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®
Comerica
Incorporated
2011
Annual
Report

Table of contents

  • Page 1
    Comerica Incorporated 2011 Annual Report ®

  • Page 2
    ... and helping people and businesses be successful. In addition to Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico. To receive e-mail alerts of breaking Comerica news, go...

  • Page 3
    ...acquisition virtually tripled our market share in Houston, provided us entry into the attractive San Antonio and Kerrville regions, and complemented our banking center network in Dallas/Fort Worth, while adding about $5 billion in assets, $2 billion in loans and $4 billion in deposits on the closing...

  • Page 4
    ...number of commercial business lines, including National Dealer Services, Technology & Life Sciences, Energy Lending, Entertainment, Environmental Services, and Mortgage Banker Finance, among others. We believe our expertise in these commercial business lines will assist us in growing loans, deposits...

  • Page 5
    ...tailored lending, investment management, treasury management and foreign exchange services. This is a deposit-rich segment with deposits, generally, more than three times as large as loans. We are looking forward to opening a new Technology & Life Sciences office in Houston in 2012 to capitalize on...

  • Page 6
    ... supplies were collected at our banking centers throughout greater Los Angeles. In Texas, we teamed up with non-profits in Dallas and Houston to open community resource centers, or access points for self-sufficiency, self-improvement, financial literacy education, job preparation and life skills...

  • Page 7
    .... MERICA CARES who stepped up to make a difference in our communities by volunteering and recording nearly 7,000 independent and corporate-sponsored hours during our fourth annual National Day of Service on September 24, 2011. Our colleagues in Texas welcomed home soldiers at Dallas/Fort Worth...

  • Page 8
    ...job growth through the end of 2011 should help support the state's economy and firm up tax revenues. Silicon Valley continues to hire, and this is good news for our Technology & Life Sciences customers and the state. In summary, Comerica is poised for the future. We have stayed true to our strategy...

  • Page 9
    ... Number) 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 Exchange Act: Common Stock, $5 par value...

  • Page 10
    ... Legal Proceedings...Item 4. Mine Safety Disclosures...PART II...Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities...Item 6. Selected Financial Data...Item 7. Management's Discussion and Analysis of Financial Condition and Results of...

  • Page 11
    ...headquartered in Dallas, Texas. As of December 31, 2011, it was among the 25 largest commercial bank holding companies in the United States. Comerica was formed in 1973 to acquire the outstanding common stock of Comerica Bank, which at such time was a Michigan banking corporation and one of Michigan...

  • Page 12
    ... services business is highly competitive. Comerica and its subsidiaries compete primarily with banks and other financial institutions for various deposits, loans, trust services and/or other products and services in their primary geographic markets of Texas, Arizona, California, Florida and Michigan...

  • Page 13
    ... the FRS. The deposits of Comerica Bank and Comerica Bank & Trust, National Association are insured by the Deposit Insurance Fund ("DIF") of the Federal Deposit Insurance Corporation ("FDIC") to the extent provided by law. The FRB supervises non-banking activities conducted by companies directly and...

  • Page 14
    ... former banking business into one bank, Comerica Bank, with branches in Texas, Arizona, California, Florida and Michigan. Dividends Comerica is a legal entity separate and distinct from its banking and other subsidiaries. Most of Comerica's revenues result from dividends its bank subsidiaries pay it...

  • Page 15
    ... a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. Undercapitalized depository institutions are subject to limitations on growth and certain activities and are required to submit an acceptable capital restoration plan...

  • Page 16
    ... depository institution's or holding company's capital, in turn, is divided into two tiers: core ("Tier 1") capital, which includes common equity, non-cumulative perpetual preferred stock, and a limited amount of cumulative perpetual preferred stock and related surplus (excluding auction rate issues...

  • Page 17
    ... shares of Comerica's common stock at an exercise price of $29.40 per share (the "Warrant"). Both the Series F Preferred Stock and the Warrant were accounted for as components of Comerica's regulatory Tier 1 capital and contained terms and limitations imposed by the U.S. Treasury. On March 17, 2010...

  • Page 18
    ...outstanding. Comerica called $4 million of the trust preferred securities effective January 7, 2012 • The Volcker Rule: Broadly restricts banking entities from engaging in proprietary trading and private fund sponsorship and investment activities and generally requires full compliance with the new...

  • Page 19
    ... crisis, including legislative and regulatory changes affecting capital, liquidity, supervision, permissible activities, corporate governance and compensation, and changes in fiscal policy may have long-term effects on the business model and profitability of financial institutions that cannot now be...

  • Page 20
    ...top-tier U.S. bank holding companies with total consolidated assets of $50 billion or more to submit annual capital plans for review, and issued instructions regarding stress testing as part of the 2012 Capital Plan Review program. Under the rule, the FRB will annually evaluate institutions' capital...

  • Page 21
    ... and pricing elements (cost of funds; servicing costs; time value of money; credit risk). Comerica prices credit facilities to reflect risk, the related costs and the expected return, while maintaining competitiveness with other financial institutions. Loans with variable and fixed rates are...

  • Page 22
    ...real estate construction and commercial mortgage loans and includes both loans to real estate investors and developers, and loans secured by owner-occupied real estate. Comerica's CRE loan underwriting policies are consistent with the approach described above and provide maximum loan-to-value ratios...

  • Page 23
    ... be no assurance that Comerica will maintain its current ratings. In December 2011, Moody's Investors Service placed Comerica on review for a possible downgrade. A downgrade to Comerica or its subsidiaries' credit ratings could affect its ability to access the capital markets, increase its borrowing...

