0000028412 cma:NoninterestDomain 2019-01-01 2019-03-31
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20202021
Or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 1-10706

Comerica Incorporated

(Exact name of registrant as specified in its charter)

Delaware38-1998421
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
Comerica Bank Tower
1717 Main Street, MC 6404
Dallas, Texas 75201
(Address of principal executive offices)
(Zip Code)
(214) 462-6831
(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Common Stock, $5 par valueCMANew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒

Accelerated filer 

☐
Non-accelerated filer 

☐

Smaller reporting company ☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
$5 par value common stock:
Outstanding as of April 24, 2020: 139,034,71726, 2021: 139,612,779 shares


Table of Contents
COMERICA INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets at March 31, 20202021 (unaudited) and December 31, 20192020
1
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 20202021 and 20192020 (unaudited)
2
Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 20202021 and 20192020 (unaudited)
3
4
5
3432
6058
6058
PART II. OTHER INFORMATION
6058
6058
6058
6259
6360


Table of Contents
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
Comerica Incorporated and Subsidiaries
(in millions, except share data)March 31, 2021December 31, 2020
(unaudited)(recast)
ASSETS
Cash and due from banks$1,064 $1,031 
Interest-bearing deposits with banks13,807 14,736 
Other short-term investments176 172 
Investment securities available-for-sale15,595 15,028 
Commercial loans30,886 32,753 
Real estate construction loans4,244 4,082 
Commercial mortgage loans9,993 9,912 
Lease financing577 594 
International loans990 926 
Residential mortgage loans1,799 1,830 
Consumer loans2,093 2,194 
Total loans50,582 52,291 
Allowance for loan losses(777)(948)
Net loans49,805 51,343 
Premises and equipment456 459 
Accrued income and other assets5,388 5,360 
Total assets$86,291 $88,129 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits$38,822 $39,420 
Money market and interest-bearing checking deposits29,880 28,540 
Savings deposits2,934 2,710 
Customer certificates of deposit2,141 2,133 
Foreign office time deposits30 66 
Total interest-bearing deposits34,985 33,449 
Total deposits73,807 72,869 
Accrued expenses and other liabilities1,480 1,482 
Medium- and long-term debt2,852 5,728 
Total liabilities78,139 80,079 
Fixed rate reset non-cumulative perpetual preferred stock, series A, 0 par value, $100,000 liquidation preference per share:
Authorized - 4,000 shares
Issued - 4,000 shares at 3/31/2021 and 12/31/2020394 394 
Common stock - $5 par value:
Authorized - 325,000,000 shares
Issued - 228,164,824 shares1,141 1,141 
Capital surplus2,183 2,185 
Accumulated other comprehensive (loss) income(105)64 
Retained earnings9,975 9,727 
Less cost of common stock in treasury - 88,579,635 shares at 3/31/2021 and 88,997,430 shares at 12/31/2020(5,436)(5,461)
Total shareholders’ equity8,152 8,050 
Total liabilities and shareholders’ equity$86,291 $88,129 
(in millions, except share data)March 31, 2020 December 31, 2019
 (unaudited)  
ASSETS   
Cash and due from banks$848
 $973
    
Interest-bearing deposits with banks4,007
 4,845
Other short-term investments138
 155
    
Investment securities available-for-sale13,041
 12,398
    
Commercial loans34,249
 31,473
Real estate construction loans3,756
 3,455
Commercial mortgage loans9,698
 9,559
Lease financing584
 588
International loans1,035
 1,009
Residential mortgage loans1,821
 1,845
Consumer loans2,315
 2,440
Total loans53,458
 50,369
Less allowance for loan losses(916) (637)
Net loans52,542
 49,732
    
Premises and equipment454
 457
Accrued income and other assets5,307
 4,842
Total assets$76,337
 $73,402
    
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Noninterest-bearing deposits$27,646
 $27,382
    
Money market and interest-bearing checking deposits24,475
 24,527
Savings deposits2,258
 2,184
Customer certificates of deposit2,958
 2,978
Other time deposits—
 133
Foreign office time deposits29
 91
Total interest-bearing deposits29,720
 29,913
Total deposits57,366
 57,295
    
Short-term borrowings2,263
 71
Accrued expenses and other liabilities1,872
 1,440
Medium- and long-term debt7,434
 7,269
Total liabilities68,935
 66,075
    
Common stock - $5 par value:   
Authorized - 325,000,000 shares   
Issued - 228,164,824 shares1,141
 1,141
Capital surplus2,168
 2,174
Accumulated other comprehensive income (loss)174
 (235)
Retained earnings9,389
 9,538
Less cost of common stock in treasury - 89,127,359 shares at 3/31/2020 and 86,069,234 shares at 12/31/2019(5,470) (5,291)
Total shareholders’ equity7,402
 7,327
Total liabilities and shareholders’ equity$76,337
 $73,402
See notes to consolidated financial statements (unaudited).

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Table of Contents
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
Comerica Incorporated and Subsidiaries 


Three Months Ended March 31,
Three Months Ended March 31,
(in millions, except per share data)2020 2019(in millions, except per share data)20212020
(recast)
INTEREST INCOME   INTEREST INCOME
Interest and fees on loans$517
 $621
Interest and fees on loans$386 $517 
Interest on investment securities74
 72
Interest on investment securities69 74 
Interest on short-term investments18
 17
Interest on short-term investments4 18 
Total interest income609
 710
Total interest income459 609 
INTEREST EXPENSE   INTEREST EXPENSE
Interest on deposits56
 52
Interest on deposits7 56 
Interest on short-term borrowings—
 1
Interest on medium- and long-term debt40
 51
Interest on medium- and long-term debt9 40 
Total interest expense96
 104
Total interest expense16 96 
Net interest income513
 606
Net interest income443 513 
Provision for credit losses411
 (13)Provision for credit losses(182)411 
Net interest income after provision for credit losses102
 619
Net interest income after provision for credit losses625 102 
NONINTEREST INCOME   NONINTEREST INCOME
Card fees59
 63
Card fees71 59 
Fiduciary income54
 49
Fiduciary income53 54 
Service charges on deposit accounts49
 51
Service charges on deposit accounts48 49 
Derivative incomeDerivative income30 20 
Commercial lending fees17
 22
Commercial lending fees18 17 
Foreign exchange income11
 11
Bank-owned life insurance12
 9
Bank-owned life insurance11 12 
Letter of credit fees9
 9
Letter of credit fees10 9 
Brokerage fees7
 7
Brokerage fees4 7 
Net securities losses(1) (8)Net securities losses0 (1)
Other noninterest income20
 25
Other noninterest income25 11 
Total noninterest income237
 238
Total noninterest income270 237 
NONINTEREST EXPENSES   NONINTEREST EXPENSES
Salaries and benefits expense242
 265
Salaries and benefits expense282 242 
Outside processing fee expense57
 63
Outside processing fee expense64 57 
Occupancy expense37
 37
Occupancy expense39 37 
Software expense37
 29
Software expense39 37 
Equipment expense12
 12
Equipment expense12 12 
Advertising expense7
 5
Advertising expense6 7 
FDIC insurance expense8
 5
FDIC insurance expense6 8 
Other noninterest expenses25
 17
Other noninterest expenses(1)17 
Total noninterest expenses425
 433
Total noninterest expenses447 417 
(Loss) income before income taxes(86) 424
(Benefit) provision for income taxes(21) 85
NET (LOSS) INCOME(65) 339
Less income allocated to participating securities—
 2
Net (loss) income attributable to common shares$(65) $337
(Losses) earnings per common share:   
Income (loss) before income taxesIncome (loss) before income taxes448 (78)
Provision (benefit) for income taxesProvision (benefit) for income taxes98 (19)
NET INCOME (LOSS)NET INCOME (LOSS)350 (59)
Less:Less:
Income allocated to participating securitiesIncome allocated to participating securities1 0 
Preferred stock dividendsPreferred stock dividends6 0 
Net income (loss) attributable to common sharesNet income (loss) attributable to common shares$343 $(59)
Earnings (losses) per common share:Earnings (losses) per common share:
Basic$(0.46) $2.14
Basic$2.46 $(0.42)
Diluted(0.46) 2.11
Diluted2.43 (0.42)
Comprehensive income344
 435
Comprehensive income181 344 
Cash dividends declared on common stock94
 105
Cash dividends declared on common stock95 94 
Cash dividends declared per common share0.68
 0.67
Cash dividends declared per common share0.68 0.68 
See notes to consolidated financial statements (unaudited).


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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)
Comerica Incorporated and Subsidiaries


Accumulated
NonredeemableCommon StockOtherTotal
PreferredSharesCapitalComprehensiveRetainedTreasuryShareholders'
(in millions, except per share data)(in millions, except per share data)StockOutstandingAmountSurplusIncome (Loss)EarningsStockEquity
  Accumulated 
Common Stock Other Total
Shares CapitalComprehensiveRetainedTreasuryShareholders'
(in millions, except per share data)OutstandingAmountSurplusIncome (Loss)EarningsStockEquity
BALANCE AT DECEMBER 31, 2018160.1
$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 plans0.5
—
(13)—
(22)31
(4)
Share-based compensation—
—
24
—
—
—
24
BALANCE AT MARCH 31, 2019155.4
$1,141
$2,159
$(513)$8,979
$(4,357)$7,409
BALANCE AT DECEMBER 31, 2019142.1
$1,141
$2,174
$(235)$9,538
$(5,291)$7,327
BALANCE AT DECEMBER 31, 2019
(recast)		BALANCE AT DECEMBER 31, 2019
(recast)		$— 142.1 $1,141 $2,174 $(316)$9,619 $(5,291)$7,327 
Cumulative effect of change in accounting principle—
—
—
—
13
—
13
Cumulative effect of change in accounting principle— — — — — 13 — 13 
Net loss—
—
—
—
(65)—
(65)Net loss— — — — — (59)— (59)
Other comprehensive income, net of tax—
—
—
409
—
—
409
Other comprehensive income, net of tax— — — — 403 — — 403 
Cash dividends declared on common stock ($0.68 per share)—
—
—
—
(94)—
(94)Cash dividends declared on common stock ($0.68 per share)— — — — — (94)— (94)
Purchase of common stock(3.4)—
—
—
—
(195)(195)Purchase of common stock— (3.4)— — — — (195)(195)
Net issuance of common stock under employee stock plans0.3
—
(14)—
(3)16
(1)Net issuance of common stock under employee stock plans— 0.3 — (14)— (3)16 (1)
Share-based compensation—
—
8
—
—
—
8
Share-based compensation— — — 8 — — — 8 
BALANCE AT MARCH 31, 2020139.0
$1,141
$2,168
$174
$9,389
$(5,470)$7,402
BALANCE AT MARCH 31, 2020 (recast)BALANCE AT MARCH 31, 2020 (recast)$— 139.0 $1,141 $2,168 $87 $9,476 $(5,470)$7,402 
BALANCE AT DECEMBER 31, 2020
(recast)		BALANCE AT DECEMBER 31, 2020
(recast)		$394 139.2 $1,141 $2,185 $64 $9,727 $(5,461)$8,050 
Net incomeNet income— — — — — 350 — 350 
Other comprehensive loss, net of taxOther comprehensive loss, net of tax— — — — (169)— — (169)
Cash dividends declared on common stock ($0.68 per share)Cash dividends declared on common stock ($0.68 per share)— — — — — (95)— (95)
Cash dividends declared on preferred stockCash dividends declared on preferred stock— — — — — (6)— (6)
Purchase of common stockPurchase of common stock— (0.1)— — — — (3)(3)
Net issuance of common stock under employee stock plansNet issuance of common stock under employee stock plans— 0.5 — (24)— (1)28 3 
Share-based compensationShare-based compensation— — — 22 — — — 22 
BALANCE AT MARCH 31, 2021BALANCE AT MARCH 31, 2021$394 139.6 $1,141 $2,183 $(105)$9,975 $(5,436)$8,152 
See notes to consolidated financial statements (unaudited).



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CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Comerica Incorporated and Subsidiaries


Three Months Ended March 31,
Three Months Ended March 31,
(in millions)2020 2019(in millions)20212020
(recast)
OPERATING ACTIVITIES   OPERATING ACTIVITIES
Net (loss) income$(65) $339
Adjustments to reconcile net (loss) income to net cash provided by operating activities:   
Net income (loss)Net income (loss)$350 $(59)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for credit losses411
 (13)Provision for credit losses(182)411 
Benefit for deferred income taxes(73) (4)
Provision (benefit) for deferred income taxesProvision (benefit) for deferred income taxes39 (71)
Depreciation and amortization26
 29
Depreciation and amortization25 26 
Net periodic defined benefit credit(5) (7)Net periodic defined benefit credit(20)(13)
Share-based compensation expense8
 24
Share-based compensation expense22 8 
Net amortization of securities1
 —
Net amortization of securities8 1 
Net securities losses1
 8
Net securities losses0 1 
Net change in:   Net change in:
Accrued income receivable8
 (20)Accrued income receivable(5)8 
Accrued expenses payable(12) (27)Accrued expenses payable26 (12)
Other, net399
 (289)Other, net(104)399 
Net cash provided by operating activities699
 40
Net cash provided by operating activities159 699 
INVESTING ACTIVITIES   INVESTING ACTIVITIES
Investment securities available-for-sale:   Investment securities available-for-sale:
Maturities and redemptions598
 487
Maturities and redemptions992 598 
Sales—
 987
Purchases(920) (1,532)Purchases(1,750)(920)
Net change in loans(3,174) (151)Net change in loans1,685 (3,174)
Net increase in premises and equipment(15) (16)Net increase in premises and equipment(18)(15)
Purchases of Federal Home Loan Bank Stock(31) (16)
Federal Home Loan Bank stock:Federal Home Loan Bank stock:
PurchasesPurchases0 (31)
RedemptionsRedemptions115 0 
Proceeds from bank-owned life insurance settlements8
 2
Proceeds from bank-owned life insurance settlements5 8 
Net cash used in investing activities(3,534) (239)
Other, netOther, net(21)0 
Net cash provided by (used in) investing activitiesNet cash provided by (used in) investing activities1,008 (3,534)
FINANCING ACTIVITIES   FINANCING ACTIVITIES
Net change in:   Net change in:
Deposits(29) (1,586)Deposits824 (29)
Short-term borrowings2,192
 891
Short-term borrowings0 2,192 
Medium- and long-term debt:   Medium- and long-term debt:
Issuances and advances—
 350
Maturities and redemptionsMaturities and redemptions(2,800)0 
Preferred stock cash dividends paidPreferred stock cash dividends paid(6)0 
Common stock:   Common stock:
Repurchases(199) (443)Repurchases(8)(199)
Cash dividends paid(95) (99)Cash dividends paid(95)(95)
Issuances under employee stock plans3
 6
Issuances under employee stock plans10 3 
Net cash provided by (used in) financing activities1,872
 (881)
Other, netOther, net12 0 
Net cash (used in) provided by financing activitiesNet cash (used in) provided by financing activities(2,063)1,872 
Net decrease in cash and cash equivalents(963) (1,080)Net decrease in cash and cash equivalents(896)(963)
Cash and cash equivalents at beginning of period5,818
 4,561
Cash and cash equivalents at beginning of period15,767 5,818 
Cash and cash equivalents at end of period$4,855
 $3,481
Cash and cash equivalents at end of period$14,871 $4,855 
Interest paid$102
 $98
Interest paid$20 $102 
Income tax paid3
 12
Income taxes paidIncome taxes paid1 3 
See notes to consolidated financial statements (unaudited).

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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, 20202021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.2021. 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, 2019.2020.
Allowance for Credit Losses
The allowance for credit losses includes both the allowance for loan lossesDefined Benefit Pension and the allowance for credit losses on lending-related commitments.
The Corporation disaggregates the loan portfolio into segments for purposes of determining the allowance for credit losses. These segments are based on the level at which the Corporation develops, documents and applies a systematic methodology to determine the allowance for credit losses. The Corporation's portfolio segments are business loans and retail loans. Business loans include the commercial, real estate construction, commercial mortgage, lease financing and international loan portfolios. Retail loans consist of residential mortgage and consumer loans, including home equity loans.Other Postretirement Costs
Effective January 1, 2020,2021, the Corporation adoptedelected to change the provisionsaccounting methodology for determining the market-related value of Accounting Standards Update (ASU) No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurementassets (MRVA) for certain classes of Credit Lossesassets in the qualified defined benefit pension plan. The MRVA is used to calculate the Corporation's expected return on Financial Instruments," commonly referredplan assets, a component of defined pension benefit cost (credit). These classes are currently comprised of the fixed income securities and private placement assets held in the portfolio, utilized by the Corporation to asmitigate the current expected credit loss (CECL) model, for allimpacts to financial assets, except those accounted for atresults from changes in fair value through net income, using the modified retrospective approach.
Under Topic 326, current expected credit losses are estimated over the contractual life of the loan portfolio, considering all available relevant information, includingpension liability. Previously, MRVA was measured using a historical and current conditionsfive-year average fair value. Under the new methodology, the Corporation calculates MRVA using fair value of plan assets. Although both methods are permitted under U.S. GAAP, the Corporation believes the new policy is preferable for these classes of assets as well as reasonable and supportable forecastsit results in more timely recognition of future events. The previous accounting principle estimated probable, estimable losses inherentthe performance of pension assets in the portfolio.results from operations.
At adoption, the Corporation’s estimate of current expected credit lossesThe change in accordance with Topic 326 resulted in a $17 million day-one decreaseaccounting methodology is applied retrospectively to all prior periods presented in the overall allowance for credit losses, from $668 million at December 31, 2019 under the incurred loss model.consolidated financial statements. The Corporation recognized a corresponding $13 million increase to retained earnings and a $4 million reduction to deferred tax assets. A similar adjustment at December 31, 2019 would have caused a 2-basis-point increase in the Common Equity Tier 1 (CET1) capital ratio. Business loans, comprising approximately 91 percentimpact of the Corporation’s total loan portfolio at transition, consist of loans and lending arrangements with generally short contractual maturities. As a result,change to the allowance for credit losses for business loans decreased $42 million. The allowance for credit losses increased $25 million for retail loans, given their longer contractual maturities.
Topic 326 also requires expected credit losses on available-for-sale (AFS) debt securities to be recorded as an allowance for credit losses. For certain types of debt securities, such as U.S. Treasuries and other securities with government guarantees, entities may expect zero credit losses. The zero-loss expectation applies to all the Corporation’s securities and no allowance for credit losses were recorded on its AFS securities portfolio at transition.
Allowance for Loan Losses
The allowance for loan losses is estimated on a quarterly basis and represents management’s estimates of current expected credit losses in the Corporation’s loan portfolio. Pools of loans with similar risk characteristics are collectively evaluated while loans that no longer share risk characteristics with loan pools are evaluated individually.
Collective loss estimates are determined by applying reserve factors, designed to estimate current expected credit losses, to amortized cost balances over the remaining contractual life of the collectively evaluated portfolio. Loans with similar risk characteristics are aggregated into homogeneous pools. Business loans are assigned to pools based primarily on business line and the Corporation’s internal risk rating system. For retail loans, pools are based on loan type, past due status and credit scores. Reserve factors are based on estimated probability of default for each pool, set to a default horizon based on contractual life, and loss given default. Historical estimates are calibrated to economic forecasts over the reasonable and supportable forecast period basedqualified defined benefit plan on the projected performanceCorporation's consolidated financial statements is as follows:
Consolidated Balance Sheets
 March 31, 2021December 31, 2020
(in millions)Accounting Change ImpactPreviously ReportedAccounting Change ImpactRecast
Amounts
Accumulated other comprehensive income (loss)$(3)$168 $(104)$64 
Retained earnings3 9,623 104 9,727 
Consolidated Statements of specific economic variables that statistically correlate with each of the probability of default and loss given default pools.Comprehensive Income

Three Months Ended March 31,
 20212020
(in millions)Accounting Change ImpactPreviously ReportedAccounting Change ImpactRecast Amounts
Other noninterest expenses$(5)$25 $(8)$17 
Provision (benefit) for income taxes2 (21)2 (19)
Net income (loss)3 (65)6 (59)
Earnings (losses) per common share
Basic$0.03 $(0.46)$0.04 $(0.42)
Diluted$0.02 $(0.46)$0.04 $(0.42)
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Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

The calculation of current expected credit losses is inherently subjective, as it requires management to exercise judgment in determining appropriate factors used to determine the allowance. Some of the most significant factors in the quantitative allowance estimate are assigning internal risk ratings to loans, selecting the economic forecasts used to calibrate the reserve factors and determining the reasonable and supportable forecast period.
•
Internal Risk Ratings: Standard loss factors are dependent on loan risk ratings for business loans. Risk ratings are assigned at origination, based on inherent credit risk, and may be updated based on new information that becomes available, periodic reviews of credit quality, a change in borrower performance or modifications to lending agreements.
•
Economic Forecasts: Management selects economic variables it believes to be most relevant based on the composition of the loan portfolio and customer base, including forecasted levels of employment, gross domestic product, corporate bond and treasury spreads, industrial production levels, consumer and commercial real estate price indices as well as housing statistics. Different economic forecast scenarios ranging from more benign to more severe are evaluated each reporting period to forecast losses over the contractual life of the loan portfolio.
•
Forecast Period: Economic forecasts are applied over the period management believes it can estimate reasonable and supportable forecasts. Forecast periods may be adjusted in response to changes in the economic environment. To estimate losses for contractual periods that extend beyond the forecast horizon, the Corporation reverts to an average historical loss experience. The Corporation typically forecasts economic variables over a two-year horizon, followed by an immediate reversion to an average historical loss experience that generally incorporates a full economic cycle. Management reviews this methodology on at least an annual basis.
The allowance for loan losses also includes qualitative adjustments to bring the allowance to the level management believes is appropriate based on factors that have not otherwise been fully accounted for, including adjustments for foresight risk, input imprecision and model imprecision. Foresight risk reflects the inherent imprecision in forecasting economic variables, including determining the depth and duration of economic cycles and their impact to relevant economic variables. The Corporation may make qualitative adjustments based on its evaluation of different forecast scenarios and known recent events impacting relevant economic variables. Input imprecision factors address the risk that certain model inputs may not reflect all available information including (i) risk factors that have not been fully addressed in internal risk ratings, (ii) changes in lending policies and procedures, (iii) changes in the level and quality of experience held by lending management, (iv) imprecision in the risk rating system and (v) limitations in data available for certain loan portfolios. Model imprecision considers known model limitations and model updates not yet fully reflected in the quantitative estimate.
The determination of the appropriate qualitative adjustment is based on management's analysis of current and expected economic conditions and their impact to the portfolio, as well as internal credit risk movements and a qualitative assessment of the lending environment, including underwriting standards. Management recognizes the sensitivity of various assumptions made in the quantitative modeling of expected losses and may adjust reserves depending upon the level of uncertainty that currently exists in one or more assumptions.
Credit losses for loans that no longer share risk characteristics with the loan pools are estimated on an individual basis. Individual credit loss estimates are typically performed for nonaccrual loans and modified loans classified as troubled debt restructurings and are based on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows. The Corporation considers certain loans to be collateral-dependent if the borrower is experiencing financial difficulty and management expects repayment for the loan to be substantially through the operation or sale of the collateral. For collateral-dependent loans, loss estimates are based on the fair value of collateral, less estimated cost to sell (if applicable). Collateral values supporting individually evaluated loans are assessed quarterly and appraisals are typically obtained at least annually.
The total allowance for loan losses is sufficient to absorb expected credit losses over the contractual life of the portfolio. Unanticipated events impacting the economy, including political instability or global events affecting the U.S. economy, could cause changes to expectations for current conditions and economic forecasts that result in an unanticipated increase in the allowance. Significant increases in current portfolio exposures or changes in credit characteristics could also increase the amount of the allowance. Such events, or others of similar nature, may result in the need for additional provision for credit losses in order to maintain an allowance that complies with credit risk and accounting policies.
Loans deemed uncollectible are charged off and deducted from the allowance. Recoveries on loans previously charged off are added to the allowance.
Credit losses are not estimated for accrued interest receivable as interest that is deemed uncollectible is written off through interest income.


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Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

Allowance for Credit Losses on Lending-Related Commitments
The allowance for credit losses on lending-related commitments estimates current expected credit losses on collective pools of letters of credit and unused commitments to extend credit based on standard reserve factors, determined in a manner similar to business loans, multiplied by a probability of draw estimate, based on historical experience and credit risk, applied to commitment amounts. The allowance for credit losses on lending-related commitments is included in accrued expenses and other liabilities on the Consolidated Balance Sheets, with the corresponding charge included in the provision for credit losses on the Consolidated Statements of Comprehensive Income.Cash Flows
Goodwill
Effective January 1, 2020, the Corporation prospectively adopted the provisions of ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” (ASU 2017-04), eliminating the second step of goodwill impairment testing, under which the implied fair value of goodwill was determined as if the reporting unit were being acquired in a business combination. Under ASU 2017-04, the Corporation will compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for any amount by which the carrying amount exceeds the reporting unit’s fair value, to the extent that the loss recognized does not exceed the amount of goodwill allocated to that reporting unit. The adoption of ASU 2017-04 did not impact the Corporation’s current financial condition or results of operations.
Goodwill, included in accrued income and other assets on the Consolidated Balance Sheets, is initially recorded as the excess of the purchase price over the fair value of net assets acquired in a business combination and is subsequently evaluated at least annually for impairment. Goodwill impairment testing is performed at the reporting unit level, equivalent to a business segment or one level below. The Corporation has three reporting units: the Business Bank, the Retail Bank and Wealth Management.
The Corporation performs its annual evaluation of goodwill impairment in the third quarter of each year and on an interim basis if events or changes in circumstances between annual tests suggest additional testing may be warranted to determine if goodwill might be impaired. The Corporation may choose to perform a qualitative assessment to determine whether it is more likely than not that the fair value of any reporting unit is less than its carrying amount, including goodwill. Factors considered in the assessment of the likelihood of impairment include macroeconomic conditions, industry and market considerations, stock performance of the Corporation and its peers, financial performance of the reporting units, and previous results of goodwill impairment tests, amongst other factors. Based on the results of the qualitative analysis, the Corporation determines whether a quantitative test is deemed necessary. The quantitative test compares the estimated fair value of identified reporting units with their carrying amount, including goodwill. If the estimated fair value of the reporting unit is less than the carrying value, an impairment charge would be recorded for the excess, not to exceed the amount of goodwill allocated to the reporting unit.
Software
Effective January 1, 2020, the Corporation adopted the provisions of ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," using a prospective approach for implementation costs incurred subsequent to the adoption of the standard. Amortization expense from capitalized implementation costs of hosting arrangements that are service contracts and fees associated with the hosting elements of the arrangements, are included in software expense in the Consolidated Statements of Comprehensive Income, along with other software-related expenses. For the three months ended March 31, 2020, software expense included $7 million of hosting fees that would have previously been included in outside processing fee expense.
Capitalized software, stated at cost less accumulated amortization, includes purchased software, capitalizable application development costs associated with internally developed software and cloud computing arrangements, including capitalizable implementation costs associated with hosting arrangements that are service contracts. Amortization, computed on the straight-line method, is charged to software expense in the Consolidated Statements of Comprehensive Income over the estimated useful life of the software, generally 5 years, or the term of the hosting arrangement for implementation costs related to service contracts.
Cloud computing arrangements include software as a service (SaaS), platform as a service (PaaS), infrastructure as a service (IaaS) and other similar hosting arrangements. The Corporation primarily utilizes SaaS and IaaS arrangements.
Three Months Ended March 31,
 20212020
(in millions)Accounting Change ImpactPreviously ReportedAccounting Change ImpactRecast Amounts
Net (loss) income$3 $(65)$6 $(59)
(Benefit) provision for deferred income taxes2 (73)2 (71)
Net periodic defined benefit credit(5)(5)(8)(13)
Capitalized implementation costs of hosting arrangements that are service contracts were insignificant for the three months ended March 31, 2020.




7
Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

Reference Rate Reform
In March 2020, the Financial Accounting Standards Board (FASB) issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” (ASU 2020-04), to provide temporary optional guidance to ease the potential accounting burden of reference rate reform. ASU 2020-04 is effective for eligible contract modifications from January 1, 2020 through December 31, 2022. Approximately 86 percent of the Corporation’s loans at March 31, 2020 were tied to LIBOR. The Corporation uses interest rate swaps to convert variable-LIBOR rate loans to fixed rates for approximately 10 percent of the loan portfolio. Additional contracts with exposure to LIBOR include swaps converted fixed-rate long-term debt to variable LIBOR rates. The Corporation adopted the provisions of ASU 2020-04 for loan contract modifications as of January 1, 2020 and for all existing hedging relationships as of that date or entered into in the first quarter of 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.
Investment securities available-for-sale, derivatives, deferred compensation plans and equity securities with readily determinable fair values (primarily money market mutual funds) 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 nonaccrualimpaired loans, and loans classified as troubled debt restructurings (TDRs), 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, 20192020 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.

