DALLAS, Oct. 18, 2016 /PRNewswire/ -- Comerica Incorporated (NYSE: CMA) today reported third quarter 2016 net income of $149 million, compared to $104 million for the second quarter 2016 and $136 million for the third quarter 2015. Earnings per diluted share were 84 cents for third quarter 2016 compared to 58 cents for second quarter 2016 and 74 cents for third quarter 2015. Comerica also continued the implementation of its efficiency and revenue initiative ("GEAR Up"), which is expected to drive additional annual pre-tax income of approximately $180 million by year-end 2017 and $270 million by year-end 2018.
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"On our last earnings call, we announced that we had identified more than 20 work streams in our GEAR Up initiative that are expected to drive a significant improvement in our bottom line. At that time, we also indicated there was more to come, as we were still identifying and analyzing opportunities. We have determined that those new opportunities add about $40 million to our initial financial target. As a result, we are now expecting to drive at least $270 million in additional pre-tax income for full-year 2018," said Ralph W. Babb, Jr., chairman and chief executive officer. "These actions, which we have already begun to execute with urgency, take us a long way towards achieving a double-digit return on equity. We expect to meet or exceed this goal with sustained growth, net of investment, normal credit costs, continued equity buybacks, and assuming only a 25 to 50 basis point increase in rates. We are not relying on a significantly better economic environment or a substantial increase in rates to reach our goal. We remain confident that as we deliver on this initiative, we will create greater shareholder value."
The GEAR Up initiative now includes expected pre-tax benefits of approximately $180 million in full-year 2017 and approximately $270 million in full-year 2018. Additional initiatives include a new retirement program that will replace the current pension plan and retirement account plan for most employees effective January 1, 2017. Active pension plan participants age 60 or older as of December 31, 2016 and current retirees will not be impacted. This initiative is expected to result in annual savings of approximately $35 million in full-year 2017 (assuming current actuarial assumptions). The initiative is also expected to reduce full-year 2016 pension expense to $7 million, resulting in a $4 million credit in the fourth quarter. In addition, streamlining additional operations and administrative support functions is expected to add about $5 million to the initial target.
-- Expense reduction targets have been increased to approximately $150
million for full-year 2017, which increases to approximately $200
million for full-year 2018. This is to be achieved through the
additional actions identified above as well as the previously announced
reduction in workforce, streamlining operational processes, real estate
optimization including consolidating 38 banking centers, selective
outsourcing of technology functions and reduction of technology system
applications. Approximately two-thirds of the workforce reduction target
will be completed by year-end 2016.
-- Revenue enhancements are unchanged and are expected to be approximately
$30 million for full-year 2017, which increase to approximately $70
million for full-year 2018, through expanded product offerings, enhanced
sales tools and training and improved customer analytics to drive
opportunities.
-- Total expected pre-tax restructuring charges of $140 million to $160
million to be incurred through 2018 are unchanged.
(dollar amounts in millions, except per share data) 3rd Qtr '16 2nd Qtr '16 3rd Qtr '15
-------------------------------------------------- ----------- ----------- -----------
Net interest income $450 $445 $422
Provision for credit losses 16 49 26
Noninterest income 272 268 260
Noninterest expenses 493 (a) 518 (a) 457
--- --- --- --- ---
Pre-tax income 213 146 199
Provision for income taxes 64 42 63
--- --- ---
Net income $149 $104 $136
---- ---- ----
Net income attributable to common shares $148 $103 $134
Diluted income per common share 0.84 0.58 0.74
Average diluted shares (in millions) 176 177 181
Common equity Tier 1 capital ratio (b) 10.68% 10.49% 10.51%
Common equity ratio 10.42 10.79 10.73
Tangible common equity ratio (c) 9.64 9.98 9.91
------------------------------- ---- ---- ----
(a) Included restructuring charge of $20 million (8 cents per share, after tax) in the third quarter 2016 and $53 million (19 cents per
share, after tax) in the second quarter 2016.
(b) September 30, 2016 ratio is estimated.
(c) See Reconciliation of Non-GAAP Financial Measures.
------------------------------------------------------
"Quarter over quarter, our earnings per share increased 45 percent. This reflected strong credit quality, a reduction in restructuring charges, solid revenue growth and well-managed expenses," said Babb. "While loans were relatively stable, average deposit growth was robust, increasing $1.5 billion. Criticized loans declined and net charge-offs were only 13 basis points of average loans. Our capital position remains solid. In line with our CCAR plan, we increased our share repurchases to 2.1 million shares for a total of $97 million, compared to $65 million in the second quarter.
"We believe we are well positioned for the future," said Babb. "We benefit meaningfully from any increase in interest rates and we continue to adeptly navigate the energy cycle. Yet, we are not waiting for the environment to improve. We are moving with urgency to execute our GEAR Up initiatives and are fully committed to delivering on these efficiency and revenue opportunities to further enhance our profitability."
Third Quarter 2016 Compared to Second Quarter 2016
Average total loans decreased $263 million to $49.2 billion.
-- Primarily reflected decreases in Energy, National Dealer Services and
Technology and Life Sciences; partially offset by increases in Mortgage
Banker Finance and Commercial Real Estate.
-- Period-end total loans decreased $1.1 billion to $49.3 billion,
primarily due to decreases in National Dealer Services and Energy.
Average total deposits increased $1.5 billion to $58.1 billion.
-- Driven by a $2.1 billion increase in noninterest-bearing deposits,
partially offset by a $534 million decrease in interest-bearing
deposits.
-- Average total deposits increased in general Middle Market, Commercial
Real Estate and Corporate Banking; partially offset by a decrease in
Wealth Management.
-- Period-end deposits increased $2.9 billion to $59.3 billion, in part
reflecting an elevated deposit level associated with the government card
program on the final day of the quarter.
Net interest income increased $5 million to $450 million.
-- Primarily the result of one additional day in the third quarter and the
benefit from an increase in LIBOR rates, partially offset by higher
funding costs.
The provision for credit losses decreased $33 million to $16 million.
-- Net credit-related charge-offs were $16 million, or 0.13 percent of
average loans, compared to $47 million, or 0.38 percent, in the second
quarter 2016. Energy net credit-related charge-offs were $6 million
compared to $32 million in the second quarter 2016.
-- The allowance for loan losses was $727 million, or 1.48 percent of total
loans. The reserve allocation for Energy remained above 8 percent of
loans in the Energy business line.
Noninterest income increased $4 million to $272 million.
-- Increases in commercial lending fees, largely due to an increase in
syndication agent fees, partially offset by a decrease in fiduciary
income.
-- Non-fee categories increased modestly, primarily due to an increase in
income from bank-owned life insurance partially offset by a decrease in
deferred compensation plan asset returns.
Noninterest expenses decreased $25 million to $493 million.
-- Excluding a $33 million decrease in restructuring charges, noninterest
expenses increased $8 million, primarily due to a $6 million decrease in
gains from the sale of leased assets and a $3 million increase in
outside processing fees.
Capital position remained solid at September 30, 2016.
-- Increased repurchases by 640,000 shares to approximately 2.1 million
shares of common stock under the equity repurchase program.
-- Dividend increased 4.5 percent to 23 cents per share.
-- Including dividends, returned a total of $137 million to shareholders.
Third Quarter 2016 Compared to Third Quarter 2015
Average total loans increased $234 million.
-- Primarily reflected continued growth in Commercial Real Estate and
Mortgage Banker Finance, partially offset by declines in Energy and
general Middle Market.
Average total deposits decreased $1.1 billion, or 2 percent.
-- Primarily driven by decreases in Municipalities, Corporate Banking,
Technology and Life Sciences and the Financial Services Division;
partially offset by increases in Retail Bank and Commercial Real Estate.
Net interest income increased $28 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 decreased $10 million, or 38 percent.
Noninterest income increased $12 million, or 5 percent.
