CONSOLIDATED BALANCE SHEETS
Comerica Incorporated and Subsidiaries
|
|
|
|
|
|
|
|
|
(in millions, except share data)
|
March 31, 2019
|
|
December 31, 2018
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
Cash and due from banks
|
$
|
1,063
|
|
|
$
|
1,390
|
|
|
|
|
|
Interest-bearing deposits with banks
|
2,418
|
|
|
3,171
|
|
Other short-term investments
|
136
|
|
|
134
|
|
|
|
|
|
Investment securities available-for-sale
|
12,212
|
|
|
12,045
|
|
|
|
|
|
Commercial loans
|
32,007
|
|
|
31,976
|
|
Real estate construction loans
|
3,291
|
|
|
3,077
|
|
Commercial mortgage loans
|
8,989
|
|
|
9,106
|
|
Lease financing
|
535
|
|
|
507
|
|
International loans
|
1,040
|
|
|
1,013
|
|
Residential mortgage loans
|
1,949
|
|
|
1,970
|
|
Consumer loans
|
2,491
|
|
|
2,514
|
|
Total loans
|
50,302
|
|
|
50,163
|
|
Less allowance for loan losses
|
(647
|
)
|
|
(671
|
)
|
Net loans
|
49,655
|
|
|
49,492
|
|
|
|
|
|
Premises and equipment
|
474
|
|
|
475
|
|
Accrued income and other assets
|
4,732
|
|
|
4,111
|
|
Total assets
|
$
|
70,690
|
|
|
$
|
70,818
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
Noninterest-bearing deposits
|
$
|
26,242
|
|
|
$
|
28,690
|
|
|
|
|
|
Money market and interest-bearing checking deposits
|
22,889
|
|
|
22,560
|
|
Savings deposits
|
2,175
|
|
|
2,172
|
|
Certificates of deposit
|
2,776
|
|
|
2,131
|
|
Foreign office time deposits
|
9
|
|
|
8
|
|
Total interest-bearing deposits
|
27,849
|
|
|
26,871
|
|
Total deposits
|
54,091
|
|
|
55,561
|
|
|
|
|
|
Short-term borrowings
|
935
|
|
|
44
|
|
Accrued expenses and other liabilities
|
1,407
|
|
|
1,243
|
|
Medium- and long-term debt
|
6,848
|
|
|
6,463
|
|
Total liabilities
|
63,281
|
|
|
63,311
|
|
|
|
|
|
Common stock - $5 par value:
|
|
|
|
Authorized - 325,000,000 shares
|
|
|
|
Issued - 228,164,824 shares
|
1,141
|
|
|
1,141
|
|
Capital surplus
|
2,159
|
|
|
2,148
|
|
Accumulated other comprehensive loss
|
(513
|
)
|
|
(609
|
)
|
Retained earnings
|
8,979
|
|
|
8,781
|
|
Less cost of common stock in treasury - 72,747,011 shares at 3/31/19 and 68,081,176 shares at 12/31/18
|
(4,357
|
)
|
|
(3,954
|
)
|
Total shareholders’ equity
|
7,409
|
|
|
7,507
|
|
Total liabilities and shareholders’ equity
|
$
|
70,690
|
|
|
$
|
70,818
|
|
See notes to consolidated financial statements (unaudited).
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
Comerica Incorporated and Subsidiaries
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in millions, except per share data)
|
2019
|
|
2018
|
INTEREST INCOME
|
|
|
|
Interest and fees on loans
|
$
|
621
|
|
|
$
|
509
|
|
Interest on investment securities
|
72
|
|
|
64
|
|
Interest on short-term investments
|
17
|
|
|
17
|
|
Total interest income
|
710
|
|
|
590
|
|
INTEREST EXPENSE
|
|
|
|
Interest on deposits
|
52
|
|
|
16
|
|
Interest on short-term borrowings
|
1
|
|
|
—
|
|
Interest on medium- and long-term debt
|
51
|
|
|
25
|
|
Total interest expense
|
104
|
|
|
41
|
|
Net interest income
|
606
|
|
|
549
|
|
Provision for credit losses
|
(13
|
)
|
|
12
|
|
Net interest income after provision for credit losses
|
619
|
|
|
537
|
|
NONINTEREST INCOME
|
|
|
|
Card fees
|
63
|
|
|
59
|
|
Service charges on deposit accounts
|
51
|
|
|
54
|
|
Fiduciary income
|
49
|
|
|
52
|
|
Commercial lending fees
|
22
|
|
|
18
|
|
Foreign exchange income
|
11
|
|
|
12
|
|
Letter of credit fees
|
9
|
|
|
10
|
|
Bank-owned life insurance
|
9
|
|
|
9
|
|
Brokerage fees
|
7
|
|
|
7
|
|
Net securities (losses) gains
|
(8
|
)
|
|
1
|
|
Other noninterest income
|
25
|
|
|
22
|
|
Total noninterest income
|
238
|
|
|
244
|
|
NONINTEREST EXPENSES
|
|
|
|
Salaries and benefits expense
|
265
|
|
|
255
|
|
Outside processing fee expense
|
63
|
|
|
61
|
|
Net occupancy expense
|
37
|
|
|
38
|
|
Software expense
|
29
|
|
|
31
|
|
Equipment expense
|
12
|
|
|
11
|
|
FDIC insurance expense
|
5
|
|
|
13
|
|
Advertising expense
|
5
|
|
|
6
|
|
Restructuring charges
|
—
|
|
|
16
|
|
Other noninterest expenses
|
17
|
|
|
15
|
|
Total noninterest expenses
|
433
|
|
|
446
|
|
Income before income taxes
|
424
|
|
|
335
|
|
Provision for income taxes
|
85
|
|
|
54
|
|
NET INCOME
|
339
|
|
|
281
|
|
Less income allocated to participating securities
|
2
|
|
|
2
|
|
Net income attributable to common shares
|
$
|
337
|
|
|
$
|
279
|
|
Earnings per common share:
|
|
|
|
Basic
|
$
|
2.14
|
|
|
$
|
1.62
|
|
Diluted
|
2.11
|
|
|
1.59
|
|
|
|
|
|
Comprehensive income
|
435
|
|
|
178
|
|
|
|
|
|
Cash dividends declared on common stock
|
105
|
|
|
52
|
|
Cash dividends declared per common share
|
0.67
|
|
|
0.30
|
|
See notes to consolidated financial statements (unaudited).
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, 2017
|
172.9
|
|
$
|
1,141
|
|
$
|
2,122
|
|
$
|
(451
|
)
|
$
|
7,887
|
|
$
|
(2,736
|
)
|
$
|
7,963
|
|
Cumulative effect of change in accounting principles
|
—
|
|
—
|
|
—
|
|
1
|
|
14
|
|
—
|
|
15
|
|
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
281
|
|
—
|
|
281
|
|
Other comprehensive loss, net of tax
|
—
|
|
—
|
|
—
|
|
(103
|
)
|
—
|
|
—
|
|
(103
|
)
|
Cash dividends declared on common stock ($0.30 per share)
|
—
|
|
—
|
|
—
|
|
—
|
|
(52
|
)
|
—
|
|
(52
|
)
|
Purchase of common stock
|
(1.7
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(159
|
)
|
(159
|
)
|
Net issuance of common stock under employee stock plans
|
1.2
|
|
—
|
|
(11
|
)
|
—
|
|
(17
|
)
|
59
|
|
31
|
|
Net issuance of common stock for warrants
|
0.1
|
|
—
|
|
(1
|
)
|
—
|
|
(3
|
)
|
4
|
|
—
|
|
Share-based compensation
|
—
|
|
—
|
|
24
|
|
—
|
|
—
|
|
—
|
|
24
|
|
BALANCE AT MARCH 31, 2018
|
172.5
|
|
$
|
1,141
|
|
$
|
2,134
|
|
$
|
(553
|
)
|
$
|
8,110
|
|
$
|
(2,832
|
)
|
$
|
8,000
|
|
|
|
|
|
|
|
|
|
BALANCE AT DECEMBER 31, 2018
|
160.1
|
|
$
|
1,141
|
|
$
|
2,148
|
|
$
|
(609
|
)
|
$
|
8,781
|
|
$
|
(3,954
|
)
|
$
|
7,507
|
|
Cumulative effect of change in accounting principle
|
—
|
|
—
|
|
—
|
|
—
|
|
(14
|
)
|
—
|
|
(14
|
)
|
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
339
|
|
—
|
|
339
|
|
Other comprehensive income, net of tax
|
—
|
|
—
|
|
—
|
|
96
|
|
—
|
|
—
|
|
96
|
|
Cash dividends declared on common stock ($0.67 per share)
|
—
|
|
—
|
|
—
|
|
—
|
|
(105
|
)
|
—
|
|
(105
|
)
|
Purchase of common stock
|
(5.2
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(434
|
)
|
(434
|
)
|
Net issuance of common stock under employee stock plans
|
0.5
|
|
—
|
|
(13
|
)
|
—
|
|
(22
|
)
|
31
|
|
(4
|
)
|
Share-based compensation
|
—
|
|
—
|
|
24
|
|
—
|
|
—
|
|
—
|
|
24
|
|
BALANCE AT MARCH 31, 2019
|
155.4
|
|
$
|
1,141
|
|
$
|
2,159
|
|
$
|
(513
|
)
|
$
|
8,979
|
|
$
|
(4,357
|
)
|
$
|
7,409
|
|
See notes to consolidated financial statements (unaudited).
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Comerica Incorporated and Subsidiaries
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in millions)
|
2019
|
|
2018
|
OPERATING ACTIVITIES
|
|
|
|
Net income
|
$
|
339
|
|
|
$
|
281
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
Provision for credit losses
|
(13
|
)
|
|
12
|
|
(Benefit) provision for deferred income taxes
|
(4
|
)
|
|
7
|
|
Depreciation and amortization
|
29
|
|
|
31
|
|
Net periodic defined benefit credit
|
(7
|
)
|
|
(5
|
)
|
Share-based compensation expense
|
24
|
|
|
24
|
|
Net amortization of securities
|
—
|
|
|
1
|
|
Net securities losses (gains)
|
8
|
|
|
(1
|
)
|
Net change in:
|
|
|
|
Accrued income receivable
|
(20
|
)
|
|
(26
|
)
|
Accrued expenses payable
|
(27
|
)
|
|
(22
|
)
|
Other, net
|
(289
|
)
|
|
56
|
|
Net cash provided by operating activities
|
40
|
|
|
358
|
|
INVESTING ACTIVITIES
|
|
|
|
Investment securities available-for-sale:
|
|
|
|
Maturities and redemptions
|
487
|
|
|
444
|
|
Sales
|
987
|
|
|
5
|
|
Purchases
|
(1,532
|
)
|
|
(441
|
)
|
Net change in loans
|
(151
|
)
|
|
(98
|
)
|
Proceeds from sales of foreclosed property
|
—
|
|
|
1
|
|
Net increase in premises and equipment
|
(16
|
)
|
|
(20
|
)
|
Purchases of Federal Home Loan Bank stock
|
(16
|
)
|
|
(41
|
)
|
Proceeds from bank-owned life insurance settlements
|
2
|
|
|
3
|
|
Net cash used in investing activities
|
(239
|
)
|
|
(147
|
)
|
FINANCING ACTIVITIES
|
|
|
|
Net change in:
|
|
|
|
Deposits
|
(1,586
|
)
|
|
(77
|
)
|
Short-term borrowings
|
891
|
|
|
38
|
|
Issuances and advances of medium- and long-term debt
|
350
|
|
|
1,000
|
|
Common stock:
|
|
|
|
Repurchases
|
(443
|
)
|
|
(168
|
)
|
Cash dividends paid
|
(99
|
)
|
|
(53
|
)
|
Issuances under employee stock plans
|
6
|
|
|
40
|
|
Net cash (used in) provided by financing activities
|
(881
|
)
|
|
780
|
|
Net (decrease) increase in cash and cash equivalents
|
(1,080
|
)
|
|
991
|
|
Cash and cash equivalents at beginning of period
|
4,561
|
|
|
5,845
|
|
Cash and cash equivalents at end of period
|
$
|
3,481
|
|
|
$
|
6,836
|
|
Interest paid
|
$
|
98
|
|
|
$
|
40
|
|
Income tax paid
|
12
|
|
|
2
|
|
Noncash investing and financing activities:
|
|
|
|
Loans transferred to other real estate
|
—
|
|
|
1
|
|
Securities transferred from held-to-maturity to available-for-sale
|
—
|
|
|
1,266
|
|
Securities transferred from available-for-sale to equity securities
|
—
|
|
|
81
|
|
See notes to consolidated financial statements (unaudited).
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
NOTE
1
- BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Organization
The accompanying unaudited consolidated financial statements were prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation were included. The results of operations for the
three months ended March 31, 2019
are not necessarily indicative of the results that may be expected for the year ending
December 31, 2019
. Certain items in prior periods were reclassified to conform to the current presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report of Comerica Incorporated and Subsidiaries (the Corporation) on Form 10-K for the year ended
December 31, 2018
.
Leases
Effective January 1, 2019, the Corporation adopted the provisions of Accounting Standards Update (ASU) No. 2016-02, “Leases (Topic 842),” (ASU 2016-02), for all open leases with a term greater than one year as of the adoption date, using the modified retrospective approach. Prior comparable periods are presented in accordance with previous guidance under Accounting Standards Codification (ASC) 840, “Leases.”
Topic 842 requires the recognition of a lease liability measured as the present value of unpaid lease payments for operating leases where the Corporation is the lessee, and a corresponding right-of-use (ROU) asset for the right to use the leased properties. The Corporation elected not to reassess whether contracts are or contain leases, lease classification or initial direct costs for existing leases, a set of practical expedients for transition provided by ASU 2016-12. Further, the Corporation elected the practical expedient to use hindsight in determining the lease term and assessing impairment. The election of the hindsight practical expedient resulted in longer lease terms for a limited number of strategic locations based on relevant factors as of the adoption date.
