Annual Statements Open main menu

COMERICA INC /NEW/ - Quarter Report: 2017 September (Form 10-Q)

Table of Contents

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, 2017
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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
 
Accelerated filer o

Non-accelerated filer o
(Do not check if a smaller reporting company)
 
Smaller reporting company o
 
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes 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 24, 2017: 173,915,038 shares


Table of Contents

COMERICA INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS
Comerica Incorporated and Subsidiaries
(in millions, except share data)
September 30, 2017
 
December 31, 2016
 
(unaudited)
 
 
ASSETS
 
 
 
Cash and due from banks
$
1,351

 
$
1,249

 
 
 
 
Interest-bearing deposits with banks
4,853

 
5,969

Other short-term investments
92

 
92

 
 
 
 
Investment securities available-for-sale
10,998

 
10,787

Investment securities held-to-maturity
1,344

 
1,582

 
 
 
 
Commercial loans
31,062

 
30,994

Real estate construction loans
3,018

 
2,869

Commercial mortgage loans
8,985

 
8,931

Lease financing
475

 
572

International loans
1,159

 
1,258

Residential mortgage loans
1,999

 
1,942

Consumer loans
2,511

 
2,522

Total loans
49,209

 
49,088

Less allowance for loan losses
(712
)
 
(730
)
Net loans
48,497

 
48,358

Premises and equipment
467

 
501

Accrued income and other assets
4,415

 
4,440

Total assets
$
72,017

 
$
72,978

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Noninterest-bearing deposits
$
32,391

 
$
31,540

 
 
 
 
Money market and interest-bearing checking deposits
20,869

 
22,556

Savings deposits
2,147

 
2,064

Customer certificates of deposit
2,342

 
2,806

Foreign office time deposits
70

 
19

Total interest-bearing deposits
25,428

 
27,445

Total deposits
57,819

 
58,985

Short-term borrowings
509

 
25

Accrued expenses and other liabilities
1,018

 
1,012

Medium- and long-term debt
4,637

 
5,160

Total liabilities
63,983

 
65,182

 
 
 
 
Common stock - $5 par value:
 
 
 
Authorized - 325,000,000 shares
 
 
 
Issued - 228,164,824 shares
1,141

 
1,141

Capital surplus
2,112

 
2,135

Accumulated other comprehensive loss
(359
)
 
(383
)
Retained earnings
7,746

 
7,331

Less cost of common stock in treasury - 53,835,135 shares at 9/30/17 and 52,851,156 shares at 12/31/16
(2,606
)
 
(2,428
)
Total shareholders’ equity
8,034

 
7,796

Total liabilities and shareholders’ equity
$
72,017

 
$
72,978

See notes to consolidated financial statements.

1

Table of Contents
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)
2017
 
2016
 
2017
 
2016
INTEREST INCOME
 
 
 
 
 
 
 
Interest and fees on loans
$
500

 
$
411

 
$
1,374

 
$
1,223

Interest on investment securities
62

 
61

 
186

 
185

Interest on short-term investments
17

 
8

 
44

 
17

Total interest income
579

 
480

 
1,604

 
1,425

INTEREST EXPENSE
 
 
 
 
 
 
 
Interest on deposits
11

 
10

 
29

 
30

Interest on short-term borrowings
3

 

 
3

 

Interest on medium- and long-term debt
19

 
20

 
56

 
53

Total interest expense
33

 
30

 
88

 
83

Net interest income
546

 
450

 
1,516

 
1,342

Provision for credit losses
24

 
16

 
57

 
213

Net interest income after provision for credit losses
522

 
434

 
1,459

 
1,129

NONINTEREST INCOME
 
 
 
 
 
 
 
Card fees
85

 
76

 
242

 
224

Service charges on deposit accounts
57

 
55

 
172

 
165

Fiduciary income
48

 
47

 
148

 
142

Commercial lending fees
21

 
26

 
63

 
68

Letter of credit fees
11

 
12

 
34

 
38

Bank-owned life insurance
12

 
12

 
31

 
30

Foreign exchange income
11

 
10

 
33

 
31

Brokerage fees
6

 
5

 
17

 
14

Net securities losses
(1
)
 

 
(3
)
 
(3
)
Other noninterest income
25

 
29

 
85

 
75

Total noninterest income
275

 
272

 
822

 
784

NONINTEREST EXPENSES
 
 
 
 
 
 
 
Salaries and benefits expense
225

 
247

 
677

 
742

Outside processing fee expense
92

 
86

 
267

 
247

Net occupancy expense
38

 
40

 
114

 
117

Equipment expense
12

 
13

 
34

 
40

Restructuring charges
7

 
20

 
32

 
73

Software expense
35

 
31

 
95

 
90

FDIC insurance expense
13

 
14

 
38

 
39

Advertising expense
8

 
5

 
19

 
15

Litigation-related expense

 

 
(2
)
 

