COMERICA INC /NEW/ - Quarter Report: 2022 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

______________________________

(Mark One)


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

For the quarterly period ended June 30, 2022


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

For the transition period from to

Commission file number 1-10706

____________________________________________________________________________________

Comerica Incorporated

(Exact name of registrant as specified in its charter)

___________________________________________________________________________________


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

Comerica Bank Tower

1717 Main Street, MC 6404

Dallas, Texas 75201

(Address of principal executive offices)

(Zip Code)

(214) 462-6831

(Registrant’s telephone number, including area code)

_________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $5 par value	CMA	New York Stock Exchange

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

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

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


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

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

$5 par value common stock:

Outstanding as of July 26, 2022: 130,819,770 shares

Table of Contents

COMERICA INCORPORATED AND SUBSIDIARIES

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Consolidated Balance Sheets at June 3 0 , 2022 (unaudited) and December 31, 20 2 1			1

Consolidated Statements of Comprehensive Income for the Three and S ix Months Ended June 3 0 , 2022 and 2021 (unaudited)			2

Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 3 0 , 2022 and 2021 (unaudited)			3

Consolidated Statements of Cash Flows for the Six Months Ended June 3 0 , 2022 and 2021 (unaudited)			4

Notes to Consolidated Financial Statements (unaudited)			5

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			33

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk			60

ITEM 4. Controls and Procedures			60

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings			60

ITEM 1A. Risk Factors			60

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			60

ITEM 6. Exhibits			61

Signature			62

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

Comerica Incorporated and Subsidiaries



(in millions, except share data)	June 30, 2022		December 31, 2021
	(unaudited)
ASSETS
Cash and due from banks	$	1,631	$	1,236
Interest-bearing deposits with banks	5,902		21,443
Other short-term investments	160		197
Investment securities available-for-sale	20,829		16,986

Commercial loans	31,259		29,366
Real estate construction loans	2,465		2,948
Commercial mortgage loans	11,855		11,255
Lease financing	653		640
International loans	1,291		1,208
Residential mortgage loans	1,753		1,771
Consumer loans	2,178		2,097
Total loans	51,454		49,285
Allowance for loan losses	(563)		(588)
Net loans	50,891		48,697
Premises and equipment	422		454
Accrued income and other assets	7,054		5,603
Total assets	$	86,889	$	94,616
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits	$	42,308	$	45,800
Money market and interest-bearing checking deposits	28,409		31,349
Savings deposits	3,342		3,167
Customer certificates of deposit	1,686		1,973

Foreign office time deposits	20		50
Total interest-bearing deposits	33,457		36,539
Total deposits	75,765		82,339

Accrued expenses and other liabilities	2,059		1,584
Medium- and long-term debt	2,630		2,796
Total liabilities	80,454		86,719
Fixed rate reset non-cumulative perpetual preferred stock, series A, no par value, $100,000 liquidation preference per share:
Authorized - 4,000 shares
Issued - 4,000 shares	394		394
Common stock - $5 par value:
Authorized - 325,000,000 shares
Issued - 228,164,824 shares	1,141		1,141
Capital surplus	2,204		2,175
Accumulated other comprehensive loss	(1,954)		(212)
Retained earnings	10,752		10,494
Less cost of common stock in treasury - 97,387,508 shares at 6/30/2022 and 97,476,872 shares at 12/31/2021	(6,102)		(6,095)
Total shareholders’ equity	6,435		7,897
Total liabilities and shareholders’ equity	$	86,889	$	94,616

See notes to consolidated financial statements (unaudited).

Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

Comerica Incorporated and Subsidiaries


	Three Months Ended June 30,				Six Months Ended June 30,

(in millions, except per share data)	2022		2021		2022		2021

INTEREST INCOME
Interest and fees on loans	$	454	$	404	$	837	$	790
Interest on investment securities	100		70		177		139
Interest on short-term investments	23		5		32		9
Total interest income	577		479		1,046		938
INTEREST EXPENSE
Interest on deposits	4		5		8		12

Interest on medium- and long-term debt	12		9		21		18
Total interest expense	16		14		29		30
Net interest income	561		465		1,017		908
Provision for credit losses	10		(135)		(1)		(317)
Net interest income after provision for credit losses	551		600		1,018		1,225
NONINTEREST INCOME
Card fees	69		84		138		155
Fiduciary income	62		60		120		113
Service charges on deposit accounts	50		47		98		95
Commercial lending fees	30		27		52		45
Derivative income	29		22		51		52
Bank-owned life insurance	12		9		25		20
Letter of credit fees	9		10		18		20
Brokerage fees	4		4		8		8

