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2013
COMERICA I NCORPORATED
ANNUAL R EPORT
A higher level
of banking
.
®

Table of contents

  • Page 1
    A higher level of banking. 2013 C OMERICA I NCORPORATED ANNUAL REPORT ®

  • Page 2
    ...nancial services company headquartered in Dallas, Texas, and strategically aligned by three business segments: The Business Bank, The Retail Bank, and Wealth Management. Comerica focuses on relationships, and helping people and businesses be successful. In addition to Texas, Comerica Bank locations...

  • Page 3
    ...percent, in combined commercial mortgage and real estate construction loans. The increase in commercial loans was primarily driven by increases in National Dealer Services, general Middle Market and Energy, EARNINGS PER SHARE (DILUTED) T O TA L AV E R A G E L O A N S AND DEPOSITS (IN BILLIONS) $51...

  • Page 4
    ... and services, and small enough to be able to deliver personalized care to customers and react quickly to changing market conditions. As a country, in 2013 we were still working our way out of the previous recession. We have been in a prolonged low-rate environment, with slow job growth, recovering...

  • Page 5
    ... investments, as business customers are placing more value on technology capabilities, especially in payments, analytics, fraud control, and mobile access. We are leveraging technology to provide the products our customers desire, while helping them to grow their bottom line. "OUR BANKING CENTERS...

  • Page 6
    ...the highly competitive environment. Period-end loans and deposits in Texas in 2013 were up 1 percent and 10 percent, respectively, from 2012. California is a state where we have operated for nearly 30 years. It serves as the headquarters of our Technology & Life Sciences and Entertainment businesses...

  • Page 7
    ... for its continued support of LAUSD's homeless students' assistance program. Since 2010, our 31 Los Angeles-area banking centers have collected and donated more than 110,000 school supplies, including new backpacks, pencils, pens, and soap, all given by bank customers and employees, to the more...

  • Page 8
    ... The Retail Bank and Wealth Management J. Patrick Faubion President Comerica Bank - Texas Market Paul R. Obermeyer Executive Vice President and Chief Information Officer Karen L. Parkhill Vice Chairman and Chief Financial Officer Linda D. Forte Senior Vice President Business Affairs Michael...

  • Page 9
    ... aggregate market value of approximately $7.2 billion based on the closing price on the New York Stock Exchange on that date of $39.83 per share. For purposes of this Form 10-K only, it has been assumed that all common shares held in Comerica's director and employee plans, and all common shares the...

  • Page 10
    ...Market Risk. Item 8. Financial Statements and Supplementary Data. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Item 9A. Controls and Procedures. Item 9B. Other Information. PART III Item 10. Directors, Executive Officers and Corporate Governance. Item...

  • Page 11
    ...and services, including commercial loans and lines of credit, deposits, cash management, capital market products, international trade finance, letters of credit, foreign exchange management services and loan syndication services. The Retail Bank includes small business banking and personal financial...

  • Page 12
    ..., loans and lines of credit, deposits, cash management, capital market products, international trade finance, letters of credit, foreign exchange management services, loan syndication services, consumer products, fiduciary services, private banking, retirement services, investment management and...

  • Page 13
    ... of its nonbank affiliates to no more than 20% of its total capital. "Covered transactions" are defined by statute to include a loan or extension of credit, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the FRB) from the affiliate, the...

  • Page 14
    ..., when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering activities of the applicants. To comply with these obligations, Comerica and its various operating units have implemented appropriate internal practices...

  • Page 15
    ... standards for real estate lending, "truth in savings" provisions, the requirement that a depository institution give 90 days prior notice to customers and regulatory authorities before closing any branch, and a prohibition on the acceptance or renewal of brokered deposits by depository institutions...

  • Page 16
    ... market value of trading account, foreign exchange, and commodity positions, whether resulting from broad market movements (such as changes in the general level of interest rates, equity prices, foreign exchange rates, or commodity prices) or from position specific factors. Comerica, like other bank...

  • Page 17
    ... appropriately balance risk and financial results in a manner that does not encourage employees to expose their organizations to imprudent risk; (ii) should be compatible with effective controls and risk-management; and (iii) should be supported by strong corporate governance, including active and...

