Strong Loan Growth in High Growth Markets as Corporate Headquarters Relocates to Texas
DALLAS, Oct. 17 /PRNewswire-FirstCall/ -- Comerica Incorporated (NYSE: CMA) today reported third quarter 2007 income from continuing operations of $180 million, or $1.17 per diluted share, compared to $196 million, or $1.25 per diluted share, for the second quarter 2007 and $195 million, or $1.20 per diluted share, for the third quarter 2006.
(dollar amounts in millions, except
per share data) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Net interest income $503 $509 $502
Provision for loan losses 45 36 15
Noninterest income 230 225 195
Noninterest expenses 423 411 399
Income from continuing operations,
net of tax 180 196 195
Net income 181 196 200
Diluted EPS from continuing
operations 1.17 1.25 1.20
Diluted EPS from discontinued
operations* 0.01 - 0.03
Diluted EPS 1.18 1.25 1.23
Return on average common
shareholders' equity from
continuing operations 14.24 % 15.41 % 15.00 %
Return on average common
shareholders' equity 14.38 15.41 15.38
Net interest margin 3.66 3.76 3.79
* In the fourth quarter 2006, Comerica sold its stake in Munder Capital
Management (Munder) and reports Munder as a discontinued operation in
all periods presented.
Income from continuing operations for the first nine months of 2007 was $565 million, or $3.61 per diluted share, compared to $597 million, or $3.65 per diluted share, for the first nine months of 2006. The provision for loan losses was $104 million for the first nine months of 2007, compared to $15 million for the same period in 2006. Return on average common shareholders' equity from continuing operations was 14.83 percent for the first nine months of 2007 and 15.48 percent for the same period in 2006.
"We had strong loan growth in our high-growth markets, particularly Texas," said Ralph W. Babb Jr., chairman and chief executive officer. "Despite a challenging external environment, we continued to advance our strategy to diversify our customer base and extend our reach in our high-growth markets, including the relocation of our corporate headquarters to Dallas, Texas. The commercial real estate market in Michigan and California continued to be challenged in the third quarter, but our enhanced credit process has positioned us well to manage these credits throughout the cycle."
Third Quarter 2007 Compared to Second Quarter 2007
First Nine Months of 2007 Compared to First Nine Months of 2006
Net Interest Income and Net Interest Margin
(dollar amounts in millions) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Net interest income $503 $509 $502
Net interest margin 3.66 % 3.76 % 3.79 %
Selected average balances:
Total earning assets $54,641 $54,304 $52,500
Total loans 49,874 49,793 48,125
Total loans, excluding FSD loans
(primarily low-rate) 48,683 48,213 46,032
Total interest-bearing deposits 30,276 30,049 29,133
Total noninterest-bearing deposits 10,840 11,633 12,723
Total noninterest-bearing deposits,
excluding FSD 8,265 8,356 8,644
Noninterest Income
Noninterest income was $230 million for the third quarter 2007, compared to $225 million for the second quarter 2007 and $195 million for the third quarter 2006. The $5 million increase in noninterest income in the third quarter 2007, compared to the second quarter 2007, reflected positive trends in commercial lending fees, letter of credit fees, foreign exchange income, brokerage fees and investment banking fees, an increase in net income (loss) from principal investing and warrants ($5 million), and securities gains of $4 million, partially offset by an $8 million decrease in deferred compensation plan asset returns. Net securities gains of $4 million included several items, the largest of which was a $3 million gain from the sale of put rights obtained in a nonaccrual loan workout several years ago. Certain categories of noninterest income are highlighted in the table below.
(in millions) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Net income (loss) from principal
investing and warrants $11 $6 $-
Net securities gains 4 - -
Net gain (loss) on sales of
businesses - 2 (7)
Other noninterest income
Deferred compensation asset
returns* (2) 6 1
* Compensation deferred by Comerica officers is invested in stocks and
bonds to reflect the investment selections of the officers. Income
(loss) earned on these assets is reported in noninterest income and the
offsetting increase (decrease) in the liability is reported in salaries
expense.
Noninterest Expenses
Noninterest expenses were $423 million for the third quarter 2007, compared to $411 million for the second quarter 2007 and $399 million for the third quarter 2006. The $12 million increase in noninterest expenses in the third quarter 2007, compared to the second quarter 2007, reflected a $15 million change in litigation and operational losses and a $3 million increase in costs related to other real estate, partially offset by decreases in incentives ($5 million) and deferred compensation plan costs ($8 million) (both contributing to the $8 million decrease in salaries in the third quarter 2007). Litigation and operational losses reflected a litigation-related insurance settlement of $8 million in the second quarter 2007. In addition, noninterest expenses included approximately $2 million of costs related to the previously announced relocation of Comerica's headquarters to Dallas, Texas, in both the third and second quarters of 2007, reflected in salaries and other noninterest expenses. Certain categories of noninterest expenses are highlighted in the table below.