  • Page 24
    ... that apply to insured depository institutions to most bank holding companies, such as Comerica, which, among other things, will, after a three-year phase-in period which begins January 1, 2013, remove trust preferred securities as a permitted component of a holding company's Tier 1 capital; 14

  • Page 25
    ...top-tier U.S. bank holding companies with total consolidated assets of $50 billion or more to submit annual capital plans for review, and issued instructions regarding stress testing as part of the 2012 Capital Plan Review program. Under the rule, the FRB will annually evaluate institutions' capital...

  • Page 26
    ... and timing of business initiatives and strategies, including, but not limited to, the opening of new banking centers, may be less successful or may be different than anticipated, which could adversely affect Comerica's business. Comerica makes certain projections and develops plans and strategies...

  • Page 27
    ... from loans and investments and interest expense on deposits and borrowings. Prevailing economic conditions, the trade, fiscal and monetary policies of the federal government and the policies of various regulatory agencies all affect market rates of interest and the availability and cost of credit...

  • Page 28
    ... and other factors outside of Comerica's control, such as fuel prices, energy costs, real estate values or other factors that affect customer income levels, could alter predicted customer borrowing, repayment, investment and deposit practices. Such a change in these practices could materially...

  • Page 29
    ... and results of operations. In some cases, Comerica could be required to apply a new or revised standard retroactively, resulting in changes to previously reported financial results, or a cumulative charge to retained earnings. • Comerica's accounting policies and processes are critical to the...

  • Page 30
    ... through January 2012. As of December 31, 2011, Comerica, through its banking affiliates, operated a total of 575 banking centers, trust services locations, and loan production or other financial services offices, primarily in the States of Texas, Michigan, California, Florida and Arizona. Of these...

  • Page 31
    ... $ $ $ Dividend yield is calculated by annualizing the quarterly dividend per share and dividing by an average of the high and low price in the quarter. Securities Authorized for Issuance Under Equity Compensation Plans As of December 31, 2011 Number of securities remaining available for future...

  • Page 32
    ...by or contributed on behalf of employees, leaving 3,018,070 shares available for future sale or awards. If the shares available for future sale or awards under the Employee Stock Purchase Plan were included, the number shown in column (c) under "Equity compensation plans approved by security holders...

  • Page 33
    ...graph is available under the caption "Performance Graph" on page F-2 of the Financial Section of this report. Purchases of Equity Securities by the Issuer and Affiliated Purchasers In November 2010, the Board of Directors of Comerica authorized the repurchase of up to 12.6 million shares of Comerica...

  • Page 34
    ... is made to the sections entitled "2011 Overview and Key Corporate Initiatives," "Results of Operations," "Strategic Lines of Business," "Balance Sheet and Capital Funds Analysis," "Risk Management," "Critical Accounting Policies," "Supplemental Financial Data" and "Forward-Looking Statements" on...

  • Page 35
    ...the related attestation report of Comerica's registered public accounting firm are included on pages F-120 and F-121 in the Financial Section of this report. As required by Rule 13a-15(d) of the Exchange Act, management, including the Chief Executive Officer and Chief Financial Officer, conducted an...

  • Page 36
    ...," "Pension Benefits at Fiscal Year-End 2011," "2011 Nonqualified Deferred Compensation," and "Potential Payments upon Termination or Change of Control at Fiscal Year-End 2011" of Comerica's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 24, 2012, which...

  • Page 37
    ... statements that are filed as part of this report are included in the Financial Section on pages F-51 through F-122. All of the schedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instruction, the required information...

  • Page 38
    FINANCIAL REVIEW AND REPORTS Comerica Incorporated and Subsidiaries Performance Graph ...2011 Overview and Key Corporate Initiatives...Results of Operations ...Strategic Lines of Business ...Balance Sheet and Capital Funds Analysis ...Risk Management...Critical Accounting Policies...Supplemental ...

  • Page 39
    ... shown below compares the total returns (assuming reinvestment of dividends) of Comerica Incorporated common stock, the S&P 500 Index, and the Keefe Bank Index. The graph assumes $100 invested in Comerica Incorporated common stock (returns based on stock prices per the NYSE) and each of the indices...

  • Page 40
    ... per common share: Income (loss) from continuing operations Net income (loss) Cash dividends declared Common shareholders' equity Tangible common equity (b) Market value Average diluted shares (in millions) YEAR-END BALANCES Total assets Total earning assets Total loans Total deposits Total medium...

  • Page 41
    ... advisory services, investment banking and brokerage services. This business segment also offers the sale of annuity products, as well as life, disability and long-term care insurance products. As a financial institution, the Corporation's principal activity is lending to and accepting deposits from...

  • Page 42
    ... middle market and small business companies. Systems integrations and branch conversions were successfully completed in the fourth quarter 2011. • Commenced a share repurchase program that, combined with dividend payments, resulted in a total payout to shareholders of 47 percent of 2011 net income...

  • Page 43
    ... securities available-for-sale (d) 5 Federal funds sold 3,741 Interest-bearing deposits with banks (e) 129 Other short-term investments 52,121 Total earning assets 921 Cash and due from banks (838) Allowance for loan losses 4,713 Accrued income and other assets $ 56,917 Total assets Money market...

  • Page 44
    ... investment securities available-for-sale Interest-bearing deposits with banks Other short-term investments Total interest income (FTE) Interest expense: Interest-bearing deposits: Money market and NOW accounts Savings deposits Customer certificates of deposit Other time deposits Foreign office time...

  • Page 45
    ... in the Commercial Real Estate ($164 million), Middle Market ($42 million), Private Banking ($12 million) and Entertainment ($12 million) business lines, partially offset by an increase in net loan charge-offs in the Technology and Life Sciences ($8 million) and Global Corporate Banking ($4 million...

  • Page 46
    ... millions) Years Ended December 31 Service charges on deposit accounts Fiduciary income Commercial lending fees Letter of credit fees Card fees Foreign exchange income Bank-owned life insurance Brokerage fees Net securities gains Other noninterest income Total noninterest income 2011 $ 208 151 87 73...

