Dallas, TX/January 19, 2021
FOURTH QUARTER 2020 NET INCOME OF $215 MILLION, $1.49 PER SHARE
Earnings per Share Increased 3 percent Compared to Third Quarter
Revenue Increased 3 percent and Credit Quality Remained Strong
FULL-YEAR 2020 NET INCOME OF $474 MILLION, $3.27 PER SHARE
Loan and Deposit Growth Helped Offset Lower Rates and Increased Credit Reserves
“Our 2020 results included solid loan performance and a record level of deposits, which helped offset the rapid decline in interest rates," said Curt C. Farmer, Comerica Chairman, President and Chief Executive Officer. "Expenses remained well-controlled and included COVID-related costs. In light of the unprecedented environment, we significantly increased our credit allowance in the first quarter. Credit migration was manageable and our full-year net charge-offs were 38 basis points of average loans, 14 basis points ex-Energy, reflective of our relationship banking strategy and deep credit experience. We maintained our strong capital levels and our book value grew 7 percent from 2019 to over $55. In summary, a solid performance, particularly considering the difficult economic conditions.
“With respect to the fourth quarter, we generated earnings per share of $1.49, a 3 percent increase over the third quarter, driven by revenue growth and strong credit quality. Loan activity was muted, but deposits increased nearly $1.5 billion. Customers continued to conserve cash and are cautiously optimistic that the economy will pick up in the second half of 2021. Our CET1 ratio increased to 10.35 percent, above our 10 percent target. As always, our priority is to use capital to support customers and to drive growth, while providing an attractive return to our shareholders.
“I could not be prouder of the unwavering commitment of our team to serve our customers, communities and each other during this challenging time. During the year, we provided $11 million in assistance to local communities and businesses as well as funded $3.9 billion in Paycheck Protection Program loans to small and medium-sized companies. The compassion and tireless efforts of our colleagues allowed Comerica to persevere and remain in a strong position as we move forward.”
(dollar amounts in millions, except per share data) | 4th Qtr '20 | 3rd Qtr '20 | 2020 | 2019 | |||||||||||||||||||||||||
FINANCIAL RESULTS | |||||||||||||||||||||||||||||
Net interest income | $ | 469 | $ | 458 | $ | 1,911 | $ | 2,339 | |||||||||||||||||||||
Provision for credit losses | (17) | 5 | 537 | 74 | |||||||||||||||||||||||||
Noninterest income | 265 | 252 | 1,001 | 1,010 | |||||||||||||||||||||||||
Noninterest expenses | 473 | 446 | 1,784 | 1,743 | |||||||||||||||||||||||||
Pre-tax income | 278 | 259 | 591 | 1,532 | |||||||||||||||||||||||||
Provision for income taxes | 63 | 48 | 117 | 334 | |||||||||||||||||||||||||
Net income | $ | 215 | $ | 211 | $ | 474 | $ | 1,198 | |||||||||||||||||||||
Diluted earnings per common share | $ | 1.49 | $ | 1.44 | $ | 3.27 | $ | 7.87 | |||||||||||||||||||||
Average loans | 51,405 | 52,013 | 51,631 | 50,511 | |||||||||||||||||||||||||
Average deposits | 70,243 | 68,763 | 65,038 | 55,481 | |||||||||||||||||||||||||
Return on average assets | 1.01 | % | 0.99 | % | 0.58 | % | 1.68 | % | |||||||||||||||||||||
Return on average common shareholders' equity | 11.14 | 10.84 | 6.18 | 16.39 | |||||||||||||||||||||||||
Net interest margin | 2.36 | 2.33 | 2.54 | 3.54 | |||||||||||||||||||||||||
Common equity Tier 1 capital ratio (a) | 10.35 | 10.25 | 10.35 | 10.13 | |||||||||||||||||||||||||
Tier 1 capital ratio (a) | 10.94 | 10.84 | 10.94 | 10.13 | |||||||||||||||||||||||||
Common equity ratio | 8.69 | 8.94 | 8.69 | 9.98 | |||||||||||||||||||||||||
Common shareholders' equity per share of common stock | $ | 55.01 | $ | 53.78 | $ | 55.01 | $ | 51.57 | |||||||||||||||||||||
Tangible common equity per share of common stock (b) | 50.43 | 49.20 | 50.43 | 47.07 | |||||||||||||||||||||||||
(a)Estimated for December 31, 2020; For periods in 2020, ratios reflect deferral of CECL model impact as calculated per regulatory guidance.
(b)See Reconciliations of Non-GAAP Financial Measures and Regulatory Ratios.
Fourth Quarter 2020 Compared to Third Quarter 2020 Overview
Balance sheet items discussed in terms of average balances unless otherwise noted.
Loans decreased $608 million to $51.4 billion.
•Increases in Equity Funds Services, Mortgage Banker Finance and National Dealer Services were more than offset by decreases in Corporate Banking, general Middle Market, Energy and Technology and Life Sciences.
◦Period-end Paycheck Protection Program (PPP) loans were $3.5 billion, reflecting repayments of $298 million primarily through the forgiveness process.
•Average yield on loans increased 7 basis points to 3.20 percent, reflecting higher loan fees driven by PPP forgiveness as well as rate and pricing actions.
Securities increased $1.0 billion, or 7 percent, to $14.9 billion.
•Full quarter effect of actions taken in third quarter to invest $2.3 billion of excess liquidity in U.S. Treasury bonds and mortgage-backed securities. Also reinvested $1.0 billion in securities repayments during the fourth quarter.
•Average yield on securities decreased 18 basis points to 1.95 percent, reflecting lower interest rates and an increase in lower-yielding U.S. Treasury securities.
Deposits increased $1.5 billion, or 2 percent, to $70.2 billion.
•Noninterest-bearing and interest-bearing deposits increased $824 million and $656 million, respectively, as customers continued to conserve cash in an uncertain economy.
•The average cost of interest-bearing deposits decreased 6 basis points to 11 basis points, reflecting prudent management of relationship pricing in a lower rate environment.
Net interest income increased $11 million to $469 million.
•Increase driven by higher loan fees primarily related to PPP forgiveness and prudent loan and deposit pricing, partially offset by reduced loan balances.
Provision for credit losses decreased $22 million to a benefit of $17 million.
•The allowance for credit losses decreased $46 million to $992 million, primarily reflecting a reduction in criticized loans as well as a slightly improved economic forecast tempered by near-term economic uncertainty. As a percentage of total loans, the allowance for credit losses remained elevated at 1.90 percent or 2.03 percent excluding PPP loans.
•Net loan charge-offs decreased $4 million to $29 million, or 0.22 percent of average loans.
Noninterest income increased $13 million to $265 million.
•Increases of $8 million in customer derivative income, primarily from a change in the credit valuation adjustment, $5 million in commercial lending fees, $2 million in foreign exchange income as well as smaller increases in other categories, partially offset by a $5 million decrease in securities trading income.
Noninterest expenses increased $27 million to $473 million.
•Increases of $14 million in salaries and benefits expense, $7 million in outside processing fee expense and $2 million each in occupancy expense and advertising expense.
◦The increase in salaries and benefits expense primarily reflected higher performance-based incentives, staff insurance expense, severance and technology-related contract labor.
Capital position remained solid with a common equity Tier 1 capital ratio of 10.35 percent and a Tier 1 capital ratio of 10.94 percent.
•Returned a total of $94 million to common shareholders through dividends.
•Declared dividend of $5 million on preferred stock, payable January 1, 2021.
2
Full-Year 2020 Compared to Full-Year 2019 Overview
Balance sheet items discussed in terms of average balances.
Loans increased $1.1 billion to $51.6 billion.
•Increases of $1.0 billion in Mortgage Banker Finance due to elevated activity, $969 million in Commercial Real Estate and smaller increases in Business, Retail and Corporate Banking more than offset decreases of $1.7 billion in National Dealer Services, as an imbalance in supply and demand resulted in lower inventory, and $428 million in Energy.
◦PPP loans were $2.5 billion.
•Average yield on loans decreased 139 basis points to 3.44 percent, reflecting lower interest rates.
Securities increased $1.3 billion, or 11 percent, to $13.4 billion.
•Invested a portion of excess liquidity in $1.8 billion of U.S. Treasury bonds and $500 million of mortgage-backed securities in third quarter 2020.
•Average yield on securities decreased 23 basis points to 2.21 percent, reflecting lower interest rates and the increase in lower-yielding U.S. Treasury securities.
Deposits increased $9.6 billion, or 17 percent, to $65.0 billion.
•Growth in every business line, including an increase of $6.4 billion in noninterest-bearing deposits, as customers conserve cash in an uncertain economy.
•The average cost of interest-bearing deposits decreased 60 basis points to 31 basis points, reflecting prudent management of relationship pricing in a lower rate environment.
Net interest income decreased $428 million to $1.9 billion.
•Higher loan volumes and lower deposit and wholesale funding costs were more than offset by the impact of lower interest rates on loans.
Provision for credit losses increased $463 million to $537 million.
•The allowance for credit losses, calculated using the current expected credit loss (CECL) model effective January 1, 2020, increased $324 million and 57 basis points as a percentage of total loans. The increase reflected credit migration and the forecasted impact of the COVID-19 pandemic in the first half of 2020, including the economic impacts of social distancing, and pressures on Energy.
•Net loan charge-offs increased $89 million to $196 million, or 0.38 percent of average loans. Excluding Energy, net loan charge-offs totaled 0.14 percent of average loans.
Noninterest income decreased $9 million to $1.0 billion.
•Increases of $14 million in securities trading income, $13 million in card fees and $5 million in investment banking fees were more than offset by decreases of $18 million in service charges on deposit accounts, $14 million in commercial lending fees (syndication agent fees), $7 million in brokerage fees, $5 million in customer derivative income and $4 million each in foreign exchange income and income from principal investing and warrants.
•Also included a $7 million increase in deferred compensation asset returns (offset in noninterest expenses), a $7 million reduction in net securities losses primarily due to a repositioning loss recorded in 2019 and a $6 million decrease from the gain on sale of Comerica's Health Savings Account (HSA) business in the fourth quarter of 2019.