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Table of Contents
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, 20202021 and December 31, 20192020.
(in millions)TotalLevel 1Level 2Level 3
March 31, 2021
Deferred compensation plan assets$108 $108 $0 $0 
Equity securities54 54 0 0 
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities4,613 4,613 0 0 
Residential mortgage-backed securities (a)10,982 0 10,982 0 
Total investment securities available-for-sale15,595 4,613 10,982 0 
Derivative assets:
Interest rate contracts340 0 316 24 
Energy contracts269 0 269 0 
Foreign exchange contracts12 0 12 0 
Total derivative assets621 0 597 24 
Total assets at fair value$16,378 $4,775 $11,579 $24 
Derivative liabilities:
Interest rate contracts$65 $0 $65 $0 
Energy contracts265 0 265 0 
Foreign exchange contracts10 0 10 0 
Total derivative liabilities340 0 340 0 
Deferred compensation plan liabilities108 108 0 0 
Total liabilities at fair value$448 $108 $340 $0 
December 31, 2020
Deferred compensation plan assets$107 $107 $0 $0 
Equity securities60 60 0 0 
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities4,658 4,658 0 0 
Residential mortgage-backed securities (a)10,370 0 10,370 0 
Total investment securities available-for-sale15,028 4,658 10,370 0 
Derivative assets:
Interest rate contracts531 0 492 39 
Energy contracts151 0 151 0 
Foreign exchange contracts18 0 18 0 
Total derivative assets700 0 661 39 
Total assets at fair value$15,895 $4,825 $11,031 $39 
Derivative liabilities:
Interest rate contracts$61 $0 $61 $0 
Energy contracts149 0 149 0 
Foreign exchange contracts19 0 19 0 
Total derivative liabilities229 0 229 0 
Deferred compensation plan liabilities107 107 0 0 
Total liabilities at fair value$336 $107 $229 $0 
(a).Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

(in millions)Total Level 1 Level 2 Level 3
March 31, 2020       
Deferred compensation plan assets$92
 $92
 $—
 $—
Equity securities40
 40
 —
 —
Investment securities available-for-sale:       
U.S. Treasury and other U.S. government agency securities2,864
 2,864
 —
 —
Residential mortgage-backed securities (a)10,177
 —
 10,177
 —
Total investment securities available-for-sale13,041
 2,864
 10,177
 —
Derivative assets:       
Interest rate contracts605
 —
 562
 43
Energy derivative contracts459
 —
 459
 —
Foreign exchange contracts34
 —
 34
 —
Total derivative assets1,098
 —
 1,055
 43
Total assets at fair value$14,271
 $2,996
 $11,232
 $43
Derivative liabilities:       
Interest rate contracts$70
 $—
 $70
 $—
Energy derivative contracts454
 —
 454
 —
Foreign exchange contracts27
 —
 27
 —
Total derivative liabilities551
 —
 551
 —
Deferred compensation plan liabilities92
 92
 —
 —
Total liabilities at fair value$643
 $92
 $551
 $—
December 31, 2019       
Deferred compensation plan assets$95
 $95
 $—
 $—
Equity securities54
 54
 —
 —
Investment securities available-for-sale:       
U.S. Treasury and other U.S. government agency securities2,792
 2,792
 —
 —
Residential mortgage-backed securities (a)9,606
 —
 9,606
 —
Total investment securities available-for-sale12,398
 2,792

9,606

—
Derivative assets:       
Interest rate contracts211
 —
 189
 22
Energy derivative contracts96
 —
 96
 —
Foreign exchange contracts10
 —
 10
 —
Total derivative assets317
 —
 295
 22
Total assets at fair value$12,864
 $2,941
 $9,901
 $22
Derivative liabilities:       
Interest rate contracts$39
 $—
 $39
 $—
Energy derivative contracts92
 —
 92
 —
Foreign exchange contracts10
 —
 10
 —
Total derivative liabilities141
 —
 141
 —
Deferred compensation plan liabilities95
 95
 —
 —
Total liabilities at fair value$236
 $95
 $141
 $—
(a)Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

There were no0 transfers of assets or liabilities recorded at fair value on a recurring basis into or out of Level 3 fair value measurements during each of the three-month periods ended March 31, 20202021 and 2019.

2020.
9
7
Table of Contents
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, 20202021 and 2019.2020.
   Net Realized/Unrealized Gains (Losses) (Pretax) Recorded in Earnings (a)    
 
Balance 
at
Beginning
of Period
    Balance at End of Period
   Payments, Sales and Redemptions 
(in millions) RealizedUnrealized  
Three Months Ended March 31, 2020          
Derivative assets:          
Interest rate contracts$22
 $—
 $21
  $—
 $43
           
Three Months Ended March 31, 2019          
Derivative assets:          
Interest rate contracts$9

$—
 $5
  $—
 $14

(a)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.
Net Realized/Unrealized Gains (Losses) (Pretax) Recorded in Earnings (a)
Balance at Beginning of PeriodBalance at End of Period
Sales
(in millions)RealizedUnrealized
Three Months Ended March 31, 2021
Derivative assets:
Interest rate contracts$39 $0 $(15)$0 $24 
Three Months Ended March 31, 2020
Derivative assets:
Interest rate contracts$22 $0 $21 $0 $43 
(a)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.

Assets and Liabilities Recorded 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, 20202021 and December 31, 2019.2020. NaN liabilities were recorded at fair value on a nonrecurring basis at March 31, 20202021 and December 31, 2019.2020.
(in millions)Level 3
March 31, 2021
Loans:
Commercial$125 
Commercial mortgage12 
Total loans137 
Other real estate8 
Total assets at fair value$145 
December 31, 2020
Loans:
Commercial$134 
Commercial mortgage16 
Total assets at fair value$150 
(in millions)Level 3
March 31, 2020 
Loans: 
Commercial$89
Lease financing1
Total assets at fair value$90
December 31, 2019 
Loans: 
Commercial$70
Total assets at fair value$70
Level 3 assets recorded at fair value on a nonrecurring basis at March 31, 20202021 and December 31, 20192020 included both nonaccrual loans and TDRs 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.

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Table of Contents
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)TotalLevel 1Level 2Level 3
March 31, 2021
Assets
Cash and due from banks$1,064 $1,064 $1,064 $0 $0 
Interest-bearing deposits with banks13,807 13,807 13,807 0 0 
Loans held-for-sale14 14 0 14 0 
Total loans, net of allowance for loan losses (a)49,805 48,880 0 0 48,880 
Customers’ liability on acceptances outstanding13 13 13 0 0 
Restricted equity investments92 92 92 0 0 
Nonmarketable equity securities (b)7 9 
Liabilities
Demand deposits (noninterest-bearing)38,822 38,822 0 38,822 0 
Interest-bearing deposits32,844 32,844 0 32,844 0 
Customer certificates of deposit2,141 2,140 0 2,140 0 
Total deposits73,807 73,806 0 73,806 0 
Acceptances outstanding13 13 13 0 0 
Medium- and long-term debt2,852 2,919 0 2,919 0 
Credit-related financial instruments(50)(50)0 0 (50)
December 31, 2020
Assets
Cash and due from banks$1,031 $1,031 $1,031 $0 $0 
Interest-bearing deposits with banks14,736 14,736 14,736 0 0 
Loans held-for-sale5 5 0 5 0 
Total loans, net of allowance for loan losses (a)51,343 50,601 0 0 50,601 
Customers’ liability on acceptances outstanding1 1 1 0 0 
Restricted equity investments207 207 207 0 0 
Nonmarketable equity securities (b)5 9 
Liabilities
Demand deposits (noninterest-bearing)39,420 39,420 0 39,420 0 
Interest-bearing deposits31,316 31,316 0 31,316 0 
Customer certificates of deposit2,133 2,133 0 2,133 0 
Total deposits72,869 72,869 0 72,869 0 
Acceptances outstanding1 1 1 0 0 
Medium- and long-term debt5,728 5,790 0 5,790 0 
Credit-related financial instruments(68)(68)0 0 (68)
(a)Included $137 million and $150 million of loans recorded at fair value on a nonrecurring basis at March 31, 2021 and December 31, 2020, 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.
9
 
Carrying
Amount
 Estimated Fair Value
(in millions) Total Level 1 Level 2 Level 3
March 31, 2020         
Assets         
Cash and due from banks$848
 $848
 $848
 $—
 $—
Interest-bearing deposits with banks4,007
 4,007
 4,007
 —
 —
Loans held-for-sale5
 5
 —
 5
 —
Total loans, net of allowance for loan losses (a)52,542
 52,108
 —
 —
 52,108
Customers’ liability on acceptances outstanding2
 2
 2
 —
 —
Restricted equity investments279
 279
 279
 —
 —
Nonmarketable equity securities (b)5
 10
      
Liabilities         
Demand deposits (noninterest-bearing)27,646
 27,646
 —
 27,646
 —
Interest-bearing deposits26,762
 26,762
 —
 26,762
 —
Customer certificates of deposit2,958
 2,959
 —
 2,959
 —
Total deposits57,366
 57,367
 —
 57,367
 —
Short-term borrowings2,263
 2,263
 2,263
 —
 —
Acceptances outstanding2
 2
 2
 —
 —
Medium- and long-term debt7,434
 7,224
 —
 7,224
 —
Credit-related financial instruments(84) (84) —
 —
 (84)
December 31, 2019         
Assets         
Cash and due from banks$973
 $973
 $973
 $—
 $—
Interest-bearing deposits with banks4,845
 4,845
 4,845
 —
 —
Loans held-for-sale6
 6
 —
 6
 —
Total loans, net of allowance for loan losses (a)49,732
 49,975
 —
 —
 49,975
Customers’ liability on acceptances outstanding2
 2
 2
 —
 —
Restricted equity investments248
 248
 248
 —
 —
Nonmarketable equity securities (b)5
 10
      
Liabilities         
Demand deposits (noninterest-bearing)27,382
 27,382
 —
 27,382
 —
Interest-bearing deposits26,802
 26,802
 —
 26,802
 —
Certificates of deposit2,978
 2,968
 —
 2,968
 —
Other time deposits133
 133
 —
 133
 —
Total deposits57,295
 57,285
 —
 57,285
 —
Short-term borrowings71
 71
 71
 —
 —
Acceptances outstanding2
 2
 2
 —
 —
Medium- and long-term debt7,269
 7,316
 —
 7,316
 —
Credit-related financial instruments(57) (57) —
 —
 (57)
(a)Included $90 million and $70 million of loans recorded at fair value on a nonrecurring basis at March 31, 2020 and December 31, 2019, 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.

11
Table of Contents
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, 2021
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities$4,578 $59 $24 $4,613 
Residential mortgage-backed securities (a)10,924 178 120 10,982 
Total investment securities available-for-sale$15,502 $237 $144 $15,595 
December 31, 2020
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities$4,583 $76 $1 $4,658 
Residential mortgage-backed securities (a)10,169 203 2 10,370 
Total investment securities available-for-sale$14,752 $279 $3 $15,028 
(in millions)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 Fair Value
March 31, 2020       
Investment securities available-for-sale:       
U.S. Treasury and other U.S. government agency securities$2,746
 $118
 $—
 $2,864
Residential mortgage-backed securities (a)9,887
 290
 —
 10,177
Total investment securities available-for-sale$12,633
 $408
 $—
 $13,041
        
December 31, 2019       
Investment securities available-for-sale:       
U.S. Treasury and other U.S. government agency securities$2,745
 $47
 $—
 $2,792
Residential mortgage-backed securities (a)9,568
 66
 28
 9,606
Total investment securities available-for-sale$12,313
 $113
 $28
 $12,398
(a)Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.
(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, 20202021 and December 31, 20192020 follows:
 Temporarily Impaired
 Less than 12 Months12 Months or moreTotal
(in millions)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
March 31, 2021
U.S. Treasury and other U.S. government agency securities$1,834 $24 $0 $0 $1,834 $24 
Residential mortgage-backed securities (a)3,577 120 0 0 3,577 120 
Total temporarily impaired securities$5,411 $144 $0 $0 $5,411 $144 
December 31, 2020
U.S. Treasury and other U.S. government agency securities$1,119 $1 $0 $0 $1,119 $1 
Residential mortgage-backed securities (a)952 2 0 0 952 2 
Total temporarily impaired securities$2,071 $3 $0 $0 $2,071 $3 
(a) follows:Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.
 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, 2020              
Residential mortgage-backed securities (a)$110
 $—
  $—
 $—
  $110
 $—
 
Total temporarily impaired securities$110
 $—
  $—

$—
  $110
 $—
 
December 31, 2019              
Residential mortgage-backed securities (a)$1,494
 $7
  $1,906
 $21
  $3,400
 $28
 
Total temporarily impaired securities$1,494
 $7
  $1,906
 $21
  $3,400
 $28
 
(a)Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.
Unrealized losses resulted from changes in market interest rates and liquidity. The Corporation’s portfolio is comprised of securities issued or guaranteed by the U.S. government or government-sponsored enterprises. As such, it is expected that the securities would not be settled at a price less than the amortized cost of the investments. Further, the Corporation does not intend to sell the investments, and it is not more likely than not that it will be required to sell the investments before recovery of amortized costs. At March 31, 2021, the Corporation had 138 securities in an unrealized loss
position with no allowance for credit losses, comprised of 19 U.S. Treasury securities and 119 residential mortgage-backed
securities.
Interest receivable on investment securities totaled $20$19 million at March 31, 20202021 and $18 million at December 31, 2019,2020 and was included in accrued income and other assets on the Consolidated Balance Sheets.
Sales, calls and write-downs of investment securities available-for-sale resulted in the following losses recorded in net securities losses on the Consolidated Statements of Comprehensive Income, computed based on the adjusted cost of the specific security.
 Three Months Ended March 31,
(in millions)2020 2019
Securities gains$—
 $—
Securities losses(1) (8)
Net securities losses$(1) $(8)


Three Months Ended March 31,
(in millions)20212020
Securities losses$0 $(1)
Net securities losses$0 $(1)
12
10
Table of Contents
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, 2020Amortized Cost Fair Value
Contractual maturity   
Within one year$30
 $31
After one year through five years2,874
 2,999
After five years through ten years884
 907
After ten years8,845
 9,104
Total investment securities$12,633

$13,041

(in millions)
March 31, 2021Amortized CostFair Value
Contractual maturity
Within one year$1,617 $1,634 
After one year through five years3,177 3,208 
After five years through ten years570 587 
After ten years10,138 10,166 
Total investment securities$15,502 $15,595 
Included in the contractual maturity distribution in the table above were residential mortgage-backed securities with a total amortized cost of $9.9$10.9 billion and a fair value of $10.2$11.0 billion. The actual cash flows of mortgage-backed securities may differ as borrowers of the underlying loans may exercise prepayment options.
At March 31, 2020,2021, investment securities with a carrying value of $6.2$4.7 billion were pledged where permitted or required by law, including $5.5$4.0 billion pledged to the Federal Home Loan Bank (FHLB) as collateral for potential future borrowings of approximately $5.2$3.9 billion and $675$648 million to secure $510$485 million of liabilities, primarily public and other deposits of state and local government agencies as well as derivative instruments. For information on FHLB borrowings, refer to Note 7.

































13
11
Table of Contents
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 amortized cost basis of loans.
Loans Past Due and Still Accruing   
(in millions)30-59
Days		60-89 
Days		90 Days
or More		TotalNonaccrual
Loans		Current
Loans (a)		Total 
Loans
March 31, 2021
Business loans:
Commercial$103 $57 $17 $177 $230 $30,479 $30,886 
Real estate construction:
Commercial Real Estate business line (b)0 0 0 0 0 3,810 3,810 
Other business lines (c)9 8 2 19 1 414 434 
Total real estate construction9 8 2 19 1 4,224 4,244 
Commercial mortgage:
Commercial Real Estate business line (b)12 1 0 13 3 2,295 2,311 
Other business lines (c)40 25 21 86 31 7,565 7,682 
Total commercial mortgage52 26 21 99 34 9,860 9,993 
Lease financing14 0 1 15 1 561 577 
International0 2 0 2 0 988 990 
Total business loans178 93 41 312 266 46,112 46,690 
Retail loans:
Residential mortgage8 4 0 12 33 1,754 1,799 
Consumer:
Home equity5 4 0 9 15 1,546 1,570 
Other consumer10 0 19 29 0 494 523 
Total consumer15 4 19 38 15 2,040 2,093 
Total retail loans23 8 19 50 48 3,794 3,892 
Total loans$201 $101 $60 $362 $314 $49,906 $50,582 
December 31, 2020
Business loans:
Commercial$62 $115 $33 $210 $252 $32,291 $32,753 
Real estate construction:
Commercial Real Estate business line (b)31 0 0 31 0 3,626 3,657 
Other business lines (c)9 0 0 9 1 415 425 
Total real estate construction40 0 0 40 1 4,041 4,082 
Commercial mortgage:
Commercial Real Estate business line (b)51 1 0 52 3 2,218 2,273 
Other business lines (c)48 40 5 93 26 7,520 7,639 
Total commercial mortgage99 41 5 145 29 9,738 9,912 
Lease financing14 0 1 15 1 578 594 
International0 0 0 0 0 926 926 
Total business loans215 156 39 410 283 47,574 48,267 
Retail loans:
Residential mortgage11 4 0 15 47 1,768 1,830 
Consumer:
Home equity7 1 0 8 17 1,563 1,588 
Other consumer10 0 6 16 0 590 606 
Total consumer17 1 6 24 17 2,153 2,194 
Total retail loans28 5 6 39 64 3,921 4,024 
Total loans$243 $161 $45 $449 $347 $51,495 $52,291 
 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, 2020             
Business loans:             
Commercial$224
 $22
 $42
 $288
 $173
 $33,788
 $34,249
Real estate construction:             
Commercial Real Estate business line (a)4
 1
 —
 5
 —
 3,341
 3,346
Other business lines (b)—
 —
 —
 —
 —
 410
 410
Total real estate construction4
 1
 —
 5
 —
 3,751
 3,756
Commercial mortgage:             
Commercial Real Estate business line (a)1
 —
 8
 9
 3
 2,167
 2,179
Other business lines (b)59
 10
 10
 79
 16
 7,424
 7,519
Total commercial mortgage60
 10
 18
 88
 19
 9,591
 9,698
Lease financing—
 —
 —
 —
 1
 583
 584
International14
 —
 4
 18
 —
 1,017
 1,035
Total business loans302
 33
 64
 399
 193
 48,730
 49,322
              
Retail loans:             
Residential mortgage37
 3
 —
 40
 20
 1,761
 1,821
Consumer:             
Home equity5
 1
 —
 6
 22
 1,699
 1,727
Other consumer1
 —
 —
 1
 —
 587
 588
Total consumer6
 1
 —
 7
 22
 2,286
 2,315
Total retail loans43
 4
 —
 47
 42
 4,047
 4,136
Total loans$345
 $37
 $64
 $446
 $235
 $52,777
 $53,458
December 31, 2019             
Business loans:             
Commercial$27
 $7
 $17
 $51
 $148
 $31,274
 $31,473
Real estate construction:             
Commercial Real Estate business line (a)6
 —
 —
 6
 —
 3,038
 3,044
Other business lines (b)—
 7
 —
 7
 —
 404
 411
Total real estate construction6
 7
 —
 13
 —
 3,442
 3,455
Commercial mortgage:             
Commercial Real Estate business line (a)9
 —
 —
 9
 2
 2,165
 2,176
Other business lines (b)16
 18
 9
 43
 12
 7,328
 7,383
Total commercial mortgage25
 18
 9
 52
 14
 9,493
 9,559
Lease financing1
 —
 —
 1
 —
 587
 588
International—
 5
 —
 5
 —
 1,004
 1,009
Total business loans59
 37
 26
 122
 162
 45,800
 46,084
              
Retail loans:             
Residential mortgage15
 2
 —
 17
 20
 1,808
 1,845
Consumer:             
Home equity4
 5
 —
 9
 17
 1,685
 1,711
Other consumer2
 3
 —
 5
 —
 724
 729
Total consumer6
 8
 —
 14
 17
 2,409
 2,440
Total retail loans21
 10
 —
 31
 37
 4,217
 4,285
Total loans$80
 $47
 $26
 $153
 $199
 $50,017
 $50,369
(a)Primarily loans to real estate developers.
(b)Primarily loans secured by owner-occupied real estate.

(a)Includes $87 million and $141 million of loans with deferred payments not considered past due in accordance with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) at March 31, 2021 and December 31, 2020, respectively.

(b)Primarily loans to real estate developers.
(c)Primarily loans secured by owner-occupied real estate.

1412
Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

The following table presents loans by credit quality indicator (CQI) and vintage year. Credit quality indicatorCQI is 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. Vintage year is the year of origination or major modification.

March 31, 2020
December 31, 2019

Vintage Year









(in millions)2020
2019
2018
2017
2016
Prior
Revolvers
Revolvers Converted to Term
Total
Total
Business loans:


















Commercial:




























Pass (a)$634

$2,829

$2,069

$1,386

$636

$1,143

$23,528

$13

$32,238

$29,785
Special Mention (b)12

106

72

57

41

47

627

—

962

841
Substandard (c)3

109

122

24

41

32

544

1

876

699
Nonaccrual (d)2

11

3

20

10

53

72

2

173

148
Total commercial651

3,055

2,266

1,487

728

1,275

24,771

16

34,249

31,473
Real estate construction


















Pass (a)98

709

1,140

812

527

220

217

—

3,723

3,424
Special Mention (b)—

—

—

—

—

—

18

—

18

19
Substandard (c)—

—

1

14

—

—

—

—

15

12
Total real estate construction98

709

1,141

826

527

220

235

—

3,756

3,455
Commercial mortgage


















Pass (a)472

1,769

1,274

1,323

975

3,114

481

—

9,408

9,262
Special Mention (b)6

46

18

13

27

50

5

—

165

159
Substandard (c)2

7

—

11

8

78

—

—

106

124
Nonaccrual (d)—

—

2

1

3

13

—

—

19

14
Total commercial mortgage480

1,822

1,294

1,348

1,013

3,255

486

—

9,698

9,559
Lease financing




























Pass (a)37

147

89

58

18

219

—

—

568

579
Special Mention (b)—

6

3

2

2

—

—

—

13

7
Substandard (c)—

1

—

1

—

—

—

—

2

2
Nonaccrual (d)1

—

—

—

—

—

—

—

1

—
Total lease financing38

154

92

61

20

219

—

—

584

588
International




























Pass (a)228

185

161

34

1

74

306

—

989

972
Special Mention (b)—

—

4

4

4

2

26

—

40

29
Substandard (c)—

—

1

—

—

—

5

—

6

8
Total international228

185

166

38

5

76

337

—

1,035

1,009
Total business loans1,495

5,925

4,959

3,760

2,293

5,045

25,829

16

49,322

46,084
Table continues on the following page.













March 31, 2021
Vintage Year
(in millions)20212020201920182017PriorRevolversRevolvers Converted to TermTotal
Business loans:
Commercial:
Pass (a)$1,632 (b)$5,073 (b)$2,191 $1,445 $944 $1,061 $16,601 $16 $28,963 
Criticized (c)30 41 217 173 86 211 1,163 2 1,923 
Total commercial1,662 5,114 2,408 1,618 1,030 1,272 17,764 18 30,886 
Real estate construction
Pass (a)44 604 1,206 1,142 571 426 183 0 4,176 
Criticized (c)0 3 29 17 8 9 2 0 68 
Total real estate construction44 607 1,235 1,159 579 435 185 0 4,244 
Commercial mortgage
Pass (a)398 2,107 1,587 1,161 1,062 2,858 399 0 9,572 
Criticized (c)3 31 63 43 33 232 16 0 421 
Total commercial mortgage401 2,138 1,650 1,204 1,095 3,090 415 0 9,993 
Lease financing
Pass (a)28 104 115 61 47 186 0 0 541 
Criticized (c)0 3 19 11 2 1 0 0 36 
Total lease financing28 107 134 72 49 187 0 0 577 
International
Pass (a)137 155 159 85 10 66 316 0 928 
Criticized (c)0 14 8 17 4 8 11 0 62 
Total international137 169 167 102 14 74 327 0 990 
Total business loans2,272 8,135 5,594 4,155 2,767 5,058 18,691 18 46,690 
Retail loans:
Residential mortgage
Pass (a)97 631 213 108 162 555 0 0 1,766 
Criticized (c)2 1 2 2 7 19 0 0 33 
Total residential mortgage99 632 215 110 169 574 0 0 1,799 
Consumer:
Home equity
Pass (a)0 0 0 0 0 16 1,474 58 1,548 
Criticized (c)0 0 0 0 0 0 16 6 22 
Total home equity0 0 0 0 0 16 1,490 64 1,570 
Other consumer
Pass (a)15 107 19 12 2 36 316 0 507 
Criticized (c)0 0 0 1 0 7 8 0 16 
Total other consumer15 107 19 13 2 43 324 0 523 
Total consumer15 107 19 13 2 59 1,814 64 2,093 
Total retail loans114 739 234 123 171 633 1,814 64 3,892 
Total loans$2,386 $8,874 $5,828 $4,278 $2,938 $5,691 $20,505 $82 $50,582 
Table continues on the following page.

1513
Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

December 31, 2020
Vintage Year
20202019201820172016PriorRevolversRevolvers Converted to TermTotal
Business loans:
Commercial:
Pass (a)$5,991 (b)$2,316 $1,563 $1,051 $429 $755 $18,416 $17 $30,538 
Criticized (c)30 281 191 116 64 166 1,365 2 2,215 
Total commercial6,021 2,597 1,754 1,167 493 921 19,781 19 32,753 
Real estate construction:
Pass (a)433 1,080 1,244 631 335 141 171 0 4,035 
Criticized (c)3 28 5 8 0 1 2 0 47 
Total real estate construction436 1,108 1,249 639 335 142 173 0 4,082 
Commercial mortgage:
Pass (a)2,053 1,559 1,146 1,120 818 2,272 431 0 9,399 
Criticized (c)47 130 42 45 41 193 15 0 513 
Total commercial mortgage2,100 1,689 1,188 1,165 859 2,465 446 0 9,912 
Lease financing
Pass (a)109 122 71 50 14 201 0 0 567 
Criticized (c)2 17 5 2 1 0 0 0 27 
Total lease financing111 139 76 52 15 201 0 0 594 
International
Pass (a)274 161 103 11 3 64 245 0 861 
Criticized (c)13 8 18 4 7 2 13 0 65 
Total international287 169 121 15 10 66 258 0 926 
Total business loans8,955 5,702 4,388 3,038 1,712 3,795 20,658 19 48,267 
Retail loans:
Residential mortgage
Pass (a)639 230 119 197 196 398 0 0 1,779 
Criticized (c)7 2 2 6 2 32 0 0 51 
Total residential mortgage646 232 121 203 198 430 0 0 1,830 
Consumer:
Home equity
Pass (a)0 0 0 0 0 15 1,489 63 1,567 
Criticized (c)0 0 0 0 0 1 13 7 21 
Total home equity0 0 0 0 0 16 1,502 70 1,588 
Other consumer
Pass (a)113 23 12 2 3 41 404 0 598 
Criticized (c)0 0 2 0 0 0 6 0 8 
Total other consumer113 23 14 2 3 41 410 0 606 
Total consumer113 23 14 2 3 57 1,912 70 2,194 
Total retail loans759 255 135 205 201 487 1,912 70 4,024 
Total loans$9,714 $5,957 $4,523 $3,243 $1,913 $4,282 $22,570 $89 $52,291 
(a)Includes all loans not included in the categories of special mention, substandard or nonaccrual.

March 31, 2020
December 31, 2019

Vintage Year









(in millions)2020
2019
2018
2017
2016
Prior
Revolvers
Revolvers Converted to Term
Total
Total
Retail loans:


















Residential mortgage




























Pass (a)136

260

170

340

285

606

—

—

1,797

1,823
Special Mention (b)—

—

4

—

—

—

—

—

4

2
Nonaccrual (d)—

—

1

1

2

16

—

—

20

20
Total residential mortgage136

260

175

341

287

622

—

—

1,821

1,845
Consumer:




















Home equity




























Pass (a)—

—

—

—

—

21

1,586

90

1,697

1,682
Special Mention (b)—

—

—

—

—

—

1

—

1

1
Substandard (c)—

—

—

—

—

—

4

3

7

11
Nonaccrual (d)—

—

—

—

—

1

15

6

22

17
Total home equity—

—

—

—

—

22

1,606

99

1,727

1,711
Other consumer




























Pass (a)6

89

28

10

11

64

373

—

581

722
Special Mention (b)—

—

1

—

—

—

6

—

7

6
Substandard (c)—

—

—

—

—

—

—

—

—

1
Total other consumer6

89

29

10

11

64

379

—

588

729
Total consumer6

89

29

10

11

86

1,985

99

2,315

2,440
Total retail loans142

349

204

351

298

708

1,985

99

4,136

4,285
Total loans$1,637

$6,274

$5,163

$4,111

$2,591

$5,753

$27,814

$115

$53,458

$50,369
(b)Includes Small Business Administration Paycheck Protection Program (PPP) loans of $925 million and $2.9 billion in 2021 and 2020, respectively, at March 31, 2021, and PPP loans of $3.5 billion in 2020 at December 31, 2020.
(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 page F-51 in the Corporation's 2019 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.
(c)Includes loans with an internal rating of special mention, substandard loans for which the accrual of interest has not been discontinued and nonaccrual loans. Special mention loans 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. Accruing substandard loans 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 are also distinguished by the distinct possibility of loss in the future if these weaknesses are not corrected. 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 page F-59 in the Corporation's 2020 Annual Report. These categories are generally consistent with the "special mention" and "substandard" categories as defined by regulatory authorities. A minority of nonaccrual loans are consistent with the "doubtful" category.

Loan interest receivable totaled $161$142 million and $172$141 million at March 31, 20202021 and December 31, 2019,2020, respectively, and was included in accrued income and other assets on the Consolidated Balance Sheets.
Substantially all individually evaluated loans are collateral-dependent and, at March 31, 2020, consisted primarily of commercial and commercial mortgage loans. Collateral-dependent commercial loans were secured by oil and gas assets, accounts receivable, inventory and equipment, and collateral-dependent commercial mortgage loans were secured by commercial real estate assets. The most significant change in collateral values during the first quarter of 2020 was a decrease in the value of oil and gas assets related to supply/demand imbalances in the energy market.