Other noninterest income	3		21		2		46
Total noninterest income	268		284		512		554
NONINTEREST EXPENSES
Salaries and benefits expense	294		277		583		559
Outside processing fee expense	62		71		124		135
Software expense	41		38		80		77
Occupancy expense	40		38		78		77
Equipment expense	13		13		24		25
Advertising expense	8		9		15		15
FDIC insurance expense	8		7		16		13
Other noninterest expenses	16		10		35		9
Total noninterest expenses	482		463		955		910
Income before income taxes	337		421		575		869
Provision for income taxes	76		93		125		191
NET INCOME	261		328		450		678
Less:
Income allocated to participating securities	1		2		2		3
Preferred stock dividends	5		5		11		11
Net income attributable to common shares	$	255	$	321	$	437	$	664
Earnings per common share:
Basic	$	1.94	$	2.35	$	3.33	$	4.81
Diluted	1.92		2.32		3.29		4.76
Comprehensive (loss) income	(520)		313		(1,292)		494
Cash dividends declared on common stock	89		92		178		187
Cash dividends declared per common share	0.68		0.68		1.36		1.36

See notes to consolidated financial statements (unaudited).

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

Comerica Incorporated and Subsidiaries


								Accumulated
	Nonredeemable		Common Stock					Other						Total
	Preferred		Shares			Capital		Comprehensive		Retained		Treasury		Shareholders'
(in millions, except per share data)	Stock		Outstanding	Amount		Surplus		(Loss) Income		Earnings		Stock		Equity
BALANCE AT MARCH 31, 2021	$	394	139.6	$	1,141	$	2,183	$	(105)	$	9,975	$	(5,436)	$	8,152

Net income	—		—	—		—		—		328		—		328
Other comprehensive loss, net of tax	—		—	—		—		(15)		—		—		(15)
Cash dividends declared on common stock ($0.68 per share)	—		—	—		—		—		(92)		—		(92)
Cash dividends on preferred stock	—		—	—		—		—		(5)		—		(5)
Purchase of common stock	—		(5.8)	—		(24)		—		—		(426)		(450)

Net issuance of common stock under employee stock plans	—		0.1	—		(3)		—		(4)		13		6

Share-based compensation	—		—	—		7		—		—		—		7

BALANCE AT JUNE 30, 2021	$	394	133.9	$	1,141	$	2,163	$	(120)	$	10,202	$	(5,849)	$	7,931
BALANCE AT MARCH 31, 2022	$	394	130.7	$	1,141	$	2,194	$	(1,173)	$	10,585	$	(6,105)	$	7,036
Net income	—		—	—		—		—		261		—		261
Other comprehensive loss, net of tax	—		—	—		—		(781)		—		—		(781)
Cash dividends declared on common stock ($0.68 per share)	—		—	—		—		—		(89)		—		(89)
Cash dividends declared on preferred stock	—		—	—		—		—		(5)		—		(5)


Net issuance of common stock under employee stock plans	—		0.1	—		(1)		—		—		3		2
Share-based compensation	—		—	—		11		—		—		—		11

BALANCE AT JUNE 30, 2022	$	394	130.8	$	1,141	$	2,204	$	(1,954)	$	10,752	$	(6,102)	$	6,435
BALANCE AT DECEMBER 31, 2020	$	394	139.2	$	1,141	$	2,185	$	64	$	9,727	$	(5,461)	$	8,050

Net income	—		—	—		—		—		678		—		678
Other comprehensive loss, net of tax	—		—	—		—		(184)		—		—		(184)
Cash dividends declared on common stock ($1.36 per share)	—		—	—		—		—		(187)		—		(187)
Cash dividends declared on preferred stock	—		—	—		—		—		(11)		—		(11)
Purchase of common stock	—		(5.9)	—		(24)		—		—		(429)		(453)


Net issuance of common stock under employee stock plans	—		0.6	—		(27)		—		(5)		41		9

Share-based compensation	—		—	—		29		—		—		—		29

BALANCE AT JUNE 30, 2021	$	394	133.9	$	1,141	$	2,163	$	(120)	$	10,202	$	(5,849)	$	7,931
BALANCE AT DECEMBER 31, 2021	$	394	130.7	$	1,141	$	2,175	$	(212)	$	10,494	$	(6,095)	$	7,897

Net income	—		—	—		—		—		450		—		450
Other comprehensive loss, net of tax	—		—	—		—		(1,742)		—		—		(1,742)
Cash dividends declared on common stock ($1.36 per share)	—		—	—		—		—		(178)		—		(178)
Cash dividends declared on preferred stock	—		—	—		—		—		(11)		—		(11)
Purchase of common stock	—		(0.4)	—		—		—		—		(36)		(36)

Net issuance of common stock under employee stock plans	—		0.5	—		(10)		—		(3)		29		16

Share-based compensation	—		—	—		39		—		—		—		39

BALANCE AT JUNE 30, 2022	$	394	130.8	$	1,141	$	2,204	$	(1,954)	$	10,752	$	(6,102)	$	6,435

See notes to consolidated financial statements (unaudited).