Other noninterest expenses
33

 
37

 
103

 
106

Total noninterest expenses
463

 
493

 
1,377

 
1,469

Income before income taxes
334

 
213

 
904

 
444

Provision for income taxes
108

 
64

 
273

 
131

NET INCOME
226

 
149

 
631

 
313

Less income allocated to participating securities
2

 
1

 
5

 
3

Net income attributable to common shares
$
224

 
$
148

 
$
626

 
$
310

Earnings per common share:
 
 
 
 
 
 
 
Basic
$
1.29

 
$
0.87

 
$
3.58

 
$
1.80

Diluted
1.26

 
0.84

 
3.50

 
1.76

 
 
 
 
 
 
 
 
Comprehensive income
228

 
152

 
655

 
450

 
 
 
 
 
 
 
 
Cash dividends declared on common stock
53

 
40

 
141

 
115

Cash dividends declared per common share
0.30

 
0.23

 
0.79

 
0.66

See notes to consolidated financial statements.

2

Table of Contents
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, 2015
175.7

 
$
1,141

 
$
2,173

 
$
(429
)
 
$
7,084

 
$
(2,409
)
 
$
7,560

Net income

 

 

 

 
313

 

 
313

Other comprehensive income, net of tax

 

 

 
137

 

 

 
137

Cash dividends declared on common stock ($0.66 per share)

 

 

 

 
(115
)
 

 
(115
)
Purchase of common stock
(5.0
)
 

 

 

 

 
(211
)
 
(211
)
Net issuance of common stock under employee stock plans
1.4

 

 
(29
)
 

 
(20
)
 
62

 
13

Share-based compensation

 

 
30

 

 

 

 
30

BALANCE AT SEPTEMBER 30, 2016
172.1

 
$
1,141

 
$
2,174

 
$
(292
)
 
$
7,262

 
$
(2,558
)
 
$
7,727

 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE AT DECEMBER 31, 2016
175.3

 
$
1,141

 
$
2,135

 
$
(383
)
 
$
7,331

 
$
(2,428
)
 
$
7,796

Cumulative effect of change in accounting principle

 

 
3

 

 
(2
)
 

 
1

Net income

 

 

 

 
631

 

 
631

Other comprehensive income, net of tax

 

 

 
24

 

 

 
24

Cash dividends declared on common stock ($0.79 per share)

 

 

 

 
(141
)
 

 
(141
)
Purchase of common stock
(5.7
)
 

 

 

 

 
(396
)
 
(396
)
Net issuance of common stock under employee stock plans
3.0

 

 
(26
)
 

 
(22
)
 
138

 
90

Net issuance of common stock for warrants
1.7

 

 
(28
)
 

 
(51
)
 
79

 

Share-based compensation

 

 
29

 

 

 

 
29

Other

 

 
(1
)
 

 

 
1

 

BALANCE AT SEPTEMBER 30, 2017
174.3

 
$
1,141

 
$
2,112

 
$
(359
)
 
$
7,746

 
$
(2,606
)
 
$
8,034

See notes to consolidated financial statements.



3

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


 
Nine Months Ended September 30,
(in millions)
2017
 
2016
OPERATING ACTIVITIES
 
 
 
Net income
$
631

 
$
313

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for credit losses
57

 
213

Benefit for deferred income taxes
(48
)
 
(74
)
Depreciation and amortization
91

 
91

Net periodic defined benefit (credit) cost
(14
)
 
11

Share-based compensation expense
29

 
30

Net amortization of securities
5

 
7

Accretion of loan purchase discount
(3
)
 
(4
)
Net gains on sales of foreclosed property
(2
)
 
(3
)
Net change in:
 
 
 
Accrued income receivable
(21
)
 
(8
)
Accrued expenses payable
28

 
71

Other, net
105

 
(245
)
Net cash provided by operating activities
858

 
402

INVESTING ACTIVITIES
 
 
 
Investment securities available-for-sale:
 
 
 
Maturities and redemptions
1,198

 
1,259

Sales
1,259

 

Purchases
(2,655
)
 
(1,396
)
Investment securities held-to-maturity:
 
 
 
Maturities and redemptions
241

 
288

Net change in loans
(193
)
 
(290
)
Proceeds from sales of foreclosed property
18

 
15

Net increase in premises and equipment
(43
)
 
(71
)
Federal Home Loan Bank stock:
 
 
 
      Purchases
(42
)
 
(115
)
      Redemptions
21

 

Other, net
2

 
3

Net cash used in investing activities
(194
)
 
(307
)
FINANCING ACTIVITIES
 
 
 
Net change in:
 
 
 
Deposits
(1,208
)
 
(686
)
Short-term borrowings
484

 
(11
)
Medium- and long-term debt:
 
 
 
Maturities
(500
)
 

Issuances

 
2,800

     Terminations
(16
)
 

Common stock:
 
 
 
Repurchases
(404
)
 
(215
)
Cash dividends paid
(128
)
 
(112
)
Issuances under employee stock plans
98

 
25

Other, net
(4
)
 
(3
)
Net cash (used in) provided by financing activities
(1,678
)
 
1,798

Net (decrease) increase in cash and cash equivalents
(1,014
)
 
1,893

Cash and cash equivalents at beginning of period
7,218

 
6,147

Cash and cash equivalents at end of period
$
6,204

 
$
8,040

Interest paid
$
89

 
$
75

Income tax paid
247

 
111

Noncash investing and financing activities:
 
 
 
Loans transferred to other real estate
6

 
21

Loans transferred from held-for-sale to portfolio

 
17

See notes to consolidated financial statements.

