DALLAS, Oct. 17, 2014 /PRNewswire/ -- Comerica Incorporated (NYSE: CMA) today reported third quarter 2014 net income of $154 million, compared to $151 million for the second quarter 2014 and $147 million for the third quarter 2013. Earnings per diluted share were 82 cents for the third quarter 2014, compared to 80 cents for the second quarter 2014 and 78 cents for the third quarter 2013. Third quarter results reflected a net benefit of $5 million, after tax, or 3 cents per share, from certain actions including a $32 million gain on the early redemption of debt, a $9 million contribution to the Comerica Charitable Foundation and other charges totaling $15 million (see "Noninterest Expenses" section for further details).
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(dollar amounts in millions, except per share data) 3rd Qtr '14 2nd Qtr '14 3rd Qtr '13 --------- ----------- ----------- ----------- Net interest income (a) $414 $416 $412 Provision for credit losses 5 11 8 Noninterest income 215 220 228 Noninterest expenses 397 (b) 404 417 Provision for income taxes 73 70 68 Net income 154 151 147 Net income attributable to common shares 152 149 145 Diluted income per common share 0.82 0.80 0.78 Average diluted shares (in millions) 185 186 187 Tier 1 common capital ratio (d) 10.69% (c) 10.50% 10.72% Basel III common equity Tier 1 capital ratio (d) (e) 10.4 10.3 10.4 Tangible common equity ratio (d) 9.94 10.39 9.87 -------- ---- ----- ----
(a) Included accretion of the purchase discount on the acquired loan portfolio of $3 million, $10 million and $8 million in the third quarter 2014, second quarter 2014 and third quarter 2013, respectively. (b) Reflected a net benefit of $8 million from certain actions, including a $32 million gain on the early redemption of debt, a $9 million contribution to the Comerica Charitable Foundation and other charges totaling $15 million. See "Noninterest Expenses" section for further details. (c) September 30, 2014 ratio is estimated. (d) See Reconciliation of Non-GAAP Financial Measures. (e) Estimated ratios based on the standardized approach in the final rule, as fully phased-in, and excluding most elements of accumulated other comprehensive income (AOCI).
"The third quarter reflected broad-based average loan growth as well as significant deposit growth across virtually all business lines," said Ralph W. Babb Jr., chairman and chief executive officer. "We also had solid credit quality and expenses that continue to be well controlled.
"Average total loans were up $3 billion, or 7 percent on a year-over-year basis, and were up $434 million, or 1 percent, compared to the second quarter. The pace of loan growth declined relative to the second quarter due to the typical seasonality, such as model changeover in our dealer services business and summer slowdown, as well as moderating growth in the overall economy. It is clear that our customers are becoming stronger and more confident, however, they remain somewhat cautious and continue to build liquidity. This is reflected in the $2.9 billion, or 13 percent, year-over-year increase in average noninterest-bearing deposits and the $1.3 billion, or 5 percent, increase over the second quarter.
"With the continued low interest rate environment and rising regulatory and technology demands, we took certain actions in the third quarter intended to assist us in partially offsetting these headwinds. As a result, our third quarter expenses included charges associated with a number of projects focused on further efficiency as well as a donation to our charitable foundation.
"We are focused on the long-term and building enduring customer relationships. Our customers appreciate the value proposition we provide, with products and services that meet their needs. We continue to be well positioned for rising rates and to benefit as the economy improves."
Third Quarter 2014 Compared to Second Quarter 2014
-- Average total loans increased $434 million, or 1 percent, to $47.2 billion, reflecting broad-based increases led by Mortgage Banker Finance ($276 million), Technology and Life Sciences ($110 million) and Energy ($95 million), partially offset by decreases in National Dealer Services ($178 million) and general Middle Market ($142 million). Period-end total loans decreased $174 million, to $47.7 billion, primarily reflecting declines in National Dealer Services ($356 million), general Middle Market ($246 million) and Mortgage Banker Finance ($102 million), partially offset by increases in almost all other lines of business. -- Average total deposits increased $1.8 billion, or 3 percent, to $55.2 billion, reflecting increases in noninterest-bearing deposits of $1.3 billion and interest-bearing deposits of $515 million. Average deposits increased in almost all lines of business, led by Middle Market. Period-end deposits increased $3.4 billion, to $57.6 billion, reflecting increases in noninterest-bearing deposits of $2.7 billion and interest-bearing deposits of $695 million. -- Net interest income decreased $2 million to $414 million in the third quarter 2014, compared to $416 million in the second quarter 2014, primarily reflecting a $7 million decline in accretion of the purchase discount on the acquired loan portfolio partially offset by the benefit from an increase in loan volume. -- The provision for credit losses decreased $6 million to $5 million in the third quarter 2014, compared to $11 million in the second quarter 2014. Net charge-offs were $3 million, or 0.03 percent of average loans, in the third quarter 2014, compared to $9 million, or 0.08 percent, in the second quarter 2014. -- Noninterest income decreased $5 million to $215 million in the third quarter 2014, reflecting a $3 million decrease in customer-driven fee income and a $2 million decrease in noncustomer-driven income. -- Noninterest expenses decreased $7 million to $397 million in the third quarter 2014, primarily reflecting a net benefit of $8 million as a result of certain actions taken in the current quarter, which included a $32 million gain on the early redemption of debt, a $9 million contribution to the Comerica Charitable Foundation and other charges totaling $15 million. Expenses were stable excluding the impact of these actions. -- Capital remained solid at September 30, 2014, as evidenced by an estimated Tier 1 common capital ratio of 10.69 percent and a tangible common equity ratio of 9.94 percent. -- Comerica repurchased approximately 1.2 million shares of common stock during third quarter 2014 under the repurchase program. Together with dividends of $0.20 per share, $95 million was returned to shareholders.
Third Quarter 2014 Compared to Third Quarter 2013
-- Average total loans increased $3.1 billion, or 7 percent, reflecting increases in almost all lines of business. -- Average total deposits increased $3.3 billion, or 6 percent, driven by an increase in noninterest-bearing deposits of $2.9 billion, or 13 percent. -- Net income increased $7 million, or 4 percent, primarily reflecting decreases in noninterest expenses, reflecting lower pension expense, and the provision for credit losses, partially offset by a decrease in noninterest income.
Net Interest Income ------------------- (dollar amounts in millions) 3rd Qtr '14 2nd Qtr '14 3rd Qtr '13 --------------- ----------- ----------- ----------- Net interest income $414 $416 $412 Net interest margin 2.67% 2.78% 2.79% Selected average balances: Total earning assets $61,672 $60,148 $58,892 Total loans 47,159 46,725 44,094 Total investment securities 9,388 9,364 9,380 Federal Reserve Bank deposits 4,877 3,801 5,156 Total deposits 55,163 53,384 51,865 Total noninterest- bearing deposits 25,275 24,011 22,379 ----------------- ------ ------ ------
-- Net interest income decreased $2 million to $414 million in the third quarter 2014, compared to the second quarter 2014. -- Interest on loans decreased $4 million, reflecting a decrease in accretion of the purchase discount on the acquired loan portfolio (-$7 million), the impact of a negative residual value adjustment to assets in the leasing portfolio (-$2 million), a decrease in interest recognized on nonaccrual loans (-$1 million), the benefit from an increase in loan balances ($4 million) more than offsetting other loan portfolio dynamics (-$2 million), and the benefit from one additional day in the third quarter ($4 million). -- Interest on investment securities decreased $1 million, primarily reflecting the second quarter 2014 benefit from a retrospective adjustment to premium amortization on mortgage-backed investment securities related to the slowing of expected future prepayments. -- Interest on short-term investments increased $1 million compared to the second quarter 2014, due to an increase in Federal Reserve Bank deposits. -- Interest expense on medium- and long-term debt decreased $2 million, primarily reflecting the net impact of maturities, redemptions and issuances during the second and third quarters. -- The net interest margin of 2.67 percent decreased 11 basis points compared to the second quarter 2014, primarily reflecting a decline in accretion of the purchase discount on the acquired loan portfolio (-5 basis points), an increase in Federal Reserve Bank deposits (-4 basis points), other loan portfolio dynamics (-1 basis point), and the impact of the negative leasing residual value adjustment (-1 basis point). -- Average earning assets increased $1.5 billion, to $61.7 billion in the third quarter 2014, compared to the second quarter 2014, primarily as a result of increases of $1.1 billion in interest-bearing deposits with banks and $434 million in average loans.
Noninterest Income
Noninterest income decreased $5 million to $215 million for the third quarter 2014, compared to $220 million for the second quarter 2014, reflecting decreases in customer-driven fee income of $3 million and noncustomer-driven income of $2 million. The decrease in customer-driven fee income primarily reflected decreases in foreign exchange income and investment banking fees, partially offset by an increase in commercial lending fees.
