COMERICA INCORPORATED DALLAS, July 19, 2016 /PRNewswire/ -- Comerica Incorporated (NYSE: CMA) today reported second quarter 2016 net income of $104 million, compared to $60 million for the first quarter 2016 and $135 million for the second quarter 2015. Earnings per diluted share were 58 cents for second quarter 2016 compared to 34 cents for first quarter 2016 and 73 cents for second quarter 2015. Comerica also announced the implementation of its efficiency and revenue initiative ("GEAR Up"), which is expected to drive additional annual pre-tax income of approximately $230 million by year-end 2018 from the actions identified to-date. Second quarter results include after-tax restructuring charges of $34 million, or 19 cents per share, associated with the initial phase of this initiative.
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"Our second quarter results were solid with a $1.1 billion increase in average loans, improved credit quality in our energy portfolio as well as increases in most fee-based noninterest income categories," said Ralph W. Babb, Jr., chairman and chief executive officer. "Noninterest expenses were well controlled. Through share repurchases of $65 million and an increase in our dividend, we returned $103 million to shareholders in the second quarter 2016, compared to $79 million in the first quarter."
Growth in Efficiency and Revenue Initiative
"Based on our initial extensive review, we are announcing the actions we are taking through Gear Up that are expected to deliver additional annual pre-tax income of approximately $230 million by year-end 2018. This initiative fundamentally transforms the way we operate to drive further efficiency and revenue growth. We are confident the initiative will improve profitability, despite current market conditions and a tough banking environment," said Babb. "We expect our efficiency ratio to improve, declining to the low 60 percent range by the end of 2017, and at or below 60 percent by year-end 2018, without any increase in interest rates. The initial actions will take us a long way to achieving a double-digit return on equity and enhanced shareholder value. Management will continue to identify additional opportunities to further enhance profitability."
The initial GEAR Up initiative includes approximately $140 million in pre-tax benefits expected to be achieved by fiscal year-end 2017 and an anticipated annual run-rate benefit of approximately $230 million by year-end 2018.
-- Revenue enhancements expected to be approximately $30 million by
year-end 2017, which increase to approximately $70 million by year-end
2018, through expanded product offerings, enhanced sales tools and
training, re-aligned employee incentives and enhanced customer analytics
to drive opportunities.
-- Expense reductions targeted to be approximately $110 million, which
increases to approximately $160 million by year-end 2018. This is to be
achieved through an approximately 9 percent reduction in workforce,
streamlining operational processes, real estate optimization including
consolidating about 40 banking centers, selective outsourcing of
technology functions and reduction of technology system applications.
-- Pre-tax restructuring charges of $140 million to $160 million in total
are expected to be incurred through 2018.
-- For further information, see the accompanying Fact Sheet.
(dollar amounts
in millions,
except per
share data) 2nd Qtr '16 1st Qtr '16 2nd Qtr '15
--------------- ----------- ----------- -----------
Net interest
income $445 $447 $421
Provision for
credit losses 49 148 47
Noninterest
income 269 246 258
Noninterest
expenses 519 (a) 460 433 (b)
--- --- --- --- ---
Pre-tax income 146 85 199
Provision for
income taxes 42 25 64
--- --- ---
Net income $104 $60 $135
---- --- ----
Net income
attributable
to common
shares $103 $59 $134
Diluted income
per common
share 0.58 0.34 0.73
Average
diluted
shares (in
millions) 177 176 182
Common equity
Tier 1
capital ratio
(c) 10.48% 10.58% 10.40%
Common equity
ratio 10.79 11.08 10.76
Tangible
common equity
ratio (d) 9.98 10.23 9.92
-------------- ---- ----- ----
(a) Included restructuring charge of $53 million in the second quarter 2016.
(b) Included net release of litigation reserves of $30 million in the second quarter 2015.
(c) June 30, 2016 ratio is estimated.
(d) See Reconciliation of Non-GAAP Financial Measures.
-------------------------------------------------------
Second Quarter 2016 Compared to First Quarter 2016
Average total loans increased $1.1 billion, or 2 percent, to $49.5 billion.
-- Primarily reflected continued growth in Commercial Real Estate and
seasonal increases in Mortgage Banker Finance and National Dealer
Services; partially offset by an expected decline in Energy. The growth
in Commercial Real Estate primarily reflected construction draws and
term financing, mainly with existing customers who are proven developers
on projects with favorable risk profiles.
-- Period-end total loans increased $1.0 billion to $50.4 billion.
Average total deposits decreased $187 million to $56.5 billion.
-- Driven by a $511 million decrease in interest-bearing deposits,
partially offset by a $324 million increase in noninterest-bearing
deposits.
-- Average total deposits increased seasonally in the Retail Bank; this was
more than offset by a seasonal decrease in Municipalities and purposeful
pricing in Corporate Banking.
-- Period-end deposits were unchanged at $56.4 billion.
Net interest income decreased $2 million to $445 million.
-- Primarily the result of the impact of nonaccrual loans and higher
funding costs, partially offset by the benefit from the increase in
average loans.
The provision for credit losses decreased $99 million to $49 million.
-- Net credit-related charge-offs were $47 million, or 0.38 percent of
average loans, compared to $58 million, or 0.49 percent, in the first
quarter 2016. Energy net credit-related charge-offs were $32 million
compared to $42 million in the first quarter 2016.
-- The allowance for loan losses increased $5 million to $729 million, or
1.45 percent of total loans. The reserve allocation for Energy exceeded
8 percent of loans in the Energy business line.
Noninterest income increased $23 million to $269 million.
-- Noninterest income increased $13 million, or 5 percent, excluding a $10
million increase in deferred compensation asset returns (offset by an
increase in deferred compensation plan expense in noninterest expense).
-- Fee-based income increased $11 million, primarily attributed to
increases of $3 million each in card fees, fiduciary income and customer
derivative income, as well as a $2 million increase in commercial
lending fees. The increase in commercial lending fees resulted primarily
from higher syndication agent fees.
Noninterest expenses increased $59 million to $519 million.
-- Second quarter restructuring charges of $53 million related to the
initiatives previously discussed included $46 million of
severance-related expenses and $7 million of professional services and
other charges.
-- Excluding the $53 million restructuring charge, noninterest expenses
increased $6 million, primarily including a $10 million increase in
deferred compensation plan expense (offset by an increase in deferred
compensation asset returns in noninterest income), partially offset by
an $8 million gain from the sale of leased assets, as well as increases
of $5 million in outside processing fees, $3 million in FDIC insurance
premiums and $2 million in advertising expense.
-- Salaries and benefits expense decreased $1 million, primarily reflecting
seasonal decreases in share-based compensation and payroll taxes,
partially offset by the $10 million increase in deferred compensation
plan expense noted above, the impact of merit increases, a seasonal
increase in 401(k) contributions and incentive compensation tied to
revenue growth.
Capital position remained solid at June 30, 2016.
-- Repurchased approximately 1.5 million shares of common stock under the
equity repurchase program.
-- Including dividends, returned a total of $103 million to shareholders.
-- Dividend increased 5 percent to 22 cents per share.
-- As announced on June 29, 2016, the Federal Reserve did not object to
Comerica's 2016 capital plan which includes equity repurchases up to
$440 million for the four-quarter period ending in the second quarter
2017. The timing and ultimate amount of equity repurchases will be
subject to various factors, including the Company's capital position,
financial performance and market conditions, including interest rates.
Restructuring charges associated with the GEAR Up initiative are not
expected to impact the pace of repurchases. In addition, at its meeting
on July 26, 2016, Comerica's board of directors will consider increasing
the quarterly dividend to 23 cents per common share.
Second Quarter 2016 Compared to Second Quarter 2015
Average total loans increased $636 million, or 1 percent.
-- Primarily reflected continued growth in Commercial Real Estate and
National Dealer Services, partially offset by declines in Energy and
general Middle Market.
Average total deposits decreased $877 million, or 2 percent.
-- Primarily driven by decreases in Municipalities, Corporate Banking and
the Financial Services Division.
Net interest income increased $24 million, or 6 percent.
-- Primarily due to higher yields on loans and Federal Reserve Bank
deposits, as well as earning asset growth; partially offset by an
increase in funding costs.
The provision for credit losses increased $2 million, or 5 percent.
Noninterest income increased $11 million, or 4 percent.
-- Excluding a $4 million increase in deferred compensation asset returns,
noninterest income increased $7 million, or 3 percent. Fee-based income
increased $6 million, primarily reflecting an $8 million increase in
card fees, mostly due to increased revenue from merchant payment
processing services and government card programs, and smaller increases
in most other fee-based categories; partially offset by a decrease of $4
million in investment banking fees.
