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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q 

______________________________

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

Or

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-10706

____________________________________________________________________________________

Comerica Incorporated

(Exact name of registrant as specified in its charter)

___________________________________________________________________________________

Delaware	38-1998421
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Comerica Bank Tower

1717 Main Street, MC 6404

Dallas, Texas 75201

(Address of principal executive offices)

(Zip Code)

(214) 462-6831

(Registrant’s telephone number, including area code) 

_________________________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

$5 par value common stock:

Outstanding as of October 26, 2015: 176,734,815 shares

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COMERICA INCORPORATED AND SUBSIDIARIES

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets at September 30, 2015 (unaudited) and December 31, 2014	1
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014 (unaudited)	2
Consolidated Statements of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2015 and 2014 (unaudited)	3
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014 (unaudited)	4
Notes to Consolidated Financial Statements (unaudited)	5
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	64
ITEM 4. Controls and Procedures	64
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings	64
ITEM 1A. Risk Factors	64
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	64
ITEM 6. Exhibits	65
Signature	66

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Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

Comerica Incorporated and Subsidiaries

(in millions, except share data)	September 30, 2015				December 31, 2014
	(unaudited)
ASSETS
Cash and due from banks	$	1,101			$	1,026
Interest-bearing deposits with banks	6,099				5,045
Other short-term investments	107				99
Investment securities available-for-sale	8,749				8,116
Investment securities held-to-maturity	1,863				1,935
Commercial loans	31,777				31,520
Real estate construction loans	1,874				1,955
Commercial mortgage loans	8,787				8,604
Lease financing	751				805
International loans	1,382				1,496
Residential mortgage loans	1,880				1,831
Consumer loans	2,491				2,382
Total loans	48,942				48,593
Less allowance for loan losses	(622		)		(594		)
Net loans	48,320				47,999
Premises and equipment	541				532
Accrued income and other assets	4,232				4,434
Total assets	$	71,012			$	69,186
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits	$	28,697			$	27,224
Money market and interest-bearing checking deposits	23,948				23,954
Savings deposits	1,853				1,752
Customer certificates of deposit	4,126				4,421
Foreign office time deposits	144				135
Total interest-bearing deposits	30,071				30,262
Total deposits	58,768				57,486
Short-term borrowings	109				116
Accrued expenses and other liabilities	1,413				1,507
Medium- and long-term debt	3,100				2,675
Total liabilities	63,390				61,784
Common stock - $5 par value:
Authorized - 325,000,000 shares
Issued - 228,164,824 shares	1,141				1,141
Capital surplus	2,165				2,188
Accumulated other comprehensive loss	(345		)		(412		)
Retained earnings	7,007				6,744
Less cost of common stock in treasury - 51,010,418 shares at 9/30/15 and 49,146,225 shares at 12/31/14	(2,346		)		(2,259		)
Total shareholders’ equity	7,622				7,402
Total liabilities and shareholders’ equity	$	71,012			$	69,186

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

Comerica Incorporated and Subsidiaries 

	Three Months Ended September 30,								Nine Months Ended September 30,
(in millions, except per share data)	2015				2014				2015				2014
INTEREST INCOME
Interest and fees on loans	$	390			$	381			$	1,156			$	1,142
Interest on investment securities	54				52				160				160
Interest on short-term investments	4				3				11				10
Total interest income	448				436				1,327				1,312
INTEREST EXPENSE
Interest on deposits	11				11				33				33
Interest on medium- and long-term debt	15				11				38				39
Total interest expense	26				22				71				72
Net interest income	422				414				1,256				1,240
Provision for credit losses	26				5				87				25
Net interest income after provision for credit losses	396				409				1,169				1,215
NONINTEREST INCOME
Service charges on deposit accounts	56				54				167				162
Fiduciary income	47				44				142				133
Commercial lending fees	22				26				69				69
Card fees	75				23				214				68
Letter of credit fees	13				14				39				43
Bank-owned life insurance	10				11				29				31
Foreign exchange income	10				9				29				30
Brokerage fees	5				4				13				13
Net securities losses	—				(1		)		(2		)		—
Other noninterest income	26				31				80				94
Total noninterest income	264				215				780				643
NONINTEREST EXPENSES
Salaries and benefits expense	243				248				747				735
Net occupancy expense	41				46				118				125
Equipment expense	14				14				40				43
Outside processing fee expense	86				31				249				89
Software expense	26				25				73				72
Litigation-related expense	(3		)		(2		)		(32		)		4
FDIC insurance expense	9				9				27				25
Advertising expense	6				5				17				16
Gain on debt redemption	—				(32		)		—				(32		)
Other noninterest expenses	39				53				117				130
Total noninterest expenses	461				397				1,356				1,207
Income before income taxes	199				227				593				651
Provision for income taxes	63				73				188				207
NET INCOME	136				154				405				444
Less income allocated to participating securities	2				2				5				6
Net income attributable to common shares	$	134			$	152			$	400			$	438
Earnings per common share:
Basic	$	0.76			$	0.85			$	2.27			$	2.44
Diluted	0.74				0.82				2.20				2.35
Comprehensive income	187				141				472				518
Cash dividends declared on common stock	37				36				110				107
Cash dividends declared per common share	0.21				0.20				0.62				0.59

