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 September 30, ~~2020~~2021


☐			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)


Delaware			38-1998421
(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 class	Trading symbol	Name of each exchange on which registered
Common Stock, $5 par value	CMA	New 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 October ~~28, 2020: 139,087,862~~27, 2021: 131,148,664 shares

Table of Contents

COMERICA INCORPORATED AND SUBSIDIARIES

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Consolidated Balance Sheets at ~~September~~Sept ~~30, 2020~~ember 3 0 , 2021 (unaudited) and December 31, ~~2019~~2020			1

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 3 ~~30,~~0 , 2021 and 2020 ~~and 2019~~ (unaudited)			2

Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30 2 ~~020~~, 2021 and ~~2019~~2020 (unaudited)			3

Consolidated Statements of Cash Flows for the Nine M ~~onths Ended~~ Months Ended September 303 0 , 2021 and 2020 ~~and 2019~~ (unaudited)			4

Notes to Consolidated Financial Statements (unaudited)			5

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3534

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk			6764

ITEM 4. Controls and Procedures			6764

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings			6764

ITEM 1A. Risk Factors			6764

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			6864

ITEM 6. Exhibits			6965

Signature			7066

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

Comerica Incorporated and Subsidiaries


(in millions, except share data)	(in millions, except share data)	September 30, 2020		December 31, 2019		(in millions, except share data)	September 30, 2021		December 31, 2020
		(unaudited)					(unaudited)		(recast)
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	988	$	973	Cash and due from banks	$	1,050	$	1,031
Interest-bearing deposits with banks	Interest-bearing deposits with banks	10,153		4,845		Interest-bearing deposits with banks	22,539		14,736
Other short-term investments	Other short-term investments	160		155		Other short-term investments	187		172
Investment securities available-for-sale	Investment securities available-for-sale	15,090		12,398		Investment securities available-for-sale	16,846		15,028

Commercial loans	Commercial loans	32,604		31,473		Commercial loans	28,355		32,753
Real estate construction loans	Real estate construction loans	4,146		3,455		Real estate construction loans	3,010		4,082
Commercial mortgage loans	Commercial mortgage loans	10,002		9,559		Commercial mortgage loans	11,215		9,912
Lease financing	Lease financing	601		588		Lease financing	569		594
International loans	International loans	923		1,009		International loans	1,131		926
Residential mortgage loans	Residential mortgage loans	1,927		1,845		Residential mortgage loans	1,813		1,830
Consumer loans	Consumer loans	2,166		2,440		Consumer loans	2,102		2,194
Total loans	Total loans	52,369		50,369		Total loans	48,195		52,291
Less allowance for loan losses		(978)		(637)
Allowance for loan losses						Allowance for loan losses	(609)		(948)
Net loans	Net loans	51,391		49,732		Net loans	47,586		51,343
Premises and equipment	Premises and equipment	456		457		Premises and equipment	447		459
Accrued income and other assets	Accrued income and other assets	5,393		4,842		Accrued income and other assets	5,874		5,360
Total assets	Total assets	$	83,631	$	73,402	Total assets	$	94,529	$	88,129
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits	Noninterest-bearing deposits	$	36,533	$	27,382	Noninterest-bearing deposits	$	44,093	$	39,420
Money market and interest-bearing checking deposits	Money market and interest-bearing checking deposits	26,948		24,527		Money market and interest-bearing checking deposits	32,932		28,540
Savings deposits	Savings deposits	2,588		2,184		Savings deposits	3,125		2,710
Customer certificates of deposit	Customer certificates of deposit	2,300		2,978		Customer certificates of deposit	2,091		2,133
Other time deposits		0		133

Foreign office time deposits	Foreign office time deposits	90		91		Foreign office time deposits	43		66
Total interest-bearing deposits	Total interest-bearing deposits	31,926		29,913		Total interest-bearing deposits	38,191		33,449
Total deposits	Total deposits	68,459		57,295		Total deposits	82,284		72,869
Short-term borrowings		10		71

Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,534		1,440		Accrued expenses and other liabilities	1,605		1,482
Medium- and long-term debt	Medium- and long-term debt	5,754		7,269		Medium- and long-term debt	2,837		5,728
Total liabilities	Total liabilities	75,757		66,075		Total liabilities	86,726		80,079
Fixed rate reset non-cumulative perpetual preferred stock, series A, 0 par value, $100,000 liquidation preference per share:
Fixed rate reset non-cumulative perpetual preferred stock, series A, no par value, $100,000 liquidation preference per share:						Fixed rate reset non-cumulative perpetual preferred stock, series A, no par value, $100,000 liquidation preference per share:
Authorized - 4,000 shares	Authorized - 4,000 shares					Authorized - 4,000 shares
Issued - 4,000 shares at 9/30/2020		394		0
Issued - 4,000 shares						Issued - 4,000 shares	394		394
Common stock - $5 par value:	Common stock - $5 par value:					Common stock - $5 par value:
Authorized - 325,000,000 shares	Authorized - 325,000,000 shares					Authorized - 325,000,000 shares
Issued - 228,164,824 shares	Issued - 228,164,824 shares	1,141		1,141		Issued - 228,164,824 shares	1,141		1,141
Capital surplus	Capital surplus	2,179		2,174		Capital surplus	2,170		2,185
Accumulated other comprehensive income (loss)		116		(235)
Accumulated other comprehensive (loss) income						Accumulated other comprehensive (loss) income	(207)		64
Retained earnings	Retained earnings	9,511		9,538		Retained earnings	10,366		9,727
Less cost of common stock in treasury - 89,095,470 shares at 9/30/2020 and 86,069,234 shares at 12/31/2019		(5,467)		(5,291)
Less cost of common stock in treasury - 97,158,441 shares at 9/30/2021 and 88,997,430 shares at 12/31/2020						Less cost of common stock in treasury - 97,158,441 shares at 9/30/2021 and 88,997,430 shares at 12/31/2020	(6,061)		(5,461)
Total shareholders’ equity	Total shareholders’ equity	7,874		7,327		Total shareholders’ equity	7,803		8,050
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	83,631	$	73,402	Total liabilities and shareholders’ equity	$	94,529	$	88,129

See notes to consolidated financial statements (unaudited).

Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

Comerica Incorporated and Subsidiaries


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,

(in millions, except per share data)	(in millions, except per share data)	2020		2019		2020		2019		(in millions, except per share data)	2021		2020		2021		2020
													(recast)				(recast)
INTEREST INCOME	INTEREST INCOME									INTEREST INCOME
Interest and fees on loans	Interest and fees on loans	$	408	$	619	$	1,359	$	1,875	Interest and fees on loans	$	411	$	408	$	1,201	$	1,359
Interest on investment securities	Interest on investment securities	72		75		220		222		Interest on investment securities	70		72		209		220
Interest on short-term investments	Interest on short-term investments	4		17		25		51		Interest on short-term investments	8		4		17		25
Total interest income	Total interest income	484		711		1,604		2,148		Total interest income	489		484		1,427		1,604
INTEREST EXPENSE	INTEREST EXPENSE									INTEREST EXPENSE
Interest on deposits	Interest on deposits	15		73		91		192		Interest on deposits	5		15		17		91
Interest on short-term borrowings	Interest on short-term borrowings	0		2		1		9		Interest on short-term borrowings	—		—		—		1
Interest on medium- and long-term debt	Interest on medium- and long-term debt	11		50		70		152		Interest on medium- and long-term debt	9		11		27		70
Total interest expense	Total interest expense	26		125		162		353		Total interest expense	14		26		44		162
Net interest income	Net interest income	458		586		1,442		1,795		Net interest income	475		458		1,383		1,442
Provision for credit losses	Provision for credit losses	5		35		554		66		Provision for credit losses	(42)		5		(359)		554
Net interest income after provision for credit losses	Net interest income after provision for credit losses	453		551		888		1,729		Net interest income after provision for credit losses	517		453		1,742		888
NONINTEREST INCOME	NONINTEREST INCOME									NONINTEREST INCOME
Card fees	Card fees	71		67		198		195		Card fees	72		71		227		198
Fiduciary income	Fiduciary income	51		53		157		154		Fiduciary income	58		51		171		157
Service charges on deposit accounts	Service charges on deposit accounts	47		51		138		153		Service charges on deposit accounts	50		47		145		138
Commercial lending fees	Commercial lending fees	19		23		53		66		Commercial lending fees	31		19		76		53
Foreign exchange income		9		11		29		33
Derivative income										Derivative income	20		9		72		48
Bank-owned life insurance	Bank-owned life insurance	12		11		33		31		Bank-owned life insurance	12		12		32		33
Letter of credit fees	Letter of credit fees	9		10		27		29		Letter of credit fees	10		9		30		27
Brokerage fees	Brokerage fees	5		7		17		21		Brokerage fees	3		5		11		17
Net securities losses		0		0		0		(8)

Other noninterest income	Other noninterest income	29		23		84		70		Other noninterest income	24		29		70		65
Total noninterest income	Total noninterest income	252		256		736		744		Total noninterest income	280		252		834		736
NONINTEREST EXPENSES	NONINTEREST EXPENSES									NONINTEREST EXPENSES
Salaries and benefits expense	Salaries and benefits expense	257		253		748		763		Salaries and benefits expense	282		257		841		748
Outside processing fee expense	Outside processing fee expense	58		66		177		194		Outside processing fee expense	65		58		200		177
Occupancy expense	Occupancy expense	40		39		114		113		Occupancy expense	40		40		117		114
Software expense	Software expense	39		30		115		87		Software expense	40		39		117		115
Equipment expense	Equipment expense	12		13		36		37		Equipment expense	13		12		38		36
Advertising expense	Advertising expense	9		10		24		24		Advertising expense	10		9		25		24
FDIC insurance expense	FDIC insurance expense	8		6		24		17		FDIC insurance expense	4		8		17		24
Other noninterest expenses	Other noninterest expenses	23		18		73		57		Other noninterest expenses	11		15		20		51
Total noninterest expenses	Total noninterest expenses	446		435		1,311		1,292		Total noninterest expenses	465		438		1,375		1,289
Income before income taxes	Income before income taxes	259		372		313		1,181		Income before income taxes	332		267		1,201		335
Provision for income taxes	Provision for income taxes	48		80		54		252		Provision for income taxes	70		50		261		59
NET INCOME	NET INCOME	211		292		259		929		NET INCOME	262		217		940		276
Less:	Less:									Less:
Income allocated to participating securities	Income allocated to participating securities	0		2		1		5		Income allocated to participating securities	1		—		4		1
Preferred stock dividends	Preferred stock dividends	8		0		8		0		Preferred stock dividends	6		8		17		8
Net income attributable to common shares	Net income attributable to common shares	$	203	$	290	$	250	$	924	Net income attributable to common shares	$	255	$	209	$	919	$	267
Earnings per common share:	Earnings per common share:									Earnings per common share:
Basic	Basic	$	1.45	$	1.98	$	1.79	$	6.08	Basic	$	1.92	$	1.49	$	6.75	$	1.91
Diluted	Diluted	1.44		1.96		1.78		6.02		Diluted	1.90		1.48		6.67		1.90
Comprehensive income	Comprehensive income	169		338		610		1,202		Comprehensive income	175		169		669		610
Cash dividends declared on common stock	Cash dividends declared on common stock	94		97		284		302		Cash dividends declared on common stock	89		94		276		284
Cash dividends declared per common share	Cash dividends declared per common share	0.68		0.67		2.04		2.01		Cash dividends declared per common share	0.68		0.68		2.04		2.04

See notes to consolidated financial statements (unaudited).

Table of Contents

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

Comerica Incorporated and Subsidiaries


									Accumulated																Accumulated
		Nonredeemable		Common Stock					Other						Total			Nonredeemable		Common Stock					Other						Total
		Preferred		Shares			Capital		Comprehensive		Retained		Treasury		Shareholders'			Preferred		Shares			Capital		Comprehensive		Retained		Treasury		Shareholders'
(in millions, except per share data)	(in millions, except per share data)	Stock		Outstanding	Amount		Surplus		Income (Loss)		Earnings		Stock		Equity		(in millions, except per share data)	Stock		Outstanding	Amount		Surplus		Income (Loss)		Earnings		Stock		Equity
BALANCE AT JUNE 30, 2019		$	—	149.8	$	1,141	$	2,168	$	(382)	$	9,176	$	(4,780)	$	7,323
BALANCE AT JUNE 30, 2020 (recast)																	BALANCE AT JUNE 30, 2020 (recast)	$	395	139.0	$	1,141	$	2,173	$	66	$	9,496	$	(5,469)	$	7,802

Net income	Net income	—		—	—		—		—		292		—		292		Net income	—		—	—		—		—		217		—		217
Other comprehensive income, net of tax		—		—	—		—		46		—		—		46
Cash dividends declared on common stock ($0.67 per share)		—		—	—		—		—		(97)		—		(97)
Purchase of common stock		—		(5.7)	—		—		—		—		(370)		(370)
Other comprehensive loss, net of tax																	Other comprehensive loss, net of tax	—		—	—		—		(48)		—		—		(48)
Cash dividends declared on common stock ($0.68 per share)																	Cash dividends declared on common stock ($0.68 per share)	—		—	—		—		—		(94)		—		(94)
Cash dividends on preferred stock																	Cash dividends on preferred stock	—		—	—		—		—		(8)		—		(8)

Issuance of preferred stock																	Issuance of preferred stock	(1)		—	—		—		—		—		—		(1)
Net issuance of common stock under employee stock plans	Net issuance of common stock under employee stock plans	—		0	—		(1)		—		(2)		4		1		Net issuance of common stock under employee stock plans	—		0.1	—		—		—		(2)		2		—

Share-based compensation	Share-based compensation	—		—	—		5		—		—		—		5		Share-based compensation	—		—	—		6		—		—		—		6

BALANCE AT SEPTEMBER 30, 2019		$	—	144.1	$	1,141	$	2,172	$	(336)	$	9,369	$	(5,146)	$	7,200
BALANCE AT JUNE 30, 2020		$	395	139.0	$	1,141	$	2,173	$	158	$	9,404	$	(5,469)	$	7,802
BALANCE AT SEPTEMBER 30, 2020 (recast)																	BALANCE AT SEPTEMBER 30, 2020 (recast)	$	394	139.1	$	1,141	$	2,179	$	18	$	9,609	$	(5,467)	$	7,874
BALANCE AT JUNE 30, 2021																	BALANCE AT JUNE 30, 2021	$	394	133.9	$	1,141	$	2,163	$	(120)	$	10,202	$	(5,849)	$	7,931
Net income	Net income	—		—	—		—		—		211		—		211		Net income	—		—	—		—		—		262		—		262
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—		—	—		—		(42)		—		—		(42)		Other comprehensive loss, net of tax	—		—	—		—		(87)		—		—		(87)
Cash dividends declared on common stock ($0.68 per share)	Cash dividends declared on common stock ($0.68 per share)	—		—	—		—		—		(94)		—		(94)		Cash dividends declared on common stock ($0.68 per share)	—		—	—		—		—		(89)		—		(89)
Cash dividends declared on preferred stock	Cash dividends declared on preferred stock	—		—	—		—		—		(8)		—		(8)		Cash dividends declared on preferred stock	—		—	—		—		—		(6)		—		(6)
Purchase of common stock																	Purchase of common stock	—		(3.1)	—		—		—		—		(220)		(220)

Issuance of preferred stock		(1)		—	—		—		—		—		—		(1)
Net issuance of common stock under employee stock plans	Net issuance of common stock under employee stock plans	—		0.1	—		0		—		(2)		2		0		Net issuance of common stock under employee stock plans	—		0.2	—		—		—		(3)		8		5
Share-based compensation	Share-based compensation	—		—	—		6		—		—		—		6		Share-based compensation	—		—	—		7		—		—		—		7

BALANCE AT SEPTEMBER 30, 2020		$	394	139.1	$	1,141	$	2,179	$	116	$	9,511	$	(5,467)	$	7,874
BALANCE AT DECEMBER 31, 2018		$	—	160.1	$	1,141	$	2,148	$	(609)	$	8,781	$	(3,954)	$	7,507
Cumulative effect of change in accounting principle		—		—	—		—		—		(14)		—		(14)
Net income		—		—	—		—		—		929		—		929
Other comprehensive income, net of tax		—		—	—		—		273		—		—		273
Cash dividends declared on common stock ($2.01 per share)		—		—	—		—		—		(302)		—		(302)
Purchase of common stock		—		(16.6)	—		0		—		—		(1,229)		(1,229)

Net issuance of common stock under employee stock plans		—		0.6	—		(13)		—		(25)		37		(1)

Share-based compensation		—		—	—		37		—		—		—		37

BALANCE AT SEPTEMBER 30, 2019		$	—	144.1	$	1,141	$	2,172	$	(336)	$	9,369	$	(5,146)	$	7,200
BALANCE AT DECEMBER 31, 2019		$	—	142.1	$	1,141	$	2,174	$	(235)	$	9,538	$	(5,291)	$	7,327
BALANCE AT SEPTEMBER 30, 2021																	BALANCE AT SEPTEMBER 30, 2021	$	394	131.0	$	1,141	$	2,170	$	(207)	$	10,366	$	(6,061)	$	7,803
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	Cumulative effect of change in accounting principle	—		—	—		—		—		13		—		13		Cumulative effect of change in accounting principle	—		—	—		—		—		13		—		13
Net income	Net income	—		—	—		—		—		259		—		259		Net income	—		—	—		—		—		276		—		276
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		—	—		—		351		—		—		351		Other comprehensive income, net of tax	—		—	—		—		334		—		—		334
Cash dividends declared on common stock ($2.04 per share)	Cash dividends declared on common stock ($2.04 per share)	—		—	—		—		—		(284)		—		(284)		Cash dividends declared on common stock ($2.04 per share)	—		—	—		—		—		(284)		—		(284)
Cash dividends declared on preferred stock	Cash dividends declared on preferred stock	—		—	—		—		—		(8)		—		(8)		Cash dividends declared on preferred stock	—		—	—		—		—		(8)		—		(8)
Purchase of common stock	Purchase of common stock	—		(3.4)	—		0		—		—		(194)		(194)		Purchase of common stock	—		(3.4)	—		—		—		—		(194)		(194)
Issuance of preferred stock																	Issuance of preferred stock	394		—	—		—		—		—		—		394

Issuance of preferred stock		394		—	—		—		—		—		—		394
Net issuance of common stock under employee stock plans	Net issuance of common stock under employee stock plans	—		0.4	—		(13)		—		(7)		18		(2)		Net issuance of common stock under employee stock plans	—		0.4	—		(13)		—		(7)		18		(2)

Share-based compensation	Share-based compensation	—		—	—		18		—		—		—		18		Share-based compensation	—		—	—		18		—		—		—		18

BALANCE AT SEPTEMBER 30, 2020		$	394	139.1	$	1,141	$	2,179	$	116	$	9,511	$	(5,467)	$	7,874
BALANCE AT SEPTEMBER 30, 2020 (recast)																	BALANCE AT SEPTEMBER 30, 2020 (recast)	$	394	139.1	$	1,141	$	2,179	$	18	$	9,609	$	(5,467)	$	7,874
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 income																	Net income	—		—	—		—		—		940		—		940
Other comprehensive loss, net of tax																	Other comprehensive loss, net of tax	—		—	—		—		(271)		—		—		(271)
Cash dividends declared on common stock ($2.04 per share)																	Cash dividends declared on common stock ($2.04 per share)	—		—	—		—		—		(276)		—		(276)
Cash dividends declared on preferred stock																	Cash dividends declared on preferred stock	—		—	—		—		—		(17)		—		(17)
Purchase of common stock																	Purchase of common stock	—		(9.0)	—		(24)		—		—		(649)		(673)

Net issuance of common stock under employee stock plans																	Net issuance of common stock under employee stock plans	—		0.8	—		(27)		—		(8)		49		14

Share-based compensation																	Share-based compensation	—		—	—		36		—		—		—		36

BALANCE AT SEPTEMBER 30, 2021																	BALANCE AT SEPTEMBER 30, 2021	$	394	131.0	$	1,141	$	2,170	$	(207)	$	10,366	$	(6,061)	$	7,803

See notes to consolidated financial statements (unaudited).

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Comerica Incorporated and Subsidiaries


		Nine Months Ended September 30,					Nine Months Ended September 30,

(in millions)	(in millions)	2020		2019		(in millions)	2021		2020
									(recast)
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income	Net income	$	259	$	929	Net income	$	940	$	276
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	Provision for credit losses	554		66		Provision for credit losses	(359)		554
(Benefit) provision for deferred income taxes		(104)		4
Provision (benefit) for deferred income taxes						Provision (benefit) for deferred income taxes	119		(99)
Depreciation and amortization	Depreciation and amortization	82		84		Depreciation and amortization	76		82
Net periodic defined benefit credit	Net periodic defined benefit credit	(19)		(23)		Net periodic defined benefit credit	(61)		(41)
Share-based compensation expense	Share-based compensation expense	18		37		Share-based compensation expense	36		18
Net amortization of securities	Net amortization of securities	7		2		Net amortization of securities	26		7

Net securities losses		0		8

Net gains on sales of foreclosed property	Net gains on sales of foreclosed property	(1)		0		Net gains on sales of foreclosed property	—		(1)

Net change in:	Net change in:					Net change in:

Accrued income receivable	Accrued income receivable	32		1		Accrued income receivable	17		32
Accrued expenses payable	Accrued expenses payable	(50)		(39)		Accrued expenses payable	84		(50)
Other, net	Other, net	(58)		(200)		Other, net	(673)		(58)
Net cash provided by operating activities	Net cash provided by operating activities	720		869		Net cash provided by operating activities	205		720
INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Investment securities available-for-sale:	Investment securities available-for-sale:					Investment securities available-for-sale:
Maturities and redemptions	Maturities and redemptions	2,344		1,615		Maturities and redemptions	4,203		2,344
Sales		0		987

Purchases	Purchases	(4,796)		(2,721)		Purchases	(6,327)		(4,796)

Net change in loans	Net change in loans	(2,185)		(1,419)		Net change in loans	5,222		(2,185)
Proceeds from sales of foreclosed property	Proceeds from sales of foreclosed property	3		1		Proceeds from sales of foreclosed property	8		3
Net increase in premises and equipment	Net increase in premises and equipment	(51)		(62)		Net increase in premises and equipment	(50)		(51)

Federal Home Loan Bank stock:	Federal Home Loan Bank stock:					Federal Home Loan Bank stock:
Purchases	Purchases	(51)		(201)		Purchases	—		(51)
Redemptions	Redemptions	92		201		Redemptions	115		92

Proceeds from bank-owned life insurance settlements	Proceeds from bank-owned life insurance settlements	14		7		Proceeds from bank-owned life insurance settlements	10		14
Other, net	Other, net	0		2		Other, net	(11)		—
Net cash used in investing activities		(4,630)		(1,590)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	3,170		(4,630)
FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Net change in:	Net change in:					Net change in:
Deposits	Deposits	11,054		1,105		Deposits	8,200		11,054
Short-term borrowings	Short-term borrowings	(61)		7		Short-term borrowings	—		(61)
Medium- and long-term debt:	Medium- and long-term debt:					Medium- and long-term debt:
Maturities and redemptions	Maturities and redemptions	(1,675)		(350)		Maturities and redemptions	(2,800)		(1,675)
Issuances and advances		0		1,050

Preferred stock:	Preferred stock:					Preferred stock:
Issuance	Issuance	394		0		Issuance	—		394
Cash dividends paid						Cash dividends paid	(17)		—
Common stock:	Common stock:					Common stock:
Repurchases	Repurchases	(199)		(1,242)		Repurchases	(679)		(199)
Cash dividends paid	Cash dividends paid	(282)		(303)		Cash dividends paid	(281)		(282)
Issuances under employee stock plans	Issuances under employee stock plans	2		12		Issuances under employee stock plans	22		2

Other, net	Other, net	0		(2)		Other, net	2		—
Net cash provided by financing activities	Net cash provided by financing activities	9,233		277		Net cash provided by financing activities	4,447		9,233
Net increase (decrease) in cash and cash equivalents		5,323		(444)
Net increase in cash and cash equivalents						Net increase in cash and cash equivalents	7,822		5,323
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	5,818		4,561		Cash and cash equivalents at beginning of period	15,767		5,818
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	11,141	$	4,117	Cash and cash equivalents at end of period	$	23,589	$	11,141
Interest paid	Interest paid	$	186	$	347	Interest paid	$	47	$	186
Income tax paid		133		221
Noncash investing and financing activities:
Loans transferred to other real estate		1		3
Income taxes paid						Income taxes paid	115		133

See notes to consolidated financial statements (unaudited).

~~Table of Contents~~

~~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 nine months ended September 30, ~~2020~~2021 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~~Defined Benefit Pension and Other Postretirement Costs

~~The allowance for credit losses includes both the allowance for loan losses 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.

Effective January 1, ~~2020,~~2021, the Corporation ~~adopted~~elected to change the ~~provisions~~accounting methodology for determining the market-related value of ~~Accounting Standards Update (ASU) No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement~~assets (MRVA) for certain asset classes in the qualified defined benefit pension plan. The MRVA is used to calculate the Corporation's expected return on plan assets, a component of ~~Credit Losses on Financial Instruments," commonly referred~~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 all~~impacts to financial ~~assets, except those accounted for at~~results 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, including~~pension liability. Previously, MRVA was measured using a historical ~~and current conditions~~five-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 forecasts~~it results in more timely recognition of ~~future events. The previous accounting principle estimated probable, estimable losses inherent~~the performance of pension assets in the ~~portfolio.~~results from operations.

~~At adoption, the Corporation’s estimate of current expected credit losses~~The change in ~~accordance with Topic 326 resulted in a $17 million day-one decrease~~accounting 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 was 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 performance~~Corporation's consolidated financial statements is as follows:

Consolidated Balance Sheets


	September 30, 2021		December 31, 2020
(in millions)	Accounting Change Impact		Previously Reported		Accounting Change Impact		Recast Amounts
Accumulated other comprehensive (loss) income	$	(11)	$	168	$	(104)	$	64
Retained earnings	11		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 September 30,
	2021		2020
(in millions)	Accounting Change Impact		Previously Reported		Accounting Change Impact		Recast Amounts
Other noninterest expenses	$	(5)	$	23	$	(8)	$	15
Provision for income taxes	1		48		2		50
Net income	4		211		6		217

Earnings per common share:
Basic	$	0.03	$	1.45	$	0.04	$	1.49
Diluted	0.03		1.44		0.04		1.48

Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

~~The calculation~~


	Nine Months Ended September 30,
	2021		2020
(in millions)	Accounting Change Impact		Previously Reported		Accounting Change Impact		Recast Amounts
Other noninterest expenses	$	(14)	$	73	$	(22)	$	51
Provision for income taxes	3		54		5		59
Net income	11		259		17		276

Earnings per common share:
Basic	$	0.08	$	1.79	$	0.12	$	1.91
Diluted	0.08		1.78		0.12		1.90

Consolidated Statements 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.Cash Flows

•~~Internal Risk Ratings~~: 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 (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. 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.~~


	Nine Months Ended September 30,
	2021		2020
(in millions)	Accounting Change Impact		Previously Reported		Accounting Change Impact		Recast Amounts
Net income	$	11	$	259	$	17	$	276
Provision (benefit) for deferred income taxes	3		(104)		5		(99)
Net periodic defined benefit credit	(14)		(19)		(22)		(41)

~~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 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.

~~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 Commercial Bank, the Retail Bank and Wealth Management.

The Corporation performs its annual evaluation of goodwill impairment in the third quarter of each year and may elect to perform a quantitative impairment analysis or first conduct a qualitative analysis to determine if a quantitative analysis is necessary. Additionally, the Corporation evaluates goodwill impairment on an interim basis if events or changes in circumstances between annual tests indicate additional testing may be warranted to determine if goodwill might be impaired. 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- and nine-month periods ended September 30, 2020, software expense included $9 million and $24 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.

~~Capitalized implementation costs of hosting arrangements that are service contracts were $3 million for both the three- and nine-month periods ended September 30, 2020.~~

~~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 72 percent of the Corporation’s loans at September 30, 2020 were tied to the London Interbank Offered Rate (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 converting fixed-rate long-term debt to variable LIBOR rates. The Corporation adopted the provisions of ASU 2020-04 as of January 1, 2020 with no impact to its financial condition and results of operation at the time of adoption.

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 ~~nonaccrual~~impaired loans, ~~and loans classified as 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, ~~2019~~2020 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.

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 September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.


(in millions)	(in millions)	Total		Level 1		Level 2		Level 3		(in millions)	Total		Level 1		Level 2		Level 3
September 30, 2020
September 30, 2021										September 30, 2021

Deferred compensation plan assets	Deferred compensation plan assets	$	100	$	100	$	0	$	0	Deferred compensation plan assets	$	108	$	108	$	—	$	—
Equity securities	Equity securities	53		53		0		0		Equity securities	71		71		—		—

Investment securities available-for-sale:	Investment securities available-for-sale:									Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities		4,683		4,683		0		0
U.S. Treasury securities										U.S. Treasury securities	3,429		3,429		—		—
Residential mortgage-backed securities (a)										Residential mortgage-backed securities (a)	13,163		—		13,163		—
Commercial mortgage-backed securities (a)										Commercial mortgage-backed securities (a)	254		—		254		—

Total investment securities available-for-sale										Total investment securities available-for-sale	16,846		3,429		13,417		—
Derivative assets:										Derivative assets:
Interest rate contracts										Interest rate contracts	326		—		299		27
Energy contracts										Energy contracts	769		—		769		—
Foreign exchange contracts										Foreign exchange contracts	18		—		18		—
Total derivative assets										Total derivative assets	1,113		—		1,086		27
Total assets at fair value										Total assets at fair value	$	18,138	$	3,608	$	14,503	$	27
Derivative liabilities:										Derivative liabilities:
Interest rate contracts										Interest rate contracts	$	62	$	—	$	62	$	—
Energy contracts										Energy contracts	764		—		764		—
Foreign exchange contracts										Foreign exchange contracts	12		—		12		—

Total derivative liabilities										Total derivative liabilities	838		—		838		—
Deferred compensation plan liabilities										Deferred compensation plan liabilities	108		108		—		—
Total liabilities at fair value										Total liabilities at fair value	$	946	$	108	$	838	$	—
December 31, 2020										December 31, 2020
Deferred compensation plan assets										Deferred compensation plan assets	$	107	$	107	$	—	$	—
Equity securities										Equity securities	60		60		—		—

Investment securities available-for-sale:										Investment securities available-for-sale:
U.S. Treasury securities										U.S. Treasury securities	4,658		4,658		—		—
Residential mortgage-backed securities (a)	Residential mortgage-backed securities (a)	10,407		0		10,407		0		Residential mortgage-backed securities (a)	10,370		—		10,370		—

Total investment securities available-for-sale	Total investment securities available-for-sale	15,090		4,683		10,407		0		Total investment securities available-for-sale	15,028		4,658		10,370		—
Derivative assets:	Derivative assets:									Derivative assets:
Interest rate contracts	Interest rate contracts	601		0		559		42		Interest rate contracts	531		—		492		39
Energy derivative contracts		214		0		214		0
Foreign exchange contracts		10		0		10		0
Total derivative assets		825		0		783		42
Total assets at fair value		$	16,068	$	4,836	$	11,190	$	42
Derivative liabilities:
Interest rate contracts		$	68	$	0	$	68	$	0
Energy derivative contracts		209		0		209		0
Foreign exchange contracts		10		0		10		0

Total derivative liabilities		287		0		287		0
Deferred compensation plan liabilities		100		100		0		0
Total liabilities at fair value		$	387	$	100	$	287	$	0
December 31, 2019
Deferred compensation plan assets		$	95	$	95	$	0	$	0
Equity securities		54		54		0		0

Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities		2,792		2,792		0		0
Residential mortgage-backed securities (a)		9,606		0		9,606		0

Total investment securities available-for-sale		12,398		2,792		9,606		0
Derivative assets:
Interest rate contracts		211		0		189		22
Energy derivative contracts		96		0		96		0
Energy contracts										Energy contracts	151		—		151		—
Foreign exchange contracts	Foreign exchange contracts	10		0		10		0		Foreign exchange contracts	18		—		18		—

Total derivative assets	Total derivative assets	317		0		295		22		Total derivative assets	700		—		661		39
Total assets at fair value	Total assets at fair value	$	12,864	$	2,941	$	9,901	$	22	Total assets at fair value	$	15,895	$	4,825	$	11,031	$	39
Derivative liabilities:	Derivative liabilities:									Derivative liabilities:
Interest rate contracts	Interest rate contracts	$	39	$	0	$	39	$	0	Interest rate contracts	$	61	$	—	$	61	$	—
Energy derivative contracts		92		0		92		0
Energy contracts										Energy contracts	149		—		149		—
Foreign exchange contracts	Foreign exchange contracts	10		0		10		0		Foreign exchange contracts	19		—		19		—

Total derivative liabilities	Total derivative liabilities	141		0		141		0		Total derivative liabilities	229		—		229		—
Deferred compensation plan liabilities	Deferred compensation plan liabilities	95		95		0		0		Deferred compensation plan liabilities	107		107		—		—
Total liabilities at fair value	Total liabilities at fair value	$	236	$	95	$	141	$	0	Total liabilities at fair value	$	336	$	107	$	229	$	—

(a)Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

There were 0no 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- and nine-month periods ended September 30, ~~2020~~2021 and ~~2019.~~2020.

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- and nine-month periods ended September 30, ~~2020~~2021 and ~~2019.~~2020.