14











16
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

Allowance for Credit Losses
The following table details the changes in the allowance for loancredit losses.
 20212020
(in millions)Business LoansRetail LoansTotalBusiness LoansRetail LoansTotal
Three Months Ended March 31
Balance at beginning of period:
Allowance for loan losses$895 $53 $948 $601 $36 $637 
Allowance for credit losses on lending-related commitments35 9 44 28 3 31 
Allowance for credit losses930 62 992 629 39 668 
Cumulative effect of change in accounting principle0 0 0 (42)25 (17)
Loan charge-offs(15)(1)(16)(87)(2)(89)
Recoveries on loans previously charged-off12 1 13 5 0 5 
Net loan charge-offs(3)0 (3)(82)(2)(84)
Provision for credit losses:
Provision for loan losses(183)15 (168)384 (4)380 
Provision for credit losses on lending-related commitments(13)(1)(14)24 7 31 
Provision for credit losses(196)14 (182)408 3 411 
Balance at end of period:
Allowance for loan losses709 68 777 861 55 916 
Allowance for credit losses on lending-related commitments22 8 30 52 10 62 
Allowance for credit losses$731 $76 $807 $913 $65 $978 
Allowance for loan losses as a percentage of total loans1.52 %1.74 %1.54 %1.75 %1.35 %1.71 %
Allowance for loan losses as a percentage of total loans excluding PPP loans1.65 n/a1.66 n/an/an/a
Allowance for credit losses as a percentage of total loans1.57 1.94 1.59 1.85 1.57 1.83 
Allowance for credit losses as a percentage of total loans excluding PPP loans1.70 n/a1.72 n/an/an/a
 2020 2019
(in millions)Business Loans Retail Loans Total Business Loans Retail Loans Total
            
Three Months Ended March 31           
Balance at beginning of period$601
 $36
 $637
 $627
 $44
 $671
Cumulative effect of change in accounting principle(42) 25
 (17) —
 —
 —
            
Loan charge-offs(87) (2) (89) (19) (1) (20)
Recoveries on loans previously charged-off5
 —
 5
 8
 1
 9
Net loan charge-offs(82) (2) (84) (11) —
 (11)
Provision for loan losses384
 (4) 380
 (8) (5) (13)
Balance at end of period$861
 $55
 $916
 $608
 $39
 $647
            
As a percentage of total loans1.75% 1.35% 1.71% 1.33% 0.88% 1.29%
n/a - not applicable

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.15
 Three Months Ended March 31,
(in millions)2020 2019
Balance at beginning of period$31
 $30
Provision for credit losses on lending-related commitments31
 —
Balance at end of period$62
 $30



17
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

Nonaccrual Loans
The following table presents additional information regarding nonaccrual loans. NaN interest income was recognized on nonaccrual loans for the three monthsthree-month periods ended March 31, 20202021 and 2019, respectively.2020.
(in millions)Nonaccrual
Loans with
No Related
Allowance		Nonaccrual
Loans with
Related
Allowance		Total
Nonaccrual
Loans
March 31, 2021
Business loans:
Commercial$50 $180 $230 
Real estate construction:
Other business lines (a)0 1 1 
Commercial mortgage:
Commercial Real Estate business line (b)1 2 3 
Other business lines (a)7 24 31 
Total commercial mortgage8 26 34 
Lease financing0 1 1 
Total business loans58 208 266 
Retail loans:
Residential mortgage33 0 33 
Consumer:
Home equity15 0 15 
Total retail loans48 0 48 
Total nonaccrual loans$106 $208 $314 
December 31, 2020
Business loans:
Commercial$57 $195 $252 
Real estate construction:
Other business lines (a)0 1 1 
Commercial mortgage:
Commercial Real Estate business line (b)1 2 3 
Other business lines (a)5 21 26 
Total commercial mortgage6 23 29 
Lease financing0 1 1 
Total business loans63 220 283 
Retail loans:
Residential mortgage47 0 47 
Consumer:
Home equity17 0 17 
Total retail loans64 0 64 
Total nonaccrual loans$127 $220 $347 
(in millions)
Nonaccrual
Loans with
No Related
Allowance
 
Nonaccrual
Loans with
Related
Allowance
 
Total
Nonaccrual
Loans
March 31, 2020     
Business loans:     
Commercial$25
 $148
 $173
Commercial mortgage:     
Commercial Real Estate business line (a)2
 1
 3
Other business lines (b)3
 13
 16
Total commercial mortgage5
 14
 19
Lease financing—
 1
 1
Total business loans30
 163
 193
Retail loans:     
Residential mortgage20
 —
 20
Consumer:     
Home equity22
 —
 22
Total retail loans42
 —
 42
Total nonaccrual loans$72
 $163
 $235
December 31, 2019     
Business loans:     
Commercial$29
 $119
 $148
Commercial mortgage:     
Commercial Real Estate business line (a)2
 —
 2
Other business lines (b)1
 11
 12
Total commercial mortgage3
 11
 14
Total business loans32
 130
 162
Retail loans:     
Residential mortgage20
 —
 20
Consumer:     
Home equity17
 —
 17
Total retail loans37
 —
 37
Total nonaccrual loans$69
 $130
 $199
(a)Primarily loans secured by owner-occupied real estate.
(a)Primarily loans to real estate developers.
(b)Primarily loans secured by owner-occupied real estate.
(b)Primarily loans to real estate developers.

Foreclosed Properties
Foreclosed properties totaled $11$8 million at both March 31, 20202021 and December 31, 2019.2020. There were 0 retail loans secured by residential real estate properties in process of foreclosure included in nonaccrual loans at March 31, 20202021 and December 31, 2019.

2020.

1816
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

Troubled Debt Restructurings
The following table details the amortized cost basis at March 31, 20202021 and 20192020 of loans considered to be troubled debt restructurings (TDRs)TDRs that were restructured during the three-month periods ended March 31, 20202021 and 2019,2020, by type of modification. In cases of loans with more than one type of modification, the loans were categorized based on the most significant modification.
Principal Deferrals (a)
(in millions)20212020
Three Months Ended March 31,
Commercial$0 $22 
Commercial mortgage:
Other business lines (b)0 2 
Total loans$0 $24 
 Principal Deferrals (a)
(in millions)2020 2019
Three Months Ended March 31,   
Business loans:   
Commercial$22
 $12
Commercial mortgage:   
Other business lines (b)2
 1
Total loans$24
 $13
(a)Primarily represents loan balances where terms were extended by more than an insignificant time period, typically more than 180 days, at or above contractual interest rates. Also includes commercial loans restructured in bankruptcy. In accordance with the provisions of the CARES Act, balances exclude $71 million, primarily retail loans, with terms extended by more than an insignificant time period.
(a)Primarily represents loan balances where terms were extended by more than an insignificant time period, typically more than 180 days, at or above contractual interest rates. Also includes commercial loans restructured in bankruptcy.
(b)Primarily loans secured by owner-occupied real estate.
(b)Primarily loans secured by owner-occupied real estate.
The Corporation charges interest on principal balances outstanding during deferral periods. Additionally, none of the modifications involved forgiveness of principal. At both March 31, 2020 and December 31, 2019,There were 0 commitments to lend additional funds to borrowers whose terms have been modified in TDRs totaled $3 million.at March 31, 2021 and December 31, 2020. 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 amortized cost basis at March 31, 2020 and 2019 of loans modified by principal deferral during the twelve-month periods ended March 31, 2020 and 2019.
 Principal Deferrals
(in millions)2020 2019
March 31   
Business loans:   
Commercial$33
 $26
Commercial mortgage:   
Other business lines (a)2
 2
Total business loans35
 28
Retail loans:   
Consumer:   
Home equity (b)—
 1
Total loans$35
 $29
(a)Primarily loans secured by owner-occupied real estate.
(b)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, 2020 and 2019, loans with a carrying value of $1 million and $4 million, respectively, were modified by interest rate reduction (reduced-rate loans).
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, a subsequent payment default is defined in terms of delinquency, when a principal or interest payment is 90 days past due. SubsequentOf the TDRs modified during the twelve-month periods ended March 31, 2021 and 2020, there were 0 subsequent defaults of principal deferrals totaled $10 millionor interest rate reductions in the three-month period ended March 31, 2020,2021, compared to none$10 million of principal deferrals and 0 interest rate reductions in the comparable period in 2019. There were 0 subsequent defaults of interest rate reductions during either of the three-month periods ended March 31, 2020 and 2019.2020.

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.


19
Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

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 credit risk. Master netting arrangements effectively reduce credit riskvaluation adjustments 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, 2020,2021, counterparties with bilateral

17
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
collateral agreements deposited $427$11 million of cash with the Corporation to secure the fair value of contracts in an unrealized gain position, and the Corporation had pledged $59$29 million of marketable investment securities and posted $26$256 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 0 derivative instruments with credit-risk-related contingent features that were in a liability position at March 31, 2020.2021.
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 taking offsetting positions 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.





2018
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, 20202021 and December 31, 20192020.
 March 31, 2021December 31, 2020
  Fair Value Fair Value
(in millions)Notional/
Contract
Amount (a)		Gross Derivative AssetsGross Derivative LiabilitiesNotional/
Contract
Amount (a)		Gross Derivative AssetsGross Derivative Liabilities
Risk management purposes
Derivatives designated as hedging instruments
Interest rate contracts:
Swaps - fair value - receive fixed/pay floating$2,650 $0 $0 $2,650 $0 $0 
Swaps - cash flow - receive fixed/pay floating5,550 0 0 5,550 0 0 
Derivatives used as economic hedges
Foreign exchange contracts:
Spot, forwards and swaps390 1 1 442 1 4 
Total risk management purposes8,590 1 1 8,642 1 4 
Customer-initiated and other activities
Interest rate contracts:
Caps and floors written909 0 2 869 0 0 
Caps and floors purchased909 2 0 869 0 0 
Swaps19,693 338 63 19,783 531 61 
Total interest rate contracts21,511 340 65 21,521 531 61 
Energy contracts:
Caps and floors written665 1 60 503 1 33 
Caps and floors purchased665 60 1 503 33 1 
Swaps2,873 208 204 2,115 117 115 
Total energy contracts4,203 269 265 3,121 151 149 
Foreign exchange contracts:
Spot, forwards, options and swaps1,429 11 9 1,901 17 15 
Total customer-initiated and other activities27,143 620 339 26,543 699 225 
Total gross derivatives$35,733 $621 $340 $35,185 $700 $229 
Amounts offset in the Consolidated Balance Sheets:
Netting adjustment - Offsetting derivative assets/liabilities(59)(59)(83)(83)
Netting adjustment - Cash collateral received/posted(2)(227)(17)(48)
Net derivatives included in the Consolidated Balance Sheets (b)560 54 600 98 
Amounts not offset in the Consolidated Balance Sheets:
Marketable securities pledged under bilateral collateral agreements0 (26)0 (42)
Net derivatives after deducting amounts not offset in the Consolidated Balance Sheets$560 $28 $600 $56 
(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 table excludes commitmentsfair value of net derivative assets included credit valuation adjustments for counterparty credit risk of $16 million and warrants accounted for as derivatives.$27 million at March 31, 2021 and December 31, 2020, respectively.

 March 31, 2020 December 31, 2019
   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$3,325
 $—
 $—
 $3,325
 $—
 $—
Swaps - cash flow - receive fixed/pay floating5,550
 —
 —
 4,550
 —
 —
Derivatives used as economic hedges           
Foreign exchange contracts:           
Spot, forwards and swaps366
 3
 2
 330
 —
 2
Total risk management purposes9,241
 3
 2
 8,205
 —
 2
Customer-initiated and other activities           
Interest rate contracts:           
Caps and floors written681
 —
 —
 671
 —
 —
Caps and floors purchased681
 —
 —
 671
 —
 —
Swaps19,754
 605
 70
 16,485
 211
 39
Total interest rate contracts21,116
 605
 70
 17,827
 211
 39
Energy contracts:           
Caps and floors written439
 1
 76
 477
 —
 23
Caps and floors purchased439
 76
 1
 477
 23
 —
Swaps1,966
 382
 377
 2,135
 73
 69
Total energy contracts2,844
 459
 454
 3,089
 96
 92
Foreign exchange contracts:           
Spot, forwards, options and swaps1,531
 31
 25
 1,013
 10
 8
Total customer-initiated and other activities25,491
 1,095
 549
 21,929
 317
 139
Total gross derivatives$34,732
 $1,098
 $551
 $30,134
 $317
 $141
Amounts offset in the Consolidated Balance Sheets:           
Netting adjustment - Offsetting derivative assets/liabilities  (55) (55)   (63) (63)
Netting adjustment - Cash collateral received/posted  (424) (23)   (11) (12)
Net derivatives included in the Consolidated Balance Sheets (b)
 619
 473
 


243
 66
Amounts not offset in the Consolidated Balance Sheets:           
Marketable securities pledged under bilateral collateral agreements  —
 (54)   —
 (21)
Net derivatives after deducting amounts not offset in the Consolidated Balance Sheets

 $619
 $419
 

 $243
 $45
19
(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 $22 million and $9 million at March 31, 2020 and December 31, 2019, respectively.


21
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 convertinginclude cash flow hedging strategies that convert variable-rate loans to fixed rates and fair value hedging strategies that convert fixed-rate long-term debt to variable ratesrates. Interest and variable-ratefees on loans to fixed rates.included $24 million and $3 million of cash flow hedge income for the three-month periods ended March 31, 2021 and 2020, respectively.
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)20212020
Total interest on medium- and long-term debt (a)$9 $40 
Fair value hedging relationships:
Interest rate contracts:
Hedged items25 30 
Derivatives designated as hedging instruments(17)(6)
 Interest on Medium- and Long-Term Debt
 Three Months Ended March 31,
(in millions)20202019
Total interest on medium-and long-term debt (a)$40
$51
   
Fair value hedging relationships:  
Interest rate contracts:  
Hedged items30
26
Derivatives designated as hedging instruments(6)1
(a) Includes the effects of hedging.
For information on accumulated net gains on cash flow hedges, refer to Note 8.
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, 20202021 and December 31, 20192020.
.

Cash flow swaps - receive fixed/pay floating rate on variable-rate loans:
loans
(dollar amounts in millions)March 31, 2020 December 31, 2019(dollar amounts in millions)March 31, 2021December 31, 2020
Derivative Notional Amount$5,550
 $4,550
Weighted Average:   
Derivative notional amountDerivative notional amount$5,550 $5,550 
Weighted average:Weighted average:
Remaining maturity (in years)3.0
 3.0
 Remaining maturity (in years)2.0 2.3 
Receive rate1.87% 1.94% Receive rate1.87 %1.87 %
Pay rate (a)1.58
 1.71
 Pay rate (a)0.12 0.15 
(a)Variable rates paid on receive fixed swaps designated as cash flow hedges are based on one-month LIBOR rates in effect at March 31, 2020 and December 31, 2019.
(a)Variable rates paid on receive fixed swaps designated as cash flow hedges are based on one-month LIBOR rates in effect at March 31, 2021 and December 31, 2020.

Fair value swaps - receive fixed/pay floating rate on medium- and long-term debt:debt
(dollar amounts in millions)March 31, 2021December 31, 2020
Derivative notional amount$2,650 $2,650 
Carrying value of hedged items (a)2,852 2,928 
Weighted average:
   Remaining maturity (in years)4.4 4.6 
   Receive rate3.68 %3.68 %
   Pay rate (b)1.10 1.16 
(dollar amounts in millions)March 31, 2020 December 31, 2019
Derivative Notional Amount$3,325
 $3,325
Carrying value of hedged items (a)3,634
 3,469
Weighted Average:   
   Remaining maturity (in years)4.3
 4.6
   Receive rate3.44% 3.44%
   Pay rate (b)2.32
 2.80
(a)Included $202 million and $279 million of cumulative hedging adjustments at March 31, 2021 and December 31, 2020, respectively, which included $5 million and $6 million, respectively, of hedging adjustment on a discontinued hedging relationship.
(a)Included $310 million and $146 million of cumulative hedging adjustments at March 31, 2020 and December 31, 2019, respectively, which included $6 million and $7 million, respectively, of hedging adjustment on a discontinued hedging relationship.
(b)
(b)Variable rates paid on receive fixed swaps designated as fair value hedges are based on one- and six-month LIBOR rates in effect at March 31, 2020 and December 31, 2019.
Foreign exchange rate risk arises from changes in the value of certain assetseffect at March 31, 2021 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.December 31, 2020.
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

2220
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

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 0 netdid not recognize any gains or losses in other noninterest income in the Consolidated Statements of Comprehensive Income for both the three-month periods ended March 31, 20202021 and 2019.2020.
Fair values of customer-initiated and other derivative instruments represent the net unrealized gains or losses on such contracts and are recorded inon the Consolidated Balance Sheets. Changes in fair value are recognized inon the Consolidated Statements of Comprehensive Income. The net gains recognized in income on customer-initiated derivative instruments, net of the impact of offsetting positions included in derivative income, were as follows.follows:
 Three Months Ended March 31,Three Months Ended March 31,
(in millions) Location of Gain2020 2019(in millions)20212020
Interest rate contracts Other noninterest income$8
 $6
Interest rate contracts$15 $8 
Energy contracts Other noninterest income1
 1
Energy contracts4 1 
Foreign exchange contracts Foreign exchange income11
 11
Foreign exchange contracts11 11 
Total  $20
 $18
Total derivative incomeTotal derivative income$30 $20 
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, 2020 December 31, 2019
Unused commitments to extend credit:   
Commercial and other$21,456
 $23,681
Bankcard, revolving check credit and home equity loan commitments3,170
 3,180
Total unused commitments to extend credit$24,626
 $26,861
Standby letters of credit$3,208
 $3,320
Commercial letters of credit35
 18

(in millions)March 31, 2021December 31, 2020
Unused commitments to extend credit:
Commercial and other$24,598 $23,443 
Bankcard, revolving check credit and home equity loan commitments3,322 3,297 
Total unused commitments to extend credit$27,920 $26,740 
Standby letters of credit$3,278 $3,273 
Commercial letters of credit40 30 
The Corporation maintains an allowance to cover current expected credit losses oninherent 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 $62$30 million and $31$44 million at March 31, 20202021 and December 31, 2019,2020, respectively.
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 $51$25 million at March 31, 20202021 and $25$37 million at December 31, 20192020 for current expected credit losses oninherent 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 $160 million and $161 million, respectively, of the $3.2 billion andThere were $3.3 billion standby and commercial letters of credit outstanding at both March 31, 20202021 and December 31, 2019,2020, of which these risk participations covered $149 million and $150 million, 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$25 million at March 31, 2020,2021, including $23$20 million in deferred fees and $10$5 million in the allowance for credit losses on lending-related commitments. At December 31, 2019,2020, the comparable amounts were $32$31 million, $26$24 million and $6$7 million, respectively.


23
Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

The following table presents a summary of criticized standby and commercial letters of credit at March 31, 20202021 and December 31, 2019.2020. The Corporation's criticized list is generally consistent with the Special Mention, Substandard and

21
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
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.
(dollar amounts in millions)March 31, 2020 December 31, 2019(dollar amounts in millions)March 31, 2021December 31, 2020
Total criticized standby and commercial letters of credit$50
 $44
Total criticized standby and commercial letters of credit$54 $73 
As a percentage of total outstanding standby and commercial letters of credit1.5% 1.3%As a percentage of total outstanding standby and commercial letters of credit1.6 %2.2 %
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 agreements 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 as if the Corporation had entered into the derivative instruments directly with the borrowers. The notional amount of such credit risk participation agreements reflects the pro-rata share of the derivative instrument, consistent with the Corporation'sits share of the related participated loan. As of March 31, 20202021 and December 31, 2019,2020, the total notional amount of the credit risk participation agreements was approximately $807 million$1.0 billion and $786 million,$1.1 billion, respectively, and the fair value was insignificant for both periods.$1 million at March 31, 2021 and $3 million at December 31, 2020. 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 $50$40 million and $20$62 million at March 31, 20202021 and December 31, 2019,2020, 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, 2020,2021, the weighted average remaining maturity of outstanding credit risk participation agreements was 3.44.4 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. 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 LIHTC entities at March 31, 2020 was limited to $453 million. There was no exposure to loss as a result of the Corporation's involvement inand other tax credit entities at March 31, 2020.2021 was limited to $458 million and $12 million, respectively.
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 ($167($173 million at March 31, 2020)2021). 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 0 financial or other support that was not contractually required to any of the above VIEs during the three months ended March 31, 20202021 and 2020.
2019.

22

24
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

The following table summarizes the impact of these tax credit entities on the Corporation’s Consolidated Statements of Comprehensive Income.
 Three Months Ended March 31,
(in millions)2020 2019
Other noninterest income:   
Amortization of other tax credit investments$—
 $1
Provision for income taxes:   
Amortization of LIHTC investments17
 15
Low income housing tax credits(16) (15)
Other tax benefits related to tax credit entities(4) (3)
Total provision for income taxes$(3) $(3)

Three Months Ended March 31,
(in millions)20212020
Provision for income taxes:
Amortization of LIHTC investments$17 $17 
Low income housing tax credits(16)(16)
Other tax benefits related to tax credit entities(4)(4)
Total provision for income taxes$(3)$(3)
For further information on the Corporation’s consolidation policy, see Note 1 to the consolidated financial statements in the Corporation's 20192020 Annual Report.

NOTE 7 - MEDIUM- AND LONG-TERM DEBT
Medium- and long-term debt is summarized as follows:
(in millions)March 31, 2021December 31, 2020
Parent company
Subordinated notes:
3.80% subordinated notes due 2026 (a)$270 $280 
Medium- and long-term notes:
3.70% notes due 2023 (a)898 905 
4.00% notes due 2029 (a)597 633 
Total medium- and long-term notes1,495 1,538 
Total parent company1,765 1,818 
Subsidiaries
Subordinated notes:
4.00% subordinated notes due 2025 (a)371 380 
7.875% subordinated notes due 2026 (a)199 207 
Total subordinated notes570 587 
Medium- and long-term notes:
2.50% notes due 2024 (a)517 523 
Total medium- and long-term notes517 523 
FHLB advances:
Floating-rate based on FHLB auction rate due 20260 2,800 
Total FHLB advances0 2,800 
Total subsidiaries1,087 3,910 
Total medium- and long-term debt$2,852 $5,728 
(in millions)March 31, 2020 December 31, 2019
Parent company   
Subordinated notes:   
3.80% subordinated notes due 2026 (a)$282
 $264
Medium- and long-term notes:   
3.70% notes due 2023 (a)917
 884
4.00% notes due 2029 (a)642
 587
Total medium- and long-term notes1,559
 1,471
Total parent company1,841
 1,735
Subsidiaries   
Subordinated notes:   
4.00% subordinated notes due 2025 (a)381
 360
7.875% subordinated notes due 2026 (a)213
 202
Total subordinated notes594
 562
Medium- and long-term notes:   
2.50% notes due 2020 (a) (b)675
 674
2.50% notes due 2024 (a)524
 498
Total medium- and long-term notes1,199
 1,172
Federal Home Loan Bank (FHLB) advances:   
Floating-rate based on FHLB auction rate due 20262,800
 2,800
Floating-rate based on FHLB auction rate due 20281,000
 1,000
Total FHLB advances3,800
 3,800
Total subsidiaries5,593
 5,534
Total medium- and long-term debt$7,434
 $7,269
(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.
(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.
(b)Due on June 2, 2020.
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- andshort-and long-term funding to its members through advances collateralized by real estate-related assets. The interest rates on the FHLB advances resets between four and eight weeks, based on the FHLB auction rate. At March 31, 2020, the weighted-average rate on the FHLB advances was 0.92%. Each note may be prepaid in full, without penalty, at each scheduled reset date. The Bank held no outstanding long-term advances at March 31, 2021. Borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. At March 31, 2020, $17.62021, $18.6 billion of real estate-related loans and $5.5$4.0 billion of investment securities were pledged to the FHLB as collateral for outstanding short- and long-term advances of $750 million and $3.8 billion, respectively, with an additional capacity for potential future borrowings of approximately $9.9$13.9 billion.


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Table of Contents
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 $11$9 million at March 31, 20202021 and $12$10 million at December 31, 2019.2020.


23
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
NOTE 8 - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (LOSS)
The following table presents a reconciliation of the changes in the components of accumulated other comprehensive (loss) income (loss) and details the components of other comprehensive (loss) income (loss) for the three months ended March 31, 20202021 and 2019,2020, including the amount of income tax expense (benefit) allocated to each component of other comprehensive (loss) income.
Three Months Ended March 31,
(in millions)20212020
Accumulated net unrealized gains on investment securities:
Balance at beginning of period, net of tax$211 $65 
Net unrealized holding (losses) gains arising during the period(183)323 
Less: (Benefit) provision for income taxes(43)76 
Change in net unrealized gains on investment securities, net of tax(140)247 
Balance at end of period, net of tax$71 $312 
Accumulated net gains on cash flow hedges:
Balance at beginning of period, net of tax$155 $34 
Net cash flow hedge (losses) gains arising during the period(18)205 
Less: (Benefit) provision for income taxes(4)48 
Change in net cash flow hedge (losses) gains arising during the period, net of tax(14)157 
Less:
Net cash flow hedge gains included in interest and fees on loans24 3 
Less: Provision for income taxes6 1 
Reclassification adjustment for net cash flow hedge gains included in net income, net of tax18 2 
Change in net cash flow hedge (losses) gains, net of tax(32)155 
Balance at end of period, net of tax (a)$123 $189 
Accumulated defined benefit pension and other postretirement plans adjustment:
Balance at beginning of period, net of tax (b)$(302)$(415)
Actuarial loss arising during the period (b)0 (3)
Less: Benefit for income taxes (b)0 (1)
Net defined benefit pension and other postretirement plans adjustment arising during the period, net of tax (b)0 (2)
Amounts recognized in other noninterest expenses:
Amortization of actuarial net loss (b)10 11 
Amortization of prior service credit(6)(7)
Total amounts recognized in other noninterest expenses (b)4 4 
Less: Provision for income taxes (b)1 1 
Adjustment for amounts recognized as components of net periodic benefit cost during the period, net of tax (b)3 3 
Change in defined benefit pension and other postretirement plans adjustment, net of tax (b)3 1 
Balance at end of period, net of tax (b)$(299)$(414)
Total accumulated other comprehensive (loss) income at end of period, net of tax (b)$(105)$87 
(a)The Corporation expects to reclassify $67 million of gains, net of tax, from accumulated other comprehensive income (loss).to earnings over the next twelve months if interest yield curves and notional amounts remain at March 31, 2021 levels.
(b)Balances at beginning of period, net of tax and changes for the three months ended March 31, 2020 have been recast to reflect the retrospective application of the Corporation's election to change the accounting method for certain components of the qualified defined benefit pension plan as of January 1, 2021. Refer to Note 1 for further information.
 Three Months Ended March 31,
(in millions)2020 2019
Accumulated net unrealized gains (losses) on investment securities:   
Balance at beginning of period, net of tax$65
 $(138)
Net unrealized holding gains arising during the period323
 109
Less: Provision for income taxes76
 25
Net unrealized holding gains arising during the period, net of tax247
 84
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 on investment securities, net of tax247
 90
Balance at end of period, net of tax$312
 $(48)
Accumulated net gains on cash flow hedges:   
Balance at beginning of period, net of tax$34
 $—
Net cash flow hedge gains arising during the period205
 4
Less: Provision for income taxes48
 1
Change in net cash flow hedge gains arising during the period, net of tax157
 3
Less:   
Net cash flow hedge gains included in interest and fees on loans3
 —
Less: Provision for income taxes1
 —
Reclassification adjustment for net cash flow hedge gains included in net income, net of tax2
 —
Change in net cash flow hedge gains, net of tax155
 3
Balance at end of period, net of tax (a)$189
 $3
Accumulated defined benefit pension and other postretirement plans adjustment:   
Balance at beginning of period, net of tax$(334) $(471)
Amortization of actuarial net loss16
 11
Amortization of prior service credit(7) (7)
Amounts recognized in other noninterest expenses9
 4
Less: Provision for income taxes2
 1
Change in defined benefit pension and other postretirement plans adjustment, net of tax7
 3
Balance at end of period, net of tax$(327) $(468)
Total accumulated other comprehensive income (loss) at end of period, net of tax$174
 $(513)
24

(a)The Corporation expects to reclassify $66 million of net gains, net of tax, from accumulated other comprehensive income to earnings over the next twelve months if interest yield curves and notional amounts remain at March 31, 2020 levels.


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Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

NOTE 9 - NET INCOME (LOSS) INCOME PER COMMON SHARE
Basic and diluted net income (loss) income per common share are presented in the following table.
Three Months Ended March 31,
(in millions, except per share data)20212020
Basic and diluted
Net income (loss)$350 $(59)
Less:
Income allocated to participating securities1 0 
Preferred stock dividends6 0 
Net income (loss) attributable to common shares$343 $(59)
Basic average common shares140 141 
Basic net income (loss) per common share$2.46 $(0.42)
Basic average common shares140 141 
Dilutive common stock equivalents:
Net effect of the assumed exercise of stock awards1 0 
Diluted average common shares141 141 
Diluted net income (loss) per common share$2.43 $(0.42)
 Three Months Ended March 31,
(in millions, except per share data)2020 2019
Basic and diluted   
Net (loss) income$(65) $339
Less: Income allocated to participating securities—
 2
Net (loss) income attributable to common shares$(65) $337
Basic average common shares141
 158
Basic net (loss) income per common share$(0.46) $2.14
Basic average common shares141
 158
Dilutive common stock equivalents:   
Net effect of the assumed exercise of stock awards—
 2
Diluted average common shares141
 160
Diluted net (loss) income per common share$(0.46) $2.11
    
Average shares related to stock awards excluded from the calculation of diluted net (loss) income per share:   
Exercise price greater than average market price of common shares for the period1.2
 0.4
Anti-dilutive (a)2.6
 —
The following average shares related to outstanding options to purchase shares of common stock were not included in the computation of diluted net income (loss) per common share because the exercise price was greater than the average market price of common shares for the period.