(in millions) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Salaries
Regular salaries $162 $156 $156
Severance - 1 1
Incentives 35 40 31
Deferred compensation plan costs (2) 6 1
Share-based compensation 12 12 13
Total salaries 207 215 202
Employee benefits 49 50 48
Litigation and operational losses 6 (9) 3
Provision for credit losses on
lending-related commitments - (2) (5)
Credit Quality
"In light of the increased stress on our commercial real estate portfolios, particularly in Michigan and California, we have taken additional reserves and realigned internal resources to continue our active management of these credits," said Babb.
(dollar amounts in millions) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Net loan charge-offs $40 $30 $3
Net lending-related commitment
charge-offs - - 5
Total net credit-related
charge-offs 40 30 8
Net loan charge-offs/Average total
loans 0.32 % 0.24 % 0.02 %
Net credit-related charge-
offs/Average total loans 0.32 0.24 0.06
Provision for loan losses $45 $36 $15
Provision for credit losses on
lending-related commitments - (2) (5)
Total provision for credit losses 45 34 10
Nonperforming assets (NPAs) 291 259 197
NPAs/Total loans and foreclosed
property 0.59 % 0.53 % 0.42 %
Allowance for loan losses $512 $507 $493
Allowance for credit losses on
lending-related commitments* 19 19 31
Total allowance for credit
losses 531 526 524
Allowance for loan losses/Total loans 1.03 % 1.04 % 1.06 %
Allowance for loan losses/NPAs 176 195 251
*Included in "Accrued expenses and other liabilities" on the consolidated
balance sheets.
Balance Sheet and Capital Management
Total assets and common shareholders' equity were $59.8 billion and $5.1 billion, respectively, at September 30, 2007, compared to $58.6 billion and $5.0 billion, respectively, at June 30, 2007. There were approximately 151 million shares outstanding at September 30, 2007, compared to 153 million shares outstanding at June 30, 2007. Open market share repurchases for the current and prior quarter are shown in the following table:
3rd Qtr '07 2nd Qtr '07
Number Number
(in millions) of Shares Amount of Shares Amount
Open market share repurchases 2.0 $109 3.5 $217
Comerica's third quarter 2007 estimated Tier 1 common, Tier 1 and total risk-based capital ratios were 7.00 percent, 7.67 percent and 11.43 percent, respectively.
Full-Year 2007 Outlook Compared to Full Year 2006 for Continuing Operations
Business Segments
Comerica's continuing operations are strategically aligned into three major business segments: the Business Bank, the Retail Bank, and Wealth & Institutional Management. The Finance Division also is included 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, 2007 and are presented on a fully taxable equivalent (FTE) basis. The accompanying narrative addresses third quarter 2007 results compared to second quarter 2007.
The following table presents net income (loss) by business segment.
(dollar amounts in millions) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Business Bank $134 72 % $136 73 % $147 73 %
Retail Bank 32 17 35 19 40 19
Wealth & Institutional
Management 20 11 16 8 16 8
186 100 % 187 100 % 203 100 %
Finance 2 - (5)
Other* (7) 9 2
Total $181 $196 $200
* Includes discontinued operations and items not directly associated with
the three major business segments or the Finance Division.
Business Bank
(dollar amounts in millions) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Net interest income (FTE) $332 $338 $331
Provision for loan losses 43 32 6
Noninterest income 82 68 56
Noninterest expenses 177 176 171
Net income 134 136 147
Net credit-related charge-offs 30 24 2
Selected average balances:
Assets 40,796 40,848 39,690
Loans 39,746 39,824 38,473
FSD loans 1,191 1,580 2,093
Deposits 15,948 16,432 17,184
FSD deposits 3,789 4,505 5,543
Net interest margin 3.31 % 3.39 % 3.42 %
Retail Bank
(dollar amounts in millions) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Net interest income (FTE) $159 $160 $161
Provision for loan losses 7 4 4
Noninterest income 56 57 53
Noninterest expenses 160 160 151
Net income 32 35 40
Net credit-related charge-offs 9 6 6
Selected average balances:
Assets 6,854 6,828 6,766
Loans 6,111 6,100 6,067
Deposits 17,144 17,191 16,751
Net interest margin 3.68 % 3.73 % 3.81 %
Wealth and Institutional Management
(dollar amounts in millions) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Net interest income (FTE) $36 $36 $37
Provision for loan losses (5) 2 -
Noninterest income 70 70 63
Noninterest expenses 81 79 76
Net income 20 16 16
Net credit-related charge-offs 1 - -
Selected average balances:
Assets 4,152 4,009 3,683
Loans 3,989 3,860 3,547
Deposits 2,378 2,295 2,317
Net interest margin 3.58 % 3.72 % 4.12 %
Geographic Market Segments
Comerica also provides market segment results for four primary geographic markets: Midwest, Western, Texas and Florida. In addition to the four primary geographic markets, Other Markets and International are also reported as market segments. The financial results below are based on methodologies in effect at September 30, 2007 and are presented on a fully taxable equivalent (FTE) basis. The accompanying narrative addresses third quarter 2007 results compared to second quarter 2007.
The following table presents net income (loss) by market segment.