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

Comerica Incorporated and Subsidiaries

	Common Stock											Accumulated Other Comprehensive Loss												Total Shareholders’ Equity
(in millions, except per share data)	Shares Outstanding			Amount				Capital Surplus								Retained Earnings				Treasury Stock
BALANCE AT DECEMBER 31, 2013	182.3			$	1,141			$	2,179			$	(391	)		$	6,318			$	(2,097	)		$	7,150
Net income	—			—				—				—				444				—				444
Other comprehensive income, net of tax	—			—				—				74				—				—				74
Cash dividends declared on common stock ($0.59 per share)	—			—				—				—				(107		)		—				(107		)
Purchase of common stock	(4.1	)		—				—				—				—				(200		)		(200		)
Net issuance of common stock under employee stock plans	2.0			—				(26		)		—				(24		)		91				41
Share-based compensation	—			—				31				—				—				—				31
Other	—			—				(1		)		—				—				1				—
BALANCE AT SEPTEMBER 30, 2014	180.2			$	1,141			$	2,183			$	(317	)		$	6,631			$	(2,205	)		$	7,433
BALANCE AT DECEMBER 31, 2014	179.0			$	1,141			$	2,188			$	(412	)		$	6,744			$	(2,259	)		$	7,402
Net income	—			—				—				—				405				—				405
Other comprehensive income, net of tax	—			—				—				67				—				—				67
Cash dividends declared on common stock ($0.62 per share)	—			—				—				—				(110		)		—				(110		)
Purchase of common stock	(3.8	)		—				—				—				—				(175		)		(175		)
Purchase and retirement of warrants	—			—				(10		)		—				—				—				(10		)
Net issuance of common stock under employee stock plans	1.0			—				(21		)		—				(10		)		45				14
Net issuance of common stock for warrants	1.0			—				(21		)		—				(22		)		43				—
Share-based compensation	—			—				29				—				—				—				29
BALANCE AT SEPTEMBER 30, 2015	177.2			$	1,141			$	2,165			$	(345	)		$	7,007			$	(2,346	)		$	7,622

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Comerica Incorporated and Subsidiaries

	Nine Months Ended September 30,
(in millions)	2015				2014
OPERATING ACTIVITIES
Net income	$	405			$	444
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	87				25
Provision (benefit) for deferred income taxes	(52		)		7
Depreciation and amortization	90				92
Net periodic defined benefit cost	34				29
Share-based compensation expense	29				31
Net amortization of securities	11				9
Accretion of loan purchase discount	(6		)		(25		)
Net securities losses	2				—
Net gains on sales of foreclosed property	(2		)		(3		)
Gain on debt redemption	—				(32		)
Excess tax benefits from share-based compensation arrangements	(3		)		(6		)
Net change in:
Trading securities	—				1
Accrued income receivable	(9		)		(2		)
Accrued expenses payable	(70		)		(44		)
Other, net	147				39
Net cash provided by operating activities	663				565
INVESTING ACTIVITIES
Investment securities available-for-sale:
Maturities and redemptions	1,282				1,328
Sales	51				—
Purchases	(1,933		)		(1,413		)
Investment securities held-to-maturity:
Maturities and redemptions	244				—
Purchases	(166		)		—
Net change in loans	(436		)		(2,254		)
Proceeds from sales of foreclosed property	8				13
Net increase in premises and equipment	(78		)		(38		)
Sales of Federal Home Loan Bank stock	—				41
Other, net	5				(4		)
Net cash used in investing activities	(1,023		)		(2,327		)
FINANCING ACTIVITIES
Net change in:
Deposits	1,361				4,205
Short-term borrowings	(7		)		(51		)
Medium- and long-term debt:
Maturities and redemptions	(606		)		(1,406		)
Issuances	1,016				596
Common stock:
Repurchases	(175		)		(200		)
Cash dividends paid	(109		)		(101		)
Issuances under employee stock plans	21				45
Purchase and retirement of warrants	(10		)		—
Excess tax benefits from share-based compensation arrangements	3				6
Other, net	(5		)		4
Net cash provided by financing activities	1,489				3,098
Net increase in cash and cash equivalents	1,129				1,336
Cash and cash equivalents at beginning of period	6,071				6,451
Cash and cash equivalents at end of period	$	7,200			$	7,787
Interest paid	$	64			$	74
Income tax paid	46				154
Noncash investing and financing activities:
Loans transferred to other real estate	9				13
Loans transferred from portfolio to held-for-sale	19				—
Lease residual transferred to other assets	16				—

See notes to consolidated financial statements.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 1 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Organization

The accompanying unaudited consolidated financial statements were prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation were included. The results of operations for the nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. Certain items in prior periods were reclassified to conform to the current presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report of Comerica Incorporated and Subsidiaries (the Corporation) on Form 10-K for the year ended December 31, 2014.