Noninterest Expenses
Noninterest expenses decreased $7 million to $397 million for the third quarter 2014, compared to $404 million for the second quarter 2014, primarily as a result of a net $8 million benefit from certain actions taken in the third quarter 2014. Excluding these actions, the $1 million increase in noninterest expenses primarily reflected the impact of one additional day in salaries and benefits expense and small increases in net occupancy expense and several other categories, partially offset by lower litigation-related expenses.
The actions taken in the third quarter 2014 included:
-- Gain on early redemption of debt of $32 million. -- Contribution to the Comerica Charitable Foundation of $9 million, included in other noninterest expenses. -- Other charges totaling $15 million associated with real estate optimization and several other efficiency-related actions, which included $6 million in salaries and benefits expense (severance-related) and $5 million in occupancy expense.
Credit Quality -------------- (dollar amounts in millions) 3rd Qtr '14 2nd Qtr '14 3rd Qtr '13 --------------------------- ----------- ----------- ----------- Net credit-related charge-offs $3 $9 $19 Net credit-related charge-offs/ Average total loans 0.03% 0.08% 0.18% Provision for credit losses $5 $11 $8 Nonperforming loans (a) 346 347 459 Nonperforming assets (NPAs) (a) 357 360 478 NPAs/Total loans and foreclosed property 0.75% 0.75% 1.08% Loans past due 90 days or more and still accruing $13 $7 $25 Allowance for loan losses 592 591 604 Allowance for credit losses on lending-related commitments (b) 43 42 34 --- --- --- Total allowance for credit losses 635 633 638 Allowance for loan losses/Period- end total loans 1.24% 1.23% 1.37% Allowance for loan losses/ Nonperforming loans 171 170 131 -------------------------- --- --- ---
(a) Excludes loans acquired with credit impairment. (b) Included in "Accrued expenses and other liabilities" on the consolidated balance sheets.
-- Net charge-offs decreased $6 million to $3 million, or 0.03 percent of average loans, in the third quarter 2014, compared to $9 million, or 0.08 percent, in the second quarter 2014. -- Criticized loans decreased $94 million to $2.1 billion at September 30, 2014, compared to $2.2 billion at June 30, 2014.
Balance Sheet and Capital Management
Total assets and common shareholders' equity were $68.9 billion and $7.4 billion, respectively, at September 30, 2014, compared to $65.3 billion and $7.4 billion, respectively, at June 30, 2014.
There were approximately 180 million common shares outstanding at September 30, 2014. Share repurchases of $59 million (1.2 million shares) under the repurchase program, combined with dividends, returned 62 percent of third quarter 2014 net income to shareholders.
In the third quarter 2014, Comerica early redeemed $150 million of 8.375% subordinated notes, at par, and issued $250 million of 3.80% subordinated notes due in July 2026. The early redemption resulted in a $32 million gain in the third quarter 2014.
Comerica's tangible common equity ratio was 9.94 percent at September 30, 2014, a decrease of 45 basis points from June 30, 2014. The estimated Tier 1 common capital ratio increased 19 basis points, to 10.69 percent at September 30, 2014, from June 30, 2014. The estimated common equity Tier 1 ratio under fully phased-in Basel III capital rules and excluding most elements of AOCI was 10.4 percent at September 30, 2014.
Full-Year and Fourth Quarter 2014 Outlook
Management expectations for full-year 2014 compared to full-year 2013 have not changed from the previously provided outlook, with the exception of the following:
-- Average loans - previous outlook was for growth in average loans of 4 percent to 6 percent and now growth is expected to be in the middle of the range, or about 5 percent. -- Net interest income - previous outlook for purchase accounting accretion was $25 million to $30 million and now accretion is expected to be at the upper end of the range, or about $30 million.
For fourth quarter 2014 compared to third quarter 2014, management expects the following, assuming a continuation of the current economic and low-rate environment:
-- Slight growth in average loans, reflecting a seasonal decline in Mortgage Banker Finance, a seasonal increase in National Dealer Services, and slight growth in our remaining business lines similar to the third quarter, with continued focus on pricing and structure discipline. -- Slight growth in net interest income, reflecting fourth quarter purchase accounting accretion of about $5 million. Loan growth approximately offsets continued pressure from low rate environment. -- Provision for credit losses to remain low, similar to the provisions in the first half of 2014. -- Noninterest income relatively stable, with stable customer-driven income and lower noncustomer-driven income. -- Noninterest expenses higher, reflecting higher technology and consulting expenses, a seasonal increase in benefits expense and certain fourth quarter actions expected to result in additional charges of about $5 million to $7 million. Third quarter included a net benefit of $8 million from actions taken.
Business Segments
Comerica's operations are strategically aligned into three major business segments: the Business Bank, the Retail Bank and Wealth Management. The Finance Division is also reported as a segment. The financial results below are based on the internal business unit structure of the Corporation and methodologies in effect at September 30, 2014 and are presented on a fully taxable equivalent (FTE) basis. The accompanying narrative addresses third quarter 2014 results compared to second quarter 2014.
In the second quarter 2014, Comerica enhanced the approach used to determine the standard reserve factors used in estimating the allowance for credit losses, which had the effect of capturing certain elements in the quantitative component of the reserve that had formerly been included in the qualitative assessment. The impact of the change was largely neutral to the total allowance for loan losses at June 30, 2014. However, because standard reserves are allocated to the segments at the loan level, while qualitative reserves are allocated at the portfolio level, the impact of the methodology change on the allowance of each segment reflected the characteristics of the individual loans within each segment's portfolio, causing segment reserves to increase or decrease accordingly.
The following table presents net income (loss) by business segment.
(dollar amounts in millions) 3rd Qtr '14 2nd Qtr '14 3rd Qtr '13 --------------- ----------- ----------- ----------- Business Bank $210 91% $195 82% $209 91% Retail Bank 7 3 15 6 6 3 Wealth Management 13 6 28 12 15 6 ----------------- --- --- --- --- --- --- 230 100% 238 100% 230 100% Finance (73) (91) (87) Other (a) (3) 4 4 -------- --- --- --- Total $154 $151 $147 ----- ---- ---- ----
(a) Includes items not directly associated with the three major business segments or the Finance Division.
Business Bank (dollar amounts in 3rd Qtr 2nd Qtr 3rd Qtr millions) '14 '14 '13 ------------------ -------- -------- -------- Net interest income (FTE) $377 $376 $368 Provision for credit losses (4) 32 (1) Noninterest income 94 95 103 Noninterest expenses 152 143 153 Net income 210 195 209 Net credit-related charge-offs (recoveries) (2) 7 9 Selected average balances: Assets 37,898 37,467 35,295 Loans 36,894 36,529 34,178 Deposits 28,841 27,382 26,284 -------- ------ ------ ------
-- Average loans increased $365 million, reflecting increases in most lines of business, led by Mortgage Banker Finance, Technology and Life Sciences, Commercial Real Estate and Corporate Banking, partially offset by decreases in National Dealer Services and general Middle Market. -- Average deposits increased $1.5 billion, primarily reflecting increases in noninterest-bearing deposits in almost all lines of business. -- Net interest income increased $1 million, primarily due to the benefit from an increase in average loan balances and one additional day in the quarter, as well as an increase in net funds transfer pricing (FTP) credits, largely due to the increase in average deposits, partially offset by a decrease in purchase accounting accretion, the impact of a negative leasing residual value adjustment and lower loan yields. -- The provision for credit losses decreased $36 million, primarily due to impact on the second quarter provision of enhancements made to the approach utilized to determine the allowance for credit losses, as well as improvements in credit quality. -- Noninterest income decreased $1 million, primarily due to decreases in foreign exchange income and warrant income, partially offset by an increase in commercial lending fees. -- Noninterest expenses increased $9 million, primarily due to an increase in allocated corporate overhead expenses related to certain actions taken in the third quarter 2014 including a contribution to the Comerica Charitable Foundation, charges associated with real estate optimization and several other efficiency-related actions.
Retail Bank (dollar amounts in 3rd Qtr 2nd Qtr 3rd Qtr millions) '14 '14 '13 ------------------ -------- -------- -------- Net interest income (FTE) $150 $149 $151 Provision for credit losses - (4) 10 Noninterest income 41 41 45 Noninterest expenses 181 171 177 Net income 7 15 6 Net credit-related charge-offs - 4 7 Selected average balances: Assets 6,117 6,051 5,967 Loans 5,452 5,385 5,285 Deposits 21,785 21,648 21,257 -------- ------ ------ ------
-- Average loans increased $67 million, reflecting increases in both Small Business and Retail Banking. -- Average deposits increased $137 million, primarily reflecting an increase in noninterest-bearing deposits, partially offset by a decline in Retail Banking certificates of deposit. -- Net interest income increased $1 million, primarily due to the benefit provided by an increase in average loan balances and the impact of one additional day in the quarter. -- The provision for credit losses increased $4 million, primarily due to the impact on the second quarter 2014 provision of enhancements to the approach utilized to determine the allowance for credit losses. -- Noninterest expenses increased $10 million, primarily due to an increase in allocated corporate overhead expenses, for the same reasons as described above in the Business Bank section.