Noninterest expense increased $86 million.
-- Noninterest expense increased $3 million excluding the second quarter
2016 restructuring charges of $53 million and the impact of a $30
million net release of litigation reserves in second quarter 2015. The
remaining increase primarily reflected increases of $6 million in
software expense and $5 million in FDIC insurance premiums, partially
offset by a decrease of $4 million in salaries and benefits and an $8
million benefit from the sale of leased assets in the second quarter
2016.
-- Salaries and benefits expense primarily reflected decreases of $8
million in pension expense and $4 million in share-based
compensation, partially offset by a $4 million increase in deferred
compensation plan expense (offset by an increase in deferred
compensation asset returns in noninterest income) and an increase of
$4 million in regular salaries, mostly due to the impact of merit
raises.
Net Interest Income
-------------------
(dollar amounts
in millions) 2nd Qtr '16 1st Qtr '16 2nd Qtr '15
--------------- ----------- ----------- -----------
Net interest
income $445 $447 $421
Net interest
margin 2.74% 2.81% 2.65%
Selected average
balances:
Total earning
assets $65,597 $64,123 $63,981
Total loans 49,469 48,392 48,833
Total investment
securities 12,334 12,357 9,936
Federal Reserve
Bank deposits 3,495 3,071 4,968
Total deposits 56,521 56,708 57,398
Total
noninterest-
bearing deposits 28,376 28,052 27,365
Medium- and
long-term debt 5,072 3,093 2,661
--------------- ----- ----- -----
Net interest income decreased $2 million to $445 million in the second quarter 2016, compared to the first quarter 2016.
-- Interest on loans was unchanged, as the benefit from an increase in
average loan balances (+$8 million) was offset by a decrease in yields.
The decrease in loan yields primarily reflected lower nonaccrual
interest recoveries in the second quarter 2016, the impact of a negative
residual value adjustment to assets in the leasing portfolio and the
full-quarter impact of loans transferred to nonaccrual in the first
quarter 2016.
-- Interest expense on debt increased $3 million, primarily due to higher
funding costs from new Federal Home Loan Bank (FHLB) borrowings during
the quarter.
The net interest margin of 2.74 percent decreased 7 basis points compared to the first quarter 2016, primarily due to the impact of increased FHLB borrowings (-2 basis points), lower loan yields (-4 basis points) and an increase in lower-yielding Federal Reserve Bank deposit balances (-1 basis point). The impact of lower loan yields included -3 basis points related to nonaccrual loans.
Credit Quality
"Energy loans continue to decline as expected, with a $356 million decrease since the end of the first quarter, as our customers continue to take the necessary actions to reduce their bank debt. We have completed 88 percent of the spring redeterminations for our E&P customers, and borrowing bases have come down about 22 percent on average. Criticized energy loans have declined $281 million to 57 percent of energy loans as of the end of the second quarter," said Babb. "While oil and gas prices have improved, we remain cautious and believe with our reserve allocation at over 8 percent of energy loans as of June 30, we are adequately reserved. Credit quality in the remainder of the portfolio remains strong."
(dollar amounts in millions) 2nd Qtr '16 1st Qtr '16 2nd Qtr '15
--------------------------- ----------- ----------- -----------
Credit-related charge-offs $59 $83 $35
Recoveries 12 25 17
--- --- ---
Net credit-related charge-offs 47 58 18
Net credit-related charge-offs/
Average total loans 0.38% 0.49% 0.15%
Provision for credit losses $49 $148 $47
Nonperforming loans 613 689 361
Nonperforming assets (NPAs) 635 714 370
NPAs/Total loans and foreclosed
property 1.26% 1.45% 0.74%
Loans past due 90 days or more and
still accruing $35 $13 $18
Allowance for loan losses 729 724 618
Allowance for credit losses on
lending-related commitments (a) 43 46 50
--- --- ---
Total allowance for credit losses 772 770 668
Allowance for loan losses/Period-
end total loans 1.45% 1.47% 1.24%
Allowance for loan losses/
Nonperforming loans 119 105 171
-------------------------- --- --- ---
(a) Included in "Accrued expenses and other liabilities" on the consolidated balance sheets.
---------------------------------------------------------------------------------------------
-- Energy business line loans were $2.7 billion at June 30, 2016 compared
to $3.1 billion at March 31, 2016.
-- Criticized Energy loans decreased $281 million, to $1.6 billion,
including a $77 million decrease in nonaccrual loans.
-- Energy net charge-offs were $32 million, compared to $42 million in
the first quarter 2016.
-- The reserve allocation for loans in the Energy business line
exceeded 8 percent at June 30, 2016, up slightly compared to March
31, 2016.
-- Net charge-offs decreased $11 million to $47 million, or 0.38 percent of
average loans, in the second quarter 2016, compared to $58 million, or
0.49 percent, in the first quarter 2016. Aside from Energy, net
charge-offs were $15 million, or 13 basis points, for the remainder of
the portfolio.
-- During the second quarter 2016, $107 million of borrower relationships
over $2 million were transferred to nonaccrual status, a decrease of
$339 million compared to $446 million transferred during the first
quarter. Second quarter 2016 transfers to nonaccrual included $51
million from Energy, compared to $349 million in the first quarter.
-- Criticized loans decreased $377 million to $3.6 billion at June 30,
2016, compared to $3.9 billion at March 31, 2016, primarily as a result
of the decrease in criticized Energy loans. Criticized loans are
generally consistent with the Special Mention, Substandard and Doubtful
categories defined by regulatory authorities.
Full-Year 2016 Outlook
Management expectations for full-year 2016 compared to full-year 2015, assuming a continuation of the current economic and low-rate environment, are as follows.
-- Average loans modestly higher, in line with Gross Domestic Product
growth, reflecting a continued decline in Energy more than offset by
increases in most other lines of business. Seasonality in National
Dealer Services, Mortgage Banker and Middle Market to impact the second
half of the year.
-- Net interest income higher, primarily reflecting the benefits from the
December 2015 short-term rate increase, loan growth and a larger
securities portfolio.
-- Provision for credit losses higher, reflecting the first quarter 2016
reserve build for Energy, with net charge-offs for the remainder of the
year between 35 basis points and 45 basis points. Additional reserve
changes dependent on developments in the oil and gas sector. Continued
solid credit quality in the remainder of the portfolio, with metrics,
absent Energy, better than historical norms.
-- Noninterest income modestly higher, with continued focus on cross-sell
opportunities, including card, fiduciary and brokerage services offset
by lower market-driven fees, including commercial lending fees,
investment banking fees, derivative income and warrant income. Benefits
from GEAR Up expected to begin in early 2017.
-- Noninterest expenses higher, with an estimated $90 million to $110
million in restructuring expense, related GEAR Up expense savings of
approximately $20 million, increased outside processing in line with
growing revenue, higher FDIC insurance expense in part due to regulatory
surcharge, and typical inflationary pressures. Additionally, 2015
benefited from $33 million in legal reserve releases, which is offset by
lower pension expense in 2016.
-- Income tax expense to approximate 30 percent of pre-tax income.
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 June 30, 2016. The accompanying narrative addresses second quarter 2016 results compared to first quarter 2016.
The following table presents net income (loss) by business segment.
(dollar amounts
in millions) 2nd Qtr '16 1st Qtr '16 2nd Qtr '15
--------------- ----------- ----------- -----------
Business Bank $154 93% $94 74% $181 81%
Retail Bank (2) (1) 11 9 18 8
Wealth Management 13 8 22 17 26 11
----------------- --- --- --- --- --- ---
165 100% 127 100% 225 100%
Finance (62) (66) (89)
Other (a) 1 (1) (1)
-------- --- --- ---
Total $104 $60 $135
----- ---- --- ----
(a) Includes items not
directly associated with the
three major business segments
or the Finance Division.
Business Bank
(dollar
amounts
in
millions) 2nd Qtr '16 1st Qtr '16 2nd Qtr '15
--------- ----------- ----------- -----------
Net
interest
income $355 $362 $373
Provision
for
credit
losses 46 151 61
Noninterest
income 142 135 138
Noninterest
expenses 222 (a) 207 175
Net
income 154 94 181
Net
credit-
related
charge-
offs 42 57 23
Selected
average
balances:
Assets 39,617 38,635 39,134
Loans 38,574 37,561 38,109
Deposits 28,429 29,108 30,229
-------- ------ ------ ------
(a) Included restructuring charge of $26 million in the second quarter 2016.