Noninterest expenses increased $41 million to $1.8 billion.
Results include a $33 million reduction to outside processing expense with a corresponding increase to software expense from a change in accounting classification as of January 1, 2020.
•Reflected increases of $16 million in operational losses, $11 million in outside processing expense (net of classification change) and $10 million in FDIC insurance expense, partially offset by a decrease of $10 million in travel and entertainment expense due to the COVID-19 pandemic.
◦Salaries and benefits expense were flat, primarily reflecting lower incentive and annual stock-based compensation, mostly offset by merit increases and higher deferred compensation expense (offset in noninterest income).
◦Expenses included approximately $18 million related to COVID-19, primarily for compensation and stipends to colleagues, charitable contributions, cleaning supplies, personal protective equipment and PPP technology costs.
3
Returned a total of $378 million to common shareholders through dividends, including an increase in the dividend to $2.72 per share and the repurchase of $189 million of common stock (3.2 million shares) prior to the suspension of the repurchase plan in response to the uncertainty of the COVID-19 pandemic environment.
•Issued $400 million of 5.625% non-cumulative perpetual preferred stock, resulting in dividends declared of $13 million on preferred stock.
Net Interest Income
Balance sheet items presented and discussed in terms of average balances.
(dollar amounts in millions) | 4th Qtr '20 | 3rd Qtr '20 | 2020 | 2019 | |||||||||||||||||||
Net interest income | $ | 469 | $ | 458 | $ | 1,911 | $ | 2,339 | |||||||||||||||
Net interest margin | 2.36 | % | 2.33 | % | 2.54 | % | 3.54 | % | |||||||||||||||
Selected balances: | |||||||||||||||||||||||
Total earning assets | $ | 79,557 | $ | 78,555 | $ | 75,419 | $ | 66,134 | |||||||||||||||
Total loans | 51,405 | 52,013 | 51,631 | 50,511 | |||||||||||||||||||
Total investment securities | 14,886 | 13,850 | 13,432 | 12,120 | |||||||||||||||||||
Federal Reserve Bank deposits | 12,828 | 12,260 | 9,944 | 3,143 | |||||||||||||||||||
Total deposits | 70,243 | 68,763 | 65,038 | 55,481 | |||||||||||||||||||
Total noninterest-bearing deposits | 36,758 | 35,934 | 33,053 | 26,644 | |||||||||||||||||||
Short-term borrowings | 3 | 218 | 314 | 369 | |||||||||||||||||||
Medium- and long-term debt | 5,741 | 5,940 | 6,549 | 6,955 |
Net interest income increased $11 million, and net interest margin increased 3 basis points, compared to third quarter 2020.
•Interest income on loans increased $6 million and improved net interest margin by 4 basis points, primarily due to the impact of higher fees driven by PPP forgiveness (+$7 million, +3 basis points), rate and pricing actions (+$3 million, +1 basis point) and a smaller increase due to other portfolio dynamics, which were partially offset by lower loan balances (-$5 million).
•Interest income on investment securities decreased $1 million and reduced net interest margin by 3 basis points due to the impact of lower rates (-$6 million, -3 basis points), partially offset by higher balances (+$5 million).
•Higher short-term investment balances reduced net interest margin by 1 basis point.
•Interest expense on deposits decreased $5 million and improved net interest margin by 3 basis points, due to lower pay rates on deposits.
•Interest expense on debt decreased $1 million due to lower rates.
4
Credit Quality
"Our credit metrics remained strong," said Farmer. "Compared to the third quarter, criticized loans declined $459 million, inflows to nonaccrual fell to the lowest level since the pandemic began, and net charge-offs decreased to only 22 basis points. A true testament to our consistent, disciplined credit culture. Positive portfolio migration coupled with continued modest improvement in the economic forecast resulted in a small reduction in our credit reserve and a negative provision expense. As the path of the economic recovery remains uncertain, our reserve for credit losses remains elevated at 1.90 percent, or 2.03 percent excluding PPP loans. We expect charge-offs to increase from the low levels we have seen the past two quarters; however, with our healthy reserve, we believe we are well-positioned to manage through this cycle."
(dollar amounts in millions) | 4th Qtr '20 | 3rd Qtr '20 | 4th Qtr '19 | ||||||||||||||
Credit-related charge-offs | $ | 39 | $ | 53 | $ | 27 | |||||||||||
Recoveries | 10 | 20 | 6 | ||||||||||||||
Net credit-related charge-offs | 29 | 33 | 21 | ||||||||||||||
Net credit-related charge-offs/Average total loans | 0.22 | % | 0.26 | % | 0.16 | % | |||||||||||
Provision for credit losses | $ | (17) | $ | 5 | $ | 8 | |||||||||||
Nonperforming loans | 350 | 325 | 204 | ||||||||||||||
Nonperforming assets (NPAs) | 359 | 335 | 215 | ||||||||||||||
NPAs/Total loans and foreclosed property | 0.69 | % | 0.64 | % | 0.43 | % | |||||||||||
Loans past due 90 days or more and still accruing | $ | 45 | $ | 29 | $ | 26 | |||||||||||
Allowance for loan losses | 948 | 978 | 637 | ||||||||||||||
Allowance for credit losses on lending-related commitments (a) | 44 | 60 | 31 | ||||||||||||||
Total allowance for credit losses | 992 | 1,038 | 668 | ||||||||||||||
Allowance for loan losses/Period-end total loans | 1.81 | % | 1.87 | % | 1.27 | % | |||||||||||
Allowance for loan losses/Period-end total loans excluding PPP loans | 1.94 | 2.01 | n/a | ||||||||||||||
Allowance for credit losses/Period-end total loans | 1.90 | 1.98 | 1.33 | ||||||||||||||
Allowance for credit losses/Period-end total loans excluding PPP loans | 2.03 | 2.14 | n/a | ||||||||||||||
Allowance for credit losses/Nonperforming loans | 2.8x | 3.2x | 3.3x |
(a) Included in accrued expenses and other liabilities on the Consolidated Balance Sheets.
n/a - not applicable
•The allowance for credit losses decreased $46 million to $992 million, or 1.90 percent of total loans, primarily reflecting a reduction in criticized loans as well as a slightly improved economic forecast tempered by near-term economic uncertainty. Excluding PPP loans, which are guaranteed by the Small Business Administration, allowance for credit losses totaled 2.03 percent of total loans.
◦Energy loans totaled $1.6 billion, or 3 percent of total loans at December 31, 2020. The allocation of reserves for Energy loans was approximately 8 percent.
•Criticized loans decreased $459 million to $2.9 billion, or 6 percent of total loans. Criticized loans are generally consistent with the Special Mention, Substandard and Doubtful categories defined by regulatory authorities.
◦Criticized Energy loans decreased $124 million to $596 million, or 20 percent of total criticized loans; 37 percent of Energy loans are criticized.
•Nonperforming assets increased $24 million to $359 million. Nonperforming assets as a percentage of total loans and foreclosed property increased to 0.69 percent compared to 0.64 percent in third quarter 2020.
◦Loans transferred to nonaccrual decreased $73 million compared to third quarter 2020.
◦Nonperforming Energy loans decreased $27 million to $114 million.
•Net charge-offs were $29 million, or 0.22 percent of average loans.
◦Energy net charge-offs totaled $4 million, compared to $9 million in third quarter 2020.
•Pandemic-related payment deferrals totaled $141 million, or 0.27 percent of total loans at December 31, 2020, with over half in retail loans.
5
Outlook for First Quarter 2021 Compared to Fourth Quarter 2020
This outlook is based on management expectations for gradual improvement in economic conditions.
•Decline in average loans reflects decreases in Mortgage Banker Finance and Energy, partially offset by growth in National Dealer Services and general Middle Market. PPP loan forgiveness potentially exceeds additional advances.
•Average deposits to remain strong.
•Decline in net interest income with lower average loan balances, LIBOR and security yields as well as two fewer days in the quarter, partially offset by careful management of loan and deposit pricing.
•Provision for credit losses reflects pace of economic recovery; net charge-offs modestly higher.
•Decrease in noninterest income as fourth quarter levels of deferred compensation asset returns, card fees, warrants and securities trading income not expected to repeat, as well as a seasonal reduction in syndication fees; partly offset by increases in service charges on deposit accounts, fiduciary income and brokerage fees.
•Decrease in noninterest expenses reflects lower deferred compensation and pension expenses, seasonal reduction in occupancy, staff insurance and advertising, as well as a two less days in the quarter; partially offset by higher annual stock-based compensation.
•Income tax expense to be approximately 22 percent of pre-tax income, excluding discrete items.
•Maintain strong capital levels. Preferred stock dividends of $6 million.
6
Strategic Lines of Business and Markets
Comerica's operations are strategically aligned into three major business segments: the Commercial Bank, the Retail Bank and Wealth Management. The Finance Division is also reported as a segment. Comerica also provides market segment results for three primary geographic markets: Michigan, California and Texas. In addition to the three primary geographic markets, Other Markets is also reported as a market segment. Other Markets includes Florida, Arizona, the International Finance division and businesses that have a significant presence outside of the three primary geographic markets. For a summary of business segment and geographic market quarterly results, see the Business Segment Financial Results and Market Segment Financial Results tables included later in this report. From time to time, Comerica may make reclassifications among the segments to 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. The financial results provided are based on the internal business unit and geographic market structures of Comerica and methodologies in effect at December 31, 2020. A discussion of business segment and geographic market year-to-date results will be included in Comerica's 2020 Form 10-K.
Conference Call and Webcast
Comerica will host a conference call to review fourth quarter 2020 financial results at 7 a.m. CT Tuesday, January 19, 2021. Interested parties may access the conference call by calling (800) 309-2262 or (706) 679-5261 (Event ID No. 8597162). The call and supplemental financial information can also be accessed via Comerica's "Investor Relations" page at www.comerica.com. A replay of the Webcast can be accessed via Comerica's “Investor Relations” page at www.comerica.com.