4

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

NOTE 1 - BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Organization
The accompanying unaudited consolidated financial statements were prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation were included. The results of operations for the nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. 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, 2016.
Share-Based Compensation
Effective January 1, 2016, the Corporation adopted the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payments Accounting” (ASU 2016-09). ASU 2016-09 provides for the election of an accounting policy as to the timing of when stock award forfeitures are recognized in compensation expense. The Corporation elected to account for forfeitures as they occur, rather than account for compensation cost based on an estimate of the number of awards that are expected to vest. The prior period effect of this policy election as of the beginning of the year was reported as "cumulative effect of change in accounting principle" in the accompanying Consolidated Statements of Changes in Shareholders’ Equity (unaudited). In addition, ASU 2016-09 requires excess tax benefits and deficiencies resulting from employee stock awards to be prospectively recognized as a component of income taxes. Previously, excess tax benefits and deficiencies were recognized in "capital surplus" in the Consolidated Statements of Changes in Shareholders' Equity. Net excess tax benefits for awards that vested, were exercised or expired included in the "provision for income taxes" totaled $2 million and $31 million for the three- and nine-month periods ended September 30, 2017, respectively.
The Corporation also retrospectively adopted certain changes to the statement of cash flows in accordance with ASU 2016-09. Excess tax benefits must be classified as an operating activity, and cash paid to a tax authority by the Corporation when withholding shares from an employee’s award for tax-withholding purposes must be classified as a financing activity. Accordingly, in the Consolidated Statements of Cash Flows (unaudited), net cash provided by operating activities increased $5 million and net cash provided by financing activities decreased by a corresponding amount for the nine months ended September 30, 2016.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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 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. The Corporation expects to adopt ASU 2014-09 in the first quarter 2018 using the modified retrospective approach, which includes presenting the cumulative effect of initial application along with supplementary disclosures. The identification of revenue streams within the scope of Topic 606 is complete, resulting in less than 30 percent of total revenues in scope of the new guidance. The accounting analysis to determine potential changes to identified performance obligations, timing of revenue recognition and presentation as a result of implementing the new guidance is in its final stages.
Under the new guidance, card fee revenue from certain products will generally be presented net of network costs (including interchange costs, surcharge fees and assessment fees), as opposed to the current presentation of associated network costs in "outside processing fees." Network costs impacted by the new guidance were approximately $97 million for the year ended December 31, 2016.
The Corporation currently defers recognition of certain treasury management fees in "service charges on deposit accounts" in the consolidated statements of comprehensive income until the amount of compensation is considered fixed and determinable. Under the new guidance, a portion of these fees will be recognized as services are rendered. As a result of this earlier recognition, the Corporation expects to record a receivable of approximately $15 million to $18 million with a corresponding adjustment to retained earnings and deferred tax liability upon adoption of ASU 2014-09. The annual amount of treasury management fees reflected in the Corporation’s results of operations is not expected to significantly change.