Three Months Ended March 31,
(average outstanding options in thousands)20212020
Average outstanding options782 1,210 
Range of exercise prices67.53 - 95.2556.79 - 95.25
(a)Average exercise price less than average market price of common shares for period; however, anti-dilutive due to net loss during the period.

Due to the net loss attributable to common shares reported for the three months ended March 31, 2020, stock awards representing 2.6 million shares of common stock were excluded from the computation of diluted net loss per share, as their inclusion would have been anti-dilutive.
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Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

NOTE 10 - EMPLOYEE BENEFIT PLANS
Net periodic defined benefit cost (credit) is comprised of service cost and other components of net benefit cost (credit). Service cost is 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 20192020 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 PlanThree Months Ended March 31,
(in millions)20212020 (a)
Service cost$10 $8 
Other components of net benefit credit:
Interest cost15 18 
Expected return on plan assets(50)(46)
Amortization of prior service credit(5)(5)
Amortization of net loss7 9 
Total other components of net benefit credit(33)(24)
Net periodic defined benefit credit$(23)$(16)
Qualified Defined Benefit Pension PlanThree Months Ended March 31,
(in millions)2020 2019
Service cost$8
 $8
    
Other components of net benefit credit:   
Interest cost18
 20
Expected return on plan assets(43) (42)
Amortization of prior service credit(5) (5)
Amortization of net loss14
 9
Total other components of net benefit credit(16) (18)
Net periodic defined benefit credit$(8) $(10)
(a)Expected return on plan assets increased $3 million and amortization of net loss was reduced by $5 million to reflect the retrospective application of the Corporation's election to change the accounting method for certain components of the qualified defined benefit pension plan as of January 1, 2021, resulting in an increase of $8 million to total other components of net benefit credit. Refer to Note 1 for further information.
Non-Qualified Defined Benefit Pension PlanThree Months Ended March 31,
(in millions)20212020
Service cost$0 $1 
Other components of net benefit cost:
Interest cost2 2 
Amortization of prior service credit(1)(2)
Amortization of net loss3 2 
Total other components of net benefit cost4 2 
Net periodic defined benefit cost$4 $3 
Non-Qualified Defined Benefit Pension PlanThree Months Ended March 31,
(in millions)2020 2019
Service cost$1
 $1
    
Other components of net benefit cost:   
Interest cost2
 2
Amortization of prior service credit(2) (2)
Amortization of net loss2
 2
Total other components of net benefit cost2
 2
Net periodic defined benefit cost$3
 $3
Postretirement Benefit PlanThree Months Ended March 31,
(in millions)20212020
Other components of net benefit credit:
Expected return on plan assets$(1)$0 
Net periodic defined benefit credit$(1)$0 
Postretirement Benefit PlanThree Months Ended March 31,
(in millions)2020 2019
Other components of net benefit credit:   
Interest cost$—
 $1
Expected return on plan assets—
 (1)
Net periodic defined benefit credit$—
 $—

NOTE 11 - INCOME TAXES AND TAX-RELATED ITEMS
At March 31, 2020,2021, net unrecognized tax benefits were $19$20 million, compared to $17$19 million at December 31, 2019.2020. The Corporation anticipates that it is reasonably possible that final settlement of federal and state tax issues will not result in a change toin net unrecognized tax benefits of $6 million within the next twelve months. Included in accrued expenses and other liabilities on the Consolidated Balance Sheets was a liability for tax-related interest and penalties of $6 million and $8 million onat both March 31, 20202021 and December 31, 2019, respectively.2020.
Net deferred tax liabilitiesassets were $13$15 million at March 31, 2020,2021, compared to net deferred tax assets of $42$4 million at December 31, 2019,2020, primarily driven by increasesdecreases to deferred tax liabilities related to unrealized gainslosses on investment securities available-for-sale andas well as net hedging gains that were partially offset by increasesdecreases to deferred tax assets related to the allowance for loan losses and allowance for depreciation.increases to deferred tax liabilities related to defined benefit plans. These were partially offset by increases to deferred tax assets related to defined benefit plan components of OCI. Included in deferred tax assets at both March 31, 20202021 and December 31, 20192020 were $3 million of state net operating loss carryforwards, which expire between 20202021 and 2029.2030. The Corporation believes that it is more likely than not that 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, 20202021 and December 31, 2019.2020. The determination regarding valuation allowance was based on evidence of loss carryback capacity, projected future
26
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
reversals of existing taxable temporary differences to absorb the deferred tax assets and assumptions made regarding future events.
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

28
Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

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 that 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, 2019, Comerica2020, the Bank is appealing a wholly-owned subsidiary of the Corporation, was named in November 2011 as a third-party defendantcourt's decision in Butte Local Development v. Masters Group v. Comerica Bank(the case), for lender liability. The case was initially tried in January 2014, in the Montana Second District Judicial Court for Silver Bow County in Butte, Montana. On January 17, 2014, a jury found for Masters, resulting in an award against the Bank. On July 1, 2015, after an appeal filed by the Bank, the Montana Supreme Court reversed the judgment against the Bank and remanded the case for a new trial with instructions that Michigan contract law should apply and dismissing all other claims. In January 2017, the case was retried, without a jury, in the Second District Court, Silver Bow County, Montana. In November 2019, the court found the Bank breached its forbearance agreement. On January 17, 2020, the court conducted a hearing on the amount of costs and interest that Masters is entitled to recover. The court also heard argument on whether Masters is entitled to attorneys' fees, and if so how much. Its decision is pending. The Bank is considering its options, including additional appeals. Management believes that current reserves related to this case are adequate in the event of an adverse 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 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 $2 million and $1 million were included in other noninterest expenses on the Consolidated Statements of Comprehensive Income for both the three-month periods ended March 31, 20202021 and 2019,2020, respectively.
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 0 to approximately $45$94 million at March 31, 2020.2021. 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 that 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.

27
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
NOTE 13 - STRATEGIC LINES OF BUSINESS SEGMENT INFORMATIONAND MARKETS
The Corporation has strategically aligned its operations into 3 major business segments: the BusinessCommercial 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 3 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

29
Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

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, 2020.2021.
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 "Strategic Lines of Business and Markets" section of the financial review.
The BusinessCommercial 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. In addition, this business segment offers a subset of commercial products and services to micro-businesses whose primary contact is through the branch network.
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.
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 22 to the consolidated financial statements in the Corporation's 20192020 Annual Report.

3028
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

Business segment financial results are as follows:
Commercial
Bank		Retail
Bank		Wealth ManagementFinanceOtherTotal
(dollar amounts in millions)
Three Months Ended March 31, 2021
Earnings summary:
Net interest income (expense)$382 $133 $42 $(117)$3 $443 
Provision for credit losses(177)6 (12)0 1 (182)
Noninterest income159 28 67 12 4 270 
Noninterest expenses215 149 76 0 7 447 
Provision (benefit) for income taxes113 0 10 (25)0 98 
Net income (loss)$390 $6 $35 $(80)$(1)$350 
Net credit-related charge-offs$2 $1 $0 $0 $0 $3 
Selected average balances:
Assets$44,448 $3,463 $5,162 $16,959 $14,527 $84,559 
Loans42,904 2,620 5,059 0 6 50,589 
Deposits41,102 24,322 4,826 985 157 71,392 
Statistical data:
Return on average assets (a)3.56 %0.11 %2.72 %n/mn/m1.68 %
Efficiency ratio (b)39.66 91.68 69.84 n/mn/m62.55 
Three Months Ended March 31, 2020
Earnings summary:
Net interest income (expense)$380 $125 $41 $(44)$11 $513 
Provision for credit losses396 3 12 0 0 411 
Noninterest income127 28 70 14 (2)237 
Noninterest expenses (c)192 145 70 0 10 417 
(Benefit) provision for income taxes (c)(19)1 6 (8)1 (19)
Net (loss) income (c)$(62)$4 $23 $(22)$(2)$(59)
Net credit-related charge-offs$83 $1 $0 $0 $0 $84 
Selected average balances:
Assets$44,254 $2,864 $5,078 $14,285 $6,784 $73,265 
Loans42,593 2,075 4,936 0 0 49,604 
Deposits30,230 21,195 4,025 1,136 182 56,768 
Statistical data:
Return on average assets (a) (c)(0.56)%0.07 %1.81 %n/mn/m(0.32)%
Efficiency ratio (b) (c)37.95 94.07 62.68 n/mn/m55.58 
 Business
Bank		 Retail
Bank		 Wealth Management Finance Other Total
(dollar amounts in millions)     
Three Months Ended March 31, 2020           
Earnings summary:           
Net interest income (expense)$380
 $125
 $41
 $(44) $11
 $513
Provision for credit losses396
 3
 12
 —
 —
 411
Noninterest income127
 28
 70
 14
 (2) 237
Noninterest expenses194
 149
 72
 —
 10
 425
(Benefit) provision for income taxes(20) —
 6
 (8) 1
(a)(21)
Net (loss) income$(63) $1
 $21
 $(22) $(2) $(65)
Net credit-related charge-offs$83
 $1
 $—
 $—
 $—
 $84
            
Selected average balances:           
Assets$44,254
 $2,864
 $5,078
 $14,285
 $6,784
 $73,265
Loans42,593
 2,075
 4,936
 —
 —
 49,604
Deposits30,230
 21,195
 4,025
 1,136
 182
 56,768
            
Statistical data:           
Return on average assets (b)(0.58)% 0.03% 1.69% n/m
 n/m
 (0.35)%
Efficiency ratio (c)38.47
 96.03
 64.28
 n/m
 n/m
 56.57
            
Three Months Ended March 31, 2019           
Earnings summary:           
Net interest income (expense)$412
 $146
 $48
 $(15) $15
 $606
Provision for credit losses(6) (4) (5) —
 2
 (13)
Noninterest income136
 31
 64
 3
 4
 238
Noninterest expenses198
 145
 72
 —
 18
 433
Provision (benefit) for income taxes82
 8
 11
 (4) (12)(a)85
Net income (loss)$274
 $28
 $34
 $(8) $11
 $339
Net credit-related charge-offs (recoveries)$12
 $—
 $(1) $—
 $—
 $11
            
Selected average balances:           
Assets$43,909
 $2,812
 $5,174
 $13,585
 $4,291
 $69,771
Loans42,538
 2,103
 5,036
 —
 —
 49,677
Deposits28,463
 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)36.24
 81.34
 64.42
 n/m
 n/m
 50.81
(a)Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(a)
Included discrete tax benefits of $3 millionand$11 million for the three months ended March 31, 2020 and 2019, respectively.
(b)Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding net losses from securities and a derivative contract tied to the conversion rate of Visa Class B shares.
(c)See Defined Benefit Pension and Other Postretirement Costs in Note 1.
(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 net (losses) gains from securities and a derivative contract tied to the conversion rate of Visa Class B shares.
n/m – not meaningful
The Corporation operates in 3 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 3 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, 2020.2021.
A discussion of the financial results and the factors impacting performance can be found in the section entitled "Market Segments" in the "Strategic Lines of Business and Markets" section of the financial review.

3129
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

Market segment financial results are as follows:
MichiganCaliforniaTexasOther
Markets		Finance
& Other		Total
(dollar amounts in millions)
Three Months Ended March 31, 2021
Earnings summary:
Net interest income (expense)$154 $172 $114 $117 $(114)$443 
Provision for credit losses(28)(54)(86)(15)1 (182)
Noninterest income66 48 36 104 16 270 
Noninterest expenses135 104 88 113 7 447 
Provision (benefit) for income taxes22 40 31 30 (25)98 
Net income (loss)$91 $130 $117 $93 $(81)$350 
Net credit-related charge-offs$0 $1 $2 $0 $0 $3 
Selected average balances:
Assets$12,916 $18,143 $10,668 $11,348 $31,484 $84,559 
Loans12,247 17,946 10,161 10,231 4 50,589 
Deposits25,683 19,968 10,783 13,816 1,142 71,392 
Statistical data:
Return on average assets (a)1.40 %2.51 %3.88 %2.54 %n/m1.68 %
Efficiency ratio (b)60.86 47.09 58.85 51.18 n/m62.55 
Three Months Ended March 31, 2020
Earnings summary:
Net interest income (expense)$163 $176 $115 $92 $(33)$513 
Provision for credit losses24 46 290 51 0 411 
Noninterest income72 33 30 90 12 237 
Noninterest expenses (c)137 93 83 94 10 417 
Provision (benefit) for income taxes (c)16 17 (50)5 (7)(19)
Net income (loss) (c)$58 $53 $(178)$32 $(24)$(59)
Net credit-related charge-offs$3 $8 $70 $3 $0 $84 
Selected average balances:
Assets$12,895 $18,007 $11,154 $10,140 $21,069 $73,265 
Loans12,191 17,742 10,566 9,105 0 49,604 
Deposits20,748 16,627 9,204 8,871 1,318 56,768 
Statistical data:
Return on average assets (a) (c)1.10 %1.19 %(6.47)%1.27 %n/m(0.32)%
Efficiency ratio (b) (c)57.92 44.60 57.38 51.69 n/m55.58 
 Michigan California Texas Other
Markets		 Finance
& Other		 Total
(dollar amounts in millions)     
Three Months Ended March 31, 2020           
Earnings summary:           
Net interest income (expense)$163
 $182
 $115
 $86
 $(33) $513
Provision for credit losses24
 51
 290
 46
 —
 411
Noninterest income72
 36
 30
 87
 12
 237
Noninterest expenses140
 98
 84
 93
 10
 425
Provision (benefit) for income taxes15
 17
 (50) 4
 (7)(a)(21)
Net income (loss)$56
 $52
 $(179) $30
 $(24) $(65)
Net credit-related charge-offs$3
 $11
 $70
 $—
 $—
 $84
            
Selected average balances:           
Assets$12,899
 $18,377
 $11,154
 $9,766
 $21,069
 $73,265
Loans12,191
 18,027
 10,566
 8,820
 —
 49,604
Deposits20,748
 17,466
 9,204
 8,032
 1,318
 56,768
            
Statistical data:           
Return on average assets (b)1.05% 1.12% (6.45)% 1.24% n/m
 (0.35)%
Efficiency ratio (c)58.91
 44.99
 58.25
 53.76
 n/m
 56.57
            
Three Months Ended March 31, 2019           
Earnings summary:           
Net interest income$187
 $205
 $122
 $92
 $—
 $606
Provision for credit losses5
 (1) (11) (8) 2
 (13)
Noninterest income72
 40
 32
 87
 7
 238
Noninterest expenses139
 100
 84
 92
 18
 433
Provision (benefit) for income taxes26
 37
 19
 19
 (16)(a)85
Net income$89
 $109
 $62
 $76
 $3
 $339
Net credit-related charge-offs (recoveries)$4
 $(3) $13
 $(3) $—
 $11
            
Selected average balances:           
Assets$13,075
 $18,934
 $10,911
 $8,975
 $17,876
 $69,771
Loans12,557
 18,652
 10,262
 8,206
 —
 49,677
Deposits19,893
 16,238
 8,697
 7,906
 1,262
 53,996
            
Statistical data:           
Return on average assets (b)1.76% 2.33% 2.31 % 3.41% n/m
 1.97 %
Efficiency ratio (c)53.66
 40.91
 54.62
 51.28
 n/m
 50.81
(a)Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(a)
Included discrete tax benefits of $3 millionand$11 million for the three months ended March 31, 2020 and 2019, respectively.
(b)Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding net losses from securities and a derivative contract tied to the conversion rate of Visa Class B shares.
(c)See Defined Benefit Pension and Other Postretirement Costs in Note 1.
(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 net (losses) gains from securities and a derivative contract tied to the conversion rate of Visa Class B shares.
n/m – not meaningfulmeaningful.

32
30
Table of Contents
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.
Commercial
Bank		Retail
Bank		Wealth ManagementFinance & OtherTotal
(in millions)
Three Months Ended March 31, 2021
Revenue from contracts with customers:
Card fees$60 $10 $1 $0 $71 
Fiduciary income0 0 53 0 53 
Service charges on deposit accounts34 13 1 0 48 
Commercial loan servicing fees (a)4 0 0 0 4 
Brokerage fees0 0 4 0 4 
Other noninterest income (b)5 4 5 0 14 
Total revenue from contracts with customers103 27 64 0 194 
Other sources of noninterest income56 1 3 16 76 
Total noninterest income$159 $28 $67 $16 $270 
Three Months Ended March 31, 2020
Revenue from contracts with customers:
Card fees$49 $9 $1 $0 $59 
Fiduciary income0 0 54 0 54 
Service charges on deposit accounts32 16 1 0 49 
Commercial loan servicing fees (a)4 0 0 0 4 
Brokerage fees0 0 7 0 7 
Other noninterest income (b)4 3 5 0 12 
Total revenue from contracts with customers89 28 68 0 185 
Other sources of noninterest income38 0 2 12 52 
Total noninterest income$127 $28 $70 $12 $237 
 
Business
Bank
 
Retail
Bank
 Wealth Management Finance & Other Total
(in millions)
Three Months Ended March 31, 2020         
Revenue from contracts with customers:         
Card fees$49
 $9
 $1
 $—
 $59
Service charges on deposit accounts32
 16
 1
 —
 49
Fiduciary income—
 —
 54
 —
 54
Commercial loan servicing fees (a)4
 —
 —
 —
 4
Brokerage fees—
 —
 7
 —
 7
Other noninterest income (b)4
 3
 5
 —
 12
Total revenue from contracts with customers89
 28
 68
 —
 185
Other sources of noninterest income38
 —
 2
 12
 52
Total noninterest income$127
 $28
 $70
 $12
 $237
          
Three Months Ended March 31, 2019         
Revenue from contracts with customers:         
Card fees$53
 $9
 $1
 $—
 $63
Service charges on deposit accounts33
 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 customers92
 29
 63
 —
 184
Other sources of noninterest income44
 2
 1
 7
 54
Total noninterest income$136
 $31
 $64
 $7
 $238

(a)Included in commercial lending fees on the Consolidated Statements of Comprehensive Income.
(a)Included in commercial lending fees on the Consolidated Statements of Comprehensive Income.
(b)Excludes derivative, warrant and other miscellaneous income.
(b)Excludes derivative, warrant and other miscellaneous income.
Adjustments to revenue during the three-month periods ended March 31, 20202021 and 20192020 for refunds or credits relating to prior periods were not significant.
Revenue from contracts with customers did not generate significant contract assets and liabilities.

31
Table of Contents
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. In addition, the Corporation may make other written and oral communications from time to time that contain such statements. All statements regarding the Corporation's expected financial position, strategies and growth prospects and general economic conditions expected to exist in the future are forward-looking statements. The words, "anticipates," "believes," "contemplates," "feels," "expects," "estimates," "seeks," "strives," "plans," "intends," "outlook," "forecast," "position," "target," "mission," "assume," "achievable," "potential," "strategy," "goal," "aspiration," "opportunity," "initiative," "outcome," "continue," "remain," "maintain," "on track," "trend," "objective," "looks forward," "projects," "models," and variations of such words and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "might," "can," "may" or similar expressions, as they relate to the Corporation or its management, are intended to identify forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of the Corporation's management based on information known to the Corporation's management as of the date of this report and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of the Corporation's management for future or past operations, products or services and forecasts of the Corporation's revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries as well as estimates of credit trends and global stability. Such statements reflect the view of the Corporation's management as of this date with respect to future events and are subject to risks and uncertainties. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, the Corporation's actual results could differ materially from those discussed. Factors that could cause or contribute to such differences include credit risks (unfavorable developments concerning credit quality; declines or other changes in the businesses or industries of the Corporation's customers, in particular the energy industry; and changes in customer behavior); market risks (changes in monetary and fiscal policies; fluctuations in interest rates and their impact on deposit pricing; and transitions away from LIBOR towards new interest rate benchmarks); liquidity risks (the Corporation's ability to maintain adequate sources of funding and liquidity; reductions in the Corporation's credit rating; and the interdependence of financial service companies); technology risks (cybersecurity risks and heightened legislative and regulatory focus on cybersecurity and data privacy); operational risks (operational, systems or infrastructure failures; reliance on other companies to provide certain key components of business infrastructure; the impact of legal and regulatory proceedings or determinations; losses due to fraud; and controls and procedures failures); compliance risks (changes in regulation or oversight; the effects of stringent capital requirements; and the impacts of future legislative, administrative or judicial changes to tax regulations); financial reporting risks (changes in accounting standards and the critical nature of the Corporation's accounting policies); strategic risks (damage to the Corporation's reputation; the Corporation's ability to utilize technology to efficiently and effectively develop, market and deliver new products and services; competitive product and pricing pressures among financial institutions within the Corporation's markets; the implementation of the Corporation's strategies and business initiatives; management's ability to maintain and expand customer relationships; management's ability to retain key officers and employees; and any future strategic acquisitions or divestitures); and other general risks (changes(impacts from the COVID-19 global pandemic;changes in general economic, political or industry conditions; the effectiveness of methods of reducing risk exposures; the effects of catastrophic events; impacts fromchanges in accounting standards and the COVID-19 global pandemic;critical nature of the Corporation's accounting policies; and the volatility of the Corporation's stock price). The Corporation cautions that the foregoing list of factors is not all-inclusive. For discussion of factors that may cause actual results to differ from expectations, please refer to our filings with the Securities and Exchange Commission. In particular, please refer to “Item 1A. Risk Factors” beginning on page 1213 of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2019 and "Item 1A. Risk Factors" beginning on page 60 of the Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. Forward-looking statements speak only as of the date they are made. The Corporation does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. For any forward-looking statements made in this report or in any documents, the Corporation claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.


SERVING CUSTOMERS, COLLEAGUES AND COMMUNITIES DURING THE COVID-19 PANDEMIC
32
The COVID-19 outbreak has affected countless people world-wide and is having a destructive impact on the global economy. While the full effects
Table of the pandemic remain unknown, the Corporation is committed to supporting its customers, colleagues and communities during this difficult time. The Corporation is offering hardship relief assistance to customers, including the consideration of various loan payment deferral and fee waiver options, and encourages customers to reach out for assistance to support their individual circumstances. As a Small Business Administration preferred lender, the Corporation is well positioned to assist business customers in accessing funds available through the Paycheck Protection Program and other lending initiatives. Through April 24, 2020, the Corporation had funded approximately $1.8 billion of approved Paycheck Protection Program loans from the initial $349 billion allocation approved by Congress, and stands ready to fund additional loan applications to the extent approved by the Small Business Administration. The Corporation has continued to serve customers at banking center drive-throughs and offer lobby hours by appointment while adhering to social distancing standards.Contents
In response to the pandemic, the Corporation activated its disaster recovery protocol, successfully avoiding significant disruptions to internal and external functions. Over 65 percent of the Corporation's colleagues are currently working remotely, and colleagues whose functions require them to be physically present are eligible for additional "Promise Pay" of up to $175 per week. The Corporation is also providing stipends to help cover unexpected dependent- and elder-care costs, as well as no-cost health care benefits pertaining to COVID-19 and free telehealth visits.
The Corporation and the Comerica Charitable Foundation have pledged $4 million to support business needs and community service organizations assisting youth, seniors and other vulnerable populations, particularly organizations addressing food insecurities and limited access to health care.

RESULTS OF OPERATIONS
The Corporation postedNet income for the three months ended March 31, 2021 was $350 million compared to a net loss of $59 million for the three months ended March 31, 2020, of $65 million, compared to net income of $339 million for the three months ended March 31, 2019. The $404 million decrease in net incomewhich was primarily due to an increase in thedriven by lower provision for credit losses calculated using the current expectedresulting from an improved economic outlook and strong credit loss (CECL) model, which reflected the forecasted impact of the COVID-19 pandemic, including the economic impacts of social distancing, and continued pressures on Energy.performance. Results for the three months ended March 31, 20202021 were also impacted by lower net interest income, reflecting the net impact of lowera decline in short-term interest rates, on loans,as well as an increase in noninterest expenses, partially offset by lowerhigher noninterest expenses.income. The provision for income taxes decreased $106increased $117 million to a benefit of $21$98 million primarily driven bydue to the decreaseincrease in pre-tax income.
The net lossNet income per diluted common share was $0.46 for the three months ended March 31, 2020,2021 was $2.43 compared to a net incomeloss per diluted common share of $2.11$0.42 for the same period in the prior year.
OutlookPension Plan Accounting Change
Effective January 1, 2021, the Corporation elected to change the accounting methodology for Second Quarter 2020 Compareddetermining market-related value of plan assets (MRVA) to First Quarter 2020
Based on current management expectationsa more preferable method for recessionary conditions:
Growthcertain classes of assets in average loans, reflecting an increasethe qualified defined benefit pension plan. The classes of assets impacted by the new accounting methodology are fixed income securities and private placement assets held in Mortgage Banker Finance and support of customers' liquidity needs, including through the Paycheck Protection Program, partly offset by customers' reduced working capital and capital expenditure needs.
Growth in average deposits as customers conserve liquidity and receive benefits of economic stimulus programs, partly offset by customers using cashportfolio, which are primarily designed to meet operating needs.
Decrease in net interest income due to the net impact of lower interest rates, partially offset by loan growth.
◦Assuming average one-month LIBOR of 45 basis points and average deposit pay rates of 25 to 30 basis points, net reduction solely from lower interest rates of approximately $75 million in second quarter 2020.
Provision for credit losses highly uncertain, reflective of economic environment, including the effects resulting frommatch the duration and severityinterest rate exposure of the COVID-19 pandemic. Current reserve is appropriateCorporation's long-term pension commitments to mitigate against the volatility of interest rates. Under the previous policy, MRVA was calculated based on a five-year average fair value. The new accounting policy recognizes changes in fair value in the year they occur and better aligns the timing of recognition of interest rate impacts to pension assets and liabilities, reducing earnings volatility.
As a result of the policy change, the defined benefit plan benefit is expected recessionary conditions asto be $79 million in 2021, an increase of $18 million from the estimated benefit under the previous policy. The impact of the change for the three months ended March 31, 2020.
Stable noninterest income with2021 was an increase in card fees offset by reduced economic activity and lower market-based fees.
Increase into the pension benefit reduction to noninterest expenses from higher outside processing fee expenseof $5 million and costs relateda corresponding increase to net income of $3 million. The change in accounting methodology is applied retrospectively to all prior periods presented in the consolidated financial statements. Discussion of results of operations is based on recast results. See Note 1 to the COVID-19 pandemic as well asconsolidated financial statements for further information and impacts of the impactchange in accounting policy.


33
Table of merit increases, partially offset by continued expense discipline.Contents
CapitalThree Months Ended March 31, 2021 compared to reflect suspension of share repurchase program and focus on supporting customers' financing needs as well as providing an attractive dividend.






Three Months Ended March 31, 2020
Analysis of Net Interest Income
Three Months Ended
March 31, 2021March 31, 2020
(dollar amounts in millions)Average
Balance		InterestAverage
Rate		Average
Balance		InterestAverage
Rate
Commercial loans (a)$30,968 $254 3.33 %$30,697 $314 4.11 %
Real estate construction loans4,137 34 3.37 3,564 43 4.85 
Commercial mortgage loans9,952 70 2.85 9,638 101 4.21 
Lease financing (b)592 (12)(8.44)582 5 3.63 
International loans962 8 3.17 1,004 11 4.48 
Residential mortgage loans1,809 14 3.13 1,855 17 3.67 
Consumer loans2,169 18 3.40 2,264 26 4.60 
Total loans (c)50,589 386 3.09 49,604 517 4.19 
Mortgage-backed securities (d)10,257 51 2.03 9,514 57 2.42 
U.S. Treasury securities (e)4,637 18 1.58 2,817 17 2.48 
Total investment securities14,894 69 1.89 12,331 74 2.43 
Interest-bearing deposits with banks12,869 4 0.10 5,407 18 1.34 
Other short-term investments171 — 0.28 154 — 1.09 
Total earning assets78,523 459 2.37 67,496 609 3.64 
Cash and due from banks970 838 
Allowance for loan losses(915)(693)
Accrued income and other assets5,981 5,624 
Total assets$84,559 $73,265 
Money market and interest-bearing checking deposits$29,012 6 0.08 $24,654 45 0.73 
Savings deposits2,800 — 0.02 2,202 — 0.06 
Customer certificates of deposit2,155 1 0.24 2,999 11 1.42 
Other time deposits— — — 70 — 2.00 
Foreign office time deposits64 — 0.09 82 — 1.30 
Total interest-bearing deposits34,031 7 0.08 30,007 56 0.76 
Short-term borrowings3 — 0.05 157 — 0.82 
Medium- and long-term debt3,609 9 0.99 7,324 40 2.15 
Total interest-bearing sources37,643 16 0.17 37,488 96 1.03 
Noninterest-bearing deposits37,361 26,761 
Accrued expenses and other liabilities1,415 1,578 
Shareholders’ equity8,140 7,438 
Total liabilities and shareholders’ equity$84,559 $73,265 
Net interest income/rate spread$443 2.20 $513 2.61 
Impact of net noninterest-bearing sources of funds 0.09 0.45 
Net interest margin (as a percentage of average earning assets)  2.29 %  3.06 %
 Three Months Ended
 March 31, 2020 March 31, 2019
(dollar amounts in millions)
Average
Balance
Interest
Average
Rate
 
Average
Balance
Interest
Average
Rate
Commercial loans$30,697
$314
4.07% $31,461
$394
5.07%
Real estate construction loans3,564
43
4.85
 3,238
46
5.74
Commercial mortgage loans9,638
101
4.21
 8,997
114
5.14
Lease financing582
5
3.63
 519
5
3.87
International loans1,004
11
4.48
 1,014
13
5.37
Residential mortgage loans1,855
17
3.67
 1,965
19
3.85
Consumer loans2,264
26
4.60
 2,483
30
4.98
Total loans (a)49,604
517
4.19
 49,677
621
5.07
        
Mortgage-backed securities9,514
57
2.42
 9,225
56
2.41
Other investment securities2,817
17
2.48
 2,730
16
2.32
Total investment securities12,331
74
2.43
 11,955
72
2.39
        
Interest-bearing deposits with banks5,407
18
1.34
 2,852
17
2.40
Other short-term investments154
—
1.09
 134
—
1.33
Total earning assets67,496
609
3.64
 64,618
710
4.44
        
Cash and due from banks838
   925
  
Allowance for loan losses(693)   (672)  
Accrued income and other assets5,624
   4,900
  
Total assets$73,265
   $69,771
  
        
Money market and interest-bearing checking deposits$24,654
45
0.73
 $22,612
47
0.83
Savings deposits2,202
—
0.06
 2,170
—
0.04
Customer certificates of deposit2,999
11
1.42
 2,170
4
0.81
Other time deposits70
—
2.00
 160
1
2.34
Foreign office time deposits82
—
1.30
 12
—
1.55
Total interest-bearing deposits30,007
56
0.76
 27,124
52
0.78
        
Short-term borrowings157
—
0.82
 221
1
2.39
Medium- and long-term debt7,324
40
2.15
 6,694
51
3.06
Total interest-bearing sources37,488
96
1.03
 34,039
104
1.23
        
Noninterest-bearing deposits26,761
   26,872
  
Accrued expenses and other liabilities1,578
   1,401
  
Total shareholders’ equity7,438
   7,459
  
Total liabilities and shareholders’ equity$73,265
   $69,771
  
        
Net interest income/rate spread $513
2.61
  $606
3.21
        
Impact of net noninterest-bearing sources of funds  0.45
   0.58
Net interest margin (as a percentage of average earning assets)  3.06%   3.79%
(a)Nonaccrual loans are included in average balances reported and in the calculation of average rates.