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Comerica Incorporated and Subsidiaries


	Six Months Ended June 30,

(in millions)	2022		2021

OPERATING ACTIVITIES
Net income	$	450	$	678
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	(1)		(317)
(Benefit) provision for deferred income taxes	(23)		69
Depreciation and amortization	46		51
Net periodic defined benefit credit	(45)		(41)
Share-based compensation expense	39		29
Net amortization of securities	18		16


Net gains on sales of foreclosed property and other repossessed assets	(2)		—


Net change in:

Accrued income receivable	(42)		1
Accrued expenses payable	(44)		31
Other, net	(748)		(514)
Net cash (used in) provided by operating activities	(352)		3
INVESTING ACTIVITIES
Investment securities available-for-sale:
Maturities and redemptions	1,454		2,819

Purchases	(7,141)		(3,828)



Net change in loans	(2,528)		2,616
Proceeds from sales of foreclosed property and other repossessed assets	2		8
Net increase in premises and equipment	(41)		(35)

Federal Home Loan Bank stock:

Redemptions	—		115

Proceeds from bank-owned life insurance settlements	14		6
Other, net	1		(12)
Net cash (used in) provided by investing activities	(8,239)		1,689
FINANCING ACTIVITIES
Net change in:
Deposits	(6,346)		2,481

Medium- and long-term debt:
Maturities and redemptions	—		(2,800)


Preferred stock:

Cash dividends paid	(11)		(11)
Common stock:
Repurchases	(40)		(459)
Cash dividends paid	(178)		(190)
Issuances under employee stock plans	21		18




Other, net	(1)		3
Net cash used in financing activities	(6,555)		(958)
Net (decrease) increase in cash and cash equivalents	(15,146)		734
Cash and cash equivalents at beginning of period	22,679		15,767
Cash and cash equivalents at end of period	$	7,533	$	16,501
Interest paid	$	28	$	30
Income taxes paid	102		96

See notes to consolidated financial statements (unaudited).

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 six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. 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, 2021.

Recently Issued Accounting Pronouncements

In March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructuring and Vintage Disclosures” (ASU 2022-02), which eliminates the accounting for troubled debt restructuring (TDR) while expanding modification and vintage disclosure requirements. Under the previous guidance, a TDR occurs when a loan to a borrower experiencing financial difficulty is restructured with a concession provided that a creditor would not otherwise consider. ASU 2022-02 removes the TDR accounting model, instead requiring modifications to apply existing refinancing and restructuring guidance. The update also requires additional disclosures on the nature, magnitude and subsequent performance of certain types of modifications with borrowers experiencing financial difficulties. ASU 2022-02 further included a requirement to disclose gross charge-offs incurred by year of origination of the related loan or lease. ASU 2022-02 is effective for the Corporation on January 1, 2023, and must be applied prospectively, except that the recognition and measurement of TDRs may be applied using a modified retrospective approach. Early adoption is permitted. The Corporation is evaluating the impact of the new guidance to its disclosures but does not expect there to be a material impact on its financial condition or results of operation.

NOTE 2 – FAIR VALUE MEASUREMENTS

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

Investment securities available-for-sale, derivatives, deferred compensation plans and equity securities with readily determinable fair values (primarily money market mutual funds) are recorded at fair value on a recurring basis. Additionally, from time to time, the Corporation may be required to record other assets and liabilities at fair value on a nonrecurring basis, such as 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, 2021 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.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following tables present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021.


(in millions)	Total		Level 1		Level 2		Level 3
June 30, 2022

Deferred compensation plan assets	$	91	$	91	$	—	$	—
Equity securities	51		51		—		—


Investment securities available-for-sale:
U.S. Treasury securities	2,802		2,802		—		—
Residential mortgage-backed securities (a)	13,165		—		13,165		—
Commercial mortgage-backed securities (a)	4,862		—		4,862		—



