Comerica 2009 Annual Report Download - page 36

Investment Securities Available-for-Sale
Investment securities available-for-sale decreased $1.8 billion to $7.4 billion at December 31, 2009, from
$9.2 billion at December 31, 2008, reflecting sales of $5.3 billion of mortgage-backed government agency
securities and redemptions of $262 million of auction-rate securities. Mortgage-backed government agency
securities were sold in 2009 as market conditions were favorable and there was no longer a need to hold a large
portfolio of fixed-rate securities to mitigate the impact of potential future rate declines on net interest income.
On an average basis, investment securities available-for-sale increased $1.3 billion to $9.4 billion in 2009,
compared to $8.1 billion in 2008, primarily due to the 2008 purchase of auction-rate securities from certain
customers, all in the fourth quarter 2008.
The purchase of auction-rate securities in 2008 resulted from the Corporation’s September 2008 offer to
repurchase, at par, auction-rate securities held by certain retail and institutional clients that were sold through
Comerica Securities, a broker/dealer subsidiary of Comerica Bank (the Bank). As of December 31, 2009, the
Corporation’s auction-rate securities portfolio was carried at an estimated fair value of $901 million, a decrease
of $246 million compared to $1.1 billion at December 31, 2008. Subsequent to repurchase, auction-rate
securities, primarily taxable and non-taxable auction-rate preferred securities, of $276 million were called or
redeemed at par, resulting in net securities gains of $14 million in 2009, compared to $84 million called or
redeemed at par in the fourth quarter 2008, resulting in net securities gains of $4 million in 2008. The
Corporation experienced minimal credit-related losses or defaults on contractual interest payments related to
the portfolio; however, the market for these securities was not active. For additional information on the
repurchase of auction-rate securities, refer to the ‘‘Critical Accounting Policies’’ section of this financial review
and Note 4 to the consolidated financial statements.
Management expects investment securities available-for-sale for 2010 to remain at a level similar to year-end
2009.
Short-Term Investments
Short-term investments include federal funds sold and securities purchased under agreements to resell,
interest-bearing deposits with banks and other short-term investments. Federal funds sold offer supplemental
earnings opportunities and serve correspondent banks. Average federal funds sold and securities purchased
under agreements to resell decreased $75 million to $18 million during 2009, compared to 2008. Interest-bearing
deposits with banks are investments with banks in developed countries or international banking facilities of
foreign banks located in the United States and include deposits with the FRB since October 1, 2008, the date at
which the FRB began paying interest on such balances. Average interest-bearing deposits with banks increased
$2.2 billion to $2.4 billion in 2009, compared to 2008, due to an increase in average deposits with the FRB.
Average deposits with the FRB represent excess liquidity, which resulted from strong core deposit growth at a
time when loan demand remained weak. At December 31, 2009, interest-bearing deposits with the FRB totaled
$4.8 billion, compared to $2.3 billion at December 31, 2008. 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 that have been originated with management’s intention to sell. Short-term
investments, other than loans held-for-sale, provide a range of maturities less than one year and are mostly used
to manage liquidity requirements of the Corporation. Average other short-term investments decreased
$90 million to $154 million in 2009, compared to 2008.
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