(a)Includes Paycheck Protection Program (PPP) loans with average balance of $3.6 billion, interest income of $31 million and an average yield of 3.47% for the three months ended March 31, 2021.

(b)The three months ended March 31, 2021 includes residual value adjustments totaling $17 million.
(c)Nonaccrual loans are included in average balances reported and in the calculation of average rates.
(d)Average balances included $157 million and $105 million of unrealized gains and losses for the three months ended March 31, 2021 and 2020, respectively; yields calculated gross of these unrealized gains and losses.
(e)Average balances included $56 million and $72 million of unrealized gains and losses for the three months ended March 31, 2021 and 2020, respectively; yields calculated gross of these unrealized gains and losses.


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Rate/Volume Analysis
Three Months Ended
March 31, 2021/March 31, 2020
(in millions)Decrease Due to RateIncrease (Decrease) Due to Volume (a)Net Decrease
Interest Income:
Loans$(139)$8 $(131)
Investment securities(16)11 (5)
Interest-bearing deposits with banks(16)2 (14)
Total interest income(171)21 (150)
Interest Expense:
Interest-bearing deposits(50)1 (49)
Medium- and long-term debt(23)(8)(31)
Total interest expense(73)(7)(80)
Net interest income$(98)$28 $(70)
 Three Months Ended
 March 31, 2020/March 31, 2019
(in millions)(Decrease) Increase Due to Rate Increase Due to Volume (a) Net (Decrease) Increase 
Interest Income:      
Loans$(105) $1
 $(104) 
Investment securities2
 —
 2
 
Interest-bearing deposits with banks(7) 8
 1
 
Total interest income(110) 9
 (101) 
Interest Expense:      
Interest-bearing deposits(3) 7
 4
 
Short-term borrowings(1) —
 (1) 
Medium- and long-term debt(15) 4
 (11) 
Total interest expense(19) 11
 (8) 
       
Net interest income$(91) $(2) $(93) 
(a)Rate/volume variances are allocated to variances due to volume.
(a)Rate/volume variances are allocated to variances due to volume.
Net interest income was $443 million for the three months ended March 31, 2021, a decrease of $70 million compared to $513 million for the three months ended March 31, 2020, a decrease of $93 million compared to $606 million2020. Net interest margin was 2.29 percent for the three months ended March 31, 2019. The decrease in net interest income primarily reflected the impact2021, a decline of lower short-term rates on loans.
The net interest margin was77 basis points from 3.06 percent for the three months ended March 31, 2020, a decrease of 73 basis points compared to 3.79 percent for the three months ended March 31, 2019, driven byreflecting the impact of the declinelower interest rates. Average earning assets increased $11.0 billion, primarily due to increases of $7.5 billion in interest-bearing deposits with banks and $3.6 billion in PPP loans. Average interest-bearing funding sources increased $155 million, reflecting a $4.0 billion increase in interest-bearing deposits, partially offset by a $3.7 billion decrease in medium- and long-term debt and a smaller decrease in short-term rates on loan yields.borrowings.
Provision for Credit Losses
The provision for credit losses, which includes the provision for loan losses and the provision for credit losses on lending-related commitments. The provision for credit losses totaled $411commitments, was a benefit of $182 million for the three months ended March 31, 2020, calculated under the CECL model,2021, compared to a benefitan expense of $13 million for the three months ended March 31, 2019. The increase in provision for credit losses reflected the forecasted impact of the COVID-19 pandemic, including the economic impacts of social distancing, and continued pressures on the Energy portfolio.
The provision for loan losses was $380$411 million for the three months ended March 31, 2020. Net loan charge-offs increased $73decreased $81 million to $84$3 million, or 0.68 percent3 basis points of average total loans for the three months ended March 31, 2020,2021, compared to $11$84 million, or 0.08 percent68 basis points of average total loans for the three months ended March 31, 2019. The increase was driven by a $59 million increase in2020. Energy net charge-offs decreased $68 million to a net recovery of Energy loans.
The provision for credit losses on lending-related commitments was $31$1 million for the three months ended March 31, 2020, compared to no provision for the three months ended March 31, 2019, with the increase primarily driven by Energy. There were no lending-related commitment charge-offs in the three-month periods ended March 31, 2020 and 2019.2021.
An analysis of the allowance for credit losses and a summary of nonperforming assets are presented under the "Credit Risk" subheading in the "Risk Management" section of this financial review. Further information about the adoption of CECL, which resulted in a $17 million decrease to the allowance for credit losses as of January 1, 2020, is presented in Note 1 to the consolidated financial statements.










3735
Table of Contents

Noninterest Income
Three Months Ended March 31,
(in millions)20212020
Card fees$71 $59 
Fiduciary income53 54 
Service charges on deposit accounts48 49 
Derivative income (a)30 20 
Commercial lending fees18 17 
Bank-owned life insurance11 12 
Letter of credit fees10 9 
Brokerage fees4 7 
Net securities losses— (1)
Other noninterest income (a)(b)25 11 
   Total noninterest income$270 $237 
Noninterest Income(a)
Beginning with the first quarter 2021, the Corporation reported customer derivative income, previously a component of other noninterest income, and foreign exchange income as a combined item captioned by derivative income on the Consolidated Statements of Comprehensive Income. Prior periods have been adjusted to conform to this presentation and the changes in presentation do not impact total noninterest income.
 Three Months Ended March 31,
(in millions)2020 2019
Card fees$59
 $63
Fiduciary income54
 49
Service charges on deposit accounts49
 51
Commercial lending fees17
 22
Foreign exchange income11
 11
Bank-owned life insurance12
 9
Letter of credit fees9
 9
Brokerage fees7
 7
Net securities losses(1) (8)
Other noninterest income (a)20
 25
Total noninterest income$237
 $238
(b)The table below provides further details on certain categories included in other noninterest income.
(a)The table below provides further details on certain categories included in other noninterest income.
Noninterest income was stable at $237increased $33 million to $270 million for the three months ended March 31, 2020,2021, including an increase in card fees as a reductionresult of higher activity related to stimulus payments and higher derivative income primarily from favorable valuation adjustments, partially offset by a decrease in net securities losses (primarilybrokerage fees due to a repositioning loss recordedlower money market funds fee revenue. Noninterest income was also impacted by increases in the first quarter of 2019), as well as increased fiduciary income, offset by decreases in syndication agent fees (a component of commercial lending fees), deferred compensation asset returns (included(offset in noninterest expenses) and principal investing and warrants, included in other noninterest income and detailed below) and card fees.below.
The following table presents certain categories included in other noninterest income on the Consolidated Statements of Comprehensive Income.
Three Months Ended March 31,
(in millions)20212020
Income from principal investing and warrants$6 $— 
Investment banking fees4 3 
Deferred compensation asset returns (a)3 (3)
Securities trading income2 2 
All other noninterest income10 9 
Other noninterest income$25 $11 
 Three Months Ended March 31,
(in millions)2020 2019
Customer derivative income (a)$9
 $7
Investment banking fees3
 2
Securities trading income2
 2
Deferred compensation asset returns (b)(3) 2
All other noninterest income9
 12
Other noninterest income$20
 $25
(a)    Compensation deferred by the Corporation's officers and directors is invested based on investment selections of the officers and directors. Income earned on these assets is reported in other noninterest income and the offsetting change in deferred compensation plan liabilities is reported in salaries and benefits expense.
(a)Customer derivative income included unfavorable credit valuation adjustments of $13 million and $1 million for the three months ended March 31, 2020 and 2019, respectively.
(b)Compensation deferred by the Corporation's officers and directors is invested based on investment selections of the officers and directors. Income earned on these assets is reported in other noninterest income and the offsetting change in deferred compensation plan liabilities is reported in salaries and benefits expense.
Noninterest Expenses
Three Months Ended March 31,
(in millions)20212020
Salaries and benefits expense$282 $242 
Outside processing fee expense64 57 
Occupancy expense39 37 
Software expense39 37 
Equipment expense12 12 
Advertising expense6 7 
FDIC insurance expense6 8 
Other noninterest expenses (a)(1)17 
Total noninterest expenses (a)$447 $417 
 Three Months Ended March 31,
(in millions)2020 2019
Salaries and benefits expense$242
 $265
Outside processing fee expense (a)57
 63
Occupancy expense37
 37
Software expense (a)37
 29
Equipment expense12
 12
Advertising expense7
 5
FDIC insurance expense8
 5
Other noninterest expenses25
 17
Total noninterest expenses$425
 $433
(a)    The three months ended March 31, 2020 has been recast to reflect the retrospective application of the Corporation's election to change the accounting method for certain components of expense related to the defined pension plan, resulting in a decrease of $8 million from the previously reported balances See Note 1 to the consolidated financial statements for further information and impacts of the change in accounting policy.
(a)Amounts reported for the three months ended March 31, 2020 included a $7 million classification adjustment for costs incurred in cloud computing arrangements, reducing outside processing fee expense and increasing software expense due to the prospective adoption of ASU No. 2018-15.
Noninterest expenses decreased $8increased $30 million to $425$447 million, primarily reflecting a decreaseincreases in salaries and benefits and outside processing fee expenses, partially offset by decreases in operational losses and non-salary pension expense (both components of other noninterest expense). The increase in salaries and benefits expense partially offset by increaseswas mostly a result of lower accrued expenses in operational losses, included in other noninterest expenses, FDIC insurance expense and advertising expense. The decline in salaries and benefits expense included decreases in incentive and annualthe first quarter 2020 for performance-related compensation, including stock-based compensation, due to the expected impact to performance of the COVID-19 pandemic, as well as lower technology-related contingent labor costs.

an increase in deferred compensation expense (offset in

3836
other noninterest income). The increase in outside processing fee expense was primarily due to volume-driven increases in government card processing expense tied to card fee revenues.
OUTLOOK
This outlook is based on management expectations for continued improvement in economic conditions.
Second Quarter 2021 Compared to
First Quarter 2021		Trends for Second Half of 2021
Average loans
•Average loans (excluding PPP) reflect growth in several businesses, including Middle Market, offset by declines in Mortgage Banker Finance, National Dealer Services and Energy. In addition, decline in PPP loans due to forgiveness process.
•Solid average loan growth in nearly all business lines (excluding PPP), more than offset by forgiveness of the bulk of PPP loans.
Average deposits
•Average deposits to remain strong, benefiting from latest stimulus.
•Average deposits begin to wane as customers put cash to use.
Net interest income
•Increase in net interest income as lease residual adjustment ($17 million in first quarter) does not repeat. All other factors offset each other.
•Net interest income reflects higher loan volume (excluding PPP loans) offset by lower securities yields. In addition, PPP volume and accelerated fees decline.
Credit quality
•Strong credit quality continues, with provision reflecting economic conditions.
•Allowance moving towards pre-pandemic level.
Noninterest income
•Decrease in noninterest income as first quarter levels of derivatives, warrants and deferred compensation asset returns not expected to repeat, partly offset by increase in card, fiduciary and syndication fees.
•Noninterest income includes increases in service charges on deposit accounts, fiduciary income and commercial loan fees, partly offset by lower card fees from decreased stimulus activity.
Noninterest expenses
•Stable noninterest expenses reflect lower salaries and benefits (annual stock-based compensation and deferred compensation asset returns not expected to repeat, as well as seasonally lower payroll taxes partly offset by merit increases and one additional day in the second quarter) offset by increase in outside processing as well as seasonal increases in occupancy and advertising.
•Continued expense discipline offsets increase in technology investment. In addition, increases due to seasonal factors and revenue-related expenses.
Tax rate
•Income tax expense for full-year 2021 to be between 22 and 23 percent of pre-tax income, excluding discrete items.
Capital
•Resume share purchases; CET1 target of approximately 10 percent.



37
Table of Contents
STRATEGIC LINES OF BUSINESS AND MARKETS
The Corporation has strategically aligned its operations into three major business segments: the BusinessCommercial 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. The Other category includes items not directly associated with thesethe business segments or the Finance segment. 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. Market segment results are also provided for the Corporation's three primary geographic markets: Michigan, California and Texas. In addition to the three primary geographic markets, Other Markets is also reported as a market segment. Note 13 to the consolidated financial statements describes the business activities of each business segment and presents financial results of the business and market segments for the three-month periods ended March 31, 20202021 and 2019.2020.
The Corporation's management accounting system assigns balance sheet and income statement items to each segment using certain methodologies, which are regularly reviewed and refined. These methodologies may be modified as the management accounting system is enhanced and changes occur in the organizational structure and/or product lines. Note 22 to the consolidated financial statements in the Corporation's 20192020 Annual Report describes the Corporation's segment reporting methodology.
Net interest income for each segment reflects the interest income generated by earning assets less interest expense on interest-bearing liabilities plus the net impact from associated internal funds transfer pricing (FTP). The FTP methodology allocates credits to each business segment for deposits and other funds provided as well as charges for loans and other assets being funded. FTP crediting rates foron deposits and other funds provided reflect the long-term value of deposits and other funding sources based on their implied maturities. Due to the longer-term nature of implied maturities, FTP crediting rates are generally less volatile than changes in interest rates observed in the market. FTP charge rates for funding loans and other assets reflect a matched cost of funds based on the pricing and duration characteristics of the assets. As a result of applying matched funding, interest revenue for each segment resulting from loans and other assets is generally not impacted by changes in interest rates. Therefore, net interest income for each segment primarily reflects the volume of loans and other earning assets at the spread over the matched cost of funds, as well as the volume of deposits at the associated FTP impactscrediting rates. Due to the impact of loan and deposit levels. As overalllower interest rates, decreased, business segments, particularly those focused on generating deposits, were impacted by lower FTP crediting rates on deposits in the three months ended March 31, 20202021 compared to the same period in the prior year. Similarly, FTP charges for funding loans decreased in the three months ended March 31, 2020,2021, compared to the same period in the prior year.
Business Segments
The following sections present a summary of the performance of each of the Corporation's business segments for the three months ended March 31, 20202021 compared to the same period in the prior year. The three months ended March 31, 2020 has been recast to reflect the retrospective application of the Corporation's election to change the accounting method for certain components of expense related to the defined pension plan. Further information about the change in accounting methodology is presented in Note 1 to the consolidated financial statements.
BusinessCommercial Bank
Three Months Ended   
Percent
Change
Three Months EndedPercent
Change
(dollar amounts in millions)March 31, 2020 March 31, 2019 Change (dollar amounts in millions)March 31, 2021March 31, 2020Change
Earnings summary:       Earnings summary:
Net interest income$380
 $412
 $(32) (8)%Net interest income$382 $380 $2 — %
Provision for credit losses396
 (6) 402
 n/m
Provision for credit losses(177)396 (573)n/m
Noninterest income127
 136
 (9) (7)Noninterest income159 127 32 26 
Noninterest expenses194
 198
 (4) (2)Noninterest expenses215 192 23 11 
(Benefit) provision for income taxes(20) 82
 (102) n/m
Net (loss) income$(63)
$274

$(337) n/m
Provision (benefit) for income taxesProvision (benefit) for income taxes113 (19)132 n/m
Net income (loss)Net income (loss)$390 $(62)$452 n/m
Net credit-related charge-offs$83
 $12
 $71
 n/m
Net credit-related charge-offs$2 $83 $(81)(97)%

 
 
 

Selected average balances:       Selected average balances:
Loans$42,593
 $42,538
 $55
 — %Loans$42,904 $42,593 $311 1 %
Deposits30,230
 28,463
 1,767
 6
Deposits41,102 30,230 10,872 36 
n/m - not meaningful


38
Table of Contents
Average loans were relatively stable. The Business2021 period included average PPP loans totaling $2.7 billion. Average deposits increased $10.9 billion, reflecting increases in all deposit categories with the exception of time deposits. The Commercial Bank's net income decreased $337increased $452 million tofrom a net loss of $63$62 million. Average loans remained relatively unchanged at $42.6 billion, primarily reflecting increases in Commercial Real Estate and Mortgage Banker Finance, offset by a decline in National Dealer Services and smaller decreases in other business lines. Average deposits increased $1.8 billion, primarily reflecting an increase in relationship-based interest-bearing deposits. Net interest income decreased $32 million to $380 million, due to a $95 million decrease in loan income, partially offset by a $63 million decrease in allocated net FTP charges. The provision for credit losses was $396 million for the three months ended March 31, 2020, compared to a benefit of $6 million for the three months ended March 31, 2019. The increase instable, while the provision for credit losses reflected the forecasted impactdecreased $573 million to a benefit of the COVID-19 pandemic, including$177 million, reflecting improvements in the economic impacts of social distancing guidelines,forecast and continued pressures onin the Energy portfolio.portfolio as well as strong credit performance. Net


39

credit-related charge-offs increased $71decreased $81 million, primarily due to $83 million. The increase in net charge-offs primarily reflected increasesa reduction in Energy and Technology and Life Sciences.net charge-offs. Noninterest income decreased $9increased $32 million, primarily reflecting decreases of $5 million in commercial lending fees and $4 millionincreases in card fees.fees, derivative income and warrant income. Noninterest expenses decreased $4increased $23 million, primarily reflecting a decreaseincreases in salaries and benefits expense, due to lower incentivecorporate overhead and stock-based compensation.outside processing fee expense, partially offset by decreases in operational losses and travel expenses.
Retail Bank
Three Months EndedPercent
Change
(dollar amounts in millions)March 31, 2021March 31, 2020Change
Earnings summary:
Net interest income$133 $125 $8 7 %
Provision for credit losses6 3 3 63
Noninterest income28 28 — (1)
Noninterest expenses149 145 4 2 
Provision for income taxes— 1 (1)(83)
Net income$6 $4 $2 77%
Net credit-related charge-offs$1 $1 $— —
Selected average balances:
Loans$2,620 $2,075 $545 26 %
Deposits24,322 21,195 3,127 15 
 Three Months Ended   
Percent
Change
(dollar amounts in millions)March 31, 2020 March 31, 2019 Change 
Earnings summary:       
Net interest income$125
 $146
 $(21) (15)%
Provision for credit losses3
 (4) 7
 n/m
Noninterest income28
 31
 (3) (8)
Noninterest expenses149
 145
 4
 2
Provision for income taxes—
 8
 (8) n/m
Net income$1

$28

$(27) (95)%
Net credit-related charge-offs$1
 $—
 $1
 n/m
        
Selected average balances:       
Loans$2,075
 $2,103
 $(28) (1)%
Deposits21,195
 20,470
 725
 4
n/m - not meaningful
Average loans increased $545 million due to loans to small businesses, including PPP loans. Average deposits increased $3.1 billion, including increases in all deposit categories with the exception of time deposits. The Retail Bank's net income decreased $27increased $2 million, to $1 million. Average deposits increased $725which included an $8 million increase in net interest income, primarily reflectingdue to an increase in relationship-based interest-bearing deposits. Net interest income decreased $21 million to $125 million, due to decreases of $11 million in allocated net FTP creditsaverage loans, and $3 million in loan income, as well as a $7$3 million increase in deposit costs. The provision for credit losses was $3 million for the three months ended March 31, 2020, compared to a benefit of $4 million for the three months ended March 31, 2019.losses. Noninterest income was stable, while noninterest expenses increased $4 million, primarily reflecting a $2 million increasedue to increases in corporate overhead and occupancy expenses, offset by decreases in operational losses.
Wealth Management
Three Months Ended   
Percent
Change
Three Months EndedPercent
Change
(dollar amounts in millions)March 31, 2020 March 31, 2019 Change (dollar amounts in millions)March 31, 2021March 31, 2020Change
Earnings summary:       Earnings summary:
Net interest income$41
 $48
 $(7) (12)%Net interest income$42 $41 $1 2 %
Provision for credit losses12
 (5) 17
 n/m
Provision for credit losses(12)12 (24)n/m
Noninterest income70
 64
 6
 9
Noninterest income67 70 (3)(5)
Noninterest expenses72
 72
 —
 —
Noninterest expenses76 70 6 9 
Provision for income taxes6
 11
 (5) (44)Provision for income taxes10 6 4 56 
Net income$21

$34

$(13) (37)%Net income$35 $23 $12 53 %
Net credit-related recoveries$—
 $(1) $1
 n/m
       
Selected average balances:       Selected average balances:
Loans$4,936
 $5,036
 $(100) (2)%Loans$5,059 $4,936 $123 2 %
Deposits4,025
 3,801
 224
 6
Deposits4,826 4,025 801 20 
n/m - not meaningful
    Average loans remained relatively stable. Average deposits increased $801 million, reflecting increases in all deposit categories with the exception of time deposits. Wealth Management's net income decreased $13increased $12 million, to $21 million. Average loans and deposits remained relativelywhich included stable at $4.9 billion and $4.0 billion, respectively. Netnet interest income decreased $7 million to $41 million, due toand a $9$24 million decrease in loan income, partially offset by a $4 million decrease in allocated net FTP charges. The provision for credit losses increased $17 million fromto a benefit of $5$12 million due to an improving economic outlook. Noninterest income decreased $3 million, while noninterest expenses increased $6 million, primarily reflecting an increase in Private Banking. Noninterest income increased $6 million, primarily reflecting a $5 million increase in fiduciary income, while noninterest expenses were stable.



40

corporate overhead.
Market Segments
The following sections present a summary of the performance of each of the Corporation's market segments for the three months ended March 31, 20202021 compared to the same period in the prior year. The three months ended March 31, 2020 has been recast to reflect the retrospective application of the Corporation's election to change the accounting method for certain

39
Table of Contents
components of expense related to the defined pension plan. Further information about the change in accounting methodology is presented in Note 1 to the consolidated financial statements.
Michigan
Three Months Ended   
Percent
Change
Three Months EndedPercent
Change
(dollar amounts in millions)March 31, 2020 March 31, 2019 Change (dollar amounts in millions)March 31, 2021March 31, 2020Change
Earnings summary:       Earnings summary:
Net interest income$163
 $187
 $(24) (13)%Net interest income$154 $163 $(9)(5)%
Provision for credit losses24
 5
 19
 n/m
Provision for credit losses(28)24 (52)n/m
Noninterest income72
 72
 —
 —
Noninterest income66 72 (6)(8)
Noninterest expenses140
 139
 1
 1
Noninterest expenses135 137 (2)(1)
Provision for income taxes15
 26
 (11) (41)Provision for income taxes22 16 6 40 
Net income$56

$89

$(33) (36)%Net income$91 $58 $33 57 %
Net credit-related charge-offs$3
 $4
 $(1) (39)%Net credit-related charge-offs$— $3 $(3)n/m
       
Selected average balances:       Selected average balances:
Loans$12,191
 $12,557
 $(366) (3)%Loans$12,247 $12,191 $56 — %
Deposits20,748
 19,893
 855
 4
Deposits25,683 20,748 4,935 24 
n/m - not meaningful
Average loans were stable at $12.2 billion, while average deposits increased $4.9 billion, reflecting increases in all deposit categories with the exception of personal time deposits. The Michigan market's net income decreasedincreased $33 million to $56$91 million. Net interest income decreased $9 million, primarily due to lower interest income from deposits (FTP basis), while the provision for credit losses decreased $52 million to a benefit of $28 million, primarily due to decreases in general Middle Market, Corporate Banking and Business Banking. Noninterest income decreased $6 million, primarily due to decreases in service charges on deposits accounts and fiduciary income, while noninterest expenses were stable.
California
Three Months EndedPercent
Change
(dollar amounts in millions)March 31, 2021March 31, 2020Change
Earnings summary:
Net interest income$172 $176 $(4)(3)%
Provision for credit losses(54)46 (100)n/m
Noninterest income48 33 15 47 
Noninterest expenses104 93 11 11 
Provision for income taxes40 17 23 n/m
Net income$130 $53 $77 n/m
Net credit-related charge-offs$1 $8 $(7)(92)%
Selected average balances:
Loans$17,946 $17,742 $204 1 %
Deposits19,968 16,627 3,341 20 
n/m - not meaningful
Average loans increased $204 million to $17.9 billion, while average deposits increased $3.3 billion, including increases in all deposit categories with the exception of time deposits. The California market's net income increased $77 million to $130 million. Net interest income was stable, while the provision for credit losses decreased $366$100 million to a benefit of $54 million, primarily reflecting decreases in Corporate Banking, general Middle Market, Corporate Banking and Small Business Banking. Technology and Life Sciences. Net credit-related charge-offs decreased $7 million, mainly due to a decrease in Technology and Life Sciences. Noninterest income increased $15 million, mostly from derivative income and warrant income. Noninterest expenses increased $11 million, including increases in salaries and benefits and corporate overhead.

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Texas
Three Months EndedPercent
Change
(dollar amounts in millions)March 31, 2021March 31, 2020Change
Earnings summary:
Net interest income$114 $115 $(1)(1)%
Provision for credit losses(86)290 (376)n/m
Noninterest income36 30 6 17 
Noninterest expenses88 83 5 5 
Provision (benefit) for income taxes31 (50)81 n/m
Net income (loss)$117 $(178)$295 n/m
Net credit-related charge-offs$2 $70 $(68)(96)%
Selected average balances:
Loans$10,161 $10,566 $(405)(4)%
Deposits10,783 9,204 1,579 17 
n/m - not meaningful
Average loans were relatively stable, while average deposits increased $855$1.6 billion, reflecting increases in all deposit categories with the exception of time deposits. The Texas market's net income increased $295 million to $117 million, which included stable net interest income. The provision for credit losses decreased $376 million to a benefit of $86 million and net credit-related charge-offs decreased $68 million, both primarily reflecting decreases in Energy. Noninterest income increased $6 million, primarily reflecting an increase in relationship-based interest-bearing deposits,increased derivative income. Noninterest expenses increased $5 million, primarily due to higher corporate overhead and salaries and benefits expense, partially offset by lower noninterest-bearingoperational losses.
Other Markets
Three Months EndedPercent
Change
(dollar amounts in millions)March 31, 2021March 31, 2020Change
Earnings summary:
Net interest income$117 $92 $25 27 %
Provision for credit losses(15)51 (66)n/m
Noninterest income104 90 14 15 
Noninterest expenses113 94 19 20 
Provision for income taxes30 5 25 n/m
Net income$93 $32 $61 n/m
Net credit-related recoveries$— $3 $(3)(98)%
Selected average balances:
Loans$10,231 $9,105 $1,126 12 %
Deposits13,816 8,871 4,945 56 
n/m - not meaningful
Average loans increased $1.1 billion, primarily due to an increase in Mortgage Banker Finance, while average deposits increased $4.9 billion, including increases in all deposit categories with the exception of time deposits. Other Markets' net income increased $61 million to $93 million. Net interest income decreased $24increased $25 million to $163 million,primarily due to a $27 million decreasegrowth in loan income and a $5 million increase in deposit costs, partially offset by an $8 million decrease in allocated net FTP charges. Theaverage loans, while the provision for credit losses decreased $66 million to a benefit of $15 million, primarily reflecting decreases in Technology and Life Sciences and Corporate Banking. Noninterest income increased $14 million, mostly from an increase in card fees. Noninterest expenses increased $19 million, primarily reflecting increases in general Middle Marketoutside processing fees and Small Business Banking, partially offset by a decrease in Commercial Real Estate. Noninterest incomesalaries and expenses were stable.
California
 Three Months Ended   
Percent
Change
(dollar amounts in millions)March 31, 2020 March 31, 2019 Change 
Earnings summary:       
Net interest income$182
 $205
 $(23) (11)%
Provision for credit losses51
 (1) 52
 n/m
Noninterest income36
 40
 (4) (12)
Noninterest expenses98
 100
 (2) (2)
Provision for income taxes17
 37
 (20) (55)
Net income$52

$109

$(57) (53)%
Net credit-related charge-offs (recoveries)$11
 $(3) $14
 n/m
        
Selected average balances:       
Loans$18,027
 $18,652
 $(625) (3)%
Deposits17,466
 16,238
 1,228
 8
n/m - not meaningful
The California market's net income decreased $57 million to $52 million. Average loans decreased $625 million, primarily reflecting decreases in National Dealer Services, Entertainment Lending and Technology and Life Sciences, partially offset by an increase in Commercial Real Estate. Average deposits increased $1.2 billion, primarily reflecting increases in relationship-based interest-bearing and noninterest-bearing deposits. Net interest income decreased $23 million to $182 million, due to a $46 million decrease in loan income and a $2 million increase in deposit costs, partially offset by a $25 million decrease in allocated net FTP charges. The provision for credit losses increased $52 million to a provision of $51 million, primarily reflecting increases in Technology and Life Sciences and general Middle Market. Net credit-related charge-offs increased $14 million to $11 million, primarily reflecting an increase in Technology and Life Sciences. Noninterest income decreased $4 million, primarily reflecting a decrease in customer derivative income, while noninterest expenses were stable.