Comerica Incorporated is a financial services company headquartered in Dallas, Texas, and strategically aligned by three major business segments: The Commercial Bank, The Retail Bank and Wealth Management. Comerica focuses on relationships and helping people and businesses be successful. In addition to Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico.
This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding Comerica's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as a reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
7
Forward-looking Statements
Any statements in this news release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “believes,” “contemplates,” “feels,” “expects,” “estimates,” “seeks,” “strives,” “plans,” “intends,” “outlook,” “forecast,” “position,” “target,” “mission,” “assume,” “achievable,” “potential,” “strategy,” “goal,” “aspiration,” “opportunity,” “initiative,” “outcome,” “continue,” “remain,” “maintain,” “on 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 Comerica or its management, are intended to identify forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of Comerica's management based on information known to Comerica's management as of the date of this news release and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of Comerica's management for future or past operations, products or services, and forecasts of Comerica's revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries as well as estimates of credit trends and global stability. Such statements reflect the view of Comerica's management as of this date with respect to future events and are subject to risks and uncertainties. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, Comerica's actual results could differ materially from those discussed. Factors that could cause or contribute to such differences include credit risks (unfavorable developments concerning credit quality; declines or other changes in the businesses or industries of Comerica'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 (Comerica's ability to maintain adequate sources of funding and liquidity; reductions in Comerica'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 Comerica's accounting policies); strategic risks (damage to Comerica's reputation; Comerica's ability to utilize technology to efficiently and effectively develop, market and deliver new products and services; competitive product and pricing pressures among financial institutions within Comerica's markets; the implementation of Comerica'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 in general economic, political or industry conditions; the effectiveness of methods of reducing risk exposures; the effects of catastrophic events; impacts from the COVID-19 global pandemic; and the volatility of Comerica’s stock price). Comerica 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 12 of Comerica's Annual Report on Form 10-K for the year ended December 31, 2019 and "Item 1A. Risk Factors" beginning on page 67 of Comerica'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. Comerica does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. For any forward-looking statements made in this news release or in any documents, Comerica claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Media Contacts: | Investor Contacts: | ||||
Wendy Bridges | Darlene P. Persons | ||||
(214) 462-4443 | (214) 462-6831 | ||||
Louis H. Mora | Amanda Perkins | ||||
(214) 462-6669 | (214) 462-6731 |
8
CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited) | ||||||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||||||
Three Months Ended | Years Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | |||||||||||||||||
(in millions, except per share data) | 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
PER COMMON SHARE AND COMMON STOCK DATA | ||||||||||||||||||||
Diluted earnings per common share | $ | 1.49 | $ | 1.44 | $ | 1.85 | $ | 3.27 | $ | 7.87 | ||||||||||
Cash dividends declared | 0.68 | 0.68 | 0.67 | 2.72 | 2.68 | |||||||||||||||
Average diluted shares (in thousands) | 140,159 | 139,673 | 144,566 | 140,216 | 151,293 | |||||||||||||||
PERFORMANCE RATIOS | ||||||||||||||||||||
Return on average common shareholders' equity | 11.14 | % | 10.84 | % | 14.74 | % | 6.18 | % | 16.39 | % | ||||||||||
Return on average assets | 1.01 | 0.99 | 1.46 | 0.58 | 1.68 | |||||||||||||||
Efficiency ratio (a) | 64.27 | 62.79 | 55.46 | 61.15 | 51.82 | |||||||||||||||
CAPITAL | ||||||||||||||||||||
Common equity tier 1 capital (b), (c) | $ | 6,919 | $ | 6,805 | $ | 6,919 | ||||||||||||||
Tier 1 capital (b), (c) | 7,313 | 7,199 | 6,919 | |||||||||||||||||
Risk-weighted assets (b) | 66,833 | 66,405 | 68,273 | |||||||||||||||||
Common equity tier 1 capital ratio (b), (c) | 10.35 | % | 10.25 | % | 10.13 | % | ||||||||||||||
Tier 1 capital ratio (b), (c) | 10.94 | 10.84 | 10.13 | |||||||||||||||||
Total capital ratio (b) | 13.21 | 13.12 | 12.13 | |||||||||||||||||
Leverage ratio (b) | 8.63 | 8.60 | 9.51 | |||||||||||||||||
Common shareholders' equity per share of common stock | $ | 55.01 | $ | 53.78 | $ | 51.57 | ||||||||||||||
Tangible common equity per share of common stock (c) | 50.43 | 49.20 | 47.07 | |||||||||||||||||
Common equity ratio | 8.69 | % | 8.94 | % | 9.98 | % | ||||||||||||||
Tangible common equity ratio (c) | 8.02 | 8.24 | 9.19 | |||||||||||||||||
AVERAGE BALANCES | ||||||||||||||||||||
Commercial loans | $ | 31,713 | $ | 32,226 | $ | 31,808 | $ | 32,144 | $ | 32,053 | ||||||||||
Real estate construction loans | 4,157 | 4,037 | 3,398 | 3,912 | 3,325 | |||||||||||||||
Commercial mortgage loans | 9,938 | 9,978 | 9,356 | 9,839 | 9,170 | |||||||||||||||
Lease financing | 600 | 601 | 586 | 594 | 557 | |||||||||||||||
International loans | 918 | 1,052 | 1,030 | 1,028 | 1,019 | |||||||||||||||
Residential mortgage loans | 1,908 | 1,961 | 1,887 | 1,905 | 1,929 | |||||||||||||||
Consumer loans | 2,171 | 2,158 | 2,440 | 2,209 | 2,458 | |||||||||||||||
Total loans | 51,405 | 52,013 | 50,505 | 51,631 | 50,511 | |||||||||||||||
Earning assets | 79,557 | 78,555 | 67,710 | 75,419 | 66,134 | |||||||||||||||
Total assets | 85,328 | 84,268 | 73,151 | 81,146 | 71,488 | |||||||||||||||
Noninterest-bearing deposits | 36,758 | 35,934 | 26,966 | 33,053 | 26,644 | |||||||||||||||
Interest-bearing deposits | 33,485 | 32,829 | 30,212 | 31,985 | 28,837 | |||||||||||||||
Total deposits | 70,243 | 68,763 | 57,178 | 65,038 | 55,481 | |||||||||||||||
Common shareholders' equity | 7,501 | 7,439 | 7,237 | 7,453 | 7,308 | |||||||||||||||
Total shareholders' equity | 7,895 | 7,834 | 7,237 | 7,691 | 7,308 | |||||||||||||||
NET INTEREST INCOME | ||||||||||||||||||||
Net interest income | $ | 469 | $ | 458 | $ | 544 | $ | 1,911 | $ | 2,339 | ||||||||||
Net interest margin | 2.36 | % | 2.33 | % | 3.20 | % | 2.54 | % | 3.54 | % | ||||||||||
CREDIT QUALITY | ||||||||||||||||||||
Nonperforming assets | $ | 359 | $ | 335 | $ | 215 | ||||||||||||||
Loans past due 90 days or more and still accruing | 45 | 29 | 26 | |||||||||||||||||
Net credit-related charge-offs | 29 | 33 | 21 | $ | 196 | $ | 107 | |||||||||||||
Allowance for loan losses | 948 | 978 | 637 | |||||||||||||||||
Allowance for credit losses on lending-related commitments | 44 | 60 | 31 | |||||||||||||||||
Total allowance for credit losses (d) | 992 | 1,038 | 668 | |||||||||||||||||
Allowance for credit losses as a percentage of total loans | 1.90 | % | 1.98 | % | 1.33 | % | ||||||||||||||
Net credit-related charge-offs as a percentage of average total loans | 0.22 | 0.26 | 0.16 | 0.38 | % | 0.21 | % | |||||||||||||
Nonperforming assets as a percentage of total loans and foreclosed property | 0.69 | 0.64 | 0.43 | |||||||||||||||||
Allowance for credit losses as a multiple of total nonperforming loans | 2.8x | 3.2x | 3.3x | |||||||||||||||||
OTHER KEY INFORMATION | ||||||||||||||||||||
Number of banking centers | 433 | 433 | 436 | |||||||||||||||||
Number of employees - full time equivalent | 7,681 | 7,738 | 7,747 |
(a) Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares.
(b) Estimated for December 31, 2020, 2020 reflects deferral of CECL model impact as calculated per regulatory guidance.
(c) See Reconciliations of Non-GAAP Financial Measures and Regulatory Ratios.
(d) Allowance for credit losses for December 31, 2020 and September 30, 2020 calculated using the CECL model effective first quarter 2020.