				Net Realized/Unrealized Gains (Losses) (Pretax) Recorded in Earnings (a)																			Net Realized/Unrealized Gains (Losses) (Pretax) Recorded in Earnings (a)
		Balance at Beginning of Period												Balance at End of Period				Balance at Beginning of Period																					Balance at End of Period
								Net Realized/Unrealized Gains (Losses) (Pretax) Recorded in Earnings (a)			Sales																		Net Realized/Unrealized Gains (Losses) (Pretax) Recorded in Earnings (a)					Sales
(in millions)	(in millions)			Realized		Unrealized						(in millions)								Realized			Unrealized
Three Months Ended September 30, 2021																Three Months Ended September 30, 2021

Derivative assets:																	Derivative assets:
Interest rate contracts																	Interest rate contracts	$	29				$	—			$	(2)				$	—				$	27

Three Months Ended September 30, 2020	Three Months Ended September 30, 2020																Three Months Ended September 30, 2020

Derivative assets:	Derivative assets:													Derivative assets:
Interest rate contracts	Interest rate contracts	$	44	$	0	$	(2)		$	0				$	42		Interest rate contracts	$	44				$	—			$	(2)				$	—				$	42

Three Months Ended September 30, 2019
Nine Months Ended September 30, 2021																	Nine Months Ended September 30, 2021

Derivative assets:	Derivative assets:													Derivative assets:
Interest rate contracts	Interest rate contracts	$	21	$	1	$	7		$	(1)		$	28	Interest rate contracts		$	39				$	—			$	(12)				$	—				$	27

Nine Months Ended September 30, 2020	Nine Months Ended September 30, 2020													Nine Months Ended September 30, 2020

Derivative assets:	Derivative assets:													Derivative assets:
Interest rate contracts	Interest rate contracts	$	22	$	0	$	20		$	0		$	42	Interest rate contracts		$	22				$	—			$	20				$	—				$	42

Nine Months Ended September 30, 2019

Derivative assets:
Interest rate contracts		$	9	$	1	$	19		$	(1)		$	28

(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 September 30, ~~2020~~2021 and December 31, ~~2019. NaN~~2020. No liabilities were recorded at fair value on a nonrecurring basis at September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.


(in millions)	Level 3
September 30, 2021


Loans:
Commercial	$	125
Real estate construction	4
Commercial mortgage	12

International	7





Total assets at fair value	$	148
December 31, 2020


Loans:
Commercial	$	~~129~~134

Commercial mortgage	516







Total assets at fair value	$	~~134~~
~~December 31, 2019~~


~~Loans:~~
~~Commercial~~	$	70









~~Total assets at fair value~~	$	70150

Level 3 assets recorded at fair value on a nonrecurring basis at September 30, ~~2020~~2021 and December 31, ~~2019~~2020 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~~observable inputs, although they are used in the determination of fair value.

Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

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.

~~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									Carrying Amount		Estimated Fair Value
(in millions)	(in millions)			Total		Level 1		Level 2		Level 3		(in millions)			Total		Level 1		Level 2		Level 3
September 30, 2020
September 30, 2021												September 30, 2021
Assets												Assets
Cash and due from banks												Cash and due from banks	$	1,050	$	1,050	$	1,050	$	—	$	—

Interest-bearing deposits with banks												Interest-bearing deposits with banks	22,539		22,539		22,539		—		—

Loans held-for-sale												Loans held-for-sale	7		7		—		7		—
Total loans, net of allowance for loan losses (a)												Total loans, net of allowance for loan losses (a)	47,586		48,146		—		—		48,146
Customers’ liability on acceptances outstanding												Customers’ liability on acceptances outstanding	3		3		3		—		—
Restricted equity investments												Restricted equity investments	92		92		92		—		—
Nonmarketable equity securities (b)												Nonmarketable equity securities (b)	6		10
Liabilities												Liabilities
Demand deposits (noninterest-bearing)												Demand deposits (noninterest-bearing)	44,093		44,093		—		44,093		—
Interest-bearing deposits												Interest-bearing deposits	36,100		36,100		—		36,100		—
Customer certificates of deposit												Customer certificates of deposit	2,091		2,090		—		2,090		—
Total deposits												Total deposits	82,284		82,283		—		82,283		—

Acceptances outstanding												Acceptances outstanding	3		3		3		—		—
Medium- and long-term debt												Medium- and long-term debt	2,837		2,904		—		2,904		—
Credit-related financial instruments												Credit-related financial instruments	(51)		(51)		—		—		(51)
December 31, 2020												December 31, 2020
Assets	Assets											Assets
Cash and due from banks	Cash and due from banks	$	988	$	988	$	988	$	0	$	0	Cash and due from banks	$	1,031	$	1,031	$	1,031	$	—	$	—

Interest-bearing deposits with banks	Interest-bearing deposits with banks	10,153		10,153		10,153		0		0		Interest-bearing deposits with banks	14,736		14,736		14,736		—		—

Loans held-for-sale	Loans held-for-sale	7		7		0		7		0		Loans held-for-sale	5		5		—		5		—
Total loans, net of allowance for loan losses (a)	Total loans, net of allowance for loan losses (a)	51,391		51,926		0		0		51,926		Total loans, net of allowance for loan losses (a)	51,343		50,601		—		—		50,601
Customers’ liability on acceptances outstanding	Customers’ liability on acceptances outstanding	2		2		2		0		0		Customers’ liability on acceptances outstanding	1		1		1		—		—
Restricted equity investments	Restricted equity investments	207		207		207		0		0		Restricted equity investments	207		207		207		—		—
Nonmarketable equity securities (b)	Nonmarketable equity securities (b)	5		9								Nonmarketable equity securities (b)	5		9
Liabilities	Liabilities											Liabilities
Demand deposits (noninterest-bearing)	Demand deposits (noninterest-bearing)	36,533		36,533		0		36,533		0		Demand deposits (noninterest-bearing)	39,420		39,420		—		39,420		—
Interest-bearing deposits	Interest-bearing deposits	29,626		29,626		0		29,626		0		Interest-bearing deposits	31,316		31,316		—		31,316		—
Customer certificates of deposit	Customer certificates of deposit	2,300		2,302		0		2,302		0		Customer certificates of deposit	2,133		2,133		—		2,133		—

Total deposits	Total deposits	68,459		68,461		0		68,461		0		Total deposits	72,869		72,869		—		72,869		—
Short-term borrowings		10		10		10		0		0

Acceptances outstanding	Acceptances outstanding	2		2		2		0		0		Acceptances outstanding	1		1		1		—		—
Medium- and long-term debt	Medium- and long-term debt	5,754		5,741		0		5,741		0		Medium- and long-term debt	5,728		5,790		—		5,790		—
Credit-related financial instruments	Credit-related financial instruments	(85)		(85)		0		0		(85)		Credit-related financial instruments	(68)		(68)		—		—		(68)
December 31, 2019
Assets
Cash and due from banks		$	973	$	973	$	973	$	0	$	0

Interest-bearing deposits with banks		4,845		4,845		4,845		0		0

Loans held-for-sale		6		6		0		6		0
Total loans, net of allowance for loan losses (a)		49,732		49,975		0		0		49,975
Customers’ liability on acceptances outstanding		2		2		2		0		0
Restricted equity investments		248		248		248		0		0
Nonmarketable equity securities (b)		5		10
Liabilities
Demand deposits (noninterest-bearing)		27,382		27,382		0		27,382		0
Interest-bearing deposits		26,802		26,802		0		26,802		0
Certificates of deposit		2,978		2,968		0		2,968		0
Other time deposits		133		133		0		133		0
Total deposits		57,295		57,285		0		57,285		0
Short-term borrowings		71		71		71		0		0
Acceptances outstanding		2		2		2		0		0
Medium- and long-term debt		7,269		7,316		0		7,316		0
Credit-related financial instruments		(57)		(57)		0		0		(57)

(a)Included ~~$134~~$148 million and ~~$70~~$150 million of loans recorded at fair value on a nonrecurring basis at September 30, ~~2020~~2021 and December 31, ~~2019,~~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.

119

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)	(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2020
September 30, 2021										September 30, 2021
Investment securities available-for-sale:	Investment securities available-for-sale:									Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities		$	4,590	$	93	$	0	$	4,683
U.S. Treasury securities										U.S. Treasury securities	$	3,417	$	34	$	22	$	3,429
Residential mortgage-backed securities (a)										Residential mortgage-backed securities (a)	13,175		114		126		13,163
Commercial mortgage-backed securities (a)										Commercial mortgage-backed securities (a)	258		—		4		254

Total investment securities available-for-sale										Total investment securities available-for-sale	$	16,850	$	148	$	152	$	16,846

December 31, 2020										December 31, 2020
Investment securities available-for-sale:										Investment securities available-for-sale:
U.S. Treasury securities										U.S. Treasury securities	$	4,583	$	76	$	1	$	4,658
Residential mortgage-backed securities (a)	Residential mortgage-backed securities (a)	10,168		241		2		10,407		Residential mortgage-backed securities (a)	10,169		203		2		10,370

Total investment securities available-for-sale	Total investment securities available-for-sale	$	14,758	$	334	$	2	$	15,090	Total investment securities available-for-sale	$	14,752	$	279	$	3	$	15,028

December 31, 2019
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities		$	2,745	$	47	$	0	$	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 summary of the Corporation’s investment securities in an unrealized loss position as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 follows:


		Temporarily Impaired													Temporarily Impaired
		Less than 12 Months				12 Months or more				Total					Less than 12 Months				12 Months or more				Total
(in millions)	(in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2020

September 30, 2021														September 30, 2021
U.S. Treasury securities														U.S. Treasury securities	$	992	$	8	$	832	$	14	$	1,824	$	22
Residential mortgage-backed securities (a)	Residential mortgage-backed securities (a)	$	980	$	2	$	0	$	0	$	980	$	2	Residential mortgage-backed securities (a)	6,872		107		391		19		7,263		126

Commercial mortgage-backed securities (a)														Commercial mortgage-backed securities (a)	254		4		—		—		254		4
Total temporarily impaired securities	Total temporarily impaired securities	$	980	$	2	$	0	$	0	$	980	$	2	Total temporarily impaired securities	$	8,118	$	119	$	1,223	$	33	$	9,341	$	152
December 31, 2019

December 31, 2020														December 31, 2020
U.S. Treasury securities														U.S. Treasury securities	$	1,119	$	1	$	—	$	—	$	1,119	$	1
Residential mortgage-backed securities (a)	Residential mortgage-backed securities (a)	$	1,494	$	7	$	1,906	$	21	$	3,400	$	28	Residential mortgage-backed securities (a)	952		2		—		—		952		2

Total temporarily impaired securities	Total temporarily impaired securities	$	1,494	$	7	$	1,906	$	21	$	3,400	$	28	Total temporarily impaired securities	$	2,071	$	3	$	—	$	—	$	2,071	$	3

(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 September 30, 2021, the Corporation had 390 securities in an unrealized loss position with no allowance for credit losses, comprised of 20 U.S. Treasury securities, 345 residential mortgage-backed securities and 25 commercial mortgage-backed securities.

Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

Interest receivable on investment securities totaled ~~$19~~$22 million at September 30, ~~2020~~2021 and ~~$20~~$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 gains and losses recorded in net securities gains (losses) on the Consolidated Statements of Comprehensive Income,~~ computed based on the adjusted cost of the specific ~~security.~~

Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2020 2019 2020 2019
Securities gains $ 0 $ 0 $ 1 $ 0
Securities losses $ 0 $ 0 $ (1) $ (8)
Net securities losses $ 0 $ 0 $ 0 $ (8)

~~Table~~security, resulted in no gains or losses during the three months ended September 30, 2021 or September 30, 2020 or the nine months ended September 30, 2021. There were $1 million of ~~Contents~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~Comerica Incorporated~~gains and ~~Subsidiaries~~

$1 million of losses for the nine months ended September 30, 2020.

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)	(in millions)					(in millions)
September 30, 2020		Amortized Cost		Fair Value
September 30, 2021						September 30, 2021	Amortized Cost		Fair Value
Contractual maturity	Contractual maturity					Contractual maturity
Within one year	Within one year	$	1,150	$	1,171	Within one year	$	469	$	472
After one year through five years	After one year through five years	3,359		3,438		After one year through five years	3,143		3,163
After five years through ten years	After five years through ten years	1,011		1,036		After five years through ten years	902		915
After ten years	After ten years	9,238		9,445		After ten years	12,336		12,296

Total investment securities	Total investment securities	$	14,758	$	15,090	Total investment securities	$	16,850	$	16,846

Included in the contractual maturity distribution in the table above were residential mortgage-backed securities with a total amortized cost and fair value of ~~$10.2~~$13.2 billion and commercial mortgage-backed securities with a total amortized cost of $258 million and a fair value of ~~$10.4 billion.~~$254 million. The actual cash flows of mortgage-backed securities may differ as borrowers of the underlying loans may exercise prepayment options.

At September 30, ~~2020,~~2021, investment securities with a carrying value of ~~$5.3~~$3.9 billion were pledged where permitted or required by law, including ~~$4.8~~$2.4 billion pledged to the Federal Home Loan Bank (FHLB) as collateral for potential future borrowings of approximately ~~$4.6~~$2.3 billion and ~~$522 million~~$1.4 billion to secure ~~$439~~$926 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.

1311

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															Loans Past Due and Still Accruing
(in millions)	(in millions)	30-59 Days		60-89 Days		90 Days or More		Total		Nonaccrual Loans		Current Loans (a)		Total Loans		(in millions)	30-59 Days		60-89 Days		90 Days or More		Total		Nonaccrual Loans		Current Loans (a)		Total Loans
September 30, 2020
September 30, 2021																September 30, 2021
Business loans:	Business loans:															Business loans:
Commercial	Commercial	$	174	$	42	$	15	$	231	$	241	$	32,132	$	32,604	Commercial	$	51	$	6	$	3	$	60	$	200	$	28,095	$	28,355
Real estate construction:	Real estate construction:															Real estate construction:
Commercial Real Estate business line (b)	Commercial Real Estate business line (b)	36		0		0		36		0		3,666		3,702		Commercial Real Estate business line (b)	17		—		—		17		—		2,471		2,488
Other business lines (c)	Other business lines (c)	10		2		0		12		0		432		444		Other business lines (c)	—		6		3		9		6		507		522
Total real estate construction	Total real estate construction	46		2		0		48		0		4,098		4,146		Total real estate construction	17		6		3		26		6		2,978		3,010
Commercial mortgage:	Commercial mortgage:															Commercial mortgage:
Commercial Real Estate business line (b)	Commercial Real Estate business line (b)	7		1		0		8		3		2,325		2,336		Commercial Real Estate business line (b)	7		—		—		7		2		3,404		3,413
Other business lines (c)	Other business lines (c)	69		10		8		87		17		7,562		7,666		Other business lines (c)	34		11		1		46		28		7,728		7,802
Total commercial mortgage	Total commercial mortgage	76		11		8		95		20		9,887		10,002		Total commercial mortgage	41		11		1		53		30		11,132		11,215
Lease financing	Lease financing	10		1		0		11		1		589		601		Lease financing	6		—		—		6		—		563		569
International	International	0		0		0		0		0		923		923		International	9		1		1		11		8		1,112		1,131
Total business loans	Total business loans	306		56		23		385		262		47,629		48,276		Total business loans	124		24		8		156		244		43,880		44,280

Retail loans:	Retail loans:															Retail loans:
Residential mortgage	Residential mortgage	13		3		0		16		40		1,871		1,927		Residential mortgage	12		1		—		13		35		1,765		1,813
Consumer:	Consumer:															Consumer:
Home equity	Home equity	2		1		0		3		20		1,617		1,640		Home equity	7		1		—		8		12		1,537		1,557
Other consumer	Other consumer	1		0		6		7		0		519		526		Other consumer	—		—		4		4		—		541		545
Total consumer	Total consumer	3		1		6		10		20		2,136		2,166		Total consumer	7		1		4		12		12		2,078		2,102
Total retail loans	Total retail loans	16		4		6		26		60		4,007		4,093		Total retail loans	19		2		4		25		47		3,843		3,915
Total loans	Total loans	$	322	$	60	$	29	$	411	$	322	$	51,636	$	52,369	Total loans	$	143	$	26	$	12	$	181	$	291	$	47,723	$	48,195
December 31, 2019
December 31, 2020																December 31, 2020
Business loans:	Business loans:															Business loans:
Commercial	Commercial	$	27	$	7	$	17	$	51	$	148	$	31,274	$	31,473	Commercial	$	62	$	115	$	33	$	210	$	252	$	32,291	$	32,753
Real estate construction:	Real estate construction:															Real estate construction:
Commercial Real Estate business line (b)	Commercial Real Estate business line (b)	6		0		0		6		0		3,038		3,044		Commercial Real Estate business line (b)	31		—		—		31		—		3,626		3,657
Other business lines (c)	Other business lines (c)	0		7		0		7		0		404		411		Other business lines (c)	9		—		—		9		1		415		425
Total real estate construction	Total real estate construction	6		7		0		13		0		3,442		3,455		Total real estate construction	40		—		—		40		1		4,041		4,082
Commercial mortgage:	Commercial mortgage:															Commercial mortgage:
Commercial Real Estate business line (b)	Commercial Real Estate business line (b)	9		0		0		9		2		2,165		2,176		Commercial Real Estate business line (b)	51		1		—		52		3		2,218		2,273
Other business lines (c)	Other business lines (c)	16		18		9		43		12		7,328		7,383		Other business lines (c)	48		40		5		93		26		7,520		7,639
Total commercial mortgage	Total commercial mortgage	25		18		9		52		14		9,493		9,559		Total commercial mortgage	99		41		5		145		29		9,738		9,912
Lease financing	Lease financing	1		0		0		1		0		587		588		Lease financing	14		—		1		15		1		578		594
International	International	0		5		0		5		0		1,004		1,009		International	—		—		—		—		—		926		926
Total business loans	Total business loans	59		37		26		122		162		45,800		46,084		Total business loans	215		156		39		410		283		47,574		48,267

Retail loans:	Retail loans:															Retail loans:
Residential mortgage	Residential mortgage	15		2		0		17		20		1,808		1,845		Residential mortgage	11		4		—		15		47		1,768		1,830
Consumer:	Consumer:															Consumer:
Home equity	Home equity	4		5		0		9		17		1,685		1,711		Home equity	7		1		—		8		17		1,563		1,588
Other consumer	Other consumer	2		3		0		5		0		724		729		Other consumer	10		—		6		16		—		590		606
Total consumer	Total consumer	6		8		0		14		17		2,409		2,440		Total consumer	17		1		6		24		17		2,153		2,194
Total retail loans	Total retail loans	21		10		0		31		37		4,217		4,285		Total retail loans	28		5		6		39		64		3,921		4,024
Total loans	Total loans	$	80	$	47	$	26	$	153	$	199	$	50,017	$	50,369	Total loans	$	243	$	161	$	45	$	449	$	347	$	51,495	$	52,291

(a)Includes ~~$385~~$35 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 September 30, ~~2020.~~2021 and December 31, 2020, respectively.

(b)Primarily loans to real estate developers.

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

1412

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

The following table presents loans by credit quality indicator (CQI) and vintage year. CQI 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.


		September 30, 2020																			December 31, 2019			September 30, 2021
		Vintage Year																						Vintage Year
(in millions)	(in millions)	2020			2019		2018		2017		2016		Prior		Revolvers		Revolvers Converted to Term		Total		Total		(in millions)	2021			2020			2019		2018		2017		Prior		Revolvers		Revolvers Converted to Term		Total
Business loans:	Business loans:																						Business loans:
Commercial:	Commercial:																						Commercial:
Pass (a)	Pass (a)	$	5,220	(b)	$	2,522	$	1,712	$	1,176	$	496	$	887	$	17,916	$	18	$	29,947	$	29,785	Pass (a)	$	3,891	(b)	$	2,149	(b)	$	1,670	$	1,122	$	779	$	863	$	16,606	$	12	$	27,092

Criticized (c)	Criticized (c)	32			316		236		117		95		198		1,661		2		2,657		1,688		Criticized (c)	67			102			138		93		33		143		685		2		1,263

Total commercial	Total commercial	5,252			2,838		1,948		1,293		591		1,085		19,577		20		32,604		31,473		Total commercial	3,958			2,251			1,808		1,215		812		1,006		17,291		14		28,355
Real estate construction	Real estate construction																						Real estate construction
Pass (a)	Pass (a)	186			983		1,323		773		426		191		193		0		4,075		3,424		Pass (a)	262			899			977		425		189		35		157		—		2,944

Criticized (c)	Criticized (c)	3			27		5		25		9		1		1		0		71		31		Criticized (c)	—			3			30		14		8		8		3		—		66

Total real estate construction	Total real estate construction	189			1,010		1,328		798		435		192		194		0		4,146		3,455		Total real estate construction	262			902			1,007		439		197		43		160		—		3,010
Commercial mortgage	Commercial mortgage																						Commercial mortgage
Pass (a)	Pass (a)	1,662			1,649		1,185		1,161		880		2,509		427		0		9,473		9,262		Pass (a)	1,655			2,003			1,504		1,547		1,135		2,588		445		—		10,877

Criticized (c)	Criticized (c)	39			118		41		58		49		213		11		0		529		297		Criticized (c)	11			44			66		30		27		151		9		—		338

Total commercial mortgage	Total commercial mortgage	1,701			1,767		1,226		1,219		929		2,722		438		0		10,002		9,559		Total commercial mortgage	1,666			2,047			1,570		1,577		1,162		2,739		454		—		11,215
Lease financing	Lease financing																						Lease financing
Pass (a)	Pass (a)	94			126		78		53		15		208		0		0		574		579		Pass (a)	62			93			103		54		40		183		—		—		535

Criticized (c)	Criticized (c)	2			18		4		2		1		0		0		0		27		9		Criticized (c)	—			2			21		9		1		1		—		—		34

Total lease financing	Total lease financing	96			144		82		55		16		208		0		0		601		588		Total lease financing	62			95			124		63		41		184		—		—		569
International	International																						International
Pass (a)	Pass (a)	283			175		126		11		2		64		218		0		879		972		Pass (a)	281			135			154		31		4		16		448		—		1,069

Criticized (c)	Criticized (c)	13			0		0		4		8		2		17		0		44		37		Criticized (c)	20			13			3		8		4		8		6		—		62

Total international	Total international	296			175		126		15		10		66		235		0		923		1,009		Total international	301			148			157		39		8		24		454		—		1,131
Total business loans	Total business loans	7,534			5,934		4,710		3,380		1,981		4,273		20,444		20		48,276		46,084		Total business loans	6,249			5,443			4,666		3,333		2,220		3,996		18,359		14		44,280
Retail loans:	Retail loans:																						Retail loans:
Residential mortgage	Residential mortgage																						Residential mortgage
Pass (a)	Pass (a)	587			248		137		237		226		447		0		0		1,882		1,823		Pass (a)	363			577			187		85		122		443		—		—		1,777

Criticized (c)	Criticized (c)	3			1		2		10		2		27		0		0		45		22		Criticized (c)	1			—			1		2		7		25		—		—		36

Total residential mortgage	Total residential mortgage	590			249		139		247		228		474		0		0		1,927		1,845		Total residential mortgage	364			577			188		87		129		468		—		—		1,813
Consumer:	Consumer:																						Consumer:
Home equity	Home equity																						Home equity
Pass (a)	Pass (a)	0			0		0		0		0		17		1,531		69		1,617		1,682		Pass (a)	—			—			—		—		—		13		1,477		52		1,542

Criticized (c)	Criticized (c)	0			0		0		0		0		1		16		6		23		29		Criticized (c)	—			—			—		—		—		—		10		5		15

Total home equity	Total home equity	0			0		0		0		0		18		1,547		75		1,640		1,711		Total home equity	—			—			—		—		—		13		1,487		57		1,557
Other consumer	Other consumer																						Other consumer
Pass (a)	Pass (a)	47			52		17		2		7		52		339		0		516		722		Pass (a)	68			72			17		9		1		33		341		—		541

Criticized (c)	Criticized (c)	0			1		3		0		0		0		6		0		10		7		Criticized (c)	—			—			—		—		—		—		4		—		4

Total other consumer	Total other consumer	47			53		20		2		7		52		345		0		526		729		Total other consumer	68			72			17		9		1		33		345		—		545
Total consumer	Total consumer	47			53		20		2		7		70		1,892		75		2,166		2,440		Total consumer	68			72			17		9		1		46		1,832		57		2,102
Total retail loans	Total retail loans	637			302		159		249		235		544		1,892		75		4,093		4,285		Total retail loans	432			649			205		96		130		514		1,832		57		3,915
Total loans	Total loans	$	8,171		$	6,236	$	4,869	$	3,629	$	2,216	$	4,817	$	22,336	$	95	$	52,369	$	50,369	Total loans	$	6,681		$	6,092		$	4,871	$	3,429	$	2,350	$	4,510	$	20,191	$	71	$	48,195

Table continues on the following page.																							Table continues on the following page.

Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries


	December 31, 2020
	Vintage Year
	2020			2019		2018		2017		2016		Prior		Revolvers		Revolvers Converted to Term		Total
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 commercial	6,021			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		—		4,035



Criticized (c)	3			28		5		8		—		1		2		—		47
Total real estate construction	436			1,108		1,249		639		335		142		173		—		4,082
Commercial mortgage:
Pass (a)	2,053			1,559		1,146		1,120		818		2,272		431		—		9,399



Criticized (c)	47			130		42		45		41		193		15		—		513
Total commercial mortgage	2,100			1,689		1,188		1,165		859		2,465		446		—		9,912
Lease financing
Pass (a)	109			122		71		50		14		201		—		—		567



Criticized (c)	2			17		5		2		1		—		—		—		27
Total lease financing	111			139		76		52		15		201		—		—		594
International
Pass (a)	274			161		103		11		3		64		245		—		861



Criticized (c)	13			8		18		4		7		2		13		—		65
Total international	287			169		121		15		10		66		258		—		926
Total business loans	8,955			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		—		—		1,779



Criticized (c)	7			2		2		6		2		32		—		—		51
Total residential mortgage	646			232		121		203		198		430		—		—		1,830
Consumer:
Home equity
Pass (a)	—			—		—		—		—		15		1,489		63		1,567



Criticized (c)	—			—		—		—		—		1		13		7		21
Total home equity	—			—		—		—		—		16		1,502		70		1,588
Other consumer
Pass (a)	113			23		12		2		3		41		404		—		598



Criticized (c)	—			—		2		—		—		—		6		—		8
Total other consumer	113			23		14		2		3		41		410		—		606
Total consumer	113			23		14		2		3		57		1,912		70		2,194
Total retail loans	759			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.

(b)Includes ~~$3.8 billion of~~ Small Business Administration Paycheck Protection Program (PPP) loans of $627 million and $393 million in 2021 and 2020, respectively, at September 30, 2021, and PPP loans of $3.5 billion in 2020 at December 31, 2020.

(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-51~~F-59 in the Corporation's ~~2019~~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 ~~$132~~$118 million and ~~$172~~$141 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and was included in accrued income and other assets on the Consolidated Balance Sheets.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

Allowance for Credit Losses

The following table details the changes in the allowance for credit losses.


		2020									2019										2021									2020
(in millions)	(in millions)	Business Loans			Retail Loans			Total			Business Loans			Retail Loans			Total			(in millions)	Business Loans			Retail Loans			Total			Business Loans			Retail Loans			Total
Three Months Ended September 30	Three Months Ended September 30																			Three Months Ended September 30
Balance at beginning of period:	Balance at beginning of period:																			Balance at beginning of period:

Allowance for loan losses	Allowance for loan losses	$	943		$	64		$	1,007		$	618		$	39		$	657		Allowance for loan losses	$	589		$	63		$	652		$	943		$	64		$	1,007
Allowance for credit losses on lending-related commitments	Allowance for credit losses on lending-related commitments	50			9			59			28			3			31			Allowance for credit losses on lending-related commitments	24			7			31			50			9			59
Allowance for credit losses	Allowance for credit losses	993			73			1,066			646			42			688			Allowance for credit losses	613			70			683			993			73			1,066

Loan charge-offs	Loan charge-offs	(53)			0			(53)			(59)			(2)			(61)			Loan charge-offs	(26)			—			(26)			(53)			—			(53)
Recoveries on loans previously charged-off	Recoveries on loans previously charged-off	18			2			20			17			2			19			Recoveries on loans previously charged-off	22			2			24			18			2			20
Net loan charge-offs		(35)			2			(33)			(42)			0			(42)
Net loan (charge-offs) recoveries																				Net loan (charge-offs) recoveries	(4)			2			(2)			(35)			2			(33)
Provision for credit losses:	Provision for credit losses:																			Provision for credit losses:
Provision for loan losses	Provision for loan losses	15			(11)			4			39			(2)			37			Provision for loan losses	(31)			(10)			(41)			15			(11)			4
Provision for credit losses on lending-related commitments	Provision for credit losses on lending-related commitments	1			0			1			(2)			0			(2)			Provision for credit losses on lending-related commitments	—			(1)			(1)			1			—			1
Provision for credit losses	Provision for credit losses	16			(11)			5			37			(2)			35			Provision for credit losses	(31)			(11)			(42)			16			(11)			5

Balance at end of period:	Balance at end of period:																			Balance at end of period:
Allowance for loan losses	Allowance for loan losses	923			55			978			615			37			652			Allowance for loan losses	554			55			609			923			55			978
Allowance for credit losses on lending-related commitments	Allowance for credit losses on lending-related commitments	51			9			60			26			3			29			Allowance for credit losses on lending-related commitments	24			6			30			51			9			60
Allowance for credit losses	Allowance for credit losses	$	974		$	64		$	1,038		$	641		$	40		$	681		Allowance for credit losses	$	578		$	61		$	639		$	974		$	64		$	1,038
Nine Months Ended September 30	Nine Months Ended September 30																			Nine Months Ended September 30
Balance at beginning of period	Balance at beginning of period																			Balance at beginning of period
Allowance for loan losses	Allowance for loan losses	$	601		$	36		$	637		$	627		$	44		$	671		Allowance for loan losses	$	895		$	53		$	948		$	601		$	36		$	637
Allowance for credit losses on lending-related commitments	Allowance for credit losses on lending-related commitments	28			3			31			26			4			30			Allowance for credit losses on lending-related commitments	35			9			44			28			3			31
Allowance for credit losses	Allowance for credit losses	629			39			668			653			48			701			Allowance for credit losses	930			62			992			629			39			668
Cumulative effect of change in accounting principle	Cumulative effect of change in accounting principle	(42)			25			(17)			0			0			0			Cumulative effect of change in accounting principle	—			—			—			(42)			25			(17)
Loan charge-offs	Loan charge-offs	(196)			(3)			(199)			(121)			(4)			(125)			Loan charge-offs	(48)			(2)			(50)			(196)			(3)			(199)
Recoveries on loans previously charged-off	Recoveries on loans previously charged-off	29			3			32			35			4			39			Recoveries on loans previously charged-off	53			3			56			29			3			32
Net loan charge-offs		(167)			0			(167)			(86)			0			(86)
Net loan recoveries (charge-offs)																				Net loan recoveries (charge-offs)	5			1			6			(167)			—			(167)
Provision for credit losses:	Provision for credit losses:																			Provision for credit losses:
Provision for loan losses	Provision for loan losses	531			(6)			525			74			(7)			67			Provision for loan losses	(346)			1			(345)			531			(6)			525
Provision for credit losses on lending-related commitments	Provision for credit losses on lending-related commitments	23			6			29			0			(1)			(1)			Provision for credit losses on lending-related commitments	(11)			(3)			(14)			23			6			29
Provision for credit losses	Provision for credit losses	554			0			554			74			(8)			66			Provision for credit losses	(357)			(2)			(359)			554			—			554

Balance at end of period:	Balance at end of period:																			Balance at end of period:
Allowance for loan losses	Allowance for loan losses	923			55			978			615			37			652			Allowance for loan losses	554			55			609			923			55			978
Allowance for credit losses on lending-related commitments	Allowance for credit losses on lending-related commitments	51			9			60			26			3			29			Allowance for credit losses on lending-related commitments	24			6			30			51			9			60
Allowance for credit losses	Allowance for credit losses	$	974		$	64		$	1,038		$	641		$	40		$	681		Allowance for credit losses	$	578		$	61		$	639		$	974		$	64		$	1,038
Allowance for loan losses as a percentage of total loans	Allowance for loan losses as a percentage of total loans	1.91		%	1.35		%	1.87		%	1.30		%	0.86		%	1.27		%	Allowance for loan losses as a percentage of total loans	1.25		%	1.42		%	1.26		%	1.91		%	1.35		%	1.87		%
Allowance for loan losses as a percentage of total loans excluding PPP loans	Allowance for loan losses as a percentage of total loans excluding PPP loans	2.07			n/a			2.01			n/a			n/a			n/a			Allowance for loan losses as a percentage of total loans excluding PPP loans	1.28			n/a			1.29			2.07			n/a			2.01
Allowance for credit losses as a percentage of total loans	Allowance for credit losses as a percentage of total loans	2.02			1.57			1.98			1.36			0.92			1.32			Allowance for credit losses as a percentage of total loans	1.30			1.57			1.33			2.02			1.57			1.98
Allowance for credit losses as a percentage of total loans excluding PPP loans	Allowance for credit losses as a percentage of total loans excluding PPP loans	2.19			n/a			2.14			n/a			n/a			n/a			Allowance for credit losses as a percentage of total loans excluding PPP loans	1.34			n/a			1.35			2.19			n/a			2.14

n/a - not applicable

1615

Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

Nonaccrual Loans

The following table presents additional information regarding nonaccrual loans. ~~NaN~~No interest income was recognized on nonaccrual loans for the three- and nine-month periods ended September 30, ~~2020~~2021 and ~~2019, respectively.~~2020.


