiency ratio (b)
35.62
84.54
59.79
n/m
n/m
51.54
(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 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 June 30, 2020
Michigan
California
Texas
Markets
& Other
Total
Earnings summary:
Net interest income (expense)
$
159
$
176
$
116
$
111
$
(91)
$
471
Provision for credit losses
40
51
31
16
—
138
Noninterest income
64
36
30
104
13
247
Noninterest expenses
139
103
91
102
5
440
Provision (benefit) for income taxes
8
13
4
21
(19)
27
Net income (loss)
$
36
$
45
$
20
$
76
$
(64)
$
113
Net credit-related charge-offs
$
—
$
4
$
46
$
—
$
—
$
50
Selected average balances:
Assets
$
13,643
$
18,948
$
11,597
$
11,732
$
25,724
$
81,644
Loans
13,014
18,663
11,184
10,640
(3)
53,498
Deposits
23,460
18,463
10,209
11,050
1,100
64,282
Statistical data:
Return on average assets (a)
0.59
%
0.93
%
0.68
%
2.53
%
n/m
0.55
%
Efficiency ratio (b)
62.08
48.61
61.88
47.41
n/m
61.14
Other
Finance
Three Months Ended September 30, 2019
Michigan
California
Texas
Markets
& Other
Total
Earnings summary:
Net interest income (expense)
$
185
$
203
$
125
$
96
$
(23)
$
586
Provision for credit losses
(1)
(6)
50
(9)
1
35
Noninterest income
74
41
31
94
16
256
Noninterest expenses
139
102
86
90
18
435
Provision (benefit) for income taxes
27
37
5
22
(11)
80
Net income (loss)
$
94
$
111
$
15
$
87
$
(15)
$
292
Net credit-related charge-offs (recoveries)
$
6
$
5
$
34
$
(3)
$
—
$
42
Selected average balances:
Assets
$
13,205
$
18,595
$
11,462
$
10,100
$
18,374
$
71,736
Loans
12,554
18,261
10,805
9,282
(15)
50,887
Deposits
20,164
16,705
8,705
7,879
2,263
55,716
Statistical data:
Return on average assets (a)
1.79
%
2.37
%
0.48
%
3.45
%
n/m
1.61
%
Efficiency ratio (b)
53.30
41.70
55.57
47.08
n/m
51.54
(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.