The impact at adoption was increases of
$329 million
and
$343 million
to total assets and liabilities, respectively, and a
$14 million
reduction to retained earnings. The increase in total assets was due to the recognition of ROU assets recorded in accrued income and other assets, and the increase in total liabilities was due to corresponding recognition of lease payment liabilities recorded in accrued expenses and other liabilities.
Operating lease liabilities reflect the Corporation’s obligation to make future lease payments, primarily for real estate locations. Lease terms typically comprise contractual terms but may include extension options reasonably assured of being exercised at lease inception for certain strategic locations such as regional headquarters. Payments are discounted using the rate the Corporation would pay to borrow amounts equal to the lease payments over the lease term (the Corporation’s incremental borrowing rate). The Corporation does not separate lease and non-lease components for contracts in which it is the lessee. ROU assets are measured based on lease liabilities adjusted for incentives and timing differences between operating lease expense and payments, recognized on a straight-line basis over the lease term. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are recognized as incurred. Common area maintenance and other executory costs are the main components of variable lease payments. Operating and variable lease expenses are recorded in net occupancy expense in the Consolidated Statements of Income.
The Corporation is the lessor in sales-type, direct finance and leveraged lease arrangements. Leases are recorded at the principal balance outstanding, net of unearned income and charge-offs. Interest income is recognized using the interest method. The impact of adopting Topic 842 for lessor accounting was not significant.
Pending Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," (ASU 2016-13), which addresses concerns regarding the perceived delay in recognition of credit losses under the existing incurred loss model. The amendment introduces a new, single model for recognizing credit losses on all financial instruments presented on a cost basis. Under the new model, entities must estimate current expected credit losses by considering all available relevant information, including historical and current conditions, as well as reasonable and supportable forecasts of future events. The update also requires additional qualitative and quantitative disclosure to allow users to better understand the credit risk within the portfolio and the methodologies for determining the allowance for credit losses.
ASU 2016-13 is effective for the Corporation on January 1, 2020 and must be applied using the modified retrospective approach with limited exceptions. The Corporation’s cross-functional implementation team, led by the Chief Financial Officer and Chief Credit Officer, continued to make progress in accordance with the detailed implementation plan for adoption. In prior periods, the Corporation developed new credit estimation models and, in the first quarter 2019, completed internal validation of
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
the models. The Corporation is currently finalizing and documenting new processes and controls, challenging current model assumptions and outputs, refining the qualitative framework as well as drafting policies and disclosures. Additionally, limited parallel runs, which began in the fourth quarter 2018, will be enhanced throughout 2019 as the end-to-end processes, controls and policies are finalized.
The ultimate impact of ASU 2016-13 will depend on the composition of the portfolio as well as economic conditions and forecasts at the time of adoption. Based on current factors, the overall allowance for credit losses is not expected to materially change due to the portfolio’s relatively short average contractual life. The commercial portfolio, which comprises most of the Corporation’s portfolio, consists of loans and lending arrangements with short contractual maturities which are expected to result in a slight reduction to the allowance for credit losses. The allowance for credit losses is expected to increase for the consumer portfolio given its longer contractual maturities. The standard will be adopted in first quarter 2020.
NOTE
2
– FAIR VALUE MEASUREMENTS
The Corporation utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The determination of fair values of financial instruments often requires the use of estimates. In cases where quoted market values in an active market are not available, the Corporation uses present value techniques and other valuation methods to estimate the fair values of its financial instruments. These valuation methods require considerable judgment and the resulting estimates of fair value can be significantly affected by the assumptions made and methods used.
Equity securities, investment securities available-for-sale, derivatives and deferred compensation plan assets and liabilities are recorded at fair value on a recurring basis. Additionally, from time to time, the Corporation may be required to record other assets and liabilities at fair value on a nonrecurring basis, such as impaired loans, other real estate (primarily foreclosed property), nonmarketable equity securities and certain other assets and liabilities. These nonrecurring fair value adjustments typically involve write-downs of individual assets or application of lower of cost or fair value accounting.
Refer to Note 1 to the consolidated financial statements in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2018
for further information about the fair value hierarchy, descriptions of the valuation methodologies and key inputs used to measure financial assets and liabilities recorded at fair value, as well as a description of the methods and significant assumptions used to estimate fair value disclosures for financial instruments not recorded at fair value in their entirety on a recurring basis.
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
The following tables present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of
March 31, 2019
and
December 31, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
Deferred compensation plan assets
|
$
|
91
|
|
|
$
|
91
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Equity securities
|
43
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
|
U.S. Treasury and other U.S. government agency securities
|
2,756
|
|
|
2,756
|
|
|
—
|
|
|
—
|
|
|
Residential mortgage-backed securities (a)
|
9,456
|
|
|
—
|
|
|
9,456
|
|
|
—
|
|
|
Total investment securities available-for-sale
|
12,212
|
|
|
2,756
|
|
|
9,456
|
|
|
—
|
|
|
Derivative assets:
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
112
|
|
|
—
|
|
|
98
|
|
|
14
|
|
|
Energy derivative contracts
|
96
|
|
|
—
|
|
|
96
|
|
|
—
|
|
|
Foreign exchange contracts
|
15
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
Total derivative assets
|
223
|
|
|
—
|
|
|
209
|
|
|
14
|
|
|
Total assets at fair value
|
$
|
12,569
|
|
|
$
|
2,890
|
|
|
$
|
9,665
|
|
|
$
|
14
|
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
47
|
|
|
$
|
—
|
|
|
Energy derivative contracts
|
93
|
|
|
—
|
|
|
93
|
|
|
—
|
|
|
Foreign exchange contracts
|
9
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
Total derivative liabilities
|
149
|
|
|
—
|
|
|
149
|
|
|
—
|
|
|
Deferred compensation plan liabilities
|
91
|
|
|
91
|
|
|
—
|
|
|
—
|
|
|
Total liabilities at fair value
|
$
|
240
|
|
|
$
|
91
|
|
|
$
|
149
|
|
|
$
|
—
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
Deferred compensation plan assets
|
$
|
88
|
|
|
$
|
88
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Equity securities
|
43
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
|
U.S. Treasury and other U.S. government agency securities
|
2,727
|
|
|
2,727
|
|
|
—
|
|
|
—
|
|
|
Residential mortgage-backed securities (a)
|
9,318
|
|
|
—
|
|
|
9,318
|
|
|
—
|
|
|
Total investment securities available-for-sale
|
12,045
|
|
|
2,727
|
|
|
9,318
|
|
|
—
|
|
|
Derivative assets:
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
67
|
|
|
—
|
|
|
58
|
|
|
9
|
|
|
Energy derivative contracts
|
189
|
|
|
—
|
|
|
189
|
|
|
—
|
|
|
Foreign exchange contracts
|
19
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
Total derivative assets
|
275
|
|
|
—
|
|
|
266
|
|
|
9
|
|
|
Total assets at fair value
|
$
|
12,451
|
|
|
$
|
2,858
|
|
|
$
|
9,584
|
|
|
$
|
9
|
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
70
|
|
|
$
|
—
|
|
|
$
|
70
|
|
|
$
|
—
|
|
|
Energy derivative contracts
|
186
|
|
|
—
|
|
|
186
|
|
|
—
|
|
|
Foreign exchange contracts
|
13
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
Total derivative liabilities
|
269
|
|
|
—
|
|
|
269
|
|
|
—
|
|
|
Deferred compensation plan liabilities
|
88
|
|
|
88
|
|
|
—
|
|
|
—
|
|
|
Total liabilities at fair value
|
$
|
357
|
|
|
$
|
88
|
|
|
$
|
269
|
|
|
$
|
—
|
|
|
|
|
(a)
|
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.
|
There were
no
transfers of assets or liabilities recorded at fair value on a recurring basis into or out of Level 1, Level 2 and Level 3 fair value measurements during each of the three-month periods ended
March 31, 2019
and
2018
.
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the
three-month periods ended March 31, 2019
and
2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Realized/Unrealized Gains (Losses) (Pretax) Recorded in Earnings (b)
|
|
|
|
|
|
Balance
at
Beginning
of Period
|
|
Change in Classification (a)
|
|
|
|
|
Balance at End of Period
|
|
|
|
|
Sales and Redemptions
|
|
(in millions)
|
|
|
Realized
|
Unrealized
|
|
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
|
$
|
—
|
|
|
$
|
14
|
|
Three Months Ended March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
$
|
—
|
|
|
$
|
44
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
$
|
(44
|
)
|
|
$
|
—
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal securities (c)
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(5
|
)
|
|
—
|
|
Equity and other non-debt securities (c)
|
44
|
|
|
(44
|
)
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
Total investment securities available-for-sale
|
49
|
|
|
(44
|
)
|
|
—
|
|
|
—
|
|
|
|
(5
|
)
|
|
—
|
|
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
14
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
|
—
|
|
|
7
|
|
|
|
(a)
|
Reflects the reclassification of equity securities resulting from the adoption of ASU 2016-01.
|
|
|
(b)
|
Realized and unrealized gains and losses due to changes in fair value are recorded in other noninterest income on the Consolidated Statements of Comprehensive Income.
|
|
|
(c)
|
Auction-rate securities.
|
Assets and Liabilities at Fair Value on a Nonrecurring Basis
The Corporation may be required to record certain assets and liabilities at fair value on a nonrecurring basis. These include assets that are recorded at the lower of cost or fair value, and were recognized at fair value since it was less than cost at the end of the period.
The following table presents assets recorded at fair value on a nonrecurring basis at
March 31, 2019
and
December 31, 2018
.
No
liabilities were recorded at fair value on a nonrecurring basis at
March 31, 2019
and
December 31, 2018
.
|
|
|
|
|
(in millions)
|
Level 3
|
March 31, 2019
|
|
Loans:
|
|
Commercial
|
$
|
40
|
|
Commercial mortgage
|
2
|
|
Total assets at fair value
|
$
|
42
|
|
December 31, 2018
|
|
Loans:
|
|
Commercial
|
$
|
33
|
|
Commercial mortgage
|
2
|
|
Total assets at fair value
|
$
|
35
|
|
Level 3 assets recorded at fair value on a nonrecurring basis at
March 31, 2019
and
December 31, 2018
included loans for which a specific allowance was established based on the fair value of collateral. The unobservable inputs were the additional adjustments applied by management to the appraised values to reflect such factors as non-current appraisals and revisions to estimated time to sell. These adjustments are determined based on qualitative judgments made by management on a case-by-case basis and are not quantifiable inputs, although they are used in the determination of fair value.
Estimated Fair Values of Financial Instruments Not Recorded at Fair Value on a Recurring Basis
The Corporation typically holds the majority of its financial instruments until maturity and thus does not expect to realize many of the estimated fair value amounts disclosed. The disclosures also do not include estimated fair value amounts for items that are not defined as financial instruments, but which have significant value. These include such items as core deposit intangibles, the future earnings potential of significant customer relationships and the value of trust operations and other fee generating businesses. The Corporation believes the imprecision of an estimate could be significant.
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
The carrying amount and estimated fair value of financial instruments not recorded at fair value in their entirety on a recurring basis on the Corporation’s Consolidated Balance Sheets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Amount
|
|
Estimated Fair Value
|
(in millions)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
$
|
1,063
|
|
|
$
|
1,063
|
|
|
$
|
1,063
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest-bearing deposits with banks
|
2,418
|
|
|
2,418
|
|
|
2,418
|
|
|
—
|
|
|
—
|
|
Loans held-for-sale
|
2
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
Total loans, net of allowance for loan losses (a)
|
49,655
|
|
|
50,154
|
|
|
—
|
|
|
—
|
|
|
50,154
|
|
Customers’ liability on acceptances outstanding
|
4
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
—
|
|
Restricted equity investments
|
264
|
|
|
264
|
|
|
264
|
|
|
—
|
|
|
—
|
|
Nonmarketable equity securities (b)
|
6
|
|
|
10
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Demand deposits (noninterest-bearing)
|
26,242
|
|
|
26,242
|
|
|
—
|
|
|
26,242
|
|
|
—
|
|
Interest-bearing deposits
|
25,073
|
|
|
25,073
|
|
|
—
|
|
|
25,073
|
|
|
—
|
|
Certificates of deposit
|
2,776
|
|
|
2,751
|
|
|
—
|
|
|
2,751
|
|
|
—
|
|
Total deposits
|
54,091
|
|
|
54,066
|
|
|
—
|
|
|
54,066
|
|
|
—
|
|
Short-term borrowings
|
935
|
|
|
935
|
|
|
935
|
|
|
—
|
|
|
—
|
|
Acceptances outstanding
|
4
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
—
|
|
Medium- and long-term debt
|
6,848
|
|
|
6,862
|
|
|
—
|
|
|
6,862
|
|
|
—
|
|
Credit-related financial instruments
|
(55
|
)
|
|
(55
|
)
|
|
—
|
|
|
—
|
|
|
(55
|
)
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
$
|
1,390
|
|
|
$
|
1,390
|
|
|
$
|
1,390
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest-bearing deposits with banks
|
3,171
|
|
|
3,171
|
|
|
3,171
|
|
|
—
|
|
|
—
|
|
Loans held-for-sale
|
3
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
Total loans, net of allowance for loan losses (a)
|
49,492
|
|
|
48,889
|
|
|
—
|
|
|
—
|
|
|
48,889
|
|
Customers’ liability on acceptances outstanding
|
4
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
—
|
|
Restricted equity investments
|
248
|
|
|
248
|
|
|
248
|
|
|
—
|
|
|
—
|
|
Nonmarketable equity securities (b)
|
6
|
|
|
11
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Demand deposits (noninterest-bearing)
|
28,690
|
|
|
28,690
|
|
|
—
|
|
|
28,690
|
|
|
—
|
|
Interest-bearing deposits
|
24,740
|
|
|
24,740
|
|
|
—
|
|
|
24,740
|
|
|
—
|
|
Certificates of deposit
|
2,131
|
|
|
2,100
|
|
|
—
|
|
|
2,100
|
|
|
—
|
|
Total deposits
|
55,561
|
|
|
55,530
|
|
|
—
|
|
|
55,530
|
|
|
—
|
|
Short-term borrowings
|
44
|
|
|
44
|
|
|
44
|
|
|
—
|
|
|
—
|
|
Acceptances outstanding
|
4
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
—
|
|
Medium- and long-term debt
|
6,463
|
|
|
6,436
|
|
|
—
|
|
|
6,436
|
|
|
—
|
|
Credit-related financial instruments
|
(57
|
)
|
|
(57
|
)
|
|
—
|
|
|
—
|
|
|
(57
|
)
|
|
|
(a)
|
Included
$42 million
and
$35 million
of impaired loans recorded at fair value on a nonrecurring basis at
March 31, 2019
and
December 31, 2018
, respectively.