Total investment securities available-for-sale	20,829		2,802		18,027		—
Derivative assets:
Interest rate contracts	126		—		126		—
Energy contracts	1,591		—		1,591		—
Foreign exchange contracts	45		—		45		—
Total derivative assets	1,762		—		1,762		—
Total assets at fair value	$	22,733	$	2,944	$	19,789	$	—
Derivative liabilities:
Interest rate contracts	$	401	$	—	$	401	$	—
Energy contracts	1,583		—		1,583		—
Foreign exchange contracts	35		—		35		—
Other financial derivative	12		—		—		12
Total derivative liabilities	2,031		—		2,019		12
Deferred compensation plan liabilities	91		91		—		—
Total liabilities at fair value	$	2,122	$	91	$	2,019	$	12
December 31, 2021
Deferred compensation plan assets	$	113	$	113	$	—	$	—
Equity securities	62		62		—		—

Investment securities available-for-sale:
U.S. Treasury securities	2,993		2,993		—		—
Residential mortgage-backed securities (a)	13,288		—		13,288		—



Commercial mortgage-backed securities (a)	705		—		705		—
Total investment securities available-for-sale	16,986		2,993		13,993		—
Derivative assets:
Interest rate contracts	239		—		213		26
Energy contracts	670		—		670		—
Foreign exchange contracts	19		—		19		—

Total derivative assets	928		—		902		26
Total assets at fair value	$	18,089	$	3,168	$	14,895	$	26
Derivative liabilities:
Interest rate contracts	$	69	$	—	$	69	$	—
Energy contracts	662		—		662		—
Foreign exchange contracts	16		—		16		—
Other financial derivative	13		—		—		13
Total derivative liabilities	760		—		747		13
Deferred compensation plan liabilities	113		113		—		—
Total liabilities at fair value	$	873	$	113	$	747	$	13

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

There were no transfers of assets or liabilities recorded at fair value on a recurring basis into or out of Level 3 fair value measurements during each of the three- and six-month periods ended June 30, 2022 and 2021.

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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 six-month periods ended June 30, 2022 and 2021.


			Net Realized/Unrealized Gains (Losses) (Pretax) Recorded in Earnings (a)
(in millions)	Balance at Beginning of Period		Realized		Unrealized				Settlements			Balance at End of Period
Three Months Ended June 30, 2022






Derivative assets:
Interest rate contracts	$	12	$	—	$	—	$	(12)		$	—

Derivative liabilities:
Other financial derivative	(12)		—		—		—			(12)
Three Months Ended June 30, 2021






Derivative assets:
Interest rate contracts	$	24	$	—	$	5	$	—		$	29
Derivative liabilities:
Other financial derivative	(11)		—		(1)				—			(12)

Six Months Ended June 30, 2022






Derivative assets:
Interest rate contracts	$	26	$	—	$	—	$	(26)		$	—
Derivative liabilities:
Other financial derivative	(13)		—		1				—			(12)

Six Months Ended June 30, 2021






Derivative assets:
Interest rate contracts	$	39	$	—	$	(10)	$	—		$	29
Derivative liabilities:
Other financial derivative	(11)		—		(1)				—			(12)

(a)Realized and unrealized gains and losses due to changes in fair value are recorded in other noninterest income on the Consolidated Statements of Comprehensive Income.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Corporation may be required to record certain assets and liabilities at fair value on a nonrecurring basis. These include assets that are recorded at the lower of cost or fair value, and were recognized at fair value since it was less than cost at the end of the period.

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Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

The following table presents assets recorded at fair value on a nonrecurring basis at June 30, 2022 and December 31, 2021. No liabilities were recorded at fair value on a nonrecurring basis at June 30, 2022 and December 31, 2021.


(in millions)	Level 3
June 30, 2022


Loans:
Commercial	$	63
Real estate construction	2
Commercial mortgage	16







Total assets at fair value	$	81
December 31, 2021


Loans:
Commercial	$	125
Real estate construction	4
Commercial mortgage	17

International	4





Total assets at fair value	$	150

Level 3 assets recorded at fair value on a nonrecurring basis at June 30, 2022 and December 31, 2021 included both nonaccrual loans and TDRs for which a specific allowance was established based on the fair value of collateral. The unobservable inputs were the additional adjustments applied by management to the appraised values to reflect such factors as non-current appraisals and revisions to estimated time to sell. These adjustments are determined based on qualitative judgments made by management on a case-by-case basis and are not observable inputs, although they are used in the determination of fair value.

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.