-- Average loans increased $1.0 billion, primarily reflecting increases in
Commercial Real Estate, Mortgage Banker Finance and National Dealer
Services, partially offset by a decrease in Energy.
-- Average deposits decreased $679 million, primarily reflecting decreases
in Municipalities and Corporate Banking, partially offset by an increase
in Mortgage Banker Finance.
-- Net interest income decreased $7 million, primarily reflecting the
impact of an increase in net funds transfer pricing (FTP) charges and
lower loan yields, largely due to the impact of nonaccrual loans and a
negative residual value adjustment to assets in the leasing portfolio,
partially offset by the benefit from the increase in average loans. The
increase in net FTP charges primarily reflected an increase in the cost
of funds as well as lower funding credits due to the decrease in average
deposits.
-- The provision for credit losses decreased $105 million, primarily
reflecting a decrease in Energy, partially offset by increases in
Commercial Real Estate, National Dealer Services, and Technology and
Life Sciences.
-- Noninterest income increased $7 million, primarily due to increases in
syndication agent fees, card fees and customer derivative income.
-- Noninterest expenses increased $15 million, primarily due to second
quarter 2016 restructuring charges. Excluding restructuring charges,
noninterest expenses decreased $11 million, primarily reflecting an $8
million gain from the sale of leased assets and a decrease in salaries
and benefits expense, partially offset by an increase in outside
processing fees tied to revenue generating activities.
Retail Bank
(dollar amounts in millions) 2nd Qtr '16 1st Qtr '16 2nd Qtr '15
--------------------------- ----------- ----------- -----------
Net
interest
income $155 $156 $155
Provision
for
credit
losses 1 3 (8)
Noninterest
income 48 43 46
Noninterest
expenses 205 (a) 179 181
Net
income (2) 11 18
Net
credit-
related
charge-
offs 1 2 1
Selected
average
balances:
Assets 6,557 6,544 6,459
Loans 5,879 5,867 5,770
Deposits 23,546 23,110 22,747
-------- ------ ------ ------
(a) Included restructuring charge of $19 million in the second quarter 2016.
-- Average deposits increased $436 million, primarily reflecting seasonal
increases. Balances increased in both interest-bearing and
noninterest-bearing deposits.
-- Net interest income decreased $1 million, primarily due to lower loan
yields, partially offset by the benefit provided by the increase in
average deposits.
-- The provision for credit losses decreased $2 million, primarily due to a
decrease in Small Business.
-- Noninterest income increased $5 million, primarily reflecting the impact
of a securities loss in the first quarter 2016 and an increase in card
fees.
-- Noninterest expenses increased $26 million, primarily due to second
quarter 2016 restructuring charges. Excluding restructuring charges,
noninterest expenses increased $7 million, primarily reflecting an
increase in outside processing expenses and smaller increases in several
other categories.
Wealth Management
(dollar
amounts
in
millions) 2nd Qtr '16 1st Qtr '16 2nd Qtr '15
--------- ----------- ----------- -----------
Net
interest
income $42 $43 $45
Provision
for
credit
losses 3 (5) (9)
Noninterest
income 62 59 60
Noninterest
expenses 81 (a) 73 74
Net
income 13 22 26
Net
credit-
related
charge-
offs
(recoveries) 4 (1) (5)
Selected average
balances:
Assets 5,215 5,162 5,153
Loans 5,016 4,964 4,954
Deposits 4,213 4,171 4,060
-------- ----- ----- -----
(a) Included restructuring charge of $8 million in the second quarter 2016.
-- Average loans increased $52 million, primarily reflecting an increase in
Private Banking.
-- Average deposits increased $42 million, primarily reflecting increases
in money market and checking deposits as well as noninterest-bearing
deposits.
-- The provision for credit losses increased $8 million, from a negative
provision of $5 million in the first quarter 2016 to a provision of $3
million in the second quarter 2016.
-- Noninterest income increased $3 million, primarily due to an increase in
fiduciary income.
-- Noninterest expenses increased $8 million, primarily due to second
quarter 2016 restructuring charges. Excluding restructuring charges,
noninterest expenses were stable.
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 June 30, 2016.
The following table presents net income (loss) by market segment.
(dollar
amounts
in
millions) 2nd Qtr '16 1st Qtr '16 2nd Qtr '15
---------- ----------- ----------- -----------
Michigan $57 34% $71 56% $98 44%
California 50 30 73 58 71 31
Texas 3 2 (76) (60) 14 6
Other
Markets 55 34 59 46 42 19
-------- --- --- --- --- --- ---
165 100% 127 100% 225 100%
Finance &
Other (a) (61) (67) (90)
---------- --- --- ---
Total $104 $60 $135
----- ---- --- ----
(a) Includes items not directly
associated with the geographic
markets.
-- Average loans increased $689 million in Other Markets, primarily
reflecting an increase in Mortgage Banker Finance; $425 million in
California, primarily reflecting increases in Commercial Real Estate and
National Dealer Services; and $77 million in Texas, mostly due to
increases in Commercial Real Estate and Private Banking, partially
offset by a decrease in Energy. Average loans decreased $114 million in
Michigan.
-- Average deposits decreased $322 million in Texas and $143 million in
Michigan, with both markets primarily reflecting decreases in
Municipalities and Corporate Banking, partially offset by an increase in
Retail Banking. Average deposits increased $279 million in California,
reflecting increases in most lines of business.
-- Net interest income decreased $9 million in Michigan and $4 million in
Texas, and increased $1 million in California. The decrease in Michigan
primarily reflected a decrease in loan yields, largely due to the impact
of the negative residual value adjustment to assets in the leasing
portfolio and lower nonaccrual interest recoveries in the second
quarter, lower FTP credits resulting from a decrease in average
deposits, and the impact of a decrease in average loans. The decrease in
Texas primarily reflected lower FTP credits resulting from a decrease in
average deposits and lower loan yields, largely due to the full quarter
impact of loans transferred to nonaccrual in the first quarter 2016 and
a decrease in accretion on the acquired loan portfolio. In California,
the benefit from an increase in average loans was partially offset by an
increase in net FTP charges, reflecting an increase in the cost of funds
and a decrease in the deposit crediting rate.
-- The provision for credit losses decreased $137 million in Texas, and
increased $23 million California and $9 million in Michigan. The
decrease in Texas primarily reflected the impact of the reserve build
for Energy in the first quarter 2016. In California, the increased
provision primarily reflected increases in National Dealer Services,
Private Banking and general Middle Market. The increase in Michigan
primarily reflected an increased provision in Commercial Real Estate.
-- Noninterest income increased $5 million in Michigan, $1 million in Texas
and $1 million in California. The increase in Michigan was primarily due
to the impact of a securities loss in the first quarter 2016, an
increase in customer derivative income and smaller increases in several
other categories.
-- Noninterest expenses increased $16 million in California, $13 million in
Texas and $8 million in Michigan. Excluding restructuring charges,
noninterest expenses were unchanged in California, and decreased $2
million in Texas and $7 million in Michigan. The decrease in Michigan
primarily reflected an $8 million gain from the sale of leased assets in
the second quarter.
Michigan Market
(dollar
amounts
in
millions) 2nd Qtr '16 1st Qtr '16 2nd Qtr '15
--------- ----------- ----------- -----------
Net
interest
income $166 $175 $178
Provision
for
credit
losses 3 (6) (13)
Noninterest
income 81 76 86
Noninterest
expenses 159 (a) 151 129
Net
income 57 71 98
Net
credit-
related
charge-
offs
(recoveries) - 5 (1)
Selected
average
balances:
Assets 13,299 13,402 13,851
Loans 12,660 12,774 13,290
Deposits 21,553 21,696 21,706
-------- ------ ------ ------
(a) Included restructuring charge of $15 million in the second quarter 2016.
California Market
(dollar amounts in millions) 2nd Qtr '16 1st Qtr '16 2nd Qtr '15
--------------------------- ----------- ----------- -----------
Net
interest
income $178 $177 $180
Provision
for
credit
losses 17 (6) 4
Noninterest
income 39 38 36
Noninterest
expenses 120 (a) 104 99
Net
income 50 73 71
Net
credit-
related
charge-
offs 17 8 6
Selected
average
balances:
Assets 17,997 17,541 16,696
Loans 17,708 17,283 16,429
Deposits 16,933 16,654 17,275
-------- ------ ------ ------
(a) Included restructuring charge of $16 million in the second quarter 2016.