9
CONSOLIDATED BALANCE SHEETS | ||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||
December 31, | September 30, | December 31, | ||||||||||||
(in millions, except share data) | 2020 | 2020 | 2019 | |||||||||||
(unaudited) | (unaudited) | |||||||||||||
ASSETS | ||||||||||||||
Cash and due from banks | $ | 1,031 | $ | 988 | $ | 973 | ||||||||
Interest-bearing deposits with banks | 14,736 | 10,153 | 4,845 | |||||||||||
Other short-term investments | 172 | 160 | 155 | |||||||||||
Investment securities available-for-sale | 15,028 | 15,090 | 12,398 | |||||||||||
Commercial loans | 32,753 | 32,604 | 31,473 | |||||||||||
Real estate construction loans | 4,082 | 4,146 | 3,455 | |||||||||||
Commercial mortgage loans | 9,912 | 10,002 | 9,559 | |||||||||||
Lease financing | 594 | 601 | 588 | |||||||||||
International loans | 926 | 923 | 1,009 | |||||||||||
Residential mortgage loans | 1,830 | 1,927 | 1,845 | |||||||||||
Consumer loans | 2,194 | 2,166 | 2,440 | |||||||||||
Total loans | 52,291 | 52,369 | 50,369 | |||||||||||
Less allowance for loan losses | (948) | (978) | (637) | |||||||||||
Net loans | 51,343 | 51,391 | 49,732 | |||||||||||
Premises and equipment | 459 | 456 | 457 | |||||||||||
Accrued income and other assets | 5,360 | 5,393 | 4,842 | |||||||||||
Total assets | $ | 88,129 | $ | 83,631 | $ | 73,402 | ||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
Noninterest-bearing deposits | $ | 39,420 | $ | 36,533 | $ | 27,382 | ||||||||
Money market and interest-bearing checking deposits | 28,540 | 26,948 | 24,527 | |||||||||||
Savings deposits | 2,710 | 2,588 | 2,184 | |||||||||||
Customer certificates of deposit | 2,133 | 2,300 | 2,978 | |||||||||||
Other time deposits | — | — | 133 | |||||||||||
Foreign office time deposits | 66 | 90 | 91 | |||||||||||
Total interest-bearing deposits | 33,449 | 31,926 | 29,913 | |||||||||||
Total deposits | 72,869 | 68,459 | 57,295 | |||||||||||
Short-term borrowings | — | 10 | 71 | |||||||||||
Accrued expenses and other liabilities | 1,482 | 1,534 | 1,440 | |||||||||||
Medium- and long-term debt | 5,728 | 5,754 | 7,269 | |||||||||||
Total liabilities | 80,079 | 75,757 | 66,075 | |||||||||||
Fixed-rate reset non-cumulative perpetual preferred stock, series A, no par value, $100,000 liquidation preference per share: | ||||||||||||||
Authorized - 4,000 shares | ||||||||||||||
Issued - 4,000 shares at 12/31/20 and 9/30/20 | 394 | 394 | — | |||||||||||
Common stock - $5 par value: | ||||||||||||||
Authorized - 325,000,000 shares | ||||||||||||||
Issued - 228,164,824 shares | 1,141 | 1,141 | 1,141 | |||||||||||
Capital surplus | 2,185 | 2,179 | 2,174 | |||||||||||
Accumulated other comprehensive income (loss) | 168 | 116 | (235) | |||||||||||
Retained earnings | 9,623 | 9,511 | 9,538 | |||||||||||
Less cost of common stock in treasury - 88,997,430 shares at 12/31/20, 89,095,470 shares at 9/30/20 and 86,069,234 shares at 12/31/19 | (5,461) | (5,467) | (5,291) | |||||||||||
Total shareholders' equity | 8,050 | 7,874 | 7,327 | |||||||||||
Total liabilities and shareholders' equity | $ | 88,129 | $ | 83,631 | $ | 73,402 |
10
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||
Three Months Ended | Years Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
(in millions, except per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | |||||||||||||||
INTEREST INCOME | |||||||||||||||||
Interest and fees on loans | $ | 414 | $ | 564 | $ | 1,773 | $ | 2,439 | |||||||||
Interest on investment securities | 71 | 75 | 291 | 297 | |||||||||||||
Interest on short-term investments | 4 | 20 | 29 | 71 | |||||||||||||
Total interest income | 489 | 659 | 2,093 | 2,807 | |||||||||||||
INTEREST EXPENSE | |||||||||||||||||
Interest on deposits | 10 | 70 | 101 | 262 | |||||||||||||
Interest on short-term borrowings | — | — | 1 | 9 | |||||||||||||
Interest on medium- and long-term debt | 10 | 45 | 80 | 197 | |||||||||||||
Total interest expense | 20 | 115 | 182 | 468 | |||||||||||||
Net interest income | 469 | 544 | 1,911 | 2,339 | |||||||||||||
Provision for credit losses | (17) | 8 | 537 | 74 | |||||||||||||
Net interest income after provision for credit losses | 486 | 536 | 1,374 | 2,265 | |||||||||||||
NONINTEREST INCOME | |||||||||||||||||
Card fees | 72 | 62 | 270 | 257 | |||||||||||||
Fiduciary income | 52 | 52 | 209 | 206 | |||||||||||||
Service charges on deposit accounts | 47 | 50 | 185 | 203 | |||||||||||||
Commercial lending fees | 24 | 25 | 77 | 91 | |||||||||||||
Bank-owned life insurance | 11 | 10 | 44 | 41 | |||||||||||||
Foreign exchange income | 11 | 11 | 40 | 44 | |||||||||||||
Letter of credit fees | 10 | 9 | 37 | 38 | |||||||||||||
Brokerage fees | 4 | 7 | 21 | 28 | |||||||||||||
Net securities gains (losses) | — | 1 | — | (7) | |||||||||||||
Other noninterest income | 34 | 39 | 118 | 109 | |||||||||||||
Total noninterest income | 265 | 266 | 1,001 | 1,010 | |||||||||||||
NONINTEREST EXPENSES | |||||||||||||||||
Salaries and benefits expense | 271 | 257 | 1,019 | 1,020 | |||||||||||||
Outside processing fee expense (a) | 65 | 70 | 242 | 264 | |||||||||||||
Occupancy expense | 42 | 41 | 156 | 154 | |||||||||||||
Software expense (a) | 39 | 30 | 154 | 117 | |||||||||||||
Equipment expense | 13 | 13 | 49 | 50 | |||||||||||||
Advertising expense | 11 | 10 | 35 | 34 | |||||||||||||
FDIC insurance expense | 9 | 6 | 33 | 23 | |||||||||||||
Other noninterest expenses | 23 | 24 | 96 | 81 | |||||||||||||
Total noninterest expenses | 473 | 451 | 1,784 | 1,743 | |||||||||||||
Income before income taxes | 278 | 351 | 591 | 1,532 | |||||||||||||
Provision for income taxes | 63 | 82 | 117 | 334 | |||||||||||||
NET INCOME | 215 | 269 | 474 | 1,198 | |||||||||||||
Less: | |||||||||||||||||
Income allocated to participating securities | 1 | 2 | 2 | 7 | |||||||||||||
Preferred stock dividends | 5 | — | 13 | — | |||||||||||||
Net income attributable to common shares | $ | 209 | $ | 267 | $ | 459 | $ | 1,191 | |||||||||
Earnings per common share: | |||||||||||||||||
Basic | $ | 1.50 | $ | 1.87 | $ | 3.29 | $ | 7.95 | |||||||||
Diluted | 1.49 | 1.85 | 3.27 | 7.87 | |||||||||||||
Comprehensive income | 267 | 370 | 877 | 1,572 | |||||||||||||
Cash dividends declared on common stock | 94 | 96 | 378 | 398 | |||||||||||||
Cash dividends declared per common share | 0.68 | 0.67 | 2.72 | 2.68 |
(a)Includes classification adjustments related to costs incurred in cloud computing arrangements of $9 million and $33 million for the three and twelve months ended December 31, 2020, respectively. These adjustments reduce outside processing fee expense and increase software expense due to the prospective adoption of ASU No. 2018-15, effective January 1, 2020.
11
CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | |||||||||||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||||||||||||||
Fourth | Third | Second | First | Fourth | Fourth Quarter 2020 Compared to: | ||||||||||||||||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Quarter | Third Quarter 2020 | Fourth Quarter 2019 | |||||||||||||||||||||||||||||
(in millions, except per share data) | 2020 | 2020 | 2020 | 2020 | 2019 | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||
INTEREST INCOME | |||||||||||||||||||||||||||||||||||
Interest and fees on loans | $ | 414 | $ | 408 | $ | 434 | $ | 517 | $ | 564 | $ | 6 | 1 | % | $ | (150) | (27) | % | |||||||||||||||||
Interest on investment securities | 71 | 72 | 74 | 74 | 75 | (1) | (1) | (4) | (4) | ||||||||||||||||||||||||||
Interest on short-term investments | 4 | 4 | 3 | 18 | 20 | — | — | (16) | (81) | ||||||||||||||||||||||||||
Total interest income | 489 | 484 | 511 | 609 | 659 | 5 | 1 | (170) | (26) | ||||||||||||||||||||||||||
INTEREST EXPENSE | |||||||||||||||||||||||||||||||||||
Interest on deposits | 10 | 15 | 20 | 56 | 70 | (5) | (34) | (60) | (87) | ||||||||||||||||||||||||||
Interest on short-term borrowings | — | — | 1 | — | — | — | — | — | — | ||||||||||||||||||||||||||
Interest on medium- and long-term debt | 10 | 11 | 19 | 40 | 45 | (1) | (10) | (35) | (77) | ||||||||||||||||||||||||||
Total interest expense | 20 | 26 | 40 | 96 | 115 | (6) | (23) | (95) | (83) | ||||||||||||||||||||||||||
Net interest income | 469 | 458 | 471 | 513 | 544 | 11 | 2 | (75) | (14) | ||||||||||||||||||||||||||
Provision for credit losses | (17) | 5 | 138 | 411 | 8 | (22) | n/m | (25) | n/m | ||||||||||||||||||||||||||
Net interest income after provision for credit losses | 486 | 453 | 333 | 102 | 536 | 33 | 7 | (50) | (9) | ||||||||||||||||||||||||||
NONINTEREST INCOME | |||||||||||||||||||||||||||||||||||
Card fees | 72 | 71 | 68 | 59 | 62 | 1 | 3 | 10 | 16 | ||||||||||||||||||||||||||
Fiduciary income | 52 | 51 | 52 | 54 | 52 | 1 | 1 | — | — | ||||||||||||||||||||||||||
Service charges on deposit accounts | 47 | 47 | 42 | 49 | 50 | — | — | (3) | (7) | ||||||||||||||||||||||||||
Commercial lending fees | 24 | 19 | 17 | 17 | 25 | 5 | 22 | (1) | (3) | ||||||||||||||||||||||||||