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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
June 30, 2022
Assets
Cash and due from banks	$	1,631	$	1,631	$	1,631	$	—	$	—

Interest-bearing deposits with banks	5,902		5,902		5,902		—		—

Other short-term investments	13		13		13		—		—
Loans held-for-sale	4		4		—		4		—
Total loans, net of allowance for loan losses (a)	50,891		48,582		—		—		48,582
Customers’ liability on acceptances outstanding	4		4		4		—		—
Restricted equity investments	92		92		92		—		—
Nonmarketable equity securities (b)	5		11
Liabilities
Demand deposits (noninterest-bearing)	42,308		42,308		—		42,308		—
Interest-bearing deposits	31,771		31,771		—		31,771		—
Customer certificates of deposit	1,686		1,659		—		1,659		—
Total deposits	75,765		75,738		—		75,738		—

Acceptances outstanding	4		4		4		—		—
Medium- and long-term debt	2,630		2,630		—		2,630		—
Credit-related financial instruments	(75)		(75)		—		—		(75)
December 31, 2021
Assets
Cash and due from banks	$	1,236	$	1,236	$	1,236	$	—	$	—

Interest-bearing deposits with banks	21,443		21,443		21,443		—		—

Other short-term investments	16		16		16		—		—
Loans held-for-sale	6		6		—		6		—
Total loans, net of allowance for loan losses (a)	48,697		49,127		—		—		49,127
Customers’ liability on acceptances outstanding	5		5		5		—		—
Restricted equity investments	92		92		92		—		—
Nonmarketable equity securities (b)	5		10
Liabilities
Demand deposits (noninterest-bearing)	45,800		45,800		—		45,800		—
Interest-bearing deposits	34,566		34,566		—		34,566		—
Customer certificates of deposit	1,973		1,968		—		1,968		—

Total deposits	82,339		82,334		—		82,334		—

Acceptances outstanding	5		5		5		—		—
Medium- and long-term debt	2,796		2,854		—		2,854		—
Credit-related financial instruments	(59)		(59)		—		—		(59)

(a)Included $81 million and $150 million of loans recorded at fair value on a nonrecurring basis at June 30, 2022 and December 31, 2021, 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.

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, which are defined by the Corporation as debt securities reported on the Consolidated Balance Sheet as investment securities available-for-sale, follows:


(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2022
Investment securities available-for-sale:
U.S. Treasury securities	$	2,925	$	—	$	123	$	2,802
Residential mortgage-backed securities (a)	14,767		1		1,603		13,165
Commercial mortgage-backed securities (a)	5,093		1		232		4,862



Total investment securities available-for-sale	$	22,785	$	2	$	1,958	$	20,829


December 31, 2021
Investment securities available-for-sale:
U.S. Treasury securities	$	3,010	$	22	$	39	$	2,993
Residential mortgage-backed securities (a)	13,397		67		176		13,288
Commercial mortgage-backed securities (a)	709		2		6		705



Total investment securities available-for-sale	$	17,116	$	91	$	221	$	16,986

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

A summary of the Corporation’s investment securities in an unrealized loss position as of June 30, 2022 and December 31, 2021 follows:


	Less than 12 Months				12 Months or more				Total
(in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
June 30, 2022
U.S. Treasury securities	$	1,098	$	5	$	1,704	$	118	$	2,802	$	123
Residential mortgage-backed securities (a)	10,475		1,124		2,497		479		12,972		1,603
Commercial mortgage-backed securities (a)	4,494		232		—		—		4,494		232
Total temporarily impaired securities	$	16,067	$	1,361	$	4,201	$	597	$	20,268	$	1,958
December 31, 2021
U.S. Treasury securities	$	465	$	6	$	1,334	$	33	$	1,799	$	39
Residential mortgage-backed securities (a)	7,197		128		1,128		48		8,325		176
Commercial mortgage-backed securities (a)	346		6		—		—		346		6
Total temporarily impaired securities	$	8,008	$	140	$	2,462	$	81	$	10,470	$	221

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

Unrealized losses on investment securities resulted from changes in market interest rates. The Corporation’s portfolio is comprised of securities issued or guaranteed by the U.S. government or government-sponsored enterprises. As such, it is expected that the securities would not be settled at a price less than the amortized cost of the investments. Further, the Corporation does not intend to sell the investments, and it is not more likely than not that it will be required to sell the investments before recovery of amortized costs. At June 30, 2022, the Corporation had 1,211 securities in an unrealized loss position with no allowance for credit losses, comprised of 28 U.S. Treasury securities, 944 residential mortgage-backed securities and 239 commercial mortgage-backed securities.

Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

Interest receivable on investment securities totaled $49 million at June 30, 2022 and $36 million at December 31, 2021 and was included in accrued income and other assets on the Consolidated Balance Sheets.

Sales, calls and write-downs of investment securities available-for-sale, computed based on the adjusted cost of the specific security, resulted in no gains or losses during the three months ended and six months ended June 30, 2022 or June 30, 2021.