Wealth Management (dollar amounts in millions) 3rd Qtr 2nd Qtr 3rd Qtr '14 '14 '13 --------------------------- -------- -------- -------- Net interest income (FTE) $47 $46 $45 Provision for credit losses 7 (9) 1 Noninterest income 63 67 61 Noninterest expenses 82 79 81 Net income 13 28 15 Net credit-related charge- offs (recoveries) 5 (2) 3 Selected average balances: Assets 5,007 4,996 4,789 Loans 4,813 4,811 4,631 Deposits 4,155 3,827 3,782 -------- ----- ----- -----
-- Average deposits increased $328 million, primarily reflecting an increase in interest-bearing balances. -- Net interest income increased $1 million due to an increase in net FTP credits, largely due to the increase in average deposits. -- The provision for loan losses increased $16 million, primarily due to the impact on the second quarter 2014 provision of enhancements to the approach utilized to determine the allowance for credit losses. -- Noninterest income decreased $4 million, primarily reflecting a decrease in investment banking fees and small decreases in several other categories. -- Noninterest expenses increased $3 million, primarily reflecting an increase in allocated corporate overhead related to certain actions taken in the third quarter 2014 including a contribution to the Comerica Charitable Foundation, charges associated with real estate optimization and several other efficiency-related actions, as well as increases in salaries and benefits expense and occupancy expenses, primarily the result of other efficiency-related actions in the third quarter, partially offset by a decrease in litigation-related expenses.
Geographic Market Segments
Comerica also provides market segment results for three primary geographic markets: Michigan, California and Texas. In addition to the three primary geographic markets, Other Markets is also reported as a market segment. Other Markets includes Florida, Arizona, the International Finance division and businesses that have a significant presence outside of the three primary geographic markets. The tables below present the geographic market results based on the methodologies in effect at September 30, 2014 and are presented on a fully taxable equivalent (FTE) basis.
The following table presents net income (loss) by market segment.
(dollar amounts in millions) 3rd Qtr '14 2nd Qtr '14 3rd Qtr '13 ---------- ----------- ----------- ----------- Michigan $68 29% $80 34% $75 33% California 63 28 63 26 69 30 Texas 40 17 36 15 35 15 Other Markets 59 26 59 25 51 22 -------- --- --- --- --- --- --- 230 100% 238 100% 230 100% Finance & Other (a) (76) (87) (83) ---------- --- --- --- Total $154 $151 $147 ----- ---- ---- ----
(a) Includes items not directly associated with the geographic markets.
-- Average loans increased $181 million and $70 million in Texas and California, respectively, and decreased $234 million in Michigan. The increase in Texas was led by Energy and Private Banking. California increases were led by Commercial Real Estate and general Middle Market, partially offset by decreases in National Dealer Services and Technology and Life Sciences. The decrease in Michigan primarily reflected declines in general Middle Market and National Dealer Services. -- Average deposits increased $980 million and $520 million in California and Michigan, respectively, and decreased $91 million in Texas. The increase in California reflected increases in most lines of business and included increases of $432 million and $548 million in noninterest-bearing and interest-bearing deposits, respectively. The increase in Michigan was primarily in general Middle Market noninterest-bearing deposits. -- Net interest income increased $6 million in California and decreased $7 million in Texas and $3 million in Michigan. The increase in California primarily reflected an increase in FTP credits, largely due to the increase in average deposits, and the benefit from an increase in average loans. The decrease in Texas was primarily the result of a decrease in the accretion of the purchase discount on the acquired loan portfolio. The decrease in Michigan primarily reflected lower loan yields, in part due to a negative leasing residual adjustment, and the impact of a decrease in average loans. All three markets benefited from the impact of one additional day in the third quarter. -- The provision for credit losses decreased $19 million in Texas, decreased $1 million in Michigan and remained flat in California. The decrease in Texas primarily reflected the impact on the second quarter provision of increased reserves on two credits and positive credit quality migration. -- Noninterest income decreased $7 million in Michigan and $2 million in California, and increased $1 million in Texas. The decrease in Michigan primarily reflected a decrease in investment banking fees and small decreases in several other noninterest income categories. In California, the decrease was primarily the result of decreases in foreign exchange and warrant income. -- Noninterest expenses increased $7 million, $6 million and $2 million in Michigan, Texas and California, respectively, primarily due to increased allocated corporate overhead expenses, for the same reasons as previously described in the Business Bank section. In California, decreases in litigation-related expenses and operational losses partially offset the increase.
Michigan Market (dollar amounts in 3rd Qtr 2nd Qtr 3rd Qtr millions) '14 '14 '13 ------------------ -------- -------- -------- Net interest income (FTE) $179 $182 $186 Provision for credit losses (8) (9) (11) Noninterest income 87 94 88 Noninterest expenses 166 159 167 Net income 68 80 75 Net credit-related charge-offs (recoveries) 3 10 1 Selected average balances: Assets 13,724 13,851 13,744 Loans 13,248 13,482 13,276 Deposits 21,214 20,694 20,465 -------- ------ ------ ------
California Market (dollar amounts in millions) 3rd Qtr 2nd Qtr 3rd Qtr '14 '14 '13 --------------------------- -------- -------- -------- Net interest income (FTE) $182 $176 $171 Provision for credit losses 14 14 - Noninterest income 37 39 42 Noninterest expenses 103 101 101 Net income 63 63 69 Net credit-related charge- offs (recoveries) 6 5 8 Selected average balances: Assets 15,768 15,721 14,250 Loans 15,509 15,439 14,002 Deposits 16,350 15,370 14,567 -------- ------ ------ ------
Texas Market (dollar amounts in millions) 3rd Qtr 2nd Qtr 3rd Qtr '14 '14 '13 --------------------------- -------- -------- -------- Net interest income (FTE) $130 $137 $129 Provision for credit losses 3 22 17 Noninterest income 32 31 35 Noninterest expenses 95 89 92 Net income 40 36 35 Net credit-related charge- offs - 2 4 Selected average balances: Assets 11,835 11,661 10,642 Loans 11,147 10,966 9,942 Deposits 10,633 10,724 10,298 -------- ------ ------ ------
Conference Call and Webcast
Comerica will host a conference call to review third quarter 2014 financial results at 7 a.m. CT Friday, October 17, 2014. Interested parties may access the conference call by calling (877) 523-5249 or (210) 591-1147 (event ID No. 3671820). The call and supplemental financial information can also be accessed via Comerica's "Investor Relations" page at www.comerica.com. A replay of the Webcast can be accessed via Comerica's "Investor Relations" page at www.comerica.com.
Comerica Incorporated is a financial services company headquartered in Dallas, Texas, and strategically aligned by three major business segments: The Business Bank, The Retail Bank and Wealth Management. Comerica focuses on relationships and helping people and businesses be successful. In addition to Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico.
This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding Comerica's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as a reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
Forward-looking Statements
Any statements in this news release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as "anticipates," "believes," "contemplates," "feels," "expects," "estimates," "seeks," "strives," "plans," "intends," "outlook," "forecast," "position," "target," "mission," "assume," "achievable," "potential," "strategy," "goal," "aspiration," "opportunity," "initiative," "outcome," "continue," "remain," "maintain," "on course," "trend," "objective," "looks forward," "projects," "models" and variations of such words and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "might," "can," "may" or similar expressions, as they relate to Comerica or its management, are intended to identify forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of Comerica's management based on information known to Comerica's management as of the date of this news release and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of Comerica's management for future or past operations, products or services, and forecasts of Comerica's revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries, estimates of credit trends and global stability. Such statements reflect the view of Comerica's management as of this date with respect to future events and are subject to risks and uncertainties. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, Comerica's actual results could differ materially from those discussed. Factors that could cause or contribute to such differences are changes in general economic, political or industry conditions; changes in monetary and fiscal policies, including changes in interest rates; volatility and disruptions in global capital and credit markets; changes in Comerica's credit rating; the interdependence of financial service companies; changes in regulation or oversight; unfavorable developments concerning credit quality; the effects of more stringent capital or liquidity requirements; declines or other changes in the businesses or industries of Comerica's customers; operational difficulties, failure of technology infrastructure or information security incidents; the implementation of Comerica's strategies and business initiatives; Comerica's ability to utilize technology to efficiently and effectively develop, market and deliver new products and services; changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing; competitive product and pricing pressures among financial institutions within Comerica's markets; changes in customer behavior; any future strategic acquisitions or divestitures; management's ability to maintain and expand customer relationships; management's ability to retain key officers and employees; the impact of legal and regulatory proceedings or determinations; the effectiveness of methods of reducing risk exposures; the effects of terrorist activities and other hostilities; the effects of catastrophic events including, but not limited to, hurricanes, tornadoes, earthquakes, fires and floods; changes in accounting standards and the critical nature of Comerica's accounting policies. Comerica cautions that the foregoing list of factors is not exclusive. For discussion of factors that may cause actual results to differ from expectations, please refer to our filings with the Securities and Exchange Commission. In particular, please refer to "Item 1A. Risk Factors" beginning on page 12 of Comerica's Annual Report on Form 10-K for the year ended December 31, 2013. 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.