-- Excluding a $6 million increase in deferred compensation asset returns,
noninterest income increased $6 million, primarily reflecting a $5
million increase in card fees and a $4 million increase in commercial
lending fees, largely due to an increase in syndication agent fees;
partially offset by decreases in warrant income and risk management
hedge ineffectiveness.
Noninterest expense increased $36 million.
-- Noninterest expense increased $10 million excluding third quarter 2016
restructuring charges of $20 million and a $6 million increase in
deferred compensation plan expense. The remaining increase primarily
reflected increases of $5 million each in software expense and FDIC
insurance premiums.
Net Interest Income
-------------------
(dollar amounts
in millions) 3rd Qtr '16 2nd Qtr '16 3rd Qtr '15
--------------- ----------- ----------- -----------
Net interest
income $450 $445 $422
Net interest
margin 2.66% 2.74% 2.54%
Selected average
balances:
Total earning
assets $67,648 $65,597 $66,191
Total loans 49,206 49,469 48,972
Total investment
securities 12,373 12,334 10,232
Federal Reserve
Bank deposits 5,781 3,495 6,710
Total deposits 58,065 56,521 59,140
Total
noninterest-
bearing deposits 30,454 28,376 28,623
Medium- and
long-term debt 5,907 5,072 3,175
--------------- ----- ----- -----
Net interest income increased $5 million to $450 million in the third quarter 2016, compared to the second quarter 2016.
-- Interest on loans increased $5 million, primarily reflecting the benefit
from increases in LIBOR rates (+$4 million), one additional day in the
third quarter (+$4 million) and the impact of a second quarter 2016
negative residual value adjustment to assets in the leasing portfolio
(+$2 million), partially offset by the impact of a decrease in average
loan balances (-$2 million), the impact of nonaccrual loans (-$1
million), lower fees (-$1 million) and other portfolio dynamics (-$1
million).
-- Interest on investment securities decreased $1 million due to a decrease
in yields.
-- Interest on short-term investments increased $3 million due to an
increase in average Federal Reserve Bank deposit balances.
-- Interest expense on debt increased $2 million, primarily due to higher
costs on variable rate debt tied to LIBOR and the full-quarter impact of
Federal Home Loan Bank (FHLB) borrowings during the second quarter.
The net interest margin of 2.66 percent decreased 8 basis points compared to the second quarter 2016, primarily due to the impact of an increase in lower-yielding Federal Reserve Bank deposit balances (-8 basis points).
Credit Quality
"Credit quality was strong, with total net charge-offs of $16 million, or 13 basis points, which is well below our historical norm," said Babb. "Criticized loans declined almost $300 million and comprised less than 7 percent of our total loans. Energy loans were 5 percent of total loans as they continued to decrease. While the overall performance of the Energy portfolio has improved, as evidenced by net charge-offs of only $6 million in the third quarter, and oil and gas prices have remained relatively stable for the past several months, we remain cautious and continued to maintain a reserve allocation of over 8 percent for Energy loans and a total reserve of 1.48 percent of total loans as of September 30, 2016. The solid performance of our total loan portfolio contributed to a reduction in our provision expense to $16 million."
(dollar amounts in millions) 3rd Qtr '16 2nd Qtr '16 3rd Qtr '15
--------------------------- ----------- ----------- -----------
Credit-related charge-offs $35 $59 $34
Recoveries 19 12 11
--- --- ---
Net credit-related charge-offs 16 47 23
Net credit-related charge-offs/
Average total loans 0.13% 0.38% 0.19%
Provision for credit losses $16 $49 $26
Nonperforming loans 639 613 369
Nonperforming assets (NPAs) 660 635 381
NPAs/Total loans and foreclosed
property 1.34% 1.26% 0.78%
Loans past due 90 days or more and
still accruing $48 $35 $5
Allowance for loan losses 727 729 622
Allowance for credit losses on
lending-related commitments (a) 45 43 48
--- --- ---
Total allowance for credit losses 772 772 670
Allowance for loan losses/Period-
end total loans 1.48% 1.45% 1.27%
Allowance for loan losses/
Nonperforming loans 114 119 169
-------------------------- --- --- ---
(a) Included in "Accrued expenses and other liabilities" on the consolidated balance sheets.
--------------------------------------------------------------------------------------------
-- Energy business line loans were $2.5 billion at September 30, 2016
compared to $2.7 billion at June 30, 2016.
-- Criticized Energy loans decreased $79 million, to $1.5 billion.
-- Energy net charge-offs were $6 million, compared to $32 million in
the second quarter 2016.
-- The reserve allocation for loans in the Energy business line
remained above 8 percent at September 30, 2016.
-- Net charge-offs decreased $31 million to $16 million, or 0.13 percent of
average loans, in the third quarter 2016, compared to $47 million, or
0.38 percent, in the second quarter 2016. Aside from Energy, net
charge-offs were $10 million, or 8 basis points, for the remainder of
the portfolio.
-- During the third quarter 2016, $105 million of borrower relationships
over $2 million were transferred to nonaccrual status, a decrease of $2
million compared to $107 million transferred during the second quarter.
Third quarter 2016 transfers to nonaccrual included $63 million from
Energy, compared to $51 million in the second quarter.
-- Criticized loans decreased $290 million to $3.3 billion at September 30,
2016, compared to $3.6 billion at June 30, 2016. Criticized loans are
generally consistent with the Special Mention, Substandard and Doubtful
categories defined by regulatory authorities.
Fourth Quarter 2016 Outlook
For fourth quarter 2016 compared to third quarter 2016, management expects the following, assuming a continuation of the current economic and low-rate environment:
-- Average loans stable, reflecting growth in National Dealer Services,
Technology and Life Sciences and small increases in several other lines
of business, offset by seasonality in Mortgage Banker and a continued
decline in Energy.
-- Net interest income slightly higher, reflecting benefits from a decline
in wholesale funding costs and an increase in LIBOR.
-- Provision for credit losses expected to remain low, with net charge-offs
below historical norms. Provision and net charge-offs expected to be
between second quarter 2016 and third quarter 2016 levels.
-- Noninterest income relatively stable, excluding income from bank-owned
life insurance and deferred compensation asset returns, with fee income
expected to remain strong at third quarter 2016 levels.
-- Noninterest expenses lower, excluding an estimated $30 million to $35
million in restructuring expense, with GEAR Up expense savings of
approximately $25 million, primarily salaries and benefits (including
pension); seasonal increases in outside processing, marketing and
occupancy expected to be partially offset by third quarter 2016 level of
deferred compensation expense not expected to repeat.
-- 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 September 30, 2016. The accompanying narrative addresses third quarter 2016 results compared to second quarter 2016.
The following table presents net income (loss) by business segment.
(dollar amounts
in millions) 3rd Qtr '16 2nd Qtr '16 3rd Qtr '15
--------------- ----------- ----------- -----------
Business Bank $192 91% $155 93% $195 85%
Retail Bank 1 - (2) (1) 13 6
Wealth Management 18 9 13 8 21 9
----------------- --- --- --- --- --- ---
211 100% 166 100% 229 100%
Finance (61) (63) (94)
Other (a) (1) 1 1
-------- --- --- ---
Total $149 $104 $136
----- ---- ---- ----
(a) Includes items not directly
associated with the three
major business segments or the
Finance Division.
Business Bank
(dollar
amounts
in
millions) 3rd Qtr '16 2nd Qtr '16 3rd Qtr '15
--------- ----------- ----------- -----------
Net
interest
income $361 $355 $378
Provision
for
credit
losses 2 46 30
Noninterest
income 145 144 144
Noninterest
expenses 215 (a) 222 (a) 198
Net
income 192 155 195
Net
credit-
related
charge-
offs 14 42 23
Selected
average
balances:
Assets 39,618 39,983 39,768
Loans 38,243 38,574 38,113
Deposits 30,019 28,441 31,405
-------- ------ ------ ------
(a) Included restructuring
charges of $10 million in
the third quarter 2016
and $26 million in the
second quarter 2016.