5

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

While no other material changes to the financial condition or results of operations have been identified to date, conclusions are preliminary as the Corporation finalizes its evaluation of the guidance. The Corporation continues to evaluate changes that may be required to applicable disclosures.
In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition of Financial Assets and Financial Liabilities," (ASU 2016-01), which makes targeted amendments to the guidance for recognition, measurement, presentation and disclosure of financial instruments. The guidance under ASU 2016-01 is effective for annual and interim periods beginning after December 15, 2017. ASU 2016-01 requires equity investments, other than equity method investments, to be measured at fair value with changes in fair value recognized in net income.  As of September 30, 2017, the Corporation classified approximately $45 million of auction-rate securities as available for sale equity securities.  At adoption, any cumulative change in the fair value of these auction-rate securities previously recognized in accumulated other comprehensive income will be recorded as an adjustment to the opening balance of retained earnings, and any further changes to their fair value will be recorded in net income. The Corporation does not expect the new guidance to have a material impact on its financial condition or results of operation. ASU 2016-01 also emphasizes the existing requirement to use exit prices to measure fair value for disclosure purposes and clarifies that entities should not make use of a practicability exception in determining the fair value of loans. Accordingly, the Corporation will refine the calculation used to determine the disclosed fair value of its held-for-investment loan portfolio as part of adopting the standard. 
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” (ASU 2016-15), which reduces diversity in the presentation of several categories of transactions in the cash flow statement. Among other things, the update clarifies the appropriate classification for proceeds from settlement of bank owned life insurance (BOLI) policies. The Corporation expects to change the classification of proceeds from settlement of BOLI policies from operating activities to investing activities. Proceeds from settlement of BOLI policies totaled $8 million and $16 million for the nine-month period ended September 30, 2017 and year ended December 31, 2016, respectively. Other changes in classification resulting from this update are not expected to be significant. ASU 2016-15 is effective for the Corporation on January 1, 2018 and must be applied using the retrospective approach.
In March 2017, the FASB issued ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (ASU 2017-07), which requires employers to report service cost as part of compensation expense and the other components of net benefit cost separately from service cost on the statement of income. Further, only the service cost component will be eligible for capitalization in deferred loan costs.
The Corporation currently includes all components of net benefit cost in "salaries and benefits expense" in the consolidated statements of comprehensive income. Upon adoption of ASU 2017-07, only service cost will remain in salaries and benefits expense, and the other components (interest cost, expected return on assets, amortization of prior service cost or credit and amortization of net actuarial gains or losses) will be included in "other noninterest expenses." The other components of net benefit cost were a benefit of $36 million and $28 million for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively. ASU 2017-07 is effective for the Corporation on January 1, 2018. The Corporation does not expect the new guidance to have a material impact on its financial condition or results of operations.
In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (ASU 2017-12), which better aligns the accounting and reporting of hedging relationships with the economics of risk management activities. ASU 2017-12 provides administrative reliefs to simplify the application of hedge accounting. The amendment is effective for the Corporation on January 1, 2019 and early adoption is permitted. The Corporation is considering early adoption of the guidance on January 1, 2018. ASU 2017-12 requires an adjustment to opening retained earnings for the cumulative effect of changes to the measurement methodology on the basis of hedged items at transition.
The Corporation’s derivative instruments used for risk management predominately comprise swaps converting fixed-rate long-term debt to variable rates. These hedges have been highly effective, with no ineffectiveness net gains or losses recognized for the three- and nine-month periods ended September 30, 2017. An ineffectiveness net loss of $2 million was included in “other noninterest income” in the consolidated statements of income for the year ended December 31, 2016. Under the amendment, gains or losses relating to hedge ineffectiveness will prospectively be included in “net interest income” rather than “other noninterest income." The Corporation does not expect the new guidance to have a material impact on its financial condition or results of operations.


6

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

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, 2016 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.
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, 2017 and December 31, 2016.
(in millions)
Total
 
Level 1
 
Level 2
 
Level 3
 
September 30, 2017
 
 
 
 
 
 
 
 
Trading securities:
 
 
 
 
 
 
 
 
Deferred compensation plan assets
$
89

 
$
89

 
$

 
$

 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
2,770

 
2,770

 

 

 
Residential mortgage-backed securities (a)
8,137

 

 
8,137

 

 
State and municipal securities
5

 

 

 
5

(b)
Equity and other non-debt securities
86

 
41

 

 
45

(b)
Total investment securities available-for-sale
10,998

 
2,811

 
8,137

 
50

 
Derivative assets:
 
 
 
 
 
 
 
 
Interest rate contracts
79

 

 
65

 
14

 
Energy derivative contracts
63

 

 
63

 

 
Foreign exchange contracts
46

 

 
46

 

 
Warrants
2

 

 

 
2

 
Total derivative assets
190

 

 
174

 
16

 
Total assets at fair value
$
11,277

 
$
2,900

 
$
8,311

 
$
66

 
Derivative liabilities:
 
 
 
 
 
 
 
 
Interest rate contracts
$
45

 
$

 
$
45

 

 
Energy derivative contracts
60

 

 
60

 

 
Foreign exchange contracts
44

 

 
44

 

 
Total derivative liabilities
149

 

 
149

 

 
Deferred compensation plan liabilities
89

 
89

 

 

 
Total liabilities at fair value
$
238

 
$
89

 
$
149

 
$

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

7

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

(in millions)
Total
 
Level 1
 
Level 2
 
Level 3
 
December 31, 2016
 
 
 
 
 
 
 
 
Trading securities:
 
 
 
 
 
 
 
 
Deferred compensation plan assets
$
87

 
$
87

 
$

 
$

 
Equity and other non-debt securities
1

 
1

 

 

 
Total trading securities
88

 
88

 

 

 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
2,779

 
2,779

 

 

 
Residential mortgage-backed securities (a)
7,872

 

 
7,872

 

 
State and municipal securities
7

 

 

 
7

(b)
Equity and other non-debt securities
129

 
82

 

 
47

(b)
Total investment securities available-for-sale
10,787

 
2,861

 
7,872

 
54

 
Derivative assets:
 
 
 
 
 
 
 
 
Interest rate contracts
223

 

 
212

 
11

 
Energy derivative contracts
146

 

 
146

 

 
Foreign exchange contracts
38

 

 
38

 

 
Warrants
3

 

 

 
3

 
Total derivative assets
410

 

 
396

 
14

 
Total assets at fair value
$
11,285

 
$
2,949

 
$
8,268

 
$
68

 
Derivative liabilities:
 
 
 
 
 
 
 
 
Interest rate contracts
$
81

 
$

 
$
81

 
$

 
Energy derivative contracts
144

 

 
144

 

 
Foreign exchange contracts
29

 

 
29

 

 
Total derivative liabilities
254

 

 
254

 

 
Deferred compensation plan liabilities
87

 
87

 

 

 
Total liabilities at fair value
$
341

 
$
87

 
$
254

 
$

 
(a)
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, 2017 and 2016.

