Dallas, TX/July 17, 2019
SECOND QUARTER 2019 NET INCOME OF $298 MILLION, $1.94 PER SHARE
Average Loans Grow $1.3 Billion to Record $51 Billion
Revenue Growth and Expense Control Drive Efficiency Ratio to Below 50 Percent
"Over the past few years, we have been on a path of transformation," said Curtis C. Farmer, president and chief executive officer. "We have increased capacity, become more efficient and managed our capital, while maintaining our underwriting and pricing discipline. These actions have produced strong results, including solid, broad-based loan growth, an efficiency ratio below 50 percent, return on assets of 1.7 percent and return on equity of 16 percent. These performance metrics should continue to be among the highest of our peers. Also, the work we have done has better positioned us to weather changes in the economic or interest rate environment."
(dollar amounts in millions, except per share data) | 2nd Qtr '19 | 1st Qtr '19 | 2nd Qtr '18 | ||||||||
FINANCIAL RESULTS | |||||||||||
Net interest income | $ | 603 | $ | 606 | $ | 590 | |||||
Provision for credit losses | 44 | (13 | ) | (29 | ) | ||||||
Noninterest income | 250 | 238 | 248 | ||||||||
Noninterest expenses | 424 | 433 | 448 | ||||||||
Pre-tax income | 385 | 424 | 419 | ||||||||
Provision for income taxes | 87 | 85 | 93 | ||||||||
Net income | $ | 298 | $ | 339 | $ | 326 | |||||
Diluted earnings per share | $ | 1.94 | $ | 2.11 | $ | 1.87 | |||||
Efficiency ratio (a) | 49.65 | % | 50.81 | % | 53.24 | % | |||||
Net interest margin | 3.67 | 3.79 | 3.62 | ||||||||
Common equity Tier 1 capital ratio (b) | 10.19 | 10.78 | 11.89 | ||||||||
Common equity ratio | 10.10 | 10.48 | 11.22 | ||||||||
ADJUSTED FINANCIAL RESULTS (c) | |||||||||||
Net interest income | $ | 603 | $ | 606 | $ | 590 | |||||
Provision for credit losses | 44 | (13 | ) | (29 | ) | ||||||
Noninterest income | 250 | 246 | 248 | ||||||||
Noninterest expenses | 424 | 433 | 437 | ||||||||
Pre-tax income | 385 | 432 | 430 | ||||||||
Provision for income taxes | 87 | 98 | 98 | ||||||||
Net income | $ | 298 | $ | 334 | $ | 332 | |||||
Diluted earnings per share | $ | 1.94 | $ | 2.08 | $ | 1.90 | |||||
Efficiency ratio (a) | 49.65 | % | 50.81 | % | 51.90 | % | |||||
(a) | Noninterest expenses as a percentage 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) | June 30, 2019 ratio is estimated. |
(c) | Financial results presented on an adjusted basis to facilitate trend analysis. See Reconciliation of Non-GAAP Financial Measures. |
1
The following table includes items used to arrive at adjusted net income in the Adjusted Financial Results (see Reconciliation of Non-GAAP Financial Measures).
2nd Qtr '19 | 1st Qtr '19 | 2nd Qtr '18 | ||||||||||||||||||
(in millions, except per share data) | Amount | Per Share | Amount | Per Share | Amount | Per Share | ||||||||||||||
Securities repositioning, net of tax | $ | — | $ | — | $ | 6 | $ | 0.04 | $ | — | $ | — | ||||||||
Restructuring charges, net of tax | — | — | — | — | 9 | 0.05 | ||||||||||||||
Discrete tax items | — | — | (11 | ) | (0.07 | ) | (3 | ) | (0.02 | ) | ||||||||||
Second Quarter 2019 Compared to First Quarter 2019 Overview
The commentary below discusses noninterest income on an adjusted basis, which includes certain adjustments management considers helpful to facilitate trend analysis. See Reconciliation of Non-GAAP Financial Measures.
Average total loans increased $1.3 billion, or 3 percent, to $51.0 billion.
• | Reflected an increase in Mortgage Banker Finance, resulting from higher home sales due to seasonality and an increase in refinancing activity due to lower rates. In addition, general Middle Market and Commercial Real Estate increased. |
• | Loan yields decreased 7 basis points to 5.00 percent, primarily reflecting the impact of decreases in short-term rates and residual value adjustments in the leasing portfolio. |
Average total deposits increased $1.0 billion, or 2 percent, to $55.0 billion. Core deposits remained stable.
• | A $1.5 billion increase in interest-bearing deposits, including approximately a $1 billion increase in brokered deposits, funded loan growth. This was partially offset by a $474 million decrease in noninterest-bearing deposits. |
• | Interest-bearing deposit costs increased 16 basis points to 94 basis points due to continued management of deposit pricing to attract and retain customers as well as the increase in brokered deposits. |
Net interest income decreased $3 million to $603 million.
• | The benefits from an increase in average loans and an additional day in the second quarter were more than offset by the expected increase in deposit costs and higher levels of funding to support loan growth. |
Provision for credit losses increased to $44 million compared to a $13 million release in first quarter 2019.
• | Primarily the result of loan growth and a decline in valuations of select liquidating assets related to Energy loans. |
• | Net credit-related charge-offs were $33 million, or 0.26 percent of average loans, including Energy net charge-offs of $25 million. |
• | The allowance for loan losses increased $10 million to $657 million, or 1.27 percent of total loans. |
Adjusted noninterest income increased $4 million to $250 million.
• | Reflected a $3 million increase in fiduciary income and increases of $2 million each in card fees and income from bank-owned life insurance, partially offset by a $3 million decrease in deferred compensation asset returns (offset in noninterest expenses). |
Noninterest expenses decreased $9 million to $424 million.
• | Salaries and benefits expense decreased $20 million, reflecting seasonal decreases in share-based compensation and payroll taxes as well as lower deferred compensation expense (offset in noninterest income), partially offset by the impact of annual merit increases and an additional day in the second quarter. |
• | Partially offsetting the decrease in salaries and benefits expense were increases of $4 million in advertising expense (from seasonally low first quarter levels), $2 million in legal expense (high first quarter recoveries), $2 million in outside processing fees (card fees and technology initiatives) and smaller increases in other categories. |
Provision for income taxes increased $2 million to $87 million.
• | An $11 million decrease in discrete tax benefits from employee stock transactions was partially offset by lower pre-tax earnings. |
Capital position remained solid with a common equity Tier 1 capital ratio of 10.19 percent.
• | Returned a total of $525 million to shareholders, including dividends and the repurchase of $425 million of common stock (5.7 million shares) under the share repurchase program. |
2
Second Quarter 2019 Compared to Second Quarter 2018 Overview
The commentary below discusses noninterest expenses on an adjusted basis, which includes certain adjustments management considers helpful to facilitate trend analysis. See Reconciliation of Non-GAAP Financial Measures.
Average total loans increased $1.7 billion.
• | Reflected increases in Energy, National Dealer Services and general Middle Market. |
• | Loan yields increased 37 basis points, primarily reflecting increases in short-term interest rates. |
Average total deposits decreased $835 million.
• | Noninterest-bearing deposits decreased $2.9 billion, partially offset by a $2.1 billion increase in interest-bearing deposits, including approximately a $1 billion increase in brokered deposits. The decline in noninterest-bearing deposits was primarily the result of customers shifting balances to interest-bearing deposits and utilizing their deposits to fund growth, acquisitions and capital expenditures as well as choosing other investment options. |
• | Interest-bearing deposit costs increased 52 basis points due to continued management of deposit pricing to attract and retain customers as well as the increase in brokered deposits. |
Net interest income increased $13 million.
• | The net benefit from higher interest rates and an increase in average loan balances were partially offset by the impact of higher average debt and interest-bearing deposits. |
Provision for credit losses increased $73 million from a $29 million release in second quarter 2018.
• | The provision increase resulted from loan growth, higher levels of recoveries in the prior quarter and a $183 million increase in total criticized loans. |
• | Nonaccrual loans, a component of criticized loans, decreased $30 million. |
Noninterest income increased $2 million.
• | Primarily reflected increases of $5 million in card fees and $2 million in income from bank-owned life insurance, partially offset by decreases of $2 million each in service charges on deposit accounts and commercial lending fees. |
Adjusted noninterest expenses decreased $13 million.
• | Primarily reflected decreases of $6 million in FDIC insurance expense, $5 million in salaries and benefits expense and $4 million in software expense. |
Provision for income taxes decreased $6 million.
• | Lower pre-tax earnings were partially offset by a decrease in discrete tax benefits from employee stock transactions. |
3
Net Interest Income
(dollar amounts in millions) | 2nd Qtr '19 | 1st Qtr '19 | 2nd Qtr '18 | ||||||||
Net interest income | $ | 603 | $ | 606 | $ | 590 | |||||
Net interest margin | 3.67 | % | 3.79 | % | 3.62 | % | |||||
Selected average balances: | |||||||||||
Total earning assets | $ | 65,890 | $ | 64,618 | $ | 65,114 | |||||
Total loans | 50,963 | 49,677 | 49,225 | ||||||||
Total investment securities | 12,091 | 11,955 | 11,799 | ||||||||
Federal Reserve Bank deposits | 2,479 | 2,642 | 3,717 | ||||||||
Total deposits | 54,995 | 53,996 | 55,830 | ||||||||
Total noninterest-bearing deposits | 26,398 | 26,872 | 29,316 | ||||||||
Short-term borrowings | 927 | 221 | 56 | ||||||||
Medium- and long-term debt | 6,712 | 6,694 | 5,584 | ||||||||
Net interest income decreased $3 million, and net interest margin decreased 12 basis points, compared to first quarter 2019.