(in millions)	(in millions)	Nonaccrual Loans with No Related Allowance		Nonaccrual Loans with Related Allowance		Total Nonaccrual Loans		(in millions)	Nonaccrual Loans with No Related Allowance		Nonaccrual Loans with Related Allowance		Total Nonaccrual Loans
September 30, 2020
September 30, 2021								September 30, 2021
Business loans:	Business loans:							Business loans:
Commercial	Commercial	$	39	$	202	$	241	Commercial	$	20	$	180	$	200
Real estate construction:								Real estate construction:

Other business lines (a)								Other business lines (a)	—		6		6

Commercial mortgage:	Commercial mortgage:							Commercial mortgage:
Commercial Real Estate business line ~~(a)~~(b)	Commercial Real Estate business line ~~(a)~~(b)	2		1		3		Commercial Real Estate business line ~~(a)~~(b)	1		1		2
Other business lines (b)		6		11		17
Other business lines (a)								Other business lines (a)	6		22		28
Total commercial mortgage	Total commercial mortgage	8		12		20		Total commercial mortgage	7		23		30
Lease financing		0		1		1

International								International	—		8		8
Total business loans	Total business loans	47		215		262		Total business loans	27		217		244
Retail loans:	Retail loans:							Retail loans:
Residential mortgage	Residential mortgage	40		0		40		Residential mortgage	35		—		35
Consumer:	Consumer:							Consumer:
Home equity	Home equity	20		0		20		Home equity	12		—		12

Total retail loans	Total retail loans	60		0		60		Total retail loans	47		—		47
Total nonaccrual loans	Total nonaccrual loans	$	107	$	215	$	322	Total nonaccrual loans	$	74	$	217	$	291
December 31, 2019
December 31, 2020								December 31, 2020
Business loans:	Business loans:							Business loans:
Commercial	Commercial	$	29	$	119	$	148	Commercial	$	57	$	195	$	252
Real estate construction:								Real estate construction:

Other business lines (a)								Other business lines (a)	—		1		1

Commercial mortgage:	Commercial mortgage:							Commercial mortgage:
Commercial Real Estate business line ~~(a)~~(b)	Commercial Real Estate business line ~~(a)~~(b)	2		0		2		Commercial Real Estate business line ~~(a)~~(b)	1		2		3
Other business lines (b)		1		11		12
Other business lines (a)								Other business lines (a)	5		21		26
Total commercial mortgage	Total commercial mortgage	3		11		14		Total commercial mortgage	6		23		29

Lease financing								Lease financing	—		1		1
Total business loans	Total business loans	32		130		162		Total business loans	63		220		283
Retail loans:	Retail loans:							Retail loans:
Residential mortgage	Residential mortgage	20		0		20		Residential mortgage	47		—		47
Consumer:	Consumer:							Consumer:
Home equity	Home equity	17		0		17		Home equity	17		—		17

Total retail loans	Total retail loans	37		0		37		Total retail loans	64		—		64
Total nonaccrual loans	Total nonaccrual loans	$	69	$	130	$	199	Total nonaccrual loans	$	127	$	220	$	347

(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 ~~$10 million and $11~~$1 million at September 30, ~~2020 and~~2021 compared to $8 million at December 31, ~~2019,~~2020, respectively. There were 0no retail loans secured by residential real estate properties in process of foreclosure included in nonaccrual loans at September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

1716

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

Troubled Debt Restructurings

The following table details the amortized cost basis at September 30, ~~2020~~2021 and ~~2019~~2020 of loans considered to be TDRs that were restructured during the three- and nine-month periods ended September 30, ~~2020~~2021 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.


		2020						2019							2021						2020
		Type of Modification						Type of Modification							Type of Modification						Type of Modification
(in millions)	(in millions)	Principal Deferrals (a)		Interest Rate Reductions		Total Modifications		Principal Deferrals (a)		Interest Rate Reductions		Total Modifications		(in millions)	Principal Deferrals (a)		Interest Rate Reductions		Total Modifications		Principal Deferrals (a)		Interest Rate Reductions		Total Modifications
Three Months Ended September 30,	Three Months Ended September 30,													Three Months Ended September 30,

Commercial	Commercial	$	11	$	0	$	11	$	11	$	0	$	11	Commercial	$	—	$	—	$	—	$	11	$	—	$	11

Commercial mortgage:	Commercial mortgage:													Commercial mortgage:

Other business lines (b)	Other business lines (b)	1		0		1		0		0		0		Other business lines (b)	—		—		—		1		—		1

Total business loans	Total business loans	12		0		12		11		0		11		Total business loans	—		—		—		12		—		12

Retail loans:	Retail loans:													Retail loans:

Consumer:	Consumer:													Consumer:
Home equity (c)	Home equity (c)	0		1		1		0		0		0		Home equity (c)	—		—		—		—		1		1

Total retail loans														Total retail loans	—		—		—		—		1		1
Total loans	Total loans	$	12	$	1	$	13	$	11	$	0	$	11	Total loans	$	—	$	—	$	—	$	12	$	1	$	13
Nine Months Ended September 30,	Nine Months Ended September 30,													Nine Months Ended September 30,
Business loans:	Business loans:													Business loans:
Commercial	Commercial	$	26	$	0	$	26	$	19	$	0	$	19	Commercial	$	—	$	—	$	—	$	26	$	—	$	26

Commercial mortgage:	Commercial mortgage:													Commercial mortgage:

Other business lines (b)	Other business lines (b)	2		0		2		0		0		0		Other business lines (b)	—		—		—		2		—		2

Total business loans	Total business loans	28		0		28		19		0		19		Total business loans	—		—		—		28		—		28
Retail loans:	Retail loans:													Retail loans:

Consumer:	Consumer:													Consumer:
Home equity (c)	Home equity (c)	0		1		1		0		1		1		Home equity (c)	—		1		1		—		1		1

Total retail loans														Total retail loans	—		1		1		—		1		1
Total loans	Total loans	$	28	$	1	$	29	$	19	$	1	$	20	Total loans	$	—	$	1	$	1	$	28	$	1	$	29

(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.

(c)Includes bankruptcy loans for which the court has discharged the borrower's obligation and the borrower has not reaffirmed the debt.

The Corporation charges interest on principal balances outstanding during deferral periods. Additionally, none of the modifications involved forgiveness of principal. ~~At September 30, 2020 and December 31, 2019,~~There were no commitments to lend additional funds to borrowers whose terms have been modified in TDRs ~~totaled $1 million~~at September 30, 2021 and ~~$3 million, respectively.~~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. Loans with terms extended by more than an insignificant time period in accordance with the provisions of the CARES Act, primarily retail loans, were $33 million at September 30, 2021 and not reported as TDRs.

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. Of the TDRs modified during the twelve-month periods ended September 30, ~~2020~~2021 and ~~2019,~~2020, subsequent defaults of principal deferrals ~~totaled $6 million and $11 million in~~or interest rate reductions were insignificant for the three- and nine-month periods ended September 30, ~~2020, respectively,~~2021, compared to ~~$17~~$6 million ~~in both~~and $11 million of ~~the comparable periods in 2019. There were 0 subsequent defaults of~~principal deferrals and no interest rate reductions ~~during either of~~in the ~~three- and nine-month periods ended September 30, 2020 and 2019.~~comparable period in 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.

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

~~Table of Contents~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~Comerica Incorporated and Subsidiaries~~

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 ~~risk~~valuation 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 September 30, ~~2020,~~2021, counterparties with bilateral collateral agreements deposited ~~$133~~$14 million of cash with the Corporation to secure the fair value of contracts in an unrealized gain position, and the Corporation had pledged ~~$51~~$58 million of marketable investment securities and posted ~~$37~~$701 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 September 30, 2020.~~

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.

1918

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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 September 30, ~~2020~~2021 and December 31, ~~2019. The table excludes commitments and warrants accounted for as derivatives.~~2020.


		September 30, 2020						December 31, 2019							September 30, 2021						December 31, 2020
				Fair Value						Fair Value							Fair Value						Fair Value
(in millions)	(in millions)	Notional/ Contract Amount (a)		Gross Derivative Assets		Gross Derivative Liabilities		Notional/ Contract Amount (a)		Gross Derivative Assets		Gross Derivative Liabilities		(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	Risk management purposes													Risk management purposes
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments													Derivatives designated as hedging instruments
Interest rate contracts:	Interest rate contracts:													Interest rate contracts:
Swaps - fair value - receive fixed/pay floating	Swaps - fair value - receive fixed/pay floating	$	2,650	$	0	$	0	$	3,325	$	0	$	0	Swaps - fair value - receive fixed/pay floating	$	2,650	$	—	$	—	$	2,650	$	—	$	—
Swaps - cash flow - receive fixed/pay floating	Swaps - cash flow - receive fixed/pay floating	5,550		0		0		4,550		0		0		Swaps - cash flow - receive fixed/pay floating	5,250		—		—		5,550		—		—
Derivatives used as economic hedges	Derivatives used as economic hedges													Derivatives used as economic hedges
Foreign exchange contracts:	Foreign exchange contracts:													Foreign exchange contracts:
Spot, forwards and swaps	Spot, forwards and swaps	328		0		2		330		0		2		Spot, forwards and swaps	401		2		—		442		1		4
Total risk management purposes	Total risk management purposes	8,528		0		2		8,205		0		2		Total risk management purposes	8,301		2		—		8,642		1		4
Customer-initiated and other activities	Customer-initiated and other activities													Customer-initiated and other activities
Interest rate contracts:	Interest rate contracts:													Interest rate contracts:
Caps and floors written	Caps and floors written	745		0		0		671		0		0		Caps and floors written	895		—		1		869		—		—
Caps and floors purchased	Caps and floors purchased	745		0		0		671		0		0		Caps and floors purchased	895		1		—		869		—		—
Swaps	Swaps	20,263		601		68		16,485		211		39		Swaps	20,601		325		61		19,783		531		61
Total interest rate contracts	Total interest rate contracts	21,753		601		68		17,827		211		39		Total interest rate contracts	22,391		326		62		21,521		531		61
Energy contracts:	Energy contracts:													Energy contracts:
Caps and floors written	Caps and floors written	447		1		36		477		0		23		Caps and floors written	1,004		1		145		503		1		33
Caps and floors purchased	Caps and floors purchased	447		36		0		477		23		0		Caps and floors purchased	1,004		145		1		503		33		1
Swaps	Swaps	2,126		177		173		2,135		73		69		Swaps	3,930		623		618		2,115		117		115
Total energy contracts	Total energy contracts	3,020		214		209		3,089		96		92		Total energy contracts	5,938		769		764		3,121		151		149
Foreign exchange contracts:	Foreign exchange contracts:													Foreign exchange contracts:
Spot, forwards, options and swaps	Spot, forwards, options and swaps	1,173		10		8		1,013		10		8		Spot, forwards, options and swaps	1,649		16		12		1,901		17		15
Total customer-initiated and other activities	Total customer-initiated and other activities	25,946		825		285		21,929		317		139		Total customer-initiated and other activities	29,978		1,111		838		26,543		699		225
Total gross derivatives	Total gross derivatives	$	34,474	$	825	$	287	$	30,134	$	317	$	141	Total gross derivatives	$	38,279	$	1,113	$	838	$	35,185	$	700	$	229
Amounts offset in the Consolidated Balance Sheets:	Amounts offset in the Consolidated Balance Sheets:													Amounts offset in the Consolidated Balance Sheets:
Netting adjustment - Offsetting derivative assets/liabilities	Netting adjustment - Offsetting derivative assets/liabilities			(72)		(72)				(63)		(63)		Netting adjustment - Offsetting derivative assets/liabilities			(77)		(77)				(83)		(83)
Netting adjustment - Cash collateral received/posted	Netting adjustment - Cash collateral received/posted			(118)		(36)				(11)		(12)		Netting adjustment - Cash collateral received/posted			(11)		(661)				(17)		(48)
Net derivatives included in the Consolidated Balance Sheets (b)	Net derivatives included in the Consolidated Balance Sheets (b)			635		179				243		66		Net derivatives included in the Consolidated Balance Sheets (b)			1,025		100				600		98
Amounts not offset in the Consolidated Balance Sheets:	Amounts not offset in the Consolidated Balance Sheets:													Amounts not offset in the Consolidated Balance Sheets:
Marketable securities pledged under bilateral collateral agreements	Marketable securities pledged under bilateral collateral agreements			0		(48)				0		(21)		Marketable securities pledged under bilateral collateral agreements			—		(57)				—		(42)
Net derivatives after deducting amounts not offset in the Consolidated Balance Sheets	Net derivatives after deducting amounts not offset in the Consolidated Balance Sheets			$	635	$	131			$	243	$	45	Net derivatives after deducting amounts not offset in the Consolidated Balance Sheets			$	1,025	$	43			$	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 fair value of net derivative assets included credit valuation adjustments for counterparty credit risk of ~~$31~~$13 million and $9$27 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

2019

Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

Risk Management

The Corporation's derivative instruments used for managing interest rate risk ~~currently comprise swaps converting~~include 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 ~~rates~~rates. Interest and ~~variable-rate~~fees on loans ~~to fixed rates.~~included $24 million of cash flow hedge income for both the three-month periods ended September 30, 2021 and 2020, and $72 million and $46 million for the nine-month periods ended September 30, 2021 and 2020, respectively. In the second quarter of 2021, interest rate swap agreements with a notional amount of $300 million outstanding matured.

The following table details the effects of fair value hedging on the Consolidated Statements of Comprehensive Income.


		Interest on Medium- and Long-Term Debt									Interest on Medium- and Long-Term Debt
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	(in millions)	2020		2019		2020		2019		(in millions)	2021		2020		2021		2020
Total interest on medium- and long-term debt (a)	Total interest on medium- and long-term debt (a)	$	11	$	50	$	70	$	152	Total interest on medium- and long-term debt (a)	$	9	$	11	$	27	$	70
Fair value hedging relationships:	Fair value hedging relationships:									Fair value hedging relationships:
Interest rate contracts:	Interest rate contracts:									Interest rate contracts:
Hedged items	Hedged items	26		28		84		80		Hedged items	25		26		76		84
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments	(16)		(2)		(34)		(1)		Derivatives designated as hedging instruments	(17)		(16)		(51)		(34)

(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 September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

Cash flow swaps - receive fixed/pay floating rate on variable-rate ~~loans:~~loans


(dollar amounts in millions)	(dollar amounts in millions)	September 30, 2020			December 31, 2019			(dollar amounts in millions)	September 30, 2021			December 31, 2020
Derivative notional amount	Derivative notional amount	$	5,550		$	4,550		Derivative notional amount	$	5,250		$	5,550
Weighted average:	Weighted average:							Weighted average:
Remaining maturity (in years)	Remaining maturity (in years)	2.5			3.0			Remaining maturity (in years)	1.6			2.3
Receive rate	Receive rate	1.87		%	1.94		%	Receive rate	1.85		%	1.87		%
Pay rate (a)	Pay rate (a)	0.16			1.71			Pay rate (a)	0.09			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 September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

Fair value swaps - receive fixed/pay floating rate on medium- and long-term ~~debt:~~debt


(dollar amounts in millions)	(dollar amounts in millions)	September 30, 2020			December 31, 2019			(dollar amounts in millions)	September 30, 2021			December 31, 2020
Derivative notional amount	Derivative notional amount	$	2,650		$	3,325		Derivative notional amount	$	2,650		$	2,650
Carrying value of hedged items (a)	Carrying value of hedged items (a)	2,954			3,469			Carrying value of hedged items (a)	2,837			2,928
Weighted average:	Weighted average:							Weighted average:
Remaining maturity (in years)	Remaining maturity (in years)	4.9			4.6			Remaining maturity (in years)	3.9			4.6
Receive rate	Receive rate	3.68		%	3.44		%	Receive rate	3.68		%	3.68		%
Pay rate (b)	Pay rate (b)	1.16			2.80			Pay rate (b)	1.07			1.16

(a)Included ~~$305~~$187 million and ~~$146~~$279 million of cumulative hedging adjustments at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, which included $6$5 million and $7$6 million, respectively, of hedging adjustment on a discontinued hedging relationship.

(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 September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

Foreign exchange rate risk arises from changes in the value of certain assets and liabilities denominated in foreign currencies. The Corporation employs spot and forward contracts in addition to swap contracts to manage exposure to these and other risks. These instruments are used as economic hedges, and net gains or losses are included in other noninterest income in the Consolidated Statements of Comprehensive Income.

~~Table of Contents~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~Comerica Incorporated and Subsidiaries~~

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

Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

limits. These limits are established annually and reviewed quarterly. For those customer-initiated derivative contracts which were not offset or where the Corporation holds a position within the limits described above, the Corporation ~~recognized 0 significant~~did not recognize any gains or losses ~~in other noninterest income in the Consolidated Statements of Comprehensive Income~~ for ~~both~~either the three- and nine-month periods ended September 30, ~~2020 and 2019.~~2021 or 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 (losses) 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 September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	(in millions)	Location of Gain	2020		2019		2020		2019		(in millions)	2021		2020		2021		2020
Interest rate contracts	Interest rate contracts	Other noninterest income	$	1	$	4	$	17	$	16	Interest rate contracts	$	2	$	1	$	26	$	17
Energy contracts	Energy contracts	Other noninterest income	0		1		3		4		Energy contracts	7		(1)		13		2
Foreign exchange contracts	Foreign exchange contracts	Foreign exchange income	9		11		29		33		Foreign exchange contracts	11		9		33		29
Total			$	10	$	16	$	49	$	53
Total derivative income											Total derivative income	$	20	$	9	$	72	$	48

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)	(in millions)	September 30, 2020		December 31, 2019		(in millions)	September 30, 2021		December 31, 2020
Unused commitments to extend credit:	Unused commitments to extend credit:					Unused commitments to extend credit:
Commercial and other	Commercial and other	$	23,322	$	23,681	Commercial and other	$	25,945	$	23,443
Bankcard, revolving check credit and home equity loan commitments		3,276		3,180
Bankcard, revolving credit and home equity loan commitments						Bankcard, revolving credit and home equity loan commitments	3,496		3,297
Total unused commitments to extend credit	Total unused commitments to extend credit	$	26,598	$	26,861	Total unused commitments to extend credit	$	29,441	$	26,740
Standby letters of credit	Standby letters of credit	$	3,191	$	3,320	Standby letters of credit	$	3,350	$	3,273
Commercial letters of credit	Commercial letters of credit	26		18		Commercial letters of credit	60		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 ~~$60~~$30 million and ~~$31~~$44 million at September 30, ~~2020~~2021 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 ~~$50~~$27 million at September 30, ~~2020~~2021 and ~~$25~~$37 million at December 31, ~~2019~~2020 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

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~~Comerica Incorporated and Subsidiaries~~

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 $169 million and $161 million, respectively, of the $3.2 billion and $3.3~~There were $3.4 billion standby and commercial letters of credit outstanding at September 30, ~~2020~~2021 and $3.3 billion at December 31, ~~2019,~~2020, of which these risk participations covered $134 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 ~~$35~~$32 million at September 30, ~~2020, including $25~~2021 and consisted of $29 million in deferred fees and ~~$10~~$3 million in the allowance for credit losses on lending-related commitments. At December 31, ~~2019,~~2020, the comparable amounts were ~~$32~~$37 million, ~~$26~~$30 million and $6$7 million, respectively.

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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 September 30, ~~2020~~2021 and December 31, ~~2019.~~2020. The Corporation's criticized list is generally consistent with the Special Mention, Substandard and Doubtful categories defined by regulatory authorities. The Corporation manages credit risk through underwriting, periodically reviewing and approving its credit exposures using Board committee approved credit policies and guidelines.


(dollar amounts in millions)	(dollar amounts in millions)	September 30, 2020			December 31, 2019			(dollar amounts in millions)	September 30, 2021			December 31, 2020
Total criticized standby and commercial letters of credit	Total criticized standby and commercial letters of credit	$	91		$	44		Total criticized standby and commercial letters of credit	$	37		$	73
As a percentage of total outstanding standby and commercial letters of credit	As a percentage of total outstanding standby and commercial letters of credit	2.8		%	1.3		%	As a percentage of total outstanding standby and commercial letters of credit	1.1		%	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's~~its share of the related participated loan. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the total notional amount of the credit risk participation agreements was approximately ~~$1.1~~$1.0 billion and ~~$786 million,~~$1.1 billion, respectively, and the fair value was $3$1 million at September 30, ~~2020~~2021 and ~~insignificant~~$3 million at December 31, ~~2019.~~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 ~~$71~~$37 million and ~~$20~~$62 million at September 30, ~~2020~~2021 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 September 30, ~~2020,~~2021, the weighted average remaining maturity of outstanding credit risk participation agreements was ~~4.5~~4.08 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 and other tax credit entities at September 30, ~~2020~~2021 was limited to ~~$450~~$444 million and ~~$10~~$20 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

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~~Comerica Incorporated and Subsidiaries~~

on the Consolidated Balance Sheets for all legally binding unfunded commitments to fund tax credit entities ($~~171~~166 million at September 30, ~~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 0no financial or other support that was not contractually required to any of the above VIEs during the nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

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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 September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	(in millions)	2020		2019		2020		2019		(in millions)	2021		2020		2021		2020
Other noninterest income:	Other noninterest income:									Other noninterest income:
Amortization of other tax credit investments	Amortization of other tax credit investments	$	0	$	0	$	0	$	1	Amortization of other tax credit investments	$	(1)	$	—	$	(1)	$	—
Provision for income taxes:	Provision for income taxes:									Provision for income taxes:
Amortization of LIHTC investments	Amortization of LIHTC investments	17		16		51		48		Amortization of LIHTC investments	$	18	$	17	53		51
Low income housing tax credits	Low income housing tax credits	(17)		(16)		(49)		(46)		Low income housing tax credits	(17)		(17)		(50)		(49)
Other tax benefits related to tax credit entities	Other tax benefits related to tax credit entities	(4)		(3)		(11)		(10)		Other tax benefits related to tax credit entities	(5)		(4)		(13)		(11)
Total provision for income taxes	Total provision for income taxes	$	(4)	$	(3)	$	(9)	$	(8)	Total provision for income taxes	$	(4)	$	(4)	$	(10)	$	(9)

For further information on the Corporation’s consolidation policy, see Note 1 to the consolidated financial statements in the Corporation's ~~2019~~2020 Annual Report.

NOTE 7 - MEDIUM- AND LONG-TERM DEBT

Medium- and long-term debt is summarized as follows:


(in millions)	(in millions)	September 30, 2020		December 31, 2019		(in millions)	September 30, 2021		December 31, 2020
Parent company	Parent company					Parent company
Subordinated notes:	Subordinated notes:					Subordinated notes:
3.80% subordinated notes due 2026 (a)	3.80% subordinated notes due 2026 (a)	$	282	$	264	3.80% subordinated notes due 2026 (a)	$	270	$	280
Medium- and long-term notes:	Medium- and long-term notes:					Medium- and long-term notes:
3.70% notes due 2023 (a)	3.70% notes due 2023 (a)	911		884		3.70% notes due 2023 (a)	887		905
4.00% notes due 2029 (a)	4.00% notes due 2029 (a)	643		587		4.00% notes due 2029 (a)	602		633
Total medium- and long-term notes	Total medium- and long-term notes	1,554		1,471		Total medium- and long-term notes	1,489		1,538
Total parent company	Total parent company	1,836		1,735		Total parent company	1,759		1,818
Subsidiaries	Subsidiaries					Subsidiaries
Subordinated notes:	Subordinated notes:					Subordinated notes:
4.00% subordinated notes due 2025 (a)	4.00% subordinated notes due 2025 (a)	382		360		4.00% subordinated notes due 2025 (a)	369		380
7.875% subordinated notes due 2026 (a)	7.875% subordinated notes due 2026 (a)	210		202		7.875% subordinated notes due 2026 (a)	195		207
Total subordinated notes	Total subordinated notes	592		562		Total subordinated notes	564		587
Medium- and long-term notes:	Medium- and long-term notes:					Medium- and long-term notes:
2.50% notes due 2020 (a)		0		674
2.50% notes due 2024 (a)	2.50% notes due 2024 (a)	526		498		2.50% notes due 2024 (a)	514		523
Total medium- and long-term notes	Total medium- and long-term notes	526		1,172		Total medium- and long-term notes	514		523
FHLB advances:	FHLB advances:					FHLB advances:
Floating-rate based on FHLB auction rate due 2026	Floating-rate based on FHLB auction rate due 2026	2,800		2,800		Floating-rate based on FHLB auction rate due 2026	—		2,800
Floating-rate based on FHLB auction rate due 2028		0		1,000
Total FHLB advances	Total FHLB advances	2,800		3,800		Total FHLB advances	—		2,800
Total subsidiaries	Total subsidiaries	3,918		5,534		Total subsidiaries	1,078		3,910
Total medium- and long-term debt	Total medium- and long-term debt	$	5,754	$	7,269	Total medium- and long-term debt	$	2,837	$	5,728

(a)The fixed interest rates on these notes have been swapped to a variable rate and designated in a hedging relationship. Accordingly, carrying value has been adjusted to reflect the change in the fair value of the debt as a result of changes in the benchmark rate.

Subordinated notes with remaining maturities greater than one year qualify as Tier 2 capital.

Comerica Bank (the Bank), a wholly-owned subsidiary of the Corporation, is a member of the FHLB, which provides ~~short- and~~short-and long-term funding to its members through advances collateralized by real estate-related assets. The interest rates on

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~~Comerica Incorporated and Subsidiaries~~

the FHLB advances resets between four and eight weeks, based on the FHLB auction rate. ~~At September 30, 2020, the weighted-average rate on the FHLB advances was 0.22%.~~ Each note may be prepaid in full, without penalty, at each scheduled reset date. The Bank held no outstanding long-term advances at September 30, 2021. Borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. At September 30, ~~2020, $19.0~~2021, $18.6 billion of real estate-related loans and ~~$4.8~~$2.4 billion of investment securities were pledged to the FHLB as collateral ~~for outstanding long-term advances of $2.8 billion~~ with ~~an additional~~ capacity for potential future borrowings of approximately $11.7 billion.

Unamortized debt issuance costs deducted from the carrying amount of medium- and long-term debt totaled ~~$10~~$8 million at September 30, ~~2020~~2021 and ~~$12~~$10 million at December 31, ~~2019.~~2020.

~~NOTE 8 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)~~

The following table presents a reconciliation of the changes in the components of accumulated other comprehensive income (loss) and details the components of other comprehensive income for the nine months ended September 30, 2020 and 2019, including the amount of income tax expense (benefit) allocated to each component of other comprehensive income.

Nine Months Ended September 30,
(in millions) 2020 2019
Accumulated net unrealized gains on investment securities:
Balance at beginning of period, net of tax $ 65 $ (138)
Net unrealized holding gains arising during the period 247 267
Less: Provision for income taxes 58 62
Net unrealized holding gains arising during the period, net of tax 189 205
Less:
Net realized losses included in net securities losses 0 (8)
Less: Benefit for income taxes 0 (2)
Reclassification adjustment for net securities losses included in net income, net of tax 0 (6)
Change in net unrealized gains on investment securities, net of tax 189 211
Balance at end of period, net of tax $ 254 $ 73
Accumulated net gains on cash flow hedges:
Balance at beginning of period, net of tax $ 34 $ 0
Net cash flow hedge gains arising during the period 232 69
Less: Provision for income taxes 56 16
Change in net cash flow hedge gains arising during the period, net of tax 176 53
Less:
Net cash flow hedge gains (losses) included in interest and fees on loans 46 (1)
Less: Provision for income taxes 12 0
Reclassification adjustment for net cash flow hedge gains (losses) included in net income, net of tax 34 (1)
Change in net cash flow hedge gains, net of tax 142 54
Balance at end of period, net of tax (a) $ 176 $ 54
Accumulated defined benefit pension and other postretirement plans adjustment:
Balance at beginning of period, net of tax $ (334) $ (471)
Amortization of actuarial net loss 47 30
Amortization of prior service credit (21) (20)
Amounts recognized in other noninterest expenses 26 10
Less: Provision for income taxes 6 2
Change in defined benefit pension and other postretirement plans adjustment, net of tax 20 8
Balance at end of period, net of tax $ (314) $ (463)
Total accumulated other comprehensive income (loss) at end of period, net of tax $ 116 $ (336)

~~(a)~~The Corporation expects to reclassify $72 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 September 30, 2020 levels.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 8 - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following table presents a reconciliation of the changes in the components of accumulated other comprehensive (loss) income and details the components of other comprehensive (loss) income for the nine months ended September 30, 2021 and 2020, including the amount of income tax (benefit) expense allocated to each component of other comprehensive (loss) income.


	Nine Months Ended September 30,
(in millions)	2021		2020
Accumulated net unrealized (losses) gains on investment securities:
Balance at beginning of period, net of tax	$	211	$	65


Net unrealized holding (losses) gains arising during the period	(280)		247
Less: (Benefit) provision for income taxes	(66)		58










Change in net unrealized (losses) gains on investment securities, net of tax	(214)		189
Balance at end of period, net of tax	$	(3)	$	254
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	(13)		232
Less: (Benefit) provision for income taxes	(3)		56
Change in net cash flow hedge gains arising during the period, net of tax	(10)		176
Less:
Net cash flow hedge gains included in interest and fees on loans	72		46
Less: Provision for income taxes	16		12
Reclassification adjustment for net cash flow hedge gains included in net income, net of tax	56		34
Change in net cash flow hedge gains, net of tax	(66)		142
Balance at end of period, net of tax (a)	$	89	$	176
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)	—		(10)


Less: Benefit for income taxes (b)	—		(2)
Net defined benefit pension and other postretirement plans adjustment arising during the period, net of tax (b)	—		(8)
Amounts recognized in other noninterest expenses:
Amortization of actuarial net loss (b)	30		35
Amortization of prior service credit	(19)		(21)

Total amounts recognized in other noninterest expenses (b)	11		14
Less: Provision for income taxes (b)	2		3
Adjustment for amounts recognized as components of net periodic benefit cost during the period, net of tax	9		11
Change in defined benefit pension and other postretirement plans adjustment, net of tax (b)	9		3
Balance at end of period, net of tax (b)	$	(293)	$	(412)












Total accumulated other comprehensive (loss) income at end of period, net of tax (b)	$	(207)	$	18

(a)The Corporation expects to reclassify $59 million of gains, net of tax, from accumulated other comprehensive loss to earnings over the next twelve months if interest yield curves and notional amounts remain at September 30, 2021 levels.

(b)Balances at beginning of period, net of tax, and changes for the nine months ended September 30, 2021 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.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 9 - NET INCOME PER COMMON SHARE

Basic and diluted net income per common share are presented in the following table.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,

(in millions, except per share data)	(in millions, except per share data)	2020		2019		2020		2019		(in millions, except per share data)	2021		2020		2021		2020
Basic and diluted	Basic and diluted									Basic and diluted
Net income	Net income	$	211	$	292	$	259	$	929	Net income	$	262	$	217	$	940	$	276
Less:	Less:									Less:
Income allocated to participating securities	Income allocated to participating securities	0		2		1		5		Income allocated to participating securities	1		—		4		1
Preferred stock dividends	Preferred stock dividends	8		0		8		0		Preferred stock dividends	6		8		17		8
Net income attributable to common shares	Net income attributable to common shares	$	203	$	290	$	250	$	924	Net income attributable to common shares	$	255	$	209	$	919	$	267
Basic average common shares	Basic average common shares	139		147		139		152		Basic average common shares	133		139		136		139
Basic net income per common share	Basic net income per common share	$	1.45	$	1.98	$	1.79	$	6.08	Basic net income per common share	$	1.92	$	1.49	$	6.75	$	1.91
Basic average common shares	Basic average common shares	139		147		139		152		Basic average common shares	133		139		136		139
Dilutive common stock equivalents:	Dilutive common stock equivalents:									Dilutive common stock equivalents:
Net effect of the assumed exercise of stock awards	Net effect of the assumed exercise of stock awards	1		1		1		2		Net effect of the assumed exercise of stock awards	1		1		2		1

Diluted average common shares	Diluted average common shares	140		148		140		154		Diluted average common shares	134		140		138		140
Diluted net income per common share	Diluted net income per common share	$	1.44	$	1.96	$	1.78	$	6.02	Diluted net income per common share	$	1.90	$	1.48	$	6.67	$	1.90

The following average shares related to outstanding options to purchase shares of common stock were not included in the computation of diluted net income per common share because the options were anti-dilutive for the period.


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended September 30,		Nine Months Ended September 30,
(average outstanding options in thousands)	(average outstanding options in thousands)	2020	2019	2020	2019	(average outstanding options in thousands)	2021	2020	2021	2020
Average outstanding options	Average outstanding options	2,029	814	1,497	570	Average outstanding options	440	2,029	443	1,497
Range of exercise prices	Range of exercise prices	$39.10 - $95.25	$67.53 - $95.25	$49.51 - $95.25	$67.53 - $95.25	Range of exercise prices	$73.24 - $95.25	$39.10 - $95.25	$73.24 - $95.25	$49.51 - $95.25

In May 2020, the Corporation issued and sold 400,000 depositary shares, each representing a 1/100th ownership interest in a share of 5.625% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, without par value, with a liquidation preference of $100,000 per share (equivalent of $1,000 per depositary share). Holders of the depositary shares will be entitled to all proportional rights and preferences of the Series A preferred stock (including dividend, voting, redemption and liquidation rights). The $400 million issuance yielded $394 million in proceeds net of underwriting discounts and offering expenses. Dividends on the Series A preferred stock will accrue on a non-cumulative basis and will be payable in arrears when, as and if authorized by the Corporation’s Board of Directors or a duly authorized committee of the Board and declared by the Corporation, on the first day of January, April, July and October of each year, commencing on October 1, 2020. Under the terms of the Series A preferred stock, the ability of the Corporation to pay dividends on, make distributions with respect to, or to repurchase, redeem or acquire its common stock or any other stock ranking on parity with or junior to the Series A preferred stock, is subject to restrictions in the event that the Corporation does not declare and either pay or set aside a sum sufficient for payment of dividends on the Series A preferred stock for the immediately preceding dividend period. The Series A preferred stock is perpetual and has no maturity date, but is redeemable at specified times subject to regulatory considerations.