Texas Market
(dollar amounts in millions) 2nd Qtr '16 1st Qtr '16 2nd Qtr '15
--------------------------- ----------- ----------- -----------
Net
interest
income $119 $123 $130
Provision
for
credit
losses 32 169 43
Noninterest
income 31 30 30
Noninterest
expenses 113 (a) 100 93
Net
income
(loss) 3 (76) 14
Net
credit-
related
charge-
offs 31 47 5
Selected
average
balances:
Assets 11,287 11,295 11,878
Loans 10,840 10,763 11,254
Deposits 10,052 10,374 10,959
-------- ------ ------ ------
(a) Included restructuring charge of $15 million in the second quarter 2016.
Conference Call and Webcast
Comerica will host a conference call to review second quarter 2016 financial results at 7 a.m. CT Tuesday, July 19, 2016. Interested parties may access the conference call by calling (877) 523-5249 or (210) 591-1147 (event ID No. 22809119). 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, including the GEAR Up initiative, and forecasts of Comerica's revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries as well as estimates of the economic benefits of the GEAR Up initiative, estimates of credit trends and global stability. Such statements reflect the view of Comerica's management as of this date with respect to future events and are subject to risks and uncertainties. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, Comerica's actual results could differ materially from those discussed. Factors that could cause or contribute to such differences are changes in general economic, political or industry conditions; changes in monetary and fiscal policies, including changes in interest rates; changes in regulation or oversight; Comerica's ability to maintain adequate sources of funding and liquidity; the effects of more stringent capital or liquidity requirements; declines or other changes in the businesses or industries of Comerica's customers, in particular the energy industry; unfavorable developments concerning credit quality; operational difficulties, failure of technology infrastructure or information security incidents; reliance on other companies to provide certain key components of business infrastructure; factors impacting noninterest expenses which are beyond Comerica's control; changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing; reductions in Comerica's credit rating; whether Comerica may achieve opportunities for revenue enhancements and efficiency improvements under the GEAR Up initiative, or changes in the scope or assumptions underlying the GEAR Up initiative; the interdependence of financial service companies; the implementation of Comerica's strategies and business initiatives; 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; 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, droughts 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, 2015 and "Item 1A. Risk Factors" beginning on page 54 of Comerica's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. 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 Six Months Ended
------------------ ----------------
June 30, March 31, June 30, June 30,
(in millions, except
per share data) 2016 2016 2015 2016 2015
-------------------- ---- ---- ---- ---- ----
PER COMMON SHARE AND COMMON STOCK
DATA
Diluted net income $0.58 $0.34 $0.73 $0.92 $1.46
Cash dividends
declared 0.22 0.21 0.21 0.43 0.41
Average diluted
shares (in
thousands) 177,240 176,055 182,422 176,614 182,281
--------------- ------- ------- ------- ------- -------
KEY RATIOS
Return on average
common shareholders'
equity 5.44% 3.13% 7.21% 4.28% 7.20%
Return on average
assets 0.59 0.34 0.79 0.47 0.78
Common equity tier 1
and tier 1 risk-
based capital ratio
(a) 10.48 10.58 10.40
Total risk-based
capital ratio (a) 12.73 12.84 12.38
Leverage ratio (a) 10.41 10.60 10.56
Common equity ratio 10.79 11.08 10.76
Tangible common
equity ratio (b) 9.98 10.23 9.92
----------------- ---- ----- ----
AVERAGE BALANCES
Commercial loans $31,511 $30,814 $31,788 $31,162 $31,442
Real estate
construction loans 2,429 2,114 1,807 2,272 1,872
Commercial mortgage
loans 9,033 8,961 8,672 8,997 8,627
Lease financing 730 726 795 728 796
International loans 1,396 1,419 1,453 1,408 1,482
Residential mortgage
loans 1,880 1,892 1,877 1,886 1,866
Consumer loans 2,490 2,466 2,441 2,478 2,409
----- ----- ----- ----- -----
Total loans 49,469 48,392 48,833 48,931 48,494
Earning assets 65,597 64,123 63,981 64,860 63,732
Total assets 70,668 69,228 68,963 69,948 68,852
Noninterest-bearing
deposits 28,376 28,052 27,365 28,214 27,033
Interest-bearing
deposits 28,145 28,656 30,033 28,401 30,163
------ ------ ------ ------ ------
Total deposits 56,521 56,708 57,398 56,615 57,196
Common shareholders'
equity 7,654 7,632 7,512 7,643 7,482
-------------------- ----- ----- ----- ----- -----
NET INTEREST INCOME
Net interest income $445 $447 $421 $892 $834
Net interest margin
(fully taxable
equivalent) 2.74% 2.81% 2.65% 2.78% 2.65%
------------------- ---- ---- ---- ---- ----
CREDIT QUALITY
Total nonperforming
assets $635 $714 $370
Loans past due 90
days or more and
still accruing 35 13 18
Net credit-related
charge-offs 47 58 19 $105 $27
Allowance for loan
losses 729 724 618
Allowance for credit
losses on lending-
related commitments 43 46 50
--- --- ---
Total allowance for
credit losses 772 770 668
Allowance for loan
losses as a
percentage of total
loans 1.45% 1.47% 1.24%
Net credit-related
charge-offs as a
percentage of
average total loans 0.38 0.49 0.15 0.43% 0.11%
Nonperforming assets
as a percentage of
total loans and
foreclosed property 1.26 1.45 0.74
Allowance for loan
losses as a
percentage of total
nonperforming loans 119 105 171
-------------------- --- --- ---
(a) June 30, 2016 ratios are estimated.
(b) See Reconciliation of Non-GAAP Financial Measures.
CONSOLIDATED BALANCE SHEETS
Comerica Incorporated and Subsidiaries
June 30, March 31, December 31, June 30,
(in millions, except share data) 2016 2016 2015 2015
------------------------------- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited)
ASSETS
Cash and due from banks $1,172 $977 $1,157 $1,148
Interest-bearing deposits with banks 2,938 2,025 4,990 4,817
Other short-term investments 100 94 113 119
Investment securities available-for-
sale 10,712 10,607 10,519 8,267
Investment securities held-to-
maturity 1,807 1,907 1,981 1,952
Commercial loans 32,360 31,562 31,659 32,723
Real estate construction loans 2,553 2,290 2,001 1,795
Commercial mortgage loans 9,038 8,982 8,977 8,674
Lease financing 684 731 724 786
International loans 1,365 1,455 1,368 1,420
Residential mortgage loans 1,856 1,874 1,870 1,865
Consumer loans 2,524 2,483 2,485 2,478
-------------- ----- ----- ----- -----
Total loans 50,380 49,377 49,084 49,741
Less allowance for loan losses (729) (724) (634) (618)
------------------------------ ---- ---- ---- ----
Net loans 49,651 48,653 48,450 49,123
Premises and equipment 544 541 550 541
Accrued income and other assets 4,356 4,203 4,117 3,978
------------------------------- ----- ----- ----- -----
Total assets $71,280 $69,007 $71,877 $69,945
------------ ------- ------- ------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $28,559 $28,025 $30,839 $28,167
Money market and interest-bearing
checking deposits 22,539 22,872 23,532 23,786
Savings deposits 2,022 2,006 1,898 1,841
Customer certificates of deposit 3,230 3,401 3,552 4,367
Foreign office time deposits 24 47 32 99
---------------------------- --- --- --- ---
Total interest-bearing deposits 27,815 28,326 29,014 30,093
------------------------------- ------ ------ ------ ------
Total deposits 56,374 56,351 59,853 58,260
Short-term borrowings 12 514 23 56
Accrued expenses and other
liabilities 1,279 1,389 1,383 1,265
Medium- and long-term debt 5,921 3,109 3,058 2,841
-------------------------- ----- ----- ----- -----
Total liabilities 63,586 61,363 64,317 62,422
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 2,165 2,158 2,173 2,158
Accumulated other comprehensive loss (295) (328) (429) (396)
Retained earnings 7,157 7,097 7,084 6,908
Less cost of common stock in treasury
-54,247,325 shares at 6/30/16,
53,086,733 shares at 3/31/16,
52,457,113 shares at 12/31/15, and
49,803,515 shares at 6/30/15 (2,474) (2,424) (2,409) (2,288)