The following table summarizes the amortized cost and fair values of investment securities by contractual maturity. Securities with multiple maturity dates are classified in the period of final maturity. The actual cash flows of mortgage-backed securities may differ as borrowers of the underlying loans may exercise prepayment options. 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)
June 30, 2022	Amortized Cost		Fair Value
Contractual maturity
Within one year	$	1,101	$	1,096
After one year through five years	2,092		1,971
After five years through ten years	5,018		4,787
After ten years	14,574		12,975


Total investment securities	$	22,785	$	20,829

At June 30, 2022, investment securities with a carrying value of $2.8 billion were pledged where permitted or required by law, including $1.3 billion pledged to the Federal Home Loan Bank (FHLB) as collateral for potential future borrowings and $1.6 billion to secure $977 million of liabilities, primarily public and other deposits of state and local government agencies as well as derivative instruments. For information on FHLB borrowings, refer to Note 7.

Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 4 – CREDIT QUALITY AND ALLOWANCE FOR CREDIT LOSSES

The following table presents an aging analysis of the amortized cost basis of loans.


	Loans Past Due and Still Accruing
(in millions)	30-59 Days		60-89 Days		90 Days or More		Total		Nonaccrual Loans		Current Loans (a)		Total Loans
June 30, 2022
Business loans:
Commercial	$	51	$	9	$	2	$	62	$	161	$	31,036	$	31,259
Real estate construction:
Commercial Real Estate business line (b)	2		—		—		2		—		1,947		1,949
Other business lines (c)	—		1		4		5		4		507		516
Total real estate construction	2		1		4		7		4		2,454		2,465
Commercial mortgage:
Commercial Real Estate business line (b)	41		—		—		41		1		3,605		3,647
Other business lines (c)	60		8		2		70		28		8,110		8,208
Total commercial mortgage	101		8		2		111		29		11,715		11,855
Lease financing	6		—		—		6		—		647		653
International	—		—		4		4		5		1,282		1,291
Total business loans	160		18		12		190		199		47,134		47,523

Retail loans:
Residential mortgage	21		1		—		22		49		1,682		1,753
Consumer:
Home equity	3		1		—		4		13		1,615		1,632
Other consumer	4		—		—		4		1		541		546
Total consumer	7		1		—		8		14		2,156		2,178
Total retail loans	28		2		—		30		63		3,838		3,931
Total loans	$	188	$	20	$	12	$	220	$	262	$	50,972	$	51,454
December 31, 2021
Business loans:
Commercial	$	35	$	18	$	6	$	59	$	173	$	29,134	$	29,366
Real estate construction:
Commercial Real Estate business line (b)	—		—		—		—		—		2,391		2,391
Other business lines (c)	15		1		—		16		6		535		557
Total real estate construction	15		1		—		16		6		2,926		2,948
Commercial mortgage:
Commercial Real Estate business line (b)	—		—		—		—		1		3,337		3,338
Other business lines (c)	18		4		16		38		31		7,848		7,917
Total commercial mortgage	18		4		16		38		32		11,185		11,255
Lease financing	5		—		—		5		—		635		640
International	5		8		1		14		5		1,189		1,208
Total business loans	78		31		23		132		216		45,069		45,417

Retail loans:
Residential mortgage	4		—		—		4		36		1,731		1,771
Consumer:
Home equity	4		3		—		7		12		1,514		1,533
Other consumer	32		1		4		37		—		527		564
Total consumer	36		4		4		44		12		2,041		2,097
Total retail loans	40		4		4		48		48		3,772		3,868
Total loans	$	118	$	35	$	27	$	180	$	264	$	48,841	$	49,285

(a)Includes $22 million of loans with deferred payments not considered past due in accordance with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) at December 31, 2021.

(b)Primarily loans to real estate developers.

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

Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

The following table presents loans by credit quality indicator (CQI) and vintage year. CQI is based on internal risk ratings assigned to each business loan at the time of approval and subjected to subsequent reviews, generally at least annually, and to pools of retail loans with similar risk characteristics. Vintage year is the year of origination or major modification.