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Texas
 Three Months Ended   
Percent
Change
(dollar amounts in millions)March 31, 2020 March 31, 2019 Change 
Earnings summary:       
Net interest income$115
 $122
 $(7) (6)%
Provision for credit losses290
 (11) 301
 n/m
Noninterest income30
 32
 (2) (5)
Noninterest expenses84
 84
 —
 —
(Benefit) provision for income taxes(50) 19
 (69) n/m
Net (loss) income$(179)
$62

$(241) n/m
Net credit-related charge-offs$70
 $13
 $57
 n/m
        
Selected average balances:       
Loans$10,566
 $10,262
 $304
 3 %
Deposits9,204
 8,697
 507
 6
n/m - not meaningful
The Texas market's net income decreased $241 million to a net loss of $179 million. Average loans increased $304 million, primarily reflecting increases in Commercial Real Estate and Corporate Banking, partially offset by decreases in Energy and National Dealer Services. Average deposits increased $507 million, primarily reflecting an increase in relationship-based interest-bearing deposits. Net interest income decreased $7 million to $115 million, due to a $19 million decrease in loan income and a $2 million increase in deposit costs, partially offset by a $14 million decrease in allocated net FTP charges. The provision for credit losses increased $301 million to $290 million, from a benefit of $11 million, primarily reflecting increases in Energy, Commercial Real Estate and smaller increases in other business lines. Net credit-related charge-offs increased $57 million to $70 million, primarily reflecting an increase in Energy. Noninterest income and expenses were stable.
Other Markets
 Three Months Ended   
Percent
Change
(dollar amounts in millions)March 31, 2020 March 31, 2019 Change 
Earnings summary:       
Net interest income$86
 $92
 $(6) (5)%
Provision for credit losses46
 (8) 54
 n/m
Noninterest income87
 87
 —
 —
Noninterest expenses93
 92
 1
 2
Provision for income taxes4
 19
 (15) (75)
Net income$30

$76

$(46) (60)%
Net credit-related recoveries$—
 $(3) $3
 n/m
        
Selected average balances:       
Loans$8,820
 $8,206
 $614
 7 %
Deposits8,032
 7,906
 126
 2
n/m - not meaningful
Other Markets' net income decreased $46 million to $30 million. Average loans increased $614 million, primarily reflecting increases in Mortgage Banker Finance and Environmental Services, partially offset by decreases in National Dealer Services and Commercial Real Estate. Net interest income decreased $6 million to $86 million, due to a $15 million decrease in loan income, partially offset by a $9 million decrease in allocated net FTP charges. The provision for credit losses increased $54 million to $46 million, primarily reflecting increases in Environmental Services and Technology and Life Sciences,benefits expense as well as smaller increases in other business lines. Noninterest income and expenses were stable.categories.

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Finance & Other
Three Months EndedPercent Change
(dollar amounts in millions)March 31, 2021March 31, 2020Change
Earnings summary:
Net interest expense$(114)$(33)$(81)n/m
Provision for credit losses1 — 1 n/m
Noninterest income16 12 4 35 %
Noninterest expenses7 10 (3)(29)
Benefit for income taxes(25)(7)(18)n/m
Net loss$(81)$(24)$(57)n/m
Selected average balances:
Loans$4 $— $4 n/m
Deposits1,142 1,318 (176)(13)%
n/m - not meaningful
Net incomeloss for the Finance & Other category decreased $27increased $57 million to a net loss of $24 million, from net income of $3$81 million. Net interest income decreased $33expense increased $81 million, primarily reflecting a decrease in net FTP revenue as a result of lower rates charged to the business segments under the Corporation's internal FTP methodology and higher levels of wholesale funding. Netmethodology. Noninterest income was also impactedincreased $4 million, primarily driven by an $8increase in securities trading income. Noninterest expenses decreased $3 million, mainly due to a decrease in discrete tax benefits, partially offset by a $6 million after-tax decrease in losses related to securities repositioning in first quarter 2019.


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operational losses.
The following table lists the Corporation's banking centers by geographic market segment.
March 31,
20212020
Michigan190 192 
Texas123 123 
California96 96 
Other Markets25 25 
Total434 436 

42
 March 31,
 2020 2019
Michigan192
 193
Texas123
 122
California96
 96
Other Markets25

25
Total436
 436


43

FINANCIAL CONDITION
First Quarter 20202021 Compared to Fourth Quarter 20192020
Period-End Balances
Total assets increased $2.9decreased $1.8 billion to $76.3$86.3 billion, driven by increasesa decrease of $3.1$1.7 billion in loans, which included declines in National Dealer Services and $643Mortgage Banker Finance. PPP loans increased $304 million to$3.8 billion, reflecting $925 million in investment securities,second round funding, partially offset by an $838first round repayments of $621 million, decrease in interest-bearing deposits with banks. The growth in period-end loans reflected an increase in Mortgage Banker Finance due to higher refinance volume inprimarily through the latter half of March as rates declined, as well as increases in Corporate Banking, Commercial Real Estate, general Middle Market and Technology and Life Sciences as customer draws increased to meet liquidity needs. The increase in investment securities primarily reflected the early purchase of a portion of expected second quarter 2020 mortgage-backed security prepayments at attractive yields as well as a $323 million increase in unrealized gains.forgiveness process.
Total liabilities increased $2.9decreased $1.9 billion to $68.9$78.1 billion, primarily reflecting a $2.2decreases of $2.9 billion increase in short-term borrowingsmedium- and long-term debt, due to fund period-end loan growth. The increasethe repayment of $2.8 billion in short-term borrowings reflected increases in federal funds purchased and short-termfloating-rate Federal Home Loan Bank (FHLB) advances. Shareholders' equityadvances during the first quarter, and $598 million in noninterest-bearing deposits, partially offset by an increase of $1.5 billion in interest-bearing deposits. The decrease in noninterest-bearing deposits included a $1.8 billion decrease in National Card Services primarily due to the timing of deposits by the U.S. Treasury, which typically fund a government card program on the first day of each month. The January funding was relatively stable at $7.4 billion.received a day early, in the fourth quarter of 2020, due to the New Year's holiday, leading to a timing difference between periods. The increase in interest-bearing deposits primarily reflected increases in Middle Market and Retail Banking.
Average Balances
Total assets were relatively stable at $73.3decreased $769 million to $84.6 billion driven by increases of $579 million in interest-bearing deposits with banks and $381 million in accrued income and other assets, partially offset by a $901due to an $816 million decrease in loans. The following table provides information about the change in the Corporation's average loan portfolio by loan type and geographic market.
Three Months EndedPercent
Change
(dollar amounts in millions)March 31, 2021December 31, 2020Change
By Loan Type:
Commercial loans (a)$30,968 $31,713 $(745)(2 %)
Real estate construction loans4,137 4,157 (20)— 
Commercial mortgage loans9,952 9,938 14 — 
Lease financing592 600 (8)(1)
International loans962 918 44 5 
Residential mortgage loans1,809 1,908 (99)(5)
Consumer loans2,169 2,171 (2)— 
Total loans$50,589 $51,405 $(816)(2 %)
Loans By Geographic Market:
Michigan$12,247 $12,225 $22 — %
California17,946 18,030 (84)— 
Texas10,161 10,583 (422)(4)
Other Markets and Finance10,235 10,567 (332)(3)
Total loans$50,589 $51,405 $(816)(2 %)
 Three Months Ended   
Percent
Change
(average balances; dollar amounts in millions)March 31, 2020 December 31, 2019 Change 
By Loan Type:       
Commercial loans$30,697
 $31,808
 $(1,111) (3)%
Real estate construction loans3,564
 3,398
 166
 5
Commercial mortgage loans9,638
 9,356
 282
 3
Lease financing582
 586
 (4) (1)
International loans1,004
 1,030
 (26) (3)
Residential mortgage loans1,855
 1,887
 (32) (2)
Consumer loans2,264
 2,440
 (176) (7)
Total loans$49,604
 $50,505
 $(901) (2)%
Loans By Geographic Market:       
Michigan$12,191
 $12,399
 $(208) (2)%
California18,027
 17,943
 84
 —
Texas10,566
 10,708
 (142) (1)
Other Markets8,820
 9,455
 (635) (7)
Total loans$49,604
 $50,505
 $(901) (2)%
(a)Includes PPP loans of $3.6 billion and $3.7 billion for the three months ended March 31, 2021 and December 31, 2020, respectively.
The decrease in loans was largely attributed to a decreasedriven by declines in Mortgage Banker Finance, from higher seasonal activityEnergy and refinance volumes in the prior quarter, as well as decreases in National Dealer Services, and Energy, partially offset by an increase in Commercial Real Estate.Equity Funds Services. The decrease in Mortgage Banker Finance resulted from lower purchase volumes compared to the high balances recorded during the fourth quarter of 2020. Energy declined due to higher oil prices resulting in improved cash flow and capital markets activity, while National Dealer Services continues to be impacted by supply chain issues impacting production. The growth in Equity Funds Services resulted from strong fund formation activity. PPP loans decreased $137 million to $3.6 billion, as average forgiven balances outpaced average newly originated balances during the quarter.
Total liabilities decreased $1.0 billion to $76.4 billion, reflecting a decrease of $2.1 billion in medium- and shareholders' equity were relatively stable at $65.8long-term debt due to the repayment of $2.8 billion in floating-rate FHLB advances during the first quarter, partially offset by increases of $603 million and $7.4 billion,$546 million in noninterest-bearing and interest-bearing deposits, respectively. The deposit growth was driven by a $993 million increase in consumer deposits primarily due to additional government stimulus payments and seasonality, as well as customers continuing to conserve cash.



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Capital
The following table presents a summary of changes in total shareholders' equity for the three months ended March 31, 2020.2021.
(in millions)
  
  
Balance at January 1, 2020  $7,327
Cumulative effect of change in accounting principle (a)
  13
Net loss  (65)
Cash dividends declared on common stock  (94)
Purchase of common stock  (195)
Other comprehensive income:   
Investment securities$247
  
Cash flow hedges155
  
Defined benefit and other postretirement plans7
 
Total other comprehensive income  409
Issuance of common stock under employee stock plans  (1)
Share-based compensation  8
Balance at March 31, 2020  $7,402
(a)(in millions)Effective
Balance at January 1, 2020, the Corporation adopted the provisions2021$8,050 
Net income350 
Cash dividends declared on common stock(95)
Cash dividends declared on preferred stock(6)
Purchase of ASU No. 2016-13, "Financial Instruments - Credit Losses" (Topic 326). For further information, refer to Note 1 to the consolidated financial statements.common stock(3)
Other comprehensive loss:
Investment securities$(140)
Cash flow hedges(32)
Defined benefit and other postretirement plans3 
Total other comprehensive loss(169)
Issuance of common stock under employee stock plans3 
Share-based compensation22 
Balance at March 31, 2021$8,152 

The following table summarizes the Corporation's repurchase activity during the three months ended March 31, 2020.2021.
(shares in thousands)Total Number of Shares Purchased as 
Part of Publicly Announced Repurchase Plans or Programs		Remaining Share
Repurchase
Authorization (a)		Total Number
of Shares
Purchased (b)		Average Price
Paid Per 
Share
January 2021— 4,870 47 $60.50 
February 2021— 4,870 8 66.62 
March 2021— 4,870 — — 
Total first quarter 2021— 4,870 55 $61.39 
(shares in thousands)Total Number of Shares Purchased as 
Part of Publicly Announced Repurchase Plans or Programs		 Remaining Share
Repurchase
Authorization (a)		 Total Number
of Shares
Purchased (b)		 Average Price
Paid Per 
Share
January 2020195
 7,902
 282
 $62.40
February 20202,157
 5,745
 2,164
 60.72
March 2020875
 4,870
 876
 52.53
Total first quarter 20203,227
 4,870
 3,322
 $58.70
(a)Maximum number of shares that may be repurchased under the publicly announced plans or programs.
(a)Maximum number of
(b)Includes approximately 55,000 shares that may yet be purchased pursuant to deferred compensation plans and shares purchased from employees to pay for taxes related to restricted stock vesting under the terms of an employee share-based compensation plan during the three months ended March 31, 2021. These transactions are not considered part of the Corporation's repurchase program.
The Corporation did not make any share repurchases under the publicly announced plans or programs.
(b)Includes approximately 95,000 shares purchased pursuant to deferred compensation plans and shares purchased from employees to pay for taxes related to restricted stock vesting under the terms of an employee share-based compensation plan during the three months ended March 31, 2020. These transactions are not considered part of the Corporation's repurchase program.
In March 2020, the Corporation suspended its share repurchase program with a focus on deploying capitalduring the first quarter of 2021 due to meet customers' growing financing requirements.the uncertain path of the economic recovery. With more confidence in the economic outlook, and an estimated CET1 ratio of more than 11 percent, which is well above its target of approximately 10 percent, the Corporation is resuming repurchases in the second quarter of 2021. On April 27, 2021, the Corporation entered into an Accelerated Share Repurchase transaction (ASR) to repurchase up to $400 million of common shares in the second quarter of 2021 to help facilitate the repurchase. The Corporation will assess the resumptiontiming and actual amount of additional share repurchases are subject to various factors, including financial performance,the Corporation's earnings generation, capital needs to fund future loan growth and market conditions. To authorize the Corporation's share repurchases, including the ASR, on April 27, 2021 the Corporation's Board of Directors approved the authorization to repurchase up to an additional 10 million shares of its outstanding common stock. Since itsthe inception of the share repurchase program in 2010, a total of 87.297.2 million shares have been authorized for repurchase. There is no expiration date for the share repurchase program.
TheUpon resumption of the share repurchase activity, the Corporation expectscontinues to use capital and liquidity intarget a responsible way to assist customers impacted by the COVID-19 crisis with a longer-term target of attaining and maintaining a Common Equitycommon equity Tier 1 (CET1) capital ratio of approximately 10 percent.percent with continued active capital management. At March 31, 2020,2021, the Corporation's estimated CET1 capital ratio was 9.51 percent, a decrease of 62 basis points compared to December 31, 2019. Higher period-end loans at March 31,11.09 percent. In 2020, increased risk-weighted assets and contributed to the lower estimated CET1 capital ratio. The Corporation expects to elect recently issuedelected regulatory relief to defer the impact of adopting the CECL model for measuring credit losses on regulatory capital, which resulted incapital. At March 31, 2021, $26 million, or a 10-basis-pointcumulative 4-basis-point benefit to the estimated CET1 capital ratio at March 31, 2020.ratios, was deferred.
On July 22, 2019, the federal banking agencies issued a final rule that simplifies certain regulatory capital rules, including the capital treatment

44
Table of mortgage servicing assets, certain deferred tax assets, investments in the capital instruments of unconsolidated financial institutions, and minority interests.  On November 13, 2019, the agencies issued a final rule that permitted early adoption of this rule for the quarter beginning January 1, 2020 rather than on April 1, 2020, as initially provided. The Corporation expects to early adopt this rule resulting in a benefit of approximately 8 basis points to the total risk-based capital ratio at March 31, 2020.Contents
The following table presents the minimum ratios required to be considered "adequately capitalized."


45
Table of Contents

required.
Common equity tier 1 capital to risk-weighted assets4.5%
Tier 1 capital to risk-weighted assets6.0
Total capital to risk-weighted assets8.0
Capital conservation buffer (a)2.5
Tier 1 capital to adjusted average assets (leverage ratio)4.0
(a)In addition to the minimum risk-based capital requirements, the Corporation is required to maintain a minimum capital conservation buffer, in the form of common equity, in order to avoid restrictions on capital distributions and discretionary bonuses.
(a)In addition to the minimum risk-based capital requirements, the Corporation is required to maintain a minimum capital conservation buffer, in the form of common equity, in order to avoid restrictions on capital distributions and discretionary bonuses.
The Corporation's capital ratios exceeded minimum regulatory requirements as follows:
March 31, 2021December 31, 2020
(dollar amounts in millions)Capital/AssetsRatioCapital/AssetsRatio
Common equity tier 1 (a), (b)$7,236 11.09 %$6,919 10.34 %
Tier 1 risk-based (a), (b)7,630 11.70 7,313 10.93 
Total risk-based (a)9,097 13.94 8,833 13.20 
Leverage (a)7,630 9.08 7,313 8.63 
Common shareholders' equity7,758 8.99 7,656 8.69 
Tangible common equity (b)7,109 8.30 7,020 8.02 
Risk-weighted assets (a)65,237 66,931 
 March 31, 2020 December 31, 2019
(dollar amounts in millions)Capital/Assets Ratio Capital/Assets Ratio
Common equity tier 1 and tier 1 risk-based (a)$6,654
 9.51% $6,919
 10.13%
Total risk-based (a)8,282
 11.83
 8,282
 12.13
Leverage (a)6,654
 9.13
 6,919
 9.51
Common equity7,402
 9.70
 7,327
 9.98
Tangible common equity (b)6,764
 8.93
 6,688
 9.19
Risk-weighted assets (a)69,996
   68,273
  
(a)    March 31, 2021 capital, risk-weighted assets and ratios are estimated.
(a)March 31, 2020 capital, risk-weighted assets and ratios are estimated and reflect deferral of CECL model impact as calculated per regulatory guidance.
(b)See Supplemental Financial Data section for reconcilements of non-GAAP financial measures.
(b)    See Supplemental Financial Data section for reconciliations of non-GAAP financial measures and regulatory ratios.
RISK MANAGEMENT
The following updated information should be read in conjunction with the "Risk Management" section on pages F-20F-22 through F-33F-38 in the Corporation's 20192020 Annual Report.
Credit Risk
Allowance for Credit Losses
The allowance for credit losses includes both the allowance for loan losses and the allowance for credit losses on lending-related commitments. Effective January 1, 2020,As a percentage of total loans, the allowance for credit losses reflected the adoption of Topic 326,was 1.59 percent at March 31, 2021, compared to 1.90 percent at December 31, 2020. Excluding $3.8 billion in PPP loans, which requires companies to estimate credit losses using the CECL framework.
CECL at January 1, 2020
At adoption on January 1, 2020, the scope and severity of the economic crisis resulting from the eventual COVID-19 pandemic were unknown. As such, the economic scenario usedare guaranteed by the Corporation to develop its estimate of CECL as of the adoption date reflected a continued moderate U.S. economic expansion compared to 2019 levels and a stable interest rate environment, with the federal funds rate remaining in the 1.50- to 1.75-percent range. Other assumptions included resolution of trade tensions, a calmer global economy and a strong U.S. dollar, all of which supported modest industrial production growth and stable oil prices. The economic scenario also assumed strong labor market conditions to support the consumer sector. Management also considered the level of uncertainty regarding its economic assumptions as part of the qualitative adjustment. The adoption of CECL resulted in a $17 million day-one decrease inSmall Business Administration, the allowance for credit losses from $668 millionwas 1.72 percent of total loans at March 31, 2021, compared to 2.03% at December 31, 2019 under the incurred loss model. See Note 1 to the consolidated financial statements2020. The allowance for further information about the adoption of CECL.
CECLcredit losses covered 2.6 times and 2.8 times total nonperforming loans at March 31, 2021 and December 31, 2020, respectively.
The allowance for credit losses was $978decreased $185 million to $807 million at March 31, 2020, which increased $327 million during the first quarter of 2020,2021, primarily reflecting a sustained recovery by the economic impacts ofU.S. economy from the COVID-19 pandemic and impacts of mitigating actions by the response by domestic and global governmental authorities, including quarantines and other social distancing policies aimed at fightingU.S. government. In addition to the spread$900 billion relief package approved in December 2020, Congress passed an additional $1.9 trillion of stimulus in March 2021 as part of the virus, which resultedAmerican Rescue Plan Act of 2021 in an economic slowdown with unprecedented speedMarch 2021. While there continues to be uncertainty, the positive progress of the vaccine rollout and force. Oil prices decreased significantly duringassociated opening of the first quarter as a result of an imbalance in production supply and demand, adding stress to an already reduced capital market activity. In responsebroader economy contributed to the worsening situation, the Federal Reserve announcedimproved economic outlook and increase in March that it was reducing the target federal funds rate to zero to 0.25 percent, and Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which included an estimated $2 trillion stimulus package seeking to prevent a protracted severe economic recession in the U.S. energy prices.
These developmentsfactors shaped the economic scenarios2-year reasonable and supportable forecast used by the Corporation in its calculation of the CECL estimate at March 31, 2020.2021. The base scenario forecastedU.S. economy is expected to grow this year at a recession with significant economic deteriorationfaster pace than previously expected, primarily due to the additional stimulus package approved in the first quarter, normalizing into historical growth rates in the second quarterhalf of 2020 before a partial recoverythe forecast period. Forecasts for other key economic variables, including the unemployment rate and oil prices, are generally in third quarter 2020 and more modest recoveryline with GDP projections. Interest rates remain low, reflecting the Federal Reserve's expectation that rates will remain at current levels in subsequent quarters. the near-to mid-term, while corporate bond rates reflect stabilizing default risk. The following table summarizes the forecasts for the economic variables most impactful to the allowance for credit losses estimate at March 31, 2021.

45
Table of Contents
Economic VariableBase Forecast
Real Gross Domestic Product (GDP) growthGrowth peaks at 7 percent in third quarter 2021, normalizing into a long-term growth rate of 2 percent by second quarter 2022.
Unemployment rateCurrent levels gradually decrease to 4 percent by the end of the forecast period.
Corporate BBB bond to 10-year Treasury bond spreadsSpreads gradually increasing from current levels to 1.6 percent by the end of the forecast period.
Oil PricesPrices remain near $55 per barrel throughout the forecast period.
Due to the high degreelevel of uncertainty regarding significant assumptions, such as the ultimate economic consequencesimpact of the global pandemic, as well as the effectivenessCorporation evaluated a range of the government’s stimulus packages, management also considered other economic scenarios, to make appropriate qualitative adjustments for certain sectors of its lending portfolio, including more benign and more severe forecasts that resulted in a decline in gross domestic product ranging from 13 percent to


46
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33 percent in the second quarter of 2020, respectively. For certain loan portfolios deemed to have increased exposure to the current economic environment, including energy, automotive production, leveraged loans and industries considered at risk due to social distancing, management consideredforecasts. In the more severe assumptions.scenario, real GDP is expected to contract in 2021, gradually improving to 3 percent by third quarter 2022. Other key economic variables follow a similar pattern of an uneven, lagged recovery. Selecting the more severe forecast would result in an increase in the quantitative calculation of allowance for credit losses by approximately $312 million as of March 31, 2021.However, factoring in model overlays and qualitative adjustments could result in a materially different estimate under a more severe scenario.
Allowance for Loan Losses
The allowance for loan losses represents management’s estimates of current expected credit losses in the Corporation’s loan portfolio. Pools of loans with similar risk characteristics are collectively evaluated, while loans that no longer share risk characteristics with loan pools are evaluated individually.
Collective loss estimates are determined by applying reserve factors, designed to estimate current expected credit losses, to amortized cost balances over the remaining contractual life of the collectively evaluated portfolio. Loans with similar risk characteristics are aggregated into homogeneous pools. The allowance for loan losses also includes qualitative adjustments to bring the allowance to the level management believes is appropriate based on factors that have not otherwise been fully accounted for, including adjustments for foresight risk, input imprecisions and model imprecision. Credit losses for loans that no longer share risk characteristics with the loan pools are estimated on an individual basis. Individual credit loss estimates are typically performed for nonaccrual loans and modified loans classified as troubled debt restructurings (TDRs) and are based on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.    
As a percentage of total loans, the allowance for loan losses was 1.711.54 percent at March 31, 2020,2021, compared to 1.271.81 percent at December 31, 2019. The allocation of reserves2020. Excluding PPP loans, the allowance for Energy loans increased to over 10 percent in response to the pressures on oil and gas markets described above. Nonperforming loans were 0.45loan losses was 1.66 percent of total loans at March 31, 2020,2021, compared to 0.401.94% at December 31, 2020. Nonperforming loans were 0.63 percent of total loans at March 31, 2021, compared to 0.67 percent at December 31, 2019,2020, and the allowance for loan losses covered 3.82.5 times and 3.12.7 times total nonperforming loans at March 31, 20202021 and December 31, 2019,2020, respectively.
Allowance for Credit Losses on Lending-Related Commitments
The allowance for credit losses on lending-related commitments estimates current expected credit losses on collective pools of letters of credit and unused commitments to extend credit based on standard reserve factors, determined in a manner similar to business loans, multiplied by a probability of draw estimate based on historical experience and credit risk, applied to commitment amounts. The allowance for credit losses on lending-related commitments totaled $62$30 million and $31$44 million at March 31, 20202021 and December 31, 2019,2020, respectively.
For additional information regarding the allowance for credit losses, refer to the "Critical Accounting Policies" section and pages F-57 through F-59 in Note 1 to the consolidated financial statements.statements of the Corporation's 2020 Annual Report.
Nonperforming Assets
Nonperforming assets include loans on nonaccrual status, troubled debt restructured loans (TDRs)TDRs which have been renegotiated to less than the original contractual rates (reduced-rate loans) and foreclosed property.assets. TDRs include performing and nonperforming loans, with nonperforming TDRs on either nonaccrual or reduced-rate status. CertainIn accordance with the provisions withinof the CARES Act, encourage financial institutionsthe Corporation elected not to practice prudent efforts to work with borrowers impacted by COVID-19. Under these provisions,consider qualifying COVID-19-related modifications, deemed to be COVID-19-related wouldprimarily deferrals, as TDRs and does not be considered a TDR if the loan was not more than 30 daysdesignate such loans as past due as of December 31, 2019 andor nonaccrual. For additional information regarding the deferral was executed between MarchCorporation's accounting policies for the CARES Act, refer to page F-56 in Note 1 2020 andto the earlier of 60 days after the date of terminationconsolidated financial statements of the COVID-19 national emergency or December 31, 2020. The banking regulators issued similar guidance, which also clarified that a COVID-19-related modification should not be considered a TDR if the borrower was current on payments at the time the underlying loan modification program was implemented and if the modification is considered to be short-term. Under these terms, as of March 31,Corporation's 2020 the Corporation had processed payment deferrals for approximately 60 obligors with an aggregate loan balance of $108 million. Through April 24, 2020, the number of obligors whose deferral request was processed increased to approximately 1,000 with an aggregate loan balance of $2.7 billion, with substantially all considered performing at the time of deferral.

Annual Report.

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The following table presents a summary of nonperforming assets and past due loans.
(dollar amounts in millions)March 31, 2020 December 31, 2019(dollar amounts in millions)March 31, 2021December 31, 2020
Nonaccrual loans:   Nonaccrual loans:
Business loans:   Business loans:
Commercial$173
 $148
Commercial$230 $252 
Real estate constructionReal estate construction1 1 
Commercial mortgage19
 14
Commercial mortgage34 29 
Lease financing1
 —
Lease financing1 1 
Total nonaccrual business loans193
 162
Total nonaccrual business loans266 283 
Retail loans:   Retail loans:
Residential mortgage20
 20
Residential mortgage33 47 
Consumer:   Consumer:
Home equity22
 17
Home equity15 17 
Total nonaccrual retail loans42
 37
Total nonaccrual retail loans48 64 
Total nonaccrual loans235
 199
Total nonaccrual loans314 347 
Reduced-rate loans4
 5
Reduced-rate loans2 3 
Total nonperforming loans239
 204
Total nonperforming loans316 350 
Foreclosed property11
 11
Foreclosed property8 8 
Other repossessed assetsOther repossessed assets1 1 
Total nonperforming assets$250
 $215
Total nonperforming assets$325 $359 
Nonperforming loans as a percentage of total loans0.45% 0.40%Nonperforming loans as a percentage of total loans0.63 %0.67 %
Nonperforming assets as a percentage of total loans and foreclosed property0.47
 0.43
Nonperforming assets as a percentage of total loans and foreclosed property0.64 0.69 
Allowance for loan losses as a multiple of total nonperforming loans3.8x
 3.1x
Allowance for credit losses as a multiple of total nonperforming loansAllowance for credit losses as a multiple of total nonperforming loans2.6x2.8x
Loans past due 90 days or more and still accruing$64
 $26
Loans past due 90 days or more and still accruing$60 $45 
Nonperforming assets increased $35decreased $34 million to $250$325 million at March 31, 2020,2021, from $215$359 million at December 31, 2019.2020. The increasedecrease in nonperforming assets primarily reflected a $25$21 million increase in nonaccrual commercial loans, which included a $22 million increasedecrease in nonperforming Energy loans, which are a component of commercial loans.
As of March 31, 2021, COVID-19-related payment deferrals totaled $87 million, or 0.17 percent of total loans, representing approximately 100 obligors and consisting of 79 percent retail loans, primarily residential mortgages, and 21 percent commercial loans. Initial deferrals have expired and new requests have been nominal as customers continue to adjust to the new environment, resulting in a $54 million decrease in deferrals since fourth quarter 2020. Loans with COVID-19-related deferred payments on a third deferral, primarily residential mortgages, totaled $71 million at March 31, 2021 and would generally be considered TDRs if not for the provisions in the CARES Act.
The following table presents a summary of TDRs at March 31, 20202021 and December 31, 2019. The table does2020.
(in millions)March 31, 2021December 31, 2020
Nonperforming TDRs:
Nonaccrual TDRs$29 $33 
Reduced-rate TDRs2 3 
Total nonperforming TDRs31 36 
Performing TDRs (a)40 41 
Total TDRs$71 $77 
(a)TDRs that do not include loan modifications deemed related toa reduction in the COVID-19 pandemic.original contractual interest rate which are performing in accordance with their modified terms.