Bank-owned life insurance | 11 | 12 | 9 | 12 | 10 | (1) | (16) | 1 | 1 | ||||||||||||||||||||||||||
Foreign exchange income | 11 | 9 | 9 | 11 | 11 | 2 | 17 | — | — | ||||||||||||||||||||||||||
Letter of credit fees | 10 | 9 | 9 | 9 | 9 | 1 | 9 | 1 | 1 | ||||||||||||||||||||||||||
Brokerage fees | 4 | 5 | 5 | 7 | 7 | (1) | (12) | (3) | (40) | ||||||||||||||||||||||||||
Net securities gains (losses) | — | — | 1 | (1) | 1 | — | — | (1) | n/m | ||||||||||||||||||||||||||
Other noninterest income | 34 | 29 | 35 | 20 | 39 | 5 | 22 | (5) | (9) | ||||||||||||||||||||||||||
Total noninterest income | 265 | 252 | 247 | 237 | 266 | 13 | 5 | (1) | (1) | ||||||||||||||||||||||||||
NONINTEREST EXPENSES | |||||||||||||||||||||||||||||||||||
Salaries and benefits expense | 271 | 257 | 249 | 242 | 257 | 14 | 6 | 14 | 5 | ||||||||||||||||||||||||||
Outside processing fee expense (a) | 65 | 58 | 62 | 57 | 70 | 7 | 12 | (5) | (7) | ||||||||||||||||||||||||||
Occupancy expense | 42 | 40 | 37 | 37 | 41 | 2 | 4 | 1 | 2 | ||||||||||||||||||||||||||
Software expense (a) | 39 | 39 | 39 | 37 | 30 | — | — | 9 | 33 | ||||||||||||||||||||||||||
Equipment expense | 13 | 12 | 12 | 12 | 13 | 1 | 2 | — | — | ||||||||||||||||||||||||||
Advertising expense | 11 | 9 | 8 | 7 | 10 | 2 | 8 | 1 | 1 | ||||||||||||||||||||||||||
FDIC insurance expense | 9 | 8 | 8 | 8 | 6 | 1 | 16 | 3 | 54 | ||||||||||||||||||||||||||
Other noninterest expenses | 23 | 23 | 25 | 25 | 24 | — | — | (1) | (1) | ||||||||||||||||||||||||||
Total noninterest expenses | 473 | 446 | 440 | 425 | 451 | 27 | 6 | 22 | 5 | ||||||||||||||||||||||||||
Income (loss) before income taxes | 278 | 259 | 140 | (86) | 351 | 19 | 8 | (73) | (20) | ||||||||||||||||||||||||||
Provision (benefit) for income taxes | 63 | 48 | 27 | (21) | 82 | 15 | 32 | (19) | (23) | ||||||||||||||||||||||||||
NET INCOME (LOSS) | 215 | 211 | 113 | (65) | 269 | 4 | 2 | (54) | (20) | ||||||||||||||||||||||||||
Less: | |||||||||||||||||||||||||||||||||||
Income allocated to participating securities | 1 | — | 1 | — | 2 | 1 | 5 | (1) | (35) | ||||||||||||||||||||||||||
Preferred stock dividends | 5 | 8 | — | — | — | (3) | (28) | 5 | n/m | ||||||||||||||||||||||||||
Net income (loss) attributable to common shares | $ | 209 | $ | 203 | $ | 112 | $ | (65) | $ | 267 | $ | 6 | 4 | % | $ | (58) | (22) | % | |||||||||||||||||
Earnings (losses) per common share: | |||||||||||||||||||||||||||||||||||
Basic | $ | 1.50 | $ | 1.45 | $ | 0.81 | $ | (0.46) | $ | 1.87 | $ | 0.05 | 4 | % | $ | (0.37) | (20) | % | |||||||||||||||||
Diluted | 1.49 | 1.44 | 0.80 | (0.46) | 1.85 | 0.05 | 3 | (0.36) | (19) | ||||||||||||||||||||||||||
Comprehensive income | 267 | 169 | 97 | 344 | 370 | 98 | 58 | (103) | (28) | ||||||||||||||||||||||||||
Cash dividends declared on common stock | 94 | 94 | 96 | 94 | 96 | — | — | (2) | (2) | ||||||||||||||||||||||||||
Cash dividends declared per common share | 0.68 | 0.68 | 0.68 | 0.68 | 0.67 | — | — | 0.01 | 1 |
(a)Includes classification adjustments related to costs incurred in cloud computing arrangements of $9 million, $9 million, $8 million and $7 million during the fourth, third, second and first quarters 2020, respectively. These adjustments reduce outside processing fee expense and increase software expense due to the prospective adoption of ASU No. 2018-15, effective January 1, 2020.
n/m - not meaningful
12
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES (unaudited) | |||||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||||||||
(in millions) | 4th Qtr | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | ||||||||||||||||||||||||
Balance at beginning of period: | |||||||||||||||||||||||||||||
Allowance for loan losses | $ | 978 | $ | 1,007 | $ | 916 | $ | 637 | $ | 652 | |||||||||||||||||||
Allowance for credit losses on lending-related commitments | 60 | 59 | 62 | 31 | 29 | ||||||||||||||||||||||||
Allowance for credit losses | 1,038 | 1,066 | 978 | 668 | 681 | ||||||||||||||||||||||||
Cumulative effect of change in accounting principle | — | — | — | (17) | — | ||||||||||||||||||||||||
Loan charge-offs: | |||||||||||||||||||||||||||||
Commercial | 37 | 53 | 55 | 87 | 24 | ||||||||||||||||||||||||
Commercial mortgage | — | — | 1 | — | 2 | ||||||||||||||||||||||||
Consumer | 2 | — | 1 | 2 | 1 | ||||||||||||||||||||||||
Total loan charge-offs | 39 | 53 | 57 | 89 | 27 | ||||||||||||||||||||||||
Recoveries on loans previously charged-off: | |||||||||||||||||||||||||||||
Commercial | 9 | 17 | 5 | 3 | 3 | ||||||||||||||||||||||||
Commercial mortgage | — | 1 | 1 | 2 | 1 | ||||||||||||||||||||||||
International | — | — | — | — | 1 | ||||||||||||||||||||||||
Consumer | 1 | 2 | 1 | — | 1 | ||||||||||||||||||||||||
Total recoveries | 10 | 20 | 7 | 5 | 6 | ||||||||||||||||||||||||
Net loan charge-offs | 29 | 33 | 50 | 84 | 21 | ||||||||||||||||||||||||
Provision for credit losses: | |||||||||||||||||||||||||||||
Provision for loan losses | (1) | 4 | 141 | 380 | 6 | ||||||||||||||||||||||||
Provision for credit losses on lending-related commitments | (16) | 1 | (3) | 31 | 2 | ||||||||||||||||||||||||
Provision for credit losses | (17) | 5 | 138 | 411 | 8 | ||||||||||||||||||||||||
Balance at end of period: | |||||||||||||||||||||||||||||
Allowance for loan losses | 948 | 978 | 1,007 | 916 | 637 | ||||||||||||||||||||||||
Allowance for credit losses on lending-related commitments | 44 | 60 | 59 | 62 | 31 | ||||||||||||||||||||||||
Allowance for credit losses | $ | 992 | $ | 1,038 | $ | 1,066 | $ | 978 | $ | 668 | |||||||||||||||||||
Allowance for loan losses as a percentage of total loans | 1.81 | % | 1.87 | % | 1.88 | % | 1.71 | % | 1.27 | % | |||||||||||||||||||
Allowance for loan losses as a percentage of total loans excluding PPP loans | 1.94 | 2.01 | 2.03 | n/a | n/a | ||||||||||||||||||||||||
Allowance for credit losses as a percentage of total loans | 1.90 | 1.98 | 1.99 | 1.83 | 1.33 | ||||||||||||||||||||||||
Allowance for credit losses as a percentage of total loans excluding PPP loans | 2.03 | 2.14 | 2.15 | n/a | n/a | ||||||||||||||||||||||||
Net loan charge-offs as a percentage of average total loans | 0.22 | 0.26 | 0.37 | 0.68 | 0.16 | ||||||||||||||||||||||||
n/a - not applicable
13
NONPERFORMING ASSETS (unaudited) | |||||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||||||||
(in millions) | 4th Qtr | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | ||||||||||||||||||||||||
SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS | |||||||||||||||||||||||||||||
Nonaccrual loans: | |||||||||||||||||||||||||||||
Business loans: | |||||||||||||||||||||||||||||
Commercial | $ | 252 | $ | 241 | $ | 200 | $ | 173 | $ | 148 | |||||||||||||||||||
Real estate construction | 1 | — | — | — | — | ||||||||||||||||||||||||
Commercial mortgage | 29 | 20 | 21 | 19 | 14 | ||||||||||||||||||||||||
Lease financing | 1 | 1 | 1 | 1 | — | ||||||||||||||||||||||||
Total nonaccrual business loans | 283 | 262 | 222 | 193 | 162 | ||||||||||||||||||||||||
Retail loans: | |||||||||||||||||||||||||||||
Residential mortgage | 47 | 40 | 24 | 20 | 20 | ||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||
Home equity | 17 | 20 | 21 | 22 | 17 | ||||||||||||||||||||||||
Total nonaccrual retail loans | 64 | 60 | 45 | 42 | 37 | ||||||||||||||||||||||||
Total nonaccrual loans | 347 | 322 | 267 | 235 | 199 | ||||||||||||||||||||||||
Reduced-rate loans | 3 | 3 | 4 | 4 | 5 | ||||||||||||||||||||||||
Total nonperforming loans | 350 | 325 | 271 | 239 | 204 | ||||||||||||||||||||||||
Foreclosed property | 8 | 10 | 11 | 11 | 11 | ||||||||||||||||||||||||
Other repossessed assets | 1 | — | — | — | — | ||||||||||||||||||||||||
Total nonperforming assets | $ | 359 | $ | 335 | $ | 282 | $ | 250 | $ | 215 | |||||||||||||||||||
Nonperforming loans as a percentage of total loans | 0.67 | % | 0.62 | % | 0.51 | % | 0.45 | % | 0.40 | % | |||||||||||||||||||
Nonperforming assets as a percentage of total loans and foreclosed property | 0.69 | 0.64 | 0.53 | 0.47 | 0.43 | ||||||||||||||||||||||||
Allowance for credit losses as a multiple of total nonperforming loans | 2.8x | 3.2x | 3.9x | 4.1x | 3.3x | ||||||||||||||||||||||||
Loans past due 90 days or more and still accruing | $ | 45 | $ | 29 | $ | 41 | $ | 64 | $ | 26 | |||||||||||||||||||
ANALYSIS OF NONACCRUAL LOANS | |||||||||||||||||||||||||||||
Nonaccrual loans at beginning of period | $ | 322 | $ | 267 | $ | 235 | $ | 199 | $ | 220 | |||||||||||||||||||
Loans transferred to nonaccrual (a) | 88 | 161 | 96 | 137 | 48 | ||||||||||||||||||||||||
Nonaccrual loan gross charge-offs | (39) | (53) | (57) | (89) | (27) | ||||||||||||||||||||||||
Loans transferred to accrual status (a) | (3) | — | — | — | (7) | ||||||||||||||||||||||||
Nonaccrual loans sold | — | (14) | — | — | (10) | ||||||||||||||||||||||||
Payments/other (b) | (21) | (39) | (7) | (12) | (25) | ||||||||||||||||||||||||
Nonaccrual loans at end of period | $ | 347 | $ | 322 | $ | 267 | $ | 235 | $ | 199 |
(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.