-- Average loans decreased $331 million, primarily reflecting decreases in
Energy, National Dealer Services and Technology and Life Sciences,
partially offset by an increase in Mortgage Banker Finance.
-- Average deposits increased $1.6 billion, primarily reflecting increases
in general Middle Market, Commercial Real Estate and Corporate Banking.
-- Net interest income increased $6 million, primarily reflecting the
benefit from one additional day in the third quarter, the impact of a
second quarter 2016 negative residual value adjustment to assets in the
leasing portfolio and an increase in net funds transfer pricing (FTP)
credits, partially offset by the impact of a decrease in average loan
balances. The increase in net FTP credits primarily reflected the
benefit from the increase in average deposits partially offset by the
impact of higher funding costs.
-- The provision for credit losses decreased $44 million, primarily
reflecting decreases in Energy and Technology and Life Sciences, in part
due to lower loan balances, partially offset by an increase in general
Middle Market.
-- Noninterest income increased $1 million, primarily due to an increase in
syndication agent fees.
-- Noninterest expenses decreased $7 million, primarily reflecting a
decrease in restructuring charges, partially offset by a decrease in
gains from the sale of leased assets and an increase in outside
processing fees.
Retail Bank
(dollar
amounts
in
millions) 3rd Qtr '16 2nd Qtr '16 3rd Qtr '15
--------- ----------- ----------- -----------
Net
interest
income $156 $155 $158
Provision
for
credit
losses 10 1 2
Noninterest
income 50 48 49
Noninterest
expenses 195 (a) 205 (a) 185
Net
income 1 (2) 13
Net
credit-
related
charge-
offs 3 1 1
Selected
average
balances:
Assets 6,544 6,558 6,518
Loans 5,871 5,879 5,835
Deposits 23,654 23,546 23,079
-------- ------ ------ ------
(a) Included restructuring
charges of $8 million in
the third quarter 2016
and $19 million in the
second quarter 2016.
-- Average deposits increased $108 million, primarily reflecting an
increase in noninterest-bearing Small Business deposits.
-- Net interest income increased $1 million, primarily the result of the
FTP benefit provided by the increase in average deposits.
-- The provision for credit losses increased $9 million, primarily due to
an increase in reserves for Small Business.
-- Noninterest income increased $2 million, primarily reflecting an
increase in customer derivative income.
-- Noninterest expenses decreased $10 million, primarily reflecting a
decrease in restructuring charges.
Wealth Management
(dollar
amounts in
millions) 3rd Qtr '16 2nd Qtr '16 3rd Qtr '15
----------- ----------- ----------- -----------
Net
interest
income $41 $42 $45
Provision
for credit
losses (1) 3 (3)
Noninterest
income 61 62 59
Noninterest
expenses 75 (a) 81 (a) 75
Net income 18 13 21
Net credit-
related
charge-
offs
(recoveries) (1) 4 (1)
Selected
average
balances:
Assets 5,283 5,215 5,228
Loans 5,092 5,016 5,024
Deposits 4,030 4,213 4,188
-------- ----- ----- -----
(a) Included restructuring
charges of $2 million in
the third quarter 2016
and $8 million in the
second quarter 2016.
-- Average loans increased $76 million, primarily reflecting an increase in
Private Banking.
-- Average deposits decreased $183 million, primarily reflecting decreases
in money market and checking deposits, partially offset by an increase
in noninterest-bearing deposits.
-- The provision for credit losses decreased $4 million, primarily
reflecting a decrease in net charge-offs.
-- Noninterest income decreased $1 million, primarily due to a decrease in
fiduciary income.
-- Noninterest expenses decreased $6 million, primarily reflecting a
decrease in restructuring charges.
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, 2016.
The following table presents net income (loss) by market segment.
(dollar
amounts
in
millions) 3rd Qtr '16 2nd Qtr '16 3rd Qtr '15
---------- ----------- ----------- -----------
Michigan $51 24% $57 34% $70 31%
California 75 35 50 30 62 27
Texas 33 16 3 2 36 16
Other
Markets 52 25 56 34 61 26
-------- --- --- --- --- --- ---
211 100% 166 100% 229 100%
Finance &
Other (a) (62) (62) (93)
---------- --- --- ---
Total $149 $104 $136
----- ---- ---- ----
(a) Includes items not
directly associated with the
geographic markets.
-- Average loans decreased $274 million in Texas, $172 million in Michigan
and $71 million in California. The decrease in Texas primarily reflected
a decrease in Energy, partially offset by an increase in Commercial Real
Estate, while the decrease in Michigan primarily reflected a decrease in
general Middle Market and the decrease in California primarily reflected
a decrease in Technology and Life Sciences, partially offset by an
increase in Commercial Real Estate.
-- Average deposits increased $741 million in California and $391 million
in Michigan, and decreased $192 million in Texas. General Middle Market
deposits increased in California and Michigan, and decreased in Texas.
The increase in California also reflected an increase in Commercial Real
Estate, while the decrease in Texas also reflected a decrease in
Technology and Life Sciences.
-- Net interest income increased $3 million in Michigan and $3 million in
California, and decreased $1 million in Texas. The increases in Michigan
and California primarily reflected the FTP benefit from higher deposit
balances and one additional day in the third quarter, partially offset
by the impact of lower loan balances and higher FTP funding costs. The
decrease in Texas primarily reflected an increase in FTP funding costs.
-- The provision for credit losses decreased $35 million in Texas and $21
million in California, and increased $10 million in Michigan. The
decrease in Texas primarily reflected a decrease in Energy, in part due
to lower loan balances. In California, the decrease primarily reflected
decreases in Technology and Life Sciences and general Middle Market. The
increase in Michigan primarily reflected an increase in general Middle
Market.
-- Noninterest income increased $5 million in California, $2 million in
Texas and $1 million in Michigan. The increase in California was
primarily due to increases in warrant income, syndication agent fees and
card fees. The increases in both Texas and Michigan were primarily due
to increases in syndication agent fees.
-- Noninterest expenses decreased $11 million in Texas and $10 million in
California and increased $2 million in Michigan. Restructuring charges
decreased in all three primary markets. In addition to the impact of
restructuring charges, the decrease in Texas reflected small decreases
in several other categories and the increase in Michigan reflected a
decrease in gains from the sale of leased assets.
Michigan Market
(dollar
amounts
in
millions) 3rd Qtr '16 2nd Qtr '16 3rd Qtr '15
---------- ----------- ----------- -----------
Net
interest
income $169 $166 $179
Provision
for
credit
losses 13 3 6
Noninterest
income 82 81 84
Noninterest
expenses 161 (a) 159 (a) 152
Net
income 51 57 70
Net
credit-
related
charge-
offs
(recoveries) 1 - 9
Selected
average
balances:
Assets 13,174 13,299 13,856
Loans 12,488 12,660 13,223
Deposits 21,944 21,553 21,946
-------- ------ ------ ------
(a) Included restructuring
charges of $5 million in
the third quarter 2016
and $15 million in the
second quarter 2016.
California Market
(dollar
amounts
in
millions) 3rd Qtr '16 2nd Qtr '16 3rd Qtr '15
--------- ----------- ----------- -----------
Net
interest
income $181 $178 $186
Provision
for
credit
losses (4) 17 24
Noninterest
income 44 39 38
Noninterest
expenses 110 (a) 120 (a) 101
Net
income 75 50 62
Net
credit-
related
charge-
offs - 17 10
Selected
average
balances:
Assets 17,933 17,998 17,060
Loans 17,637 17,708 16,789
Deposits 17,674 16,933 18,371
-------- ------ ------ ------
(a) Included restructuring
charges of $5 million in
the third quarter 2016
and $16 million in the
second quarter 2016.