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) 2014 2014 2013 2014 2013 -------------------- ---- ---- ---- ---- ---- PER COMMON SHARE AND COMMON STOCK DATA Diluted net income $0.82 $0.80 $0.78 $2.35 $2.23 Cash dividends declared 0.20 0.20 0.17 0.59 0.51 Average diluted shares (in thousands) 185,401 186,108 187,104 186,064 187,180 --------------- ------- ------- ------- ------- ------- KEY RATIOS Return on average common shareholders' equity 8.29% 8.27% 8.50% 8.08% 8.14% Return on average assets 0.93 0.93 0.92 0.91 0.89 Tier 1 common capital ratio (a) (b) 10.69 10.50 10.72 Tier 1 risk-based capital ratio (b) 10.69 10.50 10.72 Total risk-based capital ratio (b) 12.95 12.52 13.42 Leverage ratio (b) 10.80 10.93 10.88 Tangible common equity ratio (a) 9.94 10.39 9.87 ----------------- ---- ----- ---- AVERAGE BALANCES Commercial loans $30,188 $29,890 $27,759 $29,487 $28,069 Real estate construction loans 1,973 1,913 1,522 1,905 1,430 Commercial mortgage loans 8,698 8,749 8,943 8,739 9,177 Lease financing 823 850 839 840 850 International loans 1,417 1,328 1,252 1,349 1,265 Residential mortgage loans 1,792 1,773 1,642 1,763 1,600 Consumer loans 2,268 2,222 2,137 2,244 2,142 ----- ----- ----- ----- ----- Total loans 47,159 46,725 44,094 46,327 44,533 Earning assets 61,672 60,148 58,892 60,585 58,810 Total assets 66,401 64,879 63,657 65,336 63,707 Noninterest-bearing deposits 25,275 24,011 22,379 24,182 21,991 Interest-bearing deposits 29,888 29,373 29,486 29,599 29,364 ------ ------ ------ ------ ------ Total deposits 55,163 53,384 51,865 53,781 51,355 Common shareholders' equity 7,411 7,331 6,920 7,324 6,950 -------------------- ----- ----- ----- ----- ----- NET INTEREST INCOME (fully taxable equivalent basis) Net interest income $415 $417 $413 $1,243 $1,244 Net interest margin 2.67% 2.78% 2.79% 2.74% 2.83% ------------------- ---- ---- ---- ---- ---- CREDIT QUALITY Total nonperforming assets (c) $357 $360 $478 Loans past due 90 days or more and still accruing 13 7 25 Net loan charge-offs 3 9 19 $24 $60 Allowance for loan losses 592 591 604 Allowance for credit losses on lending- related commitments 43 42 34 --- --- --- Total allowance for credit losses 635 633 638 Allowance for loan losses as a percentage of total loans 1.24% 1.23% 1.37% Net loan charge-offs as a percentage of average total loans (d) 0.03 0.08 0.18 0.07% 0.18% Nonperforming assets as a percentage of total loans and foreclosed property (c) 0.75 0.75 1.08 Allowance for loan losses as a percentage of total nonperforming loans 171 170 131 -------------------- --- --- ---
See Reconciliation of Non-GAAP Financial (a) Measures. (b) September 30, 2014 ratios are estimated. (c) Excludes loans acquired with credit-impairment. (d) Lending-related commitment charge-offs were zero in all periods presented.
CONSOLIDATED BALANCE SHEETS Comerica Incorporated and Subsidiaries September 30, June 30, December 31, September 30, (in millions, except share data) 2014 2014 2013 2013 ------------------------------- ---- ---- ---- ---- (unaudited) (unaudited) (unaudited) ASSETS Cash and due from banks $1,039 $1,226 $1,140 $1,384 Interest-bearing deposits with banks 6,748 2,668 5,311 5,704 Other short-term investments 112 109 112 106 Investment securities available-for- sale 9,468 9,534 9,307 9,488 Commercial loans 30,759 30,986 28,815 27,897 Real estate construction loans 1,992 1,939 1,762 1,552 Commercial mortgage loans 8,603 8,747 8,787 8,785 Lease financing 805 822 845 829 International loans 1,429 1,352 1,327 1,286 Residential mortgage loans 1,797 1,775 1,697 1,650 Consumer loans 2,323 2,261 2,237 2,152 -------------- ----- ----- ----- ----- Total loans 47,708 47,882 45,470 44,151 Less allowance for loan losses (592) (591) (598) (604) ------------------------------ ---- ---- ---- ---- Net loans 47,116 47,291 44,872 43,547 Premises and equipment 524 562 594 604 Accrued income and other assets 3,880 3,935 3,888 3,834 ------------------------------- ----- ----- ----- ----- Total assets $68,887 $65,325 $65,224 $64,667 ------------ ------- ------- ------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest-bearing deposits $27,490 $24,774 $23,875 $23,896 Money market and interest-bearing checking deposits 23,523 22,555 22,332 21,697 Savings deposits 1,753 1,731 1,673 1,645 Customer certificates of deposit 4,698 4,962 5,063 5,180 Foreign office time deposits 117 148 349 491 ---------------------------- --- --- --- --- Total interest-bearing deposits 30,091 29,396 29,417 29,013 ------------------------------- ------ ------ ------ ------ Total deposits 57,581 54,170 53,292 52,909 Short-term borrowings 202 176 253 226 Accrued expenses and other liabilities 1,002 990 986 1,001 Medium- and long-term debt 2,669 2,620 3,543 3,565 -------------------------- ----- ----- ----- ----- Total liabilities 61,454 57,956 58,074 57,701 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 2,183 2,175 2,179 2,171 Accumulated other comprehensive loss (317) (304) (391) (541) Retained earnings 6,631 6,520 6,318 6,236 Less cost of common stock in treasury -47,992,721 shares at 9/30/14; 47,194,492 shares at 6/30/14; 45,860,786 shares at 12/31/13 and 44,483,659 shares at 9/30/13 (2,205) (2,163) (2,097) (2,041) ------------------------------------- ------ ------ ------ ------ Total shareholders' equity 7,433 7,369 7,150 6,966 -------------------------- ----- ----- ----- ----- Total liabilities and shareholders' equity $68,887 $65,325 $65,224 $64,667 ----------------------------------- ------- ------- ------- -------
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) 2014 2013 2014 2013 -------------------- ---- ---- ---- ---- INTEREST INCOME Interest and fees on loans $381 $381 $1,142 $1,159 Interest on investment securities 52 54 160 159 Interest on short- term investments 3 4 9 10 ------------------ --- --- --- --- Total interest income 436 439 1,311 1,328 INTEREST EXPENSE Interest on deposits 11 13 33 43 Interest on medium- and long-term debt 11 14 38 43 ------------------- --- --- --- --- Total interest expense 22 27 71 86 ---------------------- --- --- --- --- Net interest income 414 412 1,240 1,242 Provision for credit losses 5 8 25 37 -------------------- --- --- --- --- Net interest income after provision for credit losses 409 404 1,215 1,205 NONINTEREST INCOME Service charges on deposit accounts 54 53 162 161 Fiduciary income 44 41 133 128 Commercial lending fees 26 28 69 71 Card fees 20 20 59 55 Letter of credit fees 14 17 43 49 Bank-owned life insurance 11 12 31 31 Foreign exchange income 9 9 30 27 Brokerage fees 4 4 13 14 Net securities (losses) gains (1) 1 - (1) Other noninterest income 34 43 103 128 ----------------- --- --- --- --- Total noninterest income 215 228 643 663 NONINTEREST EXPENSES Salaries and benefits expense 248 255 735 751 Net occupancy expense 46 41 125 119 Equipment expense 14 15 43 45 Outside processing fee expense 31 31 89 89 Software expense 25 22 72 66 Litigation-related expense (2) (4) 4 - FDIC insurance expense 9 9 25 26 Advertising expense 5 6 16 18 Gain on debt redemption (32) - (32) (1) Other noninterest expenses 53 42 130 136 ----------------- --- --- --- --- Total noninterest expenses 397 417 1,207 1,249 ----------------- --- --- ----- ----- Income before income taxes 227 215 651 619 Provision for income taxes 73 68 207 195 -------------------- --- --- --- --- NET INCOME 154 147 444 424 Less income allocated to participating securities 2 2 6 6 --------------------- --- --- --- --- Net income attributable to common shares $152 $145 $438 $418 ---------------- ---- ---- ---- ---- Earnings per common share: Basic $0.85 $0.80 $2.44 $2.28 Diluted 0.82 0.78 2.35 2.23 Comprehensive income 141 144 518 296 Cash dividends declared on common stock 36 31 107 95 Cash dividends declared per common share 0.20 0.17 0.59 0.51 -------------------- ---- ---- ---- ----
CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited) Comerica Incorporated and Subsidiaries Third Second First Fourth Third Third Quarter 2014 Compared To: Quarter Quarter Quarter Quarter Quarter Second Quarter 2014 Third Quarter 2013 (in millions, except per share data) 2014 2014 2014 2013 2013 Amount Percent Amount Percent -------------------- ---- ---- ---- ---- ---- ------ ------- ------ ------- INTEREST INCOME Interest and fees on loans $381 $385 $376 $397 $381 $(4) (1)% $ - - % Interest on investment securities 52 53 55 55 54 (1) (2) (2) (5) Interest on short- term investments 3 2 4 4 4 1 26 (1) (10) ------------------ --- --- --- --- --- --- --- --- --- Total interest income 436 440 435 456 439 (4) (1) (3) (1) INTEREST EXPENSE Interest on deposits 11 11 11 12 13 - - (2) (15) Interest on medium- and long-term debt 11 13 14 14 14 (2) (12) (3) (16) ------------------- --- --- --- --- --- --- --- --- --- Total interest expense 22 24 25 26 27 (2) (5) (5) (16) ---------------------- --- --- --- --- --- --- --- --- --- Net interest income 414 416 410 430 412 (2) (1) 2 - Provision for credit losses 5 11 9 9 8 (6) (58) (3) (38) -------------------- --- --- --- --- --- --- --- --- --- Net interest income after provision 409 405 401 421 404 4 1 5 1 for credit losses NONINTEREST INCOME Service charges on deposit accounts 54 54 54 53 53 - - 1 1 Fiduciary income 44 45 44 43 41 (1) (2) 3 6 Commercial lending fees 26 23 20 28 28 3 11 (2) (7) Card fees 20 19 20 19 20 1 7 - - Letter of credit fees 14 15 14 15 17 (1) (2) (3) (15) Bank-owned life insurance 11 11 9 9 12 - - (1) (15) Foreign exchange income 9 12 9 9 9 (3) (23) - - Brokerage fees 4 4 5 4 4 - - - - Net securities (losses) gains (1) - 1 - 1 (1) N/M (2) N/M Other noninterest income 34 37 32 39 43 (3) (9) (9) (22) ----------------- --- --- --- --- --- --- --- --- --- Total noninterest income 215 220 208 219 228 (5) (2) (13) (6) NONINTEREST EXPENSES Salaries and benefits expense 248 240 247 258 255 8 3 (7) (3) Net occupancy expense 46 39 40 41 41 7 17 5 14 Equipment expense 14 15 14 15 15 (1) (2) (1) (6) Outside processing fee expense 31 30 28 30 31 1 2 - - Software expense 25 25 22 24 22 - - 3 14 Litigation-related expense (2) 3 3 52 (4) (5) N/M 2 64 FDIC insurance expense 9 8 8 7 9 1 10 - - Advertising expense 5 5 6 3 6 - - (1) (10) Gain on debt redemption (32) - - - - (32) N/M (32) N/M Other noninterest expenses 53 39 38 43 42 14 34 11 24 ----------------- --- --- --- --- --- --- --- --- --- Total noninterest expenses 397 404 406 473 417 (7) (2) (20) (5) ----------------- --- --- --- --- --- --- --- --- --- Income before income taxes 227 221 203 167 215 6 2 12 5 Provision for income taxes 73 70 64 50 68 3 4 5 7 -------------------- --- --- --- --- --- --- --- --- --- NET INCOME 154 151 139 117 147 3 1 7 4 Less income allocated to participating securities 2 2 2 2 2 - - - - --------------------- --- --- --- --- --- --- --- --- --- Net income attributable to common shares $152 $149 $137 $115 $145 $3 1% $7 5% ---------------- ---- ---- ---- ---- ---- --- --- --- --- Earnings per common share: Basic $0.85 $0.83 $0.76 $0.64 $0.80 $0.02 2% $0.05 6% Diluted 0.82 0.80 0.73 0.62 0.78 0.02 2 0.04 5 Comprehensive income 141 172 205 267 144 (31) (18) (3) (2) Cash dividends declared on common stock 36 36 35 31 31 - - 5 16 Cash dividends declared per common share 0.20 0.20 0.19 0.17 0.17 - - 0.03 18 -------------------- ---- ---- ---- ---- ---- --- --- ---- ---
N/M - Not Meaningful
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES (unaudited) Comerica Incorporated and Subsidiaries 2014 2013 ---- ---- (in millions) 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr ------------ ------- ------- ------- ------- ------- Balance at beginning of period $591 $594 $598 $604 $613 Loan charge-offs: Commercial 13 19 19 31 20 Real estate construction - - - - 1 Commercial mortgage 7 5 8 5 9 Residential mortgage 1 - - 1 1 Consumer 3 4 3 4 8 -------- --- --- --- --- --- Total loan charge-offs 24 28 30 41 39 Recoveries on loans previously charged-off: Commercial 6 11 11 17 8 Real estate construction 1 1 - 3 2 Commercial mortgage 12 3 3 5 7 Lease financing - - 2 - 1 Residential mortgage 1 3 - 1 1 Consumer 1 1 2 2 1 -------- --- --- --- --- --- Total recoveries 21 19 18 28 20 ---------------- --- --- --- --- --- Net loan charge-offs 3 9 12 13 19 Provision for loan losses 4 6 8 7 10 ------------------------- --- --- --- --- --- Balance at end of period $592 $591 $594 $598 $604 ------------------------ ---- ---- ---- ---- ---- Allowance for loan losses as a percentage of total loans 1.24% 1.23% 1.28% 1.32% 1.37% Net loan charge-offs as a percentage of average total loans 0.03 0.08 0.10 0.12 0.18 ------------------------ ---- ---- ---- ---- ----
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LENDING-RELATED COMMITMENTS (unaudited) Comerica Incorporated and Subsidiaries 2014 2013 ---- ---- (in millions) 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr ------------ ------- ------- ------- ------- ------- Balance at beginning of period $42 $37 $36 $34 $36 Add: Provision for credit losses on lending-related commitments 1 5 1 2 (2) ---------------- --- --- --- --- --- Balance at end of period $43 $42 $37 $36 $34 ----------------- --- --- --- --- --- Unfunded lending- related commitments sold $9 $ - $ - $1 $2 ----------------- --- --- --- --- --- --- ---
NONPERFORMING ASSETS (unaudited) Comerica Incorporated and Subsidiaries 2014 2013 ---- ---- (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 $93 $72 $54 $81 $107 Real estate construction 18 19 19 21 25 Commercial mortgage 144 156 162 156 206 International - - - 4 - Total nonaccrual business loans 255 247 235 262 338 Retail loans: Residential mortgage 42 45 48 53 63 Consumer: Home equity 31 32 32 33 34 Other consumer 1 2 2 2 2 -------------- --- --- --- --- --- Total consumer 32 34 34 35 36 -------------- --- --- --- --- --- Total nonaccrual retail loans 74 79 82 88 99 ----------------------- --- --- --- --- --- Total nonaccrual loans 329 326 317 350 437 Reduced-rate loans 17 21 21 24 22 ------------------ --- --- --- --- --- Total nonperforming loans (a) 346 347 338 374 459 Foreclosed property 11 13 14 9 19 ------------------- --- --- --- --- --- Total nonperforming assets (a) $357 $360 $352 $383 $478 -------------------------- ---- ---- ---- ---- ---- Nonperforming loans as a percentage of total loans 0.73% 0.73% 0.73% 0.82% 1.04% Nonperforming assets as a percentage of total loans 0.75 0.75 0.76 0.84 1.08 and foreclosed property Allowance for loan losses as a percentage of total 171 170 176 160 131 nonperforming loans Loans past due 90 days or more and still accruing $13 $7 $10 $16 $25 ------------------------- --- --- --- --- --- ANALYSIS OF NONACCRUAL LOANS Nonaccrual loans at beginning of period $326 $317 $350 $437 $449 Loans transferred to nonaccrual (b) 54 53 19 23 50 Nonaccrual business loan gross charge-offs (c) (20) (24) (27) (33) (25) Nonaccrual business loans sold (d) (3) (6) (3) (14) (17) Payments/Other (e) (28) (14) (22) (63) (20) ------------------ --- --- --- --- --- Nonaccrual loans at end of period $329 $326 $317 $350 $437 -------------------------- ---- ---- ---- ---- ---- (a) Excludes loans acquired with credit impairment. (b) Based on an analysis of nonaccrual loans with book balances greater than $2 million. (c) Analysis of gross loan charge-offs: Nonaccrual business loans $20 $24 $27 $33 $25 Performing criticized loans - - - 3 5 Consumer and residential mortgage loans 4 4 3 5 9 --- --- --- --- --- Total gross loan charge- offs $24 $28 $30 $41 $39 --- --- --- --- --- (d) Analysis of loans sold: Nonaccrual business loans $3 $6 $3 $14 $17 Performing criticized loans - 8 6 22 31 --- --- --- --- --- Total criticized loans sold $3 $14 $9 $36 $48 --- --- --- --- --- (e) Includes net changes related to nonaccrual loans with balances less than $2 million, payments on nonaccrual loans with book balances greater than $2 million and transfers of nonaccrual loans to foreclosed property. Excludes business loan gross charge-offs and business nonaccrual loans sold.