• | Interest on loans increased $14 million and reduced net interest margin by 2 basis points. Higher average loan balances (+$16 million, +2 basis points) and one additional day in the quarter (+$6 million) were partially offset by lower short-term rates (-$4 million, -2 basis points), negative residual value adjustments to assets in the leasing portfolio (-$2 million, -1 basis point), the impact of cash flow hedges (-$1 million, -1 basis point) and portfolio mix shift (-$1 million). |
• | Interest on investment securities increased $3 million and added 1 basis point to the net interest margin, primarily reflecting the impact of repositioning the portfolio late in the first quarter and reinvesting at higher yields. |
• | Interest expense on deposits increased $15 million and reduced net interest margin by 9 basis points, due to higher average deposit balances ($8 million, 5 basis points) and deposit pricing ($7 million, 4 basis points). |
• | Interest expense on debt increased $5 million and reduced net interest margin by 2 basis points, due to higher average debt balances. |
4
Credit Quality
“Credit quality remained solid with net charge-offs of 26 basis points, and nonperforming assets remained very low at 45 basis points,” said Farmer. "Recently, valuations of select problem energy assets in various stages of liquidation were reduced due to volatile oil and gas prices combined with a slowing of capital investment in this sector. This, along with loan growth, drove the increase in provision from the low levels we have been experiencing. Overall, the portfolio continues to perform well, and we expect the provision will be approximately $25 million to $35 million per quarter for the remainder of the year."
(dollar amounts in millions) | 2nd Qtr '19 | 1st Qtr '19 | 2nd Qtr '18 | ||||||||
Credit-related charge-offs | $ | 44 | $ | 20 | $ | 20 | |||||
Recoveries | 11 | 9 | 23 | ||||||||
Net credit-related charge-offs | 33 | 11 | (3 | ) | |||||||
Net credit-related charge-offs/Average total loans | 0.26 | % | 0.08 | % | (0.02 | )% | |||||
Provision for credit losses | $ | 44 | $ | (13 | ) | $ | (29 | ) | |||
Nonperforming loans | 230 | 198 | 262 | ||||||||
Nonperforming assets (NPAs) | 233 | 199 | 264 | ||||||||
NPAs/Total loans and foreclosed property | 0.45 | % | 0.40 | % | 0.53 | % | |||||
Loans past due 90 days or more and still accruing | $ | 17 | $ | 24 | $ | 20 | |||||
Allowance for loan losses | 657 | 647 | 677 | ||||||||
Allowance for credit losses on lending-related commitments (a) | 31 | 30 | 34 | ||||||||
Total allowance for credit losses | 688 | 677 | 711 | ||||||||
Allowance for loan losses/Period-end total loans | 1.27 | % | 1.29 | % | 1.36 | % | |||||
Allowance for loan losses/Nonperforming loans | 2.9x | 3.3x | 2.6x | ||||||||
(a) | Included in accrued expenses and other liabilities on the Consolidated Balance Sheets. |
• | The allowance for loan losses increased $10 million to $657 million at June 30, 2019, or 1.27 percent of total loans, reflecting loan growth and increased Energy reserves. |
• | Criticized loans were $1.9 billion, or 3.8 percent of total loans, at June 30, 2019, a $142 million increase compared to March 31, 2019. The increase in criticized loans reflected an increase in general Middle Market, partially offset by Energy loans, which decreased $30 million to $210 million. Criticized loans are generally consistent with the Special Mention, Substandard and Doubtful categories defined by regulatory authorities. |
• | Net charge-offs of $33 million remained at low historical levels as a percentage of average loans at 26 basis points. Net charge-offs from Energy loans were $25 million in the second quarter, compared to $8 million in the first quarter. |
• | Nonperforming assets increased $34 million to $233 million at June 30, 2019, compared to $199 million at March 31, 2019. Nonperforming assets as a percentage of total loans and foreclosed property increased to 0.45 percent at June 30, 2019, compared to 0.40 percent at March 31, 2019. |
• | Energy business line loans were $2.4 billion, or 4.70 percent of total loans at June 30, 2019. |
5
Full-Year 2019 Outlook
For full-year 2019 compared to full-year 2018, management expects the following, assuming a continuation of the current economic environment and interest rates as of June 30, 2019:
• | Growth in average loans of 3 percent to 4 percent, reflecting better than expected growth in the first half of 2019 and normal seasonality in the second half. |
• | Decline in average deposits of 2 percent coincident with loan growth and customers using cash in their businesses. |
• | Growth in net interest income of 2 percent from the full-year net benefit of higher interest rates, growth in average loans and repositioning the securities portfolio, partially offset by higher wholesale funding, a shift in deposit mix and lower interest recoveries. |
• | Provision for credit losses of 15 basis points to 20 basis points of total loans ($25 million to $35 million per quarter for the second half of 2019) and net charge-offs to remain low, with continued solid credit quality. |
• | Noninterest income higher by 1 percent to 2 percent, benefiting from growth in card fees and fiduciary income, partially offset by lower derivative income and service charges on deposit accounts. |
• | Noninterest expenses lower by 3 percent, reflecting the end of restructuring charges from the GEAR Up initiatives ($53 million in full-year 2018), FDIC insurance expense lower by $16 million from the discontinuance of the surcharge, as well as lower compensation and pension expense, partially offset by higher outside processing expenses in line with growing revenue, technology expenditures and typical inflationary pressures. |
◦ | Lower compensation driven by executive incentive compensation, partially offset by merit increases. |
• | Income tax expense to be approximately 23 percent of pre-tax income, excluding any tax impact from employee stock transactions. |
◦ | Full-year 2018 included discrete tax benefits of $48 million. |
• | Common equity Tier 1 capital ratio target of approximately 10 percent. |
6
Business Segments
Comerica's operations are strategically aligned into three major business segments: the Business Bank, the Retail Bank and Wealth Management. The Finance Division is also reported as a segment. 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 June 30, 2019. A discussion of business segment and geographic market year-to-date results will be included in Comerica's Second Quarter 2019 Form 10-Q.
Conference Call and Webcast
Comerica will host a conference call to review second quarter 2019 financial results at 7 a.m. CT Wednesday, July 17, 2019. Interested parties may access the conference call by calling (800) 309-2262 or (706) 679-5261 (Event ID No. 4379456). The call and supplemental financial information can also be accessed via Comerica's "Investor Relations" page at www.comerica.com. A replay of the Webcast can be accessed via Comerica's “Investor Relations” page at www.comerica.com.
Comerica Incorporated is a financial services company headquartered in Dallas, Texas, and strategically aligned by three major business segments: The Business Bank, The Retail Bank and Wealth Management. Comerica focuses on relationships and helping people and businesses be successful. In addition to Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico.