------------------------------------- ------ ------ ------ ------
Total shareholders' equity 7,694 7,644 7,560 7,523
-------------------------- ----- ----- ----- -----
Total liabilities and shareholders'
equity $71,280 $69,007 $71,877 $69,945
----------------------------------- ------- ------- ------- -------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
Comerica Incorporated and Subsidiaries
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
(in millions, except
per share data) 2016 2015 2016 2015
-------------------- ---- ---- ---- ----
INTEREST INCOME
Interest and fees on
loans $406 $388 $812 $766
Interest on investment
securities 62 53 124 106
Interest on short-
term investments 5 3 9 7
------------------ --- --- --- ---
Total interest income 473 444 945 879
INTEREST EXPENSE
Interest on deposits 10 11 20 22
Interest on medium-
and long-term debt 18 12 33 23
------------------- --- --- --- ---
Total interest expense 28 23 53 45
---------------------- --- --- --- ---
Net interest income 445 421 892 834
Provision for credit
losses 49 47 197 61
-------------------- --- --- --- ---
Net interest income
after provision for
credit losses 396 374 695 773
NONINTEREST INCOME
Card fees 77 69 151 132
Service charges on
deposit accounts 55 56 110 111
Fiduciary income 49 48 95 95
Commercial lending
fees 22 22 42 47
Letter of credit fees 13 13 26 26
Bank-owned life
insurance 9 10 18 19
Foreign exchange
income 11 9 21 19
Brokerage fees 5 4 9 8
Net securities losses (1) - (3) (2)
Other noninterest
income 29 27 46 54
----------------- --- --- --- ---
Total noninterest
income 269 258 515 509
NONINTEREST EXPENSES
Salaries and benefits
expense 247 251 495 504
Outside processing fee
expense 84 83 163 156
Net occupancy expense 39 39 77 77
Equipment expense 14 13 27 26
Restructuring charges 53 - 53 -
Software expense 30 24 59 47
FDIC insurance expense 14 9 25 18
Advertising expense 6 5 10 11
Litigation-related
expense - (30) - (29)
Other noninterest
expenses 32 39 70 78
----------------- --- --- --- ---
Total noninterest
expenses 519 433 979 888
----------------- --- --- --- ---
Income before income
taxes 146 199 231 394
Provision for income
taxes 42 64 67 125
-------------------- --- --- --- ---
NET INCOME 104 135 164 269
Less income allocated
to participating
securities 1 1 2 3
--------------------- --- --- --- ---
Net income
attributable to
common shares $103 $134 $162 $266
---------------- ---- ---- ---- ----
Earnings per common share:
Basic $0.60 $0.76 $0.94 $1.51
Diluted 0.58 0.73 0.92 1.46
Comprehensive income 137 109 298 285
Cash dividends
declared on common
stock 38 37 75 73
Cash dividends
declared per common
share 0.22 0.21 0.43 0.41
-------------------- ---- ---- ---- ----
CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
Comerica Incorporated and Subsidiaries
Second First Fourth Third Second Second Quarter 2016 Compared To:
Quarter Quarter Quarter Quarter Quarter First Quarter 2016 Second Quarter 2015
(in millions, except
per share data) 2016 2016 2015 2015 2015 Amount Percent Amount Percent
-------------------- ---- ---- ---- ---- ---- ------ ------- ------ -------
INTEREST INCOME
Interest and fees on
loans $406 $406 $395 $390 $388 $ - - % $18 5%
Interest on investment
securities 62 62 56 54 53 - - 9 18
Interest on short-
term investments 5 4 6 4 3 1 10 2 44
------------------ --- --- --- --- --- --- --- --- ---
Total interest income 473 472 457 448 444 1 - 29 7
INTEREST EXPENSE
Interest on deposits 10 10 10 11 11 - - (1) (11)
Interest on medium-
and long-term debt 18 15 14 15 12 3 20 6 49
------------------- --- --- --- --- --- --- --- --- ---
Total interest expense 28 25 24 26 23 3 10 5 22
---------------------- --- --- --- --- --- --- --- --- ---
Net interest income 445 447 433 422 421 (2) - 24 6
Provision for credit
losses 49 148 60 26 47 (99) (67) 2 5
-------------------- --- --- --- --- --- --- --- --- ---
Net interest income
after provision 396 299 373 396 374 97 33 22 6
for credit losses
NONINTEREST INCOME
Card fees 77 74 75 72 69 3 4 8 11
Service charges on
deposit accounts 55 55 55 57 56 - - (1) (3)
Fiduciary income 49 46 45 47 48 3 6 1 1
Commercial lending
fees 22 20 30 22 22 2 9 - -
Letter of credit fees 13 13 14 13 13 - - - -
Bank-owned life
insurance 9 9 11 10 10 - - (1) (4)
Foreign exchange
income 11 10 11 10 9 1 3 2 16
Brokerage fees 5 4 4 5 4 1 16 1 6
Net securities losses (1) (2) - - - 1 89 (1) n/m
Other noninterest
income 29 17 23 26 27 12 70 2 12
----------------- --- --- --- --- --- --- --- --- ---
Total noninterest
income 269 246 268 262 258 23 9 11 4
NONINTEREST EXPENSES
Salaries and benefits
expense 247 248 262 243 251 (1) (1) (4) (2)
Outside processing fee
expense 84 79 81 84 83 5 7 1 2
Net occupancy expense 39 38 41 41 39 1 4 - -
Equipment expense 14 13 14 13 13 1 6 1 7
Restructuring charges 53 - - - - 53 n/m 53 n/m
Software expense 30 29 26 26 24 1 7 6 28
FDIC insurance expense 14 11 10 9 9 3 14 5 55
Advertising expense 6 4 7 6 5 2 93 1 22
Litigation-related
expense - - - (3) (30) - - 30 n/m
Other noninterest
expenses 32 38 43 40 39 (6) (17) (7) (19)
----------------- --- --- --- --- --- --- --- ---
Total noninterest
expenses 519 460 484 459 433 59 13 86 20
----------------- --- --- --- --- --- --- --- --- ---
Income before income
taxes 146 85 157 199 199 61 73 (53) (27)
Provision for income
taxes 42 25 41 63 64 17 68 (22) (34)
-------------------- --- --- --- --- --- --- --- --- ---
NET INCOME 104 60 116 136 135 44 74 (31) (23)
Less income allocated
to participating
securities 1 1 1 2 1 - - - -
--------------------- --- --- --- --- --- --- --- --- ---
Net income
attributable to
common shares $103 $59 $115 $134 $134 $44 74% $(31) (23)%
---------------- ---- --- ---- ---- ---- --- --- ---- ----
Earnings per common share:
Basic $0.60 $0.34 $0.65 $0.76 $0.76 $0.26 76% $(0.16) (21)%
Diluted 0.58 0.34 0.64 0.74 0.73 0.24 71 (0.15) (21)
Comprehensive income 137 161 32 187 109 (24) (15) 28 27
Cash dividends
declared on common
stock 38 37 37 37 37 1 4 1 7
Cash dividends
declared per common
share 0.22 0.21 0.21 0.21 0.21 0.01 5 0.01 5
-------------------- ---- ---- ---- ---- ---- ---- --- ---- ---
n/m - not meaningful
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES (unaudited)
Comerica Incorporated and Subsidiaries
2016 2015
---- ----
(in millions) 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
------------ ------- ------- ------- ------- -------
Balance at beginning of
period $724 $634 $622 $618 $601
Loan charge-offs:
Commercial 48 72 73 30 17
Commercial mortgage - - 1 - 2
Lease financing - - - - 1
International 4 3 - 1 11
Residential mortgage - - - - 1
Consumer 2 2 2 3 3
-------- --- --- --- --- ---
Total loan charge-offs 54 77 76 34 35
Recoveries on loans previously charged-
off:
Commercial 9 12 6 8 10
Real estate construction - - - - 1
Commercial mortgage 2 12 11 2 5
Residential mortgage - - 1 - -
Consumer 1 1 7 1 1
-------- --- --- --- --- ---
Total recoveries 12 25 25 11 17
---------------- --- --- --- --- ---
Net loan charge-offs 42 52 51 23 18
Provision for loan losses 47 141 63 28 35
Foreign currency
translation adjustment - 1 - (1) -
----------------------- --- --- --- --- ---
Balance at end of period $729 $724 $634 $622 $618
------------------------ ---- ---- ---- ---- ----
Allowance for loan losses
as a percentage of total
loans 1.45% 1.47% 1.29% 1.27% 1.24%
Net loan charge-offs as
a percentage of average
total loans 0.34 0.43 0.42 0.19 0.15
------------------------ ---- ---- ---- ---- ----
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LENDING-RELATED COMMITMENTS (unaudited)
Comerica Incorporated and Subsidiaries
2016 2015
---- ----
(in millions) 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
------------ ------- ------- ------- ------- -------
Balance at
beginning of
period $46 $45 $48 $50 $39
Charge-offs on
lending-related
commitments (a) (5) (6) - - (1)
Provision for
credit losses on
lending-related
commitments 2 7 (3) (2) 12
----------------- --- --- --- --- ---
Balance at end of
period $43 $46 $45 $48 $50
----------------- --- --- --- --- ---
Unfunded lending-
related
commitments sold $12 $11 $ - $ - $12
----------------- --- --- --- --- --- --- ---
(a) Charge-offs result from the sale of unfunded lending-related commitments.