ANALYSIS OF NET INTEREST INCOME (FTE) (unaudited) Comerica Incorporated and Subsidiaries Nine Months Ended ----------------- September 30, 2014 September 30, 2013 ------------------ ------------------ Average Average Average Average (dollar amounts in millions) Balance Interest Rate Balance Interest Rate ------------------ ------- -------- ---- ------- -------- ---- Commercial loans $29,487 $689 3.12% $28,069 $688 3.28% Real estate construction loans 1,905 49 3.42 1,430 43 3.98 Commercial mortgage loans 8,739 246 3.77 9,177 271 3.95 Lease financing 840 20 3.23 850 21 3.22 International loans 1,349 37 3.64 1,265 35 3.73 Residential mortgage loans 1,763 50 3.81 1,600 50 4.13 Consumer loans 2,244 54 3.21 2,142 53 3.32 -------------- ----- --- ---- ----- --- ---- Total loans (a) 46,327 1,145 3.30 44,533 1,161 3.49 Mortgage-backed securities available- for-sale 8,976 159 2.36 9,339 158 2.29 Other investment securities available- for-sale 369 1 0.44 390 1 0.48 ---------------------- --- --- ---- --- --- ---- Total investment securities available- for-sale 9,345 160 2.28 9,729 159 2.21 Interest-bearing deposits with banks (b) 4,803 9 0.25 4,433 9 0.26 Other short-term investments 110 - 0.60 115 1 1.38 ---------------- --- --- ---- --- --- ---- Total earning assets 60,585 1,314 2.90 58,810 1,330 3.03 Cash and due from banks 932 993 Allowance for loan losses (602) (627) Accrued income and other assets 4,421 4,531 ----- ----- Total assets $65,336 $63,707 ------- ------- Money market and interest-bearing checking deposits $22,571 18 0.11 $21,594 22 0.13 Savings deposits 1,734 - 0.03 1,654 - 0.03 Customer certificates of deposit 4,990 13 0.36 5,603 19 0.44 Foreign office time deposits 304 2 0.68 513 2 0.54 ------------------- --- --- ---- --- --- ---- Total interest-bearing deposits 29,599 33 0.15 29,364 43 0.19 Short-term borrowings 209 - 0.03 189 - 0.07 Medium- and long-term debt 3,062 38 1.67 4,109 43 1.42 --------------------- ----- --- ---- ----- --- ---- Total interest-bearing sources 32,870 71 0.29 33,662 86 0.34 Noninterest-bearing deposits 24,182 21,991 Accrued expenses and other liabilities 960 1,104 Total shareholders' equity 7,324 6,950 ----- ----- Total liabilities and shareholders' equity $65,336 $63,707 ------- ------- Net interest income/rate spread (FTE) $1,243 2.61 $1,244 2.69 ------ ------ FTE adjustment $3 $2 Impact of net noninterest-bearing sources of funds 0.13 0.14 --------------------------------- ---- ---- Net interest margin (as a percentage of average earning assets) (FTE) (a) (b) 2.74% 2.83% --------------------------------------- ---- ----
(a) Accretion of the purchase discount on the acquired loan portfolio of $25 million and $26 million in the nine months ended September 30, 2014 and 2013, respectively, increased the net interest margin by 6 basis points in each period. (b) Average balances deposited with the Federal Reserve Bank reduced the net interest margin by 20 basis points in both the nine-month periods ended September 30, 2014 and 2013.
ANALYSIS OF NET INTEREST INCOME (FTE) (unaudited) Comerica Incorporated and Subsidiaries Three Months Ended ------------------ September 30, 2014 June 30, 2014 September 30, 2013 ------------------ ------------- ------------------ Average Average Average Average Average Average (dollar amounts in millions) Balance Interest Rate Balance Interest Rate Balance Interest Rate ------------------ ------- -------- ---- ------- -------- ---- ------- -------- ---- Commercial loans $30,188 $236 3.11% $29,890 $231 3.10% $27,759 $226 3.25% Real estate construction loans 1,973 17 3.41 1,913 16 3.44 1,522 15 3.78 Commercial mortgage loans 8,698 76 3.45 8,749 85 3.88 8,943 88 3.90 Lease financing 823 4 2.33 850 7 3.26 839 7 3.21 International loans 1,417 13 3.59 1,328 12 3.64 1,252 12 3.76 Residential mortgage loans 1,792 17 3.76 1,773 17 3.82 1,642 17 3.98 Consumer loans 2,268 19 3.24 2,222 18 3.22 2,137 17 3.27 -------------- ----- --- ---- ----- --- ---- ----- --- ---- Total loans (a) 47,159 382 3.22 46,725 386 3.31 44,094 382 3.44 Mortgage-backed securities available- for-sale 9,020 52 2.29 8,996 53 2.35 8,989 54 2.41 Other investment securities available- for-sale 368 - 0.43 368 - 0.46 391 - 0.43 ---------------------- --- --- ---- --- --- ---- --- --- ---- Total investment securities available- for-sale 9,388 52 2.22 9,364 53 2.28 9,380 54 2.32 Interest-bearing deposits with banks (b) 5,015 3 0.25 3,949 2 0.25 5,308 4 0.26 Other short-term investments 110 - 0.54 110 - 0.61 110 - 0.77 ---------------- --- --- ---- --- --- ---- --- --- ---- Total earning assets 61,672 437 2.82 60,148 441 2.95 58,892 440 2.97 Cash and due from banks 963 921 1,027 Allowance for loan losses (601) (602) (622) Accrued income and other assets 4,367 4,412 4,360 ----- ----- ----- Total assets $66,401 $64,879 $63,657 ------- ------- ------- Money market and interest-bearing checking deposits $23,146 6 0.11 $22,296 6 0.10 $21,894 7 0.13 Savings deposits 1,759 - 0.03 1,742 - 0.03 1,680 - 0.04 Customer certificates of deposit 4,824 4 0.36 5,041 5 0.36 5,384 6 0.41 Foreign office time deposits 159 1 1.43 294 - 0.68 528 - 0.48 ------------------- --- --- ---- --- --- ---- --- --- ---- Total interest-bearing deposits 29,888 11 0.15 29,373 11 0.15 29,486 13 0.18 Short-term borrowings 231 - 0.03 210 - 0.03 249 - 0.06 Medium- and long-term debt 2,652 11 1.75 2,999 13 1.77 3,590 14 1.54 --------------------- ----- --- ---- ----- --- ---- ----- --- ---- Total interest-bearing sources 32,771 22 0.28 32,582 24 0.30 33,325 27 0.32 Noninterest-bearing deposits 25,275 24,011 22,379 Accrued expenses and other liabilities 944 955 1,033 Total shareholders' equity 7,411 7,331 6,920 ----- ----- ----- Total liabilities and shareholders' equity $66,401 $64,879 $63,657 ------- ------- ------- Net interest income/rate spread (FTE) $415 2.54 $417 2.65 $413 2.65 ---- ---- ---- FTE adjustment $1 $1 $1 Impact of net noninterest-bearing sources of funds 0.13 0.13 0.14 --------------------------------- ---- ---- ---- Net interest margin (as a percentage of average earning assets) (FTE) (a) (b) 2.67% 2.78% 2.79% --------------------------------------- ---- ---- ----
(a) Accretion of the purchase discount on the acquired loan portfolio of $3 million, $10 million and $8 million in the third and second quarters of 2014 and the third quarter of 2013, respectively, increased the net interest margin by 2 basis points, 7 basis points and 5 basis points in each respective period. (b) Average balances deposited with the Federal Reserve Bank reduced the net interest margin by 21 basis points, 17 basis points and 24 basis points in the third and second quarters of 2014 and the third quarter of 2013, respectively.