8

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

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three- and nine-month periods ended September 30, 2017 and 2016.
 
 
 
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
 
Redemptions
 
Sales
 
Three Months Ended September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities (a)
$
5

 
$

 
$

 
$

 
 
$

 
$

 
$
5

Equity and other non-debt securities (a)
46

 

 

 
(1
)
 
 

 

 
45

Total investment securities available-for-sale
51

 

 

 
(1
)
 
 

 

 
50

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
13

 

 
1

(b)

 
 

 

 
14

Warrants
2

 

 

 

 
 

 

 
2

Three Months Ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities (a)
$
8

 
$

 
$

 
$

 
 
$

 
$

 
$
8

Corporate debt securities (a)
1

 

 

 

 
 
(1
)
 

 

Equity and other non-debt securities (a)
48

 

 

 
1

 
 
(3
)
 

 
46

Total investment securities available-for-sale
57

 

 

 
1

 
 
(4
)
 

 
54

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
27

 

 

 

 
 

 

 
27

Warrants
2

 
3

(b)

 

 
 

 
(3
)
 
2

Nine Months Ended September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities (a)
$
7

 
$

 
$

 
$

 
 
$
(2
)
 
$

 
$
5

Equity and other non-debt securities (a)
47

 



 
(1
)
 
 
(1
)
 

 
45

Total investment securities available-for-sale
54

 



 
(1
)
 
 
(3
)
 

 
50

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
11

 

 
3

(b)

 
 

 

 
14

Warrants
3

 
5

(b)
(1
)
(b)

 
 

 
(5
)
 
2

Nine Months Ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities (a)
$
9

 
$

 
$

 
$

 
 
$
(1
)
 
$

 
$
8

Corporate debt securities (a)
1

 

 

 

 
 
(1
)
 

 

Equity and other non-debt securities (a)
67

 

 

 
(3
)
 
 
(18
)
 

 
46

Total investment securities available-for-sale
77

 

 

 
(3
)
 
 
(20
)
 

 
54

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
9

 

 
18

(b)

 
 

 

 
27

Warrants
2

 
4

(b)

 

 
 

 
(4
)
 
2

(a)
Auction-rate securities.
(b)
Realized and unrealized gains and losses due to changes in fair value recorded in "other noninterest income" on the consolidated statements of comprehensive income.


ASSETS AND LIABILITIES RECORDED AT FAIR VALUE ON A NONRECURRING BASIS
The Corporation may be required, 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, 2017 and December 31, 2016. No liabilities were recorded at fair value on a nonrecurring basis at September 30, 2017 and December 31, 2016.

9

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

(in millions)
Level 3
September 30, 2017
 
Loans:
 
Commercial
$
131

Commercial mortgage
9

International
2

Total assets at fair value
$
142

December 31, 2016
 
Loans:
 
Commercial
$
256

Commercial mortgage
15

International
11

Total loans
282

Other real estate
1

Total assets at fair value
$
283

Level 3 assets recorded at fair value on a nonrecurring basis at September 30, 2017 and December 31, 2016 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, 2017 and December 31, 2016. The Corporation's Level 3 recurring fair value measurements primarily include auction-rate securities where fair value is determined using an income approach based on a discounted cash flow model and certain interest rate derivative contracts where credit valuation adjustments are significant to the overall fair value of the derivative. 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 workout periods reflect management's expectation of the pace at which short-term interest rates could rise at each respective period.
 
 
 
Discounted Cash Flow Model
 
 
 
Unobservable Input
 
Fair Value
(in millions)
 
Discount Rate
 
Workout Period (in years)
September 30, 2017
 
 
 
 
 
State and municipal securities (a)
$
5

 
5% - 7%
 
1 - 3
Equity and other non-debt securities (a)
45

 
7% - 10%
 
1 - 2
December 31, 2016
 
 
 
 
 
State and municipal securities (a)
$
7

 
4% - 6%
 
1 - 2
Equity and other non-debt securities (a)
47

 
7% - 9%
 
1 - 2
(a)
Auction-rate securities.
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.