14
ANALYSIS OF NET INTEREST INCOME (unaudited) | |||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||
Years Ended | |||||||||||||||||||||||
December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||
Average | Average | Average | Average | ||||||||||||||||||||
(dollar amounts in millions) | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||
Commercial loans (a) | $ | 32,144 | $ | 1,099 | 3.42 | % | $ | 32,053 | $ | 1,544 | 4.81 | % | |||||||||||
Real estate construction loans | 3,912 | 147 | 3.76 | 3,325 | 184 | 5.54 | |||||||||||||||||
Commercial mortgage loans | 9,839 | 320 | 3.25 | 9,170 | 447 | 4.88 | |||||||||||||||||
Lease financing | 594 | 20 | 3.37 | 557 | 19 | 3.44 | |||||||||||||||||
International loans | 1,028 | 37 | 3.61 | 1,019 | 52 | 5.13 | |||||||||||||||||
Residential mortgage loans | 1,905 | 66 | 3.45 | 1,929 | 74 | 3.85 | |||||||||||||||||
Consumer loans | 2,209 | 84 | 3.80 | 2,458 | 119 | 4.85 | |||||||||||||||||
Total loans | 51,631 | 1,773 | 3.44 | 50,511 | 2,439 | 4.83 | |||||||||||||||||
Mortgage-backed securities (b) | 9,820 | 221 | 2.30 | 9,348 | 230 | 2.44 | |||||||||||||||||
U.S. Treasury securities (c) | 3,612 | 70 | 1.98 | 2,772 | 67 | 2.43 | |||||||||||||||||
Total investment securities | 13,432 | 291 | 2.21 | 12,120 | 297 | 2.44 | |||||||||||||||||
Interest-bearing deposits with banks | 10,203 | 28 | 0.27 | 3,360 | 69 | 2.05 | |||||||||||||||||
Other short-term investments | 153 | 1 | 0.72 | 143 | 2 | 1.26 | |||||||||||||||||
Total earning assets | 75,419 | 2,093 | 2.79 | 66,134 | 2,807 | 4.24 | |||||||||||||||||
Cash and due from banks | 878 | 887 | |||||||||||||||||||||
Allowance for loan losses | (900) | (667) | |||||||||||||||||||||
Accrued income and other assets | 5,749 | 5,134 | |||||||||||||||||||||
Total assets | $ | 81,146 | $ | 71,488 | |||||||||||||||||||
Money market and interest-bearing checking deposits | $ | 26,798 | 72 | 0.27 | $ | 23,417 | 214 | 0.91 | |||||||||||||||
Savings deposits | 2,454 | 1 | 0.03 | 2,166 | 1 | 0.05 | |||||||||||||||||
Customer certificates of deposit | 2,626 | 27 | 1.02 | 2,522 | 30 | 1.18 | |||||||||||||||||
Other time deposits | 17 | — | 2.00 | 705 | 17 | 2.44 | |||||||||||||||||
Foreign office time deposits | 90 | 1 | 0.42 | 27 | — | 1.39 | |||||||||||||||||
Total interest-bearing deposits | 31,985 | 101 | 0.31 | 28,837 | 262 | 0.91 | |||||||||||||||||
Short-term borrowings | 314 | 1 | 0.32 | 369 | 9 | 2.39 | |||||||||||||||||
Medium- and long-term debt | 6,549 | 80 | 1.23 | 6,955 | 197 | 2.82 | |||||||||||||||||
Total interest-bearing sources | 38,848 | 182 | 0.47 | 36,161 | 468 | 1.29 | |||||||||||||||||
Noninterest-bearing deposits | 33,053 | 26,644 | |||||||||||||||||||||
Accrued expenses and other liabilities | 1,554 | 1,375 | |||||||||||||||||||||
Shareholders' equity | 7,691 | 7,308 | |||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 81,146 | $ | 71,488 | |||||||||||||||||||
Net interest income/rate spread | $ | 1,911 | 2.32 | $ | 2,339 | 2.95 | |||||||||||||||||
Impact of net noninterest-bearing sources of funds | 0.22 | 0.59 | |||||||||||||||||||||
Net interest margin (as a percentage of average earning assets) | 2.54 | % | 3.54 | % |
(a)Includes PPP loans with average balance of $2.5 billion, interest income of $63 million and average yield of 2.49% for the year ended December 31, 2020.
(b)Average balances included $213 million and $(36) million of unrealized gains and losses for the years ended December 31, 2020 and 2019, respectively; yields calculated gross of these unrealized gains and losses.
(c)Average balances included $90 million and $30 million of unrealized gains and losses for the years ended December 31, 2020 and 2019, respectively; yields calculated gross of these unrealized gains and losses.
15
ANALYSIS OF NET INTEREST INCOME (unaudited) | |||||||||||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||||||||||||
December 31, 2020 | September 30, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | ||||||||||||||||||||||||||||||
(dollar amounts in millions) | Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||||||||||||
Commercial loans (a) | $ | 31,713 | $ | 259 | 3.26 | % | $ | 32,226 | $ | 255 | 3.15 | % | $ | 31,808 | $ | 353 | 4.38 | % | |||||||||||||||||
Real estate construction loans | 4,157 | 35 | 3.40 | 4,037 | 34 | 3.35 | 3,398 | 44 | 5.16 | ||||||||||||||||||||||||||
Commercial mortgage loans | 9,938 | 72 | 2.86 | 9,978 | 71 | 2.85 | 9,356 | 105 | 4.45 | ||||||||||||||||||||||||||
Lease financing | 600 | 5 | 3.56 | 601 | 5 | 2.94 | 586 | 5 | 3.72 | ||||||||||||||||||||||||||
International loans | 918 | 7 | 3.23 | 1,052 | 9 | 3.25 | 1,030 | 12 | 4.73 | ||||||||||||||||||||||||||
Residential mortgage loans | 1,908 | 16 | 3.24 | 1,961 | 16 | 3.41 | 1,887 | 18 | 3.79 | ||||||||||||||||||||||||||
Consumer loans | 2,171 | 20 | 3.50 | 2,158 | 18 | 3.45 | 2,440 | 27 | 4.48 | ||||||||||||||||||||||||||
Total loans | 51,405 | 414 | 3.20 | 52,013 | 408 | 3.13 | 50,505 | 564 | 4.43 | ||||||||||||||||||||||||||
Mortgage-backed securities (b) | 10,220 | 53 | 2.13 | 9,759 | 54 | 2.28 | 9,431 | 58 | 2.45 | ||||||||||||||||||||||||||
U.S. Treasury securities (c) | 4,666 | 18 | 1.57 | 4,091 | 18 | 1.77 | 2,794 | 17 | 2.46 | ||||||||||||||||||||||||||
Total investment securities | 14,886 | 71 | 1.95 | 13,850 | 72 | 2.13 | 12,225 | 75 | 2.45 | ||||||||||||||||||||||||||
Interest-bearing deposits with banks | 13,105 | 4 | 0.10 | 12,534 | 4 | 0.10 | 4,828 | 20 | 1.64 | ||||||||||||||||||||||||||
Other short-term investments | 161 | — | 0.99 | 158 | — | 0.29 | 152 | — | 1.11 | ||||||||||||||||||||||||||
Total earning assets | 79,557 | 489 | 2.46 | 78,555 | 484 | 2.47 | 67,710 | 659 | 3.87 | ||||||||||||||||||||||||||
Cash and due from banks | 915 | 911 | 861 | ||||||||||||||||||||||||||||||||
Allowance for loan losses | (972) | (1,002) | (663) | ||||||||||||||||||||||||||||||||
Accrued income and other assets | 5,828 | 5,804 | 5,243 | ||||||||||||||||||||||||||||||||
Total assets | $ | 85,328 | $ | 84,268 | $ | 73,151 | |||||||||||||||||||||||||||||
Money market and interest-bearing checking deposits | $ | 28,521 | 7 | 0.10 | $ | 27,671 | 8 | 0.12 | $ | 24,629 | 57 | 0.91 | |||||||||||||||||||||||
Savings deposits | 2,657 | — | 0.02 | 2,560 | 1 | 0.02 | 2,169 | — | 0.06 | ||||||||||||||||||||||||||
Customer certificates of deposit | 2,215 | 2 | 0.43 | 2,495 | 6 | 0.87 | 2,935 | 11 | 1.42 | ||||||||||||||||||||||||||
Other time deposits | — | — | — | — | — | — | 410 | 2 | 2.33 | ||||||||||||||||||||||||||
Foreign office time deposits | 92 | 1 | 0.09 | 103 | — | 0.10 | 69 | — | 1.33 | ||||||||||||||||||||||||||
Total interest-bearing deposits | 33,485 | 10 | 0.11 | 32,829 | 15 | 0.17 | 30,212 | 70 | 0.92 | ||||||||||||||||||||||||||
Short-term borrowings | 3 | — | 0.06 | 218 | — | 0.25 | 60 | — | 1.60 | ||||||||||||||||||||||||||
Medium- and long-term debt | 5,741 | 10 | 0.72 | 5,940 | 11 | 0.78 | 7,305 | 45 | 2.41 | ||||||||||||||||||||||||||
Total interest-bearing sources | 39,229 | 20 | 0.20 | 38,987 | 26 | 0.27 | 37,577 | 115 | 1.21 | ||||||||||||||||||||||||||
Noninterest-bearing deposits | 36,758 | 35,934 | 26,966 | ||||||||||||||||||||||||||||||||
Accrued expenses and other liabilities | 1,446 | 1,513 | 1,371 | ||||||||||||||||||||||||||||||||
Shareholders' equity | 7,895 | 7,834 | 7,237 | ||||||||||||||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 85,328 | $ | 84,268 | $ | 73,151 | |||||||||||||||||||||||||||||
Net interest income/rate spread | $ | 469 | 2.26 | $ | 458 | 2.20 | $ | 544 | 2.66 | ||||||||||||||||||||||||||
Impact of net noninterest-bearing sources of funds | 0.10 | 0.13 | 0.54 | ||||||||||||||||||||||||||||||||
Net interest margin (as a percentage of average earning assets) | 2.36 | % | 2.33 | % | 3.20 | % | |||||||||||||||||||||||||||||
(a)Includes PPP loans with average balance of $3.7 billion and $3.8 billion, interest income of $27 million and $22 million and average yields of 2.88% and 2.31% for the three months ended December 31, 2020 and September 30, 2020, respectively.