  • Page 18
    .... Additional information on Comerica's portfolio of indirect (through funds) private equity and venture capital investments is set forth in Note 2 of the Notes to Consolidated Financial Statements located on pages F-66 through F-67 of the Financial Section of this report. Annual Capital Plans. On...

  • Page 19
    ... centers on limiting certain OTC transactions to "eligible contract participants." This regulation may have an impact on the small business customers of Comerica's banking subsidiaries by making such customers ineligible for swap derivatives as hedging in their loan agreements. Consumer Finance...

  • Page 20
    ...related to higher priced mortgage loans. HOEPA applies mainly to higher priced mortgage loans securing a consumer's principal dwelling, including purchase money loans and home equity lines of credit ("HELOCs"). The existing tests for coverage were revised, and a new prepayment penalty test for HOEPA...

  • 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
    ..., Comerica Bank Tower, 1717 Main Street, MC 6404, Dallas, Texas 75201. Item 1A. Risk Factors. This report includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. In addition, Comerica may make other written and oral communications from time to time...

  • Page 23
    ... regulatory agencies, in particular the FRB, affect the financial services industry, directly and indirectly. The FRB regulates the supply of money and credit in the U.S. and its monetary and fiscal policies determine in a large part Comerica's cost of funds for lending and investing and the return...

  • Page 24
    ...'s ability to pay dividends, or could require Comerica to reduce business levels or to raise capital, including in ways that may adversely affect its results of operations or financial condition and/or existing shareholders. The liquidity requirements applicable to Comerica as a bank holding company...

  • Page 25
    ...a number of other large financial institutions' websites, Comerica's website, www.comerica.com, was subject to denial of service attacks in 2013. These events did not result in a breach of Comerica's client data, and account information remained secure; however, during one attack, some customers may...

  • Page 26
    ... into direct investments, such as federal government and corporate securities and other investment vehicles, which, because of the absence of federal insurance premiums and reserve requirements, generally pay higher rates of return than financial institutions. Comerica's financial results...

  • Page 27
    ... depend substantially upon the continued service of its executive officers and key personnel. Comerica's future operating results also depend in significant part upon its ability to attract and retain qualified management, financial, technical, marketing, sales and support personnel. Competition for...

  • Page 28
    ...Comerica's financial statements. From time to time accounting standards setters change the financial accounting and reporting standards that govern the preparation of Comerica's financial statements. These changes can be difficult to predict and can materially impact how Comerica records and reports...

  • Page 29
    ... Detroit, Michigan 48226. Such building is owned by Comerica Bank. As of December 31, 2013, Comerica, through its banking affiliates, operated a total of 559 banking centers, trust services locations, and loan production or other financial services offices, primarily in the States of Texas, Michigan...

  • Page 30
    ... to purchase 189,136 shares of common stock, par value $5.00 per share, issued under the Amended and Restated Sterling Bancshares, Inc. 2003 Stock Incentive and Compensation Plan ("Sterling LTIP"), of which 153,111 shares were assumed by Comerica in connection with its acquisition of Sterling and...

  • Page 31
    ... to the sections entitled "2013 Overview and 2014 Outlook," "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 pages F-4 through F-48...

  • Page 32
    ...Rule 13a-15(d) of the Exchange Act, management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the period covered by this Annual Report on Form 10-K that have...

  • Page 33
    ...," "Transactions of Executive Officers with Comerica," and "Information about Nominees" of Comerica's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 22, 2014, which sections are hereby incorporated by reference. Item 14. Principal Accountant Fees and...

  • Page 34
    FINANCIAL REVIEW AND REPORTS Comerica Incorporated and Subsidiaries Performance Graph ...Selected Financial Data ...2013 Overview and 2014 Outlook ...Results of Operations ...Strategic Lines of Business ...Balance Sheet and Capital Funds Analysis ...Risk Management...Critical Accounting Policies......

  • Page 35
    ...The graph 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...

  • Page 36
    ...) from continuing operations Net income (loss) Cash dividends declared Common shareholders' equity Tangible common equity (a) Market value Average diluted shares (in millions) YEAR-END BALANCES Total assets Total earning assets Total loans Total deposits Total medium- and long-term debt Total common...