|
|
|
(b)
|
Certain investments that are measured at fair value using the net asset value have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Balance Sheets.
|
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
NOTE
3
- INVESTMENT SECURITIES
A summary of the Corporation’s investment securities follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
March 31, 2019
|
|
|
|
|
|
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
U.S. Treasury and other U.S. government agency securities
|
$
|
2,742
|
|
|
$
|
19
|
|
|
$
|
5
|
|
|
$
|
2,756
|
|
Residential mortgage-backed securities (a)
|
9,533
|
|
|
36
|
|
|
113
|
|
|
9,456
|
|
Total investment securities available-for-sale
|
$
|
12,275
|
|
|
$
|
55
|
|
|
$
|
118
|
|
|
$
|
12,212
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
|
|
U.S. Treasury and other U.S. government agency securities
|
$
|
2,732
|
|
|
$
|
14
|
|
|
$
|
19
|
|
|
$
|
2,727
|
|
Residential mortgage-backed securities (a)
|
9,493
|
|
|
22
|
|
|
197
|
|
|
9,318
|
|
Total investment securities available-for-sale
|
$
|
12,225
|
|
|
$
|
36
|
|
|
$
|
216
|
|
|
$
|
12,045
|
|
|
|
(a)
|
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.
|
A summary of the Corporation’s investment securities in an unrealized loss position as of
March 31, 2019
and
December 31, 2018
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporarily Impaired
|
|
Less than 12 Months
|
|
12 Months or more
|
|
Total
|
(in millions)
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and other U.S. government agency securities
|
$
|
1,100
|
|
|
$
|
3
|
|
|
|
$
|
378
|
|
|
$
|
2
|
|
|
|
$
|
1,478
|
|
|
$
|
5
|
|
|
Residential mortgage-backed securities (a)
|
368
|
|
|
—
|
|
|
|
6,379
|
|
|
113
|
|
|
|
6,747
|
|
|
113
|
|
|
Total temporarily impaired securities
|
$
|
1,468
|
|
|
$
|
3
|
|
|
|
$
|
6,757
|
|
|
$
|
115
|
|
|
|
$
|
8,225
|
|
|
$
|
118
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and other U.S. government agency securities
|
$
|
—
|
|
|
$
|
—
|
|
|
|
$
|
1,457
|
|
|
$
|
19
|
|
|
|
$
|
1,457
|
|
|
$
|
19
|
|
|
Residential mortgage-backed securities (a)
|
1,008
|
|
|
9
|
|
|
|
6,412
|
|
|
188
|
|
|
|
7,420
|
|
|
197
|
|
|
Total temporarily impaired securities
|
$
|
1,008
|
|
|
$
|
9
|
|
|
|
$
|
7,869
|
|
|
$
|
207
|
|
|
|
$
|
8,877
|
|
|
$
|
216
|
|
|
|
|
(a)
|
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.
|
At
March 31, 2019
, the Corporation had
324
securities in an unrealized loss position with no credit impairment, including
13
U.S. Treasury securities and
311
residential mortgage-backed securities. The unrealized losses for these securities resulted from changes in market interest rates and liquidity, not changes in credit quality. The Corporation ultimately expects full collection of the carrying amount of these securities, does not intend to sell the securities in an unrealized loss position, and it is not more-likely-than-not that the Corporation will be required to sell the securities in an unrealized loss position prior to recovery of amortized cost. The Corporation does not consider these securities to be other-than-temporarily impaired at
March 31, 2019
.
Sales, calls and write-downs of investment securities available-for-sale resulted in the following gains and losses recorded in net securities (losses) gains on the Consolidated Statements of Comprehensive Income, computed based on the adjusted cost of the specific security.
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in millions)
|
2019
|
|
2018
|
Securities gains
|
$
|
—
|
|
|
$
|
1
|
|
Securities losses
|
(8
|
)
|
|
—
|
|
Net securities (losses) gains
|
$
|
(8
|
)
|
|
$
|
1
|
|
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
The following table summarizes the amortized cost and fair values of debt securities by contractual maturity. Securities with multiple maturity dates are classified in the period of final maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
|
|
|
|
|
|
|
|
(in millions)
|
|
March 31, 2019
|
Amortized Cost
|
|
Fair Value
|
Contractual maturity
|
|
|
|
After one year through five years
|
$
|
2,784
|
|
|
$
|
2,797
|
|
After five years through ten years
|
1,396
|
|
|
1,390
|
|
After ten years
|
8,095
|
|
|
8,025
|
|
Total investment securities
|
$
|
12,275
|
|
|
$
|
12,212
|
|
Included in the contractual maturity distribution in the table above were residential mortgage-backed securities with total amortized cost and fair value of
$9.5 billion
. The actual cash flows of mortgage-backed securities may differ from contractual maturity as the borrowers of the underlying loans may exercise prepayment options.
At
March 31, 2019
, investment securities with a carrying value of
$398 million
were pledged where permitted or required by law to secure
$226 million
of liabilities, primarily public and other deposits of state and local government agencies as well as derivative instruments.
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
NOTE
4
– CREDIT QUALITY AND ALLOWANCE FOR CREDIT LOSSES
The following table presents an aging analysis of the recorded balance of loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Past Due and Still Accruing
|
|
|
|
|
|
|
(in millions)
|
30-59
Days
|
|
60-89
Days
|
|
90 Days
or More
|
|
Total
|
|
Nonaccrual
Loans
|
|
Current
Loans
|
|
Total
Loans
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
58
|
|
|
$
|
16
|
|
|
$
|
19
|
|
|
$
|
93
|
|
|
$
|
114
|
|
|
$
|
31,800
|
|
|
$
|
32,007
|
|
Real estate construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate business line (a)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,888
|
|
|
2,888
|
|
Other business lines (b)
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
397
|
|
|
403
|
|
Total real estate construction
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
3,285
|
|
|
3,291
|
|
Commercial mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate business line (a)
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
2
|
|
|
1,733
|
|
|
1,739
|
|
Other business lines (b)
|
14
|
|
|
8
|
|
|
5
|
|
|
27
|
|
|
14
|
|
|
7,209
|
|
|
7,250
|
|
Total commercial mortgage
|
18
|
|
|
8
|
|
|
5
|
|
|
31
|
|
|
16
|
|
|
8,942
|
|
|
8,989
|
|
Lease financing
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
533
|
|
|
535
|
|
International
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
3
|
|
|
1,022
|
|
|
1,040
|
|
Total business loans
|
97
|
|
|
24
|
|
|
24
|
|
|
145
|
|
|
135
|
|
|
45,582
|
|
|
45,862
|
|
Retail loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
19
|
|
|
2
|
|
|
—
|
|
|
21
|
|
|
37
|
|
|
1,891
|
|
|
1,949
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
3
|
|
|
1
|
|
|
—
|
|
|
4
|
|
|
19
|
|
|
1,740
|
|
|
1,763
|
|
Other consumer
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
727
|
|
|
728
|
|
Total consumer
|
4
|
|
|
1
|
|
|
—
|
|
|
5
|
|
|
19
|
|
|
2,467
|
|
|
2,491
|
|
Total retail loans
|
23
|
|
|
3
|
|
|
—
|
|
|
26
|
|
|
56
|
|
|
4,358
|
|
|
4,440
|
|
Total loans
|
$
|
120
|
|
|
$
|
27
|
|
|
$
|
24
|
|
|
$
|
171
|
|
|
$
|
191
|
|
|
$
|
49,940
|
|
|
$
|
50,302
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
34
|
|
|
$
|
26
|
|
|
$
|
8
|
|
|
$
|
68
|
|
|
$
|
141
|
|
|
$
|
31,767
|
|
|
$
|
31,976
|
|
Real estate construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate business line (a)
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
2,681
|
|
|
2,687
|
|
Other business lines (b)
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
384
|
|
|
390
|
|
Total real estate construction
|
12
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
3,065
|
|
|
3,077
|
|
Commercial mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate business line (a)
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
2
|
|
|
1,737
|
|
|
1,743
|
|
Other business lines (b)
|
32
|
|
|
5
|
|
|
8
|
|
|
45
|
|
|
18
|
|
|
7,300
|
|
|
7,363
|
|
Total commercial mortgage
|
36
|
|
|
5
|
|
|
8
|
|
|
49
|
|
|
20
|
|
|
9,037
|
|
|
9,106
|
|
Lease financing
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
505
|
|
|
507
|
|
International
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
1,010
|
|
|
1,013
|
|
Total business loans
|
82
|
|
|
31
|
|
|
16
|
|
|
129
|
|
|
166
|
|
|
45,384
|
|
|
45,679
|
|
Retail loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
11
|
|
|
3
|
|
|
—
|
|
|
14
|
|
|
36
|
|
|
1,920
|
|
|
1,970
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
4
|
|
|
1
|
|
|
—
|
|
|
5
|
|
|
19
|
|
|
1,741
|
|
|
1,765
|
|
Other consumer
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
748
|
|
|
749
|
|
Total consumer
|
5
|
|
|
1
|
|
|
—
|
|
|
6
|
|
|
19
|
|
|
2,489
|
|
|
2,514
|
|
Total retail loans
|
16
|
|
|
4
|
|
|
—
|
|
|
20
|
|
|
55
|
|
|
4,409
|
|
|
4,484
|
|
Total loans
|
$
|
98
|
|
|
$
|
35
|
|
|
$
|
16
|
|
|
$
|
149
|
|
|
$
|
221
|
|
|
$
|
49,793
|
|
|
$
|
50,163
|
|
|
|
(a)
|
Primarily loans to real estate developers.
|
|
|
(b)
|
Primarily loans secured by owner-occupied real estate.
|
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
The following table presents loans by credit quality indicator, based on internal risk ratings assigned to each business loan at the time of approval and subjected to subsequent reviews, generally at least annually, and to pools of retail loans with similar risk characteristics.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internally Assigned Rating
|
|
|
(in millions)
|
Pass (a)
|
|
Special
Mention (b)
|
|
Substandard (c)
|
|
Nonaccrual (d)
|
|
Total
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
30,669
|
|
|
$
|
590
|
|
|
$
|
634
|
|
|
$
|
114
|
|
|
$
|
32,007
|
|
Real estate construction:
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate business line (e)
|
2,865
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
2,888
|
|
Other business lines (f)
|
399
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
403
|
|
Total real estate construction
|
3,264
|
|
|
27
|
|
|
—
|
|
|
—
|
|
|
3,291
|
|
Commercial mortgage:
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate business line (e)
|
1,678
|
|
|
14
|
|
|
45
|
|
|
2
|
|
|
1,739
|
|
Other business lines (f)
|
7,003
|
|
|
157
|
|
|
76
|
|
|
14
|
|
|
7,250
|
|
Total commercial mortgage
|
8,681
|
|
|
171
|
|
|
121
|
|
|
16
|
|
|
8,989
|
|
Lease financing
|
522
|
|
|
9
|
|
|
2
|
|
|
2
|
|
|
535
|
|
International
|
986
|
|
|
38
|
|
|
13
|
|
|
3
|
|
|
1,040
|
|
Total business loans
|
44,122
|
|
|
835
|
|
|
770
|
|
|
135
|
|
|
45,862
|
|
Retail loans:
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
1,911
|
|
|
1
|
|
|
—
|
|
|
37
|
|
|
1,949
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
Home equity
|
1,736
|
|
|
—
|
|
|
8
|
|
|
19
|
|
|
1,763
|
|
Other consumer
|
727
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
728
|
|
Total consumer
|
2,463
|
|
|
1
|
|
|
8
|
|
|
19
|
|
|
2,491
|
|
Total retail loans
|
4,374
|
|
|
2
|
|
|
8
|
|
|
56
|
|
|
4,440
|
|
Total loans
|
$
|
48,496
|
|
|
$
|
837
|
|
|
$
|
778
|
|
|
$
|
191
|
|
|
$
|
50,302
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
30,817
|
|
|
$
|
464
|
|
|
$
|
554
|
|
|
$
|
141
|
|
|
$
|
31,976
|
|
Real estate construction:
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate business line (e)
|
2,664
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
2,687
|
|
Other business lines (f)
|
382
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
390
|
|
Total real estate construction
|
3,046
|
|
|
31
|
|
|
—
|
|
|
—
|
|
|
3,077
|
|
Commercial mortgage:
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate business line (e)
|
1,682
|
|
|
14
|
|
|
45
|
|
|
2
|
|
|
1,743
|
|
Other business lines (f)
|
7,157
|
|
|
118
|
|
|
70
|
|
|
18
|
|
|
7,363
|
|
Total commercial mortgage
|
8,839
|
|
|
132
|
|
|
115
|
|
|
20
|
|
|
9,106
|
|
Lease financing
|
500
|
|
|
3
|
|
|
2
|
|
|
2
|
|
|
507
|
|
International
|
996
|
|
|
4
|
|
|
10
|
|
|
3
|
|
|
1,013
|
|
Total business loans
|
44,198
|
|
|
634
|
|
|
681
|
|
|
166
|
|
|
45,679
|
|
Retail loans:
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
1,931
|
|
|
3
|
|
|
—
|
|
|
36
|
|
|
1,970
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
Home equity
|
1,738
|
|
|
—
|
|
|
8
|
|
|
19
|
|
|
1,765
|
|
Other consumer
|
748
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
749
|
|
Total consumer
|
2,486
|
|
|
1
|
|
|
8
|
|
|
19
|
|
|
2,514
|
|
Total retail loans
|
4,417
|
|
|
4
|
|
|
8
|
|
|
55
|
|
|
4,484
|
|
Total loans
|
$
|
48,615
|
|
|
$
|
638
|
|
|
$
|
689
|
|
|
$
|
221
|
|
|
$
|
50,163
|
|
|
|
(a)
|
Includes all loans not included in the categories of special mention, substandard or nonaccrual.