Revenue Recognition

In the first quarter 2015, the Corporation entered into a new contract for an existing debit card program. Guidance provided in Accounting Standards Code 605-45, "Principal Agent Considerations," indicates whether revenue should be reported gross or net for this type of arrangement. Management assessed various principal versus agent indicators provided in the guidance and concluded that the Corporation bears the risks and rewards of providing the services for the card program based on the new contract terms and, therefore, gross presentation of revenues and expenses is appropriate. This change in presentation resulted in increases of $48 million and $136 million to both "card fees" in noninterest income and "outside processing fee expense" in noninterest expenses for the three- and nine-month periods ended September 30, 2015, respectively.

Recently Adopted Accounting Pronouncements

Effective January 1, 2015, the Corporation prospectively adopted Accounting Standards Update (ASU) No. 2014-04, “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure,” (ASU 2014-04), which clarifies when an in-substance foreclosure or repossession of residential real estate property occurs, requiring a creditor to reclassify the loan to other real estate. According to ASU 2014-04, a consumer mortgage loan should be reclassified to other real estate either upon the creditor obtaining legal title to the real estate collateral or when the borrower voluntarily conveys all interest in the real estate property to the creditor through a deed in lieu of foreclosure or similar legal agreement. ASU 2014-04 also clarifies that a creditor that has obtained legal title to a foreclosed property should not delay reclassification when a borrower has a legal right of redemption for a period of time. The Corporation's existing accounting treatment is consistent with the new guidance, and therefore the adoption of ASU 2014-04 had no impact to the Corporation's financial condition and results of operations. Disclosures required by ASU 2014-04 are provided in Note 4.

Also effective January 1, 2015, the Corporation prospectively adopted ASU No. 2014-12, “Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period,” (ASU 2014-12). The new guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The Corporation's current accounting treatment of performance conditions for employees who are or become retirement eligible prior to the achievement of the performance target is consistent with ASU 2014-12, and as such the adoption of ASU 2014-12 had no impact to the Corporation’s financial condition and results of operations.

In the second quarter 2015, the Corporation early adopted ASU 2015-03, "Interest - Imputation of Interest (Subtopic 835-30)," which amends the presentation of debt issuance costs in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than as a deferred charge. The new guidance was retrospectively applied, which resulted in a decrease of $4 million to both "accrued income and other assets" and "medium- and long-term debt" on the consolidated balance sheets as of December 31, 2014. Unamortized debt issuance costs deducted from the carrying amount of medium- and long-term debt totaled $9 million at September 30, 2015.

Pending Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (ASU 2014-09), which is intended to improve and converge the financial reporting requirements for revenue contracts with customers. Previous GAAP comprised broad revenue recognition concepts along with numerous industry-specific requirements. The new guidance establishes a five-step model which entities must follow to recognize revenue and removes inconsistencies and weaknesses in existing guidance. The guidance under ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2017 and must be retrospectively applied. Entities will have the option of presenting

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

prior periods as impacted by the new guidance or presenting the cumulative effect of initial application along with supplementary disclosures. Early adoption is permitted, but not before annual and interim periods beginning after December 15, 2016. The Corporation is currently evaluating the impact of adopting ASU 2014-09.

In February 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis," (ASU 2015-02), which makes targeted amendments to the considerations applied by reporting entities when determining if a legal entity should be consolidated, including placing more emphasis on risk of loss when determining a controlling financial interest. Low-income housing tax credit investments that meet the criteria for the proportional amortization method are not impacted by these amendments. ASU 2015-02 is effective for annual and interim periods beginning after December 15, 2015, and must be retrospectively applied. Early adoption is permitted. The Corporation does not expect the adoption of ASU 2015-02 to have a material effect on its financial condition and results of operations.

In April 2015, the FASB issued ASU 2015-05, "Goodwill and Other - Internal-Use Software (Subtopic 350-40)," (ASU 2015-05), which defines specific criteria entities must apply to determine if a cloud computing arrangement includes an in-substance software license. The result of the assessment will direct the entity to apply either software licensing or service contract guidance to record the related costs. ASU 2015-05 is effective for annual and interim periods beginning after December 15, 2015, and can be prospectively or retrospectively applied. Early adoption is permitted. The Corporation does not expect the adoption to have a material effect on its financial condition and results of operations.