47
(in millions)March 31, 2020 December 31, 2019
Nonperforming TDRs:   
Nonaccrual TDRs$59
 $36
Reduced-rate TDRs4
 5
Total nonperforming TDRs63
 41
Performing TDRs (a)40
 69
Total TDRs$103
 $110
(a)TDRs that do not include a reduction in the original contractual interest rate which are performing in accordance with their modified terms.
During the three months ended March 31, 2020, $22 millionTable of previously performing Energy TDRs were transferred to nonaccrual. At March 31, 2020, Energy TDRs totaled $31 million, all of which were on nonaccrual status, compared to $14 million at December 31, 2019.Contents
The following table presents a summary of changes in nonaccrual loans.
Three Months Ended
(in millions)March 31, 2021December 31, 2020
Balance at beginning of period$347 $322 
Loans transferred to nonaccrual (a)61 88 
Nonaccrual loan gross charge-offs(16)(39)
Loans transferred to accrual status (a)(17)(3)
Nonaccrual loans sold(25)— 
Payments/other (b)(36)(21)
Balance at end of period$314 $347 
 Three Months Ended
(in millions)March 31, 2020 December 31, 2019
Balance at beginning of period$199
 $220
Loans transferred to nonaccrual (a)137
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Nonaccrual loan gross charge-offs(89) (27)
Loans transferred to accrual status (a)—
 (7)
Nonaccrual loans sold—
 (10)
Payments/other (b)(12) (25)
Balance at end of period$235
 $199
(a)Based on an analysis of nonaccrual loans with book balances greater than $2 million.
(a)Based on an analysis of nonaccrual loans with book balances greater than $2 million.
(b)Includes net changes related to nonaccrual loans with balances less than $2 million, payments on nonaccrual loans with book balances greater than $2 million and transfers of nonaccrual loans to foreclosed property.
(b)Includes net changes related to nonaccrual loans with balances less than or equal to $2 million, payments on nonaccrual loans with book balances greater than $2 million and transfers of nonaccrual loans to foreclosed property.
There were 13three borrowers with a balance greater than $2 million, totaling $137$61 million, transferred to nonaccrual status in first quarter 2020,2021, compared to sixseven borrowers totaling $88 million in fourth quarter 2019.2020. For further information about the composition of loans


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transferred to nonaccrual during the current period, refer to the nonaccrual information by industry category table on the following page.below.
The following table presents the composition of nonaccrual loans by balance and the related number of borrowers at March 31, 20202021 and December 31, 2019.2020.
March 31, 2020 December 31, 2019March 31, 2021December 31, 2020
(dollar amounts in millions)
Number of
Borrowers
 Balance 
Number of
Borrowers
 Balance(dollar amounts in millions)Number of
Borrowers		BalanceNumber of
Borrowers		Balance
Under $2 million708
 $74
 708
 $74
Under $2 million661 $88 682 $83 
$2 million - $5 million15
 45
 8
 22
$2 million - $5 million14 40 20 61 
$5 million - $10 million9
 70
 6
 49
$5 million - $10 million9 70 9 73 
$10 million - $25 million3
 46
 4
 54
$10 million - $25 million5 82 7 94 
Greater than $25 millionGreater than $25 million1 34 1 36 
Total735
 $235
 726
 $199
Total690 $314 719 $347 
The following table presents a summary of nonaccrual loans at March 31, 20202021 and loans transferred to nonaccrual and net loan charge-offs (recoveries) for the three months ended March 31, 2020,2021, based primarily on North American Industry Classification System (NAICS) categories.
March 31, 2021Three Months Ended March 31, 2021
(dollar amounts in millions)Nonaccrual LoansLoans Transferred to
Nonaccrual (a)		Net Loan Charge-Offs (Recoveries)
Industry Category
Mining, Quarrying and Oil & Gas Extraction$93 30 %$28 47 %$(1)(36)%
Transportation & Warehousing34 11 — — — — 
Manufacturing33 11 — — 2 61 
Residential Mortgage33 10 — — — — 
Wholesale Trade28 9 — — — — 
Services18 6 3 4 1 20 
Real Estate & Home Builders15 5 — — (1)(11)
Information & Communication14 4 — — — — 
Arts, Entertainment & Recreation9 3 — — — — 
Retail Trade4 1 — — — — 
Health Care & Social Assistance3 1 — — (1)(27)
Contractors3 1 — — (1)(41)
Utilities— — 30 49 5 149 
Other (b)27 8 — — (1)(15)
Total$314 100 %$61 100 %$3 100 %
(a)Based on an analysis of nonaccrual loans with book balances greater than $2 million.
(b)Consumer, excluding residential mortgage and certain personal purpose nonaccrual loans and net charge-offs, are included in the Other category.

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 March 31, 2020 Three Months Ended March 31, 2020
(dollar amounts in millions)Nonaccrual Loans 
Loans Transferred 
to
Nonaccrual (a)
 Net Loan Charge-Offs (Recoveries)
Industry Category  
Mining, Quarrying and Oil & Gas Extraction$65
 28% $98
 71% $67
 82 %
Wholesale Trade37
 16
 7
 5
 7
 9
Manufacturing25
 10
 4
 3
 1
 1
Residential Mortgage20
 9
 —
 —
 —
 —
Services16
 7
 5
 4
 (1) (2)
Retail Trade15
 6
 12
 9
 4
 5
Information & Communication12
 5
 —
 —
 —
 —
Contractors5
 2
 —
 —
 1
 —
Health Care & Social Assistance4
 2
 —
 —
 2
 2
Real Estate & Home Builders4
 1
 —
 —
 —
 —
Other (b)32
 14
 11
 8
 3
 3
Total$235
 100% $137
 100% $84
 100 %
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(a)Based on an analysis of nonaccrual loans with book balances greater than $2 million.
(b)Consumer, excluding residential mortgage and certain personal purpose nonaccrual loans and net charge-offs, are included in the Other category.
Loans past due 90 days or more and still accruing interest which generally represent loans that are well collateralized and in the process of collection,collection. Loans past due 90 days or more increased $38$15 million to $64$60 million at March 31, 2020,2021, compared to $26$45 million at December 31, 2019.2020. Loans past due 30-89 days and still accruing interest increased $255decreased $102 million to $382$302 million at March 31, 2020,2021, compared to $127$404 million at December 31, 2019.2020. Loans past due 30 days or more and still accruing interest as a percentage of total loans were 0.830.72 percent and 0.300.86 percent at March 31, 20202021 and December 31, 2019,2020, respectively. An aging analysis of loans included in Note 4 to the consolidated financial statements provides further information about the balances comprising past due loans.
The following table presents a summary of total criticized loans. The Corporation's criticized list is consistent with the Special Mention, Substandard and Doubtful categories defined by regulatory authorities. Criticized loans with balances of $2 million or more on nonaccrual status or loans with balances of $1 million or more whose terms have been modified in a TDR are individually subjected to quarterly credit quality reviews, and the Corporation may establish specific allowances for such loans. A table of loans by credit quality indicator included in Note 4 to the consolidated financial statements provides further information about the balances comprising total criticized loans.
(dollar amounts in millions)March 31, 2020 December 31, 2019(dollar amounts in millions)March 31, 2021December 31, 2020
Total criticized loans$2,457
 $2,120
Total criticized loans$2,581 $2,947 
As a percentage of total loans4.6% 4.2%As a percentage of total loans5.1 %5.6 %
The $337$366 million increasedecrease in criticized loans during the three months ended March 31, 20202021 included increasesdecreases of $127$207 million in Energy and $106$155 million in Technology and Life Sciences.




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general Middle Market.
Concentrations of Credit Risk
Concentrations of credit risk may exist when a number of borrowers are engaged in similar activities, or activities in the same geographic region, and have similar economic characteristics that would cause them to be similarly impacted by changes in economic or other conditions. The Corporation has concentrations of credit risk with the automotive and commercial real estate and automotive industries. All other industry concentrations, as defined by management, individually represented less than 10 percent of total loans at March 31, 2020.
Automotive Lending - Dealer:
The following table presents a summary of dealer loans.
 March 31, 2020 December 31, 2019
(in millions)
Loans
Outstanding
 
Percent of
Total Loans
 
Loans
Outstanding
 
Percent of
Total Loans
Dealer:       
Floor plan$4,077
   $3,967
  
Other3,173
   3,447
  
Total dealer$7,250
 13.6% $7,414
 14.7 %
Substantially all dealer loans are in the National Dealer Services business line and primarily include floor plan financing and other loans to automotive dealerships. Floor plan loans, included in commercial loans in the Consolidated Balance Sheets, totaled $4.1 billion at March 31, 2020, an increase of $110 million compared to $4.0 billion at December 31, 2019. At March 31, 2020 and December 31, 2019, other loans to automotive dealers in the National Dealer Services business line totaled $3.2 billion and $3.4 billion, respectively, including $2.0 billion of owner-occupied commercial real estate mortgage loans at both March 31, 2020 and December 31, 2019, respectively.
Nonaccrual dealer loans totaled $4 million at March 31, 2020 and $9 million at December 31, 2019. Dealer loan net charge-offs totaled $1 million for the three months ended March 31, 2020, compared to none for the three months ended March 31, 2019.
Automotive Lending- Production:
The following table presents a summary of loans to borrowers involved with automotive production.
 March 31, 2020 December 31, 2019
(in millions)
Loans
Outstanding
 
Percent of
Total Loans
 
Loans
Outstanding
 
Percent of
Total Loans
Production:       
Domestic$972
   $963
  
Foreign306
   286
  
Total production$1,278
 2.4% $1,249
 2.5 %
Loans to borrowers involved with automotive production, primarily Tier 1 and Tier 2 suppliers, totaled $1.3 billion and $1.2 billion at March 31, 2020 and December 31, 2019, respectively. These borrowers could face financial difficulties due to disruptions in auto production as well as their supply chains and logistics operations as a result of the COVID-19 pandemic. As such, management prudently increased reserves for this portfolio as of March 31, 2020.
Nonaccrual loans to borrowers involved with automotive production totaled $9 million at March 31, 2020 and $10 million at December 31, 2019. Criticized automotive production loans were 17 percent of criticized loans at March 31, 2020, compared to 15 percent at December 31, 2019. There were no automotive production loan net charge-offs in the three months ended March 31, 2020, compared to net recoveries of $1 million in the three months ended March 31, 2019.


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2021.
Commercial Real Estate Lending
The following table summarizes the Corporation's commercial real estate loan portfolio by loan category.
March 31, 2021December 31, 2020
(in millions)Commercial Real Estate business line (a)Other (b)TotalCommercial Real Estate business line (a)Other (b)Total
Real estate construction loans$3,810 $434 $4,244 $3,657 $425 $4,082 
Commercial mortgage loans2,311 7,682 9,993 2,273 7,639 9,912 
Total commercial real estate$6,121 $8,116 $14,237 $5,930 $8,064 $13,994 
 March 31, 2020 December 31, 2019
(in millions)Commercial Real Estate business line (a) Other (b) Total Commercial Real Estate business line (a) Other (b) Total
Real estate construction loans$3,346
 $410
 $3,756
 $3,044
 $411
 $3,455
Commercial mortgage loans2,179
 7,519
 9,698
 2,176
 7,383
 9,559
Total commercial real estate$5,525
 $7,929
 $13,454
 $5,220
 $7,794
 $13,014
(a)Primarily loans to real estate developers.
(a)Primarily loans to real estate developers.
(b)Primarily loans secured by owner-occupied real estate.
(b)Primarily loans secured by owner-occupied real estate.
The Corporation limits risk inherent in its commercial real estate lending activities by monitoring borrowers directly involved in the commercial real estate markets and adhering to conservative policies on LTVloan-to-value ratios for such loans. Commercial real estate loans, consisting of real estate construction and commercial mortgage loans, totaled $13.5$14.2 billion at March 31, 2020, an increase of $440 million compared to December 31, 2019, of which $5.52021. Of the total, $6.1 billion, or 4143 percent, were to borrowers in the Commercial Real Estate business line, includingwhich includes loans to real estate developers. The remaining $7.9 billion, or 59 percent,developers, an increase of commercial$191 million compared to December 31, 2020. Commercial real estate loans in other business lines totaled $8.1 billion, or 57 percent, at March 31, 2021. These loans consisted primarily of owner-occupied commercial mortgages, which bear credit characteristics similar to non-commercial real estate business loans.
The real estate construction loan portfolio primarily contains loans made to long-tenured customers with satisfactory completion experience. Criticized real estate construction loans in the Commercial Real Estate business line totaled $33$29 million and $31$27 million at March 31, 20202021 and December 31, 2019,2020, respectively. In other business lines, there were no criticized real estate construction loans totaled $39 million at both March 31, 2020 and2021, compared to $20 million at December 31, 2019.2020. There were no real estate construction loan charge-offs in either of the three-month periods ended March 31, 20202021 and 2019.2020.
Commercial mortgage loans are loans where the primary collateral is a lien on any real property and are primarily loans secured by owner occupiedowner-occupied real estate. Real property is generally considered primary collateral if the value of that collateral represents more than 50 percent of the commitment at loan approval. Loans in the commercial mortgage portfolio generally mature within three to five years. Criticized commercial mortgage loans in the Commercial Real Estate business line totaled $54$71 million and $55$73 million at March 31, 20202021 and December 31, 2019,2020, respectively. In other business lines, $236$350 million and $242$440 million of commercial mortgage loans were criticized at March 31, 20202021 and December 31, 2019, 2020,

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respectively. CommercialThere were no commercial mortgage loan net recoveries were $2 millioncharge-offs for the three months ended March 31, 2020,2021, compared to net charge-offsrecoveries of $1$2 million for the same period in 2019.2020.
Automotive Lending - Dealer
The following table presents a summary of dealer loans.
March 31, 2021December 31, 2020
(in millions)Loans
Outstanding		Percent of
Total Loans		Loans
Outstanding		Percent of
Total Loans
Dealer:
Floor plan$1,506 $2,344 
Other3,245 3,348 
Total dealer$4,751 9.4 %$5,692 10.9 %
Substantially all dealer loans are in the National Dealer Services business line and primarily include floor plan financing and other loans to automotive dealerships. Floor plan loans, included in commercial loans in the Consolidated Balance Sheets, totaled $1.5 billion at March 31, 2021, a decrease of $838 million compared to $2.3 billion at December 31, 2020 due to an imbalance in supply and demand impacted by a shortage in microchips used in automotive production. At March 31, 2021 and December 31, 2020, other loans to automotive dealers in the National Dealer Services business line totaled $3.2 billion and $3.3 billion, respectively, including $2.0 billion of owner-occupied commercial real estate mortgage loans at both March 31, 2021 and December 31, 2020.
There were no nonaccrual dealer loans at both March 31, 2021 and December 31, 2020. Additionally, there were no net charge-offs of dealer loans in the three months ended March 31, 2021, compared to $1 million in the three months ended March 31, 2020.
Automotive Lending- Production
The following table presents a summary of loans to borrowers involved with automotive production.
March 31, 2021December 31, 2020
(in millions)Loans
Outstanding (a)		Percent of
Total Loans		Loans
Outstanding (a)		Percent of
Total Loans
Production:
Domestic$796 $791 
Foreign306 302 
Total production$1,102 2.2 %$1,093 2.1 %
(a)Excludes PPP loans.
Loans to borrowers involved with automotive production, primarily Tier 1 and Tier 2 suppliers, totaled $1.1 billion at both March 31, 2021 and December 31, 2020. These borrowers have faced, and could face in the future, financial difficulties due to disruptions in auto production as well as their supply chains and logistics operations as a result of the COVID-19 pandemic. As such, management continued to monitor this portfolio and allocated reserves for this portfolio at March 31, 2021 were relatively stable.
Nonaccrual loans to borrowers involved with automotive production totaled $8 million at March 31, 2021 and $7 million at December 31, 2020. Criticized automotive production loans were 21 percent of the automotive production portfolio at March 31, 2021, compared to 24 percent at December 31, 2020. There were no automotive production loan net charge-offs in both of the three months ended March 31, 2021 and 2020.

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Residential Real Estate Lending
At March 31, 2021, residential real estate loans represented 7 percent of total loans. The following table summarizes the Corporation's residential mortgage and home equity loan portfolios by geographic market.
March 31, 2021December 31, 2020
(dollar amounts in millions)Residential
Mortgage
Loans		% of
Total		Home
Equity
Loans		% of
Total		Residential
Mortgage
Loans		% of
Total		Home
Equity
Loans		% of
Total
Geographic market:
Michigan$425 23 %$516 33 %$428 23 %$540 34 %
California894 50 662 42 927 51 655 41 
Texas264 15 328 21 254 14 328 21 
Other Markets216 12 64 4 221 12 65 4 
Total$1,799 100 %$1,570 100 %$1,830 100 %$1,588 100 %
Residential real estate loans, which consist of traditional residential mortgages and home equity loans and lines of credit, totaled $3.5$3.4 billion or 7 percent of total loans, at March 31, 2020. The following table summarizes the Corporation's residential mortgage and home equity loan portfolios by geographic market.
 March 31, 2020 December 31, 2019
(dollar amounts in millions)Residential
Mortgage
Loans		 % of
Total		 Home
Equity
Loans		 % of
Total		 Residential
Mortgage
Loans		 % of
Total		 Home
Equity
Loans		 % of
Total
Geographic market:               
Michigan$420
 23% $596
 34% $412
 22% $603
 35%
California907
 50
 719
 42
 932
 51
 699
 41
Texas271
 15
 349
 20
 275
 15
 346
 20
Other Markets223
 12
 63
 4
 226
 12
 63
 4
Total$1,821
 100% $1,727
 100% $1,845
 100% $1,711
 100%
2021. The residential real estate portfolio is principally located within the Corporation's primary geographic markets. Substantially all residential real estate loans past due 90 days or more are placed on nonaccrual status, and substantially all junior lien home equity loans that are current or less than 90 days past due are placed on nonaccrual status if full collection of the senior position is in doubt. At no later than 180 days past due, such loans are charged off to current appraised values less costs to sell.
Residential mortgages totaled $1.8 billion at March 31, 2020,2021, and were primarily larger, variable-rate mortgages originated and retained for certain private banking relationship customers. Of the $1.8 billion of residential mortgage loans outstanding, $20$33 million were on nonaccrual status at March 31, 2020.2021. The home equity portfolio totaled $1.7$1.6 billion at March 31, 2020,2021, of which $1.6$1.5 billion was outstanding under primarily variable-rate, interest-only home equity lines of credit, $99$64 million were in amortizing


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status and $22$16 million were closed-end home equity loans. Of the $1.7$1.6 billion of home equity loans outstanding, $22$15 million were on nonaccrual status at March 31, 2020.2021. A majority of the home equity portfolio was secured by junior liens at March 31, 2020.2021. 
Energy Lending
The Corporation has a portfolio of Energy loans primarilythat are included entirely in commercial loans in the Consolidated Balance Sheets. Customers in the Corporation's Energy business line of business (approximately 140120 relationships) are engaged in three segments of the oil and gas business: exploration and production (E&P), midstream and energy services. E&P generally includes such activities as searching for potential oil and gas fields, drilling exploratory wells and operating active wells. Commitments to E&P borrowers are generally subject to semi-annual borrowing base re-determinations based on a variety of factors including updated pricingprices (reflecting market and competitive conditions), energy reserve levels and the impact of hedging. The midstream sector is generally involved in the transportation, storage and marketing of crude and/or refined oil and gas products. The Corporation's energy services customers provide products and services primarily to the E&P segment.
The following table summarizes information about loans in the Corporation's Energy business line.
March 31, 2021December 31, 2020
(dollar amounts in millions)OutstandingsNonaccrualCriticized (a)OutstandingsNonaccrualCriticized (a)
Exploration and production (E&P)$1,077 79 %$93 $346 $1,295 81 %$114 $527 
Midstream270 20 — 32 261 16 — 56 
Services19 1 — 11 44 3 — 13 
Total Energy business line$1,366 100 %$93 $389 $1,600 100 %$114 $596 
As a percentage of total Energy loans7 %28 %7 %37 %
 March 31, 2020 December 31, 2019
(dollar amounts in millions)OutstandingsNonaccrualCriticized (a) OutstandingsNonaccrualCriticized (a)
Exploration and production (E&P)$1,695
80%$65
$417
 $1,741
78%$43
$289
Midstream364
17
—
59
 432
20
—
63
Services55
3
—
17
 48
2
—
14
Total Energy business line$2,114
100%$65
$493
 $2,221
100%$43
$366
As a percentage of total Energy loans3%23% 

 2%16%
(a)    Includes nonaccrual loans.
(a)Includes nonaccrual loans.
Loans in the Energy business line totaled $2.1$1.4 billion, or 43 percent of total loans, at March 31, 2020, and $2.2 billion at December 31, 2019,2021, a decrease of $107$234 million. Total exposure, including unused commitments to extend credit and letters of credit, was $3.7$3.0 billion (a utilization rate of 46 percent) and $4.3$3.1 billion at March 31, 20202021 and December 31, 2019,2020, respectively.
The decrease in total exposure in the Energy business line primarily reflected reduced borrowing bases as a result of lower oil and gas prices. At March 31, 2020, the Corporation had completed approximately 8 percent of the Spring borrowing base re-determinations and approximately 23 percent through April 24, 2020 resulting in average reduction to the borrowing base of 24 percent. Utilization increased to 56 percent primarily as a result of the reduction in exposure at March 31, 2020. The value and coverage benefit of hedging contracts are dependent upon the oil/gas price in each contract, as well as the operational costs, which are different for each borrower. As of March 31, 2020, 66 percent of the Corporation's E&P customers had at least 50 percent of their oil and/or gas production hedged up to one year and 35 percent of customers had at least 50 percent of production hedged for two years or more.
The Corporation's allowance methodology considers the various risk elements within the loan portfolio. When merited, the Corporation may incorporate a qualitative reserve component for Energy loans. The allocation of reserves for Energy loans increased to over 10 percent of the Energy portfolio at March 31, 2020 in response to oil market supply/demand imbalances as well as reduced capital market activity. The supply/demand imbalance has been exacerbated by the economic impacts from the COVID-19 pandemic, further stressing the Energy portfolio. Net credit-related Energy recoveries were $1 million in first quarter 2021, compared to net charge-offs wereof $67 million and $8 million for the three-month periods ended March 31, 2020 and 2019, respectively, while nonaccrualsame period in 2020. Nonaccrual Energy loans increased $22decreased $21 million to $65$93 million at March 31, 2020,2021, compared to December 31, 2019.2020. Criticized Energy loans increased $127decreased $207 million to $493$389 million, or 2015 percent of total criticized loans, at March 31, 2020.2021.


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Leveraged Loans
Certain loans in the Corporation's commercial portfolio are considered leveraged transactions. These loans are typically used for mergers, acquisitions, business recapitalizations, refinancing and equity buyouts. To help mitigate the risk associated with these loans, the Corporation focuses on middle market companies with highly capable management teams, strong sponsors and solid track records of financial performance. Industries prone to cyclical downturns and acquisitions with a high degree of integration risk are generally avoided. Other considerations include the sufficiency of collateral, the level of balance sheet leverage and the adequacy of financial covenants. During the underwriting process, cash flows are stress-tested to evaluate the borrowers' abilities to handle economic downturns and an increase in interest rates. Management considers the leveraged loan portfolio to be one of the most sensitive to economic impacts stemming from the COVID-19 pandemic and social distancing policies and has prudently increased reserves for this portfolio as of March 31, 2020. Certain energy, automotive production, and loans in other portfolios specifically identified as subject to additional stress due to COVID-19 impacts are also considered leveraged transactions.


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The FDIC defines higher-risk commercial and industrial (HR C&I) loans for assessment purposes as loans generally with leverage of four times total debt to earnings before interest, taxes and depreciation (EBITDA) as well as three times senior debt to EBITDA, excluding certain collateralized loans.
The following table summarizes information about HR C&I loans.
(in millions)March 31, 2020 December 31, 2019(in millions)March 31, 2021December 31, 2020
Outstandings$2,473
 $2,553
Outstandings$2,497 $2,441 
Criticized294
 169
Criticized404 418 
Net loan charge-offsNet loan charge-offs20212020
Three Months Ended March 31,2020 2019Three Months Ended March 31,$1 $8 
Net loan charge-offs$8
 $5
Other Loan PortfoliosSectors Most at Risk due to Economic Stress Resulting from COVID-19 Impacts
The COVID-19 pandemic    As the economy recovers, aided by additional stimulus packages and positive momentum in the vaccine rollout, the Corporation has negatively impactedcontinued to monitor the global economy, disrupted global supply chains and increased unemployment levels. The resulting temporary closure of many businesses and the implementation of social distancing and sheltering in place policies may impact manylingering impacts of the Corporation’spandemic on its customers. In addition to the energy, automotive production and leveraged loan portfolios, the Corporation considers the following portfoliossectors of its loan portfolio to be most vulnerable to financial risks from business disruptions caused by the pandemic spread mitigation efforts. For further discussion, see Item 1.A "Risk Factors" on page 6013 of this report.the Corporation's 2020 Annual Report.
March 31, 2021
Sector based on NAICS category (dollar amounts in millions)
Loans (a)Percent of Total LoansPercent Criticized (b)Percent Nonaccrual (c)
Retail Commercial Real Estate (d)$843 1.6 %4.6 %— %
Hotels528 1.0 12.4 1.8 
Arts/Recreation237 0.5 34.1 4.4 
Retail Goods and Services230 0.5 15.2 0.1 
All other impacted sectors (e)989 2.0 11.4 1.2 
Total$2,827 5.6 %11.8 %1.1 %
(a)Excludes PPP loans.
(b)Sector criticized loans as a percentage of sector total loans.
(c)Sector nonaccrual loans as a percentage of sector total loans.
(d)Loans in the retail commercial real estate sector are primarily included in the Corporation's commercial real estate portfolio.
(e)Includes airlines, restaurants and bars, childcare, coffee shops, cruise lines, education, gasoline and convenience stores, religious organizations, senior living, freight, as well as travel arrangements.


 March 31, 2020
Sector based on NAICS category (dollar amounts in millions)
Loans Percent of Total Loans Percent Criticized (a)
Hotels/Casinos$736
 1.4% 1.4%
Retail Commercial Real Estate (b)560
 1.0
 —
Arts/Recreation377
 0.7
 1.7
Retail Goods and Services357
 0.7
 9.3
Sports Franchises320
 0.6
 0.2
All other impacted sectors (c)1,320
 2.5
 6.1
Total$3,670
 6.9% 3.6%
(a)Sector criticized loans as a percentage of sector total loans.
(b)Loans in the retail commercial real estate sector are included in the Corporation's commercial real estate portfolio.
(c)Includes airlines, restaurants and bars, childcare, coffee shops, cruise lines, education, gasoline and convenience stores, religious organizations, senior living, freight, travel arrangements, as well as wineries and breweries.
Market and Liquidity Risk
Market risk represents the risk of loss due to adverse movement in prices, including interest rates, foreign exchange rates, commodity prices and equity prices. Liquidity risk represents the risk that the Corporation does not have sufficient access to funds to maintain its normal operations at all times, or does not have the ability to raise or borrow funds at a reasonable cost at all times.
The Asset and Liability Policy Committee (ALCO) of the Corporation establishes and monitors compliance with the policies and risk limits pertaining to market and liquidity risk management activities. ALCO meets regularly to discuss and review market and liquidity risk management strategies and consists of executive and senior management from various areas of the Corporation, including treasury, finance, economics, lending, deposit gathering and risk management. Corporate Treasury mitigates market and liquidity risk under the direction of ALCO through the actions it takes to manage the Corporation's market, liquidity and capital positions.

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In addition to assessing liquidity risk on a consolidated basis, Corporate Treasury also monitors the parent company's liquidity and has established limits for the minimum number of months into the future in which the parent company can meet existing and forecasted obligations without the support of additional dividends from subsidiaries. ALCO's liquidity policy requires the parent company to maintain sufficient liquidity to meet expected capital and debt obligations with a target of 24 months but no less than 18 months.
Corporate Treasury and the Enterprise Risk Division support ALCO in measuring, monitoring and managing interest rate risk as well as all other market risks. Key activities encompass: (i) providing information and analyses of the Corporation's balance sheet structure and measurement of interest rate and all other market risks; (ii) monitoring and reporting of the Corporation's positions relative to established policy limits and guidelines; (iii) developing and presenting analyses and strategies to adjust risk positions; (iv) reviewing and presenting policies and authorizations for approval; and (v) monitoring of industry trends and analytical tools to be used in the management of interest rate and all other market and liquidity risks.