Texas Market
(dollar
amounts
in
millions) 3rd Qtr '16 2nd Qtr '16 3rd Qtr '15
--------- ----------- ----------- -----------
Net
interest
income $118 $119 $129
Provision
for
credit
losses (3) 32 10
Noninterest
income 33 31 34
Noninterest
expenses 102 (a) 113 (a) 97
Net
income
(loss) 33 3 36
Net
credit-
related
charge-
offs 10 31 4
Selected
average
balances:
Assets 11,014 11,287 11,578
Loans 10,566 10,840 10,997
Deposits 9,860 10,052 10,753
-------- ----- ------ ------
(a) Included restructuring
charges of $7 million in
the third quarter 2016
and $15 million in the
second quarter 2016.
Conference Call and Webcast
Comerica will host a conference call to review third quarter 2016 financial results at 7 a.m. CT Tuesday, October 18, 2016. Interested parties may access the conference call by calling (877) 523-5249 or (210) 591-1147 (event ID No. 67807311). 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, "Item 1A. Risk Factors" on page 54 of Comerica's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 and "Item 1A. Risk Factors" on page 62 of Comerica's Quarterly Report on Form 10-Q for the quarter ended June 30, 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 Nine Months Ended
------------------ -----------------
September 30, June 30, September 30, September 30,
(in millions, except
per share data)
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
PER COMMON SHARE AND
COMMON STOCK DATA
Diluted net income $0.84 $0.58 $0.74 $1.76 $2.20
Cash dividends
declared 0.23 0.22 0.21 0.66 0.62
Average diluted
shares (in
thousands) 176,184 177,195 180,714 176,476 181,807
--------------- ------- ------- ------- ------- -------
KEY RATIOS
Return on average
common shareholders'
equity 7.80% 5.44% 7.19% 5.46% 7.20%
Return on average
assets 0.82 0.59 0.76 0.59 0.78
Common equity tier 1
and tier 1 risk-
based capital ratio
(a) 10.68 10.49 10.51
Total risk-based
capital ratio (a) 12.82 12.74 12.82
Leverage ratio (a) 10.14 10.39 10.28
Common equity ratio 10.42 10.79 10.73
Tangible common
equity ratio (b) 9.64 9.98 9.91
----------------- ---- ---- ----
AVERAGE BALANCES
Commercial loans $31,132 $31,511 $31,900 $31,152 $31,596
Real estate
construction loans 2,646 2,429 1,833 2,397 1,859
Commercial mortgage
loans 9,012 9,033 8,691 9,002 8,648
Lease financing 662 730 788 706 793
International loans 1,349 1,396 1,401 1,388 1,455
Residential mortgage
loans 1,883 1,880 1,882 1,885 1,872
Consumer loans 2,522 2,490 2,477 2,493 2,432
----- ----- ----- ----- -----
Total loans 49,206 49,469 48,972 49,023 48,655
Earning assets 67,648 65,597 66,191 65,796 64,561
Total assets 72,909 70,668 71,333 70,942 69,688
Noninterest-bearing
deposits 30,454 28,376 28,623 28,966 27,569
Interest-bearing
deposits 27,611 28,145 30,517 28,136 30,282
------ ------ ------ ------ ------
Total deposits 58,065 56,521 59,140 57,102 57,851
Common shareholders'
equity 7,677 7,654 7,559 7,654 7,508
-------------------- ----- ----- ----- ----- -----
NET INTEREST INCOME
Net interest income $450 $445 $422 $1,342 $1,256
Net interest margin
(fully taxable
equivalent) 2.66% 2.74% 2.54% 2.74% 2.61%
------------------- ---- ---- ---- ---- ----
CREDIT QUALITY
Total nonperforming
assets $660 $635 $381
Loans past due 90
days or more and
still accruing 48 35 5
Net credit-related
charge-offs 16 47 23 $121 $49
Allowance for loan
losses 727 729 622
Allowance for credit
losses on lending-
related commitments 45 43 48
--- --- ---
Total allowance for
credit losses 772 772 670
Allowance for loan
losses as a
percentage of total
loans 1.48% 1.45% 1.27%
Net credit-related
charge-offs as a
percentage of
average total loans 0.13 0.38 0.19 0.33% 0.14%
Nonperforming assets
as a percentage of
total loans and
foreclosed property 1.34 1.26 0.78
Allowance for loan
losses as a
percentage of total
nonperforming loans 114 119 169
-------------------- --- --- ---
(a) September 30, 2016 ratios are
estimated.
(b) See Reconciliation of Non-GAAP
Financial Measures.
CONSOLIDATED BALANCE SHEETS
Comerica Incorporated and
Subsidiaries
September 30, June 30, December 31, September 30,
(in millions, except share data) 2016 2016 2015 2015
------------------------------- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited)
ASSETS
Cash and due from banks $1,292 $1,172 $1,157 $1,101
Interest-bearing deposits with banks 6,748 2,938 4,990 6,099
Other short-term investments 92 100 113 107
Investment securities available-for-
sale 10,789 10,712 10,519 8,749
Investment securities held-to-
maturity 1,695 1,807 1,981 1,863
Commercial loans 31,152 32,360 31,659 31,777
Real estate construction loans 2,743 2,553 2,001 1,874
Commercial mortgage loans 9,013 9,038 8,977 8,787
Lease financing 648 684 724 751
International loans 1,303 1,365 1,368 1,382
Residential mortgage loans 1,874 1,856 1,870 1,880
Consumer loans 2,541 2,524 2,485 2,491
-------------- ----- ----- ----- -----
Total loans 49,274 50,380 49,084 48,942
Less allowance for loan losses (727) (729) (634) (622)
------------------------------ ---- ---- ---- ----
Net loans 48,547 49,651 48,450 48,320
Premises and equipment 528 544 550 541
Accrued income and other assets 4,433 4,356 4,117 4,232
------------------------------- ----- ----- ----- -----
Total assets $74,124 $71,280 $71,877 $71,012
------------ ------- ------- ------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits $31,776 $28,559 $30,839 $28,697
Money market and interest-bearing
checking deposits 22,436 22,539 23,532 23,948
Savings deposits 2,052 2,022 1,898 1,853
Customer certificates of deposit 2,967 3,230 3,552 4,126
Foreign office time deposits 30 24 32 144
---------------------------- --- --- --- ---
Total interest-bearing deposits 27,485 27,815 29,014 30,071
------------------------------- ------ ------ ------ ------
Total deposits 59,261 56,374 59,853 58,768
Short-term borrowings 12 12 23 109
Accrued expenses and other
liabilities 1,234 1,279 1,383 1,413
Medium- and long-term debt 5,890 5,921 3,058 3,100
-------------------------- ----- ----- ----- -----
Total liabilities 66,397 63,586 64,317 63,390
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 2,174 2,165 2,173 2,165
Accumulated other comprehensive loss (292) (295) (429) (345)
Retained earnings 7,262 7,157 7,084 7,007
Less cost of common stock in treasury
-56,096,416 shares at 9/30/16,
54,247,325 shares at 6/30/16,
52,457,113 shares at 12/31/15, and
51,010,418 shares at 9/30/15 (2,558) (2,474) (2,409) (2,346)
------------------------------------- ------ ------ ------ ------
Total shareholders' equity 7,727 7,694 7,560 7,622
-------------------------- ----- ----- ----- -----
Total liabilities and shareholders'
equity $74,124 $71,280 $71,877 $71,012
----------------------------------- ------- ------- ------- -------
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) 2016 2015 2016 2015
-------------------- ---- ---- ---- ----
INTEREST INCOME
Interest and fees on
loans $411 $390 $1,223 $1,156
Interest on investment
securities 61 54 185 160
Interest on short-
term investments 8 4 17 11
------------------ --- --- --- ---
Total interest income 480 448 1,425 1,327
INTEREST EXPENSE
Interest on deposits 10 11 30 33
Interest on medium-
and long-term debt 20 15 53 38
------------------- --- --- --- ---