In May 2015, the FASB issued ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent),” (ASU 2015-07) which amends disclosure requirements for entities that utilize net asset value per share (or its equivalent) to measure fair value as a practical expedient. The update eliminates the requirement to classify these investments within the fair value hierarchy and instead requires disclosure of sufficient information about these investments to permit reconciliation of the fair value of investments categorized within the fair value hierarchy to the investments presented in the consolidated balance sheet. ASU 2015-07 is effective for annual and interim periods beginning after December 15, 2015 and must be applied retrospectively. Early adoption is permitted. The adoption of ASU 2015-07 will have no impact on the Corporation's financial condition or results of operations.

NOTE 2 – FAIR VALUE MEASUREMENTS

The Corporation utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The determination of fair values of financial instruments often requires the use of estimates. In cases where quoted market values in an active market are not available, the Corporation uses present value techniques and other valuation methods to estimate the fair values of its financial instruments. These valuation methods require considerable judgment and the resulting estimates of fair value can be significantly affected by the assumptions made and methods used.

Trading securities, investment securities available-for-sale, derivatives and deferred compensation plan liabilities are recorded at fair value on a recurring basis. Additionally, from time to time, the Corporation may be required to record other assets and liabilities at fair value on a nonrecurring basis, such as impaired loans, other real estate (primarily foreclosed property), nonmarketable equity securities and certain other assets and liabilities. These nonrecurring fair value adjustments typically involve write-downs of individual assets or application of lower of cost or fair value accounting.

Refer to Note 1 to the consolidated financial statements in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2014 for further information about the fair value hierarchy, descriptions of the valuation methodologies and key inputs used to measure financial assets and liabilities recorded at fair value, as well as a description of the methods and significant assumptions used to estimate fair value disclosures for financial instruments not recorded at fair value in their entirety on a recurring basis. When credit valuation adjustments are significant to the overall fair value of a derivative, the Corporation classifies the over-the-counter derivative valuation in Level 3 of the fair value hierarchy; otherwise, over-the-counter derivative valuations are classified in Level 2.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

ASSETS AND LIABLILITIES RECORDED AT FAIR VALUE ON A RECURRING BASIS

The following tables present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of September 30, 2015 and December 31, 2014.

(in millions)	Total				Level 1				Level 2				Level 3
September 30, 2015
Trading securities:
Deferred compensation plan assets	$	89			$	89			$	—			$	—
Equity and other non-debt securities	3				3				—				—
State and municipal securities	1				—				1				—
Total trading securities	93				92				1				—
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities	930				930				—				—
Residential mortgage-backed securities (a)	7,559				—				7,559				—
State and municipal securities	9				—				—				9			(b)
Corporate debt securities	45				—				44				1			(b)
Equity and other non-debt securities	206				137				—				69			(b)
Total investment securities available-for-sale	8,749				1,067				7,603				79
Derivative assets:
Interest rate contracts	375				—				364				11
Energy derivative contracts	459				—				459				—
Foreign exchange contracts	51				—				51				—
Warrants	3				—				—				3
Total derivative assets	888				—				874				14
Total assets at fair value	$	9,730			$	1,159			$	8,478			$	93
Derivative liabilities:
Interest rate contracts	$	140			$	—			$	140			$	—
Energy derivative contracts	456				—				456				—
Foreign exchange contracts	44				—				44				—
Other	1				—				—				1
Total derivative liabilities	641				—				640				1
Deferred compensation plan liabilities	89				89				—				—
Total liabilities at fair value	$	730			$	89			$	640			$	1

(a)	Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

(b)	Auction-rate securities.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

(in millions)	Total				Level 1				Level 2				Level 3
December 31, 2014
Trading securities:
Deferred compensation plan assets	$	94			$	94			$	—			$	—
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities	526				526				—				—
Residential mortgage-backed securities (a)	7,274				—				7,274				—
State and municipal securities	23				—				—				23			(b)
Corporate debt securities	51				—				50				1			(b)
Equity and other non-debt securities	242				130				—				112			(b)
Total investment securities available-for-sale	8,116				656				7,324				136
Derivative assets:
Interest rate contracts	328				—				328				—
Energy derivative contracts	527				—				527				—
Foreign exchange contracts	39				—				39				—
Warrants	4				—				—				4
Total derivative assets	898				—				894				4
Total assets at fair value	$	9,108			$	750			$	8,218			$	140
Derivative liabilities:
Interest rate contracts	$	102			$	—			$	102			$	—
Energy derivative contracts	525				—				525				—
Foreign exchange contracts	34				—				34				—
Other	1				—				—				1
Total derivative liabilities	662				—				661				1
Deferred compensation plan liabilities	94				94				—				—
Total liabilities at fair value	$	756			$	94			$	661			$	1

(a)	Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

(b)	Auction-rate securities.

There were no transfers of assets or liabilities recorded at fair value on a recurring basis into or out of Level 1, Level 2 and Level 3 fair value measurements during each of the three- and nine-month periods ended September 30, 2015 and 2014.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three- and nine-month periods ended September 30, 2015 and 2014.