CONSOLIDATED STATISTICAL DATA (unaudited) Comerica Incorporated and Subsidiaries September 30, June 30, March 31, December 31, September 30, (in millions, except per share data) 2014 2014 2014 2013 2013 ------------------------ ---- ---- ---- ---- ---- Commercial loans: Floor plan $3,183 $3,576 $3,437 $3,504 $2,869 Other 27,576 27,410 26,337 25,311 25,028 ----- ------ ------ ------ ------ ------ Total commercial loans 30,759 30,986 29,774 28,815 27,897 Real estate construction loans 1,992 1,939 1,847 1,762 1,552 Commercial mortgage loans 8,603 8,747 8,801 8,787 8,785 Lease financing 805 822 849 845 829 International loans 1,429 1,352 1,250 1,327 1,286 Residential mortgage loans 1,797 1,775 1,751 1,697 1,650 Consumer loans: Home equity 1,634 1,574 1,533 1,517 1,501 Other consumer 689 687 684 720 651 -------------- --- --- --- --- --- Total consumer loans 2,323 2,261 2,217 2,237 2,152 -------------------- ----- ----- ----- ----- ----- Total loans $47,708 $47,882 $46,489 $45,470 $44,151 ----------- ------- ------- ------- ------- ------- Goodwill $635 $635 $635 $635 $635 Core deposit intangible 14 14 15 16 17 Loan servicing rights 1 1 1 1 1 Tier 1 common capital ratio (a) (b) 10.69% 10.50% 10.58% 10.64% 10.72% Tier 1 risk-based capital ratio (a) 10.69 10.50 10.58 10.64 10.72 Total risk-based capital ratio (a) 12.95 12.52 13.00 13.10 13.42 Leverage ratio (a) 10.80 10.93 10.85 10.77 10.88 Tangible common equity ratio (b) 9.94 10.39 10.20 10.07 9.87 Common shareholders' equity per share of common stock $41.26 $40.72 $40.09 $39.22 $37.93 Tangible common equity per share of common stock (b) 37.65 37.12 36.50 35.64 34.37 Market value per share for the quarter: High 52.72 52.60 53.50 48.69 43.49 Low 48.33 45.34 43.96 38.64 38.56 Close 49.86 50.16 51.80 47.54 39.31 Quarterly ratios: Return on average common shareholders' equity 8.29% 8.27% 7.68% 6.66% 8.50% Return on average assets 0.93 0.93 0.86 0.72 0.92 Efficiency ratio (c) 62.87 63.35 65.79 72.81 65.18 Number of banking centers 481 481 483 483 484 Number of employees - full time equivalent 8,913 8,901 8,907 8,948 8,918 --------------------- ----- ----- ----- ----- -----
(a) September 30, 2014 ratios are estimated. (b) See Reconciliation of Non-GAAP Financial Measures. (c) Noninterest expenses as a percentage of the sum of net interest income (FTE) and noninterest income excluding net securities gains (losses).
PARENT COMPANY ONLY BALANCE SHEETS (unaudited) Comerica Incorporated September 30, December 31, September 30, (in millions, except share data) 2014 2013 2013 -------------------------- ---- ---- ---- ASSETS Cash and due from subsidiary bank $5 $31 $36 Short-term investments with subsidiary bank 1,136 482 480 Other short-term investments 97 96 92 Investment in subsidiaries, principally banks 7,433 7,171 7,005 Premises and equipment 2 4 4 Other assets 134 139 134 ------------ --- --- --- Total assets $8,807 $7,923 $7,751 ------------ ------ ------ ------ LIABILITIES AND SHAREHOLDERS' EQUITY Medium- and long-term debt $1,202 $617 $620 Other liabilities 172 156 165 ----------------- --- --- --- Total liabilities 1,374 773 785 Common stock -$5 par value: Authorized -325,000,000 shares Issued -228,164,824 shares 1,141 1,141 1,141 Capital surplus 2,183 2,179 2,171 Accumulated other comprehensive loss (317) (391) (541) Retained earnings 6,631 6,318 6,236 Less cost of common stock in treasury -47,992,721 shares at 9/30/14; 45,860,786 shares at 12/31/13 and 44,483,659 shares at 9/30/13 (2,205) (2,097) (2,041) ------------------------- ------ ------ ------ Total shareholders' equity 7,433 7,150 6,966 -------------------------- ----- ----- ----- Total liabilities and shareholders' equity $8,807 $7,923 $7,751 --------------------- ------ ------ ------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) Comerica Incorporated and Subsidiaries Accumulated Common Stock Other Total ------------ Shares Capital Comprehensive Retained Treasury Shareholders' (in millions, except per share data) Outstanding Amount Surplus Loss Earnings Stock Equity -------------------- ----------- ------ ------- ---- -------- ----- ------ BALANCE AT DECEMBER 31, 2012 188.3 $1,141 $2,162 $(413) $5,928 $(1,879) $6,939 Net income - - - - 424 - 424 Other comprehensive loss, net of tax - - - (128) - - (128) Cash dividends declared on common stock ($0.51 per share) - - - - (95) - (95) Purchase of common stock (5.8) - - - - (218) (218) Net issuance of common stock under employee stock plans 1.2 - (18) - (21) 56 17 Share-based compensation - - 27 - - - 27 BALANCE AT SEPTEMBER 30, 2013 183.7 $1,141 $2,171 $(541) $6,236 $(2,041) $6,966 -------------------- ----- ------ ------ ----- ------ ------- ------ BALANCE AT DECEMBER 31, 2013 182.3 $1,141 $2,179 $(391) $6,318 $(2,097) $7,150 Net income - - - - 444 - 444 Other comprehensive income, net of tax - - - 74 - - 74 Cash dividends declared on common stock ($0.59 per share) - - - - (107) - (107) Purchase of common stock (4.1) - - - - (200) (200) Net issuance of common stock under employee stock plans 2.0 - (26) - (24) 91 41 Share-based compensation - - 31 - - - 31 Other - - (1) - - 1 - BALANCE AT SEPTEMBER 30, 2014 180.2 $1,141 $2,183 $(317) $6,631 $(2,205) $7,433 -------------------- ----- ------ ------ ----- ------ ------- ------
BUSINESS SEGMENT FINANCIAL RESULTS (unaudited) Comerica Incorporated and Subsidiaries (dollar amounts in millions) Business Retail Wealth Three Months Ended September 30, 2014 Bank Bank Management Finance Other Total ---------------- ---- ---- ---------- ------- ----- ----- Earnings summary: Net interest income (expense) (FTE) $377 $150 $47 $(166) $7 $415 Provision for credit losses (4) - 7 - 2 5 Noninterest income 94 41 63 15 2 215 Noninterest expenses 152 181 82 (29) 11 397 Provision (benefit) for income taxes (FTE) 113 3 8 (49) (1) 74 --- --- --- --- --- Net income (loss) $210 $7 $13 $(73) $(3) $154 ---- --- --- ---- --- ---- Net credit- related charge- offs (recoveries) $(2) $ - $5 $ - $ - $3 Selected average balances: Assets $37,898 $6,117 $5,007 $11,026 $6,353 $66,401 Loans 36,894 5,452 4,813 - - 47,159 Deposits 28,841 21,785 4,155 128 254 55,163 Statistical data: Return on average assets (a) 2.22% 0.12% 1.05% N/M N/M 0.93% Efficiency ratio (b) 32.32 93.96 74.98 N/M N/M 62.87 ----- ----- ----- --- --- ----- Business Retail Wealth Three Months Ended June 30, 2014 Bank Bank Management Finance Other Total --------------- ---- ---- ---------- ------- ----- ----- Earnings summary: Net interest income (expense) (FTE) $376 $149 $46 $(160) $6 $417 Provision for credit losses 32 (4) (9) - (8) 11 Noninterest income 95 41 67 15 2 220 Noninterest expenses 143 171 79 2 9 404 Provision (benefit) for income taxes (FTE) 101 8 15 (56) 3 71 --- --- --- --- --- Net income (loss) $195 $15 $28 $(91) $4 $151 ---- --- --- ---- --- ---- Net credit- related charge- offs (recoveries) $7 $4 $(2) $ - $ - $9 Selected average balances: Assets $37,467 $6,051 $4,996 $11,056 $5,309 $64,879 Loans 36,529 5,385 4,811 - - 46,725 Deposits 27,382 21,648 3,827 258 269 53,384 Statistical data: Return on average assets (a) 2.09% 0.27% 2.24% N/M N/M 0.93% Efficiency ratio (b) 30.43 89.99 69.66 N/M N/M 63.35 ---------------- ----- ----- ----- --- --- ----- Business Retail Wealth Three Months Ended September 30, 2013 Bank Bank Management Finance Other Total ---------------- ---- ---- ---------- ------- ----- ----- Earnings summary: Net interest income (expense) (FTE) $368 $151 $45 $(159) 8 $413 Provision for credit losses (1) 10 1 - (2) 8 Noninterest income 103 45 61 18 1 228 Noninterest expenses 153 177 81 2 4 417 Provision (benefit) for income taxes (FTE) 110 3 9 (56) 3 69 --- --- --- --- --- --- Net income (loss) $209 $6 $15 $(87) $4 $147 ---- --- --- ---- --- ---- Net credit- related charge- offs $9 $7 $3 $ - $ - $19 Selected average balances: Assets $35,295 $5,967 $4,789 $11,097 $6,509 $63,657 Loans 34,178 5,285 4,631 - - 44,094 Deposits 26,284 21,257 3,782 319 223 51,865 Statistical data: Return on average assets (a) 2.38% 0.12% 1.21% N/M N/M 0.92% Efficiency ratio (b) 32.49 90.27 77.22 N/M N/M 65.18 ---------------- ----- ----- ----- --- --- -----