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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 ~~2019~~2020 Annual Report.

The components of net periodic benefit cost (credit) for the Corporation's qualified pension plan, non-qualified pension plan and postretirement benefit plan are as follows.


Qualified Defined Benefit Pension Plan	Qualified Defined Benefit Pension Plan	Three Months Ended September 30,				Nine Months Ended September 30,				Qualified Defined Benefit Pension Plan	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	(in millions)	2020		2019		2020		2019		(in millions)	2021		2020 (a)		2021		2020 (a)
Service cost	Service cost	$	8	$	8	$	24	$	23	Service cost	$	10	$	8	$	29	$	24
Other components of net benefit credit:	Other components of net benefit credit:									Other components of net benefit credit:
Interest cost	Interest cost	18		20		53		60		Interest cost	16		18		46		53
Expected return on plan assets	Expected return on plan assets	(43)		(41)		(128)		(124)		Expected return on plan assets	(51)		(47)		(152)		(138)
Amortization of prior service credit	Amortization of prior service credit	(5)		(5)		(15)		(14)		Amortization of prior service credit	(5)		(5)		(14)		(15)
Amortization of net loss	Amortization of net loss	13		8		40		25		Amortization of net loss	7		9		22		28
Total other components of net benefit credit	Total other components of net benefit credit	(17)		(18)		(50)		(53)		Total other components of net benefit credit	(33)		(25)		(98)		(72)
Net periodic defined benefit credit	Net periodic defined benefit credit	$	(9)	$	(10)	$	(26)	$	(30)	Net periodic defined benefit credit	$	(23)	$	(17)	$	(69)	$	(48)

Non-Qualified Defined Benefit Pension Plan Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2020 2019 2020 2019
Service cost $ 0 $ 0 $ 1 $ 2
Other components of net benefit cost:
Interest cost 2 3 6 7
Amortization of prior service credit (2) (2) (6) (6)
Amortization of net loss 3 1 7 5
Total other components of net benefit cost 3 2 7 6
Net periodic defined benefit cost $ 3 $ 2 $ 8 $ 8
(a)Recast to reflect the retrospective application of the Corporation's election to change the accounting method for certain components of defined pension benefit credit, effective January 1, 2021. For the three months ended September 30, 2020, expected return on plan assets increased $4 million and amortization of net loss was reduced by $4 million, resulting in an increase of $8 million to total other components of net benefit credit. For the nine months ended September 30, 2020, expected return on plan assets increased $10 million and amortization of net loss was reduced by $12 million, resulting in an increase of $22 million to total other components of net benefit credit. Refer to Note 1 for further information.

Postretirement Benefit Plan Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2020 2019 2020 2019
Other components of net benefit credit:
Interest cost $ 1 $ 0 $ 1 $ 1
Expected return on plan assets (1) (1) (2) (2)
Net periodic defined benefit credit $ 0 $ (1) $ (1) $ (1)


Non-Qualified Defined Benefit Pension Plan	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2021		2020		2021		2020
Service cost	$	—	$	—	$	1	$	1
Other components of net benefit cost:
Interest cost	2		2		5		6
Amortization of prior service credit	(2)		(2)		(5)		(6)
Amortization of net loss	3		3		8		7
Total other components of net benefit cost	3		3		8		7
Net periodic defined benefit cost	$	3	$	3	$	9	$	8


Postretirement Benefit Plan	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2021		2020		2021		2020
Other components of net benefit credit:
Interest cost	$	1	$	1	$	1	$	1
Expected return on plan assets	$	(1)	$	(1)	(2)		(2)




Net periodic defined benefit credit	$	—	$	—	$	(1)	$	(1)

NOTE 11 - INCOME TAXES AND TAX-RELATED ITEMS

At September 30, ~~2020,~~2021, net unrecognized tax benefits were ~~$18~~$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 result in a ~~decrease~~change in net unrecognized tax benefits of $1$4 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 on~~at both September 30, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020.

Net deferred tax ~~assets~~liabilities were $34 million at September 30, ~~2020,~~2021, compared to ~~$42~~$4 million of net deferred tax assets at December 31, ~~2019,~~2020. The $38 million decrease resulted primarily ~~driven by increases to deferred tax liabilities related to unrealized gains on investment securities available-for-sale and net hedging gains. These were partially offset by increases~~from a decrease to deferred tax assets related to the allowance for loan losses and ~~deferred loan origination fees and costs as well as a decrease in~~an increase to deferred tax liabilities related to ~~the allowance for depreciation.~~defined benefit plans that was partially offset by decreases to deferred tax liabilities related to unrealized losses on investment securities available-for-sale as well as hedging gains and losses and an increase to deferred tax assets related to defined benefit plan components of other comprehensive

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

income. Included in deferred tax assets at both September 30, ~~2020~~2021 and December 31, ~~2019~~2020 were $3 million of state net operating loss carryforwards, which expire between ~~2020~~2021 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 September 30, ~~2020~~2021 and December 31, ~~2019.~~2020. The determination regarding valuation allowance was based on evidence of loss carryback capacity, projected future reversals of existing taxable temporary differences to absorb the deferred tax assets and assumptions made regarding future events.

~~Table of Contents~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~Comerica Incorporated and Subsidiaries~~

In the ordinary course of business, the Corporation enters into certain transactions that have tax consequences. From time to time, the Internal Revenue Service (IRS) or other tax jurisdictions may review and/or challenge specific interpretive tax positions taken by the Corporation with respect to those transactions. The Corporation believes its tax returns were filed based upon applicable statutes, regulations and case law in effect at the time of the transactions. The IRS or other tax jurisdictions, an administrative authority or a court, if presented with the transactions, could disagree with the Corporation’s interpretation of the tax law.

Based on current knowledge and probability assessment of various potential outcomes, the Corporation believes 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 and Regulatory Matters

As previously reported in the Corporation's Form 10-K for the year ended December 31, ~~2019~~2020 and Forms 10-Q for the periods ended March 31, ~~2020~~2021 and June 30, ~~2020,~~2021, the Bank ~~was named~~appealed a court's decision in ~~November 2011 as a third-party defendant in~~ Butte Local Development v. Masters Group v. Comerica Bank, ~~(the case),~~ for lender liability. The case was 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,~~6, 2021, the Montana Supreme Court affirmed in part, reversed in part the trial court's 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~~favor of Masters. The court ~~found the Bank breached its forbearance agreement. On January 17, 2020, the court conducted a hearing on~~reduced the amount of ~~costs and interest that Masters is entitled~~the award by $8 million. Additionally, in second quarter 2021, the Corporation agreed to recover. On June 12, 2020, the court found Masters is entitled to attorneys' fees, interest and costs. The Bank is appealing the decision. Management believes that current reserves related to this case are adequatea proposed settlement in connection with a class action lawsuit filed in the ~~event~~U.S. District Court in California and a related Trustee claim pending in the U.S. Bankruptcy Court in Delaware. Upon final settlement and court approval, the Corporation expects to be released from any liability for additional litigation or claims. The estimated net impact of ~~an adverse outcome.~~this settlement, including the Corporation's insurance coverage, was $15 million and included in other noninterest expenses in second quarter 2021. The Corporation has accrued the estimated probable loss for this matter within accrued expenses and other liabilities.

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.

Further, from time to time, the Corporation is also subject to examinations, inquiries and investigations by regulatory authorities in areas including, but not limited to, compliance, risk management and consumer protection, which could lead to administrative or legal proceedings or settlements. Remedies in these proceedings or settlements may include fines, penalties, restitution or alterations in the Corporation's business practices and may result in increased operating expenses or decreased revenues.

On at least a quarterly basis, the Corporation assesses its potential liabilities and contingencies in connection with outstanding legal proceedings and regulatory matters utilizing the latest information available. On a case-by-case basis, ~~reserves~~accruals are established for those legal claims and regulatory matters 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 and regulatory matters may be substantially higher or lower than the amounts ~~reserved.~~accrued. Based on current knowledge, and after consultation with legal counsel, management believes current ~~reserves~~accruals 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 $5 million were included in other noninterest expenses on the Consolidated Statements of Comprehensive Income for both the three-month periods ended September 30, 2020 and 2019, and $12 million and $10 million for the nine-month periods ended September 30, 2020 and 2019, respectively.

For matters where a loss is not probable, the Corporation has not established ~~legal reserves.~~an accrual. The Corporation believes the estimate of the aggregate range of reasonably possible losses, in excess of ~~reserves~~ established accruals, for all legal proceedings and regulatory matters in which it is involved is from 0zero to approximately ~~$45~~$48 million at September 30, ~~2020.~~2021. This estimated aggregate range of reasonably possible losses is based upon currently available information for those legal proceedings and regulatory matters in which the Corporation is involved, taking into account the Corporation’s best estimate of such losses for

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

those legal cases and regulatory matters for which such estimate can be made. For certain legal cases and regulatory matters, 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 legal proceedings and regulatory matters (including the fact many are currently in preliminary stages), the existence in certain legal 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 legal proceedings and regulatory matters (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.~~legal proceedings and regulatory matters. Accordingly, the Corporation’s estimate will change from time to time, and actual losses may be more or less than the current estimate.

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~~Notes to Consolidated Financial Statements (unaudited)~~

~~Comerica Incorporated and Subsidiaries~~

In the event of unexpected future developments, it is possible the ultimate resolution of these matters, if unfavorable, may be material to the Corporation's consolidated financial condition, results of operations or cash flows.

For information regarding income tax contingencies, refer to Note 11.

NOTE 13 - STRATEGIC LINES OF BUSINESS ~~SEGMENT INFORMATION~~AND MARKETS

The Corporation has strategically aligned its operations into 3 major business segments: the Commercial 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 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 September 30, ~~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 Commercial 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.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

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 ~~2019~~2020 Annual Report.

~~Table of Contents~~

~~Notes to Consolidated Financial Statements (unaudited)~~

~~Comerica Incorporated and Subsidiaries~~

Business segment financial results are as follows:


		Commercial Bank			Retail Bank					Wealth Management			Finance			Other				Total				Commercial Bank			Retail Bank				Wealth Management			Finance		Other		Total
(dollar amounts in millions)	(dollar amounts in millions)														(dollar amounts in millions)
Three Months Ended September 30, 2020
Three Months Ended September 30, 2021																							Three Months Ended September 30, 2021
Earnings summary:	Earnings summary:																						Earnings summary:
Net interest income (expense)	Net interest income (expense)	$	413					$	127				$	42				$	(125)						$	1		$	458	Net interest income (expense)	$	407		$	149	$	40	$	(124)		$	3	$	475
Provision for credit losses	Provision for credit losses	14			(2)					(7)			0			0				5			Provision for credit losses	(25)			(5)				(13)			—		1		(42)
Noninterest income	Noninterest income	135			28					64			16			9				252			Noninterest income	169			32				69			10		—		280
Noninterest expenses	Noninterest expenses	206			153					76			0			11				446			Noninterest expenses	224			159				79			—		3		465
Provision (benefit) for income taxes	Provision (benefit) for income taxes	67			0					8			(26)			(1)				48			Provision (benefit) for income taxes	83			4				10			(27)		—		70
Net income (loss)	Net income (loss)	$	261		$	4				$	29		$	(83)		$	0			$	211		Net income (loss)	$	294		$	23			$	33		$	(87)	$	(1)	$	262
Net credit-related charge-offs (recoveries)	Net credit-related charge-offs (recoveries)	$	36		$	(1)				$	(2)		$	0		$	0			$	33		Net credit-related charge-offs (recoveries)	$	4		$	(1)			$	(1)		$	—	$	—	$	2

Selected average balances:	Selected average balances:																						Selected average balances:
Assets	Assets	$	45,636		$	3,487				$	5,198		$	15,909		$	14,038			$	84,268		Assets	$	43,240		$	3,105			$	4,956		$	17,922	$	22,130	$	91,353
Loans	Loans	44,248			2,678					5,094			0			(7)				52,013			Loans	41,040			2,297				4,829			—		(31)		48,135
Deposits	Deposits	39,535			23,604					4,439			1,004			181				68,763			Deposits	46,632			26,088				5,209			977		209		79,115

Statistical data:	Statistical data:																						Statistical data:
Return on average assets (a)	Return on average assets (a)	2.27		%	0.05		%			2.24		%	n/m			n/m				0.99		%	Return on average assets (a)	2.33		%	0.34		%		2.36		%	n/m		n/m		1.14		%
Efficiency ratio (b)	Efficiency ratio (b)	37.60			98.29					71.72			n/m			n/m				62.79			Efficiency ratio (b)	38.82			87.18				72.83			n/m		n/m		61.57
Three Months Ended September 30, 2019
Three Months Ended September 30, 2020																							Three Months Ended September 30, 2020
Earnings summary:	Earnings summary:																						Earnings summary:
Net interest income (expense)	Net interest income (expense)	$	420		$	142				$	47		$	(38)		$	15			$	586		Net interest income (expense)	$	412		$	128			$	42		$	(125)	$	1	$	458
Provision for credit losses	Provision for credit losses	39			(2)					(3)			0			1				35			Provision for credit losses	14			(2)				(7)			—		—		5
Noninterest income	Noninterest income	140			31					69			12			4				256			Noninterest income	135			28				64			16		9		252
Noninterest expenses		199			149					69			(1)			19				435
Provision (benefit) for income taxes		74			5					12			(8)			(3)				80
Net income (loss)		$	248		$	21				$	38		$	(17)		$	2			$	292
Noninterest expenses (c)																							Noninterest expenses (c)	203			151				74			—		10		438
Provision (benefit) for income taxes (c)																							Provision (benefit) for income taxes (c)	68			—				9			(26)		(1)		50
Net income (loss) (c)																							Net income (loss) (c)	$	262		$	7			$	30		$	(83)	$	1	$	217
Net credit-related charge-offs (recoveries)	Net credit-related charge-offs (recoveries)	$	43		$	1				$	(2)		$	0		$	0			$	42		Net credit-related charge-offs (recoveries)	$	35		$	(1)			$	(1)		$	—	$	—	$	33

Selected average balances:	Selected average balances:																						Selected average balances:
Assets	Assets	$	45,460		$	2,871				$	5,032		$	14,061		$	4,312			$	71,736		Assets	$	45,638		$	3,489			$	5,197		$	15,909	$	14,035	$	84,268
Loans	Loans	43,904			2,114					4,884			0			(15)				50,887			Loans	44,250			2,680				5,094			—		(11)		52,013
Deposits	Deposits	28,917			20,761					3,775			2,049			214				55,716			Deposits	39,535			23,604				4,439			1,004		181		68,763

Statistical data:	Statistical data:																						Statistical data:
Return on average assets (a)		2.17		%	0.39		%			3.01		%	n/m			n/m				1.61		%
Efficiency ratio (b)		35.62			84.54					59.79			n/m			n/m				51.54
Return on average assets (a), (c)																							Return on average assets (a), (c)	2.29		%	0.09		%		2.35		%	n/m		n/m		1.02		%
Efficiency ratio (b), (c)																							Efficiency ratio (b), (c)	37.12			96.36				70.03			n/m		n/m		61.74

(a)Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.

(b)Noninterest expenses as a percentage of the sum of net interest income 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.

n/m – not meaningful

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Comerica Incorporated and Subsidiaries


		Commercial Bank			Retail Bank					Wealth Management			Finance			Other				Total				Commercial Bank			Retail Bank				Wealth Management			Finance		Other		Total
(dollar amounts in millions)	(dollar amounts in millions)														(dollar amounts in millions)
Nine Months Ended September 30, 2020
Nine Months Ended September 30, 2021																							Nine Months Ended September 30, 2021
Earnings summary:	Earnings summary:																						Earnings summary:
Net interest income (expense)	Net interest income (expense)	$	1,195					$	372				$	123				$	(264)						$	16		$	1,442	Net interest income (expense)	$	1,191		$	427	$	125	$	(368)		$	8	$	1,383
Provision for credit losses	Provision for credit losses	527			6					21			0			0				554			Provision for credit losses	(325)			(6)				(29)			—		1		(359)
Noninterest income	Noninterest income	406			80					200			41			9				736			Noninterest income	495			90				207			31		11		834
Noninterest expenses	Noninterest expenses	607			457					221			1			25				1,311			Noninterest expenses	643			481				232			1		18		1,375
Provision (benefit) for income taxes	Provision (benefit) for income taxes	94			(4)					17			(54)			1				54			Provision (benefit) for income taxes	307			5				29			(78)		(2)		261
Net income (loss)	Net income (loss)	$	373		$	(7)				$	64		$	(170)		$	(1)			$	259		Net income (loss)	$	1,061		$	37			$	100		$	(260)	$	2	$	940
Net credit-related charge-offs (recoveries)		$	167		$	1				$	(1)		$	0		$	0			$	167

Net credit-related (recoveries) charge-offs																							Net credit-related (recoveries) charge-offs	$	(6)		$	1			$	(1)		$	—	$	—	$	(6)
Selected average balances:	Selected average balances:																						Selected average balances:
Assets	Assets	$	45,764		$	3,221				$	5,156		$	14,902		$	10,699			$	79,742		Assets	$	43,985		$	3,321			$	5,059		$	17,451	$	18,133	$	87,949
Loans	Loans	44,256			2,413					5,035			0			2				51,706			Loans	42,090			2,483				4,940			—		(5)		49,508
Deposits	Deposits	35,376			22,486					4,228			1,030			171				63,291			Deposits	43,827			25,334				5,047			968		195		75,371

Statistical data:	Statistical data:																						Statistical data:
Return on average assets (a)	Return on average assets (a)	1.09		%	(0.04)		%			1.65		%	n/m			n/m				0.43		%	Return on average assets (a)	3.00		%	0.19		%		2.49		%	n/m		n/m		1.43		%
Efficiency ratio (b)	Efficiency ratio (b)	37.89			100.27					68.54			n/m			n/m				60.10			Efficiency ratio (b)	38.12			92.26				69.80			n/m		n/m		61.92

Nine Months Ended September 30, 2019
Nine Months Ended September 30, 2020																							Nine Months Ended September 30, 2020
Earnings summary:	Earnings summary:																						Earnings summary:
Net interest income (expense)	Net interest income (expense)	$	1,252		$	434				$	140		$	(75)		$	44			$	1,795		Net interest income (expense)	$	1,194		$	373			$	123		$	(264)	$	16	$	1,442
Provision for credit losses	Provision for credit losses	85			(5)					(13)			0			(1)				66			Provision for credit losses	527			6				21			—		—		554
Noninterest income	Noninterest income	412			95					201			29			7				744			Noninterest income	406			80				200			41		9		736
Noninterest expenses		592			441					208			0			51				1,292
Provision (benefit) for income taxes		227			21					35			(16)			(15)				252
Net income (loss)		$	760		$	72				$	111		$	(30)		$	16			$	929
Net credit-related charge-offs (recoveries)		$	90		$	1				$	(5)		$	0		$	0			$	86

Noninterest expenses (c)																							Noninterest expenses (c)	598			449				217			1		24		1,289
Provision (benefit) for income taxes (c)																							Provision (benefit) for income taxes (c)	96			(2)				18			(54)		1		59
Net income (loss) (c)																							Net income (loss) (c)	$	379		$	—			$	67		$	(170)	$	—	$	276
Net credit-related charge-offs																							Net credit-related charge-offs	$	166		$	1			$	—		$	—	$	—	$	167
Selected average balances:	Selected average balances:																						Selected average balances:
Assets	Assets	$	44,902		$	2,841				$	5,092		$	13,853		$	4,239			$	70,927		Assets	$	45,764		$	3,221			$	5,156		$	14,902	$	10,699	$	79,742
Loans	Loans	43,465			2,108					4,950			0			(9)				50,514			Loans	44,256			2,413				5,035			—		2		51,706
Deposits	Deposits	28,545			20,628					3,772			1,788			176				54,909			Deposits	35,376			22,486				4,228			1,030		171		63,291

Statistical data:	Statistical data:																						Statistical data:
Return on average assets (a)		2.26		%	0.46		%			2.92		%	n/m			n/m				1.75		%
Efficiency ratio (b)		35.61			82.70					61.04			n/m			n/m				50.66
Return on average assets (a), (c)																							Return on average assets (a), (c)	1.11		%	—		%		1.75		%	n/m		n/m		0.46		%
Efficiency ratio (b), (c)																							Efficiency ratio (b), (c)	37.40			98.34				66.89			n/m		n/m		59.08

(a)Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.

(c)See Defined Benefit Pension and Other Postretirement Costs in Note 1.

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 September 30, ~~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.

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Market segment financial results are as follows:


		Michigan			California					Texas			Other Markets				Finance & Other				Total				Michigan					California					Texas			Other Markets			Finance & Other		Total
(dollar amounts in millions)	(dollar amounts in millions)															(dollar amounts in millions)
Three Months Ended September 30, 2020
Earnings summary:
Net interest income (expense)		$	168					$	179				$	117					$	118								$	(124)				$	458
Provision for credit losses		19			11					(25)			0				0				5
Noninterest income		66			33					28			100				25				252
Noninterest expenses		139			102					89			105				11				446
Provision (benefit) for income taxes		13			21					17			24				(27)				48
Net income (loss)		$	63		$	78				$	64		$	89			$	(83)			$	211
Net credit-related charge-offs		$	6		$	16				$	11		$	0			$	0			$	33

Selected average balances:
Assets		$	13,280		$	18,357				$	11,365		$	11,322			$	29,944			$	84,268
Loans		12,607			18,095					10,923			10,399				(11)				52,013
Deposits		24,759			20,130					10,654			12,035				1,185				68,763

Statistical data:
Return on average assets (a)		0.95		%	1.46		%			2.14		%	2.68		%		n/m				0.99		%
Efficiency ratio (b)		59.79			47.98					61.16			48.22				n/m				62.79

Three Months Ended September 30, 2019
Three Months Ended September 30, 2021																								Three Months Ended September 30, 2021
Earnings summary:	Earnings summary:																							Earnings summary:
Net interest income (expense)	Net interest income (expense)	$	185		$	203				$	125		$	96			$	(23)			$	586		Net interest income (expense)	$	180				$	180				$	117		$	119		$	(121)	$	475
Provision for credit losses	Provision for credit losses	(1)			(6)					50			(9)				1				35			Provision for credit losses	(12)					1					(30)			(2)			1		(42)
Noninterest income	Noninterest income	74			41					31			94				16				256			Noninterest income	70					40					42			118			10		280
Noninterest expenses	Noninterest expenses	139			102					86			90				18				435			Noninterest expenses	144					105					95			118			3		465
Provision (benefit) for income taxes	Provision (benefit) for income taxes	27			37					5			22				(11)				80			Provision (benefit) for income taxes	23					26					20			28			(27)		70
Net income (loss)	Net income (loss)	$	94		$	111				$	15		$	87			$	(15)			$	292		Net income (loss)	$	95				$	88				$	74		$	93		$	(88)	$	262
Net credit-related charge-offs (recoveries)	Net credit-related charge-offs (recoveries)	$	6		$	5				$	34		$	(3)			$	0			$	42		Net credit-related charge-offs (recoveries)	$	4				$	5				$	(9)		$	2		$	—	$	2

Selected average balances:	Selected average balances:																							Selected average balances:
Assets	Assets	$	13,205		$	18,595				$	11,462		$	10,100			$	18,374			$	71,736		Assets	$	12,063				$	17,213				$	10,303		$	11,717		$	40,057	$	91,353
Loans	Loans	12,554			18,261					10,805			9,282				(15)				50,887			Loans	11,445					17,042					9,650			10,024			(26)		48,135
Deposits	Deposits	20,164			16,705					8,705			7,879				2,263				55,716			Deposits	27,735					23,112					11,377			15,705			1,186		79,115

Statistical data:	Statistical data:																							Statistical data:
Return on average assets (a)	Return on average assets (a)	1.79		%	2.37		%			0.48		%	3.45		%		n/m				1.61		%	Return on average assets (a)	1.33		%			1.44		%			2.37		%	2.11		%	n/m		1.14		%
Efficiency ratio (b)	Efficiency ratio (b)	53.30			41.70					55.57			47.08				n/m				51.54			Efficiency ratio (b)	57.15					47.99					59.33			50.07			n/m		61.57
Three Months Ended September 30, 2020																								Three Months Ended September 30, 2020
Earnings summary:																								Earnings summary:
Net interest income (expense)																								Net interest income (expense)	$	167				$	173				$	118		$	124		$	(124)	$	458
Provision for credit losses																								Provision for credit losses	18					15					(25)			(3)			—		5
Noninterest income																								Noninterest income	66					31					28			102			25		252
Noninterest expenses (c)																								Noninterest expenses (c)	138					97					88			105			10		438
Provision (benefit) for income taxes (c)																								Provision (benefit) for income taxes (c)	13					21					17			26			(27)		50
Net income (loss) (c)																								Net income (loss) (c)	$	64				$	71				$	66		$	98		$	(82)	$	217
Net credit-related charge-offs																								Net credit-related charge-offs	$	6				$	14				$	11		$	2		$	—	$	33
Selected average balances:																								Selected average balances:
Assets																								Assets	$	13,232				$	17,886				$	11,339		$	11,867		$	29,944	$	84,268
Loans																								Loans	12,681					17,771					10,911			10,661			(11)		52,013
Deposits																								Deposits	24,685					18,868					10,649			13,376			1,185		68,763
Statistical data:																								Statistical data:
Return on average assets (a), (c)																								Return on average assets (a), (c)	0.99		%			1.44		%			2.17		%	2.67		%	n/m		1.02		%
Efficiency ratio (b), (c)																								Efficiency ratio (b), (c)	58.79					47.54					60.32			46.87			n/m		61.74

(a)Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.

(c)See Defined Benefit Pension and Other Postretirement Costs in Note 1.

n/m – not meaningful.

3231

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries


		Michigan			California					Texas			Other Markets				Finance & Other				Total				Michigan					California					Texas			Other Markets			Finance & Other		Total
(dollar amounts in millions)	(dollar amounts in millions)															(dollar amounts in millions)
Nine Months Ended September 30, 2020
Earnings summary:
Net interest income (expense)		$	490					$	537				$	348					$	315								$	(248)				$	1,442
Provision for credit losses		83			113					296			62				0				554
Noninterest income		202			105					88			291				50				736
Noninterest expenses		418			303					264			300				26				1,311
Provision (benefit) for income taxes		36			51					(29)			49				(53)				54
Net income (loss)		$	155		$	175				$	(95)		$	195			$	(171)			$	259
Net credit-related charge-offs		$	9		$	31				$	127		$	0			$	0			$	167

Selected average balances:
Assets		$	13,272		$	18,563				$	11,369		$	10,943			$	25,595			$	79,742
Loans		12,604			18,263					10,889			9,955				(5)				51,706
Deposits		22,995			18,691					10,026			10,378				1,201				63,291

Statistical data:
Return on average assets (a)		0.86		%	1.18		%			(1.10)		%	2.28		%		n/m				0.43		%
Efficiency ratio (b)		60.20			47.16					60.41			49.60				n/m				60.10
Nine Months Ended September 30, 2019
Nine Months Ended September 30, 2021																								Nine Months Ended September 30, 2021
Earnings summary:	Earnings summary:																							Earnings summary:
Net interest income (expense)	Net interest income (expense)	$	558		$	614				$	373		$	281			$	(31)			$	1,795		Net interest income (expense)	$	513				$	526				$	344		$	360		$	(360)	$	1,383
Provision for credit losses	Provision for credit losses	(6)			(11)					88			(4)				(1)				66			Provision for credit losses	(66)					(77)					(193)			(24)			1		(359)
Noninterest income	Noninterest income	218			121					97			272				36				744			Noninterest income	208					129					113			342			42		834
Noninterest expenses	Noninterest expenses	412			301					255			273				51				1,292			Noninterest expenses	416					325					274			341			19		1,375
Provision (benefit) for income taxes	Provision (benefit) for income taxes	83			113					30			57				(31)				252			Provision (benefit) for income taxes	74					95					80			92			(80)		261
Net income (loss)	Net income (loss)	$	287		$	332				$	97		$	227			$	(14)			$	929		Net income (loss)	$	297				$	312				$	296		$	293		$	(258)	$	940
Net credit-related charge-offs (recoveries)	Net credit-related charge-offs (recoveries)	$	10		$	9				$	73		$	(6)			$	0			$	86		Net credit-related charge-offs (recoveries)	$	5				$	6				$	(19)		$	2		$	—	$	(6)

Selected average balances:	Selected average balances:																							Selected average balances:
Assets	Assets	$	13,170		$	18,877				$	11,240		$	9,548			$	18,092			$	70,927		Assets	$	12,585				$	17,636				$	10,518		$	11,624		$	35,586	$	87,949
Loans	Loans	12,605			18,572					10,586			8,760				(9)				50,514			Loans	11,998					17,480					9,934			10,100			(4)		49,508
Deposits	Deposits	19,959			16,420					8,690			7,876				1,964				54,909			Deposits	26,712					21,195					11,104			15,197			1,163		75,371

Statistical data:	Statistical data:																							Statistical data:
Return on average assets (a)	Return on average assets (a)	1.85		%	2.36		%			1.13		%	3.20		%		n/m				1.75		%	Return on average assets (a)	1.45		%			1.88		%			3.19		%	2.38		%	n/m		1.43		%
Efficiency ratio (b)	Efficiency ratio (b)	53.00			40.89					54.35			49.20				n/m				50.66			Efficiency ratio (b)	57.38					49.54					59.85			48.64			n/m		61.92
Nine Months Ended September 30, 2020																								Nine Months Ended September 30, 2020
Earnings summary:																								Earnings summary:
Net interest income (expense)																								Net interest income (expense)	$	491				$	518				$	348		$	333		$	(248)	$	1,442
Provision for credit losses																								Provision for credit losses	83					108					296			67			—		554
Noninterest income																								Noninterest income	202					98					88			298			50		736
Noninterest expenses (c)																								Noninterest expenses (c)	413					288					260			303			25		1,289
Provision (benefit) for income taxes (c)																								Provision (benefit) for income taxes (c)	37					51					(28)			52			(53)		59
Net income (loss) (c)																								Net income (loss) (c)	$	160				$	169				$	(92)		$	209		$	(170)	$	276
Net credit-related charge-offs																								Net credit-related charge-offs	$	10				$	21				$	127		$	9		$	—	$	167
Selected average balances:																								Selected average balances:
Assets																								Assets	$	13,228				$	18,072				$	11,340		$	11,507		$	25,595	$	79,742
Loans																								Loans	12,672					17,910					10,877			10,252			(5)		51,706
Deposits																								Deposits	22,926					17,617					10,017			11,530			1,201		63,291
Statistical data:																								Statistical data:
Return on average assets (a), (c)																								Return on average assets (a), (c)	0.90		%			1.22		%			(1.07)		%	2.21		%	n/m		0.46		%
Efficiency ratio (b), (c)																								Efficiency ratio (b), (c)	59.20					46.72					59.60			48.01			n/m		59.08

(a)Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.

(c)See Defined Benefit Pension and Other Postretirement Costs in Note 1.

n/m – not meaningful.