	June 30, 2022
	Vintage Year
(in millions)	2022			2021			2020			2019		2018		Prior		Revolvers		Revolvers Converted to Term		Total
Business loans:
Commercial:
Pass (a)	$	2,637	(b)	$	4,101	(b)	$	1,255	(b)	$	1,284	$	703	$	1,233	$	18,847	$	8	$	30,068


Criticized (c)	23			154			113			107		61		107		624		2		1,191

Total commercial	2,660			4,255			1,368			1,391		764		1,340		19,471		10		31,259
Real estate construction
Pass (a)	225			780			765			422		142		38		89		—		2,461


Criticized (c)	—			—			3			—		1		—		—		—		4

Total real estate construction	225			780			768			422		143		38		89		—		2,465
Commercial mortgage
Pass (a)	1,569			2,490			1,736			1,475		1,185		2,750		438		—		11,643


Criticized (c)	1			28			42			36		25		80		—		—		212

Total commercial mortgage	1,570			2,518			1,778			1,511		1,210		2,830		438		—		11,855
Lease financing
Pass (a)	152			154			78			54		43		145		—		—		626


Criticized (c)	6			3			2			8		7		1		—		—		27

Total lease financing	158			157			80			62		50		146		—		—		653
International
Pass (a)	283			287			81			74		31		15		487		—		1,258


Criticized (c)	—			—			7			—		5		11		10		—		33

Total international	283			287			88			74		36		26		497		—		1,291
Total business loans	4,896			7,997			4,082			3,460		2,203		4,380		20,495		10		47,523
Retail loans:
Residential mortgage
Pass (a)	184			405			488			138		74		414		—		—		1,703


Criticized (c)	—			4			2			8		1		35		—		—		50

Total residential mortgage	184			409			490			146		75		449		—		—		1,753
Consumer:
Home equity
Pass (a)	—			—			—			—		—		11		1,566		40		1,617


Criticized (c)	—			—			—			—		—		—		12		3		15

Total home equity	—			—			—			—		—		11		1,578		43		1,632
Other consumer
Pass (a)	48			50			59			9		1		11		366		—		544


Criticized (c)	—			—			—			1		—		—		1		—		2

Total other consumer	48			50			59			10		1		11		367		—		546
Total consumer	48			50			59			10		1		22		1,945		43		2,178
Total retail loans	232			459			549			156		76		471		1,945		43		3,931
Total loans	$	5,128		$	8,456		$	4,631		$	3,616	$	2,279	$	4,851	$	22,440	$	53	$	51,454


Table continues on the following page.

Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries


	December 31, 2021
	Vintage Year
	2021			2020			2019		2018		2017		Prior		Revolvers		Revolvers Converted to Term		Total
Business loans:
Commercial:
Pass (a)	$	5,270	(b)	$	1,740	(b)	$	1,528	$	947	$	713	$	763	$	17,241	$	10	$	28,212



Criticized (c)	101			120			105		86		26		94		620		2		1,154
Total commercial	5,371			1,860			1,633		1,033		739		857		17,861		12		29,366
Real estate construction:
Pass (a)	458			858			849		424		158		34		132		—		2,913



Criticized (c)	—			3			—		13		8		8		3		—		35
Total real estate construction	458			861			849		437		166		42		135		—		2,948
Commercial mortgage:
Pass (a)	2,491			1,932			1,444		1,343		1,018		2,298		481		—		11,007



Criticized (c)	17			44			50		22		23		87		5		—		248
Total commercial mortgage	2,508			1,976			1,494		1,365		1,041		2,385		486		—		11,255
Lease financing
Pass (a)	166			88			97		50		38		179		—		—		618



Criticized (c)	—			2			10		8		1		1		—		—		22
Total lease financing	166			90			107		58		39		180		—		—		640
International
Pass (a)	381			141			103		29		1		16		480		—		1,151



Criticized (c)	20			10			3		5		4		8		7		—		57
Total international	401			151			106		34		5		24		487		—		1,208
Total business loans	8,904			4,938			4,189		2,927		1,990		3,488		18,969		12		45,417
Retail loans:
Residential mortgage
Pass (a)	443			527			164		83		111		407		—		—		1,735



Criticized (c)	5			—			1		2		7		21		—		—		36
Total residential mortgage	448			527			165		85		118		428		—		—		1,771
Consumer:
Home equity
Pass (a)	—			—			—		—		—		11		1,460		45		1,516



Criticized (c)	—			—			—		—		—		1		12		4		17
Total home equity	—			—			—		—		—		12		1,472		49		1,533
Other consumer
Pass (a)	101			68			13		9		1		31		337		—		560



Criticized (c)	—			—			—		—		—		—		4		—		4
Total other consumer	101			68			13		9		1		31		341		—		564
Total consumer	101			68			13		9		1		43		1,813		49		2,097
Total retail loans	549			595			178		94		119		471		1,813		49		3,868
Total loans	$	9,453		$	5,533		$	4,367	$	3,021	$	2,109	$	3,959	$	20,782	$	61	$	49,285

(a)Includes all loans not included in the categories of special mention, substandard or nonaccrual.

(b)Includes Small Business Administration Paycheck Protection Program (PPP) loans of $90 million and $458 million at June 30, 2022 and December 31, 2021, respectively.