  • Page 47
    ... benefit from increased card activity and the addition of Sterling was offset by the implementation of regulatory limits on debit card transaction processing fees in the fourth quarter 2011. Growth in 2010 resulted primarily from higher levels of commercial card business activity and new customers...

  • Page 48
    ..., in 2010. The increase in 2010 was primarily due to software upgrades in the banking centers and throughout the Corporation. The Corporation recognized merger and restructuring charges of $75 million in 2011 in connection with the acquisition of Sterling. Merger and restructuring charges include...

  • Page 49
    ...included core deposit intangible amortization of $5 million due to the acquisition of Sterling, which was more than offset by smaller decreases in several other noninterest expense categories. The increase in 2010 was primarily due to a $5 million loss on the redemption of trust preferred securities...

  • Page 50
    ... preferred stock issued in connection with the Capital Purchase Program. The redemption was funded by the net proceeds from an $880 million common stock offering completed in the first quarter 2010 and from excess liquidity at the parent company. Preferred stock dividends in 2010 included a one-time...

  • Page 51
    ...decreases in charge-offs in the Commercial Real Estate and Middle Market business lines. Noninterest income of $306 million in 2011 increased $3 million from 2010, primarily due to increases in warrant income ($6 million), customer derivative income ($6 million) and card fees ($3 million), partially...

  • Page 52
    ...Commercial Real Estate business line. Noninterest income of $103 million in 2011 increased $12 million from 2010, primarily due to a $5 million increase in service charges on deposit accounts and nominal increases in several other noninterest income categories in part due to the addition of Sterling...

  • Page 53
    ...related charge-offs decreased $23 million, primarily due to decreases in net charge-offs in the Commercial Real Estate and Middle Market business lines. Noninterest income of $42 million decreased $3 million in 2011, compared to 2010, primarily due to a $6 million decrease in investment banking fees...

  • Page 54
    ... Other corporate debt securities Equity and other non-debt securities: Auction-rate preferred securities Money market and other mutual funds Total investment securities available-for-sale Commercial loans Real estate construction loans: Commercial Real Estate business line (b) Other business lines...

  • Page 55
    ... mortgage loans Consumer loans: Home equity Other consumer Total consumer loans Total loans Average Loans By Business Line: Middle Market Commercial Real Estate Global Corporate Banking National Dealer Services Specialty Businesses (c) Total Business Bank Small Business Personal Financial Services...

  • Page 56
    ...of customers to access external sources of long-term refinancing. The remaining $8.3 billion and $8.7 billion of average commercial real estate loans in other business lines in 2011 and 2010, respectively, were primarily loans secured by owner-occupied real estate. Average residential mortgage loans...

  • Page 57
    ... 31, 2010. Other short-term investments include trading securities and loans held-for-sale. Loans held-for-sale typically represent residential mortgage loans and Small Business Administration loans originated with management's intention to sell. Average other short-term investments increased...

  • Page 58
    ... 2010, the Corporation fully redeemed $2.25 billion of preferred stock issued in connection with the Capital Purchase Program. The redemption was funded by the net proceeds from an $880 million common stock offering completed in the first quarter 2010 and from excess liquidity at the parent company...

  • Page 59
    ...income (loss): Investment securities available-for-sale Cash flow hedges Defined benefit and other postretirement plans Total change in accumulated other comprehensive income (loss) Acquisition of Sterling Bancshares, Inc. Purchase of common stock Share-based compensation Balance at December 31 2011...

  • Page 60
    ... reporting on portfolio credit risks, continuous assessment and verification of risk rating models, quarterly calculation of the allowance for loan losses and the allowance for credit losses on lending-related commitments and calculation of economic credit risk capital. The Special Assets Group...

  • Page 61
    ... are business loans and retail loans. Business loans are defined as those belonging to the commercial, real estate construction, commercial mortgage, lease financing and international loan portfolios. Retail loans consist of traditional residential mortgage, home equity and other consumer loans. The...

  • Page 62
    ... Other markets), Commercial Real Estate (in all markets), Small Business Banking (in all markets) and National Dealer Services (primarily the Western market) business lines, partially offset by increases in Technology and Life Sciences (primarily the Western market) and Personal Banking (primarily...

  • Page 63
    ... at December 31, 2010. The decrease resulted primarily from improved credit quality in unfunded commitments in the Midwest, Western and Texas markets. The Corporation recorded a purchase discount for lending-related commitments acquired from Sterling. An allowance for credit losses will be recorded...

  • Page 64
    ... Real Estate business line (a) Other business lines (b) Total commercial mortgage Lease financing International Total nonaccrual business loans Retail loans: Residential mortgage Consumer: Home equity Other consumer Total consumer Total nonaccrual retail loans Total nonaccrual loans Reduced-rate...

  • Page 65
    ... Market and Commercial Real Estate business lines, respectively. In 2011, the Corporation sold $110 million of nonaccrual business loans at prices approximating carrying value plus reserves, which were primarily from the Commercial Real Estate, Middle Market and Global Corporate Banking business...

  • Page 66
    ... business lines), $24 million of commercial mortgage loans (primarily in the Middle Market, Small Business Banking and National Dealer Services business lines) and $19 million of real estate construction loans (in the Commercial Real Estate business line) at December 31, 2011. At December 31, 2010...

  • Page 67
    ...in millions) December 31 Business loans: Commercial Real estate construction Commercial mortgage International Total business loans Retail loans: Residential mortgage Consumer Total retail loans Total loans past due 90 days or more and still accruing 2011 $ 8 1 32 - 41 6 11 17 58 $ 2010 3 22 16 - 41...

  • Page 68
    ... in the National Dealer Services business line totaled $1.9 billion, including $1.4 billion of owner-occupied commercial real estate mortgage loans at both December 31, 2011 and 2010. Automotive lending also includes loans to borrowers involved with automotive production, primarily Tier 1 and Tier...