Total interest expense 30 26 83 71
---------------------- --- --- --- ---
Net interest income 450 422 1,342 1,256
Provision for credit
losses 16 26 213 87
-------------------- --- --- --- ---
Net interest income
after provision for
credit losses 434 396 1,129 1,169
NONINTEREST INCOME
Card fees 76 71 224 203
Service charges on
deposit accounts 55 57 165 168
Fiduciary income 47 47 142 142
Commercial lending
fees 26 22 68 69
Letter of credit fees 12 13 38 39
Bank-owned life
insurance 12 10 30 29
Foreign exchange
income 10 10 31 29
Brokerage fees 5 5 14 13
Net securities losses - - (3) (2)
Other noninterest
income 29 25 75 79
----------------- --- --- --- ---
Total noninterest
income 272 260 784 769
NONINTEREST EXPENSES
Salaries and benefits
expense 247 243 742 747
Outside processing fee
expense 86 83 247 239
Net occupancy expense 40 41 117 118
Equipment expense 13 13 40 39
Restructuring charges 20 - 73 -
Software expense 31 26 90 73
FDIC insurance expense 14 9 39 27
Advertising expense 5 6 15 17
Litigation-related
expense - (3) - (32)
Other noninterest
expenses 37 39 106 117
----------------- --- --- --- ---
Total noninterest
expenses 493 457 1,469 1,345
----------------- --- --- ----- -----
Income before income
taxes 213 199 444 593
Provision for income
taxes 64 63 131 188
-------------------- --- --- --- ---
NET INCOME 149 136 313 405
Less income allocated
to participating
securities 1 2 3 5
--------------------- --- --- --- ---
Net income
attributable to
common shares $148 $134 $310 $400
---------------- ---- ---- ---- ----
Earnings per common
share:
Basic $0.87 $0.76 $1.80 $2.27
Diluted 0.84 0.74 1.76 2.20
Comprehensive income 152 187 450 472
Cash dividends
declared on common
stock 40 37 115 110
Cash dividends
declared per common
share 0.23 0.21 0.66 0.62
-------------------- ---- ---- ---- ----
CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
Comerica Incorporated and Subsidiaries
Third Second First Fourth Third Third Quarter 2016 Compared To:
(in millions, except
per share data)
Quarter Quarter Quarter Quarter Quarter Second Quarter 2016 Third Quarter 2015
2016 2016 2016 2015 2015 Amount Percent Amount Percent
---- ---- ---- ---- ---- ------ ------- ------ -------
INTEREST INCOME
Interest and fees on
loans $411 $406 $406 $395 $390 $5 1% $21 5%
Interest on investment
securities 61 62 62 56 54 (1) (1) 7 14
Interest on short-
term investments 8 5 4 6 4 3 62 4 67
------------------ --- --- --- --- --- --- --- --- ---
Total interest income 480 473 472 457 448 7 1 32 7
INTEREST EXPENSE
Interest on deposits 10 10 10 10 11 - - (1) (9)
Interest on medium-
and long-term debt 20 18 15 14 15 2 12 5 37
------------------- --- --- --- --- --- --- --- --- ---
Total interest expense 30 28 25 24 26 2 8 4 18
---------------------- --- --- --- --- --- --- --- --- ---
Net interest income 450 445 447 433 422 5 1 28 6
Provision for credit
losses 16 49 148 60 26 (33) (67) (10) (38)
-------------------- --- --- --- --- --- --- --- --- ---
Net interest income
after provision 434 396 299 373 396 38 9 38 9
for credit losses
NONINTEREST INCOME
Card fees 76 76 72 73 71 - - 5 7
Service charges on
deposit accounts 55 55 55 55 57 - - (2) (2)
Fiduciary income 47 49 46 45 47 (2) (3) - -
Commercial lending
fees 26 22 20 30 22 4 12 4 12
Letter of credit fees 12 13 13 14 13 (1) (1) (1) (3)
Bank-owned life
insurance 12 9 9 11 10 3 37 2 18
Foreign exchange
income 10 11 10 11 10 (1) - - -
Brokerage fees 5 5 4 4 5 - - - -
Net securities losses - (1) (2) - - 1 38 - -
Other noninterest
income 29 29 17 23 25 - - 4 14
----------------- --- --- --- --- --- --- --- --- ---
Total noninterest
income 272 268 244 266 260 4 2 12 5
NONINTEREST EXPENSES
Salaries and benefits
expense 247 247 248 262 243 - - 4 2
Outside processing fee
expense 86 83 78 79 83 3 3 3 3
Net occupancy expense 40 39 38 41 41 1 - (1) (3)
Equipment expense 13 14 13 14 13 (1) (5) - -
Restructuring charges 20 53 - - - (33) (63) 20 n/m
Software expense 31 30 29 26 26 1 1 5 20
FDIC insurance expense 14 14 11 10 9 - - 5 62
Advertising expense 5 6 4 7 6 (1) (22) (1) (13)
Litigation-related
expense - - - - (3) - - 3 n/m
Other noninterest
expenses 37 32 37 43 39 5 15 (2) (7)
----------------- --- --- --- --- --- --- --- ---
Total noninterest
expenses 493 518 458 482 457 (25) (5) 36 8
----------------- --- --- --- --- --- --- --- --- ---
Income before income
taxes 213 146 85 157 199 67 45 14 7
Provision for income
taxes 64 42 25 41 63 22 48 1 -
-------------------- --- --- --- --- --- --- --- --- ---
NET INCOME 149 104 60 116 136 45 44 13 10
Less income allocated
to participating
securities 1 1 1 1 2 - - (1) (4)
--------------------- --- --- --- --- --- --- --- --- ---
Net income
attributable to
common shares $148 $103 $59 $115 $134 $45 44% $14 10%
---------------- ---- ---- --- ---- ---- --- --- --- ---
Earnings per common
share:
Basic $0.87 $0.60 $0.34 $0.65 $0.76 $0.27 45% $0.11 14%
Diluted 0.84 0.58 0.34 0.64 0.74 0.26 45 0.10 14
Comprehensive income 152 137 161 32 187 15 11 (35) (19)
Cash dividends
declared on common
stock 40 38 37 37 37 2 3 3 6
Cash dividends
declared per common
share 0.23 0.22 0.21 0.21 0.21 0.01 5 0.02 10
-------------------- ---- ---- ---- ---- ---- ---- --- ---- ---
n/m - not meaningful
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES (unaudited)
Comerica Incorporated and
Subsidiaries
2016 2015
---- ----
(in millions) 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
------------ ------- ------- ------- ------- -------
Balance at beginning of
period $729 $724 $634 $622 $618
Loan charge-offs:
Commercial 24 48 72 73 30
Commercial mortgage 2 - - 1 -
International 8 4 3 - 1
Consumer 1 2 2 2 3
-------- --- --- --- --- ---
Total loan charge-offs 35 54 77 76 34
Recoveries on loans
previously charged-off:
Commercial 15 9 12 6 8
Commercial mortgage 3 2 12 11 2
Residential mortgage - - - 1 -
Consumer 1 1 1 7 1
-------- --- --- --- --- ---
Total recoveries 19 12 25 25 11
---------------- --- --- --- --- ---
Net loan charge-offs 16 42 52 51 23
Provision for loan losses 14 47 141 63 28
Foreign currency
translation adjustment - - 1 - (1)
----------------------- --- --- --- --- ---
Balance at end of period $727 $729 $724 $634 $622
------------------------ ---- ---- ---- ---- ----
Allowance for loan losses
as a percentage of total
loans 1.48% 1.45% 1.47% 1.29% 1.27%
Net loan charge-offs as
a percentage of average
total loans 0.13 0.34 0.43 0.42 0.19
------------------------ ---- ---- ---- ---- ----
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LENDING-RELATED COMMITMENTS (unaudited)
Comerica Incorporated and Subsidiaries
2016 2015
---- ----
(in millions) 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
------------ ------- ------- ------- ------- -------
Balance at
beginning of
period $43 $46 $45 $48 $50
Charge-offs on
lending-related
commitments (a) - (5) (6) - -
Provision for
credit losses on
lending-related
commitments 2 2 7 (3) (2)
----------------- --- --- --- --- ---
Balance at end of
period $45 $43 $46 $45 $48
----------------- --- --- --- --- ---
Unfunded lending-
related
commitments sold $ - $12 $11 $ - $ -
----------------- --- --- --- --- --- --- --- ---
(a) Charge-offs result from the sale
of unfunded lending-related
commitments.