NONPERFORMING ASSETS (unaudited)
Comerica Incorporated and Subsidiaries
2016 2015
---- ----
(in millions) 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
------------ ------- ------- ------- ------- -------
SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS
Nonaccrual loans:
Business loans:
Commercial $482 $547 $238 $214 $186
Real estate construction - - 1 1 1
Commercial mortgage 44 47 60 66 77
Lease financing 6 6 6 8 11
International 18 27 8 8 9
Total nonaccrual business
loans 550 627 313 297 284
Retail loans:
Residential mortgage 26 26 27 31 35
Consumer:
Home equity 28 27 27 28 29
Other consumer 1 1 - 1 1
-------------- --- --- --- --- ---
Total consumer 29 28 27 29 30
-------------- --- --- --- --- ---
Total nonaccrual retail
loans 55 54 54 60 65
----------------------- --- --- --- --- ---
Total nonaccrual loans 605 681 367 357 349
Reduced-rate loans 8 8 12 12 12
------------------ --- --- --- --- ---
Total nonperforming loans 613 689 379 369 361
Foreclosed property 22 25 12 12 9
------------------- --- --- --- --- ---
Total nonperforming assets $635 $714 $391 $381 $370
-------------------------- ---- ---- ---- ---- ----
Nonperforming loans as a
percentage of total loans 1.22% 1.40% 0.77% 0.75% 0.72%
Nonperforming assets as a
percentage of total loans 1.26 1.45 0.80 0.78 0.74
and foreclosed property
Allowance for loan losses as
a percentage of total 119 105 167 169 171
nonperforming loans
Loans past due 90 days or
more and still accruing $35 $13 $17 $5 $18
------------------------- --- --- --- --- ---
ANALYSIS OF NONACCRUAL LOANS
Nonaccrual loans at
beginning of period $681 $367 $357 $349 $266
Loans transferred to
nonaccrual (a) 107 446 105 69 145
Nonaccrual business loan
gross charge-offs (b) (52) (75) (49) (31) (31)
Nonaccrual business loans
sold (c) (40) (21) - - (1)
Payments/Other (d) (91) (36) (46) (30) (30)
------------------ --- --- --- --- ---
Nonaccrual loans at end of
period $605 $681 $367 $357 $349
-------------------------- ---- ---- ---- ---- ----
(a) Based on an analysis of nonaccrual loans with book balances greater than $2 million.
(b) Analysis of gross loan charge-offs:
Nonaccrual business loans $52 $75 $49 $31 $31
Performing business loans - - 25 - -
Consumer and residential
mortgage loans 2 2 2 3 4
--- --- --- --- ---
Total gross loan charge-
offs $54 $77 $76 $34 $35
--- --- --- --- ---
(c) Analysis of loans sold:
Nonaccrual business loans $40 $21 $ - $ - $1
Performing criticized loans - - 3 - -
--- --- --- --- ---
Total criticized loans sold $40 $21 $3 $ - $1
--- --- --- --- --- ---
(d) 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 (unaudited)
Comerica Incorporated and Subsidiaries
Six Months Ended
----------------
June 30, 2016 June 30, 2015
------------- -------------
Average Average Average Average
(dollar amounts in
millions) Balance Interest Rate (a) Balance Interest Rate (a)
------------------ ------- -------- ------- ------- -------- -------
Commercial loans $31,162 $500 3.24% $31,442 $475 3.06%
Real estate construction
loans 2,272 41 3.64 1,872 32 3.43
Commercial mortgage
loans 8,997 158 3.53 8,627 146 3.41
Lease financing 728 10 2.66 796 12 3.12
International loans 1,408 26 3.64 1,482 27 3.69
Residential mortgage
loans 1,886 36 3.85 1,866 35 3.77
Consumer loans 2,478 41 3.35 2,409 39 3.23
-------------- ----- --- ---- ----- --- ----
Total loans 48,931 812 3.34 48,494 766 3.19
Mortgage-backed
securities (b) 9,341 102 2.21 9,064 101 2.24
Other investment
securities 3,004 22 1.50 858 5 1.13
---------------- ----- --- ---- --- --- ----
Total investment
securities (b) 12,345 124 2.04 9,922 106 2.15
Interest-bearing
deposits with banks 3,478 9 0.50 5,216 7 0.25
Other short-term
investments 106 - 0.76 100 - 0.75
---------------- --- --- ---- --- --- ----
Total earning assets 64,860 945 2.94 63,732 879 2.79
Cash and due from banks 1,071 1,034
Allowance for loan
losses (714) (607)
Accrued income and other
assets 4,731 4,693
----- -----
Total assets $69,948 $68,852
------- -------
Money market and
interest-bearing
checking deposits $22,989 13 0.11 $23,809 13 0.11
Savings deposits 1,973 - 0.02 1,810 - 0.02
Customer certificates of
deposit 3,399 7 0.40 4,423 8 0.37
Foreign office time
deposits 40 - 0.34 121 1 1.36
------------------- --- --- ---- --- --- ----
Total interest-bearing
deposits 28,401 20 0.14 30,163 22 0.14
Short-term borrowings 262 - 0.45 94 - 0.05
Medium- and long-term
debt 4,083 33 1.62 2,675 23 1.78
--------------------- ----- --- ---- ----- --- ----
Total interest-bearing
sources 32,746 53 0.32 32,932 45 0.28
Noninterest-bearing
deposits 28,214 27,033
Accrued expenses and
other liabilities 1,345 1,405
Total shareholders'
equity 7,643 7,482
----- -----
Total liabilities and
shareholders' equity $69,948 $68,852
------- -------
Net interest income/rate spread $892 2.62 $834 2.51
---- ----
Impact of net noninterest-bearing
sources of funds 0.16 0.14
--------------------------------- ---- ----
Net interest margin (as a percentage of
average earning assets) 2.78% 2.65%
--------------------------------------- ---- ----
(a) Fully taxable equivalent.
(b) Includes investment securities available-for-sale and investment securities held-to-maturity.
ANALYSIS OF NET INTEREST INCOME (unaudited)
Comerica Incorporated and Subsidiaries
Three Months Ended
------------------
June 30, 2016 March 31, 2016 June 30, 2015
------------- -------------- -------------
Average Average Average Average Average Average
(dollar amounts in
millions) Balance Interest Rate (a) Balance Interest Rate (a) Balance Interest Rate (a)
------------------ ------- -------- ------- ------- -------- ------- ------- -------- -------
Commercial loans $31,511 $251 3.23% $30,814 $249 3.25% $31,788 $242 3.07%
Real estate construction
loans 2,429 22 3.62 2,114 19 3.66 1,807 16 3.51
Commercial mortgage
loans 9,033 78 3.47 8,961 80 3.59 8,672 73 3.38
Lease financing 730 4 1.98 726 6 3.33 795 6 3.19
International loans 1,396 13 3.63 1,419 13 3.65 1,453 13 3.68
Residential mortgage
loans 1,880 17 3.76 1,892 19 3.94 1,877 18 3.78
Consumer loans 2,490 21 3.37 2,466 20 3.33 2,441 20 3.25
-------------- ----- --- ---- ----- --- ---- ----- --- ----
Total loans 49,469 406 3.31 48,392 406 3.38 48,833 388 3.20
Mortgage-backed
securities (b) 9,326 51 2.21 9,356 51 2.22 9,057 50 2.23
Other investment
securities 3,008 11 1.50 3,001 11 1.50 879 3 1.16
---------------- ----- --- ---- ----- --- ---- --- --- ----
Total investment
securities (b) 12,334 62 2.03 12,357 62 2.05 9,936 53 2.13
Interest-bearing
deposits with banks 3,690 5 0.50 3,265 4 0.50 5,110 3 0.25
Other short-term
investments 104 - 0.58 109 - 0.93 102 - 0.42
---------------- --- --- ---- --- --- ---- --- --- ----
Total earning assets 65,597 473 2.91 64,123 472 2.97 63,981 444 2.79
Cash and due from banks 1,074 1,068 1,041
Allowance for loan
losses (749) (680) (613)
Accrued income and other
assets 4,746 4,717 4,554
----- ----- -----
Total assets $70,668 $69,228 $68,963
------- ------- -------
Money market and
interest-bearing
checking deposits $22,785 6 0.11 $23,193 6 0.11 $23,659 6 0.11
Savings deposits 2,010 - 0.02 1,936 - 0.02 1,834 - 0.02
Customer certificates of
deposit 3,320 4 0.40 3,477 4 0.40 4,422 4 0.37
Foreign office time
deposits 30 - 0.35 50 - 0.33 118 1 1.26
------------------- --- --- ---- --- --- ---- --- --- ----
Total interest-bearing
deposits 28,145 10 0.14 28,656 10 0.14 30,033 11 0.14
Short-term borrowings 159 - 0.45 365 - 0.45 78 - 0.04
Medium- and long-term
debt 5,072 18 1.42 3,093 15 1.94 2,661 12 1.83
--------------------- ----- --- ---- ----- --- ---- ----- --- ----
Total interest-bearing
sources 33,376 28 0.33 32,114 25 0.32 32,772 23 0.28
Noninterest-bearing
deposits 28,376 28,052 27,365
Accrued expenses and
other liabilities 1,262 1,430 1,314
Total shareholders'
equity 7,654 7,632 7,512
----- ----- -----
Total liabilities and
shareholders' equity $70,668 $69,228 $68,963
------- ------- -------
Net interest income/rate spread $445 2.58 $447 2.65 $421 2.51
---- ---- ----
Impact of net noninterest-bearing
sources of funds 0.16 0.16 0.14
--------------------------------- ---- ---- ----
Net interest margin (as a percentage of
average earning assets) 2.74% 2.81% 2.65%
--------------------------------------- ---- ---- ----
(a) Fully taxable equivalent.