3332

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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 Management		Finance & Other		Total			Commercial Bank		Retail Bank		Wealth Management		Finance & Other		Total
(in millions)	(in millions)											(in millions)
Three Months Ended September 30, 2020
Three Months Ended September 30, 2021												Three Months Ended September 30, 2021
Revenue from contracts with customers:	Revenue from contracts with customers:											Revenue from contracts with customers:
Card fees	Card fees	$	60	$	11	$	0	$	0	$	71	Card fees	$	60	$	11	$	1	$	—	$	72
Fiduciary income												Fiduciary income	—		—		58		—		58
Service charges on deposit accounts	Service charges on deposit accounts	33		12		2		0		47		Service charges on deposit accounts	34		14		2		—		50
Fiduciary income		0		0		51		0		51
Commercial loan servicing fees (a)	Commercial loan servicing fees (a)	5		0		0		0		5		Commercial loan servicing fees (a)	5		—		—		—		5
Brokerage fees	Brokerage fees	0		0		5		0		5		Brokerage fees	—		—		3		—		3
Other noninterest income (b)	Other noninterest income (b)	8		2		4		0		14		Other noninterest income (b)	(3)		5		4		—		6
Total revenue from contracts with customers	Total revenue from contracts with customers	106		25		62		0		193		Total revenue from contracts with customers	96		30		68		—		194
Other sources of noninterest income	Other sources of noninterest income	29		3		2		25		59		Other sources of noninterest income	73		2		1		10		86
Total noninterest income	Total noninterest income	$	135	$	28	$	64	$	25	$	252	Total noninterest income	$	169	$	32	$	69	$	10	$	280
Three Months Ended September 30, 2019
Three Months Ended September 30, 2020												Three Months Ended September 30, 2020
Revenue from contracts with customers:	Revenue from contracts with customers:											Revenue from contracts with customers:
Card fees	Card fees	$	55	$	11	$	1	$	0	$	67	Card fees	$	60	$	11	$	—	$	—	$	71
Fiduciary income												Fiduciary income	—		—		51		—		51
Service charges on deposit accounts	Service charges on deposit accounts	32		18		1		0		51		Service charges on deposit accounts	33		12		2		—		47
Commercial loan servicing fees (a)												Commercial loan servicing fees (a)	5		—		—		—		5
Brokerage fees												Brokerage fees	—		—		5		—		5
Other noninterest income (b)												Other noninterest income (b)	8		2		4		—		14
Total revenue from contracts with customers												Total revenue from contracts with customers	106		25		62		—		193
Other sources of noninterest income												Other sources of noninterest income	29		3		2		25		59
Total noninterest income												Total noninterest income	$	135	$	28	$	64	$	25	$	252
Nine Months Ended September 30, 2021												Nine Months Ended September 30, 2021
Revenue from contracts with customers:												Revenue from contracts with customers:
Card fees												Card fees	$	192	$	32	$	3	$	—	$	227
Fiduciary income	Fiduciary income	0		0		53		0		53		Fiduciary income	—		—		171		—		171
Service charges on deposit accounts												Service charges on deposit accounts	101		40		4		—		145
Commercial loan servicing fees (a)	Commercial loan servicing fees (a)	5		0		0		0		5		Commercial loan servicing fees (a)	15		—		—		—		15
Brokerage fees	Brokerage fees	0		0		7		0		7		Brokerage fees	—		—		11		—		11
Other noninterest income (b)	Other noninterest income (b)	1		1		5		0		7		Other noninterest income (b)	6		12		13		—		31
Total revenue from contracts with customers	Total revenue from contracts with customers	93		30		67		0		190		Total revenue from contracts with customers	314		84		202		—		600
Other sources of noninterest income	Other sources of noninterest income	47		1		2		16		66		Other sources of noninterest income	181		6		5		42		234
Total noninterest income	Total noninterest income	$	140	$	31	$	69	$	16	$	256	Total noninterest income	$	495	$	90	$	207	$	42	$	834
Nine Months Ended September 30, 2020	Nine Months Ended September 30, 2020											Nine Months Ended September 30, 2020
Revenue from contracts with customers:	Revenue from contracts with customers:											Revenue from contracts with customers:
Card fees	Card fees	$	168	$	28	$	2	$	0	$	198	Card fees	$	168	$	28	$	2	$	—	$	198
Fiduciary income												Fiduciary income	—		—		157		—		157
Service charges on deposit accounts	Service charges on deposit accounts	95		39		4		0		138		Service charges on deposit accounts	95		39		4		—		138
Fiduciary income		0		0		157		0		157
Commercial loan servicing fees (a)	Commercial loan servicing fees (a)	13		0		0		0		13		Commercial loan servicing fees (a)	13		—		—		—		13
Brokerage fees	Brokerage fees	0		0		17		0		17		Brokerage fees	—		—		17		—		17
Other noninterest income (b)	Other noninterest income (b)	23		7		13		0		43		Other noninterest income (b)	23		7		13		—		43
Total revenue from contracts with customers	Total revenue from contracts with customers	299		74		193		0		566		Total revenue from contracts with customers	299		74		193		—		566
Other sources of noninterest income	Other sources of noninterest income	107		6		7		50		170		Other sources of noninterest income	107		6		7		50		170
Total noninterest income	Total noninterest income	$	406	$	80	$	200	$	50	$	736	Total noninterest income	$	406	$	80	$	200	$	50	$	736
Nine Months Ended September 30, 2019
Revenue from contracts with customers:
Card fees		$	162	$	30	$	3	$	0	$	195
Service charges on deposit accounts		98		52		3		0		153
Fiduciary income		0		0		154		0		154
Commercial loan servicing fees (a)		13		0		0		0		13
Brokerage fees		0		0		21		0		21
Other noninterest income (b)		5		8		14		0		27
Total revenue from contracts with customers		278		90		195		0		563
Other sources of noninterest income		134		5		6		36		181
Total noninterest income		$	412	$	95	$	201	$	36	$	744

(a)Included in commercial lending fees on the Consolidated Statements of Comprehensive Income.

(b)Excludes derivative, warrant and other miscellaneous income.

Adjustments to revenue during the three- and nine-month periods ended September 30, ~~2020~~2021 and ~~2019~~2020 for refunds or credits relating to prior periods were not significant.

Revenue from contracts with customers did not generate significant contract assets and liabilities.

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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 from~~changes 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 67 of the Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30,~~ 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.

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Net income for the three months ended September 30, ~~2020~~2021 was ~~$211 million, a decrease of $81~~$262 million, compared to ~~$292~~$217 million for the three months ended September 30, ~~2019.~~2020. The ~~decrease in net income reflected the net impact of lower interest rates. Net income for the nine months ended September 30, 2020 was $259~~$45 million ~~a decrease of $670 million compared to $929 million for the nine months ended September 30, 2019. The decrease~~increase in net income was driven by lower provision for credit losses, broad-based noninterest income growth and an increase in net interest income that reflected higher loan fees and lower deposit costs, partially offset by higher noninterest expenses. The decline in the provision for credit losses ~~calculated using~~resulted from continued improvements in the ~~current expected~~economic outlook and strong credit ~~loss (CECL) model, which reflects the forecasted impact of the COVID-19 pandemic and pressures on the Energy portfolio, as well as the net impact of lower interest rates.~~

performance. Net income per diluted common share was ~~$1.44~~$1.90 and ~~$1.96~~$1.48 for the three months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively, ~~a decrease~~an increase of ~~$0.52~~$0.42 per diluted common share. Net income per diluted common share ~~was $1.78 and $6.02~~benefited from the decrease in shares outstanding due to repurchases in 2021.

Effective January 1, 2021, the Corporation elected to change the accounting methodology for determining market-related value of plan assets (MRVA) for certain classes of assets in the qualified defined benefit pension plan. The impact of the change for the ~~nine~~three months ended September 30, ~~2020~~2021 was an increase to the pension benefit reduction to noninterest expenses of $5 million and ~~2019, respectively,~~ a ~~decrease~~corresponding increase to net income of ~~$4.24 per diluted common share.~~

$4 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 consolidated financial statements for further information and impacts of the change in accounting policy.

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~~Three Months Ended September 30, 2020 compared to Three Months Ended September 30, 2019~~

Analysis of Net Interest Income


		Three Months Ended														Three Months Ended
		September 30, 2020						September 30, 2019						September 30, 2021				September 30, 2020
(dollar amounts in millions)	(dollar amounts in millions)	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate			(dollar amounts in millions)	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
Commercial loans (a)	Commercial loans (a)	$	32,226	$	255	3.15	%	$	32,329	$	392	4.82	%		Commercial loans (a)	$	28,244	$	262	3.67	%	$	32,226	$	255	3.15	%
Real estate construction loans	Real estate construction loans	4,037		34		3.35		3,344		47		5.53			Real estate construction loans	3,160		28		3.46		4,037		34		3.35
Commercial mortgage loans	Commercial mortgage loans	9,978		71		2.85		9,264		112		4.82			Commercial mortgage loans	11,165		82		2.90		9,978		71		2.85
Lease financing	Lease financing	601		5		2.94		578		6		3.83			Lease financing	580		1		1.12		601		5		2.94
International loans	International loans	1,052		9		3.25		1,007		13		5.12			International loans	1,075		8		3.13		1,052		9		3.25
Residential mortgage loans	Residential mortgage loans	1,961		16		3.41		1,920		18		3.84			Residential mortgage loans	1,816		13		2.92		1,961		16		3.41
Consumer loans	Consumer loans	2,158		18		3.45		2,445		31		4.92			Consumer loans	2,095		17		3.31		2,158		18		3.45
Total loans (b)	Total loans (b)	52,013		408		3.13		50,887		619		4.83			Total loans (b)	48,135		411		3.39		52,013		408		3.13
Mortgage-backed securities (c)	Mortgage-backed securities (c)	9,759		54		2.28		9,408		58		2.45			Mortgage-backed securities (c)	12,331		58		1.89		9,759		54		2.28
U.S. Treasury securities (d)	U.S. Treasury securities (d)	4,091		18		1.77		2,795		17		2.45			U.S. Treasury securities (d)	3,638		12		1.32		4,091		18		1.77
Total investment securities	Total investment securities	13,850		72		2.13		12,203		75		2.45			Total investment securities	15,969		70		1.76		13,850		72		2.13
Interest-bearing deposits with banks	Interest-bearing deposits with banks	12,534		4		0.10		3,049		16		2.13			Interest-bearing deposits with banks	20,494		8		0.16		12,534		4		0.10
Other short-term investments	Other short-term investments	158		—		0.29		146		1		1.28			Other short-term investments	190		—		0.20		158		—		0.29
Total earning assets	Total earning assets	78,555		484		2.47		66,285		711		4.26			Total earning assets	84,788		489		2.30		78,555		484		2.47
Cash and due from banks	Cash and due from banks	911						864							Cash and due from banks	964						911
Allowance for loan losses	Allowance for loan losses	(1,002)						(673)							Allowance for loan losses	(644)						(1,002)
Accrued income and other assets	Accrued income and other assets	5,804						5,260							Accrued income and other assets	6,245						5,804
Total assets	Total assets	$	84,268					$	71,736						Total assets	$	91,353					$	84,268
Money market and interest-bearing checking deposits	Money market and interest-bearing checking deposits	$	27,671	8		0.12		$	23,497	57		0.97			Money market and interest-bearing checking deposits	$	31,865	4		0.05		$	27,671	8		0.12
Savings deposits	Savings deposits	2,560		1		0.02		2,155		1		0.04			Savings deposits	3,097		—		0.01		2,560		1		0.02
Customer certificates of deposit	Customer certificates of deposit	2,495		6		0.87		2,627		8		1.30			Customer certificates of deposit	2,128		1		0.20		2,495		6		0.87
Other time deposits		—		—		—		1,085		7		2.46

Foreign office time deposits	Foreign office time deposits	103		—		0.10		13		—		1.45			Foreign office time deposits	41		—		0.08		103		—		0.10
Total interest-bearing deposits	Total interest-bearing deposits	32,829		15		0.17		29,377		73		0.99			Total interest-bearing deposits	37,131		5		0.06		32,829		15		0.17
Short-term borrowings	Short-term borrowings	218		—		0.25		268		2		2.33			Short-term borrowings	1		—		—		218		—		0.25
Medium- and long-term debt	Medium- and long-term debt	5,940		11		0.78		7,100		50		2.78			Medium- and long-term debt	2,864		9		1.16		5,940		11		0.78
Total interest-bearing sources	Total interest-bearing sources	38,987		26		0.27		36,745		125		1.34			Total interest-bearing sources	39,996		14		0.14		38,987		26		0.27
Noninterest-bearing deposits	Noninterest-bearing deposits	35,934						26,339							Noninterest-bearing deposits	41,984						35,934
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,513						1,398							Accrued expenses and other liabilities	1,456						1,513
Shareholders’ equity	Shareholders’ equity	7,834						7,254							Shareholders’ equity	7,917						7,834
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	84,268					$	71,736						Total liabilities and shareholders’ equity	$	91,353					$	84,268
Net interest income/rate spread	Net interest income/rate spread			$	458	2.20				$	586	2.92			Net interest income/rate spread			$	475	2.16				$	458	2.20
Impact of net noninterest-bearing sources of funds	Impact of net noninterest-bearing sources of funds					0.13						0.60			Impact of net noninterest-bearing sources of funds					0.07						0.13
Net interest margin (as a percentage of average earning assets)	Net interest margin (as a percentage of average earning assets)					2.33	%					3.52	%		Net interest margin (as a percentage of average earning assets)					2.23	%					2.33	%

(a)~~Includes~~Included Paycheck Protection Program (PPP) loans with average ~~balance~~balances of $1.7 billion and $3.8 billion, interest income of $34 million and $22 million and average yields of 8.02% and 2.31% for the three months ended September 30, ~~2020.~~2021 and 2020, respectively. Period-end net unamortized deferred fees totaled $23 million and $72 million at September 30, 2021 and September 30, 2020, respectively.

(b)Nonaccrual loans are included in average balances reported and in the calculation of average rates.

(c)Average balances included ~~$254~~$78 million and ~~$28~~$254 million of unrealized gains and losses for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively; yields calculated gross of these unrealized gains and losses.

(d)Average balances included ~~$99~~$23 million and ~~$51~~$99 million of unrealized gains and losses for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively; yields calculated gross of these unrealized gains and losses.

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Rate/Volume Analysis


		Three Months Ended							Three Months Ended
		September 30, 2020/September 30, 2019							September 30, 2021/September 30, 2020
(in millions)	(in millions)	Decrease Due to Rate		Increase (Decrease) Due to Volume (a)		Net Decrease		(in millions)	Increase (Decrease) Due to Rate		(Decrease) Increase Due to Volume (a)		Net Increase (Decrease)
Interest Income:	Interest Income:							Interest Income:
Loans(b)	Loans(b)	$	(219)	$	8	$	(211)	Loans(b)	$	35	$	(32)	$	3
Investment securities	Investment securities	(5)		2		(3)		Investment securities	(14)		12		(2)
Interest-bearing deposits with banks	Interest-bearing deposits with banks	(15)		3		(12)		Interest-bearing deposits with banks	1		3		4
Other short-term investments		(1)		—		(1)

Total interest income	Total interest income	(240)		13		(227)		Total interest income	22		(17)		5
Interest Expense:	Interest Expense:							Interest Expense:
Interest-bearing deposits	Interest-bearing deposits	(59)		1		(58)		Interest-bearing deposits	(11)		1		(10)
Short-term borrowings		(2)		—		(2)

Medium- and long-term debt	Medium- and long-term debt	(34)		(5)		(39)		Medium- and long-term debt	—		(2)		(2)
Total interest expense	Total interest expense	(95)		(4)		(99)		Total interest expense	(11)		(1)		(12)
Net interest income	Net interest income	$	(145)	$	17	$	(128)	Net interest income	$	33	$	(16)	$	17

(a)Rate/volume variances are allocated to variances due to volume.

(b)Included a $12 million increase in PPP interest income primarily related to loan forgiveness.

Net interest income was $475 million for the three months ended September 30, 2021, an increase of $17 million compared to $458 million for the three months ended September 30, ~~2020, a decrease~~2020. The increase in net interest income was driven by PPP loan forgiveness as well as lower rates paid on interest-bearing deposits, partially offset by lower loan volume and the net impact of ~~$128 million compared to $586 million~~the increase in lower-yielding investment securities. Net interest margin was 2.23 percent for the three months ended September 30, ~~2019. The decrease in net interest income primarily reflected the impact~~2021, a decline of lower interest rates. The $1.1 billion increase in average loans was primarily in commercial mortgage and real estate construction. Average commercial loans for third quarter 2020 included $3.8 billion in lower-yielding PPP loans. The decline in rates led to the 11910 basis ~~point decrease in the net interest margin, to~~points from 2.33 percent for the three months ended September 30, ~~2020 from 3.52 percent for~~2020.

Average earning assets increased $6.2 billion, due to increases of $8.0 billion in interest-bearing deposits with banks and $2.1 billion in investment securities, partially offset by a $3.9 billion decrease in loans. Average interest-bearing funding sources increased $1.0 billion, reflecting a $4.3 billion increase in interest-bearing deposits, partially offset by a $3.1 billion decrease in medium- and long-term debt.

For further discussion of the ~~three months ended September 30, 2019.~~effects of market rates on net interest income, refer to the "Market and Liquidity Risk" section of this financial review.

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, ~~calculated under~~was a benefit of $42 million for the ~~CECL model~~three months ended September 30, 2021, compared to an expense of $5 million for the three months ended September 30, 2020. The change in the provision for credit lossesprimarily reflected the economy re-opening as well as improvements in the economic forecast and in the loan portfolio, including Energy, since the onset of the pandemic last year. Net loan charge-offs decreased $31 million to $2 million for the three months ended September 30, 2021, compared to $33 million for the three months ended September 30, 2020, ~~was $5 million, compared to $35 million for the three months ended September 30, 2019. Net loan charge-offs decreased $9 million to $33 million, or 0.26 percent~~driven by decreases of average total loans for the three months ended September 30, 2020, compared to $42 million, or 0.33 percent of average total loans for the three months ended September 30, 2019. Energy net charge-offs decreased $25 million ~~including a $13~~in Energy and $8 million ~~increase~~ in Technology and Life Sciences to net recoveries ~~compared to the three months ended September 30, 2019, which was partially offset by a~~of $16 million ~~increase in net charge-offs on general Middle Market loans.~~and $1 million, respectively.

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.

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Noninterest Income


		Three Months Ended September 30,					Three Months Ended September 30,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020
Card fees	Card fees	$	71	$	67	Card fees	$	72	$	71
Fiduciary income	Fiduciary income	51		53		Fiduciary income	58		51
Service charges on deposit accounts	Service charges on deposit accounts	47		51		Service charges on deposit accounts	50		47
Commercial lending fees	Commercial lending fees	19		23		Commercial lending fees	31		19
Foreign exchange income		9		11
Derivative income (a)						Derivative income (a)	20		9
Bank-owned life insurance	Bank-owned life insurance	12		11		Bank-owned life insurance	12		12
Letter of credit fees	Letter of credit fees	9		10		Letter of credit fees	10		9
Brokerage fees	Brokerage fees	5		7		Brokerage fees	3		5

Other noninterest income (a)		29		23
Other noninterest income (a), (b)						Other noninterest income (a), (b)	24		29
Total noninterest income	Total noninterest income	$	252	$	256	Total noninterest income	$	280	$	252

(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.

(b)The table below provides further details on certain categories included in other noninterest income.

Noninterest income ~~decreased $4~~increased $28 million to ~~$252~~$280 million for the three months ended September 30, ~~2020, including reductions~~2021, reflecting increases in commercial lending fees, derivative income, fiduciary income and service charges on deposit ~~accounts reflecting the impacts of social distancing,~~accounts. The increase in commercial lending fees primarily resulted from new syndication agent ~~fees (a component of commercial lending fees), brokerage fees and fiduciary income, partially offset by an~~activity, while the increase in ~~card fees resulting from higher activity related~~derivative income was largely due to ~~stimulus payments.~~favorable valuation adjustments. Noninterest income was also impacted by ~~higher~~a decrease in other noninterest income, as detailed below, driven by lower securities trading income and deferred compensation asset returns (offset in other noninterest expenses), ~~as well as lower customer derivative~~partially offset by higher income ~~and income on~~from principal investing and ~~warrants, included in other noninterest income and detailed below.~~warrants.

The following table presents certain categories included in other noninterest income on the Consolidated Statements of Comprehensive Income.


		Three Months Ended September 30,					Three Months Ended September 30,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020
Income from principal investing and warrants						Income from principal investing and warrants	$	14	$	1
Investment banking fees						Investment banking fees	3		2
Deferred compensation asset returns (a)	Deferred compensation asset returns (a)	$	8	$	3	Deferred compensation asset returns (a)	—		8
Securities trading income		8		1
Investment banking fees		2		2
Income from principal investing and warrants		1		3
Customer derivative income (b)		—		6
Securities trading income (b)						Securities trading income (b)	(3)		8
All other noninterest income	All other noninterest income	10		8		All other noninterest income	10		10
Other noninterest income	Other noninterest income	$	29	$	23	Other noninterest income	$	24	$	29

(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.

(b) ~~Customer derivative income included unfavorable valuation adjustments~~Includes changes in value of ~~$6 million for both the~~shares obtained through exercise of warrants.

Noninterest Expenses


	Three Months Ended September 30,
(in millions)	2021		2020


Salaries and benefits expense	$	282	$	257
Outside processing fee expense	65		58
Occupancy expense	40		40
Software expense	40		39
Equipment expense	13		12
Advertising expense	10		9
FDIC insurance expense	4		8
Other noninterest expenses (a)	11		15
Total noninterest expenses (a)	$	465	$	438

(a) The three months ended September 30, 2020 ~~and 2019.~~

~~Noninterest Expenses~~

Three Months Ended September 30,
(in millions) 2020 2019
Salaries and benefits expense $ 257 $ 253
Outside processing fee expense (a) 58 66
Occupancy expense 40 39
Software expense (a) 39 30
Equipment expense 12 13
Advertising expense 9 10
FDIC insurance expense 8 6
Other noninterest expenses 23 18
Total noninterest expenses $ 446 $ 435

~~(a) Amounts reported~~have been recast to reflect the retrospective application of the Corporation's election to change the accounting method for ~~the three months ended September 30, 2020 included a $9 million classification adjustment for costs incurred in cloud computing arrangements, reducing outside processing fee~~certain components of expense ~~and increasing software expense due~~related to the ~~prospective adoption~~defined pension plan, resulting in a decrease of ~~ASU No. 2018-15, effective January~~$8 million from the previously reported balances. See Note 1 ~~2020.~~to the consolidated financial statements for further information and impacts of the change in accounting policy.

Noninterest expenses increased ~~$11~~$27 million to ~~$446~~$465 million, primarily reflecting ~~higher~~increases in salaries and benefits expense and ~~charitable contributions as well as smaller increases~~outside processing fee expense, partially offset by a decrease in ~~various categories.~~other noninterest expenses. The increase in salaries and benefits expense was mostly due to higher performance-related compensation driven by ~~higher deferred compensation expense (offset in noninterest income)~~strong financial results and the impact of annual merit increases, partially offset by lower ~~incentive~~deferred compensation ~~and technology-related labor costs.~~expense (offset in other noninterest income).

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The increase in outside processing fee expense primarily related to data processing support for PPP loans, while the decrease in other noninterest expenses was driven by lower non-salary pension expense and smaller decreases in other categories, partially offset by higher consulting fees.

Provision for Income Taxes

The provision for income taxes increased $20 million to $70 million, driven by higher pre-tax income, partially offset by an increase in discrete tax benefits. Discrete tax benefits were $5 million in third quarter 2021, primarily resulting from adjustments to annual federal filings and resolution of certain state matters, compared to $2 million in third quarter 2020.

Nine Months Ended September 30, ~~2020 compared~~2021 Compared to Nine Months Ended September 30, ~~2019~~2020

~~Analysis of~~ Net ~~Interest Income~~

Nine Months Ended
September 30, 2020 September 30, 2019
(dollar amounts in millions) Average
Balance Interest Average
Rate Average
Balance Interest Average
Rate
Commercial loans (a) $ 32,289 $ 840 3.48 % $ 32,135 $ 1,191 4.96 %
Real estate construction loans 3,830 112 3.90 3,301 140 5.67
Commercial mortgage loans 9,806 248 3.38 9,108 342 5.02
Lease financing 592 15 3.30 548 14 3.34
International loans 1,064 30 3.73 1,015 40 5.26
Residential mortgage loans 1,904 50 3.52 1,943 56 3.87
Consumer loans 2,221 64 3.90 2,464 92 4.98
Total loans (b) 51,706 1,359 3.51 50,514 1,875 4.96
Mortgage-backed securities (c) 9,686 168 2.36 9,320 172 2.44
U.S. Treasury securities (d) 3,258 52 2.18 2,764 50 2.42
Total investment securities 12,944 220 2.31 12,084 222 2.43
Interest-bearing deposits with banks 9,229 24 0.35 2,866 49 2.29
Other short-term investments 151 1 0.62 140 2 1.32
Total earning assets 74,030 1,604 2.91 65,604 2,148 4.37
Cash and due from banks 866 896
Allowance for loan losses (876) (668)
Accrued income and other assets 5,722 5,095
Total assets $ 79,742 $ 70,927
Money market and interest-bearing checking deposits $ 26,220 65 0.33 $ 23,010 157 0.91
Savings deposits 2,386 1 0.03 2,164 1 0.04
Customer certificates of deposit 2,764 25 1.18 2,383 19 1.09
Other time deposits 23 — 2.00 804 15 2.45
Foreign office time deposits 89 — 0.54 13 — 1.51
Total interest-bearing deposits 31,482 91 0.39 28,374 192 0.91
Short-term borrowings 418 1 0.32 472 9 2.43
Medium- and long-term debt 6,821 70 1.38 6,837 152 2.97
Total interest-bearing sources 38,721 162 0.56 35,683 353 1.32
Noninterest-bearing deposits 31,809 26,535
Accrued expenses and other liabilities 1,590 1,377
Shareholders’ equity 7,622 7,332
Total liabilities and shareholders’ equity $ 79,742 $ 70,927
Net interest income/rate spread $ 1,442 2.35 $ 1,795 3.05
Impact of net noninterest-bearing sources of funds 0.26 0.60
Net interest margin (as a percentage of average earning assets) 2.61 % 3.65 %

~~(a)Includes PPP loans with average balance of $2.1 billion~~income for the nine months ended September 30, 2021 was $940 million, an increase of $664 million compared to $276 million for the nine months ended September 30, 2020. The increase was driven by lower provision for credit losses as the economic outlook significantly shifted from the height of the pandemic in 2020. Net income was also impacted by higher noninterest income, partially offset by higher noninterest expenses and a decrease in net interest income. For the nine months ended September 30, 2021, net income per diluted common share was $6.67, an increase of $4.77 compared to $1.90 for the nine months ended September 30, 2020. Net income per diluted common share benefited from the decrease in shares outstanding due to repurchases in 2021.

Effective January 1, 2021, the Corporation elected to change the accounting methodology for determining MRVA for certain classes of assets in the qualified defined benefit pension plan. The impact of the change for the nine months ended September 30, 2021 was an increase to the pension benefit reduction to noninterest expenses of $14 million and a corresponding increase to net income of $11 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 consolidated financial statements for further information and impacts of the change in accounting policy.

Table of Contents

Analysis of Net Interest Income


	Nine Months Ended
	September 30, 2021						September 30, 2020
(dollar amounts in millions)	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
Commercial loans (a)	$	29,741	$	769	3.46	%	$	32,289	$	840	3.48	%
Real estate construction loans	3,826		97		3.37		3,830		112		3.90
Commercial mortgage loans	10,408		224		2.87		9,806		248		3.38
Lease financing (b)	583		(7)		(1.55)		592		15		3.30
International loans	1,024		24		3.17		1,064		30		3.73
Residential mortgage loans	1,814		41		3.05		1,904		50		3.52
Consumer loans	2,112		53		3.36		2,221		64		3.90
Total loans (c)	49,508		1,201		3.24		51,706		1,359		3.51
Mortgage-backed securities (d)	11,221		163		1.95		9,686		168		2.36
U.S. Treasury securities (e)	4,205		46		1.49		3,258		52		2.18
Total investment securities	15,426		209		1.82		12,944		220		2.31
Interest-bearing deposits with banks	16,524		17		0.13		9,229		24		0.35
Other short-term investments	179		—		0.23		151		1		0.62
Total earning assets	81,637		1,427		2.34		74,030		1,604		2.91
Cash and due from banks	972						866
Allowance for loan losses	(770)						(876)
Accrued income and other assets	6,110						5,722
Total assets	$	87,949					$	79,742
Money market and interest-bearing checking deposits	$	30,300	14		0.06		$	26,220	65		0.33
Savings deposits	2,974		—		0.01		2,386		1		0.03
Customer certificates of deposit	2,137		3		0.22		2,764		25		1.18
Other time deposits	—		—		—		23		—		2.00
Foreign office time deposits	48		—		0.09		89		—		0.54
Total interest-bearing deposits	35,459		17		0.07		31,482		91		0.39
Short-term borrowings	2		—		—		418		1		0.32
Medium- and long-term debt	3,107		27		1.10		6,821		70		1.38
Total interest-bearing sources	38,568		44		0.15		38,721		162		0.56
Noninterest-bearing deposits	39,912						31,809
Accrued expenses and other liabilities	1,465						1,590
Shareholders’ equity	8,004						7,622
Total liabilities and shareholders’ equity	$	87,949					$	79,742
Net interest income/rate spread			$	1,383	2.19				$	1,442	2.35
Impact of net noninterest-bearing sources of funds					0.08						0.26
Net interest margin (as a percentage of average earning assets)					2.27	%					2.61	%

(a)Included PPP loans with average balances of $2.9 billion and $2.1 billion, interest income of $96 million and $36 million and average yields of 4.43% and 2.27% for the nine months ended September 30, 2021 and 2020, respectively. Period-end net unamortized deferred fees totaled $23 million and $72 million at September 30, 2021 and September 30, 2020, respectively.

(b)The nine months ended September 30, 2021 included residual value adjustments totaling $20 million, which impacted the average yield on loans by 6 basis points.

(c)Nonaccrual loans are included in average balances reported and in the calculation of average rates.

~~(c)~~(d)Average balances included ~~$212~~$109 million and ~~$(62)~~$212 million of unrealized gains and losses for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively; yields calculated gross of these unrealized gains and losses.

~~(d)~~(e)Average balances included ~~$94~~$37 million and ~~$23~~$94 million of unrealized gains and losses for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively; yields calculated gross of these unrealized gains and losses.

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Rate/Volume Analysis


		Nine Months Ended							Nine Months Ended
		September 30, 2020/September 30, 2019							September 30, 2021/September 30, 2020
(in millions)	(in millions)	Decrease Due to Rate		Increase Due to Volume (a)		Net Decrease		(in millions)	Decrease Due to Rate		(Decrease) Increase Due to Volume (a)		Net Decrease
Interest Income:	Interest Income:							Interest Income:
Loans(b)	Loans(b)	$	(547)	$	31	$	(516)	Loans(b)	$	(106)	$	(52)	$	(158)
Investment securities	Investment securities	(5)		3		(2)		Investment securities	(46)		35		(11)
Interest-bearing deposits with banks	Interest-bearing deposits with banks	(42)		17		(25)		Interest-bearing deposits with banks	(14)		7		(7)
Other short-term investments	Other short-term investments	(1)		—		(1)		Other short-term investments	(1)		—		(1)
Total interest income	Total interest income	(595)		51		(544)		Total interest income	(167)		(10)		(177)
Interest Expense:	Interest Expense:							Interest Expense:
Interest-bearing deposits	Interest-bearing deposits	(110)		9		(101)		Interest-bearing deposits	(75)		1		(74)
Short-term borrowings	Short-term borrowings	(8)		—		(8)		Short-term borrowings	—		(1)		(1)
Medium- and long-term debt	Medium- and long-term debt	(82)		—		(82)		Medium- and long-term debt	(13)		(30)		(43)
Total interest expense	Total interest expense	(200)		9		(191)		Total interest expense	(88)		(30)		(118)
Net interest income	Net interest income	$	(395)	$	42	$	(353)	Net interest income	$	(79)	$	20	$	(59)

(a)Rate/volume variances are allocated to variances due to volume.

(b)Included a $60 million increase in PPP interest income primarily related to loan forgiveness.

Net interest income was $1.4 billion for the nine months ended September 30, ~~2020,~~2021, a decrease of ~~$353~~$59 million compared to ~~$1.8 billion~~the nine months ended September 30, 2020. The decrease in net interest income reflected lower yields on earning assets and a decrease in loan balances, partially offset by lower rates paid on deposits and debt. Net interest margin was 2.27 percent for the nine months ended September 30, ~~2019. Net~~2021, a decrease of 34 basis points compared to 2.61 percent for the comparable period in 2020. The decrease in net interest margin ~~was 2.61~~reflected the decline in the average 30-day LIBOR, from 0.64 percent for the nine months ended September 30, 2020 ~~a decrease of 104 basis points compared~~ to ~~3.65~~0.10 percent for the comparable period in 2019. The decrease in net interest income and margin reflected the impact of lower interest rates, partially offset by the $1.2 billion increase in loans. The average loan balance in the nine months ended September 30, ~~2020 included $2.1~~2021.

Average earning assets increased $7.6 billion, due to increases of $7.3 billion in ~~lower-yielding PPP~~interest-bearing deposits with banks and $2.5 billion in investment securities, partially offset by a $2.2 billion decrease in loans. Average interest-bearing funding sources decreased $153 million, reflecting a $3.7 billion decrease in medium- and long-term debt and a $416 million decrease in short-term borrowings, mostly offset by a $4.0 billion increase in interest-bearing deposits.

For further discussion of the effects of market rates on net interest income, refer to the "Market and Liquidity Risk" section of this financial review.

Provision for Credit Losses

The provision for credit losses ~~which includes both~~was a benefit of $359 million for the ~~provision for loan losses and the provision for credit losses on lending-related commitments, was~~nine months ended September 30, 2021, compared to an expense of $554 million for the nine months ended September 30, ~~2020, compared to $66~~2020. The change in provision for credit losses reflected the economy re-opening as well as improvements in the economic forecast and in the loan portfolio, including Energy, since the onset of the pandemic last year. Net loan recoveries were $6 million for the nine months ended September 30, ~~2019. The provision for credit losses for the nine months ended September 30, 2020, which was calculated under the CECL model, increased primarily due~~2021, compared to ~~the forecasted impact of the COVID-19 pandemic, including the economic impacts of social distancing, and sustained pressures on the Energy portfolio. Net~~net loan charge-offs ~~increased $81 million to~~of $167 million for the nine months ended September 30, 2020, ~~compared to $86 million for the nine months ended September 30, 2019,~~largely driven by a ~~$54~~decrease of $150 million ~~increase~~ in Energy net ~~charge-offs of Energy loans.~~charge-offs.

An analysis of the allowance for credit losses and nonperforming assets is presented under the "Credit Risk" subheading in the "Risk Management" section of this financial review.