NONPERFORMING ASSETS (unaudited)
Comerica Incorporated and Subsidiaries
2016 2015
---- ----
(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 $508 $482 $547 $238 $214
Real estate construction - - - 1 1
Commercial mortgage 44 44 47 60 66
Lease financing 6 6 6 6 8
International 19 18 27 8 8
Total nonaccrual business loans 577 550 627 313 297
Retail loans:
Residential mortgage 23 26 26 27 31
Consumer:
Home equity 27 28 27 27 28
Other consumer 4 1 1 - 1
-------------- --- --- --- --- ---
Total consumer 31 29 28 27 29
-------------- --- --- --- --- ---
Total nonaccrual retail loans 54 55 54 54 60
----------------------------- --- --- --- --- ---
Total nonaccrual loans 631 605 681 367 357
Reduced-rate loans 8 8 8 12 12
------------------ --- --- --- --- ---
Total nonperforming loans 639 613 689 379 369
Foreclosed property 21 22 25 12 12
------------------- --- --- --- --- ---
Total nonperforming assets $660 $635 $714 $391 $381
-------------------------- ---- ---- ---- ---- ----
Nonperforming loans as a percentage of total loans 1.30% 1.22% 1.40% 0.77% 0.75%
Nonperforming assets as a percentage of total loans 1.34 1.26 1.45 0.80 0.78
and foreclosed property
Allowance for loan losses as a percentage of total 114 119 105 167 169
nonperforming loans
Loans past due 90 days or more and still accruing $48 $35 $13 $17 $5
------------------------------------------------- --- --- --- --- ---
ANALYSIS OF NONACCRUAL LOANS
Nonaccrual loans at beginning of period $605 $681 $367 $357 $349
Loans transferred to nonaccrual (a) 105 107 446 105 69
Nonaccrual business loan gross charge-offs (b) (34) (52) (75) (49) (31)
Nonaccrual business loans sold (c) (2) (40) (21) - -
Payments/Other (d) (43) (91) (36) (46) (30)
------------------ --- --- --- --- ---
Nonaccrual loans at end of period $631 $605 $681 $367 $357
--------------------------------- ---- ---- ---- ---- ----
(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 $34 $52 $75 $49 $31
Performing business loans - - - 25 -
Consumer and residential mortgage loans 1 2 2 2 3
--- --- --- --- ---
Total gross loan charge-offs $35 $54 $77 $76 $34
--- --- --- --- ---
(c) Analysis of loans sold:
Nonaccrual business loans $2 $40 $21 $ - $ -
Performing criticized loans - - - 3 -
--- --- --- --- ---
Total criticized loans sold $2 $40 $21 $3 $ -
--- --- --- --- --- ---
(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
Nine Months Ended
-----------------
September 30, 2016 September 30, 2015
------------------ ------------------
(dollar amounts in
millions) Average Average Average Average
Balance Interest Rate (a) Balance Interest Rate (a)
------- -------- ------- ------- -------- -------
Commercial loans $31,152 $753 3.24% $31,596 $718 3.05%
Real estate construction
loans 2,397 65 3.61 1,859 48 3.44
Commercial mortgage
loans 9,002 236 3.50 8,648 220 3.40
Lease financing 706 15 2.86 793 19 3.13
International loans 1,388 38 3.61 1,455 39 3.63
Residential mortgage
loans 1,885 54 3.81 1,872 53 3.78
Consumer loans 2,493 62 3.34 2,432 59 3.23
-------------- ----- --- ---- ----- --- ----
Total loans 49,023 1,223 3.34 48,655 1,156 3.19
Mortgage-backed
securities (b) 9,347 152 2.20 9,076 151 2.23
Other investment
securities 3,008 33 1.50 950 9 1.18
---------------- ----- --- ---- --- --- ----
Total investment
securities (b) 12,355 185 2.03 10,026 160 2.13
Interest-bearing
deposits with banks 4,313 16 0.50 5,774 11 0.25
Other short-term
investments 105 1 0.65 106 - 0.78
---------------- --- --- ---- --- --- ----
Total earning assets 65,796 1,425 2.90 64,561 1,327 2.76
Cash and due from banks 1,098 1,054
Allowance for loan
losses (726) (614)
Accrued income and other
assets 4,774 4,687
----- -----
Total assets $70,942 $69,688
------- -------
Money market and
interest-bearing
checking deposits $22,797 20 0.11 $23,973 20 0.11
Savings deposits 1,996 - 0.02 1,827 - 0.02
Customer certificates of
deposit 3,308 10 0.40 4,359 12 0.37
Foreign office time
deposits 35 - 0.34 123 1 1.13
------------------- --- --- ---- --- --- ----
Total interest-bearing
deposits 28,136 30 0.14 30,282 33 0.14
Short-term borrowings 180 - 0.45 93 - 0.05
Medium- and long-term
debt 4,695 53 1.51 2,843 38 1.80
--------------------- ----- --- ---- ----- --- ----
Total interest-bearing
sources 33,011 83 0.33 33,218 71 0.28
Noninterest-bearing
deposits 28,966 27,569
Accrued expenses and
other liabilities 1,311 1,393
Total shareholders'
equity 7,654 7,508
----- -----
Total liabilities and
shareholders' equity $70,942 $69,688
------- -------
Net interest income/
rate spread $1,342 2.57 $1,256 2.48
------ ------
Impact of net
noninterest-bearing
sources of funds 0.17 0.13
-------------------- ---- ----
Net interest margin (as
a percentage of average
earning assets) 2.74% 2.61%
------------------------ ---- ----
(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
------------------
September 30, 2016 June 30, 2016 September 30, 2015
------------------ ------------- ------------------
(dollar amounts in
millions) Average Average Average Average Average Average
Balance Interest Rate (a) Balance Interest Rate (a) Balance Interest Rate (a)
------- -------- ------- ------- -------- ------- ------- -------- -------
Commercial loans $31,132 $253 3.25% $31,511 $251 3.23% $31,900 $243 3.04%
Real estate construction
loans 2,646 24 3.57 2,429 22 3.62 1,833 16 3.47
Commercial mortgage
loans 9,012 78 3.43 9,033 78 3.47 8,691 74 3.39
Lease financing 662 5 3.30 730 4 1.98 788 6 3.16
International loans 1,349 12 3.56 1,396 13 3.63 1,401 13 3.51
Residential mortgage
loans 1,883 18 3.74 1,880 17 3.76 1,882 18 3.79
Consumer loans 2,522 21 3.31 2,490 21 3.37 2,477 20 3.21
-------------- ----- --- ---- ----- --- ---- ----- --- ----
Total loans 49,206 411 3.33 49,469 406 3.31 48,972 390 3.17
Mortgage-backed
securities (b) 9,359 50 2.17 9,326 51 2.21 9,099 50 2.21
Other investment
securities 3,014 11 1.51 3,008 11 1.50 1,133 4 1.26
---------------- ----- --- ---- ----- --- ---- ----- --- ----
Total investment
securities (b) 12,373 61 2.01 12,334 62 2.03 10,232 54 2.11
Interest-bearing
deposits with banks 5,967 8 0.51 3,690 5 0.50 6,869 4 0.25
Other short-term
investments 102 - 0.43 104 - 0.58 118 - 0.82
---------------- --- --- ---- --- --- ---- --- --- ----
Total earning assets 67,648 480 2.84 65,597 473 2.91 66,191 448 2.70
Cash and due from banks 1,152 1,074 1,095
Allowance for loan
losses (749) (749) (628)
Accrued income and other
assets 4,858 4,746 4,675
----- ----- -----
Total assets $72,909 $70,668 $71,333
------- ------- -------
Money market and