|
|
|
(b)
|
Special mention loans are accruing loans that have potential credit weaknesses that deserve management’s close attention, such as loans to borrowers who may be experiencing financial difficulties that may result in deterioration of repayment prospects from the borrower at some future date. This category is generally consistent with the "special mention" category as defined by regulatory authorities.
|
|
|
(c)
|
Substandard loans are accruing loans that have a well-defined weakness, or weaknesses, such as loans to borrowers who may be experiencing losses from operations or inadequate liquidity of a degree and duration that jeopardizes the orderly repayment of the loan. Substandard loans also are distinguished by the distinct possibility of loss in the future if these weaknesses are not corrected. This category is generally consistent with the "substandard" category as defined by regulatory authorities.
|
|
|
(d)
|
Nonaccrual loans are loans for which the accrual of interest has been discontinued. For further information regarding nonaccrual loans, refer to the Nonperforming Assets subheading in Note 1 - Basis of Presentation and Accounting Policies - on pages F-52 and F-53 in the Corporation's 2018 Annual Report. A significant majority of nonaccrual loans are generally consistent with the "substandard" category and the remainder are generally consistent with the "doubtful" category as defined by regulatory authorities.
|
|
|
(e)
|
Primarily loans to real estate developers.
|
|
|
(f)
|
Primarily loans secured by owner-occupied real estate.
|
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
The following table summarizes nonperforming assets.
|
|
|
|
|
|
|
|
|
(in millions)
|
March 31, 2019
|
|
December 31, 2018
|
Nonaccrual loans
|
$
|
191
|
|
|
$
|
221
|
|
Reduced-rate loans (a)
|
7
|
|
|
8
|
|
Total nonperforming loans
|
198
|
|
|
229
|
|
Foreclosed property (b)
|
1
|
|
|
1
|
|
Total nonperforming assets
|
$
|
199
|
|
|
$
|
230
|
|
|
|
(a)
|
There were
no
reduced-rate business loans at both
March 31, 2019
and
December 31, 2018
. Reduced-rate retail loans were
$7 million
and
$8 million
at
March 31, 2019
and
December 31, 2018
, respectively.
|
|
|
(b)
|
There were
no
foreclosed residential real estate properties at both
March 31, 2019
and
December 31, 2018
.
|
There were
$1 million
of retail loans secured by residential real estate properties in process of foreclosure included in nonaccrual loans at both
March 31, 2019
and
December 31, 2018
.
Allowance for Credit Losses
The following table details the changes in the allowance for loan losses and related loan amounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
(in millions)
|
Business Loans
|
|
Retail Loans
|
|
Total
|
|
Business Loans
|
|
Retail Loans
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
$
|
627
|
|
|
$
|
44
|
|
|
$
|
671
|
|
|
$
|
661
|
|
|
$
|
51
|
|
|
$
|
712
|
|
Loan charge-offs
|
(19
|
)
|
|
(1
|
)
|
|
(20
|
)
|
|
(36
|
)
|
|
(1
|
)
|
|
(37
|
)
|
Recoveries on loans previously charged-off
|
8
|
|
|
1
|
|
|
9
|
|
|
8
|
|
|
1
|
|
|
9
|
|
Net loan charge-offs
|
(11
|
)
|
|
—
|
|
|
(11
|
)
|
|
(28
|
)
|
|
—
|
|
|
(28
|
)
|
Provision for loan losses
|
(8
|
)
|
|
(5
|
)
|
|
(13
|
)
|
|
20
|
|
|
(6
|
)
|
|
14
|
|
Balance at end of period
|
$
|
608
|
|
|
$
|
39
|
|
|
$
|
647
|
|
|
$
|
653
|
|
|
$
|
45
|
|
|
$
|
698
|
|
As a percentage of total loans
|
1.33
|
%
|
|
0.88
|
%
|
|
1.29
|
%
|
|
1.46
|
%
|
|
0.99
|
%
|
|
1.42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
35
|
|
|
$
|
—
|
|
|
$
|
35
|
|
|
$
|
42
|
|
|
$
|
—
|
|
|
$
|
42
|
|
Collectively evaluated for impairment
|
573
|
|
|
39
|
|
|
612
|
|
|
611
|
|
|
45
|
|
|
656
|
|
Total allowance for loan losses
|
$
|
608
|
|
|
$
|
39
|
|
|
$
|
647
|
|
|
$
|
653
|
|
|
$
|
45
|
|
|
$
|
698
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
202
|
|
|
$
|
34
|
|
|
$
|
236
|
|
|
$
|
384
|
|
|
$
|
31
|
|
|
$
|
415
|
|
Collectively evaluated for impairment
|
45,660
|
|
|
4,406
|
|
|
50,066
|
|
|
44,339
|
|
|
4,486
|
|
|
48,825
|
|
Total loans evaluated for impairment
|
$
|
45,862
|
|
|
$
|
4,440
|
|
|
$
|
50,302
|
|
|
$
|
44,723
|
|
|
$
|
4,517
|
|
|
$
|
49,240
|
|
Changes in the allowance for credit losses on lending-related commitments, included in accrued expenses and other liabilities on the Consolidated Balance Sheets, are summarized in the following table.
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in millions)
|
2019
|
|
2018
|
Balance at beginning of period
|
$
|
30
|
|
|
$
|
42
|
|
Provision for credit losses on lending-related commitments
|
—
|
|
|
(2
|
)
|
Balance at end of period
|
$
|
30
|
|
|
$
|
40
|
|
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
Individually Evaluated Impaired Loans
The following table presents additional information regarding individually evaluated impaired loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment In:
|
|
|
|
|
(in millions)
|
Impaired
Loans with
No Related
Allowance
|
|
Impaired
Loans with
Related
Allowance
|
|
Total
Impaired
Loans
|
|
Unpaid
Principal
Balance
|
|
Related
Allowance
for Loan
Losses
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
30
|
|
|
$
|
114
|
|
|
$
|
144
|
|
|
$
|
194
|
|
|
$
|
33
|
|
Commercial mortgage:
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate business line (a)
|
39
|
|
|
—
|
|
|
39
|
|
|
49
|
|
|
—
|
|
Other business lines (b)
|
2
|
|
|
13
|
|
|
15
|
|
|
20
|
|
|
2
|
|
Total commercial mortgage
|
41
|
|
|
13
|
|
|
54
|
|
|
69
|
|
|
2
|
|
Lease financing
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
—
|
|
International
|
2
|
|
|
1
|
|
|
3
|
|
|
9
|
|
|
—
|
|
Total business loans
|
73
|
|
|
129
|
|
|
202
|
|
|
273
|
|
|
35
|
|
Retail loans:
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
16
|
|
|
8
|
|
|
24
|
|
|
25
|
|
|
—
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
Home equity
|
9
|
|
|
—
|
|
|
9
|
|
|
11
|
|
|
—
|
|
Other consumer
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
Total consumer
|
10
|
|
|
—
|
|
|
10
|
|
|
12
|
|
|
—
|
|
Total retail loans (c)
|
26
|
|
|
8
|
|
|
34
|
|
|
37
|
|
|
—
|
|
Total individually evaluated impaired loans
|
$
|
99
|
|
|
$
|
137
|
|
|
$
|
236
|
|
|
$
|
310
|
|
|
$
|
35
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
|
|
Commercial
|
$
|
50
|
|
|
$
|
130
|
|
|
$
|
180
|
|
|
$
|
227
|
|
|
$
|
24
|
|
Commercial mortgage:
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate business line (a)
|
39
|
|
|
—
|
|
|
39
|
|
|
49
|
|
|
—
|
|
Other business lines (b)
|
2
|
|
|
16
|
|
|
18
|
|
|
23
|
|
|
3
|
|
Total commercial mortgage
|
41
|
|
|
16
|
|
|
57
|
|
|
72
|
|
|
3
|
|
International
|
2
|
|
|
1
|
|
|
3
|
|
|
8
|
|
|
—
|
|
Total business loans
|
93
|
|
|
147
|
|
|
240
|
|
|
307
|
|
|
27
|
|
Retail loans:
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
16
|
|
|
8
|
|
|
24
|
|
|
25
|
|
|
—
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
Home equity
|
11
|
|
|
—
|
|
|
11
|
|
|
13
|
|
|
—
|
|
Other consumer
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
Total consumer
|
12
|
|
|
—
|
|
|
12
|
|
|
14
|
|
|
—
|
|
Total retail loans (c)
|
28
|
|
|
8
|
|
|
36
|
|
|
39
|
|
|
—
|
|
Total individually evaluated impaired loans
|
$
|
121
|
|
|
$
|
155
|
|
|
$
|
276
|
|
|
$
|
346
|
|
|
$
|
27
|
|
|
|
(a)
|
Primarily loans to real estate developers.
|
|
|
(b)
|
Primarily loans secured by owner-occupied real estate.
|
|
|
(c)
|
Individually evaluated retail loans generally have no related allowance for loan losses, primarily due to policy which results in direct write-downs of most restructured retail loans.
|
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
The following table presents information regarding average individually evaluated impaired loans and the related interest recognized as of
March 31, 2019
and
2018
. Interest income recognized for the period primarily related to performing restructured loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually Evaluated Impaired Loans
|
|
2019
|
|
2018
|
(in millions)
|
Average Balance for the Period
|
|
Interest Income Recognized for the Period
|
|
Average Balance for the Period
|
|
Interest Income Recognized for the Period
|
Three Months Ended March 31
|
|
|
|
|
|
|
|
Business loans:
|
|
|
|
|
|
|
|
Commercial
|
$
|
162
|
|
|
$
|
1
|
|
|
$
|
344
|
|
|
$
|
1
|
|
Commercial mortgage:
|
|
|
|
|
|
|
|
Commercial Real Estate business line (a)
|
39
|
|
|
1
|
|
|
40
|
|
|
1
|
|
Other business lines (b)
|
16
|
|
|
—
|
|
|
25
|
|
|
—
|
|
Total commercial mortgage
|
55
|
|
|
1
|
|
|
65
|
|
|
1
|
|
Lease financing
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
International
|
3
|
|
|
—
|
|
|
5
|
|
|
—
|
|
Total business loans
|
221
|
|
|
2
|
|
|
414
|
|
|
2
|
|
Retail loans:
|
|
|
|
|
|
|
|
Residential mortgage
|
24
|
|
|
—
|
|
|
20
|
|
|
—
|
|
Consumer loans:
|
|
|
|
|
|
|
|
Home equity
|
10
|
|
|
—
|
|
|
11
|
|
|
—
|
|
Other consumer
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Total consumer
|
11
|
|
|
—
|
|
|
12
|
|
|
—
|
|
Total retail loans
|
35
|
|
|
—
|
|
|
32
|
|
|
—
|
|
Total individually evaluated impaired loans
|
$
|
256
|
|
|
$
|
2
|
|
|
$
|
446
|
|
|
$
|
2
|
|
|
|
(a)
|
Primarily loans to real estate developers.
|
|
|
(b)
|
Primarily loans secured by owner-occupied real estate.
|
Troubled Debt Restructurings
The following table details the recorded balance at
March 31, 2019
and
2018
of loans considered to be troubled debt restructurings (TDRs) that were restructured during the
three-month periods ended March 31, 2019
and
2018
, all of which were principal deferrals.
|
|
|
|
|
|
|
|
|
|
Principal Deferrals (a)
|
(in millions)
|
2019
|
2018
|
Three Months Ended March 31,
|
|
|
|
Business loans:
|
|
|
|
Commercial
|
$
|
12
|
|
|
$
|
28
|
|
Commercial mortgage:
|
|
|
|
Other business lines (b)
|
1
|
|
|
1
|
|
Total business loans
|
13
|
|
|
29
|
|
Retail loans:
|
|
|
|
Consumer:
|
|
|
|
Home equity (c)
|
—
|
|
|
1
|
|
Total loans
|
$
|
13
|
|
|
$
|
30
|
|
|
|
(a)
|
Primarily represents loan balances where terms were extended
90
days or more at or above contractual interest rates.
|
|
|
(b)
|
Primarily loans secured by owner-occupied real estate.
|
|
|
(c)
|
Includes bankruptcy loans for which the court has discharged the borrower's obligation and the borrower has not reaffirmed the debt.
|
The Corporation charges interest on principal balances outstanding during deferral periods. Additionally, none of the modifications involved forgiveness of principal. As a result, the current and future financial effects of the recorded balance of loans considered to be TDRs that were restructured during the
three months ended March 31, 2019
and
2018
were insignificant.
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
At
March 31, 2019
and
December 31, 2018
, commitments to lend additional funds to borrowers whose terms have been modified in TDRs totaled
$24 million
and
$20 million
, respectively. On an ongoing basis, the Corporation monitors the performance of modified loans to their restructured terms. The allowance for loan losses continues to be reassessed on the basis of an individual evaluation of the loan.