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Noninterest Income


		Nine Months Ended September 30,					Nine Months Ended September 30,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020
Card fees	Card fees	$	198	$	195	Card fees	$	227	$	198
Fiduciary income	Fiduciary income	157		154		Fiduciary income	171		157
Service charges on deposit accounts	Service charges on deposit accounts	138		153		Service charges on deposit accounts	145		138
Commercial lending fees	Commercial lending fees	53		66		Commercial lending fees	76		53
Foreign exchange income		29		33
Derivative income (a)						Derivative income (a)	72		48
Bank-owned life insurance	Bank-owned life insurance	33		31		Bank-owned life insurance	32		33
Letter of credit fees	Letter of credit fees	27		29		Letter of credit fees	30		27
Brokerage fees	Brokerage fees	17		21		Brokerage fees	11		17
Net securities losses		—		(8)
Other noninterest income (a)		84		70

Other noninterest income (a), (b)						Other noninterest income (a), (b)	70		65
Total noninterest income	Total noninterest income	$	736	$	744	Total noninterest income	$	834	$	736

(b)The table below provides further details on certain categories included in other noninterest income.

Noninterest income ~~decreased $8~~increased $98 million to ~~$736~~$834 million, ~~which reflected a decline~~including increases in ~~service charges on deposit accounts, primarily resulting from pandemic-driven reductions in commercial activity levels and non-sufficient funds and~~

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~~overdraft fees. Additionally, declines in~~card fees, derivative income, syndication agent fees ~~(included in~~(component of commercial lending fees), and higher fiduciary income. The increase in card fees resulted from higher activity mostly related to stimulus payments and merchant payment processing services, while the increase in derivative income was primarily due to favorable valuation adjustments partially offset by a decrease in interest rate swap activity. Noninterest income was also impacted by an increase in other noninterest income, as detailed below, driven by higher income from principal investing and warrants, ~~foreign exchange income and brokerage fees were partially~~mostly offset by ~~higher~~lower securities trading income and investment banking fees (included in other noninterest income and detailed below) as well as increases in fiduciary income, card fees and the impact of losses related to securities repositioning during the nine-month period ended September 30, 2019.income.

The following table presents certain categories included in other noninterest income on the Consolidated Statements of Comprehensive Income.


		Nine Months Ended September 30,					Nine Months Ended September 30,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020
Securities trading income		$	20	$	5
Customer derivative income (a)		19		19
Income from principal investing and warrants						Income from principal investing and warrants	$	22	$	1
Deferred compensation asset returns (a)						Deferred compensation asset returns (a)	9		7
Investment banking fees	Investment banking fees	9		5		Investment banking fees	9		9
Deferred compensation asset returns (b)		7		5
Income from principal investing and warrants		1		6

Securities trading income (b)						Securities trading income (b)	1		20
All other noninterest income	All other noninterest income	28		30		All other noninterest income	29		28
Other noninterest income	Other noninterest income	$	84	$	70	Other noninterest income	$	70	$	65

(a)~~Customer derivative income included unfavorable valuation adjustments of $22 million and $10 million for the nine months ended September 30, 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.

(b) Includes changes in value of shares obtained through exercise of warrants.

Noninterest Expenses


		Nine Months Ended September 30,					Nine Months Ended September 30,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020

Salaries and benefits expense	Salaries and benefits expense	$	748	$	763	Salaries and benefits expense	$	841	$	748
Outside processing fee expense ~~(a)~~	Outside processing fee expense ~~(a)~~	177		194		Outside processing fee expense ~~(a)~~	200		177
Occupancy expense	Occupancy expense	114		113		Occupancy expense	117		114
Software expense ~~(a)~~	Software expense ~~(a)~~	115		87		Software expense ~~(a)~~	117		115
Equipment expense	Equipment expense	36		37		Equipment expense	38		36
Advertising expense	Advertising expense	24		24		Advertising expense	25		24
FDIC insurance expense	FDIC insurance expense	24		17		FDIC insurance expense	17		24
Other noninterest expenses(a)	Other noninterest expenses(a)	73		57		Other noninterest expenses(a)	20		51
Total noninterest expenses(a)	Total noninterest expenses(a)	$	1,311	$	1,292	Total noninterest expenses(a)	$	1,375	$	1,289

(a) ~~Amounts reported for the~~The nine months ended September 30, 2020 ~~included a $24 million classification adjustment~~has been recast to reflect the retrospective application of the Corporation's election to change the accounting method for ~~costs incurred in cloud computing arrangements, reducing outside processing fee~~certain components of expense ~~and increasing software expense due~~related to the ~~prospective adoption~~defined pension plan, resulting in a decrease of ~~ASU No. 2018-15, effective January~~$22 million from the previously reported balances. See Note 1 ~~2020.~~to the consolidated financial statements for further information and impacts of the change in accounting policy.

Noninterest expenses increased ~~$19~~$86 million to ~~$1.3 billion. The increase in noninterest expenses primarily reflected~~$1.4 billion, due to increases within other noninterest expenses including higher operational losses, charitable contributions and other defined benefit costs. Additionally, excluding the $24 million classification adjustment for the prospective adoption of ASU No. 2018-15, higher outside processing fees and FDIC insurance expenses as well as smaller increases in other categories partially offset decreases in salaries and benefits expense and ~~a reduction~~outside processing fee expense, partially offset by decreases in ~~travel~~other noninterest expenses and ~~entertainment expense due to the COVID-19 pandemic.~~lower FDIC insurance expense. The increase in charitable contributions included amounts previously pledged in response to the pandemic to support business needs and community service organizations that care for and provide critical services to communities served by the Corporation. The decline in salaries and benefits expense ~~included lower incentive and annual stock-based~~reflected higher performance-related compensation ~~as well as a reduction in technology-related contingent labor costs, partially offset~~driven by ~~annual merit increases.~~

strong financial

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results. Higher technology-related labor costs (related to contract labor) and staff insurance (from elevated claims) also contributed to the increase in salaries and benefits expense. The increase in outside processing fee expense was primarily due to higher volumes of government card transactions (tied to card fee revenue) and data processing support for PPP loans. The decrease in other noninterest expenses was driven by lower non-salary pension expense and operational losses, partially offset by higher litigation-related expenses and consulting fees.

Provision for Income Taxes

The provision for income taxes increased $202 million to $261 million, driven by higher pre-tax income, partially offset by an increase in certain discrete tax benefits. Discrete tax benefits were $9 million for the nine months ended September 30, 2021, primarily resulting from adjustments to annual federal filings, resolution of certain state matters and compensation benefits, compared to $3 million for the nine months ended September 30, 2020.

OUTLOOK ~~FOR FOURTH QUARTER 2020 COMPARED TO THIRD QUARTER 2020~~

This outlook is based on management expectations for ~~gradual~~continued improvement in economic conditions. While some modest forgiveness of PPP loans is expected by the end of the year, given the current level of uncertainty, any impact from loan forgiveness on loans, net interest income and expenses is excluded from this outlook.

•Decline in average loans reflects decreases in Mortgage Banker Finance due to a reduction in activity and the cyclical impacts on Middle Market, Large Corporate and Energy, partially offset by growth in National Dealer Services as inventory levels begin to slowly rebuild.

Fourth Quarter 2021 Compared to Third Quarter 2021

Average loans

•Non-PPP portfolio to have growth in general Middle Market and several other business lines, partly offset by a decline in Mortgage Banker Finance. This growth is expected to be more than offset by forgiveness of the bulk of PPP loans.

Average deposits

•Deposits to remain strong.

Net interest income

•Non-PPP portfolio to have lower loan fees from elevated levels mostly offset by loan growth; this is expected to be more than offset by lower PPP-related income.

Credit quality

•Strong credit quality continues.

Noninterest income

•Growth in several customer-related fee categories, more than offset by lower commercial loan fees and warrant and BOLI income.

Noninterest expenses

•Increases in seasonal expenses and technology investments, offset by lower compensation expense from elevated level.

Tax rate

•Income tax expense for full-year 2021 to be between 22 and 23 percent of pre-tax income, excluding discrete items.

Capital

•CET1 target of approximately 10 percent.

•~~Average deposits to remain strong and relatively stable (excluding the benefit of possible additional fiscal stimulus).~~

•Net interest income relatively stable with lower loan balances as well as the impact of lower LIBOR and securities yields, mostly offset by careful management of loan and deposit pricing, the full quarter benefit of the larger securities portfolio and lower wholesale funding.

•~~Provision for credit losses reflects pace of economic recovery; net charge-offs modestly higher.~~

•Decrease in noninterest income as third quarter levels of deferred compensation, securities trading income and bank-owned life insurance not to repeat. Reduced card fees as economic stimulus benefits recede, offset by growth in several fee categories due to improving economic conditions.

•Increase in noninterest expenses reflects technology projects and seasonal impact of staff insurance, mostly offset by third quarter levels of deferred compensation and charitable contributions not expected to repeat.

•~~Maintain strong capital levels with a focus on supporting growth as well as providing an attractive return to our shareholders.~~

STRATEGIC LINES OF BUSINESS AND MARKETS

The Corporation has strategically aligned its operations into three major business segments: the Commercial 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 ~~these~~the 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- and nine-month periods ended September 30, ~~2020~~2021 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 ~~2019~~2020 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

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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 ~~for~~on 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 ~~impacts~~crediting rates. Due to the impact of ~~loan and deposit levels. As overall~~lower interest rates, ~~decreased,~~ business segments, particularly those focused on generating deposits, were impacted by lower FTP crediting rates on deposits in the nine months ended September 30, ~~2020~~2021 compared to the same period in the prior year. Similarly, FTP charges for funding loans decreased in the nine months ended September 30, ~~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 nine months ended September 30, ~~2020~~2021 compared to the same period in the prior year.

~~Table~~ The nine months ended September 30, 2021 has been recast to reflect the retrospective application of ~~Contents~~

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.

Commercial Bank


		Nine Months Ended						Percent Change			Nine Months Ended						Percent Change
(dollar amounts in millions)	(dollar amounts in millions)	September 30, 2020		September 30, 2019		Change				(dollar amounts in millions)	September 30, 2021		September 30, 2020		Change
Earnings summary:	Earnings summary:									Earnings summary:
Net interest income	Net interest income	$	1,195	$	1,252	$	(57)	(5)	%	Net interest income	$	1,191	$	1,194	$	(3)	—	%
Provision for credit losses	Provision for credit losses	527		85		442		n/m		Provision for credit losses	(325)		527		(852)		n/m
Noninterest income	Noninterest income	406		412		(6)		(1)		Noninterest income	495		406		89		22
Noninterest expenses	Noninterest expenses	607		592		15		2		Noninterest expenses	643		598		45		7
Provision for income taxes	Provision for income taxes	94		227		(133)		(58)		Provision for income taxes	307		96		211		n/m
Net income	Net income	$	373	$	760	$	(387)	(51)	%	Net income	$	1,061	$	379	$	682	n/m
Net credit-related charge-offs		$	167	$	90	$	77	85	%
Net credit-related (recoveries) charge-offs										Net credit-related (recoveries) charge-offs	$	(6)	$	166	$	(172)	n/m

Selected average balances:	Selected average balances:									Selected average balances:
Loans(a)	Loans(a)	$	44,256	$	43,465	$	791	2	%	Loans(a)	$	42,090	$	44,256	$	(2,166)	(5)	%
Deposits	Deposits	35,376		28,545		6,831		24		Deposits	43,827		35,376		8,451		24

~~n/m - not meaningful~~

The $791 million increase in average loans reflected growth in Commercial Real Estate, Mortgage Banker Finance and Business Banking, partially offset by a decrease in National Dealer Services due to an imbalance in supply and demand resulting in lower inventory. Average(a)Included PPP loans ~~totaled~~with average balances of $2.2 billion and $1.7 ~~billion. Average deposits increased $6.8~~ billion reflecting increases in all deposit categories as customers conserved cash due to uncertainty. The Commercial Bank's net income decreased $387 million to $373 million. Net interest income decreased $57 million to $1.2 billion, due to a $505 million decrease in loan interest income, partially offset by decreases of $396 million in allocated net FTP chargesfor the nine months ended September 30, 2021 and $52 million in deposit costs. The provision for credit losses increased $442 million to $527 million primarily due to the forecasted impact of the COVID-19 pandemic, including the economic impacts of social distancing and sustained pressures on the Energy portfolio, while net credit-related charge-offs increased $77 million to $167 million, primarily due to Energy net charge-offs. Noninterest income decreased $6 million, primarily reflecting a decrease of $13 million in commercial lending fees as well as lower warrant, foreign exchange and derivative income, partially offset by an increase of $14 million in securities trading income as well as higher card and investment banking fees. Noninterest expenses increased $15 million, primarily reflecting a $9 million increase in corporate overhead as well as higher FDIC insurance expense, operational and litigation-related costs, partially offset by lower incentive and stock-based compensation.

~~Retail Bank~~

Nine Months Ended Percent
Change
(dollar amounts in millions) September 30, 2020 September 30, 2019 Change
Earnings summary:
Net interest income $ 372 $ 434 $ (62) (14) %
Provision for credit losses 6 (5) 11 n/m
Noninterest income 80 95 (15) (16)
Noninterest expenses 457 441 16 4
(Benefit) provision for income taxes (4) 21 (25) n/m
Net (loss) income $ (7) $ 72 $ (79) n/m
Net credit-related charge-offs $ 1 $ 1 $ — —
Selected average balances:
Loans $ 2,413 $ 2,108 $ 305 14 %
Deposits 22,486 20,628 1,858 9
2020, respectively.

n/m - not meaningful

Average loans ~~increased $305~~decreased $2.2 billion, including a $513 million ~~due to~~increase in PPP loans. The change in loans ~~to small businesses, including PPP loans.~~included decreases in National Dealer Services, Energy, Technology and Life Sciences and general Middle Market, partially offset by increases in Equity Fund Services, Environmental Services and Commercial Real Estate. Average deposits increased ~~$1.9~~$8.5 billion, reflecting increases in all deposit categories. The ~~Retail~~Commercial Bank's net income ~~decreased $79 million to a net loss of $7~~increased $682 million. Net interest income was stable, while the provision for credit losses decreased ~~$62~~$852 million to ~~$372~~a benefit of $325 million, reflecting the economy re-opening as well as sustained improvements in the economic forecasts and in the Energy portfolio. Net credit-related charge-offs decreased $172 million to a $6 million recovery, primarily due to ~~decreases~~a reduction of ~~$64~~$150 million in ~~allocated~~Energy net ~~FTP credits~~charge-offs. Noninterest income increased $89 million with increases in derivative income, card fees, commercial lending fees and ~~$13 million in loan~~warrant income, partially offset by a ~~$15 million~~ decrease in deposit costs. The provision for credit losses increased $11 million from a benefit of $5 million. Noninterest income decreased $15 million, including a $13 million decrease in service charges on deposit accounts.securities trading income. Noninterest expenses increased ~~$16~~$45 million, primarily ~~due to~~reflecting increases ~~of $6 million in operational losses and $5 million~~ in salaries and benefits expense, ~~as well as smaller increases~~outside processing fee expense and corporate overhead, which were partially offset by a decrease in ~~other categories.~~

litigation-related expenses.

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Retail Bank


	Nine Months Ended						Percent Change
(dollar amounts in millions)	September 30, 2021		September 30, 2020		Change
Earnings summary:
Net interest income	$	427	$	373	$	54	15	%
Provision for credit losses	(6)		6		(12)		n/m
Noninterest income	90		80		10		12
Noninterest expenses	481		449		32		7
Provision (benefit) for income taxes	5		(2)		7		n/m
Net income	$	37	$	—	$	37	n/m
Net credit-related charge-offs	$	1	$	1	$	—	—

Selected average balances:
Loans (a)	$	2,483	$	2,413	$	70	3	%
Deposits	25,334		22,486		2,848		13

(a)Included PPP loans with average balances of $532 million and $328 million for the nine months ended September 30, 2021 and 2020, respectively.

n/m - not meaningful

Average loans increased $70 million due to loans to small businesses, driven by PPP loans. Average deposits increased $2.8 billion, including increases in all deposit categories with the exception of time deposits. The Retail Bank's net income increased $37 million. Net interest income increased $54 million, primarily due to higher deposit volumes earning FTP crediting rates. Provision for credit losses decreased $12 million to a benefit of $6 million. Noninterest income increased $10 million, driven by increases in card fees and smaller increases in other categories. Noninterest expenses increased $32 million, primarily due to increases in litigation-related expenses and corporate overhead, which were partially offset by a decrease in operational losses.

Wealth Management


		Nine Months Ended						Percent Change			Nine Months Ended						Percent Change
(dollar amounts in millions)	(dollar amounts in millions)	September 30, 2020		September 30, 2019		Change				(dollar amounts in millions)	September 30, 2021		September 30, 2020		Change
Earnings summary:	Earnings summary:									Earnings summary:
Net interest income	Net interest income	$	123	$	140	$	(17)	(12)	%	Net interest income	$	125	$	123	$	2	2	%
Provision for credit losses	Provision for credit losses	21		(13)		34		n/m		Provision for credit losses	(29)		21		(50)		n/m
Noninterest income	Noninterest income	200		201		(1)		(1)		Noninterest income	207		200		7		4
Noninterest expenses	Noninterest expenses	221		208		13		6		Noninterest expenses	232		217		15		8
Provision for income taxes	Provision for income taxes	17		35		(18)		(51)		Provision for income taxes	29		18		11		56
Net income	Net income	$	64	$	111	$	(47)	(43)	%	Net income	$	100	$	67	$	33	49
Net credit-related recoveries	Net credit-related recoveries	$	(1)	$	(5)	$	4	(90)		Net credit-related recoveries	$	(1)	$	—	$	(1)	n/m

Selected average balances:	Selected average balances:									Selected average balances:
Loans(a)	Loans(a)	$	5,035	$	4,950	$	85	2	%	Loans(a)	$	4,940	$	5,035	$	(95)	(2)	%
Deposits	Deposits	4,228		3,772		456		12		Deposits	5,047		4,228		819		19

(a)Included PPP loans with average balances of $155 million and $114 million for the nine months ended September 30, 2021 and 2020, respectively.

n/m - not meaningful

Average loans ~~remained relatively stable at $5.0 billion. Average~~decreased $95 million to $4.9 billion, while average deposits increased ~~$456~~$819 million, reflecting increases in all deposit ~~categories.~~categories with the exception of time deposits. Wealth Management's net income ~~decreased $47~~increased $33 million to ~~$64~~$100 million. Net interest income was relatively stable, while provision for credit losses decreased ~~$17~~$50 million to ~~$123~~a benefit of $29 million due to ~~a $45~~the improving economic outlook. Noninterest income increased $7 million, ~~decrease~~primarily due to an increase in ~~loan~~fiduciary income, partially offset by ~~decreases of $20 million~~a decrease in ~~allocated net FTP charges and $8 million in deposit costs. The provision for credit losses increased $34 million from a benefit of $13 million.~~brokerage fees. Noninterest ~~income was stable, while noninterest~~ expenses increased ~~$13~~$15 million, primarily reflecting increases ~~of $6 million~~ in salaries and benefits expense and ~~$5 million in software expense.~~corporate overhead.

Market Segments

The following sections present a summary of the performance of each of the Corporation's market segments for the nine months ended September 30, ~~2020~~2021 compared to the same period in the prior year.

~~Michigan~~

Nine Months Ended Percent
Change
(dollar amounts in millions) September 30, 2020 September 30, 2019 Change
Earnings summary:
Net interest income $ 490 $ 558 $ (68) (12) %
Provision for credit losses 83 (6) 89 n/m
Noninterest income 202 218 (16) (8)
Noninterest expenses 418 412 6 1
Provision for income taxes 36 83 (47) (57)
Net income $ 155 $ 287 $ (132) (46) %
Net credit-related charge-offs $ 9 $ 10 $ (1) (4) %
Selected average balances:
Loans $ 12,604 $ 12,605 $ (1) — %
Deposits 22,995 19,959 3,036 15

~~n/m - not meaningful~~

~~Average loans were relatively stable at $12.6 billion, while average deposits increased $3.0 billion, reflecting increases~~ The nine months ended September 30, 2021 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 ~~all deposit categories as customers conserved cash due~~accounting methodology is presented in Note 1 to uncertainty. The Michigan market's net income decreased $132 million to $155 million. Net interest income decreased $68 million to $490 million, due to a $144 million decrease in loan income, partially offset by a $52 million increase in allocated net FTP credits and a $25 million decrease in deposit costs. The provision for credit losses increased $89 million from a benefit of $6 million, primarily reflecting increases in general Middle Market and Business Banking. Noninterest income decreased $16 million, including an $8 million decrease in service charges on deposit accounts and a $3 million decline in both card and brokerage fees. Noninterest expenses increased $6 million, primarily due to an increase in operational losses.the consolidated financial statements.

Table of Contents

~~California~~Michigan


		Nine Months Ended						Percent Change			Nine Months Ended						Percent Change
(dollar amounts in millions)	(dollar amounts in millions)	September 30, 2020		September 30, 2019		Change				(dollar amounts in millions)	September 30, 2021		September 30, 2020		Change
Earnings summary:	Earnings summary:									Earnings summary:
Net interest income	Net interest income	$	537	$	614	$	(77)	(12)	%	Net interest income	$	513	$	491	$	22	4	%
Provision for credit losses	Provision for credit losses	113		(11)		124		n/m		Provision for credit losses	(66)		83		(149)		n/m
Noninterest income	Noninterest income	105		121		(16)		(12)		Noninterest income	208		202		6		3
Noninterest expenses	Noninterest expenses	303		301		2		1		Noninterest expenses	416		413		3		1
Provision for income taxes	Provision for income taxes	51		113		(62)		(54)		Provision for income taxes	74		37		37		95
Net income	Net income	$	175	$	332	$	(157)	(47)	%	Net income	$	297	$	160	$	137	87%
Net credit-related charge-offs	Net credit-related charge-offs	$	31	$	9	$	22	n/m		Net credit-related charge-offs	$	5	$	10	$	(5)	(49)%

Selected average balances:	Selected average balances:									Selected average balances:
Loans(a)	Loans(a)	$	18,263	$	18,572	$	(309)	(2)	%	Loans(a)	$	11,998	$	12,672	$	(674)	(5)	%
Deposits	Deposits	18,691		16,420		2,271		14		Deposits	26,712		22,926		3,786		17

(a)Included PPP loans with average balances of $1.1 billion and $810 million for the nine months ended September 30, 2021 and 2020, respectively.

n/m - not meaningful

Average loans decreased ~~$309~~$674 million, ~~primarily reflecting a decrease~~driven by decreases in National Dealer Services. and general Middle Market. Average deposits increased ~~$2.3~~$3.8 billion, reflecting increases in all deposit categories with the exception of time deposits. The Michigan market's net income increased $137 million. Net interest income increased $22 million, primarily driven by higher deposit volumes earning FTP crediting rates, partially offset by a decrease in average loans. The provision for credit losses decreased $149 million to a benefit of $66 million, primarily due to decreases in general Middle Market, Business Banking and Corporate Banking. Net credit-related charge-offs decreased $5 million, mainly due to decreases in Corporate Banking and Business Banking. Noninterest income increased $6 million, driven by an increase in card fees and smaller increases in other categories. Noninterest expenses increased $3 million, primarily due to increases in salaries and benefits expense and corporate overhead, partially offset by decreases in litigation-related expenses and operational losses.

California


	Nine Months Ended						Percent Change
(dollar amounts in millions)	September 30, 2021		September 30, 2020		Change
Earnings summary:
Net interest income	$	526	$	518	$	8	2	%
Provision for credit losses	(77)		108		(185)		n/m
Noninterest income	129		98		31		32
Noninterest expenses	325		288		37		13
Provision for income taxes	95		51		44		89
Net income	$	312	$	169	$	143	84%
Net credit-related charge-offs	$	6	$	21	$	(15)	(72)	%

Selected average balances:
Loans (a)	$	17,480	$	17,910	$	(430)	(2)	%
Deposits	21,195		17,617		3,578		20

(a)Included PPP loans with average balances of $960 million and $724 million for the nine months ended September 30, 2021 and 2020, respectively.

n/m - not meaningful

Average loans decreased $430 million, primarily due to decreases in National Dealer Services and general Middle Market, partially offset by increases in Equity Fund Services, Commercial Real Estate and Entertainment Lending. Average deposits increased $3.6 billion, including increases in all deposit categories with the exception of time deposits. The California market's net income ~~decreased $157 million to $175~~increased $143 million. Net interest income ~~decreased $77~~increased $8 million, ~~to $537 million, due to a $231 million decrease in loan income,~~primarily driven by higher deposit volumes earning FTP crediting rates, partially offset by ~~decreases of $124 million~~a decrease in ~~allocated net FTP charges and $30 million in deposit costs.~~average loans. The provision for credit losses ~~increased $124~~decreased $185 million ~~from~~to a benefit of ~~$11~~$77 million, primarily reflecting ~~increases~~decreases in Commercial Real Estate, general Middle Market and ~~smaller increases in other categories.~~Business Banking. Net credit-related charge-offs ~~increased $22~~decreased $15 million, mainly due to ~~$31 million, primarily reflecting an increase~~decreases in Technology and Life Sciences and general Middle Market. Noninterest income ~~decreased $16 million, including declines in commercial lending fees, card fees and smaller decreases in other categories, while noninterest expenses were relatively stable.~~

~~Texas~~

Nine Months Ended Percent
Change
(dollar amounts in millions) September 30, 2020 September 30, 2019 Change
Earnings summary:
Net interest income $ 348 $ 373 $ (25) (6) %
Provision for credit losses 296 88 208 n/m
Noninterest income 88 97 (9) (10)
Noninterest expenses 264 255 9 3
(Benefit) provision for income taxes (29) 30 (59) n/m
Net (loss) income $ (95) $ 97 $ (192) n/m
Net credit-related charge-offs $ 127 $ 73 $ 54 75 %
Selected average balances:
Loans $ 10,889 $ 10,586 $ 303 3 %
Deposits 10,026 8,690 1,336 15

~~n/m - not meaningful~~

~~Average loans~~ increased ~~$303~~$31 million, primarily ~~reflecting increases in Commercial Real Estate~~from warrant and Corporate Banking, partially offset by decreases in Energy and National Dealer Services. Average deposits increased $1.3 billion, reflecting increases in all deposit categories. The Texas market's net income decreased $192 million to a net loss of $95 million. Net interest income decreased $25 million to $348 million, due to a $118 million decrease in loanderivative income, partially offset by ~~decreases of $88 million~~a decrease in allocated net FTP charges and $6 million in deposit costs. The provision for credit losses increased $208 million, primarily reflecting an increase in Energy, while net credit-related charge-offs included $121 million in Energy net charge-offs. Noninterest income decreased $9 million, primarily reflecting lower service charges on deposit accounts and commercial lending fees.securities trading income. Noninterest expenses increased $9$37 million, ~~primarily due to higher corporate overhead and smaller~~including increases in ~~other categories.~~litigation-related expenses, salaries and benefits expense and corporate overhead.

Table of Contents

~~Other Markets~~Texas

Nine Months Ended Percent
Change
(dollar amounts in millions) September 30, 2020 September 30, 2019 Change
Earnings summary:
Net interest income $ 315 $ 281 $ 34 11 %
Provision for credit losses 62 (4) 66 n/m
Noninterest income 291 272 19 7
Noninterest expenses 300 273 27 10
Provision for income taxes 49 57 (8) (14)
Net income $ 195 $ 227 $ (32) (15) %
Net credit-related recoveries $ — $ (6) $ 6 n/m
Selected average balances:
Loans $ 9,955 $ 8,760 $ 1,195 14 %
Deposits 10,378 7,876 2,502 32

~~n/m - not meaningful~~


	Nine Months Ended						Percent Change
(dollar amounts in millions)	September 30, 2021		September 30, 2020		Change
Earnings summary:
Net interest income	$	344	$	348	$	(4)	(1)	%
Provision for credit losses	(193)		296		(489)		n/m
Noninterest income	113		88		25		28
Noninterest expenses	274		260		14		5
Provision (benefit) for income taxes	80		(28)		108		n/m
Net income (loss)	$	296	$	(92)	$	388	n/m
Net credit-related (recoveries) charge-offs	$	(19)	$	127	$	(146)	n/m

Selected average balances:
Loans (a)	$	9,934	$	10,877	$	(943)	(9)	%
Deposits	11,104		10,017		1,087		11

~~Average~~(a)Included PPP loans ~~increased $1.2 billion,~~ ~~primarily reflecting increases in general Middle Market~~with average balances of $547 million and ~~Mortgage Banker Finance, partially offset by a decrease in National Dealer Services. Average deposits increased $2.5 billion, including increases in noninterest-bearing~~$419 million for the nine months ended September 30, 2021 and relationship-based interest-bearing deposits. Other Markets' net income decreased $32 million to $195 million. Net interest income increased $34 million to $315 million due to decreases of $91 million in allocated net FTP charges and $11 million in deposit costs, partially offset by a $70 million decrease in loan income. The provision for credit losses increased $66 million to $62 million, primarily reflecting increases in Corporate Banking and Technology and Life Sciences. Net credit-related recoveries decreased $6 million, primarily due to a decrease in Private Banking. Noninterest income increased $19 million, including increases of $11 million each in card fees and securities trading income. Noninterest expenses increased $27 million, primarily reflecting increases of $6 million each in operational losses and software expense as well as smaller increases in other categories.2020, respectively.

~~Finance & Other~~

Nine Months Ended Percent Change
(dollar amounts in millions) September 30, 2020 September 30, 2019 Change
Earnings summary:
Net interest expense $ (248) $ (31) $ (217) n/m
Provision for credit losses — (1) 1 n/m
Noninterest income 50 36 14 38
Noninterest expenses 26 51 (25) (49)
Benefit for income taxes (53) (31) (22) 73
Net loss $ (171) $ (14) $ (157) n/m
Selected average balances:
Loans $ (5) $ (9) $ 4 (49) %
Deposits 1,201 1,964 (763) (39)

n/m - not meaningful

Average loans decreased $943 million, primarily due to decreases in Energy, Corporate Banking and general Middle Market, partially offset by an increase in Commercial Real Estate. Average deposits increased $1.1 billion, including increases in all deposit categories with the exception of time deposits. The Texas market's net income increased $388 million from a net loss of $92 million. Net interest income was relatively stable, while the provision for credit losses decreased ~~$763~~$489 million to a benefit of $193 million and net credit-related charge-offs decreased $146 million to a recovery of $19 million, both reflecting decreases in Energy. Noninterest income increased $25 million, reflecting increased derivative and warrant income. Noninterest expenses increased $14 million, mainly due to increases in salaries and benefits expense.

Other Markets


	Nine Months Ended						Percent Change
(dollar amounts in millions)	September 30, 2021		September 30, 2020		Change
Earnings summary:
Net interest income	$	360	$	333	$	27	8	%
Provision for credit losses	(24)		67		(91)		n/m
Noninterest income	342		298		44		15
Noninterest expenses	341		303		38		13
Provision for income taxes	92		52		40		74
Net income	$	293	$	209	$	84	40	%
Net credit-related charge-offs	$	2	$	9	$	(7)	(81)%

Selected average balances:
Loans (a)	$	10,100	$	10,252	$	(152)	(1)	%
Deposits	15,197		11,530		3,667		32

(a)Included PPP loans with average balances of $239 million and $188 million for the nine months ended September 30, 2021 and 2020, respectively.

n/m - not meaningful

Average loans were relatively stable, while average deposits increased $3.7 billion, including increases in all deposit categories with the exception of time deposits. Other Markets' net income increased $84 million. Net interest income increased $27 million, primarily due to higher deposit volumes earning FTP crediting rates. The provision for credit losses decreased $91 million to a benefit of $24 million, primarily reflecting decreases in Technology and Life Sciences and Corporate Banking. Noninterest income increased $44 million, mostly from increases in card fees, commercial lending fees, fiduciary and derivative income, partially offset by a decrease in ~~other time deposits.~~ securities trading income. Noninterest expenses increased $38 million, primarily reflecting increases in outside processing fees, corporate overhead and salaries and benefits expense, partially offset by lower operational losses.

Table of Contents

Finance & Other


	Nine Months Ended						Percent Change
(dollar amounts in millions)	September 30, 2021		September 30, 2020		Change
Earnings summary:
Net interest expense	$	(360)	$	(248)	$	(112)	45	%
Provision for credit losses	1		—		1		n/m
Noninterest income	42		50		(8)		(17)
Noninterest expenses	19		25		(6)		(26)
Benefit for income taxes	(80)		(53)		(27)		50
Net loss	$	(258)	$	(170)	$	(88)	52	%

Selected average balances:
Loans	$	(4)	$	(5)	$	1	(20)%
Deposits	1,163		1,201		(38)		(3)

n/m - not meaningful

Net loss for the Finance & Other category increased ~~$157~~$88 million to ~~$171~~$258 million. Net interest expense ~~decreased $217~~increased $112 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. Noninterest income ~~increased $14 million, primarily driven by increases of~~decreased $8 million ~~in net securities losses, due to securities repositioning in 2019, and $4 million~~as a result of a decline in derivative income. Noninterest expenses decreased ~~$25~~$6 million, driven by ~~lower~~an increase in salaries and benefits expense.

~~Table of Contents~~

The following table lists the Corporation's banking centers by geographic market segment.