interest-bearing
checking deposits $22,415 7 0.12 $22,785 6 0.11 $24,298 7 0.11
Savings deposits 2,042 - 0.03 2,010 - 0.02 1,860 - 0.02
Customer certificates of
deposit 3,129 3 0.40 3,320 4 0.40 4,232 4 0.37
Foreign office time
deposits 25 - 0.37 30 - 0.35 127 - 0.70
------------------- --- --- ---- --- --- ---- --- --- ----
Total interest-bearing
deposits 27,611 10 0.14 28,145 10 0.14 30,517 11 0.14
Short-term borrowings 17 - 0.47 159 - 0.45 91 - 0.04
Medium- and long-term
debt 5,907 20 1.36 5,072 18 1.42 3,175 15 1.85
--------------------- ----- --- ---- ----- --- ---- ----- --- ----
Total interest-bearing
sources 33,535 30 0.36 33,376 28 0.33 33,783 26 0.30
Noninterest-bearing
deposits 30,454 28,376 28,623
Accrued expenses and
other liabilities 1,243 1,262 1,368
Total shareholders'
equity 7,677 7,654 7,559
----- ----- -----
Total liabilities and
shareholders' equity $72,909 $70,668 $71,333
------- ------- -------
Net interest income/
rate spread $450 2.48 $445 2.58 $422 2.40
---- ---- ----
Impact of net
noninterest-bearing
sources of funds 0.18 0.16 0.14
-------------------- ---- ---- ----
Net interest margin (as
a percentage of average
earning assets) 2.66% 2.74% 2.54%
------------------------ ---- ---- ----
(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
(in millions, except per
share data) September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
---- ---- ---- ---- ----
Commercial loans:
Floor plan $3,778 $4,120 $3,902 $3,939 $3,538
Other 27,374 28,240 27,660 27,720 28,239
----- ------ ------ ------ ------ ------
Total commercial loans 31,152 32,360 31,562 31,659 31,777
Real estate construction
loans 2,743 2,553 2,290 2,001 1,874
Commercial mortgage loans 9,013 9,038 8,982 8,977 8,787
Lease financing 648 684 731 724 751
International loans 1,303 1,365 1,455 1,368 1,382
Residential mortgage
loans 1,874 1,856 1,874 1,870 1,880
Consumer loans:
Home equity 1,792 1,779 1,738 1,720 1,714
Other consumer 749 745 745 765 777
-------------- --- --- --- --- ---
Total consumer loans 2,541 2,524 2,483 2,485 2,491
-------------------- ----- ----- ----- ----- -----
Total loans $49,274 $50,380 $49,377 $49,084 $48,942
----------- ------- ------- ------- ------- -------
Goodwill $635 $635 $635 $635 $635
Core deposit intangible 8 9 9 10 10
Other intangibles 3 3 4 4 4
Common equity tier 1
capital (a) 7,378 7,346 7,331 7,350 7,327
Risk-weighted assets (a) 69,100 70,056 69,319 69,731 69,718
Common equity tier 1 and
tier 1 risk-based
capital ratio (a) 10.68% 10.49% 10.58% 10.54% 10.51%
Total risk-based capital
ratio (a) 12.82 12.74 12.84 12.69 12.82
Leverage ratio (a) 10.14 10.39 10.60 10.22 10.28
Common equity ratio 10.42 10.79 11.08 10.52 10.73
Tangible common equity
ratio (b) 9.64 9.98 10.23 9.70 9.91
Common shareholders'
equity per share of
common stock $44.91 $44.24 $43.66 $43.03 $43.02
Tangible common equity
per share of common
stock (b) 41.15 40.52 39.96 39.33 39.36
Market value per share
for the quarter:
High 47.81 47.55 41.74 47.44 52.93
Low 38.39 36.27 30.48 39.52 40.01
Close 47.32 41.13 37.87 41.83 41.10
Quarterly ratios:
Return on average common
shareholders' equity 7.80% 5.44% 3.13% 6.08% 7.19%
Return on average assets 0.82 0.59 0.34 0.64 0.76
Efficiency ratio (c) 68.15 72.43 65.99 68.92 66.87
Number of banking centers 473 473 477 477 477
Number of employees -
full time equivalent 8,476 8,792 8,869 8,880 8,941
--------------------- ----- ----- ----- ----- -----
September 30,
2016 amounts
and ratios
are
(a) 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) 2016 2015 2015
-------------------------- ---- ---- ----
ASSETS
Cash and due from
subsidiary bank $ - $4 $5
Short-term investments
with subsidiary bank 588 569 563
Other short-term
investments 88 89 89
Investment in subsidiaries,
principally banks 7,685 7,523 7,596
Premises and equipment 2 3 2
Other assets 161 137 138
------------ --- --- ---
Total assets $8,524 $8,325 $8,393
------------ ------ ------ ------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Medium- and long-term debt $626 $608 $618
Other liabilities 171 157 153
----------------- --- --- ---
Total liabilities 797 765 771
Common stock -$5 par
value:
Authorized -325,000,000
shares
Issued -228,164,824 shares 1,141 1,141 1,141
Capital surplus 2,174 2,173 2,165
Accumulated other
comprehensive loss (292) (429) (345)
Retained earnings 7,262 7,084 7,007
Less cost of common stock
in treasury -56,096,416
shares at 9/30/16,
52,457,113 shares at
12/31/15 and 51,010,418
shares at 9/30/15 (2,558) (2,409) (2,346)
------------------------- ------ ------ ------
Total shareholders' equity 7,727 7,560 7,622
-------------------------- ----- ----- -----
Total liabilities and
shareholders' equity $8,524 $8,325 $8,393
--------------------- ------ ------ ------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
Comerica Incorporated and Subsidiaries
Accumulated
Common Stock Other Total
------------
(in millions, except
per share data) Shares Capital Comprehensive Retained Treasury Shareholders'
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 - - - - 405 - 405
Other comprehensive
income, net of tax - - - 67 - - 67
Cash dividends
declared on common
stock ($0.62 per
share) - - - - (110) - (110)
Purchase of common
stock (3.8) - - - - (175) (175)
Purchase and
retirement of
warrants - - (10) - - - (10)
Net issuance of common
stock under employee
stock plans 1.0 - (21) - (10) 45 14
Net issuance of common
stock for warrants 1.0 - (21) - (22) 43 -
Share-based
compensation - - 29 - - - 29
BALANCE AT SEPTEMBER
30, 2015 177.2 $1,141 $2,165 $(345) $7,007 $(2,346) $7,622
-------------------- ----- ------ ------ ----- ------ ------- ------
BALANCE AT DECEMBER
31, 2015 175.7 $1,141 $2,173 $(429) $7,084 $(2,409) $7,560
Net income - - - - 313 - 313
Other comprehensive
income, net of tax - - - 137 - - 137
Cash dividends
declared on common
stock ($0.66 per
share) - - - - (115) - (115)
Purchase of common
stock (5.0) - - - - (211) (211)
Net issuance of common
stock under employee
stock plans 1.4 - (29) - (20) 62 13
Share-based
compensation - - 30 - - - 30
BALANCE AT SEPTEMBER
30, 2016 172.1 $1,141 $2,174 $(292) $7,262 $(2,558) $7,727
-------------------- ----- ------ ------ ----- ------ ------- ------
BUSINESS SEGMENT FINANCIAL RESULTS (unaudited)
Comerica Incorporated and Subsidiaries
(dollar amounts
in millions)
Three Months
Ended September
30, 2016 Business Retail Wealth
Bank Bank Management Finance Other Total
---- ---- ---------- ------- ----- -----
Earnings summary:
Net interest
income (expense) $361 $156 $41 $(114) $6 $450