  • Page 37
    ...and services, including commercial loans and lines of credit, deposits, cash management, capital market products, international trade finance, letters of credit, foreign exchange management services and loan syndication services. The Retail Bank includes small business banking and personal financial...

  • Page 38
    ...slow growing economy and low rate environment, are as follows: • Average loan growth consistent with 2013, reflecting stabilization in Mortgage Banker Finance near average fourth quarter 2013 levels, improving trends in Commercial Real Estate and continued focus on pricing and structure discipline...

  • Page 39
    ... deposits with banks (d) Other short-term investments Total earning assets Cash and due from banks Allowance for loan losses Accrued income and other assets Total assets Money market and interest-bearing checking deposits Savings deposits Customer certificates of deposit Foreign office time deposits...

  • Page 40
    ...) Years Ended December 31 Increase (Decrease) Due to Rate Interest Income (FTE): Commercial loans Real estate construction loans Commercial mortgage loans Lease financing International loans Residential mortgage loans Consumer loans Total loans Mortgage-backed securities available-for-sale Other...

  • Page 41
    ... of this financial review. NONINTEREST INCOME (in millions) Years Ended December 31 2013 2012 2011 Customer-driven income: Service charges on deposit accounts Fiduciary income Commercial lending fees Card fees (a) Letter of credit fees Foreign exchange income Brokerage fees Other customer-driven...

  • Page 42
    ..., in 2012, compared to 2011. The increase was due to an increase in fees earned on the unused portion of lines of credit. Syndication agent fees remained stable in 2013, compared to 2012. Card fees, which consist primarily of interchange fees earned on debit cards and commercial cards, increased...

  • Page 43
    ...2013 2012 2011 Salaries Employee benefits Total salaries and employee benefits Net occupancy expense Equipment expense Outside processing fee expense Software expense Litigation-related expenses FDIC insurance expense Advertising expense Other real estate expense Merger and restructuring charges...

  • Page 44
    ...-for-sale and legal reserves as well as a decrease in deferred tax liabilities related to lease financing transactions. This was partially offset by a decrease in deferred tax assets related to defined benefit plans, a decrease in the allowance for loan losses, accretion of the purchase discount on...

  • Page 45
    ... and lower executive incentive compensation. Employee benefits expense increased $35 million, or 17 percent in 2012, primarily from a $28 million increase in defined benefit pension expense, largely driven by declines in the discount rate and the expected long-term rate of return on plan assets, and...

  • Page 46
    ... credit score and expected remaining life of each loan, letter of credit and unused commitment recorded in the business segments. Operational risk is allocated based on loans and letters of credit, deposit balances, non-earning assets, trust assets under management, certain noninterest income items...

  • Page 47
    ... on mortgage-backed investment securities. The Finance Division pays the three major business segments for the long-term value of deposits based on their implied lives. The three major business segments pay the Finance Division for funding based on the pricing and term characteristics of their loans...

  • Page 48
    ... losses, partially offset by improvements in credit quality and lower loan balances. Net credit-related charge-offs of $6 million for 2013 decreased $35 million from the prior year, primarily reflecting decreases in Commercial Real Estate and general Middle Market. Noninterest income of $357 million...

  • Page 49
    ... Real Estate. Noninterest income of $114 million in 2013 increased $9 million from the prior year, primarily reflecting increases in card fees ($11 million), in part due to the change in the method of allocating commercial card income as discussed above, fiduciary income ($8 million) and small...

  • Page 50
    ... government agency securities Residential mortgage-backed securities State and municipal securities (a) Corporate debt securities Equity and other non-debt securities Total investment securities available-for-sale Commercial loans Real estate construction loans: Commercial Real Estate business line...

  • Page 51
    ... Market National Dealer Services Energy Technology and Life Sciences Environmental Services Entertainment Total Middle Market Corporate Banking Mortgage Banker Finance Commercial Real Estate Total Business Bank commercial loans Total Retail Bank commercial loans Total Wealth Management commercial...

  • Page 52
    ... information on real estate loans, refer to "Commercial and Residential Real Estate Lending" in the "Risk Management" section of this financial review. ANALYSIS OF INVESTMENT SECURITIES PORTFOLIO (FTE) Maturity (a) (dollar amounts in millions) December 31, 2013 Within 1 Year Amount Yield 1 - 5 Years...