  • Page 69
    ... Real Estate business line (a) Other business lines (b) Total commercial mortgage loans (a) Primarily loans to real estate investors and developers. (b) Primarily loans secured by owner-occupied real estate. The Corporation limits risk inherent in its commercial real estate lending activities...

  • Page 70
    ... 31, 2011 Location of Property Other Texas Florida Markets Michigan (dollar amounts in millions) Project Type: Real estate construction loans: Commercial Real Estate business line: Residential: Single family Land development Total residential Other construction: Multi-family Retail Multi-use Office...

  • Page 71
    ..., 2011. A majority of the home equity portfolio was secured by junior liens. The Corporation rarely originates residential real estate loans with loan-to-value ratios above 100 percent at origination, has no sub-prime mortgage programs and does not originate payment-option adjustable-rate mortgages...

  • Page 72
    ...Corporation's direct exposure to state and local municipalities as of December 31, 2011 and 2010. (in millions) December 31 Loans outstanding Lease financing Investment securities available-for-sale Trading account securities Standby letters of credit Unused commitments to extend credit Total direct...

  • Page 73
    ... with the Capital Management Policy. Interest Rate Risk Net interest income is the predominant source of revenue for the Corporation. Interest rate risk arises primarily through the Corporation's core business activities of extending loans and accepting deposits. The Corporation's balance sheet is...

  • Page 74
    ... the economic value of equity utilizing multiple simulation analyses. The Corporation frequently evaluates net interest income under various balance sheet and interest rate scenarios, looking at a 12-month time horizon, using simulation modeling analysis as its principal risk management evaluation...

  • Page 75
    ... core deposits due, in part, to the acquisition of Sterling, and forecasted prepayments on the Corporation's mortgage-backed securities portfolio. LOAN MATURITIES AND INTEREST RATE SENSITIVITY (in millions) December 31, 2011 Commercial loans Real estate construction loans Commercial mortgage loans...

  • Page 76
    ...unrecognized tax benefits. In addition to contractual obligations, other commercial commitments of the Corporation impact liquidity. These include commitments to fund indirect private equity and venture capital investments, unused commitments to extend credit, standby letters of credit and financial...

  • Page 77
    ... a reservoir of liquidity. Liquid assets include cash and due from banks, federal funds sold, interest-bearing deposits with banks, other short-term investments and unencumbered investment securities available-for-sale. At December 31, 2011, the Corporation held excess liquidity, represented by...

  • Page 78
    ... valuation of stock options and restricted stock, refer to the "Critical Accounting Policies" section of this financial review. Nonmarketable Equity Securities At December 31, 2011, the Corporation had a $15 million portfolio of investments in indirect private equity and venture capital funds, with...

  • Page 79
    ...an acceptable level. BUSINESS RISK Business risk represents the risk of loss due to impairment of reputation, failure to fully develop and execute business plans, failure to assess current and new opportunities in business, markets and products, and any other event not identified in the defined risk...

  • Page 80
    ... are business loans and retail loans. Business loans are defined as those belonging to the commercial, real estate construction, commercial mortgage, lease financing and international loan portfolios. Retail loans consist of traditional residential mortgage, home equity and other consumer loans. For...

  • Page 81
    ... of business loans conducted by the Corporation's asset quality review function, a function independent of the lending and credit groups responsible for assigning the initial internal risk rating at the time of approval. An error rate is calculated by major geographic market and updated semiannually...

  • Page 82
    ...and the related measurement techniques. Auction-Rate Securities The Corporation holds a portfolio of auction-rate securities at a fair value of $432 million at December 31, 2011, recorded as investment securities available-for-sale , with unrealized gains and losses, net of income taxes, reported as...

  • Page 83
    ... has three reporting units: the Business Bank, the Retail Bank and Wealth Management. As discussed in Note 2 to the consolidated financial statements, the Corporation completed the acquisition of Sterling in the third quarter 2011. Under the acquisition method of accounting, assets acquired and...

  • Page 84
    ...the reporting units to fall below the carrying value, resulting in a goodwill impairment charge. Any impairment charge would not affect the Corporation's regulatory capital ratios, tangible common equity ratio or liquidity position. PENSION PLAN ACCOUNTING The Corporation has defined benefit pension...

  • Page 85
    ... were no assets in the non-qualified defined benefit pension plan at December 31, 2011, and 2010. Defined benefit pension expense is recorded in "employee benefits" expense on the consolidated statements of income and is allocated to business segments based on the segment's share of salaries expense...

  • Page 86
    ... Tier 1 Common Capital Ratio: Tier 1 capital (a) Less: Fixed rate cumulative perpetual preferred stock Trust preferred securities Tier 1 common capital Risk-weighted assets (a) Tier 1 capital ratio Tier 1 common capital ratio Tangible Common Equity Ratio: Total shareholders' equity Less: Fixed rate...

  • Page 87
    ... and timing of business initiatives and strategies, including, but not limited to, the opening of new banking centers, may be less successful or may be different than anticipated, which could adversely affect the Corporation's business; proposed revenue enhancements and efficiency improvements may...

  • Page 88
    ... Comerica Incorporated and Subsidiaries (in millions, except share data) December 31 ASSETS Cash and due from banks Interest-bearing deposits with banks Other short-term investments Investment securities available-for-sale Commercial loans Real estate construction loans Commercial mortgage loans...

  • Page 89
    ... INCOME Service charges on deposit accounts Fiduciary income Commercial lending fees Letter of credit fees Card fees Foreign exchange income Bank-owned life insurance Brokerage fees Net securities gains Other noninterest income Total noninterest income NONINTEREST EXPENSES Salaries Employee benefits...