10

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

The carrying amount and estimated fair value of financial instruments not recorded at fair value in their entirety on a recurring basis on the Corporation’s consolidated balance sheets are as follows:
 
Carrying
Amount
 
Estimated Fair Value
(in millions)
 
Total
 
Level 1
 
Level 2
 
Level 3
September 30, 2017
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
1,351

 
$
1,351

 
$
1,351

 
$

 
$

Interest-bearing deposits with banks
4,853

 
4,853

 
4,853

 

 

Investment securities held-to-maturity
1,344

 
1,339

 

 
1,339

 

Loans held-for-sale
3

 
3

 

 
3

 

Total loans, net of allowance for loan losses (a)
48,497

 
48,296

 

 

 
48,296

Customers’ liability on acceptances outstanding
2

 
2

 
2

 

 

Restricted equity investments
228

 
228

 
228

 

 

Nonmarketable equity securities (b)
6

 
9

 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Demand deposits (noninterest-bearing)
32,391

 
32,391

 

 
32,391

 

Interest-bearing deposits
23,086

 
23,086

 

 
23,086

 

Customer certificates of deposit
2,342

 
2,309

 

 
2,309

 

Total deposits
57,819

 
57,786

 

 
57,786

 

Short-term borrowings
509

 
509

 
509

 

 

Acceptances outstanding
2

 
2

 
2

 

 

Medium- and long-term debt
4,637

 
4,642

 

 
4,642

 

Credit-related financial instruments
(70
)
 
(70
)
 

 

 
(70
)
December 31, 2016
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
1,249

 
$
1,249

 
$
1,249

 
$

 
$

Interest-bearing deposits with banks
5,969

 
5,969

 
5,969

 

 

Investment securities held-to-maturity
1,582

 
1,576

 

 
1,576

 

Loans held-for-sale
4

 
4

 

 
4

 

Total loans, net of allowance for loan losses (a)
48,358

 
48,250

 

 

 
48,250

Customers’ liability on acceptances outstanding
5

 
5

 
5

 

 

Restricted equity investments
207

 
207

 
207

 

 

Nonmarketable equity securities (b)
11

 
16

 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Demand deposits (noninterest-bearing)
31,540

 
31,540

 

 
31,540

 

Interest-bearing deposits
24,639

 
24,639

 

 
24,639

 

Customer certificates of deposit
2,806

 
2,731

 

 
2,731

 

Total deposits
58,985

 
58,910

 

 
58,910

 

Short-term borrowings
25

 
25

 
25

 

 

Acceptances outstanding
5

 
5

 
5

 

 

Medium- and long-term debt
5,160

 
5,132

 

 
5,132

 

Credit-related financial instruments
(73
)
 
(73
)
 

 

 
(73
)
(a)
Included $142 million and $282 million of impaired loans recorded at fair value on a nonrecurring basis at September 30, 2017 and December 31, 2016, respectively.
(b)
Certain investments that are measured at fair value using the net asset value have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

11

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

NOTE 3 - INVESTMENT SECURITIES
A summary of the Corporation’s investment securities follows:
(in millions)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
September 30, 2017
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
$
2,763

 
$
8

 
$
1

 
$
2,770

Residential mortgage-backed securities (a)
8,168

 
44

 
75

 
8,137

State and municipal securities
5

 

 

 
5

Equity and other non-debt securities
86

 
2

 
2

 
86

Total investment securities available-for-sale (b)
$
11,022

 
$
54

 
$
78

 
$
10,998

Investment securities held-to-maturity (c):
 
 
 
 
 
 
 
Residential mortgage-backed securities (a)
$
1,344

 
$
1

 
$
6

 
$
1,339

 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
$
2,772

 
$
8

 
$
1

 
$
2,779

Residential mortgage-backed securities (a)
7,921

 
48

 
97

 
7,872

State and municipal securities
7

 

 

 
7

Equity and other non-debt securities
129

 
1

 
1

 
129

Total investment securities available-for-sale (b)
$
10,829

 
$
57

 
$
99

 
$
10,787

Investment securities held-to-maturity (c):
 
 
 
 
 
 
 
Residential mortgage-backed securities (a)
$
1,582

 
$
1

 
$
7

 
$
1,576

(a)
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 $52 million and $50 million, respectively as of September 30, 2017 and $55 million and $54 million, respectively, as of December 31, 2016.
(c)
The amortized cost of investment securities held-to-maturity included net unrealized losses of $9 million at September 30, 2017 and $12 million at December 31, 2016 related to securities transferred from available-for-sale, which are included in accumulated other comprehensive loss.
A summary of the Corporation’s investment securities in an unrealized loss position as of September 30, 2017 and December 31, 2016 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, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
$
486

 
$
1

 
 
$

 
$

 
 
$
486

 
$
1

 
Residential mortgage-backed securities (a)
4,111

 
55

 
 
1,446

 
36

 
 
5,557

 
91

 
State and municipal securities (b)

 

 
 
5

 

(c)
 
5

 

(c)
Equity and other non-debt securities (b)

 

 
 
45

 
2

 
 
45

 
2

 
Total temporarily impaired securities
$
4,597

 
$
56

 
 
$
1,496


$
38

 
 
$
6,093

 
$
94

 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
$
527

 
$
1

 
 
$

 
$

 
 
$
527

 
$
1

 
Residential mortgage-backed securities (a)
4,992

 
87

 
 
1,177

 
32

 
 
6,169

 
119

 
State and municipal securities (b)

 

 
 
7

 

(c)
 
7

 