This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding Comerica's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as a reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
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 are changes in general economic, political or industry conditions; changes in monetary and fiscal policies; operational, systems or infrastructure failures; reliance on other companies to provide certain key components of business infrastructure; cybersecurity risks; whether Comerica may achieve opportunities for revenue enhancements and efficiency improvements under the GEAR Up initiative, or changes in the scope or assumptions underlying the GEAR Up initiative; Comerica's ability to maintain adequate sources of funding and liquidity; the effects of more stringent capital requirements; declines or other changes in the businesses or industries of Comerica's customers; unfavorable developments concerning credit quality; changes in regulation or oversight; heightened legislative and regulatory focus on cybersecurity and data privacy; fluctuations in interest rates and their impact on deposit pricing; transitions away from LIBOR towards new interest rate benchmarks; reductions in Comerica's credit rating; 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 interdependence of financial service companies; the implementation of Comerica's strategies and business initiatives; changes in customer behavior; management's ability to maintain and expand customer relationships; the effectiveness of methods of reducing risk exposures; the effects of catastrophic events including, but not limited to, hurricanes, tornadoes, earthquakes, fires, droughts and floods; the impacts of future legislative, administrative or judicial changes to tax regulations; any future strategic acquisitions or divestitures; management's ability to retain key officers and employees; the impact of legal and regulatory proceedings or determinations; losses due to fraud; the effects of terrorist activities and other hostilities; changes in accounting standards; the critical nature of Comerica's accounting policies; controls and procedures failures; 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, 2018. 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 Contact: | Investor Contacts: |
Yolanda Y. Schufford | Darlene P. Persons |
(214) 462-4443 | (214) 462-6831 |
Chelsea R. Smith | |
(214) 462-6834 | |
CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | March 31, | June 30, | June 30, | |||||||||||||
(in millions, except per share data) | 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||
PER COMMON SHARE AND COMMON STOCK DATA | ||||||||||||||||
Diluted net income | $ | 1.94 | $ | 2.11 | $ | 1.87 | $ | 4.06 | $ | 3.46 | ||||||
Cash dividends declared | 0.67 | 0.67 | 0.34 | 1.34 | 0.64 | |||||||||||
Average diluted shares (in thousands) | 153,189 | 159,518 | 173,601 | 156,351 | 174,351 | |||||||||||
PERFORMANCE RATIOS | ||||||||||||||||
Return on average common shareholders' equity | 16.41 | % | 18.44 | % | 16.40 | % | 17.43 | % | 15.39 | % | ||||||
Return on average assets | 1.68 | 1.97 | 1.85 | 1.82 | 1.74 | |||||||||||
Efficiency ratio (a) | 49.65 | 50.81 | 53.24 | 50.23 | 54.74 | |||||||||||
CAPITAL | ||||||||||||||||
Common equity tier 1 capital (b) | $ | 7,060 | $ | 7,277 | $ | 8,026 | ||||||||||
Risk-weighted assets (b) | 69,291 | 67,532 | 67,508 | |||||||||||||
Common shareholders' equity per share of common stock | 48.89 | 47.67 | 47.27 | |||||||||||||
Tangible common equity per share of common stock | 44.61 | 43.55 | 43.51 | |||||||||||||
Common equity tier 1 and tier 1 risk-based capital ratio (b) | 10.19 | % | 10.78 | % | 11.89 | % | ||||||||||
Total risk-based capital ratio (b) | 12.19 | 12.80 | 13.96 | |||||||||||||
Leverage ratio (b) | 9.90 | 10.40 | 11.36 | |||||||||||||
Common equity ratio | 10.10 | 10.48 | 11.22 | |||||||||||||
Tangible common equity ratio (c) | 9.30 | 9.66 | 10.42 | |||||||||||||
AVERAGE BALANCES | ||||||||||||||||
Commercial loans | $ | 32,607 | $ | 31,461 | $ | 30,966 | $ | 32,037 | $ | 30,556 | ||||||
Real estate construction loans | 3,319 | 3,238 | 3,189 | 3,279 | 3,129 | |||||||||||
Commercial mortgage loans | 9,060 | 8,997 | 9,174 | 9,028 | 9,195 | |||||||||||
Lease financing | 546 | 519 | 457 | 533 | 461 | |||||||||||
International loans | 1,025 | 1,014 | 981 | 1,019 | 989 | |||||||||||
Residential mortgage loans | 1,943 | 1,965 | 1,993 | 1,954 | 2,002 | |||||||||||
Consumer loans | 2,463 | 2,483 | 2,465 | 2,473 | 2,493 | |||||||||||
Total loans | 50,963 | 49,677 | 49,225 | 50,323 | 48,825 | |||||||||||
Earning assets | 65,890 | 64,618 | 65,114 | 65,257 | 65,063 | |||||||||||
Total assets | 71,252 | 69,771 | 70,520 | 70,515 | 70,423 | |||||||||||
Noninterest-bearing deposits | 26,398 | 26,872 | 29,316 | 26,634 | 29,591 | |||||||||||
Interest-bearing deposits | 28,597 | 27,124 | 26,514 | 27,864 | 26,368 | |||||||||||
Total deposits | 54,995 | 53,996 | 55,830 | 54,498 | 55,959 | |||||||||||
Common shareholders' equity | 7,285 | 7,459 | 7,977 | 7,371 | 7,952 | |||||||||||
NET INTEREST INCOME | ||||||||||||||||
Net interest income | $ | 603 | $ | 606 | $ | 590 | $ | 1,209 | $ | 1,139 | ||||||
Net interest margin | 3.67 | % | 3.79 | % | 3.62 | % | 3.73 | % | 3.52 | % | ||||||
CREDIT QUALITY | ||||||||||||||||
Total nonperforming assets | $ | 233 | $ | 199 | $ | 264 | ||||||||||
Loans past due 90 days or more and still accruing | 17 | 24 | 20 | |||||||||||||
Net credit-related charge-offs | 33 | 11 | (3 | ) | $ | 44 | $ | 25 | ||||||||
Allowance for loan losses | 657 | 647 | 677 | |||||||||||||
Allowance for credit losses on lending-related commitments | 31 | 30 | 34 | |||||||||||||
Total allowance for credit losses | 688 | 677 | 711 | |||||||||||||
Allowance for loan losses as a percentage of total loans | 1.27 | % | 1.29 | % | 1.36 | % | ||||||||||
Net credit-related charge-offs as a percentage of average total loans | 0.26 | 0.08 | (0.02 | ) | 0.17 | % | 0.10 | % | ||||||||
Nonperforming assets as a percentage of total loans and foreclosed property | 0.45 | 0.40 | 0.53 | |||||||||||||
Allowance for loan losses as a percentage of total nonperforming loans | 2.9x | 3.3x | 2.6x | |||||||||||||
OTHER KEY INFORMATION | ||||||||||||||||
Number of banking centers | 436 | 436 | 438 | |||||||||||||
Number of employees - full time equivalent | 7,693 | 7,675 | 7,868 | |||||||||||||
(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) | June 30, 2019 ratios are estimated. |
(c) | See Reconciliation of Non-GAAP Financial Measures. |
9
CONSOLIDATED BALANCE SHEETS | ||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||
June 30, | March 31, | December 31, | June 30, | |||||||||
(in millions, except share data) | 2019 | 2019 | 2018 | 2018 | ||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||
ASSETS | ||||||||||||
Cash and due from banks | $ | 1,029 | $ | 1,063 | $ | 1,390 | $ | 1,424 | ||||
Interest-bearing deposits with banks | 2,552 | 2,418 | 3,171 | 4,236 | ||||||||
Other short-term investments | 140 | 136 | 134 | 134 | ||||||||
Investment securities available-for-sale | 12,338 | 12,212 | 12,045 | 11,915 | ||||||||
Commercial loans | 33,326 | 32,007 | 31,976 | 31,530 | ||||||||
Real estate construction loans | 3,292 | 3,291 | 3,077 | 3,257 | ||||||||
Commercial mortgage loans | 9,217 | 8,989 | 9,106 | 9,124 | ||||||||
Lease financing | 575 | 535 | 507 | 458 | ||||||||