  • Page 90
    ... income Cash dividends declared on common stock ($0.40 per share) Acquisition of Sterling Bancshares, Inc. Purchase of common stock Net issuance of common stock under employee stock plans Share-based compensation BALANCE AT DECEMBER 31, 2011 Nonredeemable Preferred Stock Shares Outstanding...

  • Page 91
    ... in customers' liability on acceptances outstanding Cash and cash equivalents acquired in acquisition of Sterling Bancshares, Inc. Purchase of Federal Reserve Bank stock Sales of Federal Home Loan Bank Stock Proceeds from sales of indirect private equity and venture capital funds Proceeds from...

  • Page 92
    ... value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. Fair value measurements are separately disclosed by level within the fair value hierarchy. For assets and liabilities recorded at fair value, it is the Corporation's policy...

  • Page 93
    ... rates and estimates of future cash flows, could significantly affect the results of current or future values. For further information about fair value measurements, refer to Note 3. Other Short-Term Investments Other short-term investments include trading securities and loans held-for-sale. Trading...

  • Page 94
    ... are business loans and retail loans. Business loans are defined as those belonging to the commercial, real estate construction, commercial mortgage, lease financing and international loan portfolios. Retail loans consist of traditional residential mortgage, home equity and other consumer loans. For...

  • Page 95
    ... of business loans conducted by the Corporation's asset quality review function, a function independent of the lending and credit groups responsible for assigning the initial internal risk rating at the time of approval. An error rate is calculated by major geographic market and updated semiannually...

  • Page 96
    ...-line method, is charged to operations over five years, the estimated useful life of the software. Capitalized software is included in "accrued income and other assets" on the consolidated balance sheets. Goodwill The Corporation performs its annual impairment test for goodwill in the third quarter...

  • Page 97
    ... The Corporation has a portfolio of investments in indirect private equity and venture capital funds. The majority of these investments are not readily marketable, are accounted for on the cost or equity method and are included in "accrued income and other assets" on the consolidated balance sheets...

  • Page 98
    ... current benefit obligation and a long-term expected rate of return on plan assets. Net periodic defined benefit pension expense includes service cost, interest cost based on the assumed discount rate, an expected return on plan assets based on an actuarially derived market-related value of assets...

  • Page 99
    ... deposits with banks" on the consolidated balance sheets. Cash flows from discontinued operations are reported as separate line items within cash flows from operating, investing and financing activities in the consolidated statements of cash flows. Other Comprehensive Income (Loss) The Corporation...

  • Page 100
    ... shares) Warrants issued Stock options issued Total consideration paid Fair value of identifiable assets acquired: Cash and cash equivalents Investment securities available-for-sale Total loans Premises and equipment Core deposit intangible Accrued income and other assets Total identifiable assets...

  • Page 101
    ..., 2011. (in millions) Balance at beginning of period Merger and restructuring charges Payments Balance at December 31, 2011 Year Ended December 31, 2011 $ - 75 (49) 26 $ In connection with the acquisition of Sterling, the Corporation acquired loans both with and without evidence of credit quality...

  • Page 102
    ... FINANCIAL STATEMENTS Comerica Incorporated and Subsidiaries Loans acquired with evidence of credit quality deterioration at acquisition for which it was probable that the Corporation would not be able to collect all contractual amounts due were accounted for as purchased credit-impaired (PCI...

  • Page 103
    ... include assets related to employee deferred compensation plans, which are invested in mutual funds, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and other securities traded on an active exchange, such as the New York Stock Exchange. Deferred...

  • Page 104
    ... is no observable market price, the Corporation classifies the impaired loan as nonrecurring Level 3. Business loans consist of commercial, real estate construction, commercial mortgage, lease financing and international loans. The estimated fair value for variable rate business loans that reprice...

  • Page 105
    ... to fund additional investments in nonmarketable equity securities recorded at fair value on a nonrecurring basis were $1 million at both December 31, 2011 and 2010. The Corporation also holds restricted equity investments, primarily Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock...

  • Page 106
    ... fair value of checking, savings and certain money market deposit accounts is represented by the amounts payable on demand. The estimated fair value of term deposits is calculated by discounting the scheduled cash flows using the period-end rates offered on these instruments. Short-term borrowings...

  • Page 107
    ...municipal securities (b) Corporate debt securities: Auction-rate debt securities Other corporate debt securities Equity and other non-debt securities: Auction-rate preferred securities Money market and other mutual funds Total investment securities available-for-sale Derivative assets: Interest rate...

  • Page 108
    ...municipal securities (b) Corporate debt securities: Auction-rate debt securities Other corporate debt securities Equity and other non-debt securities: Auction-rate preferred securities Money market and other mutual funds Total investment securities available-for-sale Derivative assets: Interest rate...

  • Page 109
    ... corporate debt securities Auction-rate preferred securities Total investment securities available-for-sale Derivative assets: Warrants Derivative liabilities: Other Year Ended December 31, 2010 Trading securities: State and municipal securities Other securities Total trading securities Investment...

  • Page 110
    ...December 31, 2010 Trading securities: Other securities Investment securities available-for-sale: State and municipal securities (a) Auction-rate debt securities Other corporate debt securities Auction-rate preferred securities Total investment securities available-forsale Derivative assets: Warrants...

  • Page 111
    ...) December 31, 2011 Loans held-for-sale: Residential mortgage Loans: Commercial Real estate construction Commercial mortgage Lease financing International Total loans Nonmarketable equity securities Other real estate Loan servicing rights Total assets at fair value December 31, 2010 Loans held-for...

  • Page 112
    ... balance sheets are as follows: December 31 2011 (in millions) Assets Cash and due from banks Interest-bearing deposits with banks Loans held-for-sale Total loans, net of allowance for loan losses (a) Customers' liability on acceptances outstanding Nonmarketable equity securities (b) Loan servicing...