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Interest Rate Risk
Net interest income is the primary source of revenue for the Corporation. Interest rate risk arises in the normal course of business due to differences in the repricing and cash flow characteristics of assets and liabilities, primarily through the Corporation's core business activities of extending loans and acquiring deposits. The Corporation's balance sheet is predominantly characterized by floating-rate loans funded by core deposits. Including the impact of interest rate swaps converting floating-rate loans to fixed, the Corporation's loan composition at March 31, 20202021 was 7055 percent 30-day LIBOR, 67 percent other LIBOR (primarily 60-day)60-and 90-day), 611 percent prime and 1827 percent fixed rate. ThisAdditionally, 25 percent of loans had non-zero interest rate floors protecting against future rate declines. The composition of the loan portfolio creates sensitivity to interest rate movements due to the imbalance between the faster repricing of the floating-rate loan portfolio versus deposit products. In addition, the growth and/or contraction in the Corporation's loans and deposits may lead to changes in sensitivity to interest rate movements in the absence of mitigating actions. Examples of such actions are purchasing fixed-rate investment securities, which provide liquidity to the balance sheet and act to mitigate the inherent interest sensitivity, as well as hedging with interest rate swaps and options. Other mitigating factors include interest rate floors on a portion of the loan portfolio. The Corporation actively manages its exposure to interest rate risk with the principal objective of optimizing net interest income and the economic value of equity while operating within acceptable limits established for interest rate risk and maintaining adequate levels of funding and liquidity.
Since no single measurement system satisfies all management objectives, a combination of techniques is used to manage interest rate risk. These techniques examine the impact of interest rate risk on net interest income and the economic value of equity under a variety of alternative scenarios, including changes in the level, slope and shape of the yield curve utilizing multiple simulation analyses. Simulation analyses produce only estimates of net interest income as the assumptions used are inherently uncertain. Actual results may differ from simulated results due to many factors, including, but not limited to, the timing, magnitude and frequency of changes in interest rates, market conditions, regulatory impacts and management strategies.
Sensitivity of Net Interest Income to Changes in Interest Rates
The analysis of the impact of changes in interest rates on net interest income under various interest rate scenarios is management's principal risk management technique. Management models a base-case net interest income under an unchanged interest rate environment. Existing derivative instruments entered into for risk management purposes as of the balance sheet dates are included in the analysis, but no additional hedging is forecasted. At March 31, 2020,2021, these derivative instruments comprise interest rate swaps that convert $3.3$2.7 billion of fixed-rate medium- and long-term debt to variable rates through fair value hedges and convert $5.6 billion of variable-rate loans to fixed rates through cash flow hedges. Additionally, included in this analysis are $12.7 billion of loans that were subject to an average interest rate floor of 0.8 percent at March 31, 2021. This base-case net interest income is then compared against interest rate scenarios in which short-term rates rise or decline 100 basis points (with a floor of zero percent) in a linear, non-parallel fashion from the base case over 12 months, resulting in an average increase or decrease in short-term interest rateschange of 50 basis points over the period.period while long-term rates increase or decrease to a lesser degree.
Each scenario includes assumptions such as loan growth, investment security prepayment levels, depositor behavior, yield curve changes, loan and deposit pricing, and overall balance sheet mix and growth. Ingrowth which are in line with historical patterns. However, in this low rate environment, depositors have maintained a higher level of liquidity and their historical behavior may be less indicative of future trends. As a result, the rising rate scenario reflects a greater decrease in deposits than we have experienced historically as rates rise. Changes in actual economic activity may result in a materially different interest rate environment as well as a balance sheet structure that is different from the changes management included in its simulation analysis.

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The table below, as of March 31, 20202021 and December 31, 2019,2020, displays the estimated impact on net interest income during the next 12 months by relating the base case scenario results to those from the rising and declining rate scenarios described above.
Estimated Annual Change
March 31, 2020 December 31, 2019March 31, 2021December 31, 2020
(dollar amounts in millions)Amount % Amount %(dollar amounts in millions)Amount%Amount%
Change in Interest Rates:   Change in Interest Rates:   Change in Interest Rates:Change in Interest Rates:
Rising 100 basis points$97
 5 %Rising 100 basis points$90
 4 %Rising 100 basis points$156 9 %Rising 100 basis points$161 9 %
Declining to zero percent(32) (2)Declining 100 basis points(135) (6)Declining to zero percent(31)(2)Declining to zero percent(34)(2)
Sensitivity to risingdeclining interest rates increasedremained steady from December 31, 20192020 to March 31, 20202021 due to offsetting changes in balance sheet composition, partially offset by the addition of swaps converting variable-rate loans to fixed rates. Sensitivity to declining rates decreased due to changes in balance sheet composition andas well as limited remaining downward movement in rates before reaching zero-percenthitting zero percent floors. Sensitivity to rising interest rates remained relatively constant due to continued fixed-rate PPP lending, growth of floating rate loans with floors as well as a slightly larger securities portfolio offsetting higher deposit volumes.
Sensitivity of Economic Value of Equity to Changes in Interest Rates
In addition to the simulation analysis on net interest income, an economic value of equity analysis provides an alternative view of the interest rate risk position. The economic value of equity is the difference between the estimate of the economic value of the Corporation's financial assets, liabilities and off-balance sheet instruments, derived through discounting cash flows based on actual rates at the end of the period, and the estimated economic value after applying the estimated impact of rate movements.


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The Corporation primarily monitors the percentage change on the base-case economic value of equity. The economic value of equity analysis is based on an immediate parallel 100 basis point shock.shock with a floor of zero percent.
The table below, as of March 31, 20202021 and December 31, 2019,2020, displays the estimated impact on the economic value of equity from the interest rate scenario described above.
March 31, 2020 December 31, 2019March 31, 2021December 31, 2020
(dollar amounts in millions)Amount % Amount %(dollar amounts in millions)Amount%Amount%
Change in Interest Rates:   Change in Interest Rates:   Change in Interest Rates:Change in Interest Rates:
Rising 100 basis points$923
 11 %Rising 100 basis points$716
 7 %Rising 100 basis points$1,335 11 %Rising 100 basis points$1,793 18 %
Declining to zero percent(446) (5)Declining 100 basis points(1,178) (12)Declining to zero percent(516)(4)Declining to zero percent(551)(6)
The sensitivity of the economic value of equity to rising rates increaseddecreased from December 31, 20192020 to March 31, 20202021 due to changesduration extension in deposit pay ratesthe securities portfolio and expected shorter deposit lives. The sensitivitySensitivity to declining rates decreased slightly due to the changes in balance sheet composition as well asand is limited remaining downward movement in rates before reaching zero-percent floors.by the assumption of a zero percent rate floor.
LIBOR Transition
On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, publicly announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. The Corporation has substantial exposure to LIBOR-based products, including loans, securities, derivatives and hedges, and is preparing for a transition from LIBOR toward alternative rates. A dedicated program officeExecution activities to begin incorporating fallback language in legacy LIBOR-based commercial loans started in the fourth quarter 2020. By the end of first quarter 2021, the Corporation completed initial systems readiness activities to support new Secured Overnight Financing Rate (SOFR) origination. The Corporation has also signed the new ISDA protocols and governance structure has been established,is operationally ready to issue new SOFR-based Swaps. Communications and learning activities to support customers and colleagues are ongoing. The Corporation's enterprise transition milestones are closely aligned with direction and oversightrecommendations from the Chief Executive Officer, Chief Financial Officer and Chief Risk Officer. A cross-functional implementation team has been tasked with execution of an enterprise LIBOR transition plan road map. Key execution tasks are underway and include evaluating alternative rates and associated impacts, assessing the population of impacted contracts and ensuring necessary fallback provisions are incorporated, ensuring operational and system readiness, monitoring and mitigating overall transition risks, as well as communicating timely with internal and external stakeholders. Additionally, Comerica is a member of the Alternative Reference Rates Committee (ARRC)for both best practices and assists with establishing industry guidelines and recommendations for the overall LIBOR transition.recommended objectives. The Corporation continueswill continue to align with industry and regulatory guidelines regarding the cessation of LIBOR as well as monitor market developments and regulatory updates, as well as collaborate with regulators and industry groups on the transition.for transitioning to alternative reference rates. For a discussion of the various risks facing the Corporation in relation to the transition away from LIBOR, refer to "Itemsee the market risk discussion within “Item 1A. Risk Factors"Factors” beginning on page 1213 of the Corporation's 2019 Annual Report.Report on Form 10-K for the year ended December 31, 2020.
Wholesale Funding
The Corporation may access the purchased funds market when necessary, which includes a variety of funding sources. Capacity for incremental purchased funds at March 31, 20202021 included short-term FHLB advances, the ability to purchase federal funds, sell securities under agreements to repurchase as well as issue deposits through brokers. Purchased funds increaseddecreased to $2.3 billion$30 million at March 31, 20202021 compared to $295$66 million at December 31, 2019, driven by increases in short-term FHLB advances and federal funds purchased. 2020.
At March 31, 2020,2021, the Bank had pledged loans totaling $21.6$18.9 billion which provided for up to $17.2$15.2 billion of available collateralized borrowing with the FRB.Federal Reserve Bank (FRB).

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The Bank is a member of the FHLB of Dallas, Texas, which provides short- and long-term funding to its members through advances collateralized by real estate-related assets. Actual borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. At March 31, 2020, $17.62021, $18.6 billion of real estate-related loans and $5.5$4.0 billion of investment securities were pledged to the FHLB as collateral for current and potential future borrowings. The Corporation had $3.8 billion of FHLB long-term advances, maturing between 2026 and 2028, as well as $750 million in short-term advances outstanding at March 31, 2020, and capacity for potential future borrowings of approximately $9.9$13.9 billion.
Additionally,In April 2021, the Bank terminated a $15.0 billion note program, under which the Bank had the ability to issue up to $13.5 billion of debt at March 31, 20202021. Outstanding notes issued under an existing $15.0 billion notethe program which allowswere unaffected by the issuance of debt with maturities between three months and 30 years. termination.
The Corporation also maintains a shelf registration statement with the Securities and Exchange Commission from which it may issue debt and/or equity securities.


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The ability of the Corporation and the Bank to raise funds at competitive rates may be impacted by rating agencies' views of the credit quality, liquidity, capital and earnings of the Corporation and the Bank. As of April 28, 2020,March 31, 2021, the three major rating agencies had assigned the ratings below to long-term senior unsecured obligations of the Corporation and the Bank. A security rating is not a recommendation to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.
Comerica IncorporatedComerica Bank
March 31, 20202021RatingOutlookRatingOutlook
Standard and Poor’sBBB+NegativeA-Negative
Moody’s Investors ServiceA3StableA3Stable
Fitch RatingsA-StableA-Stable
The Corporation satisfies liquidity needs with either liquid assets or various funding sources. Liquid assets totaled $11.8$26.0 billion and $17.9$25.9 billion at March 31, 20202021 and December 31, 2019,2020, respectively. Liquid assets include cash and due from banks, federal funds sold, interest-bearing deposits with banks, other short-term investments and unencumbered investment securities.
The Corporation performs monthly liquidity stress testing to evaluate its ability to meet funding needs in hypothetical stressed environments. Such environments cover a series of broad events, distinguished in terms of duration and severity. The evaluation as of March 31, 20202021 projected sufficient sources of liquidity were available under each series of events.
Total liquidity sources, comprised of liquid assets and remaining borrowing capacity with the FRB and the FHLB, totaled $38.9$55.0 billion at March 31, 2020.

2021. On a stand-alone basis, the Corporation had liquid assets of $1.5 billion on an unconsolidated basis at March 31, 2021.

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CRITICAL ACCOUNTING POLICIES
The Corporation’s consolidated financial statements are prepared based on the application of accounting policies, the most significant of which are described in Note 1 to the consolidated financial statements included in the Corporation's 20192020 Annual Report. These policies require numerous estimates and strategic or economic assumptions, which may prove inaccurate or subject to variations. Changes in underlying factors, assumptions or estimates could have a material impact on the Corporation’s future financial condition and results of operations. At December 31, 2019,2020, the most critical of these significant accounting policies were the policies related to the allowance for credit losses, fair value measurement, goodwill, pension plan accounting and income taxes. These policies were reviewed with the Audit Committee of the Corporation’s Board of Directors and are discussed more fully on pages F-34F-39 through F-36F-43 in the Corporation's 20192020 Annual Report. Below areAs of the date of this report, there have been no significant changes to the Corporation's critical accounting policies or estimates, since the Corporation's 2019 Annual Report.
ALLOWANCE FOR CREDIT LOSSES
The Corporation adopted new accounting guidance for estimating credit losses, known as the CECL model, in first quarter 2020. In accordance with CECL, the allowance for credit losses, which includes both the allowance for loan losses and the allowance for credit losses on lending-related commitments, is calculated with the objective of maintaining a reserve for current expected credit losses over the remaining contractual life of the portfolio. Management's determination of the appropriateness of the allowance is based on periodic evaluations of the loan portfolio, lending-related commitments, current as well as forecasted economic factors and other relevant factors.
In determining the allowance for credit lossesexcept for the majorityMRVA methodology change described in Results of its lending portfolio, the Corporation uses standard loss factors, based on estimated probability of default for internal risk ratingsOperations and loss given default. Management applies standard reserve factors to pools of loans and lending-related commitments with similar risk characteristics, calibrates these standard loss factors using economic forecasts and incorporates qualitative adjustments. As such, the calculation of current expected credit losses is inherently subjective and requires management to exercise significant judgment.

•
Internal risk ratings: Standard loss factors are applied to pools of loans based on the Corporation's internal risk rating system; therefore, loss estimates are highly dependent on the accuracy of the risk rating assigned to each loan. The inherent imprecision in the risk rating system resulting from inaccuracy in assigning and/or entering risk ratings in the loan accounting system is monitored by the Corporation's asset quality review function. Changes to internal risk ratings, beyond the forecasted migration inherent in the credit models,would result in a different estimated allowance for credit losses. To illustrate, if five percent of the individual risk ratings were adjusted down by one rating across all pools, the allowance for loan losses as of March 31, 2020 would change by approximately $10 million.

•
Forecasted economic variables: Historical standard loss factor estimates are calibrated to economic forecasts over the reasonable and supportable forecast period based on the projected performance of specific economic variables that statistically correlate with the probability of default and loss given default pools. Loss estimates revert to historical loss experience for contractual lives beyond the forecast period. Management selects economic variables it believes to be most relevant based on the composition of the loan portfolio and customer base, including forecasted levels of employment, gross domestic product, corporate bond and treasury spreads, industrial production levels, consumer and commercial real estate price indices as well as housing statistics. For first quarter 2020, management used an economic forecast that considered information available as of the end of the period, including assumptions regarding the impacts of the global coronavirus pandemic, the government stimulus package included in the CARES Act, effects of social distancing policy and current pressures on energy. The forecast anticipated significant economic deterioration during the second quarter of 2020 as part of a recession that would create severe financial stress, followed by a partial recovery during third quarter 2020 and more modest recovery in subsequent quarters for the remainder of the reasonable and supportable period.

The allowance for credit losses is highly sensitive to the economic forecasts used to develop the estimate. Due to the high level of uncertainty regarding significant assumptions, such as the ultimate impact of the global pandemic and effectiveness of the government stimulus, the Corporation evaluated a range of economic scenarios, including more and less severe economic deteriorations in the second quarter of 2020, with varying speeds of recovery. In isolation, assuming a more prolonged recession through next year with elevated unemployment levels through the latter half of 2022, the CECL model may have resulted in a significantly higher allowance for credit losses. However, because qualitative adjustments are an integral part of the allowance methodology, the actual impact of a change in assumptions is not determinable.

•
Qualitative adjustments:The Corporation includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative estimate, including foresight risk, model imprecisions and input imprecisions. Qualitative adjustments for foresight risk, reflect the inherent imprecision in economic forecasts and may be included based on management’s evaluation of different forecast scenarios, ranging from more benign to more severe, and known recent events impacting the Corporation’s portfolio. Model imprecision adjustments may be included to mitigate known limitations


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in the quantitative models. Input imprecision includes adjustments for portfolios where recent historical losses exceed expected losses or known recent events are expected to alter risk ratings once evidence is acquired, as well as a qualitative assessment of the lending environment, including underwriting standards, current economic and political conditions, and other factors affecting credit quality. Qualitative reserves at March 31, 2020 primarily included adjustments for uncertainties related to forecasted economic variables and model imprecision.

For further discussion of the methodology used in the determination of the allowance for credit losses, refer to Note 1 to the consolidated financial statements. To the extent actual outcomes differ from management estimates, additional provision for credit losses may be required that would adversely impact earnings in future periods. The allowance is assigned to business segments and any earnings impact resulting from actual outcomes differing from management estimates would primarily affect the Business Bank segment.

GOODWILL
Goodwill is initially recorded as the excess of the purchase price over the fair value of net assets acquired in a business combination and is subsequently evaluated at least annually for impairment. Goodwill impairment testing is performed at the reporting unit level, equivalent to a business segment or one level below. The Corporation has three reporting units: the Business Bank, the Retail Bank and Wealth Management. At March 31, 2020, goodwill totaled $635 million, including $473 million allocated to the Business Bank, $101 million allocated to the Retail Bank and $61 million allocated to Wealth Management.
The Corporation performs its annual evaluation of goodwill impairment in the third quarter of each year and on an interim basis if events or changes in circumstances between annual tests suggest additional testing may be warranted to determine if goodwill might be impaired. The Corporation may elect to perform a quantitative impairment analysis, or first conduct a qualitative analysis to determine if a quantitative analysis is necessary.
In the first quarter of 2020, economic conditions deteriorated significantly with the spread of the coronavirus global pandemic. The outbreak resulted in social distancing requirements throughout the world, severely restricting the economy. In response to the crisis, the Federal Reserve lowered the Federal Funds rate in March 2020 to close to zero. Additionally, the U.S. government initiated numerous measures to support the economy, including the CARES Act. Given the current economic deterioration, the Corporation assessed whether the events and circumstances resulted in it being more likely than not that the fair value of any reporting unit was less than its carrying value. Impairment indicators considered comprised economic conditions, including projections of the duration of current conditions and timing of a potential recovery; industry and market considerations; government intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting units; performance of the Corporation’s stock and other relevant events. The Corporation further considered the amount by which fair value exceeded book value for each unit in the most recent quantitative analysis and sensitivities performed. At the conclusion of the assessment, the Corporation determined that it was more likely than not that the fair value of each reporting unit exceeded its carrying value.
The analysis included evaluation of various factors that continue to rapidly evolve and for which significant uncertainty remains, including the impact of the coronavirus global pandemic to the economy and ongoing government intervention to mitigate that impact. Further weakening in the economic environment, such as continued decline in the performance of the reporting units or other factors, could cause the fair value of one or more of the reporting units to fall below their carrying value, resulting in a goodwill impairment charge. Additionally, new legislative or regulatory changes not anticipated in management's expectations may cause the fair value of one or more of the reporting units to fall below the carrying value, resulting in a goodwill impairment charge. Any impairment charge would not affect the Corporation's regulatory capital ratios, tangible common equity ratio or liquidity position.





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SUPPLEMENTAL FINANCIAL DATA
The Corporation believes non-GAAP measures are meaningful because they reflect adjustments commonly made by management, investors, regulators and analysts to evaluate the adequacy of common equity and our performance trends. Tangible common equity is used by Comericathe Corporation to measure the quality of capital and the return relative to balance sheet risk.
The following table provides a reconciliation of non-GAAP financial measures used in this financial review with financial measuresCommon equity tier 1 capital ratio removes preferred stock from the Tier 1 capital ratio as defined by GAAP.
(dollar amounts in millions)March 31, 2020 December 31, 2019
Tangible Common Equity Ratio:   
Common shareholders' equity$7,402
 $7,327
Less:   
Goodwill635
 635
Other intangible assets3
 4
Tangible common equity$6,764
 $6,688
Total assets$76,337
 $73,402
Less:   
Goodwill635
 635
Other intangible assets3
 4
Tangible assets$75,699
 $72,763
Common equity ratio9.70% 9.98%
Tangible common equity ratio8.93
 9.19
Tangible Common Equity per Share of Common Stock:   
Common shareholders' equity$7,402
 $7,327
Tangible common equity6,764
 6,688
Shares of common stock outstanding (in millions)139
 142
Common shareholders' equity per share of common stock$53.24
 $51.57
Tangible common equity per share of common stock48.65
 47.07

and calculated in conformity with bank regulations. The tangible common equity ratio removes the effect of intangible assets from capital and total assets. Tangible common equity per share of common stock removes the effect of intangible assets from common shareholders' equity per share of common stock.

The following table provides a reconciliation of non-GAAP financial measures and regulatory ratios used in this financial review with financial measures defined by GAAP.
(dollar amounts in millions)March 31, 2021December 31, 2020
Common Equity Tier 1 Capital (a):
Tier 1 capital$7,630 $7,313 
Less:
Fixed-rate reset non-cumulative perpetual preferred stock394 394 
Common equity tier 1 capital$7,236 $6,919 
Risk-weighted assets$65,237 $66,931 
Tier 1 capital ratio11.70 %10.93 %
Common equity tier 1 capital ratio11.09 10.34 
Tangible Common Equity Ratio:
Total shareholders' equity$8,152 $8,050 
Less:
Fixed-rate reset non-cumulative perpetual preferred stock394 394 
Common shareholders' equity$7,758 $7,656 
Less:
Goodwill635 635 
Other intangible assets (b)14 1 
Tangible common equity$7,109 $7,020 
Total assets$86,291 $88,129 
Less:
Goodwill635 635 
Other intangible assets (b)14 1 
Tangible assets$85,642 $87,493 
Common equity ratio8.99 %8.69 %
Tangible common equity ratio8.30 8.02 
Tangible Common Equity per Share of Common Stock:
Common shareholders' equity$7,758 $7,656 
Tangible common equity7,109 7,020 
Shares of common stock outstanding (in millions)140 139 
Common shareholders' equity per share of common stock$55.58 $55.01 
Tangible common equity per share of common stock50.93 50.43 
(a)March 31, 2021 ratios are estimated. Ratios reflect deferral of CECL model impact as calculated per regulatory guidance.
(b)In first quarter 2021, the Corporation acquired an intangible asset of $13 million to be amortized over a period of 10 years.

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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Quantitative and qualitative disclosures for the current period can be found in the "Market and Liquidity Risk" section of "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations."

ITEM 4. Controls and Procedures
(a)
(a)Evaluation of Disclosure Controls and Procedures. The Corporation maintains a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed by the Corporation in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Corporation's management, including the Corporation's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management has evaluated, with the participation of the Corporation's Chief Executive Officer and Chief Financial Officer, the effectiveness of the Corporation's disclosure controls and procedures as of the end of the period covered by this quarterly report (the "Evaluation Date"). Based on the evaluation, the Corporation's Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, the Corporation's disclosure controls and procedures are effective.
(b)Changes in Internal Control Over Financial Reporting. During the period to which this report relates, there have not been any changes in the Corporation's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or that are reasonably likely to materially affect, such controls.

Evaluation of Disclosure Controls and Procedures. The Corporation maintains a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed by the Corporation in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Corporation's management, including the Corporation's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management has evaluated, with the participation of the Corporation's Chief Executive Officer and Chief Financial Officer, the effectiveness of the Corporation's disclosure controls and procedures as of the end of the period covered by this quarterly report (the "Evaluation Date"). Based on the evaluation, the Corporation's Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, the Corporation's disclosure controls and procedures are effective.
(b)
Changes in Internal Control Over Financial Reporting. During the period to which this report relates, there have not been any changes in the Corporation's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or that are reasonably likely to materially affect, such controls.
PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings
For information regarding the Corporation's legal proceedings, see "Part I. Item 1. Note 12 – Contingent Liabilities," which is incorporated herein by reference.

ITEM 1A. Risk Factors
Other than as set forth below, there have    There has been no material change in the Corporation’s risk factors as previously disclosed in our Form 10-K for the fiscal year ended December 31, 20192020 in response to Part I, Item 1A. of such Form 10-K. Such risk factors are incorporated herein by reference.     
The following risk factor is added under "General Risk":

•The COVID-19 pandemic has impacted our business, and the ultimate impact on our business and financial results will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities. As a result, the demand for our products and services may be significantly impacted. Furthermore, the pandemic has influenced and could further influence the recognition of credit losses in our loan portfolios and has increased and could further increase our allowance for credit losses, particularly as businesses remain closed and as more customers may draw on their lines of credit or seek additional loans to help finance their businesses. Similarly, because of changing economic and market conditions affecting issuers, the securities we hold may lose value. Our business operations may also be disrupted if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic, and we have already temporarily closed certain of our branches and offices. In response to the pandemic, we have also enacted hardship relief assistance for customers experiencing financial difficulty as a result of COVID-19, including fee and penalty waivers, loan deferrals or other scenarios that may help our customers. As well, we are a lender for the Small Business Administration's Paycheck Protection Program ("PPP") and other SBA, Federal Reserve or United States Treasury programs that have been or may be created in the future in response to the pandemic. These programs are new and their effects on Comerica's business are uncertain. The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

Below we amend the following risk factor discussed under "Credit Risk" in Part II, "Item 1A. Risk Factors" in Part I, Item 1A. of our Form 10-K for the fiscal year ended December 31, 2019.


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•Declines in the businesses or industries of Comerica's customers - in particular, the energy industry - could cause increased credit losses or decreased loan balances, which could adversely affect Comerica.

Comerica's business customer base consists, in part, of customers in volatile businesses and industries such as the automotive, commercial real estate, residential real estate and energy industries. These industries are sensitive to global economic conditions, supply chain factors and/or commodities prices. Any decline in one of these businesses or industries could cause increased credit losses, which in turn could adversely affect Comerica. Further, any decline in these businesses or industries could cause decreased borrowings, either due to reduced demand or reductions in the borrowing base available for each customer loan.

In particular, oil and gas prices have fallen sharply since the beginning of 2020 due to global events. Loans in the Energy business line were $2.1 billion, or approximately 4 percent of total loans, at March 31, 2020. At March 31, 2020, the reserve allocation for Energy loans was over 10 percent of total Energy loans. If oil and gas prices continue to remain depressed for a prolonged period of time, Comerica's energy portfolio could experience increased credit losses, which could adversely affect Comerica's financial results. Furthermore, a prolonged period of low oil prices could also have a negative impact on the Texas economy, which could have a material adverse effect on Comerica’s business, financial condition and results of operations. For more information regarding Comerica's energy portfolio, please see “Energy Lending” beginning on page 52 of this report.

For more information regarding certain of Comerica's lines of business, please see "Concentration of Credit Risk," "Automotive Lending," "Commercial Real Estate Lending," "Residential Real Estate Lending" and “Energy Lending” on pages F-25 through F-27 of Comerica’s Form 10-K for the fiscal year ended December 31, 2019.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
For information regarding the Corporation's purchase of equity securities, see "Part I. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations – Capital," which is incorporated herein by reference.


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ITEM 6. Exhibits
Exhibit No.Description
Exhibit No.3.1Description
3.1
Restated Certificate of Incorporation of Comerica Incorporated (filed as Exhibit 3.2 to Registrant's Current Report on Form 8-K dated August 4, 2010, and incorporated herein by reference).
3.2
3.3
Amended and Restated Bylaws of Comerica Incorporated (filed as Exhibit 3.3 to Registrant's Current Report on Form 8-K dated April 9,November 3, 2020, and incorporated herein by reference).
43.4
Certificate of Designations of 5.625% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, dated May 26, 2020, of Comerica Incorporated (including the form of 5.625% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A Certificate of Comerica Incorporated attached as Exhibit A thereto) (filed as Exhibit 3.1 to Registrant's Current Report on Form 8-K dated May 26, 2020, and incorporated herein by reference).
4[In accordance with Regulation S-K Item No. 601(b)(4)(iii), the Registrant is not filing copies of instruments defining the rights of holders of long-term debt because none of those instruments authorizes debt in excess of 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. The Registrant hereby agrees to furnish a copy of any such instrument to the SEC upon request.]
10.18†10.1†
Comerica Incorporated Amended and Restated 2018 Long-Term Incentive Plan.
10.1G†
Form of Change of Control EmploymentStandard Comerica Incorporated Senior Executive Long-Term Performance Restricted Stock Unit Award Agreement (BE4 and Higher Version without gross-up or window period-current)under the Comerica Incorporated 2018 Long-Term Incentive Plan (2020 version) (filed as Exhibit 10.1010.1G to Registrant's QuarterlyAnnual Report on Form 10-Q10-K for the quarteryear ended MarchDecember 31, 2018,2020, and incorporated herein by reference).
10.18A†10.1K†
ScheduleForm of Named Executive Officers Party to Change of Control EmploymentStandard Comerica Incorporated Restricted Stock Unit Agreement (BE4 and Higher Version without gross-up or window period-current).(2021 three-year non-cliff vesting) under the Comerica Incorporated 2018 Long-Term Incentive Plan.
31.118.1
Preferability Letter from Independent Registered Public Accounting Firm.
31.1
Chairman, President and CEO Rule 13a-14(a)/15d-14(a) Certification of Periodic Report (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002).
31.2
Executive Vice President and CFO Rule 13a-14(a)/15d-14(a) Certification of Periodic Report (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002).
32
Section 1350 Certification of Periodic Report (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002).
101Financial statements from Quarterly Report on Form 10-Q of the Registrant for the quarter ended March 31, 2020,2021, formatted in Inline XBRL: (i) the Consolidated Balance Sheets (unaudited), (ii) the Consolidated Statements of Comprehensive Income (unaudited), (iii) the Consolidated Statements of Changes in Shareholders' Equity (unaudited), (iv) the Consolidated Statements of Cash Flows (unaudited) and (v) the Notes to Consolidated Financial Statements (unaudited).
104The cover page from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020,2021, formatted in Inline XBRL (included in Exhibit 101).
†Management contract or compensatory plan or arrangement.


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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
COMERICA INCORPORATED
(Registrant)
COMERICA INCORPORATED
(Registrant)
/s/ Mauricio A. Ortiz
Mauricio A. Ortiz
Senior Vice President and
Chief Accounting Officer and
Duly Authorized Officer
Date: April 29, 2020

28, 2021

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