		September 30,			September 30,
		2020	2019		2021	2020
Michigan	Michigan	189	192	Michigan	188	189
Texas	Texas	123	123	Texas	124	123
California	California	96	96	California	95	96
Other Markets	Other Markets	25	25	Other Markets	26	25

Total	Total	433	436	Total	433	433

Table of Contents

FINANCIAL CONDITION

Third Quarter ~~2020~~2021 Compared to Fourth Quarter ~~2019~~2020

Period-End Balances

Total assets increased ~~$10.2~~$6.4 billion to ~~$83.6~~$94.5 billion, driven by increases of ~~$5.3~~$7.8 billion in interest-bearing deposits with banks ~~$2.7~~and $1.8 billion in investment securities, available-for-sale and $2.0 billion in loans. The growth in interest-bearing deposits with banks (primarily deposits with the Federal Reserve Bank) resulted from growth in relationship-based deposits as customers conserve cash in an uncertain environment, while investment securities increased as a portion of excess liquidity was invested in U.S. Treasury bonds and mortgage-backed securities. The increase in loans reflected growth in Mortgage Banker Finance, Commercial Real Estate, Business and Retail Banking, partially offset by a decrease in National Dealer Services. At September 30, 2020, PPP loans totaled $3.8 billion, driving the growth in Business and Retail Banking (small businesses) as well as offsetting a decline in general Middle Market.

~~Total liabilities increased $9.7 billion to $75.8 billion, reflecting increases of $9.2 billion and $2.0 billion in noninterest-bearing and interest-bearing deposits, respectively,~~ partially offset by a decrease of ~~$1.5~~$4.1 billion in ~~medium-~~loans, which included a $2.5 billion decline in PPP loans. Mortgage-backed securities increased $3.0 billion due to continued deployment of excess liquidity, partially offset by a $1.2 billion decrease in Treasury securities related to maturities. The decline in loans included decreases of $1.9 billion in National Dealer Services as a result of low inventories, $968 million in Mortgage Banker Finance from elevated activity in 2020 and ~~long-term debt.~~$615 million in Business Banking, primarily due to PPP forgiveness. Excluding the impact of PPP loans, period-end loans declined $1.6 billion, primarily from decreases of $1.8 billion in National Dealer Service and $968 million in Mortgage Banker Finance, partially offset by increases of $719 million in general Middle Market and $418 million in Environmental Services.

Total liabilities increased $6.6 billion to $86.7 billion, primarily reflecting increases of $4.7 billion each in interest-bearing and noninterest-bearing deposits, partially offset by the repayment of $2.8 billion in floating-rate Federal Home Loan Bank (FHLB) advances during the first quarter. The deposit growth reflected increases in ~~noninterest-bearing and interest-bearing deposits was primarily driven by~~nearly every business line as commercial customers ~~conserving liquidity. Total shareholders' equity~~generated increased ~~$547 million, including net proceeds of $394 million~~cash, while consumer customers continued to conserve cash from ~~the issuance of preferred stock in May 2020.~~government stimulus payments.

Average Balances

Total assets increased ~~$11.1~~$6.0 billion to ~~$84.3~~$91.4 billion ~~primarily~~ due to increases of ~~$7.7~~$7.4 billion in interest-bearing deposits with banks ~~$1.6~~and $1.1 billion in investment securities, ~~and $1.5~~partially offset by a $3.3 billion 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 Ended						Percent Change			Three Months Ended						Percent Change
(average balances; dollar amounts in millions)		September 30, 2020		December 31, 2019		Change
(dollar amounts in millions)										(dollar amounts in millions)	September 30, 2021		December 31, 2020		Change		Percent Change
By Loan Type:	By Loan Type:									By Loan Type:
Commercial loans (a)	Commercial loans (a)	$	32,226	$	31,808	$	418	1	%	Commercial loans (a)	$	28,244	$	31,713	$	(3,469)	(11	%)
Real estate construction loans	Real estate construction loans	4,037		3,398		639		19		Real estate construction loans	3,160		4,157		(997)		(24)
Commercial mortgage loans	Commercial mortgage loans	9,978		9,356		622		7		Commercial mortgage loans	11,165		9,938		1,227		12
Lease financing	Lease financing	601		586		15		3		Lease financing	580		600		(20)		(3)
International loans	International loans	1,052		1,030		22		2		International loans	1,075		918		157		17
Residential mortgage loans	Residential mortgage loans	1,961		1,887		74		4		Residential mortgage loans	1,816		1,908		(92)		(5)
Consumer loans	Consumer loans	2,158		2,440		(282)		(12)		Consumer loans	2,095		2,171		(76)		(4)
Total loans	Total loans	$	52,013	$	50,505	$	1,508	3	%	Total loans	$	48,135	$	51,405	$	(3,270)	(6	%)
Loans By Geographic Market:	Loans By Geographic Market:									Loans By Geographic Market:
Michigan	Michigan	$	12,607	$	12,399	$	208	2	%	Michigan	$	11,445	$	12,225	$	(780)	(6	%)
California	California	18,095		17,943		152		1		California	17,042		18,030		(988)		(5)
Texas	Texas	10,923		10,708		215		2		Texas	9,650		10,583		(933)		(9)
Other Markets and Finance	Other Markets and Finance	10,388		9,455		933		10		Other Markets and Finance	9,998		10,567		(569)		(5)
Total loans	Total loans	$	52,013	$	50,505	$	1,508	3	%	Total loans	$	48,135	$	51,405	$	(3,270)	(6	%)

(a)~~Includes~~Included PPP loans of ~~$3.8~~$1.7 billion and $3.7 billion for the three months ended September 30, ~~2020.~~2021 and December 31, 2020, respectively.

The ~~increase~~decrease in loans, ~~reflected growth~~which included a $2.0 billion decline in PPP loans, was primarily driven by declines in National Dealer Services, Mortgage Banker Finance ~~Commercial Real Estate,~~and Business ~~and Retail~~ Banking, partially offset by an increase in Equity Fund Services. National Dealer Services continues to be impacted by supply chain issues resulting in low inventory levels. Excluding the impact of PPP loans, average loans declined $1.3 billion as a ~~decrease~~result of decreases in National Dealer ~~Services. The average balance of PPP loans for the three months ended September 30, 2020 was $3.8 billion, driving the growth~~Services and Mortgage Banker Finance, partially offset by increases in ~~Business~~general Middle Market and ~~Retail Banking.~~Equity Fund Services.

Total liabilities increased ~~$10.5~~$6.0 billion to ~~$76.4~~$83.4 billion, reflecting increases of ~~$9.0~~$5.2 billion and ~~$2.6~~$3.6 billion in noninterest-bearing and interest-bearing deposits, respectively, partially offset by a decrease of ~~$1.4~~$2.9 billion in medium- and long-term ~~debt. Total shareholders' equity increased $597 million~~debt due to ~~$7.8~~the repayment of $2.8 billion ~~including net proceeds of $394 million from~~in floating-rate FHLB advances during the ~~issuance of preferred stock~~first quarter. The deposit growth reflected increases in ~~May 2020.~~nearly every business line as customers continue to conserve cash.

Table of Contents

Capital

The following table presents a summary of changes in total shareholders' equity for the nine months ended September 30, ~~2020.~~2021.

(in millions)

Balance at January 1, ~~2020~~2021

~~7,327~~8,050

~~Cumulative effect of change in accounting principle~~ ~~(a)~~

Net income

~~259~~940

Cash dividends declared on common stock

~~(284)~~(276)

Cash dividends declared on preferred stock

~~(8)~~(17)

Purchase of common stock

~~(194)~~(673)

~~Issuance of preferred stock~~

~~394~~

Other comprehensive ~~income:~~(loss) income, net of tax:

Investment securities

~~189~~ (214)

Cash flow hedges

~~142~~ (66)

Defined benefit and other postretirement plans

209

Total other comprehensive ~~income~~loss, net of tax

~~351~~ (271)

~~Issuance~~Net issuance of common stock under employee stock plans

~~(2)~~14

Share-based compensation

1836

Balance at September 30, ~~2020~~2021

~~7,874~~7,803

~~(a)~~Effective January 1, 2020, the Corporation adopted the provisions of ASU No. 2016-13, "Financial Instruments - Credit Losses" (Topic 326). For further information, refer to Note 1 to the consolidated financial statements.

The following table summarizes the Corporation's repurchase activity during the nine months ended September 30, ~~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
Total first quarter 2020 3,227 4,870 3,322 $ 58.70
Total second quarter 2020 — 4,870 6 28.62
July 2020 — 4,870 4 37.26
August 2020 — 4,870 2 36.52
September 2020 — 4,870 1 42.09
Total third quarter 2020 — 4,870 7 37.94
Total 2020 year-to-date 3,227 4,870 3,335 58.60


(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



Total first quarter 2021	—	4,870	55	$	61.39



Total second quarter 2021	5,882	8,988	5,884	76.51
July 2021	475	8,513	477	68.22
August 2021	1,737	6,776	1,737	72.85
September 2021	838	5,938	838	72.81
Total third quarter 2021	3,050	5,938	3,052	72.12




Total 2021 year-to-date	8,932	5,938	8,991	74.92

(a)Maximum number of shares that may ~~yet~~ be ~~purchased~~repurchased under the publicly announced plans or programs.

(b)Includes approximately ~~108,000~~59,000 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 nine months ended September 30, ~~2020.~~2021. These transactions are not considered part of the Corporation's repurchase program.

~~In March 2020,~~On April 27, 2021 the ~~Corporation suspended~~Corporation's Board of Directors approved the authorization to repurchase up to an additional 10 million shares of its ~~share repurchase program, with a focus on deploying capital to meet customers' growing financing requirements, resulting~~outstanding common stock, including an Accelerated Share Repurchase transaction (ASR) effected in ~~no share repurchases under the program during~~ the second ~~and third quarters~~quarter of ~~2020. The Corporation will continue to assess the resumption of repurchases subject to various factors including financial performance, capital needs and market conditions.~~2021. Since the inception of the share repurchase program in 2010, a total of ~~87.2~~97.2 million shares have been authorized for repurchase. There is no expiration date for the share repurchase program. The timing and actual amount of additional share repurchases are subject to various factors, including the Corporation's earnings generation, capital needs to fund future loan growth and market conditions.

In May 2020, the Corporation issued $400 million of 5.625% non-cumulative perpetual preferred stock, which yielded $394 million in proceeds net of underwriting discounts and offering expenses. See Note 9 to the consolidated financial statements for further information about the terms of the preferred stock.

The Corporation ~~is prepared~~continues to ~~continue using capital and liquidity in~~target a ~~responsible way to assist customers impacted by the COVID-19 crisis with a target of attaining and maintaining a Common Equity~~common equity Tier 1 ~~(CET1)~~ capital ratio of approximately 10 ~~percent.~~percent with continued active capital management. At September 30, ~~2020,~~2021, the Corporation's estimated CET1 capital ratio was ~~10.26 percent, an increase of 13 basis points compared to December 31, 2019. In 2020,~~10.21 percent. While the Corporation elected regulatory relief to defer the impact of adopting the CECL model for measuring credit losses on regulatory ~~capital. At~~capital, there was no estimated deferral amount at September 30, 2020, $83 million, or a cumulative 12-basis-point benefit to the estimated capital ratios, was deferred. Also in 2020, the Corporation adopted capital rules issued by federal banking agencies that simplified certain regulatory capital rules, including the capital treatment of mortgage servicing assets, certain deferred tax assets, investments in the capital instruments of unconsolidated financial institutions and minority interests.

~~Table of Contents~~

2021.

The following table presents the minimum ratios required.



Common equity tier 1 capital to risk-weighted assets	4.5	%
Tier 1 capital to risk-weighted assets	6.0
Total capital to risk-weighted assets	8.0
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.

Table of Contents

The Corporation's capital ratios exceeded minimum regulatory requirements as follows:


		September 30, 2020				December 31, 2019					September 30, 2021				December 31, 2020
(dollar amounts in millions)	(dollar amounts in millions)	Capital/Assets		Ratio		Capital/Assets		Ratio		(dollar amounts in millions)	Capital/Assets		Ratio		Capital/Assets		Ratio
Common equity tier 1 (a), (b)	Common equity tier 1 (a), (b)	$	6,805	10.26	%	$	6,919	10.13	%	Common equity tier 1 (a), (b)	$	6,965	10.21	%	$	6,919	10.34	%
Tier 1 risk-based (a), (b)	Tier 1 risk-based (a), (b)	7,199		10.86		6,919		10.13		Tier 1 risk-based (a), (b)	7,359		10.79		7,313		10.93
Total risk-based (a)	Total risk-based (a)	8,712		13.14		8,282		12.13		Total risk-based (a)	8,529		12.51		8,833		13.20
Leverage (a)	Leverage (a)	7,199		8.59		6,919		9.51		Leverage (a)	7,359		8.08		7,313		8.63
Common equity		7,480		8.94		7,327		9.98
Common shareholders' equity										Common shareholders' equity	7,409		7.84		7,656		8.69
Tangible common equity (b)	Tangible common equity (b)	6,843		8.24		6,688		9.19		Tangible common equity (b)	6,762		7.20		7,020		8.02
Risk-weighted assets (a)	Risk-weighted assets (a)	66,299				68,273				Risk-weighted assets (a)	68,193				66,931

(a) September 30, ~~2020~~2021 capital, risk-weighted assets and ratios are ~~estimated and~~estimated. Ratios reflect deferral of CECL model impact as calculated per regulatory guidance. The deferred amounts were zero at September 30, 2021 (estimated) and $72 million at December 31, 2020.

(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-20~~F-22 through ~~F-33~~F-38 in the Corporation's ~~2019~~2020 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, the allowance for credit losses reflected the adoption of Topic 326, which requires companies to estimate credit losses using the CECL framework.~~ As a percentage of total loans, the allowance for credit losses was ~~1.98~~1.33 percent at September 30, ~~2020,~~2021, compared to ~~1.33~~1.90 percent at December 31, ~~2019.~~2020. Excluding ~~$3.8~~$1.0 billion in PPP loans, which are guaranteed by the Small Business Administration, the allowance for credit losses was ~~2.14~~1.35 percent of total loans at September 30, 2021, compared to 2.03 percent at December 31, 2020. The allowance for credit losses covered ~~3.2~~2.2 times and ~~3.3~~2.8 times total nonperforming loans at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

At adoption on January 1, 2020, the scope and severity of the economic crisis resulting from the COVID-19 pandemic were unknown. As such, the economic scenario used 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 forecast also assumed strong labor market conditions to support the consumer sector. Management 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 in the allowance for credit losses, from $668 million at December 31, 2019 under the incurred loss model. See Note 1 to the consolidated financial statements for further information about the adoption of CECL.

The allowance for credit losses ~~increased by $387~~decreased $353 million from ~~adoption date~~$992 million at December 31, 2020 to ~~$1.0 billion~~$639 million at September 30, ~~2020,~~2021, primarily reflecting a sustained recovery by the ~~economic impacts of~~U.S. economy from the COVID-19 pandemic and ~~the response by domestic and global governmental authorities, including quarantines and other social distancing policies aimed at fighting the spread~~benefits of ~~the virus. Energy markets, which were already experiencing stress prior to the pandemic, were further impacted~~mitigating actions by the ~~rapid decline~~U.S. government. Despite a slowdown in ~~demand resulting from social distancing policies. Demand~~consumer spending driven by the Delta variant, strong business spending and improved ~~slightly~~labor markets supported growth in the ~~third quarter as the economy began to recover, but energy markets remain uncertain. The~~broader U.S. economy contracted into a recession with unusual speed and force, ending the longest expansionary period in U.S. history. The U.S. government and the Federal Reserve responded to the pandemic with unprecedented measures. In addition to the Federal Reserve reducing the target federal funds rate to zero to 0.25 percent, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that included an estimated $2 trillion stimulus package. In recent months, states across the U.S. began loosening social distancing policies, stimulating economic activity. While the economy showed signs of a recovery during the third quarter,economy. However, there continues to be uncertainty ~~regarding~~related to the

~~Table~~ impact of ~~Contents~~

~~path of the economic recovery, with the potential for~~emerging COVID-19 variants and lagging vaccination rates, supply chain constraints, future ~~waves of COVID-19 cases as jurisdictions continue to reopen across the country, the mitigating impacts of previous~~monetary and ~~possible future government interventions, as well as the effects of the results of the upcoming elections.~~fiscal support and inflationary pressures.

These factors shaped the 2-year reasonable and supportable ~~forecast~~forecasts used by the Corporation in its CECL estimate at September 30, ~~2020. After a partial rebound in GDP growth in third quarter 2020, forecasted GDP reaches pre-pandemic, fourth quarter 2019 levels by~~2021. The U.S. economy is expected to continue to grow at an accelerated pace through the ~~latter portion~~first half of ~~2021,~~2022 before normalizing into historical growth ~~rates by the end of the forecast period.~~rates. Forecasts for other key economic variables, including the unemployment rate and oil prices, are generally in line with GDP projections. Interest rates remain low, reflecting the Federal Reserve's expectation that rates will remain at current levels in the near-to mid-term, while corporate bond rates reflect ~~decreasing~~normalized default ~~risk as the economy recovers. Economic forecasts for third quarter 2020 were generally consistent with second quarter 2020 forecasts.~~risk. The following table summarizes ~~the forecasts for~~select economic variables representative of the economic ~~variables most impactful~~forecasts used to develop the allowance for credit losses estimate at September 30, ~~2020.~~2021.


Economic Variable			Base Forecast
Real ~~GDP~~Gross Domestic Product (GDP) growth			Growth ~~of 8~~peaks at 6.7 percent in fourth quarter ~~2020, normalizing into~~2021, before gradually declining to a long-term ~~growth~~ rate of 2 to 3 percent by ~~second~~third quarter 2022.
Unemployment rate			~~Below 9 percent in fourth quarter 2020, gradually decreasing~~Current levels decrease to 64 percent by third quarter 2022 with minimal change through the ~~end~~remainder of the forecast period.
Corporate BBB bond to 10-year Treasury bond spreads			Spreads ~~at normalized levels between 1.70 and 2~~gradually increase to 1.8 percent ~~throughout~~by the end of the forecast period.
Oil Prices			Prices ~~below $40 per barrel in fourth quarter 2020~~ gradually ~~stabilize~~decrease from current levels to ~~$50~~$62 per barrel by ~~third quarter 2021.~~the end of the forecast period.

Due to the high ~~degree~~level of uncertainty regarding significant assumptions, such as the ultimate ~~economic consequences~~impact of the global pandemic, ~~as well as~~ the ~~effectiveness~~Corporation 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 economic forecasts. In the more severe scenario, real GDP is expected to contract through second quarter 2022, gradually improving to a growth rate of 4.5 percent by the end of the forecast period. Other key economic variables follow a similar pattern of short-term contractions followed by a gradual recovery. Selecting the more severe forecast would result in an increase in the quantitative calculation of allowance for credit losses by approximately $162 millionas of September 30, 2021.However, factoring in model overlays and qualitative adjustments could result in a materially different estimate under a more severe scenario.

Table of Contents

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~~The following table presents metrics of ~~total loans,~~ the allowance for loan losses was 1.87 percent at September 30, 2020, compared to 1.27 percent at December 31, 2019. Excluding PPP loans, the allowance for loan losses was 2.01 percent of total loans at September 30, 2020. The allocation of reserves for Energy loans remains above 10 percent in response to sustained pressures on the Energy portfolio. Nonperforming loans were 0.62 percent of total loans at September 30, 2020, compared to 0.40 percent at December 31, 2019, and ~~the allowance for loan losses covered 3.0 times and 3.1 times total~~ nonperforming ~~loans at September 30, 2020 and December 31, 2019, respectively.~~loans.


	September 30, 2021		December 31, 2020
Allowance for loan losses as a percentage of total loans	1.26	%	1.81	%
Allowance for loan losses as a percentage of total loans excluding PPP loans	1.29		1.94
Nonperforming loans as a percentage of total loans	0.61		0.67
Allowance for loan losses as a multiple of total nonperforming loans	2.1x		2.7x

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 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 ~~$60~~$30 million and ~~$31~~$44 million at September 30, ~~2020~~2021 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.~~

~~Table~~statements of ~~Contents~~

the Corporation's 2020 Annual Report.

Nonperforming Assets

Nonperforming assets include loans on nonaccrual status, 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. ~~Certain~~In accordance with the provisions ~~within~~of the CARES Act, ~~encourage financial institutions~~the 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 would~~primarily deferrals, as TDRs and does not be considered a TDR if the loan was not more than 30 days past due as of December 31, 2019 and the deferral was executed between March 1, 2020 and the earlier of 60 days after the date of termination 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 was considered to be short-term. Modifications are first evaluated for eligibility under the CARES Act, then the interagency guidance if they do not qualify for the CARES Act relief. Modifications that are not eligible for either program continue to follow the Corporation’s established TDR policy. Fordesignate such loans ~~not otherwise reportable as past due or nonaccrual, financial institutions are generally not expected to designate loans with deferrals granted due to COVID-19~~ as past due or nonaccrual. As of September 30, 2020, pandemic-related payment deferrals totaled $385 million, representing approximately 300 obligors and consisting of 60 percent commercial loans and 40 percent retail loans, primarily residential mortgages. The decreaseFor additional information regarding the Corporation's accounting policies for the CARES Act, refer to page F-56 in ~~deferrals since second quarter 2020 reflects customers adjusting~~Note 1 to the ~~new environment as initial deferrals have expired and new requests have been nominal.~~consolidated financial statements of the Corporation's 2020 Annual Report.

Table of Contents

The following table presents a summary of nonperforming assets and past due loans.


(dollar amounts in millions)	(dollar amounts in millions)	September 30, 2020			December 31, 2019			(dollar amounts in millions)	September 30, 2021			December 31, 2020
Nonaccrual loans:	Nonaccrual loans:							Nonaccrual loans:
Business loans:	Business loans:							Business loans:
Commercial	Commercial	$	241		$	148		Commercial	$	200		$	252

Real estate construction								Real estate construction	6			1
Commercial mortgage	Commercial mortgage	20			14			Commercial mortgage	30			29
Lease financing	Lease financing	1			—			Lease financing	—			1

International								International	8			—
Total nonaccrual business loans	Total nonaccrual business loans	262			162			Total nonaccrual business loans	244			283
Retail loans:	Retail loans:							Retail loans:
Residential mortgage	Residential mortgage	40			20			Residential mortgage	35			47
Consumer:	Consumer:							Consumer:
Home equity	Home equity	20			17			Home equity	12			17

Total nonaccrual retail loans	Total nonaccrual retail loans	60			37			Total nonaccrual retail loans	47			64
Total nonaccrual loans	Total nonaccrual loans	322			199			Total nonaccrual loans	291			347
Reduced-rate loans	Reduced-rate loans	3			5			Reduced-rate loans	4			3
Total nonperforming loans	Total nonperforming loans	325			204			Total nonperforming loans	295			350
Foreclosed property	Foreclosed property	10			11			Foreclosed property	1			8
Other repossessed assets								Other repossessed assets	—			1
Total nonperforming assets	Total nonperforming assets	$	335		$	215		Total nonperforming assets	$	296		$	359

Nonperforming loans as a percentage of total loans	Nonperforming loans as a percentage of total loans	0.62		%	0.40		%	Nonperforming loans as a percentage of total loans	0.61		%	0.67		%
Nonperforming assets as a percentage of total loans and foreclosed property	Nonperforming assets as a percentage of total loans and foreclosed property	0.64			0.43			Nonperforming assets as a percentage of total loans and foreclosed property	0.62			0.69
Allowance for credit losses as a multiple of total nonperforming loans	Allowance for credit losses as a multiple of total nonperforming loans	3.2x			3.3x			Allowance for credit losses as a multiple of total nonperforming loans	2.2x			2.8x
Loans past due 90 days or more and still accruing	Loans past due 90 days or more and still accruing	$	29		$	26		Loans past due 90 days or more and still accruing	$	12		$	45

Nonperforming assets ~~increased $120~~decreased $63 million to ~~$335~~$296 million at September 30, ~~2020,~~2021, from ~~$215~~$359 million at December 31, ~~2019.~~2020. The ~~increase~~decrease in nonperforming assets primarily reflected ~~a $98~~an $86 million ~~increase~~decrease in nonperforming Energy loans, which are a component of commercial loans.

As of September 30, 2021, COVID-19-related payment deferrals, which consisted of residential mortgages, totaled $35 million, or 0.07 percent of total loans. Initial deferrals have expired and new requests have been nominal as customers continue to adjust to the new environment, resulting in a $107 million decrease in deferrals since fourth quarter 2020. Loans with COVID-19-related deferred payments on a third or later deferral, primarily residential mortgages, totaled $33 million at September 30, 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 September 30, ~~2020~~2021 and December 31, ~~2019. Loan modifications related to the COVID-19 pandemic were insignificant at September 30,~~ 2020.


(in millions)	(in millions)	September 30, 2020		December 31, 2019		(in millions)	September 30, 2021		December 31, 2020
Nonperforming TDRs:	Nonperforming TDRs:					Nonperforming TDRs:
Nonaccrual TDRs	Nonaccrual TDRs	$	47	$	36	Nonaccrual TDRs	$	23	$	33
Reduced-rate TDRs	Reduced-rate TDRs	3		5		Reduced-rate TDRs	4		3
Total nonperforming TDRs	Total nonperforming TDRs	50		41		Total nonperforming TDRs	27		36
Performing TDRs (a)	Performing TDRs (a)	41		69		Performing TDRs (a)	40		41
Total TDRs	Total TDRs	$	91	$	110	Total TDRs	$	67	$	77

(a)TDRs that do not include a reduction in the original contractual interest rate which are performing in accordance with their modified terms.

Table of Contents

During the nine months ended September 30, 2020, $22 million of previously performing Energy TDRs were transferred to nonaccrual or charged off. At September 30, 2020, Energy TDRs totaled $12 million, all of which were on nonaccrual status, compared to $14 million at December 31, 2019.

The following table presents a summary of changes in nonaccrual loans.


		Three Months Ended							Three Months Ended
(in millions)	(in millions)	September 30, 2020		June 30, 2020		March 31, 2020		(in millions)	September 30, 2021		June 30, 2021		March 31, 2021
Balance at beginning of period	Balance at beginning of period	$	267	$	235	$	199	Balance at beginning of period	$	311	$	314	$	347
Loans transferred to nonaccrual (a)	Loans transferred to nonaccrual (a)	161		96		137		Loans transferred to nonaccrual (a)	55		62		61
Nonaccrual loan gross charge-offs	Nonaccrual loan gross charge-offs	(53)		(57)		(89)		Nonaccrual loan gross charge-offs	(26)		(8)		(16)
Loans transferred to accrual status (a)	Loans transferred to accrual status (a)	—		—		—		Loans transferred to accrual status (a)	(8)		—		(17)
Nonaccrual loans sold	Nonaccrual loans sold	(14)		—		—		Nonaccrual loans sold	(9)		—		(25)
Payments/other (b)	Payments/other (b)	(39)		(7)		(12)		Payments/other (b)	(32)		(57)		(36)
Balance at end of period	Balance at end of period	$	322	$	267	$	235	Balance at end of period	$	291	$	311	$	314

(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 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 14five borrowers with a balance greater than $2 million, totaling ~~$161~~$55 million, transferred to nonaccrual status in third quarter ~~2020,~~2021, compared to ~~eight~~seven borrowers totaling ~~$96~~$62 million in second quarter ~~2020~~2021 and 13three borrowers totaling ~~$137~~$61 million in first quarter ~~2020.~~2021. For further information about the composition of loans transferred to nonaccrual during the current period, refer to the nonaccrual information by industry category table below.

The following table presents the composition of nonaccrual loans by balance and the related number of borrowers at September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

September 30, 2020 December 31, 2019
(dollar amounts in millions) Number of
Borrowers Balance Number of
Borrowers Balance
Under $2 million 688 $ 80 708 $ 74
$2 million - $5 million 21 72 8 22
$5 million - $10 million 3 23 6 49
$10 million - $25 million 11 147 4 54
Total 723 $ 322 726 $ 199

~~Table of Contents~~


	September 30, 2021			December 31, 2020
(dollar amounts in millions)	Number of Borrowers	Balance		Number of Borrowers	Balance
Under $2 million	603	$	69	682	$	83
$2 million - $5 million	14	39		20	61
$5 million - $10 million	7	58		9	73
$10 million - $25 million	6	92		7	94
Greater than $25 million	1	33		1	36
Total	631	$	291	719	$	347

The following table presents a summary of nonaccrual loans at September 30, ~~2020 and~~2021 as well as loans transferred to nonaccrual and net loan charge-offs (recoveries) for the three months ended September 30, ~~2020,~~2021, based ~~primarily~~ on North American Industry Classification System (NAICS) categories.


		September 30, 2020				Three Months Ended September 30, 2020													September 30, 2021								Three Months Ended September 30, 2021
(dollar amounts in millions)	(dollar amounts in millions)	Nonaccrual Loans				Loans Transferred to Nonaccrual (a)								Net Loan Charge-Offs (Recoveries)				(dollar amounts in millions)	Nonaccrual Loans								Loans Transferred to Nonaccrual (a)								Net Loan Charge-Offs (Recoveries)
Industry Category	Industry Category											Industry Category
Transportation & Warehousing																		Transportation & Warehousing				$	50			17	%			$	—			—	%			$	6
Manufacturing																		Manufacturing	37					13			10					18			7
Residential Mortgage																		Residential Mortgage	35					12			2					4			(1)
Real Estate & Home Builders																		Real Estate & Home Builders	33					11			24					43			2
Mining, Quarrying and Oil & Gas Extraction	Mining, Quarrying and Oil & Gas Extraction	$	141	44	%			$	104			64	%				$	9			26		%	Mining, Quarrying and Oil & Gas Extraction	28				10				—				—			(16)
Residential Mortgage		40		12		14				9				—		—
Wholesale Trade	Wholesale Trade	31		10		—				—				3		10		Wholesale Trade	26					9			—					—			—
Manufacturing		28		9		11				7				(1)		(2)
Health Care & Social Assistance																		Health Care & Social Assistance	17					6			19					35			6
Services	Services	21		6		16				10				6		20		Services	15					5			—					—			—
Information & Communication	Information & Communication	12		4		—				—				—		—		Information & Communication	13					4			—					—			—
Real Estate & Home Builders		7		2		—				—				—		—
Health Care & Social Assistance		5		2		2				1				2		5
Arts, Entertainment & Recreation																		Arts, Entertainment & Recreation	9					3			—					—			—
Retail Trade	Retail Trade	5		1		—				—				2		6		Retail Trade	3					1			—					—			1
Contractors	Contractors	4		1		—				—				—		—		Contractors	2					1			—					—			—
Arts, Entertainment, and Recreation		1		1		14				9				14		42

Other (b)	Other (b)	27		8		—				—				(2)		(7)		Other (b)	23					8			—					—			(3)
Total	Total	$	322	100	%	$	161			100	%			$	33	100	%	Total	$	291				100	%		$	55				100	%		$	2

(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.

Table of Contents

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, increased $3~~collection. Loans past due 90 days or more decreased $33 million to ~~$29~~$12 million at September 30, ~~2020,~~2021, compared to ~~$26~~$45 million at December 31, ~~2019.~~2020. Loans past due 30-89 days ~~and still accruing interest increased $255~~decreased $235 million to ~~$382~~$169 million at September 30, ~~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 ~~0.79~~0.38 percent and ~~0.30~~0.86 percent at September 30, ~~2020~~2021 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. Risk ratings are adjusted as appropriate based on dialogue with borrowers and review of current and projected financial performance, including liquidity and cash flow forecasts as well as receivable and inventory levels. 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)	(dollar amounts in millions)	September 30, 2020			June 30, 2020			December 31, 2019			(dollar amounts in millions)	September 30, 2021			June 30, 2021			December 31, 2020
Total criticized loans	Total criticized loans	$	3,406		$	3,379		$	2,120		Total criticized loans	$	1,818		$	2,176		$	2,947
As a percentage of total loans	As a percentage of total loans	6.5		%	6.3		%	4.2		%	As a percentage of total loans	3.8		%	4.3		%	5.6		%

The ~~$1.3~~$1.1 billion ~~increase~~decrease in criticized loans during the nine months ended September 30, ~~2020~~2021 included ~~increases~~decreases of ~~$584~~$448 million in Energy and $521 million in general Middle ~~Market and $354 million in Energy.~~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 September 30, ~~2020.~~

~~Table of Contents~~

~~Automotive Lending - Dealer:~~

~~The following table presents a summary of dealer loans.~~

September 30, 2020 December 31, 2019
(in millions) Loans
Outstanding Percent of
Total Loans Loans
Outstanding Percent of
Total Loans
Dealer:
Floor plan $ 1,964 $ 3,967
Other 3,391 3,447
Total dealer $ 5,355 10.2 % $ 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 $2.0 billion at September 30, 2020, a decrease of $2.0 billion compared to $4.0 billion at December 31, 2019 due to an imbalance in supply and demand resulting in lower inventory. At both September 30, 2020 and December 31, 2019, other loans to automotive dealers in the National Dealer Services business line totaled $3.4 billion, including $2.1 billion and $2.0 billion of owner-occupied commercial real estate mortgage loans at September 30, 2020 and December 31, 2019, respectively.

There were no nonaccrual dealer loans at September 30, 2020 and $9 million at December 31, 2019. Dealer loan net charge-offs totaled $2 million for the nine months ended September 30, 2020, compared to none for the nine months ended September 30, 2019.

~~Automotive Lending- Production:~~

~~The following table presents a summary of loans to borrowers involved with automotive production.~~

September 30, 2020 December 31, 2019
(in millions) Loans
Outstanding (a) Percent of
Total Loans (a) Loans
Outstanding Percent of
Total Loans
Production:
Domestic $ 869 $ 963
Foreign 359 286
Total production $ 1,228 2.5 % $ 1,249 2.5 %

~~(a)Excludes PPP loans.~~

Loans to borrowers involved with automotive production, primarily Tier 1 and Tier 2 suppliers, totaled $1.2 billion at both September 30, 2020 and December 31, 2019. 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 continued to increase allocated reserves for this portfolio as of September 30, 2020.