The following table presents information regarding the recorded balance at
March 31, 2019
and
2018
of loans modified by principal deferral during the twelve-month periods ended
March 31, 2019
and
2018
.
|
|
|
|
|
|
|
|
|
|
Principal Deferrals
|
(in millions)
|
2019
|
|
2018
|
March 31
|
|
|
|
Business loans:
|
|
|
|
Commercial
|
$
|
26
|
|
|
$
|
90
|
|
Commercial mortgage:
|
|
|
|
Commercial Real Estate business line (a)
|
—
|
|
|
37
|
|
Other business lines (b)
|
2
|
|
|
2
|
|
Total commercial mortgage
|
2
|
|
|
39
|
|
Total business loans
|
28
|
|
|
129
|
|
Retail loans:
|
|
|
|
Consumer:
|
|
|
|
Home equity (c)
|
1
|
|
|
2
|
|
Total loans
|
$
|
29
|
|
|
$
|
131
|
|
|
|
(a)
|
Primarily loans to real estate developers.
|
|
|
(b)
|
Primarily loans secured by owner-occupied real estate.
|
|
|
(c)
|
Includes bankruptcy loans for which the court has discharged the borrower's obligation and the borrower has not reaffirmed the debt.
|
During the twelve-month periods ended
March 31, 2019
and
2018
, loans with a carrying value of
$4 million
and
$17 million
, respectively, were modified by interest rate reduction (reduced-rate loans). There were
no
loans restructured into two notes (AB note restructures) during the twelve-month period ended
March 31, 2019
, compared to loans with a carrying value of
$20 million
restructured during the twelve-month period ended
March 31, 2018
.
For principal deferrals, incremental deterioration in the credit quality of the loan, represented by a downgrade in the risk rating of the loan, for example, due to missed interest payments or a reduction of collateral value, is considered a subsequent default. For interest rate reductions and AB note restructures, a subsequent payment default is defined in terms of delinquency, when a principal or interest payment is
90
days past due. There were
no
subsequent defaults of principal deferrals, interest rate reductions or AB note restructures during both the
three-month periods ended March 31, 2019
and
2018
.
NOTE
5
- DERIVATIVE AND CREDIT-RELATED FINANCIAL INSTRUMENTS
In the normal course of business, the Corporation enters into various transactions involving derivative and credit-related financial instruments to manage exposure to fluctuations in interest rate, foreign currency and other market risks and to meet the financing needs of customers (customer-initiated derivatives). These financial instruments involve, to varying degrees, elements of market and credit risk. Market and credit risk are included in the determination of fair value.
Market risk is the potential loss that may result from movements in interest rates, foreign currency exchange rates or energy commodity prices that cause an unfavorable change in the value of a financial instrument. The Corporation manages this risk by establishing monetary exposure limits and monitoring compliance with those limits. Market risk inherent in interest rate and energy contracts entered into on behalf of customers is mitigated by taking offsetting positions, except in those circumstances when the amount, tenor and/or contract rate level results in negligible economic risk, whereby the cost of purchasing an offsetting contract is not economically justifiable. The Corporation mitigates most of the inherent market risk in foreign exchange contracts entered into on behalf of customers by taking offsetting positions and manages the remainder through individual foreign currency position limits and aggregate value-at-risk limits. These limits are established annually and positions are monitored quarterly. Market risk inherent in derivative instruments held or issued for risk management purposes is typically offset by changes in the fair value of the assets or liabilities being hedged.
Credit risk is the possible loss that may occur in the event of nonperformance by the counterparty to a financial instrument. The Corporation attempts to minimize credit risk arising from customer-initiated derivatives by evaluating the creditworthiness of each customer, adhering to the same credit approval process used for traditional lending activities and obtaining collateral as deemed necessary. Derivatives with dealer counterparties are either cleared through a clearinghouse or settled directly with a single counterparty. For derivatives settled directly with dealer counterparties, the Corporation utilizes counterparty risk limits and monitoring procedures as well as master netting arrangements and bilateral collateral agreements to facilitate the management of
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
credit risk. Master netting arrangements effectively reduce credit risk by permitting settlement of positive and negative positions and offset cash collateral held with the same counterparty on a net basis. Bilateral collateral agreements require daily exchange of cash or highly rated securities issued by the U.S. Treasury or other U.S. government entities to collateralize amounts due to either party. At
March 31, 2019
, counterparties with bilateral collateral agreements deposited
$23 million
of cash with the Corporation to secure the fair value of contracts in an unrealized gain position, and the Corporation had pledged
$12 million
of marketable investment securities and posted
$18 million
of cash as collateral for contracts in an unrealized loss position. For those counterparties not covered under bilateral collateral agreements, collateral is obtained, if deemed necessary, based on the results of management’s credit evaluation of the counterparty. Collateral varies, but may include cash, investment securities, accounts receivable, equipment or real estate. Included in the fair value of derivative instruments are credit valuation adjustments reflecting counterparty credit risk. These adjustments are determined by applying a credit spread for the counterparty or the Corporation, as appropriate, to the total expected exposure of the derivative. There were
no
derivative instruments with credit-risk-related contingent features that were in a liability position at
March 31, 2019
.
Derivative Instruments
Derivative instruments utilized by the Corporation are negotiated over-the-counter and primarily include swaps, caps and floors, forward contracts and options, each of which may relate to interest rates, energy commodity prices or foreign currency exchange rates. Swaps are agreements in which two parties periodically exchange cash payments based on specified indices applied to a specified notional amount until a stated maturity. Caps and floors are agreements which entitle the buyer to receive cash payments based on the difference between a specified reference rate or price and an agreed strike rate or price, applied to a specified notional amount until a stated maturity. Forward contracts are over-the-counter agreements to buy or sell an asset at a specified future date and price. Options are similar to forward contracts except the purchaser has the right, but not the obligation, to buy or sell the asset during a specified period or at a specified future date.
Over-the-counter contracts are tailored to meet the needs of the counterparties involved and, therefore, contain a greater degree of credit risk and liquidity risk than exchange-traded contracts, which have standardized terms and readily available price information. The Corporation reduces exposure to market and liquidity risks from over-the-counter derivative instruments entered into for risk management purposes, and transactions entered into to mitigate the market risk associated with customer-initiated transactions, by conducting hedging transactions with investment grade domestic and foreign financial institutions and subjecting counterparties to credit approvals, limits and collateral monitoring procedures similar to those used in making other extensions of credit. In addition, certain derivative contracts executed bilaterally with a dealer counterparty in the over-the-counter market are cleared through a clearinghouse, whereby the clearinghouse becomes the counterparty to the transaction.
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
The following table presents the composition of the Corporation’s derivative instruments held or issued for risk management purposes or in connection with customer-initiated and other activities at
March 31, 2019
and
December 31, 2018
. The table excludes commitments and warrants accounted for as derivatives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
|
|
Fair Value
|
|
|
|
Fair Value
|
(in millions)
|
Notional/
Contract
Amount (a)
|
|
Gross Derivative Assets
|
|
Gross Derivative Liabilities
|
|
Notional/
Contract
Amount (a)
|
|
Gross Derivative Assets
|
|
Gross Derivative Liabilities
|
Risk management purposes
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Swaps - fair value - receive fixed/pay floating
|
$
|
2,975
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
2,625
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Swaps - cash flow - receive fixed/pay floating
|
800
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Derivatives used as economic hedges
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Spot, forwards and swaps
|
382
|
|
|
2
|
|
|
—
|
|
|
302
|
|
|
1
|
|
|
1
|
|
Total risk management purposes
|
4,157
|
|
|
2
|
|
|
2
|
|
|
2,927
|
|
|
1
|
|
|
3
|
|
Customer-initiated and other activities
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Caps and floors written
|
908
|
|
|
—
|
|
|
1
|
|
|
885
|
|
|
—
|
|
|
1
|
|
Caps and floors purchased
|
908
|
|
|
1
|
|
|
—
|
|
|
885
|
|
|
1
|
|
|
—
|
|
Swaps
|
13,613
|
|
|
111
|
|
|
44
|
|
|
13,115
|
|
|
66
|
|
|
67
|
|
Total interest rate contracts
|
15,429
|
|
|
112
|
|
|
45
|
|
|
14,885
|
|
|
67
|
|
|
68
|
|
Energy contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Caps and floors written
|
414
|
|
|
—
|
|
|
21
|
|
|
278
|
|
|
—
|
|
|
26
|
|
Caps and floors purchased
|
414
|
|
|
21
|
|
|
—
|
|
|
278
|
|
|
26
|
|
|
—
|
|
Swaps
|
1,957
|
|
|
75
|
|
|
72
|
|
|
2,094
|
|
|
163
|
|
|
160
|
|
Total energy contracts
|
2,785
|
|
|
96
|
|
|
93
|
|
|
2,650
|
|
|
189
|
|
|
186
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
|
|
|
|
Spot, forwards, options and swaps
|
1,289
|
|
|
13
|
|
|
9
|
|
|
1,095
|
|
|
18
|
|
|
12
|
|
Total customer-initiated and other activities
|
19,503
|
|
|
221
|
|
|
147
|
|
|
18,630
|
|
|
274
|
|
|
266
|
|
Total gross derivatives
|
$
|
23,660
|
|
|
$
|
223
|
|
|
$
|
149
|
|
|
$
|
21,557
|
|
|
$
|
275
|
|
|
$
|
269
|
|
Amounts offset in the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
Netting adjustment - Offsetting derivative assets/liabilities
|
|
|
(65
|
)
|
|
(65
|
)
|
|
|
|
(45
|
)
|
|
(45
|
)
|
Netting adjustment - Cash collateral received/posted
|
|
|
(18
|
)
|
|
(18
|
)
|
|
|
|
(174
|
)
|
|
(1
|
)
|
Net derivatives included in the Consolidated Balance Sheets (b)
|
|
|
140
|
|
|
66
|
|
|
|
|
|
56
|
|
|
223
|
|
Amounts not offset in the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities pledged under bilateral collateral agreements
|
|
|
—
|
|
|
(10
|
)
|
|
|
|
(1
|
)
|
|
—
|
|
Net derivatives after deducting amounts not offset in the Consolidated Balance Sheets
|
|
|
|
$
|
140
|
|
|
$
|
56
|
|
|
|
|
|
$
|
55
|
|
|
$
|
223
|
|
|
|
(a)
|
Notional or contractual amounts, which represent the extent of involvement in the derivatives market, are used to determine the contractual cash flows required in accordance with the terms of the agreement. These amounts are typically not exchanged, significantly exceed amounts subject to credit or market risk and are not reflected in the Consolidated Balance Sheets.
|
|
|
(b)
|
Net derivative assets are included in accrued income and other assets and net derivative liabilities are included in accrued expenses and other liabilities on the Consolidated Balance Sheets. Included in the fair value of net derivative assets and net derivative liabilities are credit valuation adjustments reflecting counterparty credit risk and credit risk of the Corporation. The fair value of net derivative assets included credit valuation adjustments for counterparty credit risk of
$3 million
and
$2 million
at
March 31, 2019
and
December 31, 2018
, respectively.
|
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
Risk Management
The Corporation's derivative instruments used for managing interest rate risk currently comprise swaps converting fixed-rate long-term debt to variable rates and variable-rate loans to fixed rates.
The following table details the effects of fair value hedging on the Consolidated Statements of Comprehensive Income.
|
|
|
|
|
|
|
|
|
|
Interest on Medium- and Long-Term Debt
|
|
Three Months Ended March 31,
|
(in millions)
|
2019
|
|
2018
|
Total interest on medium-and long-term debt (a)
|
$
|
51
|
|
|
$
|
25
|
|
|
|
|
|
Fair value hedging relationships:
|
|
|
|
Interest rate contracts:
|
|
|
|
Hedged items
|
26
|
|
|
15
|
|
Derivatives designated as hedging instruments
|
1
|
|
|
(3
|
)
|
(a) Includes the effects of hedging.
The impact of cash flow hedging was insignificant for the
three months ended March 31, 2019
.
The following table summarizes the expected weighted average remaining maturity of the notional amount of risk management interest rate swaps, the carrying amount of the related hedged items and the weighted average interest rates associated with amounts expected to be received or paid on interest rate swap agreements as of
March 31, 2019
and
December 31, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
(dollar amounts in millions)
|
Derivative Notional
Amount
|
|
Carrying Value of Hedged Items (a)
|
|
Remaining
Maturity
(in years)
|
|
Receive Rate
|
|
Pay Rate (b)
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
Swaps - cash flow - receive fixed/pay floating rate
|
|
|
|
|
|
|
|
|
|
Variable rate loans
|
$
|
800
|
|
|
$
|
800
|
|
|
3.0
|
|
2.34
|
%
|
|
2.49
|
%
|
Swaps - fair value - receive fixed/pay floating rate
|
|
|
|
|
|
|
|
|
|
Medium- and long-term debt
|
2,975
|
|
|
3,048
|
|
|
4.4
|
|
3.47
|
|
|
3.56
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
Swaps - fair value - receive fixed/pay floating rate
|
|
|
|
|
|
|
|
|
|
Medium- and long-term debt
|
2,625
|
|
|
2,663
|
|
|
3.9
|
|
3.40
|
|
|
3.45
|
|
|
|
(a)
|
Included $
88 million
and $
49 million
of cumulative hedging adjustments to fair value hedges at
March 31, 2019
and
December 31, 2018
, respectively, which included $
7 million
and $
8 million
, respectively, of hedging adjustment on a discontinued hedging relationship.
|
|
|
(b)
|
Variable rates paid on receive fixed swaps designated as fair value and cash flow hedges are based on one- and six-month LIBOR rates in effect at
March 31, 2019
and
December 31, 2018
.
|
Foreign exchange rate risk arises from changes in the value of certain assets and liabilities denominated in foreign currencies. The Corporation employs spot and forward contracts in addition to swap contracts to manage exposure to these and other risks. These instruments are used as economic hedges and net gains or losses are included in other noninterest income in the Consolidated Statements of Comprehensive Income.