(b) Includes investment securities available-for-sale and investment securities held-to-maturity.
CONSOLIDATED STATISTICAL DATA (unaudited)
Comerica Incorporated and Subsidiaries
June 30, March 31, December 31, September 30, June 30,
(in millions, except per
share data) 2016 2016 2015 2015 2015
------------------------ ---- ---- ---- ---- ----
Commercial loans:
Floor plan $4,120 $3,902 $3,939 $3,538 $3,840
Other 28,240 27,660 27,720 28,239 28,883
----- ------ ------ ------ ------ ------
Total commercial loans 32,360 31,562 31,659 31,777 32,723
Real estate construction
loans 2,553 2,290 2,001 1,874 1,795
Commercial mortgage loans 9,038 8,982 8,977 8,787 8,674
Lease financing 684 731 724 751 786
International loans 1,365 1,455 1,368 1,382 1,420
Residential mortgage
loans 1,856 1,874 1,870 1,880 1,865
Consumer loans:
Home equity 1,779 1,738 1,720 1,714 1,682
Other consumer 745 745 765 777 796
-------------- --- --- --- --- ---
Total consumer loans 2,524 2,483 2,485 2,491 2,478
-------------------- ----- ----- ----- ----- -----
Total loans $50,380 $49,377 $49,084 $48,942 $49,741
----------- ------- ------- ------- ------- -------
Goodwill $635 $635 $635 $635 $635
Core deposit intangible 9 9 10 10 11
Other intangibles 3 4 4 4 4
Common equity tier 1
capital (a) 7,346 7,331 7,350 7,327 7,280
Risk-weighted assets (a) 70,097 69,319 69,731 69,718 69,967
Common equity tier 1 and
tier 1 risk-based
capital ratio (a) 10.48% 10.58% 10.54% 10.51% 10.40%
Total risk-based capital
ratio (a) 12.73 12.84 12.69 12.82 12.38
Leverage ratio (a) 10.41 10.60 10.22 10.28 10.56
Common equity ratio 10.79 11.08 10.52 10.73 10.76
Tangible common equity
ratio (b) 9.98 10.23 9.70 9.91 9.92
Common shareholders'
equity per share of
common stock $44.24 $43.66 $43.03 $43.02 $42.18
Tangible common equity
per share of common
stock (b) 40.52 39.96 39.33 39.36 38.53
Market value per share for the quarter:
High 47.55 41.74 47.44 52.93 53.45
Low 36.27 30.48 39.52 40.01 44.38
Close 41.13 37.87 41.83 41.10 51.32
Quarterly ratios:
Return on average common
shareholders' equity 5.44% 3.13% 6.08% 7.19% 7.21%
Return on average assets 0.59 0.34 0.64 0.76 0.79
Efficiency ratio (c) 72.48 66.07 69.00 66.98 63.49
Number of banking centers 473 477 477 477 477
Number of employees -
full time equivalent 8,792 8,869 8,880 8,941 8,901
--------------------- ----- ----- ----- ----- -----
(a) June 30, 2016
amounts and
ratios are
estimated.
See
Reconciliation
of Non-GAAP
Financial
(b) 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
June 30, December 31, June 30,
(in
millions,
except
share
data) 2016 2015 2015
---------- ---- ---- ----
ASSETS
Cash and
due from
subsidiary
bank $8 $4 $7
Short-
term
investments
with
subsidiary
bank 563 569 861
Other
short-
term
investments 87 89 94
Investment
in
subsidiaries,
principally
banks 7,666 7,523 7,500
Premises
and
equipment 2 3 2
Other
assets 163 137 122
------- --- --- ---
Total
assets $8,489 $8,325 $8,586
------- ------ ------ ------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Medium-
and long-
term debt $632 $608 $903
Other
liabilities 163 157 160
------------ --- --- ---
Total
liabilities 795 765 1,063
Common stock -$5 par
value:
Authorized -325,000,000
shares
Issued -
228,164,824
shares 1,141 1,141 1,141
Capital
surplus 2,165 2,173 2,158
Accumulated
other
comprehensive
loss (295) (429) (396)
Retained
earnings 7,157 7,084 6,908
Less cost
of common and
stock in 49,803,515
treasury shares at
- 6/30/15
54,247,325
shares at
6/30/16,
52,457,113
shares at
12/31/15 (2,474) (2,409) (2,288)
----------- ------ ------ ------
Total
shareholders'
equity 7,694 7,560 7,523
-------------- ----- ----- -----
Total
liabilities
and
shareholders'
equity $8,489 $8,325 $8,586
-------------- ------ ------ ------
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, 2014 179.0 $1,141 $2,188 $(412) $6,744 $(2,259) $7,402
Net income - - - - 269 - 269
Other comprehensive
income, net of tax - - - 16 - - 16
Cash dividends
declared on common
stock ($0.41 per
share) - - - - (73) - (73)
Purchase of common
stock (2.5) - - - - (115) (115)
Purchase and
retirement of
warrants - - (10) - - - (10)
Net issuance of common
stock under employee
stock plans 0.9 - (23) - (10) 43 10
Net issuance of common
stock for warrants 1.0 - (21) - (22) 43 -
Share-based
compensation - - 24 - - - 24
BALANCE AT JUNE 30,
2015 178.4 $1,141 $2,158 $(396) $6,908 $(2,288) $7,523
------------------- ----- ------ ------ ----- ------ ------- ------
BALANCE AT DECEMBER
31, 2015 175.7 $1,141 $2,173 $(429) $7,084 $(2,409) $7,560
Net income - - - - 164 - 164
Other comprehensive
income, net of tax - - - 134 - - 134
Cash dividends
declared on common
stock ($0.43 per
share) - - - - (75) - (75)
Purchase of common
stock (2.9) - - - - (114) (114)
Net issuance of common
stock under employee
stock plans 1.1 - (33) - (16) 49 -
Share-based
compensation - - 25 - - - 25
BALANCE AT JUNE 30,
2016 173.9 $1,141 $2,165 $(295) $7,157 $(2,474) $7,694
------------------- ----- ------ ------ ----- ------ ------- ------
BUSINESS SEGMENT FINANCIAL RESULTS (unaudited)
Comerica Incorporated and Subsidiaries
(dollar amounts
in millions) Business Retail Wealth
Three Months
Ended June 30,
2016 Bank Bank Management Finance Other Total
--------------- ---- ---- ---------- ------- ----- -----
Earnings summary:
Net interest
income
(expense) $355 $155 $42 $(111) $4 $445
Provision for
credit losses 46 1 3 - (1) 49
Noninterest
income 142 48 62 13 4 269
Noninterest
expenses 222 205 81 2 9 519
Provision
(benefit) for
income taxes 75 (1) 7 (38) (1) 42
--- --- --- --- ---
Net income
(loss) $154 $(2) $13 $(62) $1 $104
---- --- --- ---- --- ----
Net credit-
related charge-
offs $42 $1 $4 $ - $ - $47
Selected average balances:
Assets $39,617 $6,557 $5,215 $14,135 $5,144 $70,668
Loans 38,574 5,879 5,016 - - 49,469
Deposits 28,429 23,546 4,213 62 271 56,521
Statistical data:
Return on
average assets
(a) 1.55% (0.03)% 1.02% N/M N/M 0.59%
Efficiency ratio
(b) 44.46 101.12 77.65 N/M N/M 72.48
----- ------ ----- --- --- -----
Business Retail Wealth
Three Months
Ended March 31,
2016 Bank Bank Management Finance Other Total
---------------- ---- ---- ---------- ------- ----- -----
Earnings summary:
Net interest
income
(expense) $362 $156 $43 $(118) $4 $447
Provision for
credit losses 151 3 (5) - (1) 148
Noninterest
income 135 43 59 14 (5) 246