(c)
Equity and other non-debt securities (b)
36

 

(c)
 
11

 

(c)
 
47

 

(c)
Total temporarily impaired securities
$
5,555

 
$
88

 
 
$
1,195

 
$
32

 
 
$
6,750

 
$
120

 
(a)
Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.
(b)
Primarily auction-rate securities.
(c)
Unrealized losses less than $0.5 million.
At September 30, 2017, the Corporation had 240 securities in an unrealized loss position with no credit impairment, including 6 U.S. Treasury securities, 193 residential mortgage-backed securities, 28 equity and other non-debt auction-rate preferred

12

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

securities and 13 state and municipal auction-rate securities. As of September 30, 2017, approximately 96 percent of the aggregate par value of auction-rate securities have been redeemed or sold since acquisition, of which approximately 90 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, 2017.
Sales, calls and write-downs of investment securities available-for-sale resulted in the following gains and losses recorded in “net securities gains (losses)” on the consolidated statements of comprehensive income, computed based on the adjusted cost of the specific security.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions)
2017
 
2016
 
2017
 
2016
Securities gains
$

 
$

 
$
1

 
$

Securities losses (a)
(1
)
 

 
(4
)
 
(3
)
Net securities losses
$
(1
)
 
$

 
$
(3
)
 
$
(3
)
(a)
Primarily charges related to a derivative contract tied to the conversion rate of Visa Class B shares.
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, 2017
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Contractual maturity
 
 
 
 
 
 
 
Within one year
$
20

 
$
20

 
$

 
$

After one year through five years
2,947

 
2,953

 

 

After five years through ten years
1,744

 
1,770

 
19

 
19

After ten years
6,225

 
6,169

 
1,325

 
1,320

Subtotal
10,936

 
10,912

 
1,344

 
1,339

Equity and other non-debt securities
86

 
86

 

 

Total investment securities
$
11,022

 
$
10,998

 
$
1,344

 
$
1,339

Included in the contractual maturity distribution in the table above were residential mortgage-backed securities available-for-sale with total amortized cost of $8.2 billion and fair value of $8.1 billion, and residential mortgage-backed securities held-to-maturity with a total amortized cost and fair value of $1.3 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, 2017, investment securities with a carrying value of $950 million were pledged where permitted or required by law to secure $700 million of liabilities, primarily public and other deposits of state and local government agencies and derivative instruments.

13

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

NOTE 4 – CREDIT QUALITY AND ALLOWANCE FOR CREDIT LOSSES
The following table presents an aging analysis of the 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, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Business loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
52

 
$
31

 
$
7

 
$
90

 
$
345

 
$
30,627

 
$
31,062

Real estate construction:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial Real Estate business line (a)

 

 

 

 

 
2,709

 
2,709

Other business lines (b)
11

 

 

 
11

 

 
298

 
309

Total real estate construction
11

 

 

 
11

 

 
3,007

 
3,018

Commercial mortgage:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial Real Estate business line (a)
20

 

 

 
20

 
9

 
1,702

 
1,731

Other business lines (b)
18

 
10

 
3

 
31

 
26

 
7,197

 
7,254

Total commercial mortgage
38

 
10

 
3

 
51

 
35

 
8,899

 
8,985

Lease financing

 

 

 

 
8

 
467

 
475

International
11

 

 
2

 
13

 
6

 
1,140

 
1,159

Total business loans
112

 
41

 
12

 
165

 
394

 
44,140

 
44,699

Retail loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
14

 
9

 

 
23

 
28

 
1,948

 
1,999

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity
5

 
1

 

 
6

 
22

 
1,762

 
1,790

Other consumer
1

 
1

 

 
2

 

 
719

 
721

Total consumer
6

 
2

 

 
8

 
22

 
2,481

 
2,511

Total retail loans
20

 
11

 

 
31

 
50

 
4,429

 
4,510

Total loans
$
132

 
$
52

 
$
12

 
$
196

 
$
444

 
$
48,569

 
$
49,209

December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Business loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
30

 
$
12

 
$
14

 
$
56

 
$
445

 
$
30,493

 
$
30,994

Real estate construction:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial Real Estate business line (a)

 

 

 

 

 
2,485

 
2,485

Other business lines (b)

 

 

 

 

 
384

 
384

Total real estate construction

 

 

 

 

 
2,869

 
2,869

Commercial mortgage:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial Real Estate business line (a)
5

 

 

 
5

 
9

 
2,004

 
2,018

Other business lines (b)
58

 
5

 
5

 
68

 
37

 
6,808

 
6,913

Total commercial mortgage
63

 
5

 
5

 
73

 
46

 
8,812

 
8,931

Lease financing

 

 

 

 
6

 
566

 
572

International
1

 

 

 
1

 
14

 
1,243

 
1,258

Total business loans
94

 
17

 
19

 
130

 
511

 
43,983

 
44,624

Retail loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
7

 
3

 

 
10

 
39

 
1,893

 
1,942

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity
4

 
3

 