International loans | 1,024 | 1,040 | 1,013 | 993 | ||||||||
Residential mortgage loans | 1,924 | 1,949 | 1,970 | 1,954 | ||||||||
Consumer loans | 2,443 | 2,491 | 2,514 | 2,476 | ||||||||
Total loans | 51,801 | 50,302 | 50,163 | 49,792 | ||||||||
Less allowance for loan losses | (657 | ) | (647 | ) | (671 | ) | (677 | ) | ||||
Net loans | 51,144 | 49,655 | 49,492 | 49,115 | ||||||||
Premises and equipment | 470 | 474 | 475 | 467 | ||||||||
Accrued income and other assets | 4,864 | 4,732 | 4,111 | 4,696 | ||||||||
Total assets | $ | 72,537 | $ | 70,690 | $ | 70,818 | $ | 71,987 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
Noninterest-bearing deposits | $ | 27,001 | $ | 26,242 | $ | 28,690 | $ | 30,316 | ||||
Money market and interest-bearing checking deposits | 22,195 | 22,889 | 22,560 | 22,544 | ||||||||
Savings deposits | 2,162 | 2,175 | 2,172 | 2,227 | ||||||||
Customer certificates of deposit | 2,441 | 2,258 | 2,131 | 2,089 | ||||||||
Other time deposits | 1,726 | 518 | — | — | ||||||||
Foreign office time deposits | 12 | 9 | 8 | 34 | ||||||||
Total interest-bearing deposits | 28,536 | 27,849 | 26,871 | 26,894 | ||||||||
Total deposits | 55,537 | 54,091 | 55,561 | 57,210 | ||||||||
Short-term borrowings | 1,733 | 935 | 44 | 58 | ||||||||
Accrued expenses and other liabilities | 1,386 | 1,407 | 1,243 | 1,057 | ||||||||
Medium- and long-term debt | 6,558 | 6,848 | 6,463 | 5,583 | ||||||||
Total liabilities | 65,214 | 63,281 | 63,311 | 63,908 | ||||||||
Common stock - $5 par value: | ||||||||||||
Authorized - 325,000,000 shares | ||||||||||||
Issued - 228,164,824 shares | 1,141 | 1,141 | 1,141 | 1,141 | ||||||||
Capital surplus | 2,168 | 2,159 | 2,148 | 2,144 | ||||||||
Accumulated other comprehensive loss | (382 | ) | (513 | ) | (609 | ) | (589 | ) | ||||
Retained earnings | 9,176 | 8,979 | 8,781 | 8,374 | ||||||||
Less cost of common stock in treasury - 78,367,534 shares at 6/30/19, 72,747,011 shares at 3/31/19, 68,081,176 shares as 12/31/18 and 57,254,526 shares at 6/30/18 | (4,780 | ) | (4,357 | ) | (3,954 | ) | (2,991 | ) | ||||
Total shareholders' equity | 7,323 | 7,409 | 7,507 | 8,079 | ||||||||
Total liabilities and shareholders' equity | $ | 72,537 | $ | 70,690 | $ | 70,818 | $ | 71,987 | ||||
10
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | |||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
(in millions, except per share data) | 2019 | 2018 | 2019 | 2018 | |||||||||
INTEREST INCOME | |||||||||||||
Interest and fees on loans | $ | 635 | $ | 568 | $ | 1,256 | $ | 1,077 | |||||
Interest on investment securities | 75 | 64 | 147 | 128 | |||||||||
Interest on short-term investments | 17 | 18 | 34 | 35 | |||||||||
Total interest income | 727 | 650 | 1,437 | 1,240 | |||||||||
INTEREST EXPENSE | |||||||||||||
Interest on deposits | 67 | 28 | 119 | 44 | |||||||||
Interest on short-term borrowings | 6 | — | 7 | — | |||||||||
Interest on medium- and long-term debt | 51 | 32 | 102 | 57 | |||||||||
Total interest expense | 124 | 60 | 228 | 101 | |||||||||
Net interest income | 603 | 590 | 1,209 | 1,139 | |||||||||
Provision for credit losses | 44 | (29 | ) | 31 | (17 | ) | |||||||
Net interest income after provision for credit losses | 559 | 619 | 1,178 | 1,156 | |||||||||
NONINTEREST INCOME | |||||||||||||
Card fees | 65 | 60 | 128 | 119 | |||||||||
Service charges on deposit accounts | 51 | 53 | 102 | 107 | |||||||||
Fiduciary income | 52 | 52 | 101 | 104 | |||||||||
Commercial lending fees | 21 | 23 | 43 | 41 | |||||||||
Foreign exchange income | 11 | 12 | 22 | 24 | |||||||||
Letter of credit fees | 10 | 11 | 19 | 21 | |||||||||
Bank-owned life insurance | 11 | 9 | 20 | 18 | |||||||||
Brokerage fees | 7 | 6 | 14 | 13 | |||||||||
Net securities gains (losses) | — | — | (8 | ) | 1 | ||||||||
Other noninterest income | 22 | 22 | 47 | 44 | |||||||||
Total noninterest income | 250 | 248 | 488 | 492 | |||||||||
NONINTEREST EXPENSES | |||||||||||||
Salaries and benefits expense | 245 | 250 | 510 | 505 | |||||||||
Outside processing fee expense | 65 | 64 | 128 | 125 | |||||||||
Net occupancy expense | 37 | 37 | 74 | 75 | |||||||||
Software expense | 28 | 32 | 57 | 63 | |||||||||
Equipment expense | 12 | 11 | 24 | 22 | |||||||||
FDIC insurance expense | 6 | 12 | 11 | 25 | |||||||||
Advertising expense | 9 | 8 | 14 | 14 | |||||||||
Restructuring charges | — | 11 | — | 27 | |||||||||
Other noninterest expenses | 22 | 23 | 39 | 38 | |||||||||
Total noninterest expenses | 424 | 448 | 857 | 894 | |||||||||
Income before income taxes | 385 | 419 | 809 | 754 | |||||||||
Provision for income taxes | 87 | 93 | 172 | 147 | |||||||||
NET INCOME | 298 | 326 | 637 | 607 | |||||||||
Less income allocated to participating securities | 1 | 2 | 3 | 4 | |||||||||
Net income attributable to shares | $ | 297 | $ | 324 | $ | 634 | $ | 603 | |||||
Earnings per share: | |||||||||||||
Basic | $ | 1.95 | $ | 1.90 | $ | 4.10 | $ | 3.52 | |||||
Diluted | 1.94 | 1.87 | 4.06 | 3.46 | |||||||||
Comprehensive income | 429 | 290 | 864 | 468 | |||||||||
Cash dividends declared on stock | 100 | 58 | 205 | 110 | |||||||||
Cash dividends declared per share | 0.67 | 0.34 | 1.34 | 0.64 | |||||||||
11
CONSOLIDATED QUARTERLY STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | |||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||||||
Second | First | Fourth | Third | Second | Second Quarter 2019 Compared to: | ||||||||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Quarter | First Quarter 2019 | Second Quarter 2018 | |||||||||||||||||||||
(in millions, except per share data) | 2019 | 2019 | 2018 | 2018 | 2018 | Amount | Percent | Amount | Percent | ||||||||||||||||||
INTEREST INCOME | |||||||||||||||||||||||||||
Interest and fees on loans | $ | 635 | $ | 621 | $ | 604 | $ | 581 | $ | 568 | $ | 14 | 2 | % | $ | 67 | 12 | % | |||||||||
Interest on investment securities | 75 | 72 | 71 | 66 | 64 | 3 | 3 | 11 | 16 | ||||||||||||||||||
Interest on short-term investments | 17 | 17 | 29 | 28 | 18 | — | — | (1 | ) | (10 | ) | ||||||||||||||||
Total interest income | 727 | 710 | 704 | 675 | 650 | 17 | 2 | 77 | 12 | ||||||||||||||||||
INTEREST EXPENSE | |||||||||||||||||||||||||||
Interest on deposits | 67 | 52 | 43 | 35 | 28 | 15 | 29 | 39 | n/m | ||||||||||||||||||
Interest on short-term borrowings | 6 | 1 | — | 1 | — | 5 | n/m | 6 | n/m | ||||||||||||||||||
Interest on medium- and long-term debt | 51 | 51 | 47 | 40 | 32 | — | — | 19 | 61 | ||||||||||||||||||
Total interest expense | 124 | 104 | 90 | 76 | 60 | 20 | 19 | 64 | n/m | ||||||||||||||||||
Net interest income | 603 | 606 | 614 | 599 | 590 | (3 | ) | (1 | ) | 13 | 2 | ||||||||||||||||
Provision for credit losses | 44 | (13 | ) | 16 | — | (29 | ) | 57 | n/m | 73 | n/m | ||||||||||||||||
Net interest income after provision for credit losses | 559 | 619 | 598 | 599 | 619 | (60 | ) | (10 | ) | (60 | ) | (10 | ) | ||||||||||||||
NONINTEREST INCOME | |||||||||||||||||||||||||||
Card fees | 65 | 63 | 64 | 61 | 60 | 2 | 2 | 5 | 8 | ||||||||||||||||||
Service charges on deposit accounts | 51 | 51 | 51 | 53 | 53 | — | — | (2 | ) | (3 | ) | ||||||||||||||||
Fiduciary income | 52 | 49 | 51 | 51 | 52 | 3 | 5 | — | — | ||||||||||||||||||
Commercial lending fees | 21 | 22 | 23 | 21 | 23 | (1 | ) | (1 | ) | (2 | ) | (7 | ) | ||||||||||||||
Foreign exchange income | 11 | 11 | 11 | 12 | 12 | — | — | (1 | ) | (10 | ) | ||||||||||||||||
Letter of credit fees | 10 | 9 | 10 | 9 | 11 | 1 | — | (1 | ) | (9 | ) | ||||||||||||||||