(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 (FTE) and noninterest income excluding net securities gains. FTE - Fully Taxable Equivalent N/M - Not Meaningful
MARKET SEGMENT FINANCIAL RESULTS (unaudited) Comerica Incorporated and Subsidiaries (dollar amounts in millions) Other Finance Three Months Ended September 30, 2014 Michigan California Texas Markets & Other Total ---------------- -------- ---------- ----- ------- ------- ----- Earnings summary: Net interest income (expense) (FTE) $179 $182 $130 $83 $(159) $415 Provision for credit losses (8) 14 3 (6) 2 5 Noninterest income 87 37 32 42 17 215 Noninterest expenses 166 103 95 51 (18) 397 Provision (benefit) for income taxes (FTE) 40 39 24 21 (50) 74 --- --- --- --- --- --- Net income (loss) $68 $63 $40 $59 $(76) $154 --- --- --- --- ---- ---- Net credit- related charge- offs (recoveries) $3 $6 $ - $(6) $ - $3 Selected average balances: Assets $13,724 $15,768 $11,835 $7,695 $17,379 $66,401 Loans 13,248 15,509 11,147 7,255 - 47,159 Deposits 21,214 16,350 10,633 6,584 382 55,163 Statistical data: Return on average assets (a) 1.22% 1.46% 1.34% 3.08% N/M 0.93% Efficiency ratio (b) 62.28 46.72 58.75 41.16 N/M 62.87 ---------------- ----- ----- ----- ----- --- ----- Other Finance Three Months Ended June 30, 2014 Michigan California Texas Markets & Other Total --------------- -------- ---------- ----- ------- ------- ----- Earnings summary: Net interest income (expense) (FTE) $182 $176 $137 $76 $(154) $417 Provision for credit losses (9) 14 22 (8) (8) 11 Noninterest income 94 39 31 39 17 220 Noninterest expenses 159 101 89 44 11 404 Provision (benefit) for income taxes (FTE) 46 37 21 20 (53) 71 --- --- --- --- --- --- Net income (loss) $80 $63 $36 $59 $(87) $151 --- --- --- --- ---- ---- Net credit- related charge- offs (recoveries) $10 $5 $2 $(8) $ - $9 Selected average balances: Assets $13,851 $15,721 $11,661 $7,281 $16,365 $64,879 Loans 13,482 15,439 10,966 6,838 - 46,725 Deposits 20,694 15,370 10,724 6,069 527 53,384 Statistical data: Return on average assets (a) 1.48% 1.54% 1.23% 3.24% NM 0.93% Efficiency ratio (b) 57.70 46.78 52.61 38.93 NM 63.35 ---------------- ----- ----- ----- ----- --- ----- Other Finance Three Months Ended September 30, 2013 Michigan California Texas Markets & Other Total ---------------- -------- ---------- ----- ------- ------- ----- Earnings summary: Net interest income (expense) (FTE) $186 $171 $129 $78 $(151) $413 Provision for credit losses (11) - 17 4 (2) 8 Noninterest income 88 42 35 44 19 228 Noninterest expenses 167 101 92 51 6 417 Provision (benefit) for income taxes (FTE) 43 43 20 16 (53) 69 --- --- --- --- --- --- Net income (loss) $75 $69 $35 $51 $(83) $147 --- --- --- --- ---- ---- Net credit- related charge- offs $1 $8 $4 $6 $ - $19 Selected average balances: Assets $13,744 $14,250 $10,642 $7,415 $17,606 $63,657 Loans 13,276 14,002 9,942 6,874 - 44,094 Deposits 20,465 14,567 10,298 5,993 542 51,865 Statistical data: Return on average assets (a) 1.43% 1.80% 1.20% 2.70% N/M 0.92% Efficiency ratio (b) 60.89 47.38 56.52 42.04 N/M 65.18 ---------------- ----- ----- ----- ----- --- -----
(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 (FTE) and noninterest income excluding net securities gains. FTE - Fully Taxable Equivalent N/M - Not Meaningful
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited) Comerica Incorporated and Subsidiaries September 30, June 30, March 31, December 31, September 30, (dollar amounts in millions) 2014 2014 2014 2013 2013 ------------------ ---- ---- ---- ---- ---- Tier 1 Common Capital Ratio: Tier 1 and Tier 1 common capital (a) (b) $7,105 $7,027 $6,962 $6,895 $6,862 Risk-weighted assets (a) (b) 66,481 66,911 65,788 64,825 64,027 --------------- ------ ------ ------ ------ ------ Tier 1 and Tier 1 common risk-based capital ratio (b) 10.69% 10.50% 10.58% 10.64% 10.72% Basel III Common Equity Tier 1 Capital Ratio: Tier 1 common capital (b) $7,105 $7,027 $6,962 $6,895 $6,862 Basel III adjustments (c) (1) (1) (2) (6) (4) ---------------- --- --- --- --- --- Basel III common equity Tier 1 capital (c) 7,104 7,026 6,960 6,889 6,858 ---------------- ----- ----- ----- ----- ----- Risk-weighted assets (a) (b) $66,481 $66,911 $65,788 $64,825 $64,027 Basel III adjustments (c) 1,627 1,594 1,590 1,754 1,726 ----- ----- ----- ----- ----- Basel III risk- weighted assets (c) $68,108 $68,505 $67,378 $66,579 $65,753 ---------------- ------- ------- ------- ------- ------- Tier 1 common capital ratio (b) 10.7% 10.5% 10.6% 10.6% 10.7% Basel III common equity Tier 1 capital ratio (c) 10.4 10.3 10.3 10.3 10.4 ------------------ ---- ---- ---- ---- ---- Tangible Common Equity Ratio: Common shareholders' equity $7,433 $7,369 $7,283 $7,150 $6,966 Less: Goodwill 635 635 635 635 635 Other intangible assets 15 15 16 17 18 --- --- --- --- --- Tangible common equity $6,783 $6,719 $6,632 $6,498 $6,313 --------------- ------ ------ ------ ------ ------ Total assets $68,887 $65,325 $65,681 $65,224 $64,667 Less: Goodwill 635 635 635 635 635 Other intangible assets 15 15 16 17 18 --- --- --- --- --- Tangible assets $68,237 $64,675 $65,030 $64,572 $64,014 --------------- ------- ------- ------- ------- ------- Common equity ratio 10.79% 11.28% 11.09% 10.97% 10.78% Tangible common equity ratio 9.94 10.39 10.20 10.07 9.87 --------------- ---- ----- ----- ----- ---- Tangible Common Equity per Share of Common Stock: Common shareholders' equity $7,433 $7,369 $7,283 $7,150 $6,966 Tangible common equity 6,783 6,719 6,632 6,498 6,313 --------------- ----- ----- ----- ----- ----- Shares of common stock outstanding (in millions) 180 181 182 182 184 ------------------ --- --- --- --- --- Common shareholders' equity per share of common stock $41.26 $40.72 $40.09 $39.22 $37.93 Tangible common equity per share of common stock 37.65 37.12 36.50 35.64 34.37 ----------------- ----- ----- ----- ----- -----
(a) Tier 1 capital and risk- weighted assets as defined by regulation. (b) September 30, 2014 Tier 1 capital and risk-weighted assets are estimated. (c) Estimated ratios based on the standardized approach in the final rule for the U.S. adoption of the Basel III regulatory capital framework, as fully phased-in, and excluding most elements of AOCI.
The Tier 1 common capital ratio removes preferred stock and qualifying trust preferred securities from Tier 1 capital as defined by and calculated in conformity with bank regulations. The Basel III common equity Tier 1 capital ratio further adjusts Tier 1 common capital and risk-weighted assets to account for the final rule approved by U.S. banking regulators in July 2013 for the U.S. adoption of the Basel III regulatory capital framework, as fully phased-in. The final Basel III capital rules are effective January 1, 2015 for banking organizations subject to the standardized approach. The tangible common equity ratio removes preferred stock and the effect of intangible assets from capital and the effect of intangible assets from total assets. Tangible common equity per share of common stock removes the effect of intangible assets from common shareholders equity per share of common stock. Comerica believes these measurements are meaningful measures of capital adequacy used by investors, regulators, management and others to evaluate the adequacy of common equity and to compare against other companies in the industry.
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SOURCE Comerica Incorporated