  • Page 53
    ... December 31 2013 2012 Change Percent Change Noninterest-bearing deposits Money market and interest-bearing checking deposits Savings deposits Customer certificates of deposit Foreign office and other time deposits Total deposits Short-term borrowings Medium- and long-term debt Total borrowed funds...

  • Page 54
    ... forecasting process is also used by the Corporation to conduct the stress test that was part of the Federal Reserve's Comprehensive Capital Analysis and Review. For additional information about risk management processes, refer to the "Risk Management" section of this financial review. In July 2013...

  • Page 55
    ..., the Net Stable Funding Ratio (NSFR), which requires the amount of available longer-term, stable sources of funding to be at least 100 percent of the required amount of longer-term stable funding over a one-year period. The Basel Committee on Banking Supervision is in the process of reviewing the...

  • Page 56
    ...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 is responsible for managing the recovery process on distressed or defaulted loans and loan sales...

  • Page 57
    ... 31 2013 2012 2011 2010 2009 $ Balance at beginning of year Loan charge-offs: 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 (a) Other business lines...

  • Page 58
    ... decreased reserves in Private Banking, Commercial Real Estate and Small Business, partially offset by increased reserves in Energy and Technology and Life Sciences. By market, reserves decreased in Michigan, California and Other Markets and increased in Texas (primarily Energy). Acquired loans were...

  • Page 59
    ...presented below. (dollar amounts in millions) Years Ended December 31 2013 2012 2011 2010 2009 $ Balance at beginning of year Less: Charge-offs on lending-related commitments (a) Add: Provision for credit losses on lending-related commitments $ Balance at end of year 32 - 4 36 $ 26 - 6 32 $ 35...

  • Page 60
    ... ASSETS AND PAST DUE LOANS (dollar amounts in millions) December 31 2013 2012 2011 2010 2009 Nonaccrual loans: Business loans: Commercial Real estate construction: Commercial Real Estate business line (a) Other business lines (b) Total real estate construction Commercial mortgage: Commercial...

  • Page 61
    ...) 2013 2012 Years Ended December 31 $ 519 $ Balance at beginning of period 860 144 Loans transferred to nonaccrual (a) 187 (117) Nonaccrual business loan gross charge-offs (b) (211) - Loans transferred to accrual status (a) (41) (47) Nonaccrual business loans sold (c) (91) (149) Payments/other...

  • Page 62
    ...Nonaccrual Loans Year Ended December 31, 2013 Loans Transferred to Nonaccrual (a) Net Loan Charge-Offs (Recoveries) Real Estate and Home Builders Residential Mortgage Services Manufacturing Holding and Other Investment Companies Retail Trade Wholesale Trade Contractors Natural Resources Health Care...

  • Page 63
    ...million at December 31, 2012. For further information regarding the Corporation's nonperforming assets policies and impaired loans, refer to Note 1 and Note 4 to the consolidated financial statements. Concentration of Credit Risk Concentrations of credit risk may exist when a number of borrowers are...

  • Page 64
    ... the National Dealer Services business line. Loans in the National Dealer Services business line include floor plan financing and other loans to automotive dealerships. Floor plan loans, included in "commercial loans" in the consolidated balance sheets, totaled $3.5 billion at December 31, 2013, an...

  • Page 65
    ... Total Commercial mortgage loans: Commercial Real Estate business line: Residential: Land carry Single family Total residential Other commercial mortgage: Multi-family Retail Office Commercial Multi-use Land carry Other Other commercial mortgage loans (a) Total (a) California Michigan Texas Florida...

  • Page 66
    ...) Geographic market: Michigan California Texas Other Markets Total % of Total % of Total 57% 26 14 3 100% $ 53% $ 29 15 3 100% $ Residential real estate loans, which consist of traditional residential mortgages and home equity loans and lines of credit, totaled $3.2 billion at December 31, 2013...

  • Page 67
    ... auction-rate preferred securities collateralized by municipal securities were rated investment grade and were adequately collateralized at both December 31, 2013 and 2012. Municipal securities are held in the trading account for resale to customers. In addition, Comerica Securities, a broker-dealer...