Customer-Initiated and Other
The Corporation enters into derivative transactions at the request of customers and generally takes offsetting positions with dealer counterparties to mitigate the inherent market risk. Income primarily results from the spread between the customer derivative and the offsetting dealer position.
For customer-initiated foreign exchange contracts where offsetting positions have not been taken, the Corporation manages the remaining inherent market risk through individual foreign currency position limits and aggregate value-at-risk limits. These limits are established annually and reviewed quarterly. For those customer-initiated derivative contracts which were not offset or where the Corporation holds a position within the limits described above, the Corporation recognized
no
net gains or losses in other noninterest income in the Consolidated Statements of Comprehensive Income for both the
three-month periods ended March 31, 2019
and
2018
.
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
Fair values of customer-initiated and other derivative instruments represent the net unrealized gains or losses on such contracts and are recorded in the Consolidated Balance Sheets. Changes in fair value are recognized in the Consolidated Statements of Comprehensive Income. The net gains recognized in income on customer-initiated derivative instruments, net of the impact of offsetting positions, were as follows
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in millions)
|
|
Location of Gain
|
2019
|
|
2018
|
Interest rate contracts
|
|
Other noninterest income
|
$
|
6
|
|
|
$
|
4
|
|
Energy contracts
|
|
Other noninterest income
|
1
|
|
|
—
|
|
Foreign exchange contracts
|
|
Foreign exchange income
|
11
|
|
|
12
|
|
Total
|
|
|
$
|
18
|
|
|
$
|
16
|
|
Credit-Related Financial Instruments
The Corporation issues off-balance sheet financial instruments in connection with commercial and consumer lending activities. The Corporation’s credit risk associated with these instruments is represented by the contractual amounts indicated in the following table.
|
|
|
|
|
|
|
|
|
(in millions)
|
March 31, 2019
|
|
December 31, 2018
|
Unused commitments to extend credit:
|
|
|
|
Commercial and other
|
$
|
23,629
|
|
|
$
|
24,266
|
|
Bankcard, revolving check credit and home equity loan commitments
|
3,054
|
|
|
3,001
|
|
Total unused commitments to extend credit
|
$
|
26,683
|
|
|
$
|
27,267
|
|
Standby letters of credit
|
$
|
3,211
|
|
|
$
|
3,244
|
|
Commercial letters of credit
|
29
|
|
|
39
|
|
The Corporation maintains an allowance to cover probable credit losses inherent in lending-related commitments, including unused commitments to extend credit, letters of credit and financial guarantees. The allowance for credit losses on lending-related commitments, included in accrued expenses and other liabilities on the Consolidated Balance Sheets, was
$30 million
at both
March 31, 2019
and
December 31, 2018
.
Unused Commitments to Extend Credit
Commitments to extend credit are legally binding agreements to lend to a customer, provided there is no violation of any condition established in the contract. These commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments expire without being drawn upon, the total contractual amount of commitments does not necessarily represent future cash requirements of the Corporation. Commercial and other unused commitments are primarily variable rate commitments. The allowance for credit losses on lending-related commitments included
$23 million
and
$24 million
at
March 31, 2019
and
December 31, 2018
, respectively, for probable credit losses inherent in the Corporation’s unused commitments to extend credit.
Standby and Commercial Letters of Credit
Standby letters of credit represent conditional obligations of the Corporation which guarantee the performance of a customer to a third party. Standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. Commercial letters of credit are issued to finance foreign or domestic trade transactions. These contracts expire in decreasing amounts through the year
2028
. The Corporation may enter into participation arrangements with third parties that effectively reduce the maximum amount of future payments which may be required under standby and commercial letters of credit. These risk participations covered
$126 million
and
$136 million
of the
$3.2 billion
and
$3.3 billion
standby and commercial letters of credit outstanding at
March 31, 2019
and
December 31, 2018
, respectively.
The carrying value of the Corporation’s standby and commercial letters of credit, included in accrued expenses and other liabilities on the Consolidated Balance Sheets, totaled
$33 million
at
March 31, 2019
, including
$26 million
in deferred fees and
$7 million
in the allowance for credit losses on lending-related commitments. At
December 31, 2018
, the comparable amounts were
$34 million
,
$28 million
and
$6 million
, respectively.
The following table presents a summary of criticized standby and commercial letters of credit at
March 31, 2019
and
December 31, 2018
. The Corporation's criticized list is generally consistent with the Special Mention, Substandard and Doubtful categories defined by regulatory authorities. The Corporation manages credit risk through underwriting, periodically reviewing and approving its credit exposures using Board committee approved credit policies and guidelines.
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
|
|
|
|
|
|
|
|
|
(dollar amounts in millions)
|
March 31, 2019
|
|
December 31, 2018
|
Total criticized standby and commercial letters of credit
|
$
|
50
|
|
|
$
|
49
|
|
As a percentage of total outstanding standby and commercial letters of credit
|
1.5
|
%
|
|
1.5
|
%
|
Other Credit-Related Financial Instruments
The Corporation enters into credit risk participation agreements, under which the Corporation assumes credit exposure associated with a borrower’s performance related to certain interest rate derivative contracts. The Corporation is not a party to the interest rate derivative contracts and only enters into these credit risk participation agreements in instances in which the Corporation is also a party to the related loan participation agreement for such borrowers. The Corporation manages its credit risk on the credit risk participation agreements by monitoring the creditworthiness of the borrowers, which is based on the normal credit review process had it entered into the derivative instruments directly with the borrower. The notional amount of such credit risk participation agreement reflects the pro-rata share of the derivative instrument, consistent with its share of the related participated loan. As of
March 31, 2019
and
December 31, 2018
, the total notional amount of the credit risk participation agreements was approximately
$674 million
and
$703 million
, respectively, and the fair value was
insignificant
for both periods. The maximum estimated exposure to these agreements, as measured by projecting a maximum value of the guaranteed derivative instruments, assuming 100 percent default by all obligors on the maximum values, was
$12 million
and
$7 million
at
March 31, 2019
and
December 31, 2018
, respectively. In the event of default, the lead bank has the ability to liquidate the assets of the borrower, in which case the lead bank would be required to return a percentage of the recouped assets to the participating banks. As of
March 31, 2019
, the weighted average remaining maturity of outstanding credit risk participation agreements was
3.6
years.
NOTE
6
- VARIABLE INTEREST ENTITIES (VIEs)
The Corporation evaluates its interest in certain entities to determine if these entities meet the definition of a VIE and whether the Corporation is the primary beneficiary and should consolidate the entity based on the variable interests it held both at inception and when there is a change in circumstances that requires a reconsideration.
The Corporation holds ownership interests in funds in the form of limited partnerships or limited liability companies (LLCs) investing in affordable housing projects that qualify for the low-income housing tax credit (LIHTC). The Corporation also directly invests in limited partnerships and LLCs which invest in community development projects which generate similar tax credits to investors (other tax credit entities). As an investor, the Corporation obtains income tax credits and deductions from the operating losses of these tax credit entities. These tax credit entities meet the definition of a VIE; however, the Corporation is not the primary beneficiary of the entities, as the general partner or the managing member has both the power to direct the activities that most significantly impact the economic performance of the entities and the obligation to absorb losses or the right to receive benefits that could be significant to the entities.
The Corporation accounts for its interests in LIHTC entities using the proportional amortization method. Exposure to loss as a result of the Corporation’s involvement with LIHTC entities at
March 31, 2019
was limited to
$443 million
. Ownership interests in other tax credit entities are accounted for under either the cost or equity method. Exposure to loss as a result of the Corporation's involvement in other tax credit entities at
March 31, 2019
was limited to
$6 million
.
Investment balances, including all legally binding commitments to fund future investments, are included in accrued income and other assets on the Consolidated Balance Sheets. A liability is recognized in accrued expenses and other liabilities on the Consolidated Balance Sheets for all legally binding unfunded commitments to fund tax credit entities (
$172 million
at
March 31, 2019
). Amortization and other write-downs of LIHTC investments are presented on a net basis as a component of the provision for income taxes on the Consolidated Statements of Comprehensive Income, while amortization and write-downs of other tax credit investments are recorded in other noninterest income. The income tax credits and deductions are recorded as a reduction of income tax expense and a reduction of federal income taxes payable.
The Corporation provided
no
financial or other support that was not contractually required to any of the above VIEs during the
three months ended March 31, 2019
and
2018
.
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
The following table summarizes the impact of these tax credit entities on line items on the Corporation’s Consolidated Statements of Comprehensive Income.
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in millions)
|
2019
|
|
2018
|
Other noninterest income:
|
|
|
|
Amortization of other tax credit investments
|
$
|
1
|
|
|
$
|
1
|
|
Provision for income taxes:
|
|
|
|
Amortization of LIHTC investments
|
15
|
|
|
15
|
|
Low income housing tax credits
|
(15
|
)
|
|
(15
|
)
|
Other tax benefits related to tax credit entities
|
(3
|
)
|
|
(3
|
)
|
Total provision for income taxes
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
For further information on the Corporation’s consolidation policy, see Note 1 to the consolidated financial statements in the Corporation's
2018
Annual Report.
NOTE
7
- MEDIUM- AND LONG-TERM DEBT
Medium- and long-term debt is summarized as follows:
|
|
|
|
|
|
|
|
|
(in millions)
|
March 31, 2019
|
|
December 31, 2018
|
Parent company
|
|
|
|
Subordinated notes:
|
|
|
|
3.80% subordinated notes due 2026 (a)
|
$
|
256
|
|
|
$
|
250
|
|
Medium- and long-term notes:
|
|
|
|
2.125% notes due 2019 (a)
|
349
|
|
|
348
|
|
3.70% notes due 2023 (a)
|
869
|
|
|
861
|
|
4.00% notes due 2029 (a)
|
358
|
|
|
—
|
|
Total medium-term notes
|
1,576
|
|
|
1,209
|
|
Total parent company
|
1,832
|
|
|
1,459
|
|
Subsidiaries
|
|
|
|
Subordinated notes:
|
|
|
|
4.00% subordinated notes due 2025 (a)
|
349
|
|
|
343
|
|
7.875% subordinated notes due 2026 (a)
|
200
|
|
|
198
|
|
Total subordinated notes
|
549
|
|
|
541
|
|
Medium-term notes:
|
|
|
|
2.50% notes due 2020 (a)
|
667
|
|
|
663
|
|
Federal Home Loan Bank (FHLB) advances:
|
|
|
|
Floating-rate based on FHLB auction rate due 2026
|
2,800
|
|
|
2,800
|
|
Floating-rate based on FHLB auction rate due 2028
|
1,000
|
|
|
1,000
|
|
Total FHLB advances
|
3,800
|
|
|
3,800
|
|
Total subsidiaries
|
5,016
|
|
|
5,004
|
|
Total medium- and long-term debt
|
$
|
6,848
|
|
|
$
|
6,463
|
|
|
|
(a)
|
The fixed interest rates on these notes have been swapped to a variable rate and designated in a hedging relationship. Accordingly, carrying value has been adjusted to reflect the change in the fair value of the debt as a result of changes in the benchmark rate.
|
Subordinated notes with remaining maturities greater than one year qualify as Tier 2 capital.
Comerica Bank (the Bank), a wholly-owned subsidiary of the Corporation, is a member of the FHLB, which provides short- and long-term funding to its members through advances collateralized by real estate-related assets. The interest rate on the FHLB advances resets between four and eight weeks, based on the FHLB auction rate. At
March 31, 2019
, the weighted-average rate on the FHLB advances was
2.60%
. Each note may be prepaid in full, without penalty, at each scheduled reset date. Borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. At
March 31, 2019
,
$16.3 billion
of real estate-related loans were pledged to the FHLB as collateral for current and potential future borrowings of approximately
$4.6 billion
.
On February 1, 2019, the Corporation issued
$350 million
of
4.00%
senior notes maturing in
2029
, swapped to a floating rate at 30-day LIBOR plus 129 basis points.
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
Unamortized debt issuance costs deducted from the carrying amount of medium- and long-term debt totaled
$10 million
at
March 31, 2019
and
$8 million
at
December 31, 2018
.
NOTE
8
- ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents a reconciliation of the changes in the components of accumulated other comprehensive loss and details the components of other comprehensive income (loss) for the
three months ended March 31, 2019
and
2018
, including the amount of income tax expense (benefit) allocated to each component of other comprehensive income (loss).