 
7

 
28

 
1,765

 
1,800

Other consumer
1

 

 

 
1

 
4

 
717

 
722

Total consumer
5

 
3

 

 
8

 
32

 
2,482

 
2,522

Total retail loans
12

 
6

 

 
18

 
71

 
4,375

 
4,464

Total loans
$
106

 
$
23

 
$
19

 
$
148

 
$
582

 
$
48,358

 
$
49,088

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


14

Table of Contents
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, 2017
 
 
 
 
 
 
 
 
 
Business loans:
 
 
 
 
 
 
 
 
 
Commercial
$
29,187

 
$
617

 
$
913

 
$
345

 
$
31,062

Real estate construction:
 
 
 
 
 
 
 
 
 
Commercial Real Estate business line (e)
2,658

 
51

 

 

 
2,709

Other business lines (f)
305

 
4

 

 

 
309

Total real estate construction
2,963

 
55

 

 

 
3,018

Commercial mortgage:
 
 
 
 
 
 
 
 
 
Commercial Real Estate business line (e)
1,660

 
20

 
42

 
9

 
1,731

Other business lines (f)
7,000

 
111

 
117

 
26

 
7,254

Total commercial mortgage
8,660

 
131

 
159

 
35

 
8,985

Lease financing
442

 
24

 
1

 
8

 
475

International
1,082

 
53

 
18

 
6

 
1,159

Total business loans
42,334

 
880

 
1,091

 
394

 
44,699

Retail loans:
 
 
 
 
 
 
 
 
 
Residential mortgage
1,962

 
9

 

 
28

 
1,999

Consumer:
 
 
 
 
 
 
 
 
 
Home equity
1,759

 
1

 
8

 
22

 
1,790

Other consumer
720

 
1

 

 

 
721

Total consumer
2,479

 
2

 
8

 
22

 
2,511

Total retail loans
4,441

 
11

 
8

 
50

 
4,510

Total loans
$
46,775

 
$
891

 
$
1,099

 
$
444

 
$
49,209

December 31, 2016
 
 
 
 
 
 
 
 
 
Business loans:
 
 
 
 
 
 
 
 
 
Commercial
$
28,616

 
$
944

 
$
989

 
$
445

 
$
30,994

Real estate construction:
 
 
 
 
 
 
 
 
 
Commercial Real Estate business line (e)
2,485

 

 

 

 
2,485

Other business lines (f)
381

 

 
3

 

 
384

Total real estate construction
2,866

 

 
3

 

 
2,869

Commercial mortgage:
 
 
 
 
 
 
 
 
 
Commercial Real Estate business line (e)
1,970

 
19

 
20

 
9

 
2,018

Other business lines (f)
6,645

 
109

 
122

 
37

 
6,913

Total commercial mortgage
8,615

 
128

 
142

 
46

 
8,931

Lease financing
550

 
11

 
5

 
6

 
572

International
1,200

 
22

 
22

 
14

 
1,258

Total business loans
41,847

 
1,105

 
1,161

 
511

 
44,624

Retail loans:
 
 
 
 
 
 
 
 
 
Residential mortgage
1,900

 
3

 

 
39

 
1,942

Consumer:
 
 
 
 
 
 
 
 
 
Home equity
1,767

 
1

 
4

 
28

 
1,800

Other consumer
718

 

 

 
4

 
722

Total consumer
2,485

 
1

 
4

 
32

 
2,522

Total retail loans
4,385

 
4

 
4

 
71

 
4,464

Total loans
$
46,232

 
$
1,109

 
$
1,165

 
$
582

 
$
49,088

(a)
Includes all loans not included in the categories of special mention, substandard or nonaccrual.
(b)
Special mention loans are accruing loans that have potential credit weaknesses that deserve management’s close attention, such as loans to borrowers who may be experiencing financial difficulties that may result in deterioration of repayment prospects from the borrower at some future date.
(c)
Substandard loans are accruing loans that have a well-defined weakness, or weaknesses, such as loans to borrowers who may be experiencing losses from operations or inadequate liquidity of a degree and duration that jeopardizes the orderly repayment of the loan. Substandard loans also are distinguished by the distinct possibility of loss in the future if these weaknesses are not corrected. This category is generally consistent with the "substandard" category as defined by regulatory authorities.
(d)
Nonaccrual loans are loans for which the accrual of interest has been discontinued. For further information regarding nonaccrual loans, refer to the Nonperforming Assets subheading in Note 1 - Basis of Presentation and Accounting Policies - on page F-56 in the Corporation's 2016 Annual Report. A significant majority of nonaccrual loans are generally consistent with the "substandard" category and the remainder are generally consistent with the "doubtful" category as defined by regulatory authorities.
(e)
Primarily loans to real estate developers.
(f)
Primarily loans secured by owner-occupied real estate.

15

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

The following table summarizes nonperforming assets.
(in millions)
September 30, 2017
 
December 31, 2016
Nonaccrual loans
$
444

 
$
582

Reduced-rate loans (a)