  • Page 68
    ... strategies, and consists of executive and senior management from various areas of the Corporation, including treasury, finance, economics, lending, deposit gathering and risk management. The Corporation's Treasury Department supports ALCO in measuring, monitoring and managing interest rate...

  • Page 69
    ... rate swaps. The Corporation actively manages its exposure to interest rate risk, with the principal objective of optimizing net interest income and the economic value of equity while operating within acceptable limits established for interest rate risk and maintaining adequate levels of funding...

  • Page 70
    ... for the year ended December 31, 2012. In addition to interest rate swaps, the Corporation employs various other types of derivative instruments as offsetting positions to mitigate exposures to foreign currency risks associated with specific assets and liabilities (e.g., customer loans or deposits...

  • Page 71
    ... total interest rate, energy and foreign exchange contracts at December 31, 2013 and 2012, respectively. Further information regarding customer-initiated and other derivative instruments is provided in Note 8 to the consolidated financial statements. Liquidity Risk and Off-Balance Sheet Arrangements...

  • Page 72
    ... financial statements for a further discussion of these commercial commitments. Wholesale Funding The Corporation may access the purchased funds market when necessary, which includes foreign office time deposits and short-term borrowings. Capacity for incremental purchased funds at December 31, 2013...

  • Page 73
    ... underlying assets, particularly equity and debt securities. Other components of noninterest income, primarily brokerage fees, are at risk to changes in the volume of market activity. OPERATIONAL RISK Operational risk represents the risk of loss resulting from inadequate or failed internal processes...

  • Page 74
    ... 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 75
    ...on samples 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. Incremental reserves may be established to cover losses in industries...

  • Page 76
    ... included primarily auction-rate securities at December 31, 2013. Additionally, from time to time, the Corporation may be required to record at fair value other financial assets or liabilities on a nonrecurring basis. Note 2 to the consolidated financial statements includes information about the...

  • Page 77
    ... value are discounted. Estimated future cash flows are derived from internal forecasts and economic expectations for each reporting unit which incorporate uncertainty factors inherent to long-term projections. The applicable discount rate is based on the imputed cost of equity capital appropriate...

  • Page 78
    ...long-term return assumption. The assets are invested in certain collective investment and mutual funds, common stocks, U.S. Treasury and other U.S. government agency securities, and corporate and municipal bonds and notes. The rate of compensation increase is based on reviewing recent annual pension...

  • Page 79
    ... quarter 2012. There were no assets in the non-qualified defined benefit pension plan at December 31, 2013, and 2012. 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...

  • Page 80
    ...in this financial review with financial measures defined by GAAP. (dollar amounts in millions) December 31 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 risk-based...

  • Page 81
    ... the Corporation's business; the Corporation may not be able to utilize technology to efficiently and effectively develop, market and deliver new products and services to its customers; changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing...

  • Page 82
    ... share data) December 31 2013 2012 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...

  • Page 83
    ... charges on deposit accounts Fiduciary income Commercial lending fees Card fees Letter of credit fees Bank-owned life insurance Foreign exchange income Brokerage fees Net securities (losses) gains Other noninterest income Total noninterest income NONINTEREST EXPENSES Salaries Employee benefits...

  • Page 84
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Comerica Incorporated and Subsidiaries (in millions) Years Ended December 31 2013 2012 2011 NET INCOME OTHER COMPREHENSIVE INCOME (LOSS) Unrealized (losses) gains on investment securities available-for-sale: Net unrealized holding (losses) gains ...

  • Page 85
    ... per share data) BALANCE AT DECEMBER 31, 2010 Net income Other comprehensive income, net of tax Cash dividends declared on common stock ($0.40 per share) Purchase of common stock Acquisition of Sterling Bancshares, Inc. Net issuance of common stock under employee stock plans Share-based compensation...

  • Page 86
    ... by operating activities INVESTING ACTIVITIES Investment securities available-for-sale: Maturities and redemptions Purchases Sales Net change in loans Cash and cash equivalents acquired in acquisition of Sterling Bancshares, Inc. Sales of Federal Home Loan Bank stock Purchase of Federal Reserve Bank...