(b)Average balances included $215 million, $254 million and $41 million of unrealized gains and losses for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively; yields calculated gross of these unrealized gains and losses.
(c)Average balances included $80 million, $99 million and $50 million of unrealized gains and losses for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively; yields calculated gross of these unrealized gains and losses.
16
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) | ||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||
Nonredeemable | Common Stock | Other | Total | |||||||||||||||||||||||
Preferred | Shares | Capital | Comprehensive | Retained | Treasury | Shareholders' | ||||||||||||||||||||
(in millions, except per share data) | Stock | Outstanding | Amount | Surplus | Income (Loss) | Earnings | Stock | Equity | ||||||||||||||||||
BALANCE AT SEPTEMBER 30, 2019 | $ | — | 144.1 | $ | 1,141 | $ | 2,172 | $ | (336) | $ | 9,369 | $ | (5,146) | $ | 7,200 | |||||||||||
Net income | — | — | — | — | — | 269 | — | 269 | ||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | 101 | — | — | 101 | ||||||||||||||||||
Cash dividends declared on common stock ($0.67 per share) | — | — | — | — | — | (96) | — | (96) | ||||||||||||||||||
Purchase of common stock | — | (2.1) | — | — | — | — | (151) | (151) | ||||||||||||||||||
Net issuance of common stock under employee stock plans | — | 0.1 | — | — | — | (4) | 6 | 2 | ||||||||||||||||||
Share-based compensation | — | — | — | 2 | — | — | — | 2 | ||||||||||||||||||
BALANCE AT DECEMBER 31, 2019 | $ | — | 142.1 | $ | 1,141 | $ | 2,174 | $ | (235) | $ | 9,538 | $ | (5,291) | $ | 7,327 | |||||||||||
BALANCE AT SEPTEMBER 30, 2020 | $ | 394 | 139.1 | $ | 1,141 | $ | 2,179 | $ | 116 | $ | 9,511 | $ | (5,467) | $ | 7,874 | |||||||||||
Net income | — | — | — | — | — | 215 | — | 215 | ||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | 52 | — | — | 52 | ||||||||||||||||||
Cash dividends declared on common stock ($0.68 per share) | — | — | — | — | — | (94) | — | (94) | ||||||||||||||||||
Cash dividends declared on preferred stock | — | — | — | — | — | (5) | — | (5) | ||||||||||||||||||
Net issuance of common stock under employee stock plans | — | 0.1 | — | — | — | (4) | 6 | 2 | ||||||||||||||||||
Share-based compensation | — | — | — | 6 | — | — | — | 6 | ||||||||||||||||||
BALANCE AT DECEMBER 31, 2020 | $ | 394 | 139.2 | $ | 1,141 | $ | 2,185 | $ | 168 | $ | 9,623 | $ | (5,461) | $ | 8,050 | |||||||||||
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 | — | — | — | — | — | 1,198 | — | 1,198 | ||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | 374 | — | — | 374 | ||||||||||||||||||
Cash dividends declared on common stock ($2.68 per share) | — | — | — | — | — | (398) | — | (398) | ||||||||||||||||||
Purchase of common stock | — | (18.7) | — | — | — | — | (1,380) | (1,380) | ||||||||||||||||||
Net issuance of common stock under employee stock plans | — | 0.7 | — | (13) | — | (29) | 43 | 1 | ||||||||||||||||||
Share-based compensation | — | — | — | 39 | — | — | — | 39 | ||||||||||||||||||
BALANCE AT DECEMBER 31, 2019 | $ | — | 142.1 | $ | 1,141 | $ | 2,174 | $ | (235) | $ | 9,538 | $ | (5,291) | $ | 7,327 | |||||||||||
Cumulative effect of change in accounting principle | — | — | — | — | — | 13 | — | 13 | ||||||||||||||||||
Net income | — | — | — | — | — | 474 | — | 474 | ||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | 403 | — | — | 403 | ||||||||||||||||||
Cash dividends declared on common stock ($2.72 per share) | — | — | — | — | — | (378) | — | (378) | ||||||||||||||||||
Cash dividends declared on preferred stock | — | — | — | — | — | (13) | — | (13) | ||||||||||||||||||
Purchase of common stock | — | (3.4) | — | — | — | — | (194) | (194) | ||||||||||||||||||
Issuance of preferred stock | 394 | — | — | — | — | — | — | 394 | ||||||||||||||||||
Net issuance of common stock under employee stock plans | — | 0.5 | — | (13) | — | (11) | 24 | — | ||||||||||||||||||
Share-based compensation | — | — | — | 24 | — | — | — | 24 | ||||||||||||||||||
BALANCE AT DECEMBER 31, 2020 | $ | 394 | 139.2 | $ | 1,141 | $ | 2,185 | $ | 168 | $ | 9,623 | $ | (5,461) | $ | 8,050 |
17
BUSINESS SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||||||||||||||
(dollar amounts in millions) | Commercial | Retail | Wealth | ||||||||||||||||||||||||||||||||
Three Months Ended December 31, 2020 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||||||||||||||
Earnings summary: | |||||||||||||||||||||||||||||||||||
Net interest income (expense) | $ | 413 | $ | 130 | $ | 44 | $ | (120) | $ | 2 | $ | 469 | |||||||||||||||||||||||
Provision for credit losses | (32) | 1 | 14 | — | — | (17) | |||||||||||||||||||||||||||||
Noninterest income | 149 | 30 | 63 | 14 | 9 | 265 | |||||||||||||||||||||||||||||
Noninterest expenses | 219 | 162 | 80 | 1 | 11 | 473 | |||||||||||||||||||||||||||||
Provision (benefit) for income taxes | 88 | (1) | 3 | (25) | (2) | 63 | |||||||||||||||||||||||||||||
Net income (loss) | $ | 287 | $ | (2) | $ | 10 | $ | (82) | $ | 2 | $ | 215 | |||||||||||||||||||||||
Net credit-related charge-offs | $ | 25 | $ | — | $ | 4 | $ | — | $ | — | $ | 29 | |||||||||||||||||||||||
Selected average balances: | |||||||||||||||||||||||||||||||||||
Assets | $ | 45,117 | $ | 3,457 | $ | 5,181 | $ | 16,957 | $ | 14,616 | $ | 85,328 | |||||||||||||||||||||||
Loans | 43,722 | 2,628 | 5,073 | — | (18) | 51,405 | |||||||||||||||||||||||||||||
Deposits | 40,256 | 23,869 | 4,919 | 1,013 | 186 | 70,243 | |||||||||||||||||||||||||||||
Statistical data: | |||||||||||||||||||||||||||||||||||
Return on average assets (a) | 2.53 | % | (0.03) | % | 0.66 | % | n/m | n/m | 1.01 | % | |||||||||||||||||||||||||
Efficiency ratio (b) | 39.17 | 101.25 | 75.16 | n/m | n/m | 64.27 | |||||||||||||||||||||||||||||
Commercial | Retail | Wealth | |||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2020 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||||||||||||||
Earnings summary: | |||||||||||||||||||||||||||||||||||
Net interest income (expense) | $ | 413 | $ | 127 | $ | 42 | $ | (125) | $ | 1 | $ | 458 | |||||||||||||||||||||||
Provision for credit losses | 14 | (2) | (7) | — | — | 5 | |||||||||||||||||||||||||||||
Noninterest income | 135 | 28 | 64 | 16 | 9 | 252 | |||||||||||||||||||||||||||||
Noninterest expenses | 206 | 153 | 76 | — | 11 | 446 | |||||||||||||||||||||||||||||
Provision (benefit) for income taxes | 67 | — | 8 | (26) | (1) | 48 | |||||||||||||||||||||||||||||
Net income (loss) | $ | 261 | $ | 4 | $ | 29 | $ | (83) | $ | — | $ | 211 | |||||||||||||||||||||||
Net credit-related charge-offs (recoveries) | $ | 36 | $ | (1) | $ | (2) | $ | — | $ | — | $ | 33 | |||||||||||||||||||||||
Selected average balances: | |||||||||||||||||||||||||||||||||||
Assets | $ | 45,636 | $ | 3,487 | $ | 5,198 | $ | 15,909 | $ | 14,038 | $ | 84,268 | |||||||||||||||||||||||
Loans | 44,248 | 2,678 | 5,094 | — | (7) | 52,013 | |||||||||||||||||||||||||||||
Deposits | 39,535 | 23,604 | 4,439 | 1,004 | 181 | 68,763 | |||||||||||||||||||||||||||||
Statistical data: | |||||||||||||||||||||||||||||||||||
Return on average assets (a) | 2.27 | % | 0.05 | % | 2.24 | % | n/m | n/m | 0.99 | % | |||||||||||||||||||||||||
Efficiency ratio (b) | 37.60 | 98.29 | 71.72 | n/m | n/m | 62.79 | |||||||||||||||||||||||||||||
Commercial | Retail | Wealth | |||||||||||||||||||||||||||||||||
Three Months Ended December 31, 2019 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||||||||||||||
Earnings summary: | |||||||||||||||||||||||||||||||||||
Net interest income (expense) | $ | 403 | $ | 134 | $ | 43 | $ | (48) | $ | 12 | $ | 544 | |||||||||||||||||||||||
Provision for credit losses | 3 | 1 | (1) | — | 5 | 8 | |||||||||||||||||||||||||||||
Noninterest income | 143 | 37 | 69 | 12 | 5 | 266 | |||||||||||||||||||||||||||||
Noninterest expenses | 203 | 156 | 75 | 1 | 16 | 451 | |||||||||||||||||||||||||||||
Provision (benefit) for income taxes | 79 | 3 | 9 | (10) | 1 | 82 | |||||||||||||||||||||||||||||
Net income (loss) | $ | 261 | $ | 11 | $ | 29 | $ | (27) | $ | (5) | $ | 269 | |||||||||||||||||||||||
Net credit-related charge-offs | $ | 21 | $ | — | $ | — | $ | — | $ | — | $ | 21 | |||||||||||||||||||||||
Selected average balances: | |||||||||||||||||||||||||||||||||||
Assets | $ | 45,075 | $ | 2,883 | $ | 5,057 | $ | 14,054 | $ | 6,082 | $ | 73,151 | |||||||||||||||||||||||
Loans | 43,514 | 2,090 | 4,894 | — | 7 | 50,505 | |||||||||||||||||||||||||||||
Deposits | 30,535 | 21,084 | 4,015 | 1,332 | 212 | 57,178 | |||||||||||||||||||||||||||||
Statistical data: | |||||||||||||||||||||||||||||||||||
Return on average assets (a) | 2.31 | % | 0.19 | % | 2.26 | % | n/m | n/m | 1.46 | % | |||||||||||||||||||||||||
Efficiency ratio (b) | 37.03 | 89.99 | 66.71 | n/m | n/m | 55.46 |
(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 gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares.