Nonaccrual loans to borrowers involved with automotive production totaled $5 million at September 30, 2020 and $10 million at December 31, 2019. Criticized automotive production loans were 25 percent of the automotive production portfolio at September 30, 2020, compared to 15 percent at December 31, 2019. Automotive production loan net charge-offs totaled $1 million in the nine months ended September 30, 2020, compared to net recoveries of $1 million in the nine months ended September 30, 2019.2021.

Commercial Real Estate Lending

The following table summarizes the Corporation's commercial real estate loan portfolio by loan category.


		September 30, 2020						December 31, 2019						September 30, 2021								December 31, 2020
(in millions)	(in millions)	Commercial Real Estate business line (a)		Other (b)		Total		Commercial Real Estate business line (a)		Other (b)		Total			(in millions)	Commercial Real Estate business line (a)		Other (b)		Total			Commercial Real Estate business line (a)		Other (b)		Total
Real estate construction loans	Real estate construction loans	$	3,702	$	444	$	4,146	$	3,044	$	411	$	3,455		Real estate construction loans	$	2,488	$	522	$	3,010		$	3,657	$	425	$	4,082
Commercial mortgage loans	Commercial mortgage loans	2,336		7,666		10,002		2,176		7,383		9,559			Commercial mortgage loans	3,413		7,802		11,215			2,273		7,639		9,912
Total commercial real estate	Total commercial real estate	$	6,038	$	8,110	$	14,148	$	5,220	$	7,794	$	13,014		Total commercial real estate	$	5,901	$	8,324	$	14,225		$	5,930	$	8,064	$	13,994

(a)Primarily loans to real estate developers.

(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 loan-to-value ratios for such loans.

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Commercial real estate loans, consisting of real estate construction and commercial mortgage loans, totaled ~~$14.1~~$14.2 billion ~~or 27 percent of total loans,~~ at September 30, ~~2020, an increase of $1.1 billion compared to December 31, 2019, of which $6.0~~2021. Of the total, $5.9 billion, or 4341 percent, were to borrowers in the Commercial Real Estate business line, ~~including~~which includes loans to real estate ~~developers. The remaining $8.1 billion, or 57 percent,~~developers, a decrease of ~~commercial~~$29 million compared to December 31, 2020. Commercial real estate loans in other business lines totaled $8.3 billion, or 59 percent, at September 30, 2021, an increase of $260 million compared to December 31, 2020. These loans consisted primarily of owner-occupied commercial mortgages, which bear credit characteristics similar to non-commercial real estate business loans. Generally, loans previously reported as real estate construction are classified as commercial mortgage loans upon receipt of a certificate of occupancy. During the second and third quarters 2021, the Corporation performed an in-depth review of the status of these loans which resulted in $1.2 billion of loans previously reported as real estate construction to be classified as commercial mortgage loans as of September 30, 2021.

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 ~~$54~~$30 million and ~~$31~~$27 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. In other business lines, criticized real estate construction loans totaled ~~$17~~$36 million at September 30, ~~2020,~~2021, compared to ~~none~~$20 million at December 31, ~~2019.~~2020. There were no real estate construction loan charge-offs in either of the nine-month periods ended September 30, ~~2020 and 2019.~~2021 or 2020.

Commercial mortgage loans are loans where the primary collateral is a lien on any real property and are primarily loans secured by owner-occupied real estate. Real property is generally considered primary collateral if the value of that

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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 ~~$64~~$68 million and ~~$55~~$73 million at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. In other business lines, ~~$465~~$270 million and ~~$242~~$440 million of commercial mortgage loans were criticized at September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Commercial mortgage loan net ~~recoveries~~charge-offs were ~~$3 million and $2 million~~zero for the nine months ended September 30, 2021, compared to net recoveries of $3 million for the same period in 2020.

Automotive Lending - Dealer

The following table presents a summary of dealer loans.


	September 30, 2021				December 31, 2020
(in millions)	Loans Outstanding		Percent of Total Loans		Loans Outstanding		Percent of Total Loans
Dealer:
Floor plan	$	555			$	2,344
Other	3,190				3,348
Total dealer	$	3,745	7.8	%	$	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 $555 million at September 30, 2021, a decrease of $1.8 billion compared to $2.3 billion at December 31, 2020, due to an imbalance in supply and ~~2019, respectively.~~demand impacted by a shortage in microchips used in automotive production. Other loans to automotive dealers in the National Dealer Services business line totaled $3.2 billion, including $2.0 billion of owner-occupied commercial real estate mortgage loans at both September 30, 2021 and December 31, 2020.

There were no nonaccrual dealer loans at both September 30, 2021 and December 31, 2020. Additionally, there were no net charge-offs of dealer loans in the nine months ended September 30, 2021, compared to $2 million in the nine months ended September 30, 2020.

Automotive Lending- Production

The following table presents a summary of loans to borrowers involved with automotive production.


	September 30, 2021				December 31, 2020
(in millions)	Loans Outstanding (a)		Percent of Total Loans		Loans Outstanding (a)		Percent of Total Loans
Production:
Domestic	$	819			$	791
Foreign	318				302
Total production	$	1,137	2.4	%	$	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 September 30, 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 September 30, 2021 were relatively stable.

There were no nonaccrual loans to borrowers involved with automotive production at September 30, 2021, compared to $7 million at December 31, 2020. Criticized automotive production loans were 12 percent of the automotive production portfolio at September 30, 2021, compared to 24 percent at December 31, 2020. Automotive production loan net charge-offs totaled $7 million in the nine months ended September 30, 2021, compared to $1 million in the nine months ended September 30, 2020.

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Residential Real Estate Lending

At September 30, 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.


	September 30, 2021								December 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	$	450	25	%	$	500	32	%	$	428	23	%	$	540	34	%
California	903		50		666		43		927		51		655		41
Texas	241		13		330		21		254		14		328		21
Other Markets	219		12		61		4		221		12		65		4
Total	$	1,813	100	%	$	1,557	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 ~~$3.6~~$3.4 billion ~~or 7 percent of total loans,~~ at September 30, ~~2020. The following table summarizes the Corporation's residential mortgage and home equity loan portfolios by geographic market.~~

September 30, 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 $ 444 23 % $ 558 34 % $ 412 22 % $ 603 35 %
California 983 51 687 42 932 51 699 41
Texas 261 14 332 20 275 15 346 20
Other Markets 239 12 63 4 226 12 63 4
Total $ 1,927 100 % $ 1,640 100 % $ 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 ~~$1.9~~$1.8 billion at September 30, ~~2020,~~2021, and were primarily larger, variable-rate mortgages originated and retained for certain private banking relationship customers. Of the ~~$1.9~~$1.8 billion of residential mortgage loans outstanding, ~~$40~~$35 million were on nonaccrual status at September 30, ~~2020.~~2021. The home equity portfolio totaled $1.6 billion at September 30, ~~2020,~~2021, of which ~~$1.5 billion~~95 percent was outstanding under primarily variable-rate, interest-only home equity lines of credit, ~~$75 million~~4 percent were in amortizing status and ~~$18 million~~1 percent were closed-end home equity loans. Of the $1.6 billion of home equity loans outstanding, ~~$20~~$12 million were on nonaccrual status at September 30, ~~2020.~~2021. A majority of the home equity portfolio was secured by junior liens at September 30, ~~2020.~~2021.

Energy Lending

The Corporation has a portfolio of Energy loans that are included entirely in commercial loans in the Consolidated Balance Sheets. Customers in the Corporation's Energy business line ~~of business~~ (approximately ~~140~~120 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 ~~pricing~~prices (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.

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The following table summarizes information about loans in the Corporation's Energy business line.


		September 30, 2020										December 31, 2019											September 30, 2021										December 31, 2020
(dollar amounts in millions)	(dollar amounts in millions)	Outstandings				Nonaccrual			Criticized (a)			Outstandings				Nonaccrual			Criticized (a)			(dollar amounts in millions)	Outstandings				Nonaccrual			Criticized (a)			Outstandings				Nonaccrual			Criticized (a)
Exploration and production (E&P)	Exploration and production (E&P)	$	1,451	79	%	$	141		$	648		$	1,741	78	%	$	43		$	289		Exploration and production (E&P)	$	1,008	79	%	$	28		$	136		$	1,295	81	%	$	114		$	527
Midstream	Midstream	338		18		—			59			432		20		—			63			Midstream	244		19		—			—			261		16		—			56
Services	Services	46		3		—			13			48		2		—			14			Services	25		2		—			12			44		3		—			13
Total Energy business line	Total Energy business line	$	1,835	100	%	$	141		$	720		$	2,221	100	%	$	43		$	366		Total Energy business line	$	1,277	100	%	$	28		$	148		$	1,600	100	%	$	114		$	596
As a percentage of total Energy loans	As a percentage of total Energy loans					8		%	39		%					2		%	16		%	As a percentage of total Energy loans					2		%	12		%					7		%	37		%

(a) Includes nonaccrual loans.

Loans in the Energy business line totaled ~~$1.8~~$1.3 billion, or 43 percent of total loans, at September 30, ~~2020 and $2.2 billion at December 31, 2019,~~2021, a decrease of ~~$386 million.~~$323 million compared to December 31, 2020. Total exposure, including unused commitments to extend credit and letters of credit, was ~~$3.3~~$2.9 billion at September 30, 2021 (a utilization rate of 5544 percent) and ~~$4.3~~$3.1 billion at ~~September 30, 2020 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 as well as reduced production activity. At September 30, 2020, the Corporation had started Fall borrowing base re-determinations, and expects a slight increase in borrowing bases. 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 September 30, 2020, 74 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 38 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 remained over 10 percent of the Energy portfolio at September 30, 2020. Energy markets, which were already experiencing stress prior to the pandemic, were further impacted by the rapid decline in demand resulting from social distancing policies. Demand improved slightly in the third quarter as the economy began to recover, but energy markets remain uncertain. Net credit-related Energy ~~charge-offs~~recoveries were $9$16 million and ~~$121~~$29 million for the three- and nine-month periods ended September 30, ~~2020,~~2021, respectively, compared to ~~$34~~net charge-offs of $9 million and ~~$67~~$121 million for ~~the same~~comparable periods in ~~2019.~~2020. Nonaccrual Energy loans ~~increased $98~~decreased $86 million to ~~$141~~$28 million at September 30, ~~2020,~~2021, compared to December 31, ~~2019.~~2020. Criticized Energy loans ~~increased $354~~decreased $448 million to ~~$720~~$148 million, or 218 percent of total criticized loans, at September 30, 2021 compared to December 31, 2020.

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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 continued to set aside increased reserves for this portfolio as of September 30, 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.

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.~~loans, which represented 5 percent of total loans at both September 30, 2021 and December 31, 2020.

(in millions) September 30, 2020 December 31, 2019
Outstandings $ 2,464 $ 2,553
Criticized 500 169
Net loan charge-offs 2020 2019
Three Months Ended September 30, $ 7 $ 1
Nine Months Ended September 30, 20 6

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(in millions)	September 30, 2021		December 31, 2020
Outstandings	$	2,492	$	2,441
Criticized	245		418
Net loan charge-offs	2021		2020
Three Months Ended September 30,	$	6	$	7
Nine Months Ended September 30,	10		20

Other Sectors 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 impacted~~continued 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 has impacted, and will continue to impact, manylingering impacts of the ~~Corporation’s~~pandemic on its customers. In addition to the energy, automotive production and leveraged loan portfolios, the Corporation considers the following sectors of its loan portfolio to be most vulnerable to financial risks from business disruptions caused by the pandemic spread mitigation efforts. During third quarter 2020, the Corporation removed casinos and sports franchises from the vulnerable classification as these sectors experienced no negative migration, and the criticized and nonaccrual loans within these sectors were well below the total sector average. Additionally, there was no indication at September 30, 2020 that these sectors should be considered to be at elevated risk. For further discussion, see Item 1.A "Risk Factors" on page 6713 of ~~this report.~~the Corporation's 2020 Annual Report.


		September 30, 2020									September 30, 2021
Sector based on NAICS category (dollar amounts in millions)	Sector based on NAICS category (dollar amounts in millions)	Loans (a)		Percent of Total Loans (a)		Percent Criticized (b)		Percent Nonaccrual (c)		Sector based on NAICS category (dollar amounts in millions)	Loans (a)		Percent of Total Loans		Percent Criticized (b)		Percent Nonaccrual (c)

Retail Commercial Real Estate (d)	Retail Commercial Real Estate (d)	$	781	1.6	%	4.7	%	—	%	Retail Commercial Real Estate (d)	$	797	1.7	%	5.0	%	—	%
Hotels	Hotels	559		1.2		9.5		—		Hotels	555		1.2		4.6		1.7
Retail Goods and Services	Retail Goods and Services	261		0.5		14.5		—		Retail Goods and Services	238		0.5		7.2		0.1
Arts/Recreation	Arts/Recreation	248		0.5		28.5		—		Arts/Recreation	208		0.4		24.3		5.1

All other impacted sectors (e)	All other impacted sectors (e)	1,032		2.1		9.9		0.4		All other impacted sectors (e)	1,046		2.2		9.7		2.6
Total	Total	$	2,881	5.9	%	10.4	%	0.1	%	Total	$	2,844	5.9	%	8.3	%	1.6	%

(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.

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

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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.

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.

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 September 30, ~~2020~~2021 was 5559 percent 30-day LIBOR, 76 percent other LIBOR (primarily 60-and 90-day), 12 percent prime and 2623 percent fixed rate. ~~At September 30, 2020,~~

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16Additionally, 31 percent of ~~total~~ loans ~~primarily tied to the 30-day LIBOR,~~ had non-zero interest rate floors protecting against future rate declines. ~~This~~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 September 30, ~~2020,~~2021, these derivative instruments comprise interest rate swaps that convert $2.7 billion of fixed-rate medium- and long-term debt to variable rates through fair value hedges and convert ~~$5.6~~$5.3 billion of variable-rate loans to fixed rates through cash flow hedges. Additionally, included in this analysis are ~~$8.4~~$15.1 billion of loans that were subject to an average interest rate floor of ~~0.9~~0.7 percent at September 30, ~~2020.~~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 rates~~change 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. In~~growth 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 September 30, ~~2020~~2021 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.

September 30, 2020 December 31, 2019
(dollar amounts in millions) Amount % Amount %
Change in Interest Rates: Change in Interest Rates:
Rising 100 basis points $ 130 7 % Rising 100 basis points $ 90 4 %
Declining to zero percent (33) (2) Declining 100 basis points (135) (6)


	Estimated Annual Change
	September 30, 2021					December 31, 2020
(dollar amounts in millions)	Amount		%			Amount		%
Change in Interest Rates:					Change in Interest Rates:
Rising 100 basis points	$	188	11	%	Rising 100 basis points	$	161	9	%
Declining to zero percent	(41)		(2)		Declining to zero percent	(34)		(2)

Sensitivity to declining interest rates ~~decreased~~remained steady from December 31, ~~2019~~2020 to September 30, ~~2020~~2021 due to offsetting changes in balance sheet composition, as well as limited remaining downward movement in rates before hitting zero percent floors. Sensitivity to rising interest rates slightly increased due to ~~changes in balance sheet composition,~~forgiveness of fixed-rate PPP loans and higher deposit volumes, partially offset by ~~fixed-rate Paycheck Protection Program lending,~~the growth ~~in the~~of floating-rate loans with floors as well as a larger securities ~~portfolio and the addition of swaps converting variable-rate loans to fixed rates.~~portfolio.

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. 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 with a floor of zero percent.

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The table below, as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, displays the estimated impact on the economic value of equity from the interest rate scenario described above.


		September 30, 2020					December 31, 2019					September 30, 2021					December 31, 2020
(dollar amounts in millions)	(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:					Change in Interest Rates:
Rising 100 basis points	Rising 100 basis points	$	1,238	13	%	Rising 100 basis points	$	716	7	%	Rising 100 basis points	$	1,475	10	%	Rising 100 basis points	$	1,793	18	%
Declining to zero percent	Declining to zero percent	(479)		(5)		Declining 100 basis points	(1,178)		(12)		Declining to zero percent	(417)		(3)		Declining to zero percent	(551)		(6)

The sensitivity of the economic value of equity to rising rates ~~increased~~decreased from December 31, ~~2019~~2020 to September 30, ~~2020~~2021 due primarily to ~~changes~~duration extension and balance growth in ~~deposit pay rates and expected lives. The sensitivity~~the securities portfolio. Sensitivity to declining rates decreased due to the changes in ~~balance sheet composition as well as~~the securities portfolio and is limited ~~remaining downward movement in rates before hitting modeled 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 (FCA), which regulates LIBOR, publicly announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. Effective March 2021, the FCA confirmed that certain LIBOR tenors will no longer be supported after December 31, 2021 and that the remaining tenors, including those most commonly used by the Corporation, will cease to be supported after June 30, 2023. 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 office~~

As of July 1, 2021, the Corporation was operationally ready to issue new Secured Overnight Financing Rate (SOFR)-based cash and ~~governance structure, with direction~~derivative products. Additionally, as of September 30, 2021, the Corporation was operationally ready to issue new Bloomberg Short-Term Bank Yield Index (BSBY)-based cash and ~~oversight from~~derivative products. The Corporation is prepared for the ~~Chief Executive Officer, Chief Financial Officer~~cessation of the LIBOR tenors as announced by the FCA and ~~Chief Risk Officer, continues~~will cease originating LIBOR-based products in the fourth quarter of 2021. Communications and learning activities to ~~guide a cross-functional implementation team to execute an enterprise LIBOR transition plan. Comerica’s~~support customers and colleagues are ongoing.

The Corporation's enterprise transition ~~milestones~~timelines are closely aligned with recommendations from the Alternative Reference Rates Committee ~~(ARRC)~~ for both best practices and recommended ~~2020~~ objectives. ~~Beginning in second quarter 2020, customer disclosure information for both consumer and commercial loans were provided for new originations.~~ The Corporation ~~began indexing new retail adjustable rate mortgages~~will continue to SOFR (Secured Overnight Financing Rate) in third quarter 2020. Execution activities are in process to incorporate fallback language in legacy LIBOR-based commercial loans targeted to begin in fourth quarter 2020. Additional milestones for products originated on alternative reference rates will be executed in alignmentalign with ~~market~~industry and ~~industry decisions. The Corporation continues to~~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 "Item~~see 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 September 30, ~~2020~~2021 included short-term ~~Federal Home Loan Bank (FHLB)~~FHLB advances, the ability to purchase

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federal funds, sell securities under agreements to repurchase as well as issue deposits through brokers. Purchased funds decreased to ~~$100~~$43 million at September 30, ~~2020~~2021 compared to ~~$295~~$66 million at December 31, ~~2019, driven by decreases in short-term FHLB advances.~~ 2020.

At September 30, ~~2020,~~2021, the Bank had pledged loans totaling ~~$19.1~~$20.4 billion which provided ~~for~~ up to ~~$14.9~~$16.4 billion of available collateralized borrowing with the Federal Reserve Bank (FRB).

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 September 30, ~~2020, $19.0~~2021, $18.6 billion of real estate-related loans and ~~$4.8~~$2.4 billion of investment securities were pledged to the FHLB as collateral for ~~current and~~ potential future borrowings. The Corporation had ~~$2.8 billion of FHLB long-term advances, maturing in 2026, and~~ capacity for potential future borrowings of approximately $11.7 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 ~~September 30, 2020~~the time of termination. Outstanding notes issued under ~~an existing $15.0 billion note~~the program ~~which allows~~were 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.

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 September 30, ~~2020,~~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 Incorporated

Comerica Bank

September 30, ~~2020~~2021

Rating

Outlook

Rating

Outlook

~~Standard and Poor’s~~

~~BBB+~~

~~Negative~~

A-

~~Negative~~

Moody’s Investors Service

Stable

Fitch Ratings

A-

Stable

A-

Stable

Standard and Poor’s

BBB+

Stable

A-

Stable

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The Corporation satisfies liquidity needs with either liquid assets or various funding sources. Liquid assets totaled ~~$21.0~~$36.8 billion and ~~$17.9~~$25.9 billion at September 30, ~~2020~~2021 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 September 30, ~~2020~~2021 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 ~~$47.6~~$64.9 billion at September 30, ~~2020.~~2021. On a stand-alone basis, the Corporation had liquid assets of ~~$1.5 billion~~$716 million on an unconsolidated basis at September 30, ~~2020.~~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 ~~2019~~2020 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-34~~F-39 through ~~F-36~~F-43 in the Corporation's ~~2019~~2020 Annual Report. ~~Below are~~As 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 framework, 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.

~~In determining the allowance for credit losses~~except for the ~~majority~~MRVA methodology change described in Results of ~~its lending portfolio, the Corporation uses reserve factors, based on estimated probability of default for internal risk ratings~~Operations and loss given default. Management applies reserve factors to pools of loans and lending-related commitments with similar risk characteristics, calibrates these factors using economic forecasts and incorporates qualitative adjustments. 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. For further discussion on~~statements and the ~~economic forecast incorporated into~~updates to the goodwill critical accounting policy outlined below.

The Corporation performed the annual goodwill impairment test in third quarter ~~2020 model, refer~~2021, resulting in the following updates to the ~~“Risk Management” section of this financial review.~~

~~Management's determination~~critical accounting policy on page F-41 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. The calculation is inherently subjective and requires management to exercise significant judgment in developing assumptions into the estimate, the most significant of which are the loan risk rating process, development of economic forecasts and application of qualitative adjustments. Sensitivities are disclosed to demonstrate how changes in loan risk ratings and economic forecast scenarios may impact the allowance for credit losses. Sensitivities only consider changes to each specific assumption in isolation and their impact to the quantitative modeled results; however, they do not contemplate impacts to the qualitative framework.Corporation's 2020 Annual Report.

~~Loan Risk Rating Process~~

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 5 percent of the individual risk ratings were adjusted down by one rating across all pools, the allowance for loan losses as of ~~September 30, 2020~~ ~~would change by approximately $15 million.~~

~~Forecasted Economic Variables~~

Historical 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.

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 government stimulus programs, the Corporation evaluated a range of economic scenarios, including a more severe economic forecast scenario, with varying speeds of recovery. The following table summarizes the more severe forecast scenario for the economic variables that are most impactful.

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~~Economic Variable~~			~~More Severe Forecast~~
~~Real GDP growth~~			~~Contracts by 4 percent in fourth quarter 2020, gradually improving to 5 percent growth in 2022 as the forecast period ends part-way through an economic recovery.~~
~~Unemployment rate~~			~~Current levels below 10 percent increase to 11 percent in early 2021, maintaining such levels for several quarters before decreasing below 10 percent near the end of the forecast period.~~
~~Corporate BBB bond to 10-year Treasury bond spreads~~			~~Spreads widen to 4 percent in the near term, gradually normalizing to below 2 percent by 2022.~~
~~Oil Prices~~			~~Continue to decline to below $25 per barrel part-way through the forecast period, improving to nearly $30 per barrel by third quarter 2022.~~

Selecting a different forecast in the current environment could result in a significantly different estimated allowance for credit losses. To illustrate, absent model overlays and other qualitative adjustments that are part of the quarterly reserving process, if the Corporation selected the more severe scenario to inform its models, the allowance for credit losses as of September 30, 2020 would increase by approximately $1 billion. However, factoring in model overlays and qualitative adjustments could result in a materially different estimate under a more severe scenario.

~~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 and model overlays may be included to mitigate known limitations 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 September 30, 2020 primarily included adjustments for uncertainties related to forecasted economic variables and model imprecision.~~

~~Other Considerations~~

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 Commercial Bank segment.

~~GOODWILL~~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 Commercial Bank, the Retail Bank and Wealth Management. At September 30, 2021 and December 31, 2020, goodwill totaled $635 million, including $473 million allocated to the Commercial Bank, $101 million allocated to the Retail Bank and $61 million allocated to Wealth Management.

The ~~Corporation performs its~~ annual ~~evaluation~~test of goodwill impairment in the third quarter of each year and may elect to perform a quantitative impairment analysis or first conduct a qualitative analysis to determine if a quantitative analysis is necessary. Additionally, the Corporation evaluates goodwill impairment on an interim basis if events or changes in circumstances between annual tests indicate additional testing may be warranted to determine if goodwill might be impaired.

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 economic deterioration in the first quarter of 2020, 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

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and sensitivities performed. At the conclusion of the first quarter 2020 assessment, the Corporation determined that it was more likely than not that the fair value of each reporting unit exceeded its carrying value.

In second quarter 2020, the Corporation performed a quantitative goodwill impairment test in response to continued macroeconomic deterioration and the ongoing impacts to the banking industry and markets in which the Corporation operates. The estimated fair values of the reporting units were determined using a blend of two commonly used valuation techniques: the market approach and the income approach. For the market approach, valuations of reporting units considered a combination of earnings and equity multiples from companies with characteristics similar to each reporting unit. Since the fair values determined under the market approach are representative of noncontrolling interests, the valuations incorporated a control premium. For the income approach, estimated future cash flows were derived from internal forecasts and economic expectations for each reporting unit. In the short- and mid-term, forecasts incorporated current economic conditions and ongoing impacts of the global pandemic, including a federal funds target near zero and an elevated allowance for credit losses. Long-term projections reflected normalized rate and credit environments, as well as a long-term rate of return for each reporting unit. Projections were discounted using an applicable discount rate to calculate fair value. The discount rate was based on the imputed cost of equity capital appropriate for each reporting unit, which incorporated the risk-free rate of return, the level of non-diversified risk associated with companies with characteristics similar to the reporting unit, a size risk premium and a market equity risk premium. The discount rate further reflected the uncertainty of current economic conditions and potential impacts to the forecasted financial information. The combined fair value of all units was compared to the Corporation’s market capitalization for reasonableness. At the conclusion of the quantitative impairment test in second quarter 2020, the estimated fair values of all reporting units substantially exceeded their carrying amounts, including goodwill.

~~The annual goodwill impairment test~~ was performed as of the beginning of the third quarter ~~2020.~~2021. The Corporation first assessed qualitative factors to determine whether it was more likely than not that the fair value of any reporting unit was less than its carrying amount, including goodwill. Qualitative factors included economic conditions, industry and market considerations, cost factors, overall financial performance, regulatory developments and performance of the Corporation’s stock, among other events and circumstances. At the conclusion of the qualitative assessment in third quarter ~~2020,~~2021, the Corporation determined that it was more likely than not that the fair value of each reporting unit exceeded its carrying value.

~~Analyzing goodwill includes consideration~~Qualitative factors considered in the analysis of ~~various factors that continue~~each reporting unit incorporate current macroeconomic and market conditions, such as trends in key economic data and industry developments, effects of the global pandemic and ongoing recovery to ~~rapidly evolve~~the business, recent reporting unit financial performance and ~~for which significant uncertainty remains, including~~ the impact of ~~the coronavirus global pandemic to the economy~~regulatory and ~~ongoing government intervention to mitigate that impact.~~legislative actions. Further weakening in the economic environment, such as ~~continued~~a 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 the Corporation to measure the quality of capital and the return relative to balance sheet risk.

Common equity tier 1 capital ratio removes preferred stock from the Tier 1 capital ratio as defined by 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)	(dollar amounts in millions)	September 30, 2020			December 31, 2019			(dollar amounts in millions)	September 30, 2021			December 31, 2020
Common Equity Tier 1 Capital (a):	Common Equity Tier 1 Capital (a):							Common Equity Tier 1 Capital (a):
Tier 1 capital	Tier 1 capital	$	7,199		$	6,919		Tier 1 capital	$	7,359		$	7,313
Less:	Less:							Less:
Fixed-rate reset non-cumulative perpetual preferred stock	Fixed-rate reset non-cumulative perpetual preferred stock	394			—			Fixed-rate reset non-cumulative perpetual preferred stock	394			394
Common equity tier 1 capital	Common equity tier 1 capital	$	6,805		$	6,919		Common equity tier 1 capital	$	6,965		$	6,919
Risk-weighted assets	Risk-weighted assets	$	66,299		$	68,273		Risk-weighted assets	$	68,193		$	66,931
Tier 1 capital ratio	Tier 1 capital ratio	10.86		%	10.13		%	Tier 1 capital ratio	10.79		%	10.93		%
Common equity tier 1 capital ratio	Common equity tier 1 capital ratio	10.26			10.13			Common equity tier 1 capital ratio	10.21			10.34
Tangible Common Equity Ratio:	Tangible Common Equity Ratio:							Tangible Common Equity Ratio:
Total shareholders' equity	Total shareholders' equity	$	7,874		$	7,327		Total shareholders' equity	$	7,803		$	8,050
Less:	Less:							Less:
Fixed-rate non-cumulative perpetual preferred stock		394			—
Fixed-rate reset non-cumulative perpetual preferred stock								Fixed-rate reset non-cumulative perpetual preferred stock	394			394
Common shareholders' equity	Common shareholders' equity	$	7,480		$	7,327		Common shareholders' equity	$	7,409		$	7,656
Less:	Less:							Less:
Goodwill	Goodwill	635			635			Goodwill	635			635
Other intangible assets(b)	Other intangible assets(b)	2			4			Other intangible assets(b)	12			1
Tangible common equity	Tangible common equity	$	6,843		$	6,688		Tangible common equity	$	6,762		$	7,020
Total assets	Total assets	$	83,631		$	73,402		Total assets	$	94,529		$	88,129
Less:	Less:							Less:
Goodwill	Goodwill	635			635			Goodwill	635			635
Other intangible assets(b)	Other intangible assets(b)	2			4			Other intangible assets(b)	12			1
Tangible assets	Tangible assets	$	82,994		$	72,763		Tangible assets	$	93,882		$	87,493
Common equity ratio	Common equity ratio	8.94		%	9.98		%	Common equity ratio	7.84		%	8.69		%
Tangible common equity ratio	Tangible common equity ratio	8.24			9.19			Tangible common equity ratio	7.20			8.02
Tangible Common Equity per Share of Common Stock:	Tangible Common Equity per Share of Common Stock:							Tangible Common Equity per Share of Common Stock:
Common shareholders' equity	Common shareholders' equity	$	7,480		$	7,327		Common shareholders' equity	$	7,409		$	7,656
Tangible common equity	Tangible common equity	6,843			6,688			Tangible common equity	6,762			7,020
Shares of common stock outstanding (in millions)	Shares of common stock outstanding (in millions)	139			142			Shares of common stock outstanding (in millions)	131			139
Common shareholders' equity per share of common stock	Common shareholders' equity per share of common stock	$	53.78		$	51.57		Common shareholders' equity per share of common stock	$	56.55		$	55.01
Tangible common equity per share of common stock	Tangible common equity per share of common stock	49.20			47.07			Tangible common equity per share of common stock	51.61			50.43

(a)~~Tier 1 capital as defined by regulation; estimated for~~ September 30, ~~2020, reflects~~2021 ratios are estimated. Ratios reflect deferral of CECL model ~~impact.~~impact as calculated per regulatory guidance. The deferred amounts were zero at September 30, 2021 (estimated) and $72 million at December 31, 2020.

(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)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 ~~changes~~change in the Corporation’s risk factors as previously disclosed in our Form 10-K for the fiscal year ended December 31, ~~2019~~2020 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 and will likely continue to adversely impact 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 has been, and is expected to continue to 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 some businesses remain closed or are forced to close again and as more customers may draw on their lines of credit or seek additional loans to help finance their businesses. Certain industries have been particularly susceptible to the effects of the pandemic, such as retail commercial real estate, retail goods and services, hotels, arts/recreation, airlines, restaurants and bars, childcare, coffee shops, cruise lines, education, gasoline and convenience stores, religious organizations, senior living, freight and travel arrangements, and Comerica has outstanding loans to clients in these industries, as described above under "Other Sectors Most at Risk due to Economic Stress Resulting from COVID-19 Impacts." Similarly, because of changing economic and market conditions affecting issuers, the securities we hold may lose value. We have temporarily closed certain of our branches and offices and our business operations may also be disrupted if significant portions of our workforce are unable to work effectively long-term, including because of illness, quarantines, government actions, or

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other restrictions in connection with the pandemic. 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 of September 30, 2020, pandemic-related payment deferrals totaled $385 million, representing approximately 300 obligors and consisting of 60 percent commercial loans and 40 percent retail loans, primarily residential mortgages.

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.~~

•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, energy markets have shown continued stress for most of 2020 and remain uncertain. Loans in the Energy business line were $1.8 billion, or approximately 4 percent of total loans, at September 30, 2020. At September 30, 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 57 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

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						Certificate of Amendment to Restated Certificate of Incorporation of Comerica Incorporated (filed as Exhibit 3.2 to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, and incorporated herein by reference).

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).

3.4						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.]

~~10.11†~~10.1L†						~~Amended and Restated~~Form of Standard Comerica Incorporated ~~Non-Employee Director Fee Deferral~~ Restricted Stock Unit Agreement (Director Version) under the Comerica Incorporated 2018 Long-Term Incentive Plan ~~(amended and restated effective July 1, 2020)~~ (filed as Exhibit ~~10.11~~10.1L to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2020, and incorporated herein by reference).~~

~~10.12†~~						Amended and Restated Comerica Incorporated Common Stock Non-Employee Director Fee Deferral Plan (amended and restated effective July 1, 2020)(filed as Exhibit 10.12 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020,2021, and incorporated herein by reference).

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).

101						Financial statements from Quarterly Report on Form 10-Q of the Registrant for the quarter ended September 30, ~~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).

104						The cover page from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, ~~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)

			/s/ Mauricio A. Ortiz
			Mauricio A. Ortiz
			~~Senior~~Executive Vice President and
			Chief Accounting Officer and
			Duly Authorized Officer

Date: October ~~30, 2020~~29, 2021

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