  • Page 87
    ... Comerica Incorporated (the Corporation) is a registered financial holding company headquartered in Dallas, Texas. The Corporation's major business segments are the Business Bank, the Retail Bank and Wealth Management. The Corporation operates in three primary geographic markets: Michigan...

  • Page 88
    ... discount 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 2. Other Short-Term Investments Other short-term investments include trading securities and loans held-for-sale...

  • Page 89
    ... 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 90
    ...on samples 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. Incremental reserves may be established to cover losses in industries...

  • Page 91
    ... balance sheets, with the corresponding charge reflected in the "provision for credit losses" on the consolidated statements of income. Nonperforming Assets Nonperforming assets consist of nonaccrual loans, including loans held-for-sale, reduced-rate loans and foreclosed property. Business loans...

  • Page 92
    ... value are discounted. Estimated future cash flows are derived from internal forecasts and economic expectations for each reporting unit which incorporate uncertainty factors inherent to long-term projections. The applicable discount rate is based on the imputed cost of equity capital appropriate...

  • Page 93
    ... primarily Federal Home Loan Bank of Dallas (FHLB) and Federal Reserve Bank (FRB) stock. These investments are accounted for on the cost or equity method and are included in "accrued income and other assets" on the consolidated balance sheets. The investments are individually reviewed for impairment...

  • Page 94
    ... published deposit account agreements for retail accounts or contractual agreements for commercial accounts. Fiduciary income includes fees and commissions from asset management, custody, recordkeeeping, investment advisory and other services provided to personal and institutional trust customers...

  • Page 95
    ... number of common shares and common stock equivalents outstanding during the period. Statements of Cash Flows Cash and cash equivalents are defined as those amounts included in "cash and due from banks", "federal funds sold" and "interest-bearing deposits with banks" on the consolidated balance...

  • Page 96
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Comerica Incorporated and Subsidiaries approximately $5 million of foreclosed residential real estate property subject to a redemption period was classified in nonperforming loans. F-63

  • Page 97
    ... 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 compensation...

  • Page 98
    ...New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include residential mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored entities and corporate...

  • Page 99
    ... FINANCIAL STATEMENTS Comerica Incorporated and Subsidiaries Derivative assets and derivative liabilities Derivative instruments held or issued for risk management or customer-initiated activities are traded in over-the-counter markets where quoted market prices are not readily available. Fair value...

  • Page 100
    ... price, the Corporation classifies the other real estate as Level 3. Deposit liabilities The estimated 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...

  • Page 101
    ... compensation plan assets Equity and other non-debt securities Residential mortgage-backed securities (a) State and municipal securities Total trading securities Investment securities available-for-sale: U.S. Treasury and other U.S. government agency securities Residential mortgage-backed securities...

  • Page 102
    ...government agency securities Residential mortgage-backed securities (a) State and municipal securities Corporate debt securities Equity and other non-debt securities Total investment securities available-for-sale Derivative assets: Interest rate contracts Energy derivative contracts Foreign exchange...

  • Page 103
    ... Other Year Ended December 31, 2012 Investment securities available-for-sale: State and municipal securities (a) Corporate debt securities (a) Equity and other non-debt securities (a) Total investment securities available-for-sale Derivative assets: Warrants Derivative liabilities: Other Balance at...

  • Page 104
    ... were recorded at fair value on a nonrecurring basis at December 31, 2013 and 2012. (in millions) Level 3 December 31, 2013 Loans: Commercial Real estate construction Commercial mortgage International Total loans Nonmarketable equity securities Other real estate Total assets at fair value December...

  • Page 105
    ...-bearing deposits Customer certificates of deposit Total deposits Short-term borrowings Acceptances outstanding Medium- and long-term debt Credit-related financial instruments December 31, 2012 Assets Cash and due from banks Federal funds sold Interest-bearing deposits with banks Loans held-for-sale...

  • Page 106
    ... mortgage-backed securities, 50 equity and other non-debt auction-rate preferred securities, 17 state and municipal auction-rate securities, one corporate auction-rate debt security and one mutual fund. As of December 31, 2013, approximately 87 percent of the aggregate par value of auction-rate...