  • Page 113
    ... debt securities Other corporate debt securities Equity and other non-debt securities: Auction-rate preferred securities Money market and other mutual funds Total investment securities available-for-sale December 31, 2010 U.S. Treasury and other U.S. government agency securities Residential mortgage...

  • Page 114
    ... years through ten years After ten years Subtotal Equity and other nondebt securities: Auction-rate preferred securities Money market and other mutual funds Total investment securities available-for-sale Amortized Cost $ 66 270 151 8,898 9,385 423 93 9,901 $ Fair Value 66 278 152 9,107 9,603 408 93...

  • Page 115
    ... 31, 2011 (a) Recorded in "investment securities available-for-sale" on the consolidated balance sheets. (b) Changes in fair value recognized in accumulated other comprehensive income (loss). $ Par Value 985 $ (308) $ 677 $ (201) $ 476 $ In January 2012, auction-rate preferred securities with...

  • Page 116
    ...: Home equity Other consumer Total consumer Total retail loans Total loans December 31, 2010 Business loans: Commercial Real estate construction: Commercial Real Estate business line (a) Other business lines (b) Total real estate construction Commercial mortgage: Commercial Real Estate business line...

  • Page 117
    ... period Charge-offs on lending-related commitments (a) Provision for credit losses on lending-related commitments Balance at end of period Unfunded lending-related commitments sold $ 2011 35 $ - (9) 26 $ 5 $ 2010 37 $ - (2) 35 $ 2 $ 2009 38 (1) - 37 1 $ $ (a) Charge-offs result from the sale of...

  • Page 118
    ... Home equity Other consumer Total consumer Total retail loans Total individually evaluated impaired loans December 31, 2010 Business loans: Commercial Real estate construction: Commercial Real Estate business line (a) Commercial mortgage: Commercial Real Estate business line (a) Other business lines...

  • Page 119
    ... commercial mortgage Lease financing International Total business loans Retail loans: Residential mortgage Consumer loans: Home equity Other consumer Total consumer Total retail loans $ Total individually evaluated impaired loans $ $ $ (a) Primarily loans to real estate investors and developers...

  • Page 120
    ... is either fully charged off or exchanged for an equity interest. (c) Primarily loans to real estate investors and developers. (d) Primarily loans secured by owner-occupied real estate. At December 31, 2011 and 2010, commitments to lend additional funds to borrowers whose terms have been modified...

  • Page 121
    ...: Home equity Other consumer Total consumer Total retail loans Total loans December 31, 2010 Business loans: Commercial Real estate construction: Commercial Real Estate business line (e) Other business lines (f) Total real estate construction Commercial mortgage: Commercial Real Estate business line...

  • Page 122
    ... business line (a) Other business lines (b) Total commercial mortgage loans Total commercial real estate loans Total unused commitments on commercial real estate loans (a) Primarily loans to real estate investors and developers. (b) Primarily loans secured by owner-occupied real estate. $ 2011...

  • Page 123
    ... units based on each reporting units' estimated economic benefit from the transaction. Changes in goodwill in the consolidated balance sheets from December 31, 2010 to December 31, 2011 attributable to the acquisition of Sterling were allocated to the Corporation's business segments as follows. (in...

  • Page 124
    ... cash, investment securities, accounts receivable, equipment or real estate. Included in the fair value of derivative instruments are credit valuation adjustments reflecting counterparty credit risk. These adjustments are determined by applying a credit spread for the counterparty or the Corporation...

  • Page 125
    ...in connection with customer-initiated and other activities at December 31, 2011 and 2010. The table excludes commitments, warrants accounted for as derivatives and a derivative related to the Corporation's 2008 sale of its remaining ownership of Visa shares. December 31, 2011 Fair Value (a) Notional...

  • Page 126
    ... and fees on loans (effective portion) 2011 (2) $ 1 1 2010 2 1 28 Foreign exchange rate risk arises from changes in the value of certain assets and liabilities denominated in foreign currencies. The Corporation employs spot and forward contracts in addition to swap contracts to manage exposure...

  • Page 127
    ... exchange contracts where offsetting positions have not been taken, the Corporation manages the remaining inherent market risk through individual foreign currency position limits and aggregate value-at-risk limits. These limits are established annually and reviewed quarterly. For those customer...

  • Page 128
    ... revolving check credit and home equity loan commitments Total unused commitments to extend credit Standby letters of credit Commercial letters of credit Other credit-related financial instruments 2011 $ $ $ 24,819 1,612 26,431 5,325 132 6 $ $ $ 2010 23,578 1,568 25,146 5,453 93 1 The Corporation...

  • Page 129
    ... with its share of the related participated loan. As of December 31, 2011 and 2010, the total notional amount of the credit risk participation agreements was approximately $394 million and $316 million, respectively, and the fair value, included in customer-initiated interest rate contracts recorded...

  • Page 130
    ... noninterest income Provision (benefit) for income taxes (a) 2011 $ (a) Income tax credits from low income housing tax credit/historic rehabilitation tax credit partnerships. For further information on the Corporation's consolidation policy, see Note 1. NOTE 11 - DEPOSITS At December 31, 2011, the...

  • Page 131
    ... of commercial paper, borrowed securities, term federal funds purchased, short-term notes, treasury tax and loan deposits and, in 2009, Federal Reserve Term Auction Facility borrowings, generally mature within one to 120 days from the transaction date. At December 31, 2011, Comerica Bank (the Bank...

  • Page 132
    ...indices due 2011 to 2012 Federal Home Loan Bank advances: Floating-rate based on LIBOR indices due 2011 to 2014 Other notes: 6.0% - 6.4% fixed-rate notes due 2020 Total subsidiaries Total medium- and long-term debt (a) Medium- and long-term debt assumed in Sterling acquisition. The carrying value of...