(dollar amounts in millions) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Midwest $89 48 % $87 47 % $102 50 %
Western 50 27 58 31 60 30
Texas 26 14 20 10 22 11
Florida 3 1 2 1 6 3
Other Markets 3 2 5 3 5 2
International 15 8 15 8 8 4
186 100 % 187 100 % 203 100 %
Finance & Other* (5) 9 (3)
Total $181 $196 $200
* Includes discontinued operations and items not directly associated with
the geographic markets.
Midwest
(dollar amounts in millions) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Net interest income (FTE) $241 $248 $251
Provision for loan losses 24 34 24
Noninterest income 124 122 117
Noninterest expenses 220 217 206
Net income 89 87 102
Net credit-related charge-offs 30 29 5
Selected average balances:
Assets 22,792 22,875 22,922
Loans 21,816 21,946 21,842
Deposits 16,608 16,477 16,716
Net interest margin 4.38 % 4.52 % 4.56 %
Western Market
(dollar amounts in millions) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Net interest income (FTE) $177 $179 $176
Provision for loan losses 23 5 (4)
Noninterest income 36 32 23
Noninterest expenses 110 113 108
Net income 50 58 60
Net credit-related charge-offs 7 4 -
Selected average balances:
Assets 17,095 17,257 16,430
Loans 16,543 16,715 15,887
FSD loans 1,191 1,580 2,093
Deposits 13,009 13,595 13,975
FSD deposits 3,607 4,310 5,408
Net interest margin 4.24 % 4.29 % 4.39 %
Texas Market
(dollar amounts in millions) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Net interest income (FTE) $71 $69 $67
Provision for loan losses (2) 3 (1)
Noninterest income 24 20 19
Noninterest expenses 58 56 54
Net income 26 20 22
Total net credit-related charge-offs 1 1 3
Selected average balances:
Assets 7,172 6,844 6,388
Loans 6,902 6,570 6,121
Deposits 3,920 3,836 3,672
Net interest margin 4.08 % 4.22 % 4.30 %
Florida Market
(dollar amounts in millions) 3rd Qtr '07 2nd Qtr '07 3rd Qtr '06
Net interest income (FTE) $13 $11 $11
Provision for loan losses 3 2 (3)
Noninterest income 4 3 4
Noninterest expenses 10 9 9
Net income 3 2 6
Net credit-related charge-offs 1 1 -
Selected average balances:
Assets 1,706 1,666 1,549
Loans 1,692 1,649 1,532
Deposits 271 290 313
Net interest margin 2.97 % 2.68 % 2.81 %
Conference Call and Webcast
Comerica will host a conference call to review third quarter 2007 financial results at 8 a.m. EDT (7 a.m. CDT) Wednesday, October 17, 2007. Interested parties may access the conference call by calling (800) 309-2262 or (706) 679-5261 (event ID No. 17469032). The call and supplemental financial information can also be accessed on the Internet at www.comerica.com. A replay will be available approximately two hours following the conference call until October 31, 2007. The conference call replay can be accessed by calling (800) 642-1687 or (706) 645-9291 (event ID No. 17469032). A replay of the Webcast can also 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 into three major business segments: the Business Bank, the Retail Bank, and Wealth & Institutional Management. Comerica focuses on relationships and helping businesses and people to be successful. Comerica Bank locations can be found in Michigan, California, Texas, Florida and Arizona, with select businesses operating in several other states, Canada and Mexico.
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," "feels," "expects," "estimates," "seeks," "strives," "plans," "intends," "outlook," "forecast," "position," "target," "mission," "assume," "achievable," "potential," "strategy," "goal," "aspiration," "outcome," "continue," "remain," "maintain," "trend," "objective" 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 the pace of an economic recovery and related changes in employment levels, changes related to the headquarters relocation or to its underlying assumptions, the effects of war and other armed conflicts or acts of terrorism, the effects of natural disasters including, but not limited to, hurricanes, tornadoes, earthquakes and floods, the disruption of private or public utilities, the implementation of Comerica's strategies and business models, management's ability to maintain and expand customer relationships, management's ability to retain key officers and employees, changes in the accounting treatment of any particular item, the impact of regulatory examinations, declines or other changes in the businesses or industries in which Comerica has a concentration of loans, including, but not limited to, automotive production, the anticipated performance of any new banking centers, the entry of new competitors in Comerica's markets, changes in the level of fee income, changes in applicable laws and regulations, including those concerning taxes, banking, securities and insurance, changes in trade, monetary and fiscal policies, including the interest rate policies of the Board of Governors of the Federal Reserve System, fluctuations in inflation or interest rates, changes in general economic conditions and related credit and market conditions and adverse conditions in the stock market. Comerica cautions that the foregoing list of factors is not exclusive. 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.
SOURCE Comerica Incorporated
CONTACT: Media, Wayne J. Mielke, +1-214-462-4463; or Investors, Darlene
P. Persons, +1-313-222-2840, or Paul Jaremski, +1-214-969-6476, all of
Comerica Incorporated
Web site: http://www.comerica.com
(CMA)