n/m - not meaningful
18
MARKET SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||||||||||||||
(dollar amounts in millions) | Other | Finance | |||||||||||||||||||||||||||||||||
Three Months Ended December 31, 2020 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||||||||||||||
Earnings summary: | |||||||||||||||||||||||||||||||||||
Net interest income (expense) | $ | 170 | $ | 186 | $ | 117 | $ | 114 | $ | (118) | $ | 469 | |||||||||||||||||||||||
Provision for credit losses | 12 | 21 | (26) | (24) | — | (17) | |||||||||||||||||||||||||||||
Noninterest income | 71 | 42 | 32 | 97 | 23 | 265 | |||||||||||||||||||||||||||||
Noninterest expenses | 141 | 111 | 95 | 114 | 12 | 473 | |||||||||||||||||||||||||||||
Provision (benefit) for income taxes | 18 | 24 | 18 | 30 | (27) | 63 | |||||||||||||||||||||||||||||
Net income (loss) | $ | 70 | $ | 72 | $ | 62 | $ | 91 | $ | (80) | $ | 215 | |||||||||||||||||||||||
Net credit-related charge-offs | $ | 5 | $ | — | $ | 24 | $ | — | $ | — | $ | 29 | |||||||||||||||||||||||
Selected average balances: | |||||||||||||||||||||||||||||||||||
Assets | $ | 12,899 | $ | 18,561 | $ | 11,039 | $ | 11,256 | $ | 31,573 | $ | 85,328 | |||||||||||||||||||||||
Loans | 12,225 | 18,265 | 10,583 | 10,350 | (18) | 51,405 | |||||||||||||||||||||||||||||
Deposits | 25,003 | 21,457 | 10,759 | 11,825 | 1,199 | 70,243 | |||||||||||||||||||||||||||||
Statistical data: | |||||||||||||||||||||||||||||||||||
Return on average assets (a) | 1.07 | % | 1.25 | % | 1.98 | % | 2.88 | % | n/m | 1.01 | % | ||||||||||||||||||||||||
Efficiency ratio (b) | 58.62 | 48.96 | 64.06 | 54.00 | n/m | 64.27 | |||||||||||||||||||||||||||||
Other | Finance | ||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2020 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||||||||||||||
Earnings summary: | |||||||||||||||||||||||||||||||||||
Net interest income (expense) | $ | 168 | $ | 179 | $ | 117 | $ | 118 | $ | (124) | $ | 458 | |||||||||||||||||||||||
Provision for credit losses | 19 | 11 | (25) | — | — | 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 | $ | — | $ | — | $ | 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 | |||||||||||||||||||||||||||||
Other | Finance | ||||||||||||||||||||||||||||||||||
Three Months Ended December 31, 2019 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||||||||||||||
Earnings summary: | |||||||||||||||||||||||||||||||||||
Net interest income (expense) | $ | 171 | $ | 194 | $ | 120 | $ | 95 | $ | (36) | $ | 544 | |||||||||||||||||||||||
Provision for credit losses | (5) | (22) | 31 | (1) | 5 | 8 | |||||||||||||||||||||||||||||
Noninterest income | 73 | 52 | 31 | 93 | 17 | 266 | |||||||||||||||||||||||||||||
Noninterest expenses | 142 | 105 | 90 | 97 | 17 | 451 | |||||||||||||||||||||||||||||
Provision (benefit) for income taxes | 25 | 41 | 8 | 17 | (9) | 82 | |||||||||||||||||||||||||||||
Net income (loss) | $ | 82 | $ | 122 | $ | 22 | $ | 75 | $ | (32) | $ | 269 | |||||||||||||||||||||||
Net credit-related charge-offs (recoveries) | $ | 1 | $ | (1) | $ | 20 | $ | 1 | $ | — | $ | 21 | |||||||||||||||||||||||
Selected average balances: | |||||||||||||||||||||||||||||||||||
Assets | $ | 13,091 | $ | 18,295 | $ | 11,353 | $ | 10,277 | $ | 20,135 | $ | 73,151 | |||||||||||||||||||||||
Loans | 12,399 | 17,942 | 10,708 | 9,449 | 7 | 50,505 | |||||||||||||||||||||||||||||
Deposits | 20,443 | 18,107 | 9,045 | 8,039 | 1,544 | 57,178 | |||||||||||||||||||||||||||||
Statistical data: | |||||||||||||||||||||||||||||||||||
Return on average assets (a) | 1.55 | % | 2.51 | % | 0.84 | % | 2.83 | % | n/m | 1.46 | % | ||||||||||||||||||||||||
Efficiency ratio (b) | 57.21 | 42.45 | 59.43 | 51.97 | n/m | 55.46 |
(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 gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares.
n/m - not meaningful
19
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND REGULATORY RATIOS (unaudited) | |||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||
Comerica 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 Comerica 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.
December 31, | September 30, | December 31, | |||||||||||||||
(dollar amounts in millions) | 2020 | 2020 | 2019 | ||||||||||||||
Common Equity Tier 1 Capital (a): | |||||||||||||||||
Tier 1 capital | $ | 7,313 | $ | 7,199 | $ | 6,919 | |||||||||||
Less: | |||||||||||||||||
Fixed-rate reset non-cumulative perpetual preferred stock | 394 | 394 | — | ||||||||||||||
Common equity tier 1 capital | $ | 6,919 | $ | 6,805 | $ | 6,919 | |||||||||||
Risk-weighted assets | $ | 66,833 | $ | 66,405 | $ | 68,273 | |||||||||||
Tier 1 capital ratio | 10.94 | % | 10.84 | % | 10.13 | % | |||||||||||
Common equity tier 1 capital ratio | 10.35 | 10.25 | 10.13 | ||||||||||||||
Tangible Common Equity: | |||||||||||||||||
Total shareholders' equity | $ | 8,050 | $ | 7,874 | $ | 7,327 | |||||||||||
Less: | |||||||||||||||||
Fixed-rate reset non-cumulative perpetual preferred stock | 394 | 394 | — | ||||||||||||||
Common shareholders' equity | $ | 7,656 | $ | 7,480 | $ | 7,327 | |||||||||||
Less: | |||||||||||||||||
Goodwill | 635 | 635 | 635 | ||||||||||||||
Other intangible assets | 1 | 2 | 4 | ||||||||||||||
Tangible common equity | $ | 7,020 | $ | 6,843 | $ | 6,688 | |||||||||||
Total assets | $ | 88,129 | $ | 83,631 | $ | 73,402 | |||||||||||
Less: | |||||||||||||||||
Goodwill | 635 | 635 | 635 | ||||||||||||||
Other intangible assets | 1 | 2 | 4 | ||||||||||||||
Tangible assets | $ | 87,493 | $ | 82,994 | $ | 72,763 | |||||||||||
Common equity ratio | 8.69 | % | 8.94 | % | 9.98 | % | |||||||||||
Tangible common equity ratio | 8.02 | 8.24 | 9.19 | ||||||||||||||
Tangible Common Equity per Share of Common Stock: | |||||||||||||||||
Common shareholders' equity | $ | 7,656 | $ | 7,480 | $ | 7,327 | |||||||||||
Tangible common equity | 7,020 | 6,843 | 6,688 | ||||||||||||||
Shares of common stock outstanding (in millions) | 139 | 139 | 142 | ||||||||||||||
Common shareholders' equity per share of common stock | $ | 55.01 | $ | 53.78 | $ | 51.57 | |||||||||||
Tangible common equity per share of common stock | 50.43 | 49.20 | 47.07 |
(a)Estimated for December 31, 2020, 2020 ratios reflect deferral of CECL model impact as calculated per regulatory guidance.
20