Bank-owned life insurance | 11 | 9 | 10 | 11 | 9 | 2 | 12 | 2 | 18 | ||||||||||||||||||
Brokerage fees | 7 | 7 | 7 | 7 | 6 | — | — | 1 | 17 | ||||||||||||||||||
Net securities gains (losses) | — | (8 | ) | — | (20 | ) | — | 8 | n/m | — | — | ||||||||||||||||
Other noninterest income | 22 | 25 | 23 | 29 | 22 | (3 | ) | (6 | ) | — | — | ||||||||||||||||
Total noninterest income | 250 | 238 | 250 | 234 | 248 | 12 | 5 | 2 | 1 | ||||||||||||||||||
NONINTEREST EXPENSES | |||||||||||||||||||||||||||
Salaries and benefits expense | 245 | 265 | 250 | 254 | 250 | (20 | ) | (8 | ) | (5 | ) | (2 | ) | ||||||||||||||
Outside processing fee expense | 65 | 63 | 65 | 65 | 64 | 2 | 5 | 1 | 3 | ||||||||||||||||||
Net occupancy expense | 37 | 37 | 39 | 38 | 37 | — | — | — | — | ||||||||||||||||||
Software expense | 28 | 29 | 30 | 32 | 32 | (1 | ) | (3 | ) | (4 | ) | (10 | ) | ||||||||||||||
Equipment expense | 12 | 12 | 14 | 12 | 11 | — | — | 1 | 4 | ||||||||||||||||||
FDIC insurance expense | 6 | 5 | 6 | 11 | 12 | 1 | 30 | (6 | ) | (47 | ) | ||||||||||||||||
Advertising expense | 9 | 5 | 8 | 8 | 8 | 4 | 61 | 1 | 13 | ||||||||||||||||||
Restructuring charges | — | — | 14 | 12 | 11 | — | — | (11 | ) | n/m | |||||||||||||||||
Other noninterest expenses | 22 | 17 | 22 | 20 | 23 | 5 | 28 | (1 | ) | (5 | ) | ||||||||||||||||
Total noninterest expenses | 424 | 433 | 448 | 452 | 448 | (9 | ) | (2 | ) | (24 | ) | (5 | ) | ||||||||||||||
Income before income taxes | 385 | 424 | 400 | 381 | 419 | (39 | ) | (9 | ) | (34 | ) | (8 | ) | ||||||||||||||
Provision for income taxes | 87 | 85 | 90 | 63 | 93 | 2 | 2 | (6 | ) | (8 | ) | ||||||||||||||||
NET INCOME | 298 | 339 | 310 | 318 | 326 | (41 | ) | (12 | ) | (28 | ) | (9 | ) | ||||||||||||||
Less income allocated to participating securities | 1 | 2 | 2 | 2 | 2 | (1 | ) | (15 | ) | (1 | ) | (7 | ) | ||||||||||||||
Net income attributable to shares | $ | 297 | $ | 337 | $ | 308 | $ | 316 | $ | 324 | $ | (40 | ) | (12 | )% | $ | (27 | ) | (8 | )% | |||||||
Earnings per share: | |||||||||||||||||||||||||||
Basic | $ | 1.95 | $ | 2.14 | $ | 1.91 | $ | 1.89 | $ | 1.90 | $ | (0.19 | ) | (9 | )% | $ | 0.05 | 3 | % | ||||||||
Diluted | 1.94 | 2.11 | 1.88 | 1.86 | 1.87 | (0.17 | ) | (8 | ) | 0.07 | 4 | ||||||||||||||||
Comprehensive income | 429 | 435 | 312 | 296 | 290 | (6 | ) | (1 | ) | 139 | 48 | ||||||||||||||||
Cash dividends declared on stock | 100 | 105 | 99 | 100 | 58 | (5 | ) | (5 | ) | 42 | 72 | ||||||||||||||||
Cash dividends declared per share | 0.67 | 0.67 | 0.60 | 0.60 | 0.34 | — | — | 0.33 | 97 | ||||||||||||||||||
n/m - not meaningful
12
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(in millions) | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | |||||||||||
Balance at beginning of period | $ | 647 | $ | 671 | $ | 664 | $ | 677 | $ | 698 | ||||||
Loan charge-offs: | ||||||||||||||||
Commercial | 42 | 18 | 19 | 23 | 17 | |||||||||||
Commercial mortgage | — | 1 | 2 | — | 1 | |||||||||||
International | 1 | — | — | 1 | — | |||||||||||
Consumer | 1 | 1 | — | 1 | 2 | |||||||||||
Total loan charge-offs | 44 | 20 | 21 | 25 | 20 | |||||||||||
Recoveries on loans previously charged-off: | ||||||||||||||||
Commercial | 7 | 8 | 8 | 8 | 20 | |||||||||||
Commercial mortgage | 3 | — | — | 1 | 1 | |||||||||||
International | — | — | — | — | 1 | |||||||||||
Residential mortgage | — | — | 1 | — | — | |||||||||||
Consumer | 1 | 1 | 1 | 1 | 1 | |||||||||||
Total recoveries | 11 | 9 | 10 | 10 | 23 | |||||||||||
Net loan charge-offs (recoveries) | 33 | 11 | 11 | 15 | (3 | ) | ||||||||||
Provision for loan losses | 43 | (13 | ) | 19 | 1 | (23 | ) | |||||||||
Foreign currency translation adjustment | — | — | (1 | ) | 1 | (1 | ) | |||||||||
Balance at end of period | $ | 657 | $ | 647 | $ | 671 | $ | 664 | $ | 677 | ||||||
Allowance for loan losses as a percentage of total loans | 1.27 | % | 1.29 | % | 1.34 | % | 1.35 | % | 1.36 | % | ||||||
Net loan charge-offs (recoveries) as a percentage of average total loans | 0.26 | 0.08 | 0.09 | 0.13 | (0.02 | ) | ||||||||||
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LENDING-RELATED COMMITMENTS (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(in millions) | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | |||||||||||
Balance at beginning of period | $ | 30 | $ | 30 | $ | 33 | $ | 34 | $ | 40 | ||||||
Add: Provision for credit losses on lending-related commitments | 1 | — | (3 | ) | (1 | ) | (6 | ) | ||||||||
Balance at end of period | $ | 31 | $ | 30 | $ | 30 | $ | 33 | $ | 34 | ||||||
13
NONPERFORMING ASSETS (unaudited) | ||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||
2019 | 2018 | |||||||||||||||
(in millions) | 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | |||||||||||
SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS | ||||||||||||||||
Nonaccrual loans: | ||||||||||||||||
Business loans: | ||||||||||||||||
Commercial | $ | 155 | $ | 114 | $ | 141 | $ | 149 | $ | 171 | ||||||
Commercial mortgage | 12 | 16 | 20 | 22 | 29 | |||||||||||
Lease financing | 1 | 2 | 2 | 2 | 2 | |||||||||||
International | 3 | 3 | 3 | 4 | 4 | |||||||||||
Total nonaccrual business loans | 171 | 135 | 166 | 177 | 206 | |||||||||||
Retail loans: | ||||||||||||||||
Residential mortgage | 35 | 37 | 36 | 34 | 29 | |||||||||||
Consumer: | ||||||||||||||||
Home equity | 18 | 19 | 19 | 19 | 19 | |||||||||||
Total nonaccrual retail loans | 53 | 56 | 55 | 53 | 48 | |||||||||||
Total nonaccrual loans | 224 | 191 | 221 | 230 | 254 | |||||||||||
Reduced-rate loans | 6 | 7 | 8 | 9 | 8 | |||||||||||
Total nonperforming loans | 230 | 198 | 229 | 239 | 262 | |||||||||||
Foreclosed property | 3 | 1 | 1 | 1 | 2 | |||||||||||
Total nonperforming assets | $ | 233 | $ | 199 | $ | 230 | $ | 240 | $ | 264 | ||||||
Nonperforming loans as a percentage of total loans | 0.44 | % | 0.39 | % | 0.46 | % | 0.49 | % | 0.53 | % | ||||||
Nonperforming assets as a percentage of total loans and foreclosed property | 0.45 | 0.40 | 0.46 | 0.49 | 0.53 | |||||||||||
Allowance for loan losses as a multiple of total nonperforming loans | 2.9x | 3.3x | 2.9x | 2.8x | 2.6x | |||||||||||
Loans past due 90 days or more and still accruing | $ | 17 | $ | 24 | $ | 16 | $ | 28 | $ | 20 | ||||||
ANALYSIS OF NONACCRUAL LOANS | ||||||||||||||||
Nonaccrual loans at beginning of period | $ | 191 | $ | 221 | $ | 230 | $ | 254 | $ | 326 | ||||||
Loans transferred to nonaccrual (a) | 93 | 4 | 42 | 35 | 49 | |||||||||||
Nonaccrual loan gross charge-offs | (44 | ) | (20 | ) | (21 | ) | (25 | ) | (20 | ) | ||||||
Loans transferred to accrual status (a) | — | — | (3 | ) | — | — | ||||||||||
Nonaccrual loans sold | (5 | ) | — | (5 | ) | (9 | ) | (15 | ) | |||||||
Payments/Other (b) | (11 | ) | (14 | ) | (22 | ) | (25 | ) | (86 | ) | ||||||
Nonaccrual loans at end of period | $ | 224 | $ | 191 | $ | 221 | $ | 230 | $ | 254 | ||||||
(a) Based on an analysis of nonaccrual loans with book balances greater than $2 million. | ||||||||||||||||
(b) Includes net changes related to nonaccrual loans with balances less than $2 million, payments on nonaccrual loans with book balances greater than $2 million and transfers of nonaccrual loans to foreclosed property. | ||||||||||||||||
14
ANALYSIS OF NET INTEREST INCOME (unaudited) | |||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||
Six Months Ended | |||||||||||||||||
June 30, 2019 | June 30, 2018 | ||||||||||||||||
Average | Average | Average | Average | ||||||||||||||