  • Page 133
    ... by mortgage-related assets to its members. FHLB advances bear interest at variable rates based on LIBOR and were secured by a blanket lien on $15 billion of real estate-related loans at December 31, 2011. The Corporation currently has a $15 billion medium-term senior note program. This program...

  • Page 134
    ... STATEMENTS Comerica Incorporated and Subsidiaries In the first quarter 2010, the Corporation fully redeemed $2.25 billion of Fixed Rate Cumulative Perpetual Preferred Stock (preferred stock) issued in 2008 in connection with the U.S. Department of Treasury (U.S. Treasury) Capital Purchase Program...

  • Page 135
    ... in net unrealized gains and losses on investment securities available-for-sale, the change in accumulated net gains and losses on cash flow hedges and the change in the accumulated defined benefit and other postretirement plans adjustment. Total comprehensive income (loss) was $426 million, $224...

  • Page 136
    ... table. (in millions, except per share data) Years Ended December 31 Basic and diluted Income from continuing operations Less: Preferred stock dividends Redemption discount accretion on preferred stock Income allocated to participating securities Income (loss) from continuing operations attributable...

  • Page 137
    ... dividends, were fully vested when awarded, and were settled in cash in the first quarter 2011. The amount paid upon settlement was equal to the number of PSUs settled multiplied by the reported closing price on the NYSE for a share of the Corporation common stock on the date of settlement. Salaries...

  • Page 138
    ... rates Expected dividend yield Expected volatility factors of the market price of Comerica common stock Expected option life (in years) $ 2011 11.58 3.43% 3.00 38 6.1 $ 2010 11.07 3.73% 3.00 40 6.1 $ 2009 6.55 3.08% 4.62 58 6.4 A summary of the Corporation's stock option activity and related...

  • Page 139
    ... retirement. The Corporation's postretirement benefit plan continues to provide postretirement health care and life insurance benefits for retirees as of December 31, 1992. The plan also provides certain postretirement health care and life insurance benefits for a limited number of retirees who...

  • Page 140
    ... Subsidiaries The accumulated benefit obligation exceeded the fair value of plan assets for the non-qualified defined benefit pension plan and the postretirement benefit plan at December 31, 2011 and 2010. The following table details the changes in plan assets and benefit obligations recognized in...

  • Page 141
    ... income securities include U.S. Treasury and other U.S. government agency securities, mortgage-backed securities, corporate bonds and notes, municipal bonds, collateralized mortgage obligations and money market funds. Fair Value Measurements The Corporation's qualified defined benefit pension plan...

  • Page 142
    ... the Corporation's qualified defined benefit pension plan investments measured at fair value on a recurring basis at December 31, 2011 and 2010, by asset category and level within the fair value hierarchy, are detailed in the table below. (in millions) December 31, 2011 Equity securities: Collective...

  • Page 143
    ...Purchases $ $ 9 10 $ $ Sales Balance at End of Period 26 28 (12) $ (11) $ There were no assets in the non-qualified defined benefit pension plan at December 31, 2011 and 2010. The postretirement benefit plan is fully invested in bank-owned life insurance policies. The fair value of bank-owned life...

  • Page 144
    ... on bank-owned life insurance, and deducting tax credits related to investments in low income housing partnerships. Taxrelated interest and penalties, state taxes and foreign taxes are then added to the federal tax provision. The current and deferred components of the provision (benefit) for income...

  • Page 145
    ... liabilities were as follows: (in millions) December 31 Deferred tax assets: Allowance for loan losses Deferred loan origination fees and costs Other comprehensive loss Employee benefits Foreign tax credit Auction-rate securities Other tax credits Other temporary differences, net Total deferred tax...

  • Page 146
    ... level of customer deposits in the Corporation's banking subsidiaries. The average required reserve balances were $335 million and $311 million for the years ended December 31, 2011 and 2010, respectively. Banking regulations limit the transfer of assets in the form of dividends, loans or advances...

  • Page 147
    ...26 $ $ Comerica Bank 6,596 8,849 63,029 60,065 10.47% 14.04 10.98 6,073 8,455 59,278 53,306 10.24 % 14.26 11.39 (dollar amounts in millions) December 31, 2011 Tier 1 capital (minimum-$2.5 billion (Consolidated)) Total capital (minimum-$5.1 billion (Consolidated)) Risk-weighted assets Average assets...

  • Page 148
    ...range of financial services provided to small business customers, this business segment offers a variety of consumer products, including deposit accounts, installment loans, credit cards, student loans, home equity lines of credit and residential mortgage loans. Wealth Management offers products and...

  • Page 149
    ... expenses 331 Provision (benefit) for income taxes (FTE) $ 723 Net income (loss) $ 199 Net credit-related charge-offs Selected average balances: Assets Loans Deposits Statistical data: Return on average assets (a) Efficiency ratio (dollar amounts in millions) Year Ended December 31, 2010 $ 30,691 30...

  • Page 150
    ... of the Western market. The Texas and Florida markets consist of operations located in the states of Texas and Florida, respectively. Other Markets include businesses with a national perspective, the Corporation's investment management and trust alliance businesses as well as activities in all...

  • Page 151
    ...) Net credit-related charge-offs Selected average balances: Assets Loans Deposits Statistical data: Return on average assets (a) Efficiency ratio $ 816 199 397 751 92 - 171 211 $ 639 148 135 432 80 - 114 212 $ 318 48 91 253 38 - 70 47 $ 43 33 14 44 (7) - (13) 30 Western Texas Florida Other Markets...

  • Page 152
    ... equity. FTE-Fully Taxable Equivalent n/m - not meaningful NOTE 24 - PARENT COMPANY FINANCIAL STATEMENTS BALANCE SHEETS - COMERICA INCORPORATED (in millions, except share data) December 31 Assets Cash and due from subsidiary bank Short-term investments with subsidiary bank Other short-term...