					Net Realized/Unrealized Gains (Losses) (Pretax)
	Balance  at Beginning of Period				Recorded in Earnings								Recorded in Other Comprehensive Income									Balance  at End of  Period
(in millions)					Realized				Unrealized									Sales
Three Months Ended September 30, 2015
Investment securities available-for-sale:
State and municipal securities (a)	$	23			$	—			$	—			$	—				$	(14	)		$	9
Corporate debt securities (a)	1				—				—				—					—				1
Equity and other non-debt securities (a)	71				—				—				(1		)	(b)		(1		)		69
Total investment securities available-for-sale	95				—				—				(1		)	(b)		(15		)		79
Derivative assets:
Interest rate contracts	2				—				9			(d)	—					—				11
Warrants	3				5			(d)	—				—					(5		)		3
Derivative liabilities:
Other	1				—				—				—					—				1
Three Months Ended September 30, 2014
Investment securities available-for-sale:
State and municipal securities (a)	$	23			$	—			$	—			$	—				$	—			$	23
Corporate debt securities (a)	1				—				—				—					—				1
Equity and other non-debt securities (a)	118				1			(c)	—				1			(b)		(7		)		113
Total investment securities available-for-sale	142				1			(c)	—				1			(b)		(7		)		137
Derivative assets:
Warrants	4				2			(d)	—				—					(2		)		4
Derivative liabilities:
Other	2				—				(1		)	(c)	—					—				3
Nine Months Ended September 30, 2015
Investment securities available-for-sale:
State and municipal securities (a)	$	23			$	—			$	—			$	—				$	(14	)		$	9
Corporate debt securities (a)	1				—				—				—					—				1
Equity and other non-debt securities (a)	112				(2		)	(c)	—				—					(41		)		69
Total investment securities available-for-sale	136				(2		)	(c)	—				—					(55		)		79
Derivative assets:
Interest rate contracts	—				—				11			(d)	—					—				11
Warrants	4				6			(d)	(1		)	(d)	—					(6		)		3
Derivative liabilities:
Other	1				—				—				—					—				1
Nine Months Ended September 30, 2014
Investment securities available-for-sale:
State and municipal securities (a)	$	22			$	—			$	—			$	1		(b)		$	—			$	23
Corporate debt securities (a)	1				—				—				—					—				1
Equity and other non-debt securities (a)	136				2			(c)	—				7			(b)		(32		)		113
Total investment securities available-for-sale	159				2			(c)	—				8			(b)		(32		)		137
Derivative assets:
Warrants	3				6			(d)	1			(d)	—					(6		)		4
Derivative liabilities:
Other	2				—				(1		)	(c)	—					—				3

(a)	Auction-rate securities.

(b)	Recorded in "net unrealized gains (losses) on investment securities available-for-sale" in other comprehensive income.

(c)	Realized and unrealized gains and losses due to changes in fair value recorded in "net securities gains" on the consolidated statements of comprehensive income.

(d)	Realized and unrealized gains and losses due to changes in fair value recorded in "other noninterest income" on the consolidated statements of comprehensive income.

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Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

ASSETS AND LIABILITIES RECORDED AT FAIR VALUE ON A NONRECURRING BASIS

The Corporation may be required, from time to time, to record certain assets and liabilities at fair value on a nonrecurring basis. These include assets that are recorded at the lower of cost or fair value that were recognized at fair value below cost at the end of the period. The following table presents assets recorded at fair value on a nonrecurring basis at September 30, 2015 and December 31, 2014. No liabilities were recorded at fair value on a nonrecurring basis at September 30, 2015 and December 31, 2014.

(in millions)	Total				Level 2				Level 3
September 30, 2015
Loans held-for-sale:
Commercial	$	12			$	12			$	—
Loans:
Commercial	124				—				124
Commercial mortgage	12				—				12
International	8				—				8
Total loans	144				—				144
Nonmarketable equity securities	1				—				1
Other real estate	3				—				3
Total assets at fair value	$	160			$	12			$	148
December 31, 2014
Loans:
Commercial	38				—				$	38
Commercial mortgage	26				—				26
Total loans	64				—				64
Nonmarketable equity securities	2				—				2
Other real estate	2				—				2
Total assets at fair value	$	68			$	—			$	68

Level 3 assets recorded at fair value on a nonrecurring basis at September 30, 2015 and December 31, 2014 included loans for which a specific allowance was established based on the fair value of collateral and other real estate for which fair value of the properties was less than the cost basis. For both asset classes, the unobservable inputs were the additional adjustments applied by management to the appraised values to reflect such factors as non-current appraisals and revisions to estimated time to sell. These adjustments are determined based on qualitative judgments made by management on a case-by-case basis and are not quantifiable inputs, although they are used in the determination of fair value.