Provision for
credit losses 2 10 (1) - 5 16
Noninterest
income 145 50 61 13 3 272
Noninterest
expenses 215 195 75 (1) 9 493
Provision
(benefit) for
income taxes 97 - 10 (39) (4) 64
--- --- --- --- ---
Net income (loss) $192 $1 $18 $(61) $(1) $149
---- --- --- ---- --- ----
Net credit-
related charge-
offs
(recoveries) $14 $3 $(1) $ - $ - $16
Selected average
balances:
Assets $39,618 $6,544 $5,283 $14,144 $7,320 $72,909
Loans 38,243 5,871 5,092 - - 49,206
Deposits 30,019 23,654 4,030 98 264 58,065
Statistical data:
Return on average
assets (a) 1.94% 0.01% 1.39% N/M N/M 0.82%
Efficiency ratio
(b) 42.38 94.57 73.07 N/M N/M 68.15
----- ----- ----- --- --- -----
Three Months
Ended June 30,
2016 Business Retail Wealth
Bank Bank Management Finance Other Total
---- ---- ---------- ------- ----- -----
Earnings summary:
Net interest
income (expense) $355 $155 $42 $(113) $6 $445
Provision for
credit losses 46 1 3 - (1) 49
Noninterest
income 144 48 62 10 4 268
Noninterest
expenses 222 205 81 (1) 11 518
Provision
(benefit) for
income taxes 76 (1) 7 (39) (1) 42
--- --- --- --- ---
Net income (loss) $155 $(2) $13 $(63) $1 $104
---- --- --- ---- --- ----
Net credit-
related charge-
offs $42 $1 $4 $ - $ - $47
Selected average
balances:
Assets $39,983 $6,558 $5,215 $13,927 $4,985 $70,668
Loans 38,574 5,879 5,016 - - 49,469
Deposits 28,441 23,546 4,213 50 271 56,521
Statistical data:
Return on average
assets (a) 1.55% (0.03)% 1.02% N/M N/M 0.59%
Efficiency ratio
(b) 44.31 101.12 77.65 N/M N/M 72.43
---------------- ----- ------ ----- --- --- -----
Three Months
Ended September
30, 2015 Business Retail Wealth
Bank Bank Management Finance Other Total
---- ---- ---------- ------- ----- -----
Earnings summary:
Net interest
income (expense) $378 $158 $45 $(163) $4 $422
Provision for
credit losses 30 2 (3) - (3) 26
Noninterest
income 144 49 59 12 (4) 260
Noninterest
expenses 198 185 75 - (1) 457
Provision
(benefit) for
income taxes 99 7 11 (57) 3 63
--- --- --- --- --- ---
Net income (loss) $195 $13 $21 $(94) $1 $136
---- --- --- ---- --- ----
Net credit-
related charge-
offs
(recoveries) $23 $1 $(1) $ - $ - $23
Selected average
balances:
Assets $39,768 $6,518 $5,228 $11,761 $8,058 $71,333
Loans 38,113 5,835 5,024 - - 48,972
Deposits 31,405 23,079 4,188 203 265 59,140
Statistical data:
Return on average
assets (a) 1.96% 0.23% 1.62% N/M N/M 0.76%
Efficiency ratio
(b) 37.98 89.33 71.12 N/M N/M 66.87
---------------- ----- ----- ----- --- --- -----
(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 September
30, 2016 Michigan California Texas Markets & Other Total
---------------- -------- ---------- ----- ------- ------- -----
Earnings summary:
Net interest
income (expense) $169 $181 $118 $90 $(108) $450
Provision for
credit losses 13 (4) (3) 5 5 16
Noninterest
income 82 44 33 97 16 272
Noninterest
expenses 161 110 102 112 8 493
Provision
(benefit) for
income taxes 26 44 19 18 (43) 64
--- --- --- --- --- ---
Net income (loss) $51 $75 $33 $52 $(62) $149
--- --- --- --- ---- ----
Net credit-
related charge-
offs $1 $ - $10 $5 $ - $16
Selected average
balances:
Assets $13,174 $17,933 $11,014 $9,324 $21,464 $72,909
Loans 12,488 17,637 10,566 8,515 - 49,206
Deposits 21,944 17,674 9,860 8,225 362 58,065
Statistical data:
Return on average
assets (a) 0.90% 1.61% 1.18% 2.23% N/M 0.82%
Efficiency ratio
(b) 64.10 48.56 67.29 59.87 N/M 68.15
---------------- ----- ----- ----- ----- --- -----
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 31 103 14 268
Noninterest
expenses 159 120 113 116 10 518
Provision
(benefit) for
income taxes 28 30 2 22 (40) 42
--- --- --- --- --- ---
Net income (loss) $57 $50 $3 $56 $(62) $104
--- --- --- --- ---- ----
Net credit-
related charge-
offs
(recoveries) $ - $17 $31 $(1) $ - $47
Selected average
balances:
Assets $13,299 $17,998 $11,287 $9,172 $18,912 $70,668
Loans 12,660 17,708 10,840 8,261 - 49,469
Deposits 21,553 16,933 10,052 7,662 321 56,521
Statistical data:
Return on average
assets (a) 1.01% 1.10% 0.11% 2.46% N/M 0.59%
Efficiency ratio
(b) 64.13 55.30 74.91 60.43 N/M 72.43
---------------- ----- ----- ----- ----- --- -----
Other Finance
Three Months
Ended September
30, 2015 Michigan California Texas Markets & Other Total
---------------- -------- ---------- ----- ------- ------- -----
Earnings summary:
Net interest
income (expense) $179 $186 $129 $87 $(159) $422
Provision for
credit losses 6 24 10 (11) (3) 26
Noninterest
income 84 38 34 96 8 260
Noninterest
expenses 152 101 97 108 (1) 457
Provision
(benefit) for
income taxes 35 37 20 25 (54) 63
--- --- --- --- --- ---
Net income (loss) $70 $62 $36 $61 $(93) $136
--- --- --- --- ---- ----
Net credit-
related charge-
offs $9 $10 $4 $ - $ - $23
Selected average
balances:
Assets $13,856 $17,060 $11,578 $9,020 $19,819 $71,333
Loans 13,223 16,789 10,997 7,963 - 48,972
Deposits 21,946 18,371 10,753 7,602 468 59,140
Statistical data:
Return on average
assets (a) 1.23% 1.27% 1.16% 2.70% N/M 0.76%
Efficiency ratio
(b) 57.42 45.19 59.48 59.00 N/M 66.87
---------------- ----- ----- ----- ----- --- -----
(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
(dollar amounts in
millions) September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
---- ---- ---- ---- ----
Tangible Common
Equity Ratio:
Common
shareholders'
equity $7,727 $7,694 $7,644 $7,560 $7,622
Less:
Goodwill 635 635 635 635 635
Other intangible
assets 11 12 13 14 14
--- --- --- --- ---
Tangible common
equity $7,081 $7,047 $6,996 $6,911 $6,973
--------------- ------ ------ ------ ------ ------
Total assets $74,124 $71,280 $69,007 $71,877 $71,012
Less:
Goodwill 635 635 635 635 635
Other intangible
assets 11 12 13 14 14
--- --- --- --- ---
Tangible assets $73,478 $70,633 $68,359 $71,228 $70,363
--------------- ------- ------- ------- ------- -------
Common equity ratio 10.42% 10.79% 11.08% 10.52% 10.73%
Tangible common
equity ratio 9.64 9.98 10.23 9.70 9.91
--------------- ---- ---- ----- ---- ----
Tangible Common
Equity per Share
of Common Stock:
Common
shareholders'
equity $7,727 $7,694 $7,644 $7,560 $7,622
Tangible common
equity 7,081 7,047 6,996 6,911 6,973
--------------- ----- ----- ----- ----- -----
Shares of common
stock outstanding
(in millions) 172 174 175 176 177
------------------ --- --- --- --- ---
Common
shareholders'
equity per share
of common stock $44.91 $44.24 $43.66 $43.03 $43.02
Tangible common
equity per share
of common stock 41.15 40.52 39.96 39.33 39.36
----------------- ----- ----- ----- ----- -----
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