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in millions)
|
2019
|
|
2018
|
Accumulated net unrealized losses on investment securities:
|
|
|
|
Balance at beginning of period, net of tax
|
$
|
(138
|
)
|
|
$
|
(101
|
)
|
|
|
|
|
Cumulative effect of change in accounting principle
|
—
|
|
|
1
|
|
|
|
|
|
Net unrealized holding gains (losses) arising during the period
|
109
|
|
|
(142
|
)
|
Less: Provision (benefit) for income taxes
|
25
|
|
|
(33
|
)
|
Net unrealized holding gains (losses) arising during the period, net of tax
|
84
|
|
|
(109
|
)
|
Less:
|
|
|
|
Net realized losses included in net securities losses
|
(8
|
)
|
|
—
|
|
Less: Benefit for income taxes
|
(2
|
)
|
|
—
|
|
Reclassification adjustment for net securities losses included in net income, net of tax
|
(6
|
)
|
|
—
|
|
Change in net unrealized gains (losses) on investment securities, net of tax
|
90
|
|
|
(109
|
)
|
Balance at end of period, net of tax
|
$
|
(48
|
)
|
|
$
|
(209
|
)
|
|
|
|
|
Accumulated net gains on cash flow hedges:
|
|
|
|
Balance at beginning of period, net of tax
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Net cash flow hedge gains arising during the period
|
4
|
|
|
—
|
|
Less: Provision for income taxes
|
1
|
|
|
—
|
|
Change in net cash flow hedge gains, net of tax
|
3
|
|
|
—
|
|
Balance at end of period, net of tax
|
$
|
3
|
|
|
$
|
—
|
|
|
|
|
|
Accumulated defined benefit pension and other postretirement plans adjustment:
|
|
|
|
Balance at beginning of period, net of tax
|
$
|
(471
|
)
|
|
$
|
(350
|
)
|
|
|
|
|
Amortization of actuarial net loss
|
11
|
|
|
15
|
|
Amortization of prior service credit
|
(7
|
)
|
|
(7
|
)
|
Amounts recognized in other noninterest expense
|
4
|
|
|
8
|
|
Less: Provision for income taxes
|
1
|
|
|
2
|
|
Change in defined benefit pension and other postretirement plans adjustment, net of tax
|
3
|
|
|
6
|
|
Balance at end of period, net of tax
|
$
|
(468
|
)
|
|
$
|
(344
|
)
|
Total accumulated other comprehensive loss at end of period, net of tax
|
$
|
(513
|
)
|
|
$
|
(553
|
)
|
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
NOTE
9
- NET INCOME PER COMMON SHARE
Basic and diluted net income per common share are presented in the following table.
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
(in millions, except per share data)
|
2019
|
|
2018
|
Basic and diluted
|
|
|
|
Net income
|
$
|
339
|
|
|
$
|
281
|
|
Less: Income allocated to participating securities
|
2
|
|
|
2
|
|
Net income attributable to common shares
|
$
|
337
|
|
|
$
|
279
|
|
|
|
|
|
Basic average common shares
|
158
|
|
|
172
|
|
|
|
|
|
Basic net income per common share
|
$
|
2.14
|
|
|
$
|
1.62
|
|
|
|
|
|
Basic average common shares
|
158
|
|
|
172
|
|
Dilutive common stock equivalents:
|
|
|
|
Net effect of the assumed exercise of stock options
|
2
|
|
|
2
|
|
Net effect of the assumed exercise of warrants
|
—
|
|
|
1
|
|
Diluted average common shares
|
160
|
|
|
175
|
|
|
|
|
|
Diluted net income per common share
|
$
|
2.11
|
|
|
$
|
1.59
|
|
The following average shares related to outstanding options to purchase shares of common stock were not included in the computation of diluted net income per common share because the options were anti-dilutive for the period.
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
(shares in millions)
|
2019
|
|
2018
|
Average outstanding options
|
0.42
|
|
|
—
|
Range of exercise prices
|
$80.17 - $95.25
|
|
—
|
NOTE
10
- EMPLOYEE BENEFIT PLANS
Net periodic defined benefit cost (credit) comprise service cost and other components of net benefit cost (credit). Service costs are included in salaries and benefits expense and other components of net benefit cost (credit) are included in other noninterest expenses on the Consolidated Statements of Comprehensive Income. For further information on the Corporation's employee benefit plans, refer to Note 17 to the consolidated financial statements in the Corporation's
2018
Annual Report.
The components of net periodic benefit cost (credit) for the Corporation's qualified pension plan, non-qualified pension plan and postretirement benefit plan are as follows.
|
|
|
|
|
|
|
|
|
Qualified Defined Benefit Pension Plan
|
Three Months Ended March 31,
|
(in millions)
|
2019
|
|
2018
|
Service cost
|
$
|
8
|
|
|
$
|
7
|
|
|
|
|
|
Other components of net benefit credit:
|
|
|
|
Interest cost
|
20
|
|
|
19
|
|
Expected return on plan assets
|
(42
|
)
|
|
(41
|
)
|
Amortization of prior service credit
|
(5
|
)
|
|
(5
|
)
|
Amortization of net loss
|
9
|
|
|
13
|
|
Total other components of net benefit credit
|
(18
|
)
|
|
(14
|
)
|
Net periodic defined benefit credit
|
$
|
(10
|
)
|
|
$
|
(7
|
)
|
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
|
|
|
|
|
|
|
|
|
Non-Qualified Defined Benefit Pension Plan
|
Three Months Ended March 31,
|
(in millions)
|
2019
|
|
2018
|
Service cost
|
$
|
1
|
|
|
$
|
—
|
|
|
|
|
|
Other components of net benefit cost:
|
|
|
|
Interest cost
|
2
|
|
|
2
|
|
Amortization of prior service credit
|
(2
|
)
|
|
(2
|
)
|
Amortization of net loss
|
2
|
|
|
2
|
|
Total other components of net benefit cost
|
2
|
|
|
2
|
|
Net periodic defined benefit cost
|
$
|
3
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
Postretirement Benefit Plan
|
Three Months Ended March 31,
|
(in millions)
|
2019
|
|
2018
|
Other components of net benefit credit:
|
|
|
|
Interest cost
|
$
|
1
|
|
|
$
|
1
|
|
Expected return on plan assets
|
(1
|
)
|
|
(1
|
)
|
Net periodic defined benefit credit
|
$
|
—
|
|
|
$
|
—
|
|
NOTE
11
- INCOME TAXES AND TAX-RELATED ITEMS
At
March 31, 2019
, net unrecognized tax benefits were
$15 million
, compared to
$14 million
at
December 31, 2018
. The Corporation anticipates it is reasonably possible settlements with tax authorities will result in a
$1 million
decrease in net unrecognized tax benefits within the next twelve months. The liability for tax-related interest and penalties included in accrued expenses and other liabilities was
$7 million
at both
March 31, 2019
and
December 31, 2018
.
Net deferred tax assets were
$145 million
at
March 31, 2019
, compared to
$166 million
at
December 31, 2018
. The
$21 million
decrease in net deferred tax assets resulted primarily from a decrease in deferred tax assets related to unrealized losses on investment securities available-for-sale and the allowance for loan losses, partially offset by the decrease to deferred tax liabilities related to lease financing transactions and the allowance for depreciation. Included in deferred tax assets at both
March 31, 2019
and
December 31, 2018
were
$4 million
of state net operating loss carryforwards, which expire between
2019
and
2028
. The Corporation believes it is more likely than not the benefit from certain of these state net operating loss carryforwards will not be realized and, accordingly, maintained a valuation allowance of
$3 million
at both
March 31, 2019
and
December 31, 2018
.
In the ordinary course of business, the Corporation enters into certain transactions that have tax consequences. From time to time, the Internal Revenue Service (IRS) or other tax jurisdictions may review and/or challenge specific interpretive tax positions taken by the Corporation with respect to those transactions. The Corporation believes its tax returns were filed based upon applicable statutes, regulations and case law in effect at the time of the transactions. The IRS or other tax jurisdictions, an administrative authority or a court, if presented with the transactions, could disagree with the Corporation’s interpretation of the tax law.
Based on current knowledge and probability assessment of various potential outcomes, the Corporation believes current tax reserves are adequate, and the amount of any potential incremental liability arising is not expected to have a material adverse effect on the Corporation’s consolidated financial condition or results of operations. Probabilities and outcomes are reviewed as events unfold, and adjustments to the reserves are made when necessary.
NOTE
12
- CONTINGENT LIABILITIES
Legal Proceedings
As previously reported in the Corporation's Form 10-K for the year ended
December 31, 2018
, the Bank was named in November 2011 as a third-party defendant in
Butte Local Development v. Masters Group v. Comerica Bank
(the case), for lender liability. The case was tried in January 2014, in the Montana Second District Judicial Court for Silver Bow County in Butte, Montana. On
January 17, 2014
, a jury awarded Masters
$52 million
against the Bank. On July 1, 2015, after an appeal filed by the Corporation, the Montana Supreme Court reversed the judgment against the Corporation and remanded the case for a new trial with instructions that Michigan contract law should apply and dismissing all other claims. The case was retried in the same district court, without a jury, in January 2017, and the Corporation awaits a ruling. Management believes current reserves related to this case are adequate in the event of a negative outcome.
The Corporation and certain of its subsidiaries are subject to various other pending or threatened legal proceedings arising out of the normal course of business or operations. The Corporation believes it has meritorious defenses to the claims asserted against it in its other currently outstanding legal proceedings and, with respect to such legal proceedings, intends to continue to defend itself vigorously, litigating or settling cases according to management’s judgment as to what is in the best interests of the
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
Corporation and its shareholders. Settlement may result from the Corporation's determination that it may be more prudent financially to settle, rather than litigate, and should not be regarded as an admission of liability. On at least a quarterly basis, the Corporation assesses its potential liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. On a case-by-case basis, reserves are established for those legal claims for which it is probable that a loss will be incurred either as a result of a settlement or judgment, and the amount of such loss can be reasonably estimated. The actual costs of resolving these claims may be substantially higher or lower than the amounts reserved. Based on current knowledge, and after consultation with legal counsel, management believes current reserves are adequate, and the amount of any incremental liability arising from these matters is not expected to have a material adverse effect on the Corporation’s consolidated financial condition, results of operations or cash flows. Legal fees of
$1 million
and
$3 million
for the
three-month periods ended March 31, 2019 and 2018
, respectively, were included in other noninterest expenses on the Consolidated Statements of Comprehensive Income.
For matters where a loss is not probable, the Corporation has not established legal reserves. The Corporation believes the estimate of the aggregate range of reasonably possible losses, in excess of reserves established, for all legal proceedings in which it is involved is from
zero
to approximately
$34 million
at
March 31, 2019
. This estimated aggregate range of reasonably possible losses is based upon currently available information for those proceedings in which the Corporation is involved, taking into account the Corporation’s best estimate of such losses for those cases for which such estimate can be made. For certain cases, the Corporation does not believe an estimate can currently be made. The Corporation’s estimate involves significant judgment, given the varying stages of the proceedings (including the fact many are currently in preliminary stages), the existence in certain proceedings of multiple defendants (including the Corporation) whose share of liability has yet to be determined, the numerous yet-unresolved issues in many of the proceedings (including issues regarding class certification and the scope of many of the claims) and the attendant uncertainty of the various potential outcomes of such proceedings. Accordingly, the Corporation’s estimate will change from time to time, and actual losses may be more or less than the current estimate.
In the event of unexpected future developments, it is possible the ultimate resolution of these matters, if unfavorable, may be material to the Corporation's consolidated financial condition, results of operations or cash flows.
For information regarding income tax contingencies, refer to Note
11
.
NOTE
13
- BUSINESS SEGMENT INFORMATION
The Corporation has strategically aligned its operations into
three
major business segments: the Business Bank, the Retail Bank and Wealth Management. These business segments are differentiated based on the type of customer and the related products and services provided. In addition to the
three
major business segments, the Finance Division is also reported as a segment. Business segment results are produced by the Corporation’s internal management accounting system. This system measures financial results based on the internal business unit structure of the Corporation. The performance of the business segments is not comparable with the Corporation's consolidated results and is not necessarily comparable with similar information for any other financial institution. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. The management accounting system assigns balance sheet and income statement items to each business segment using certain methodologies, which are regularly reviewed and refined. From time to time, the Corporation may make reclassifications among the segments to more appropriately reflect management's current view of the segments, and methodologies may be modified as the management accounting system is enhanced and changes occur in the organizational structure and/or product lines. For comparability purposes, amounts in all periods are based on business unit structure and methodologies in effect at
March 31, 2019
.
The following discussion provides information about the activities of each business segment. A discussion of the financial results and the factors impacting performance can be found in the section entitled "Business Segments" in the financial review.
The Business Bank meets the needs of small and middle market businesses, multinational corporations and governmental entities by offering various products and services, including commercial loans and lines of credit, deposits, cash management, capital market products, international trade finance, letters of credit, foreign exchange management services and loan syndication services.
The Retail Bank includes a full range of personal financial services, consisting of consumer lending, consumer deposit gathering and mortgage loan origination. This business segment offers a variety of consumer products, including deposit accounts, installment loans, credit cards, student loans, home equity lines of credit and residential mortgage loans.
Wealth Management offers products and services consisting of fiduciary services, private banking, retirement services, investment management and advisory services, investment banking and brokerage services. This business segment also offers the sale of annuity products, as well as life, disability and long-term care insurance products.
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
The Finance segment includes the Corporation’s securities portfolio and asset and liability management activities. This segment is responsible for managing the Corporation’s funding, liquidity and capital needs, performing interest sensitivity analysis and executing various strategies to manage the Corporation’s exposure to liquidity, interest rate risk and foreign exchange risk.
The Other category includes the income and expense impact of equity and cash, tax benefits not assigned to specific business segments, charges of an unusual or infrequent nature that are not reflective of the normal operations of the business segments and miscellaneous other expenses of a corporate nature.
For further information on the methodologies which form the basis for these results refer to Note 23 to the consolidated financial statements in the Corporation's
2018
Annual Report.