The following table presents quantitative information related to the significant unobservable inputs utilized in the Corporation's Level 3 recurring fair value measurement as of September 30, 2015 and December 31, 2014. The Corporation's Level 3 recurring fair value measurements include auction-rate securities where fair value is determined using an income approach based on a discounted cash flow model. The inputs in the table below reflect management's expectation of continued illiquidity in the secondary auction-rate securities market due to a lack of market activity for the issuers remaining in the portfolio, a lack of market incentives for issuer redemptions, and the expectation for a continuing low interest rate environment. The September 30, 2015 workout periods reflect management's view that short-term interest rates could begin to rise in 2015.

					Discounted Cash Flow Model
					Unobservable Input
	Fair Value (in millions)				Discount Rate		Workout Period (in years)
September 30, 2015
State and municipal securities (a)	$	9			3% - 10%		1 - 3
Equity and other non-debt securities (a)	69				4% - 9%		1 - 2
December 31, 2014
State and municipal securities (a)	$	23			3% - 9%		1 - 3
Equity and other non-debt securities (a)	112				4% - 8%		1 - 2

(a)	Auction-rate securities.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS NOT RECORDED AT FAIR VALUE ON A RECURRING BASIS

The Corporation typically holds the majority of its financial instruments until maturity and thus does not expect to realize many of the estimated fair value amounts disclosed. The disclosures also do not include estimated fair value amounts for items that are not defined as financial instruments, but which have significant value. These include such items as core deposit intangibles, the future earnings potential of significant customer relationships and the value of trust operations and other fee generating businesses. The Corporation believes the imprecision of an estimate could be significant.

The carrying amount and estimated fair value of financial instruments not recorded at fair value in their entirety on a recurring basis on the Corporation’s consolidated balance sheets are as follows:

	Carrying Amount				Estimated Fair Value
(in millions)					Total				Level 1				Level 2				Level 3
September 30, 2015
Assets
Cash and due from banks	$	1,101			$	1,101			$	1,101			$	—			$	—
Interest-bearing deposits with banks	6,099				6,099				6,099				—				—
Investment securities held-to-maturity	1,863				1,872				—				1,872				—
Loans held-for-sale (a)	15				15				—				15				—
Total loans, net of allowance for loan losses (b)	48,320				48,244				—				—				48,244
Customers’ liability on acceptances outstanding	5				5				5				—				—
Nonmarketable equity securities (c)	10				19				—				—				19
Restricted equity investments	92				92				92				—				—
Liabilities
Demand deposits (noninterest-bearing)	28,697				28,697				—				28,697				—
Interest-bearing deposits	25,945				25,945				—				25,945				—
Customer certificates of deposit	4,126				4,119				—				4,119				—
Total deposits	58,768				58,761				—				58,761				—
Short-term borrowings	109				109				109				—				—
Acceptances outstanding	5				5				5				—				—
Medium- and long-term debt	3,100				3,047				—				3,047				—
Credit-related financial instruments	(89		)		(89		)		—				—				(89		)
December 31, 2014
Assets
Cash and due from banks	$	1,026			$	1,026			$	1,026			$	—			$	—
Interest-bearing deposits with banks	5,045				5,045				5,045				—				—
Investment securities held-to-maturity	1,935				1,933				—				1,933				—
Loans held-for-sale (a)	5				5				—				5				—
Total loans, net of allowance for loan losses (b)	47,999				47,932				—				—				47,932
Customers’ liability on acceptances outstanding	10				10				10				—				—
Nonmarketable equity securities (c)	11				18				—				—				18
Restricted equity investments	92				92				92				—				—
Liabilities
Demand deposits (noninterest-bearing)	27,224				27,224				—				27,224				—
Interest-bearing deposits	25,841				25,841				—				25,841				—
Customer certificates of deposit	4,421				4,411				—				4,411				—
Total deposits	57,486				57,476				—				57,476				—
Short-term borrowings	116				116				116				—				—
Acceptances outstanding	10				10				10				—				—
Medium- and long-term debt	2,675				2,681				—				2,681				—
Credit-related financial instruments	(85		)		(85		)		—				—				(85		)

(a)	Included $12 million and no impaired loans held-for-sale recorded at fair value on a nonrecurring basis at September 30, 2015 and December 31, 2014, respectively.

(b)	Included $144 million and $64 million of impaired loans recorded at fair value on a nonrecurring basis at September 30, 2015 and December 31, 2014, respectively.