Noninterest
expenses 207 179 73 2 (1) 460
Provision
(benefit) for
income taxes 45 6 12 (40) 2 25
--- --- --- --- ---
Net income
(loss) $94 $11 $22 $(66) $(1) $60
--- --- --- ---- --- ---
Net credit-
related charge-
offs
(recoveries) $57 $2 $(1) $ - $ - $58
Selected average balances:
Assets $38,635 $6,544 $5,162 $14,162 $4,725 $69,228
Loans 37,561 5,867 4,964 - - 48,392
Deposits 29,108 23,110 4,171 103 216 56,708
Statistical data:
Return on
average assets
(a) 0.97% 0.19% 1.69% N/M N/M 0.34%
Efficiency ratio
(b) 41.62 88.91 71.47 N/M N/M 66.07
---------------- ----- ----- ----- --- --- -----
Business Retail Wealth
Three Months
Ended June 30,
2015 Bank Bank Management Finance Other Total
--------------- ---- ---- ---------- ------- ----- -----
Earnings summary:
Net interest
income
(expense) $373 $155 $45 $(154) $2 $421
Provision for
credit losses 61 (8) (9) - 3 47
Noninterest
income 138 46 60 14 - 258
Noninterest
expenses 175 181 74 2 1 433
Provision
(benefit) for
income taxes 94 10 14 (53) (1) 64
--- --- --- --- --- ---
Net income
(loss) $181 $18 $26 $(89) $(1) $135
---- --- --- ---- --- ----
Net credit-
related charge-
offs
(recoveries) $23 $1 $(5) $ - $ - $19
Selected average balances:
Assets $39,134 $6,459 $5,153 $11,697 $6,520 $68,963
Loans 38,109 5,770 4,954 - - 48,833
Deposits 30,229 22,747 4,060 93 269 57,398
Statistical data:
Return on
average assets
(a) 1.86% 0.30% 2.01% N/M N/M 0.79%
Efficiency ratio
(b) 33.96 89.88 70.28 N/M N/M 63.49
---------------- ----- ----- ----- --- --- -----
(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
(fully
taxable
equivalent
basis) and
noninterest
income
excluding
net
securities
gains.
N/M - Not Meaningful
MARKET SEGMENT FINANCIAL RESULTS (unaudited)
Comerica Incorporated and Subsidiaries
(dollar amounts in millions) Other Finance
Three Months
Ended June 30,
2016 Michigan California Texas Markets & Other Total
--------------- -------- ---------- ----- ------- ------- -----
Earnings summary:
Net interest
income
(expense) $166 $178 $119 $89 $(107) $445
Provision for
credit losses 3 17 32 (2) (1) 49
Noninterest
income 81 39 31 101 17 269
Noninterest
expenses 159 120 113 116 11 519
Provision
(benefit) for
income taxes 28 30 2 21 (39) 42
--- --- --- --- --- ---
Net income
(loss) $57 $50 $3 $55 $(61) $104
--- --- --- --- ---- ----
Net credit-
related charge-
offs
(recoveries) $ - $17 $31 $(1) $ - $47
Selected average balances:
Assets $13,299 $17,997 $11,287 $8,806 $19,279 $70,668
Loans 12,660 17,708 10,840 8,261 - 49,469
Deposits 21,553 16,933 10,052 7,650 333 56,521
Statistical data:
Return on
average assets
(a) 1.01% 1.10% 0.11% 2.52% N/M 0.59%
Efficiency ratio
(b) 64.13 55.30 74.91 60.98 N/M 72.48
---------------- ----- ----- ----- ----- --- -----
Other Finance
Three Months
Ended March 31,
2016 Michigan California Texas Markets & Other Total
---------------- -------- ---------- ----- ------- ------- -----
Earnings summary:
Net interest
income
(expense) $175 $177 $123 $86 $(114) $447
Provision for
credit losses (6) (6) 169 (8) (1) 148
Noninterest
income 76 38 30 93 9 246
Noninterest
expenses 151 104 100 104 1 460
Provision
(benefit) for
income taxes 35 44 (40) 24 (38) 25
--- --- --- --- --- ---
Net income
(loss) $71 $73 $(76) $59 $(67) $60
--- --- ---- --- ---- ---
Net credit-
related charge-
offs
(recoveries) $5 $8 $47 $(2) $ - $58
Selected average balances:
Assets $13,402 $17,541 $11,295 $8,103 $18,887 $69,228
Loans 12,774 17,283 10,763 7,572 - 48,392
Deposits 21,696 16,654 10,374 7,665 319 56,708
Statistical data:
Return on
average assets
(a) 1.26% 1.66% (2.54)% 2.84% N/M 0.34%
Efficiency ratio
(b) 59.59 48.10 65.37 58.36 N/M 66.07
---------------- ----- ----- ----- ----- --- -----
Other Finance
Three Months
Ended June 30,
2015 Michigan California Texas Markets & Other Total
--------------- -------- ---------- ----- ------- ------- -----
Earnings summary:
Net interest
income
(expense) $178 $180 $130 $85 $(152) $421
Provision for
credit losses (13) 4 43 10 3 47
Noninterest
income 86 36 30 92 14 258
Noninterest
expenses 129 99 93 109 3 433
Provision
(benefit) for
income taxes 50 42 10 16 (54) 64
--- --- --- --- --- ---
Net income
(loss) $98 $71 $14 $42 $(90) $135
--- --- --- --- ---- ----
Net credit-
related charge-
offs
(recoveries) $(1) $6 $5 $9 $ - $19
Selected average balances:
Assets $13,851 $16,696 $11,878 $8,321 $18,217 $68,963
Loans 13,290 16,429 11,254 7,860 - 48,833
Deposits 21,706 17,275 10,959 7,096 362 57,398
Statistical data:
Return on
average assets
(a) 1.73% 1.54% 0.45% 2.03% N/M 0.79%
Efficiency ratio
(b) 48.09 45.90 58.13 61.56 N/M 63.49
---------------- ----- ----- ----- ----- --- -----
(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
(fully
taxable
equivalent
basis) and
noninterest
income
excluding
net
securities
gains.
N/M - Not Meaningful
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)
Comerica Incorporated and Subsidiaries
June 30, March 31, December 31, September 30, June 30,
(dollar amounts in
millions) 2016 2016 2015 2015 2015
------------------ ---- ---- ---- ---- ----
Tangible Common Equity Ratio:
Common
shareholders'
equity $7,694 $7,644 $7,560 $7,622 $7,523
Less:
Goodwill 635 635 635 635 635
Other intangible
assets 12 13 14 14 15
--- --- --- --- ---
Tangible common
equity $7,047 $6,996 $6,911 $6,973 $6,873
--------------- ------ ------ ------ ------ ------
Total assets $71,280 $69,007 $71,877 $71,012 $69,945
Less:
Goodwill 635 635 635 635 635
Other intangible
assets 12 13 14 14 15
--- --- --- --- ---
Tangible assets $70,633 $68,359 $71,228 $70,363 $69,295
--------------- ------- ------- ------- ------- -------
Common equity ratio 10.79% 11.08% 10.52% 10.73% 10.76%
Tangible common
equity ratio 9.98 10.23 9.70 9.91 9.92
--------------- ---- ----- ---- ---- ----
Tangible Common Equity per Share of
Common Stock:
Common
shareholders'
equity $7,694 $7,644 $7,560 $7,622 $7,523
Tangible common
equity 7,047 6,996 6,911 6,973 6,873
--------------- ----- ----- ----- ----- -----
Shares of common
stock outstanding
(in millions) 174 175 176 177 178
------------------ --- --- --- --- ---
Common
shareholders'
equity per share
of common stock $44.24 $43.66 $43.03 $43.02 $42.18
Tangible common
equity per share
of common stock 40.52 39.96 39.33 39.36 38.53
----------------- ----- ----- ----- ----- -----
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