(c)Includes loans with an internal rating of special mention, substandard loans for which the accrual of interest has not been discontinued and nonaccrual loans. Special mention loans have potential credit weaknesses that deserve management’s close attention, such as loans to borrowers who may be experiencing financial difficulties that may result in deterioration of repayment prospects from the borrower at some future date. Accruing substandard loans have a well-defined weakness, or weaknesses, such as loans to borrowers who may be experiencing losses from operations or inadequate liquidity of a degree and duration that jeopardizes the orderly repayment of the loan. Substandard loans are also distinguished by the distinct possibility of loss in the future if these weaknesses are not corrected. Nonaccrual loans are loans for which the accrual of interest has been discontinued. For further information regarding nonaccrual loans, refer to the Nonperforming Assets subheading in Note 1 - Basis of Presentation and Accounting Policies on page F-52 in the Corporation's 2021 Annual Report. These categories are generally consistent with the "special mention" and "substandard" categories as defined by regulatory authorities. A minority of nonaccrual loans are consistent with the "doubtful" category.

Loan interest receivable totaled $149 million and $120 million at June 30, 2022 and December 31, 2021, respectively and was included in accrued income and other assets on the Consolidated Balance Sheets.

Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

Allowance for Credit Losses

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


	2022									2021
(in millions)	Business Loans			Retail Loans			Total			Business Loans			Retail Loans			Total
Three Months Ended June 30
Balance at beginning of period:

Allowance for loan losses	$	493		$	61		$	554		$	709		$	68		$	777
Allowance for credit losses on lending-related commitments	33			12			45			22			8			30
Allowance for credit losses	526			73			599			731			76			807

Loan charge-offs	(13)			—			(13)			(7)			(1)			(8)
Recoveries on loans previously charged-off	12			1			13			19			—			19
Net loan (charge-offs) recoveries	(1)			1			—			12			(1)			11
Provision for credit losses:
Provision for loan losses	10			(1)			9			(132)			(4)			(136)
Provision for credit losses on lending-related commitments	1			—			1			2			(1)			1
Provision for credit losses	11			(1)			10			(130)			(5)			(135)

Balance at end of period:
Allowance for loan losses	502			61			563			589			63			652
Allowance for credit losses on lending-related commitments	34			12			46			24			7			31
Allowance for credit losses	$	536		$	73		$	609		$	613		$	70		$	683
Six Months Ended June 30
Balance at beginning of period
Allowance for loan losses	$	531		$	57		$	588		$	895		$	53		$	948
Allowance for credit losses on lending-related commitments	24			6			30			35			9			44
Allowance for credit losses	555			63			618			930			62			992

Loan charge-offs	(30)			(1)			(31)			(22)			(2)			(24)
Recoveries on loans previously charged-off	21			2			23			31			1			32
Net loan (charge-offs) recoveries	(9)			1			(8)			9			(1)			8
Provision for credit losses:
Provision for loan losses	(20)			3			(17)			(315)			11			(304)
Provision for credit losses on lending-related commitments	10			6			16			(11)			(2)			(13)
Provision for credit losses	(10)			9			(1)			(326)			9			(317)

Balance at end of period:
Allowance for loan losses	502			61			563			589			63			652
Allowance for credit losses on lending-related commitments	34			12			46			24			7			31
Allowance for credit losses	$	536		$	73		$	609		$	613		$	70		$	683
Allowance for loan losses as a percentage of total loans	1.06		%	1.55		%	1.09		%	1.27		%	1.63		%	1.30		%

Allowance for credit losses as a percentage of total loans	1.13			1.85			1.18			1.32			1.80			1.36

Table of Contents

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

Nonaccrual Loans

The following table presents additional information regarding nonaccrual loans. Interest income of $2 million was recognized on nonaccrual loans for both the three months ended June 30, 2022 and 2021, and $4 million for both the six months ended June 30, 2022 and 2021.


(in millions)	Nonaccrual Loans with No Related Allowance		Nonaccrual Loans with Related Allowance		Total Nonaccrual Loans
June 30, 2022
Business loans:
Commercial	$	67	$	94	$	161
Real estate construction:

Other business lines (a)	—		4		4

Commercial mortgage:
Commercial Real Estate business line (b)	—		1		1
Other business lines (a)	4		24		28
Total commercial mortgage	4		25		29

International	5		—		5
Total business loans	76		123		199
Retail loans:
Residential mortgage	49		—		49
Consumer:
Home equity	13		—		13
Other consumer	1		—		1
Total consumer	14		—		14
Total retail loans	63		—		63
Total nonaccrual loans	$	139	$	123	$	262
December 31, 2021
Business loans:
Commercial	$	8