(c)	Included $1 million and $2 million of nonmarketable equity securities recorded at fair value on a nonrecurring basis at September 30, 2015 and December 31, 2014, respectively.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 3 - INVESTMENT SECURITIES

A summary of the Corporation’s investment securities follows:

(in millions)	Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
September 30, 2015
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities	$	917			$	13			$	—			$	930
Residential mortgage-backed securities (a)	7,445				133				19				7,559
State and municipal securities	9				—				—				9
Corporate debt securities	45				—				—				45
Equity and other non-debt securities	206				1				1				206
Total investment securities available-for-sale (b)	$	8,622			$	147			$	20			$	8,749
Investment securities held-to-maturity (c):
Residential mortgage-backed securities (a)	$	1,863			$	10			$	1			$	1,872
December 31, 2014
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities	$	526			$	—			$	—			$	526
Residential mortgage-backed securities (a)	7,192				122				40				7,274
State and municipal securities	24				—				1				23
Corporate debt securities	51				—				—				51
Equity and other non-debt securities	242				1				1				242
Total investment securities available-for-sale (b)	$	8,035			$	123			$	42			$	8,116
Investment securities held-to-maturity (c):
Residential mortgage-backed securities (a)	$	1,935			$	—			$	2			$	1,933

(a)	Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

(b)	Included auction-rate securities at amortized cost and fair value of $80 million and $79 million, respectively as of September 30, 2015 and $137 million and $136 million, respectively, as of December 31, 2014.

(c)	The amortized cost of investment securities held-to-maturity included net unrealized losses of $17 million at September 30, 2015 and $23 million at December 31, 2014 related to securities transferred from available-for-sale, which are included in accumulated other comprehensive loss.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

A summary of the Corporation’s investment securities in an unrealized loss position as of September 30, 2015 and December 31, 2014 follows:

	Temporarily Impaired
	Less than 12 Months									12 Months or more									Total
(in millions)	Fair Value				Unrealized Losses					Fair Value				Unrealized Losses					Fair Value				Unrealized Losses
September 30, 2015
Residential mortgage-backed securities (b)	$	642			$	3				$	2,071			$	37				$	2,713			$	40
State and municipal securities (c)	—				—					9				—			(a)		9				—			(a)
Corporate debt securities (c)	—				—					1				—			(a)		1				—			(a)
Equity and other non-debt securities (c)	70				1					—				—					70				1
Total temporarily impaired securities	$	712			$	4				$	2,081			$	37				$	2,793			$	41
December 31, 2014
U.S. Treasury and other U.S. government agency securities	$	298			$	—		(a)		$	—			$	—				$	298			$	—		(a)
Residential mortgage-backed securities (b)	626				3					3,112				71					3,738				74
State and municipal securities (c)	—				—					22				1					22				1
Corporate debt securities (c)	—				—					1				—			(a)		1				—			(a)
Equity and other non-debt securities (c)	—				—					112				1					112				1
Total temporarily impaired securities	$	924			$	3				$	3,247			$	73				$	4,171			$	76

(a)	Unrealized losses less than $0.5 million.

(b)	Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

(c)	Auction-rate securities.

At September 30, 2015, the Corporation had 123 securities in an unrealized loss position with no credit impairment, including 68 residential mortgage-backed securities, 38 auction-rate preferred securities, 16 state and municipal auction-rate securities, and one corporate auction-rate debt security. As of September 30, 2015, approximately 94 percent of the aggregate par value of auction-rate securities have been redeemed or sold since acquisition, of which approximately 91 percent were redeemed at or above cost. The unrealized losses for these securities resulted from changes in market interest rates and liquidity. The Corporation ultimately expects full collection of the carrying amount of these securities, does not intend to sell the securities in an unrealized loss position, and it is not more-likely-than-not that the Corporation will be required to sell the securities in an unrealized loss position prior to recovery of amortized cost. The Corporation does not consider these securities to be other-than-temporarily impaired at September 30, 2015.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

Sales, calls and write-downs of investment securities available-for-sale resulted in the following gains and losses recorded in “net securities losses” on the consolidated statements of comprehensive income, computed based on the adjusted cost of the specific security.

	Three Months Ended September 30,								Nine Months Ended September 30,
(in millions)	2015				2014				2015				2014
Securities gains	$	—			$	—			$	—			$	1
Securities losses	—				(1		)		(2		)		(1		)
Net securities losses	$	—			$	(1	)		$	(2	)		$	—

The following table summarizes the amortized cost and fair values of debt securities by contractual maturity. Securities with multiple maturity dates are classified in the period of final maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(in millions)	Available-for-sale								Held-to-maturity
September 30, 2015	Amortized Cost				Fair Value				Amortized Cost				Fair Value
Contractual maturity
Within one year	$	74			$	74			$	—			$	—
After one year through five years	1,123				1,136				—				—
After five years through ten years	929				976				—				—
After ten years	6,290				6,357				1,863				1,872
Subtotal	8,416				8,543				1,863				1,872
Equity and other non-debt securities	206				206
Total investment securities	$	8,622			$	8,749			$	1,863			$	1,872

Included in the contractual maturity distribution in the table above were residential mortgage-backed securities available-for-sale with total amortized cost and fair value of $7.4 billion and $7.6 billion, respectively, and residential mortgage-backed securities held-to-maturity with a total amortized cost and fair value of $1.9 billion. The actual cash flows of mortgage-backed securities may differ from contractual maturity as the borrowers of the underlying loans may exercise prepayment options.