(dollar amounts in millions) | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||
Commercial loans | $ | 32,037 | $ | 799 | 5.04 | % | $ | 30,556 | $ | 672 | 4.44 | % | |||||
Real estate construction loans | 3,279 | 93 | 5.74 | 3,129 | 77 | 4.93 | |||||||||||
Commercial mortgage loans | 9,028 | 230 | 5.13 | 9,195 | 205 | 4.49 | |||||||||||
Lease financing | 533 | 8 | 3.08 | 461 | 9 | 3.93 | |||||||||||
International loans | 1,019 | 27 | 5.33 | 989 | 24 | 4.81 | |||||||||||
Residential mortgage loans | 1,954 | 38 | 3.89 | 2,002 | 38 | 3.78 | |||||||||||
Consumer loans | 2,473 | 61 | 5.00 | 2,493 | 52 | 4.24 | |||||||||||
Total loans | 50,323 | 1,256 | 5.03 | 48,825 | 1,077 | 4.45 | |||||||||||
Mortgage-backed securities | 9,275 | 114 | 2.43 | 9,133 | 104 | 2.23 | |||||||||||
Other investment securities | 2,748 | 33 | 2.40 | 2,722 | 24 | 1.71 | |||||||||||
Total investment securities | 12,023 | 147 | 2.42 | 11,855 | 128 | 2.11 | |||||||||||
Interest-bearing deposits with banks | 2,773 | 33 | 2.38 | 4,251 | 35 | 1.68 | |||||||||||
Other short-term investments | 138 | 1 | 1.34 | 132 | — | 0.84 | |||||||||||
Total earning assets | 65,257 | 1,437 | 4.43 | 65,063 | 1,240 | 3.83 | |||||||||||
Cash and due from banks | 912 | 1,248 | |||||||||||||||
Allowance for loan losses | (666 | ) | (713 | ) | |||||||||||||
Accrued income and other assets | 5,012 | 4,825 | |||||||||||||||
Total assets | $ | 70,515 | $ | 70,423 | |||||||||||||
Money market and interest-bearing checking deposits | $ | 22,763 | 100 | 0.88 | $ | 22,039 | 40 | 0.37 | |||||||||
Savings deposits | 2,169 | — | 0.04 | 2,205 | — | 0.03 | |||||||||||
Customer certificates of deposit | 2,258 | 11 | 0.96 | 2,092 | 4 | 0.36 | |||||||||||
Other time deposits | 661 | 8 | 2.45 | — | — | — | |||||||||||
Foreign office time deposits | 13 | — | 1.54 | 32 | — | 1.13 | |||||||||||
Total interest-bearing deposits | 27,864 | 119 | 0.86 | 26,368 | 44 | 0.34 | |||||||||||
Short-term borrowings | 576 | 7 | 2.42 | 45 | — | 1.63 | |||||||||||
Medium- and long-term debt | 6,703 | 102 | 3.03 | 5,390 | 57 | 2.11 | |||||||||||
Total interest-bearing sources | 35,143 | 228 | 1.30 | 31,803 | 101 | 0.64 | |||||||||||
Noninterest-bearing deposits | 26,634 | 29,591 | |||||||||||||||
Accrued expenses and other liabilities | 1,367 | 1,077 | |||||||||||||||
Total shareholders' equity | 7,371 | 7,952 | |||||||||||||||
Total liabilities and shareholders' equity | $ | 70,515 | $ | 70,423 | |||||||||||||
Net interest income/rate spread | $ | 1,209 | 3.13 | $ | 1,139 | 3.19 | |||||||||||
Impact of net noninterest-bearing sources of funds | 0.60 | 0.33 | |||||||||||||||
Net interest margin (as a percentage of average earning assets) | 3.73 | % | 3.52 | % | |||||||||||||
15
ANALYSIS OF NET INTEREST INCOME (unaudited) | ||||||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||
June 30, 2019 | March 31, 2019 | June 30, 2018 | ||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||
(dollar amounts in millions) | Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||
Commercial loans | $ | 32,607 | $ | 405 | 5.00 | % | $ | 31,461 | $ | 394 | 5.07 | % | $ | 30,966 | $ | 357 | 4.64 | % | ||||||||
Real estate construction loans | 3,319 | 47 | 5.74 | 3,238 | 46 | 5.74 | 3,189 | 41 | 5.12 | |||||||||||||||||
Commercial mortgage loans | 9,060 | 116 | 5.12 | 8,997 | 114 | 5.14 | 9,174 | 107 | 4.65 | |||||||||||||||||
Lease financing | 546 | 3 | 2.32 | 519 | 5 | 3.87 | 457 | 4 | 3.65 | |||||||||||||||||
International loans | 1,025 | 14 | 5.30 | 1,014 | 13 | 5.37 | 981 | 13 | 5.02 | |||||||||||||||||
Residential mortgage loans | 1,943 | 19 | 3.92 | 1,965 | 19 | 3.85 | 1,993 | 20 | 3.88 | |||||||||||||||||
Consumer loans | 2,463 | 31 | 5.02 | 2,483 | 30 | 4.98 | 2,465 | 26 | 4.35 | |||||||||||||||||
Total loans | 50,963 | 635 | 5.00 | 49,677 | 621 | 5.07 | 49,225 | 568 | 4.63 | |||||||||||||||||
Mortgage-backed securities | 9,326 | 58 | 2.45 | 9,225 | 56 | 2.41 | 9,098 | 52 | 2.25 | |||||||||||||||||
Other investment securities | 2,765 | 17 | 2.47 | 2,730 | 16 | 2.32 | 2,701 | 12 | 1.71 | |||||||||||||||||
Total investment securities | 12,091 | 75 | 2.45 | 11,955 | 72 | 2.39 | 11,799 | 64 | 2.12 | |||||||||||||||||
Interest-bearing deposits with banks | 2,694 | 16 | 2.37 | 2,852 | 17 | 2.40 | 3,957 | 18 | 1.82 | |||||||||||||||||
Other short-term investments | 142 | 1 | 1.34 | 134 | — | 1.33 | 133 | — | 0.94 | |||||||||||||||||
Total earning assets | 65,890 | 727 | 4.42 | 64,618 | 710 | 4.44 | 65,114 | 650 | 3.98 | |||||||||||||||||
Cash and due from banks | 900 | 925 | 1,235 | |||||||||||||||||||||||
Allowance for loan losses | (660 | ) | (672 | ) | (708 | ) | ||||||||||||||||||||
Accrued income and other assets | 5,122 | 4,900 | 4,879 | |||||||||||||||||||||||
Total assets | $ | 71,252 | $ | 69,771 | $ | 70,520 | ||||||||||||||||||||
Money market and interest-bearing checking deposits | $ | 22,913 | 53 | 0.93 | $ | 22,612 | 47 | 0.83 | $ | 22,187 | 26 | 0.47 | ||||||||||||||
Savings deposits | 2,169 | — | 0.03 | 2,170 | — | 0.04 | 2,231 | — | 0.04 | |||||||||||||||||
Customer certificates of deposit | 2,346 | 7 | 1.10 | 2,170 | 4 | 0.81 | 2,063 | 2 | 0.38 | |||||||||||||||||
Other time deposits | 1,156 | 7 | 2.46 | 160 | 1 | 2.34 | — | — | — | |||||||||||||||||
Foreign office time deposits | 13 | — | 1.54 | 12 | — | 1.55 | 33 | — | 1.13 | |||||||||||||||||
Total interest-bearing deposits | 28,597 | 67 | 0.94 | 27,124 | 52 | 0.78 | 26,514 | 28 | 0.42 | |||||||||||||||||
Short-term borrowings | 927 | 6 | 2.42 | 221 | 1 | 2.39 | 56 | — | 1.74 | |||||||||||||||||
Medium- and long-term debt | 6,712 | 51 | 3.00 | 6,694 | 51 | 3.06 | 5,584 | 32 | 2.24 | |||||||||||||||||
Total interest-bearing sources | 36,236 | 124 | 1.36 | 34,039 | 104 | 1.23 | 32,154 | 60 | 0.74 | |||||||||||||||||
Noninterest-bearing deposits | 26,398 | 26,872 | 29,316 | |||||||||||||||||||||||
Accrued expenses and other liabilities | 1,333 | 1,401 | 1,073 | |||||||||||||||||||||||
Total shareholders' equity | 7,285 | 7,459 | 7,977 | |||||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 71,252 | $ | 69,771 | $ | 70,520 | ||||||||||||||||||||
Net interest income/rate spread | $ | 603 | 3.06 | $ | 606 | 3.21 | $ | 590 | 3.24 | |||||||||||||||||
Impact of net noninterest-bearing sources of funds | 0.61 | 0.58 | 0.38 | |||||||||||||||||||||||
Net interest margin (as a percentage of average earning assets) | 3.67 | % | 3.79 | % | 3.62 | % | ||||||||||||||||||||
16
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) | ||||||||||||||||||||
Comerica Incorporated and Subsidiaries | ||||||||||||||||||||
Accumulated | ||||||||||||||||||||
Common Stock | Other | Total | ||||||||||||||||||
Shares | Capital | Comprehensive | Retained | Treasury | Shareholders' | |||||||||||||||
(in millions, except per share data) | Outstanding | Amount | Surplus | Loss | Earnings | Stock | Equity | |||||||||||||
BALANCE AT MARCH 31, 2018 | 172.5 | $ | 1,141 | $ | 2,134 | $ | (553 | ) | $ | 8,110 | $ | (2,832 | ) | $ | 8,000 | |||||
Cumulative effect of change in accounting principles | — | — | — | — | — | — | — | |||||||||||||
Net income | — | — | — | — | 326 | — | 326 | |||||||||||||
Other comprehensive loss, net of tax | — | — | — | (36 | ) | — | — | (36 | ) | |||||||||||
Cash dividends declared on common stock ($0.34 per share) | — | — | — | — | (58 | ) | — | (58 | ) | |||||||||||
Purchase of common stock | (1.7 | ) | — | — | — | — | (169 | ) | (169 | ) | ||||||||||