Business segment financial results are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
Bank
|
|
Retail
Bank
|
|
Wealth Management
|
|
Finance
|
|
Other
|
|
Total
|
(dollar amounts in millions)
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Earnings summary:
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense)
|
$
|
412
|
|
|
$
|
146
|
|
|
$
|
47
|
|
|
$
|
(15
|
)
|
|
$
|
16
|
|
|
$
|
606
|
|
Provision for credit losses
|
(6
|
)
|
|
(4
|
)
|
|
(5
|
)
|
|
—
|
|
|
2
|
|
|
(13
|
)
|
Noninterest income
|
136
|
|
|
31
|
|
|
64
|
|
|
4
|
|
|
3
|
|
|
238
|
|
Noninterest expenses
|
198
|
|
|
145
|
|
|
72
|
|
|
—
|
|
|
18
|
|
|
433
|
|
Provision (benefit) for income taxes
|
82
|
|
|
8
|
|
|
11
|
|
|
(4
|
)
|
|
(12
|
)
|
(a)
|
85
|
|
Net income (loss)
|
$
|
274
|
|
|
$
|
28
|
|
|
$
|
33
|
|
|
$
|
(7
|
)
|
|
$
|
11
|
|
|
$
|
339
|
|
Net credit-related charge-offs (recoveries)
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected average balances:
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
$
|
43,909
|
|
|
$
|
2,812
|
|
|
$
|
5,174
|
|
|
$
|
13,911
|
|
|
$
|
3,965
|
|
|
$
|
69,771
|
|
Loans
|
42,538
|
|
|
2,103
|
|
|
5,036
|
|
|
—
|
|
|
—
|
|
|
49,677
|
|
Deposits
|
28,463
|
|
|
20,470
|
|
|
3,801
|
|
|
1,130
|
|
|
132
|
|
|
53,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statistical data:
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (b)
|
2.53
|
%
|
|
0.54
|
%
|
|
2.67
|
%
|
|
n/m
|
|
|
n/m
|
|
|
1.97
|
%
|
Efficiency ratio (c)
|
36.23
|
|
|
81.12
|
|
|
64.41
|
|
|
n/m
|
|
|
n/m
|
|
|
50.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
Earnings summary:
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense)
|
$
|
381
|
|
|
$
|
127
|
|
|
$
|
43
|
|
|
$
|
(14
|
)
|
|
$
|
12
|
|
|
$
|
549
|
|
Provision for credit losses
|
16
|
|
|
(2
|
)
|
|
(4
|
)
|
|
—
|
|
|
2
|
|
|
12
|
|
Noninterest income
|
131
|
|
|
33
|
|
|
67
|
|
|
11
|
|
|
2
|
|
|
244
|
|
Noninterest expenses
|
213
|
|
|
148
|
|
|
72
|
|
|
(1
|
)
|
|
14
|
|
|
446
|
|
Provision (benefit) for income taxes
|
65
|
|
|
3
|
|
|
10
|
|
|
(3
|
)
|
|
(21
|
)
|
(a)
|
54
|
|
Net income
|
$
|
218
|
|
|
$
|
11
|
|
|
$
|
32
|
|
|
$
|
1
|
|
|
$
|
19
|
|
|
$
|
281
|
|
Net credit-related charge-offs (recoveries)
|
$
|
30
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected average balances:
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
$
|
42,706
|
|
|
$
|
2,632
|
|
|
$
|
5,373
|
|
|
$
|
13,779
|
|
|
$
|
5,836
|
|
|
$
|
70,326
|
|
Loans
|
41,102
|
|
|
2,073
|
|
|
5,246
|
|
|
—
|
|
|
—
|
|
|
48,421
|
|
Deposits
|
30,485
|
|
|
20,893
|
|
|
3,796
|
|
|
823
|
|
|
93
|
|
|
56,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statistical data:
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (b)
|
2.07
|
%
|
|
0.20
|
%
|
|
2.42
|
%
|
|
n/m
|
|
|
n/m
|
|
|
1.62
|
%
|
Efficiency ratio (c)
|
41.55
|
|
|
92.16
|
|
|
65.81
|
|
|
n/m
|
|
|
n/m
|
|
|
56.33
|
|
|
|
(a)
|
Included discrete tax benefits of
$11 million
and
$22 million
for the
three months ended March 31, 2019
and
2018
, respectively.
|
|
|
(b)
|
Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
|
|
|
(c)
|
Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares.
|
n/m – not meaningful
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
The Corporation operates in
three
primary markets - Texas, California, and Michigan, as well as in Arizona and Florida, with select businesses operating in several other states, and in Canada and Mexico. The Corporation produces market segment results for the Corporation’s
three
primary geographic markets as well as Other Markets. Other Markets includes Florida, Arizona, the International Finance division and businesses with a national perspective. The Finance & Other category includes the Finance segment and the Other category as previously described. Market segment results are provided as supplemental information to the business segment results and may not meet all operating segment criteria as set forth in GAAP. For comparability purposes, amounts in all periods are based on market segments and methodologies in effect at
March 31, 2019
.
A discussion of the financial results and the factors impacting performance can be found in the section entitled "Market Segments" in the financial review.
Market segment financial results are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michigan
|
|
California
|
|
Texas
|
|
Other
Markets
|
|
Finance
& Other
|
|
Total
|
(dollar amounts in millions)
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Earnings summary:
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
$
|
187
|
|
|
$
|
205
|
|
|
$
|
122
|
|
|
$
|
91
|
|
|
$
|
1
|
|
|
$
|
606
|
|
Provision for credit losses
|
5
|
|
|
(1
|
)
|
|
(11
|
)
|
|
(8
|
)
|
|
2
|
|
|
(13
|
)
|
Noninterest income
|
71
|
|
|
41
|
|
|
32
|
|
|
87
|
|
|
7
|
|
|
238
|
|
Noninterest expenses
|
140
|
|
|
100
|
|
|
84
|
|
|
91
|
|
|
18
|
|
|
433
|
|
Provision (benefit) for income taxes
|
26
|
|
|
37
|
|
|
19
|
|
|
19
|
|
|
(16
|
)
|
(a)
|
85
|
|
Net income
|
$
|
87
|
|
|
$
|
110
|
|
|
$
|
62
|
|
|
$
|
76
|
|
|
$
|
4
|
|
|
$
|
339
|
|
Net credit-related charge-offs (recoveries)
|
$
|
4
|
|
|
$
|
(3
|
)
|
|
$
|
13
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected average balances:
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
$
|
13,075
|
|
|
$
|
19,048
|
|
|
$
|
10,920
|
|
|
$
|
8,852
|
|
|
$
|
17,876
|
|
|
$
|
69,771
|
|
Loans
|
12,557
|
|
|
18,768
|
|
|
10,270
|
|
|
8,082
|
|
|
—
|
|
|
49,677
|
|
Deposits
|
19,893
|
|
|
16,245
|
|
|
8,698
|
|
|
7,898
|
|
|
1,262
|
|
|
53,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statistical data:
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (b)
|
1.74
|
%
|
|
2.32
|
%
|
|
2.30
|
%
|
|
3.48
|
%
|
|
n/m
|
|
|
1.97
|
%
|
Efficiency ratio (c)
|
53.82
|
|
|
40.85
|
|
|
54.60
|
|
|
50.99
|
|
|
n/m
|
|
|
50.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
Earnings summary:
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense)
|
$
|
175
|
|
|
$
|
188
|
|
|
$
|
111
|
|
|
$
|
78
|
|
|
$
|
(3
|
)
|
|
$
|
549
|
|
Provision for credit losses
|
34
|
|
|
(2
|
)
|
|
(14
|
)
|
|
(8
|
)
|
|
2
|
|
|
12
|
|
Noninterest income
|
73
|
|
|
39
|
|
|
31
|
|
|
88
|
|
|
13
|
|
|
244
|
|
Noninterest expenses
|
144
|
|
|
106
|
|
|
92
|
|
|
91
|
|
|
13
|
|
|
446
|
|
Provision (benefit) for income taxes
|
17
|
|
|
32
|
|
|
15
|
|
|
15
|
|
|
(25
|
)
|
(a)
|
54
|
|
Net income
|
$
|
53
|
|
|
$
|
91
|
|
|
$
|
49
|
|
|
$
|
68
|
|
|
$
|
20
|
|
|
$
|
281
|
|
Net credit-related (recoveries) charge-offs
|
$
|
(1
|
)
|
|
$
|
13
|
|
|
$
|
5
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected average balances:
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
$
|
13,395
|
|
|
$
|
18,582
|
|
|
$
|
10,373
|
|
|
$
|
8,361
|
|
|
$
|
19,615
|
|
|
$
|
70,326
|
|
Loans
|
12,604
|
|
|
18,347
|
|
|
9,830
|
|
|
7,640
|
|
|
—
|
|
|
48,421
|
|
Deposits
|
21,224
|
|
|
17,091
|
|
|
9,188
|
|
|
7,670
|
|
|
917
|
|
|
56,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statistical data:
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (b)
|
0.98
|
%
|
|
1.98
|
%
|
|
1.91
|
%
|
|
3.32
|
%
|
|
n/m
|
|
|
1.62
|
%
|
Efficiency ratio (c)
|
57.99
|
|
|
46.82
|
|
|
64.71
|
|
|
54.98
|
|
|
n/m
|
|
|
56.33
|
|
|
|
(a)
|
Included discrete tax benefits of
$11 million
and
$22 million
for the
three months ended March 31, 2019
and
2018
, respectively.
|
|
|
(b)
|
Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
|
|
|
(c)
|
Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares.
|
n/m – not meaningful
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
NOTE
14
- REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue from contracts with customers comprises the noninterest income earned by the Corporation in exchange for services provided to customers. The following table presents the composition of revenue from contracts with customers, segregated from other sources of noninterest income, by business segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
Bank
|
|
Retail
Bank
|
|
Wealth Management
|
|
Finance & Other
|
|
Total
|
(in millions)
|
Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
Revenue from contracts with customers:
|
|
|
|
|
|
|
|
|
|
Card fees
|
$
|
53
|
|
|
$
|
9
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
63
|
|
Service charges on deposit accounts
|
33
|
|
|
17
|
|
|
1
|
|
|
—
|
|
|
51
|
|
Fiduciary income
|
—
|
|
|
—
|
|
|
49
|
|
|
—
|
|
|
49
|
|
Commercial loan servicing fees (a)
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
Brokerage fees
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
Other noninterest income (b)
|
2
|
|
|
3
|
|
|
5
|
|
|
—
|
|
|
10
|
|
Total revenue from contracts with customers
|
92
|
|
|
29
|
|
|
63
|
|
|
—
|
|
|
184
|
|
Other sources of noninterest income
|
44
|
|
|
2
|
|
|
1
|
|
|
7
|
|
|
54
|
|
Total noninterest income
|
$
|
136
|
|
|
$
|
31
|
|
|
$
|
64
|
|
|
$
|
7
|
|
|
$
|
238
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2018
|
|
|
|
|
|
|
|
|
|
Revenue from contracts with customers:
|
|
|
|
|
|
|
|
|
|
Card fees
|
$
|
49
|
|
|
$
|
9
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
59
|
|
Service charges on deposit accounts
|
35
|
|
|
18
|
|
|
1
|
|
|
—
|
|
|
54
|
|
Fiduciary income
|
—
|
|
|
—
|
|
|
52
|
|
|
—
|
|
|
52
|
|
Commercial loan servicing fees (a)
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
Brokerage fees
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
Other noninterest income (b)
|
4
|
|
|
5
|
|
|
4
|
|
|
—
|
|
|
13
|
|
Total revenue from contracts with customers
|
92
|
|
|
32
|
|
|
65
|
|
|
—
|
|
|
189
|
|
Other sources of noninterest income
|
39
|
|
|
1
|
|
|
2
|
|
|
13
|
|
|
55
|
|
Total noninterest income
|
$
|
131
|
|
|
$
|
33
|
|
|
$
|
67
|
|
|
$
|
13
|
|
|
$
|
244
|
|
|
|
(a)
|
Included in commercial lending fees on the Consolidated Statements of Comprehensive Income.
|
|
|
(b)
|
Excludes derivative, warrant and other miscellaneous income.
|
Adjustments to revenue during the
three-month periods ended March 31, 2019
and
2018
for refunds or credits relating to prior periods were not significant.
Revenue from contracts with customers did not generate significant contract assets and liabilities.
NOTE
15
- LEASES
As a lessee, the Corporation has entered into operating leases for the majority of its real estate locations, primarily retail and office space. The Corporation recognized total lease expense of
$19 million
, including
$15 million
of operating lease expense and
$4 million
of variable lease expense, for the
three months ended March 31, 2019
.
At
March 31, 2019
, the Corporation's ROU assets and operating lease liabilities were
$318 million
and
$355 million
, respectively. The weighted average lease term for the lease liabilities was
9
years, and the weighted average discount rate of remaining payments was
3.93 percent
. Lease liabilities from new ROU assets obtained during the
three months ended March 31, 2019
totaled
$4 million
. Cash paid on operating lease liabilities was
$16 million
for the
three months ended March 31, 2019
.
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
As of
March 31, 2019
, the contractual maturities of operating lease liabilities were as follows:
|
|
|
|
|
(in millions)
|
|
Years Ending December 31
|
|
2019 (a)
|
$
|
43
|
|
2020
|
63
|
|
2021
|
55
|
|
2022
|
46
|
|
2023
|
39
|
|
Thereafter
|
182
|
|
Total contractual maturities
|
428
|
|
Less imputed interest
|
(73
|
)
|
Total operating lease liabilities
|
$
|
355
|
|
(a) Contractual maturities for the nine months remaining in
2019
.
As a lessor, the Corporation leases certain types of manufacturing and warehouse equipment as well as public and private transportation vehicles to its customers. The Corporation recognized
$3 million
of lease-related revenue, primarily interest income from sales-type and direct financing leases, for the
three months ended March 31, 2019
. At
March 31, 2019
, the Corporation's net investment in sales-type and direct financing leases was
$320 million
.
As of
March 31, 2019
, the contractual maturities of sales-type and direct financing lease receivables were as follows:
|
|
|
|
|
(in millions)
|
|
Years Ending December 31
|
|
2019 (a)
|
$
|
65
|
|
2020
|
66
|
|
2021
|
54
|
|
2022
|
48
|
|
2023
|
42
|
|
Thereafter
|
68
|
|
Total lease payments receivable
|
343
|
|
Less deferred interest income
|
(23
|
)
|
Total lease receivables (b)
|
$
|
320
|
|
(a) Contractual maturities for the nine months remaining in
2019
.
(b) Includes unguaranteed residual values of
$60 million
and excludes net investment in leveraged leases of
$215 million
.