At September 30, 2015, investment securities with a carrying value of $2.9 billion were pledged where permitted or required by law to secure $2.1 billion of liabilities, primarily public and other deposits of state and local government agencies and derivative instruments.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 4 – CREDIT QUALITY AND ALLOWANCE FOR CREDIT LOSSES

The following table presents an aging analysis of the recorded balance of loans.

	Loans Past Due and Still Accruing
(in millions)	30-59 Days				60-89  Days				90 Days or More				Total				Nonaccrual Loans				Current Loans				Total  Loans
September 30, 2015
Business loans:
Commercial	$	83			$	8			$	2			$	93			$	214			$	31,470			$	31,777
Real estate construction:
Commercial Real Estate business line (a)	4				—				—				4				—				1,558				1,562
Other business lines (b)	1				—				—				1				1				310				312
Total real estate construction	5				—				—				5				1				1,868				1,874
Commercial mortgage:
Commercial Real Estate business line (a)	21				—				—				21				17				1,964				2,002
Other business lines (b)	13				3				2				18				49				6,718				6,785
Total commercial mortgage	34				3				2				39				66				8,682				8,787
Lease financing	—				—				—				—				8				743				751
International	3				—				1				4				8				1,370				1,382
Total business loans	125				11				5				141				297				44,133				44,571
Retail loans:
Residential mortgage	12				1				—				13				31				1,836				1,880
Consumer:
Home equity	5				1				—				6				28				1,680				1,714
Other consumer	2				—				—				2				1				774				777
Total consumer	7				1				—				8				29				2,454				2,491
Total retail loans	19				2				—				21				60				4,290				4,371
Total loans	$	144			$	13			$	5			$	162			$	357			$	48,423			$	48,942
December 31, 2014
Business loans:
Commercial	$	58			$	13			$	1			$	72			$	109			$	31,339			$	31,520
Real estate construction:
Commercial Real Estate business line (a)	3				—				—				3				1				1,602				1,606
Other business lines (b)	12				—				—				12				1				336				349
Total real estate construction	15				—				—				15				2				1,938				1,955
Commercial mortgage:
Commercial Real Estate business line (a)	8				1				1				10				22				1,758				1,790
Other business lines (b)	16				12				2				30				73				6,711				6,814
Total commercial mortgage	24				13				3				40				95				8,469				8,604
Lease financing	—				—				—				—				—				805				805
International	9				—				—				9				—				1,487				1,496
Total business loans	106				26				4				136				206				44,038				44,380
Retail loans:
Residential mortgage	9				2				—				11				36				1,784				1,831
Consumer:
Home equity	5				3				—				8				30				1,620				1,658
Other consumer	12				—				1				13				1				710				724
Total consumer	17				3				1				21				31				2,330				2,382
Total retail loans	26				5				1				32				67				4,114				4,213
Total loans	$	132			$	31			$	5			$	168			$	273			$	48,152			$	48,593

(a)	Primarily loans to real estate developers.

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

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

The following table presents loans by credit quality indicator, based on internal risk ratings assigned to each business loan at the time of approval and subjected to subsequent reviews, generally at least annually, and to pools of retail loans with similar risk characteristics.

	Internally Assigned Rating
(in millions)	Pass (a)				Special Mention (b)				Substandard (c)				Nonaccrual (d)				Total
September 30, 2015
Business loans:
Commercial	$	29,571			$	1,035			$	957			$	214			$	31,777
Real estate construction:
Commercial Real Estate business line (e)	1,554				—				8				—				1,562
Other business lines (f)	303				—				8				1				312
Total real estate construction	1,857				—				16				1				1,874
Commercial mortgage:
Commercial Real Estate business line (e)	1,920				33				32				17				2,002
Other business lines (f)	6,441				160				135				49				6,785
Total commercial mortgage	8,361				193				167				66				8,787
Lease financing	719				16				8				8				751
International	1,281				69				24				8				1,382
Total business loans	41,789				1,313				1,172				297				44,571
Retail loans:
Residential mortgage	1,816				1				32				31				1,880
Consumer:
Home equity	1,682				1				3				28				1,714
Other consumer	757				9				10				1				777
Total consumer	2,439				10				13				29				2,491
Total retail loans	4,255				11				45				60				4,371
Total loans	$	46,044			$	1,324			$	1,217			$	357			$	48,942
December 31, 2014
Business loans:
Commercial	$	30,310			$	560			$	541			$	109			$	31,520
Real estate construction:
Commercial Real Estate business line (e)	1,594				11				—				1				1,606
Other business lines (f)	336				7				5				1				349
Total real estate construction	1,930				18				5				2				1,955
Commercial mortgage:
Commercial Real Estate business line (e)	1,652				69				47				22