Net issuance of common stock under employee stock plans | 0.1 | — | — | — | (4 | ) | 10 | 6 | ||||||||||||
Net issuance of common stock for warrants | — | — | — | — | — | — | — | |||||||||||||
Share-based compensation | — | — | 10 | — | — | — | 10 | |||||||||||||
BALANCE AT JUNE 30, 2018 | 170.9 | $ | 1,141 | $ | 2,144 | $ | (589 | ) | $ | 8,374 | $ | (2,991 | ) | $ | 8,079 | |||||
BALANCE AT MARCH 31, 2019 | 155.4 | $ | 1,141 | $ | 2,159 | $ | (513 | ) | $ | 8,979 | $ | (4,357 | ) | $ | 7,409 | |||||
Net income | — | — | — | — | 298 | — | 298 | |||||||||||||
Other comprehensive income, net of tax | — | — | — | 131 | — | — | 131 | |||||||||||||
Cash dividends declared on common stock ($0.67 per share) | — | — | — | — | (100 | ) | — | (100 | ) | |||||||||||
Purchase of common stock | (5.7 | ) | — | — | — | — | (425 | ) | (425 | ) | ||||||||||
Net issuance of common stock under employee stock plans | 0.1 | — | 1 | — | (1 | ) | 2 | 2 | ||||||||||||
Share-based compensation | — | — | 8 | — | — | — | 8 | |||||||||||||
BALANCE AT JUNE 30, 2019 | 149.8 | $ | 1,141 | $ | 2,168 | $ | (382 | ) | $ | 9,176 | $ | (4,780 | ) | $ | 7,323 | |||||
BALANCE AT DECEMBER 31, 2017 | 172.9 | $ | 1,141 | $ | 2,122 | $ | (451 | ) | $ | 7,887 | $ | (2,736 | ) | $ | 7,963 | |||||
Cumulative effect of change in accounting principles | — | — | — | 1 | 14 | — | 15 | |||||||||||||
Net income | — | — | — | — | 607 | — | 607 | |||||||||||||
Other comprehensive loss, net of tax | — | — | — | (139 | ) | — | — | (139 | ) | |||||||||||
Cash dividends declared on common stock ($0.64 per share) | — | — | — | — | (110 | ) | — | (110 | ) | |||||||||||
Purchase of common stock | (3.4 | ) | — | — | — | — | (328 | ) | (328 | ) | ||||||||||
Net issuance of common stock under employee stock plans | 1.3 | — | (11 | ) | — | (21 | ) | 69 | 37 | |||||||||||
Net issuance of common stock for warrants | 0.1 | — | (1 | ) | — | (3 | ) | 4 | — | |||||||||||
Share-based compensation | — | — | 34 | — | — | — | 34 | |||||||||||||
BALANCE AT JUNE 30, 2018 | 170.9 | $ | 1,141 | $ | 2,144 | $ | (589 | ) | $ | 8,374 | $ | (2,991 | ) | $ | 8,079 | |||||
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 | — | — | — | — | 637 | — | 637 | |||||||||||||
Other comprehensive income, net of tax | — | — | — | 227 | — | — | 227 | |||||||||||||
Cash dividends declared on common stock ($1.34 per share) | — | — | — | — | (205 | ) | — | (205 | ) | |||||||||||
Purchase of common stock | (10.9 | ) | — | — | — | — | (859 | ) | (859 | ) | ||||||||||
Net issuance of common stock under employee stock plans | 0.6 | — | (12 | ) | — | (23 | ) | 33 | (2 | ) | ||||||||||
Share-based compensation | — | — | 32 | — | — | — | 32 | |||||||||||||
BALANCE AT JUNE 30, 2019 | 149.8 | $ | 1,141 | $ | 2,168 | $ | (382 | ) | $ | 9,176 | $ | (4,780 | ) | $ | 7,323 | |||||
17
BUSINESS SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||
(dollar amounts in millions) | Business | Retail | Wealth | ||||||||||||||||||||
Three Months Ended June 30, 2019 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 420 | $ | 146 | $ | 46 | $ | (24 | ) | $ | 15 | $ | 603 | ||||||||||
Provision for credit losses | 52 | 1 | (5 | ) | — | (4 | ) | 44 | |||||||||||||||
Noninterest income | 136 | 33 | 68 | 14 | (1 | ) | 250 | ||||||||||||||||
Noninterest expenses | 195 | 147 | 67 | — | 15 | 424 | |||||||||||||||||
Provision (benefit) for income taxes | 71 | 7 | 13 | (4 | ) | — | 87 | ||||||||||||||||
Net income (loss) | $ | 238 | $ | 24 | $ | 39 | $ | (6 | ) | $ | 3 | $ | 298 | ||||||||||
Net credit-related charge-offs (recoveries) | $ | 35 | $ | — | $ | (2 | ) | $ | — | $ | — | $ | 33 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 45,321 | $ | 2,839 | $ | 5,071 | $ | 14,242 | $ | 3,779 | $ | 71,252 | |||||||||||
Loans | 43,926 | 2,107 | 4,930 | — | — | 50,963 | |||||||||||||||||
Deposits | 28,251 | 20,649 | 3,740 | 2,174 | 181 | 54,995 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 2.11 | % | 0.44 | % | 3.10 | % | n/m | n/m | 1.68 | % | |||||||||||||
Efficiency ratio (b) | 34.98 | 82.26 | 58.99 | n/m | n/m | 49.65 | |||||||||||||||||
Business | Retail | Wealth | |||||||||||||||||||||
Three Months Ended March 31, 2019 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 412 | $ | 146 | $ | 47 | $ | (15 | ) | $ | 16 | $ | 606 | ||||||||||
Provision for credit losses | (6 | ) | (4 | ) | (5 | ) | — | 2 | (13 | ) | |||||||||||||
Noninterest income | 136 | 31 | 64 | 4 | 3 | 238 | |||||||||||||||||
Noninterest expenses | 198 | 145 | 72 | — | 18 | 433 | |||||||||||||||||
Provision (benefit) for income taxes | 82 | 9 | 10 | (4 | ) | (12 | ) | (c) | 85 | ||||||||||||||
Net income (loss) | $ | 274 | $ | 27 | $ | 34 | $ | (7 | ) | $ | 11 | $ | 339 | ||||||||||
Net credit-related charge-offs (recoveries) | $ | 12 | $ | — | $ | (1 | ) | $ | — | $ | — | $ | 11 | ||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 43,909 | $ | 2,812 | $ | 5,174 | $ | 13,911 | $ | 3,965 | $ | 69,771 | |||||||||||
Loans | 42,538 | 2,103 | 5,036 | — | — | 49,677 | |||||||||||||||||
Deposits | 28,463 | 20,470 | 3,801 | 1,130 | 132 | 53,996 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 2.53 | % | 0.54 | % | 2.67 | % | n/m | n/m | 1.97 | % | |||||||||||||
Efficiency ratio (b) | 36.24 | 81.34 | 64.42 | n/m | n/m | 50.81 | |||||||||||||||||
Business | Retail | Wealth | |||||||||||||||||||||
Three Months Ended June 30, 2018 | Bank | Bank | Management | Finance | Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 405 | $ | 135 | $ | 44 | $ | (7 | ) | $ | 13 | $ | 590 | ||||||||||
Provision for credit losses | (25 | ) | (1 | ) | 1 | — | (4 | ) | (29 | ) | |||||||||||||
Noninterest income | 135 | 32 | 67 | 12 | 2 | 248 | |||||||||||||||||
Noninterest expenses | 211 | 149 | 75 | (1 | ) | 14 | 448 | ||||||||||||||||
Provision (benefit) for income taxes | 81 | 4 | 8 | (2 | ) | 2 | (c) | 93 | |||||||||||||||
Net income | $ | 273 | $ | 15 | $ | 27 | $ | 8 | $ | 3 | $ | 326 | |||||||||||
Net credit-related (recoveries) charge-offs | $ | (4 | ) | $ | — | $ | 1 | $ | — | $ | — | $ | (3 | ) | |||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 43,740 | $ | 2,633 | $ | 5,260 | $ | 13,735 | $ | 5,152 | $ | 70,520 | |||||||||||
Loans | 42,041 | 2,057 | 5,127 | — | — | 49,225 | |||||||||||||||||
Deposits | 29,735 | 21,008 | 3,852 | 1,093 | 142 | 55,830 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 2.50 | % | 0.28 | % | 2.10 | % | n/m | n/m | 1.85 | % | |||||||||||||
Efficiency ratio (b) | 39.12 | 87.84 | 66.81 | n/m | n/m | 53.24 | |||||||||||||||||
(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. |
(c) | Included discrete tax benefits of $11 million and $3 million for first quarter 2019 and second quarter 2018, respectively. |
n/m - not meaningful
18
MARKET SEGMENT FINANCIAL RESULTS (unaudited) | |||||||||||||||||||||||
Comerica Incorporated and Subsidiaries | |||||||||||||||||||||||
(dollar amounts in millions) | Other | Finance | |||||||||||||||||||||
Three Months Ended June 30, 2019 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income (expense) | $ | 186 | $ | 208 | $ | 124 | $ | 94 | $ | (9 | ) | $ | 603 | ||||||||||
Provision for credit losses | (10 | ) | (4 | ) | 49 | 13 | (4 | ) | 44 | ||||||||||||||
Noninterest income | 72 | 40 | 34 | 91 | 13 | 250 | |||||||||||||||||
Noninterest expenses | 134 | 99 | 84 | 92 | 15 | 424 | |||||||||||||||||
Provision (benefit) for income taxes | 30 | 39 | 6 | 16 | (4 | ) | 87 | ||||||||||||||||