  • Page 153
    ... income taxes Income (loss) before equity in undistributed earnings of subsidiaries Equity in undistributed earnings of subsidiaries, principally banks Net income Less: Preferred stock dividends Income allocated to participating securities Net income (loss) attributable to common shares 2011 2010...

  • Page 154
    ... for deferred income taxes Excess tax benefits from share-based compensation arrangements Other, net Net cash provided by operating activities Investing Activities Net proceeds from private equity and venture capital investments Cash and cash equivalents acquired from Sterling Bancshares, Inc...

  • Page 155
    ... ended December 31, 2011. (in millions, except per share data) Years Ended December 31 Income from discontinued operations before income taxes Provision for income taxes Net income from discontinued operations Earnings per common share from discontinued operations: Basic Diluted 2010 $ $ $ 27 10 17...

  • Page 156
    ...Provision (benefit) for income taxes Income from continuing operations Income from discontinued operations, net of tax Net income Less: Preferred stock dividends Income allocated to participating securities Net income (loss) attributable to common shares Basic earnings per common share: Income (loss...

  • Page 157
    ... of the Corporation's Chief Executive Officer and Chief Financial Officer, internal control over financial reporting as it relates to the Corporation's consolidated financial statements presented in conformity with U.S. generally accepted accounting principles as of December 31, 2011. The assessment...

  • Page 158
    ... of the Public Company Accounting Oversight Board (United States), the 2011 consolidated financial statements of Comerica Incorporated and subsidiaries and our report dated February 21, 2012 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Dallas, Texas February 21, 2012 F-121

  • Page 159
    ... PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders Comerica Incorporated We have audited the accompanying consolidated balance sheets of Comerica Incorporated and subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of income, shareholders' equity, and cash...

  • Page 160
    ... 31 ASSETS Cash and due from banks Federal funds sold Interest-bearing deposits with banks Other short-term investments Investment securities available-for-sale Commercial loans Real estate construction loans Commercial mortgage loans Lease financing International loans Residential mortgage loans...

  • Page 161
    ... INCOME Service charges on deposit accounts Fiduciary income Commercial lending fees Letter of credit fees Card fees Foreign exchange income Bank-owned life insurance Brokerage fees Net securities gains Other noninterest income Total noninterest income NONINTEREST EXPENSES Salaries Employee benefits...

  • Page 162
    ... short-term investments Investment securities available-for-sale Commercial loans Real estate construction loans Commercial mortgage loans Lease financing International loans Residential mortgage loans Consumer loans Total loans Interest income as a percentage of earning assets Domestic deposits...

  • Page 163
    ... as of February 21, 2012. COMERICA INCORPORATED By: /s/ Ralph W. Babb, Jr. Ralph W. Babb, Jr. Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant...

  • Page 164
    ... dated as of June 9, 2010, between Comerica Incorporated (as successor to Sterling Bancshares, Inc.) and America Stock Transfer & Trust Company, LLC (filed as Exhibit 4.1 to Sterling Bancshares, Inc.'s Registration Statement on Form 8-A12B filed on June 10, 2010 (File No. 001-34768) and incorporated...

  • Page 165
    ... Employee Stock Purchase Plan (amended and restated November 15, 2011). Comerica Incorporated 2011 Management Incentive Plan (filed as Exhibit 10.1 to Registrant's Current Report on Form 8-K dated April 26, 2011, and incorporated herein by reference). Form of Standard Comerica Incorporated No Sale...

  • Page 166
    ...to Registrant's Current Report on Form 8-K dated July 26, 2011, and incorporated herein by reference). Amended and Restated Comerica Incorporated Stock Option Plan For Non-Employee Directors (amended and restated on May 22, 2001) (filed as Exhibit 10.12 to Registrant's Annual Report on Form 10-K for...

  • Page 167
    ... by reference). Amendments to Benefit Plans and Related Consent of Senior Executive Officers dated November 14, 2008 (filed as Exhibit 10.3 to Registrant's Current Report on Form 8-K dated November 13, 2008, regarding U.S. Department of Treasury's Capital Purchase Program, and incorporated herein by...

  • Page 168
    ...) (not applicable) (not applicable) (not applicable) Financial statements from Annual Report on Form 10-K of the Registrant for the year ended December 31, 2011, formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii...

  • Page 169
    ...Babb, Jr., Chairman, President and Chief Executive Officer of Comerica Incorporated (the "Registrant"), certify that: 1. 2. I have reviewed this annual report on Form 10-K of the Registrant for the year ended December 31, 2011; Based on my knowledge, this report does not contain any untrue statement...

  • Page 170
    ...2002 I, Karen L. Parkhill, Vice Chairman and Chief Financial Officer of Comerica Incorporated (the "Registrant"), certify that: 1. 2. I have reviewed this annual report on Form 10-K of the Registrant for the year ended December 31, 2011; Based on my knowledge, this report does not contain any untrue...

  • Page 171
    ... Vice Chairman and Chief Financial Officer, of Comerica Incorporated (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: (1) the Annual Report on Form 10-K of the Company for the year ended December 31, 2011 (the "Report") fully complies...

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    ... Governance, Regulatory Relations and Legal Affairs MEGAN D. BURKHART Executive Vice President and Chief Human Resources Officer DAVID E. DUPREY Executive Vice President and General Auditor J. PATRICK FAUBION President Comerica Bank - Texas Market LINDA D. FORTE Senior Vice President Business...

  • Page 175
    ... quotes, news releases and financial data. Shareholder Assistance Inquiries related to shareholder records, change of name, address or ownership of stock, and lost or stolen stock certificates should be directed to the transfer agent and registrar: Stock Prices, Dividends and Yields Quarter High...

  • Page 176
    C C H Comerica Bank Tower 1717 Main Street Dallas, Texas 75201