Net income (loss) | $ | 104 | $ | 114 | $ | 19 | $ | 64 | $ | (3 | ) | $ | 298 | ||||||||||
Net credit-related charge-offs | $ | — | $ | 7 | $ | 26 | $ | — | $ | — | $ | 33 | |||||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 13,239 | $ | 19,228 | $ | 11,349 | $ | 9,415 | $ | 18,021 | $ | 71,252 | |||||||||||
Loans | 12,704 | 18,928 | 10,692 | 8,639 | — | 50,963 | |||||||||||||||||
Deposits | 19,816 | 16,325 | 8,670 | 7,829 | 2,355 | 54,995 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 2.01 | % | 2.37 | % | 0.69 | % | 2.76 | % | n/m | 1.68 | % | ||||||||||||
Efficiency ratio (b) | 52.04 | 39.96 | 52.86 | 49.56 | n/m | 49.65 | |||||||||||||||||
Other | Finance | ||||||||||||||||||||||
Three Months Ended March 31, 2019 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income | $ | 186 | $ | 205 | $ | 123 | $ | 91 | $ | 1 | $ | 606 | |||||||||||
Provision for credit losses | 5 | (1 | ) | (11 | ) | (8 | ) | 2 | (13 | ) | |||||||||||||
Noninterest income | 72 | 40 | 32 | 87 | 7 | 238 | |||||||||||||||||
Noninterest expenses | 139 | 100 | 85 | 91 | 18 | 433 | |||||||||||||||||
Provision (benefit) for income taxes | 26 | 37 | 19 | 19 | (16 | ) | (c) | 85 | |||||||||||||||
Net income | $ | 88 | $ | 109 | $ | 62 | $ | 76 | $ | 4 | $ | 339 | |||||||||||
Net credit-related charge-offs (recoveries) | $ | 4 | $ | (3 | ) | $ | 13 | $ | (3 | ) | $ | — | $ | 11 | |||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 13,075 | $ | 19,048 | $ | 10,920 | $ | 8,852 | $ | 17,876 | $ | 69,771 | |||||||||||
Loans | 12,557 | 18,768 | 10,270 | 8,082 | — | 49,677 | |||||||||||||||||
Deposits | 19,893 | 16,245 | 8,698 | 7,898 | 1,262 | 53,996 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 1.76 | % | 2.32 | % | 2.30 | % | 3.44 | % | n/m | 1.97 | % | ||||||||||||
Efficiency ratio (b) | 53.66 | 40.87 | 54.62 | 51.39 | n/m | 50.81 | |||||||||||||||||
Other | Finance | ||||||||||||||||||||||
Three Months Ended June 30, 2018 | Michigan | California | Texas | Markets | & Other | Total | |||||||||||||||||
Earnings summary: | |||||||||||||||||||||||
Net interest income | $ | 181 | $ | 194 | $ | 122 | $ | 87 | $ | 6 | $ | 590 | |||||||||||
Provision for credit losses | — | (9 | ) | (15 | ) | (1 | ) | (4 | ) | (29 | ) | ||||||||||||
Noninterest income | 72 | 42 | 30 | 90 | 14 | 248 | |||||||||||||||||
Noninterest expenses | 144 | 105 | 92 | 94 | 13 | 448 | |||||||||||||||||
Provision for income taxes | 25 | 35 | 17 | 16 | — | (c) | 93 | ||||||||||||||||
Net income | $ | 84 | $ | 105 | $ | 58 | $ | 68 | $ | 11 | $ | 326 | |||||||||||
Net credit-related charge-offs (recoveries) | $ | — | $ | 1 | $ | 2 | $ | (6 | ) | $ | — | $ | (3 | ) | |||||||||
Selected average balances: | |||||||||||||||||||||||
Assets | $ | 13,426 | $ | 18,696 | $ | 10,439 | $ | 9,072 | $ | 18,887 | $ | 70,520 | |||||||||||
Loans | 12,640 | 18,435 | 9,862 | 8,288 | — | 49,225 | |||||||||||||||||
Deposits | 20,902 | 16,642 | 8,967 | 8,084 | 1,235 | 55,830 | |||||||||||||||||
Statistical data: | |||||||||||||||||||||||
Return on average assets (a) | 1.55 | % | 2.25 | % | 2.22 | % | 3.03 | % | n/m | 1.85 | % | ||||||||||||
Efficiency ratio (b) | 56.50 | 44.49 | 60.22 | 52.81 | n/m | 53.24 | |||||||||||||||||
(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. |
(c) | Included discrete tax benefits of $11 million and $3 million for first quarter 2019 and second quarter 2018, respectively. |
n/m - not meaningful
19
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (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 equity and our performance trends. Comerica believes the adjusted financial results provide a greater understanding of ongoing operations and enhance the comparability of results with prior periods. Tangible equity is used by Comerica to measure the quality of capital and the return relative to balance sheet risk.
ADJUSTED FINANCIAL RESULTS | Three Months Ended | ||||||||
June 30, | March 31, | June 30, | |||||||
(dollar amounts in millions, except per share data) | 2019 | 2019 | 2018 | ||||||
Noninterest Income: | |||||||||
Noninterest income | $ | 250 | $ | 238 | $ | 248 | |||
Securities repositioning | — | 8 | — | ||||||
Adjusted noninterest income | $ | 250 | $ | 246 | $ | 248 | |||
Noninterest Expenses: | |||||||||
Noninterest expenses | $ | 424 | $ | 433 | $ | 448 | |||
Restructuring charges | — | — | (11 | ) | |||||
Adjusted noninterest expenses | $ | 424 | $ | 433 | $ | 437 | |||
Pre-tax Income: | |||||||||
Pre-tax income | $ | 385 | $ | 424 | $ | 419 | |||
Securities repositioning | — | 8 | — | ||||||
Restructuring charges | — | — | 11 | ||||||
Adjusted pre-tax income | $ | 385 | $ | 432 | $ | 430 | |||
Provision for Income Taxes: | |||||||||
Provision for income taxes | $ | 87 | $ | 85 | $ | 93 | |||
Tax on securities repositioning | — | 2 | — | ||||||
Tax on restructuring charges | — | — | 2 | ||||||
Discrete tax items | — | 11 | 3 | ||||||
Adjusted provision for income taxes | $ | 87 | $ | 98 | $ | 98 | |||
Net Income: | |||||||||
Net income | $ | 298 | $ | 339 | $ | 326 | |||
Securities repositioning, net of tax | — | 6 | — | ||||||
Restructuring charges, net of tax | — | — | 9 | ||||||
Discrete tax items | — | (11 | ) | (3 | ) | ||||
Adjusted net income | $ | 298 | $ | 334 | $ | 332 | |||
Diluted Earnings per Share: | |||||||||
Diluted earnings per share | $ | 1.94 | $ | 2.11 | $ | 1.87 | |||
Securities repositioning, net of tax | — | 0.04 | — | ||||||
Restructuring charges, net of tax | — | — | 0.05 | ||||||
Discrete tax items | — | (0.07 | ) | (0.02 | ) | ||||
Adjusted diluted earnings per share | $ | 1.94 | $ | 2.08 | $ | 1.90 | |||
Efficiency Ratio: | |||||||||
Reported | 49.65 | % | 50.81 | % | 53.24 | % | |||
Adjusted | 49.65 | 50.81 | 51.90 | ||||||
Securities repositioning refers to first quarter 2019 losses incurred on the sale of approximately $1 billion of treasury securities that were replaced by higher-yielding treasuries with a similar duration of 4 years. Discrete tax items include the tax benefit from employee stock transactions.
20
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited) (Continued) | |||||
Comerica Incorporated and Subsidiaries | |||||
June 30, | March 31, | June 30, | |||||||
(dollar amounts in millions) | 2019 | 2019 | 2018 | ||||||
Tangible Equity Ratio: | |||||||||
Shareholders' equity | $ | 7,323 | $ | 7,409 | $ | 8,079 | |||
Less: | |||||||||
Goodwill | 635 | 635 | 635 | ||||||
Other intangible assets | 4 | 5 | 7 | ||||||
Tangible equity | $ | 6,684 | $ | 6,769 | $ | 7,437 | |||
Total assets | $ | 72,537 | $ | 70,690 | $ | 71,987 | |||
Less: | |||||||||
Goodwill | 635 | 635 | 635 | ||||||
Other intangible assets | 4 | 5 | 7 | ||||||
Tangible assets | $ | 71,898 | $ | 70,050 | $ | 71,345 | |||
Equity ratio | 10.10 | % | 10.48 | % | 11.22 | % | |||
Tangible equity ratio | 9.30 | 9.66 | 10.42 | ||||||
Tangible Equity per Share of Stock: | |||||||||
Shareholders' equity | $ | 7,323 | $ | 7,409 | $ | 8,079 | |||
Tangible equity | 6,684 | 6,769 | 7,437 | ||||||
Shares of stock outstanding (in millions) | 150 | 155 | 171 | ||||||
Shareholders' equity per share of stock | $ | 48.89 | $ | 47.67 | $ | 47.27 | |||
Tangible equity per share of stock | 44.61 | 43.55 | 43.51 | ||||||
The tangible equity ratio removes the effect of intangible assets from capital and total assets. Tangible equity per share of stock removes the effect of intangible assets from shareholders' equity per share of stock.
21