  • Page 107
    ... of investment securities available-for-sale resulted in the following gains and losses recorded in "net securities gains (losses)" on the consolidated statements of income, computed based on the adjusted cost of the specific security. (in millions) Years Ended December 31 2013 2012 2011 Securities...

  • Page 108
    ...: Home equity Other consumer Total consumer Total retail loans Total loans December 31, 2012 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 109
    ...: Home equity Other consumer Total consumer Total retail loans Total loans December 31, 2012 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 110
    ...loan losses and related loan amounts. 2013 (in millions) Business Loans Retail Loans Total Business Loans 2012 Retail Loans Total Business Loans 2011 Retail Loans Total Years Ended December 31 Allowance for loan losses: Balance at beginning of period $ 552 (130) Loan charge-offs Recoveries on loans...

  • Page 111
    ...: Home equity Other consumer Total consumer Total retail loans (c) Total individually evaluated impaired loans December 31, 2012 Business loans: Commercial Real estate construction: Commercial Real Estate business line (a) Other business lines (b) Total real estate construction Commercial mortgage...

  • Page 112
    ... Commercial mortgage: Commercial Real Estate business line (a) Other business lines (b) Total commercial mortgage Lease financing International Total business loans Retail loans: Residential mortgage Consumer: Home equity Other consumer Total consumer Total retail loans Total individually evaluated...

  • Page 113
    ... 2012 Type of Modification Principal Deferrals (a) Interest AB Note Rate Restructures Total Reductions (b) Modifications (in millions) Years Ended December 31 Business loans: Commercial Real estate construction: Commercial Real Estate business line (c) Commercial mortgage: Commercial Real Estate...

  • Page 114
    ... defined in terms of delinquency, when a principal or interest payment is 90 days past due. There were no subsequent payment defaults of reduced rate loans or AB note restructures during the years ended December 31, 2013 and 2012. Purchased Credit-Impaired Loans Acquired loans are initially recorded...

  • Page 115
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Comerica Incorporated and Subsidiaries Changes in the accretable yield for acquired PCI loans for the years ended December 31, 2013 and 2012 were as follows. (in millions) Years Ended December 31 2013 2012 Balance at beginning of period Reclassifications ...

  • Page 116
    ... Corporation's portfolio of commercial real estate loans, which includes real estate construction and commercial mortgage loans, was as follows. (in millions) December 31 2013 2012 Real estate construction loans: Commercial Real Estate business line (a) Other business lines (b) Total real estate...

  • Page 117
    ... the carrying value of goodwill for the years ended December 31, 2013, 2012 and 2011. (in millions) December 31 2013 2012 2011 Business Bank Retail Bank Wealth Management Total $ $ 380 $ 194 61 635 $ 380 $ 194 61 635 $ 380 194 61 635 The Corporation performs its annual evaluation of...

  • Page 118
    ...course of business, the Corporation enters into various transactions involving derivative and credit-related financial instruments to manage exposure to fluctuations in interest rate, foreign currency and other market risks and to meet the financing needs of customers (customer-initiated derivatives...

  • Page 119
    ...by the Corporation are negotiated over-the-counter and primarily include swaps, caps and floors, forward contracts and options, each of which may relate to interest rates, energy commodity prices or foreign currency exchange rates. Swaps are agreements in which two parties periodically exchange cash...

  • Page 120
    ..., the Corporation employs a variety of financial instruments for risk management purposes, including cash instruments, such as investment securities, as well as derivative instruments. Activity related to these instruments is centered predominantly in the interest rate markets and mainly involves...

  • Page 121
    ... FINANCIAL STATEMENTS Comerica Incorporated and Subsidiaries be used to manage exposures to market risks, including interest rate caps and floors, total return swaps, foreign exchange forward contracts and foreign exchange swap agreements. The Corporation entered into interest rate swap agreements...

  • Page 122
    ...Location of Gain 2013 2012 Other noninterest income $ Other noninterest income Foreign exchange income $ 22 3 35 60 $ $ 22 3 35 60 Credit-Related Financial Instruments The Corporation issues off-balance sheet financial instruments in connection with commercial and consumer lending activities...

  • Page 123
    ... its share of the related participated loan. As of December 31, 2013 and 2012, the total notional amount of the credit risk participation agreements was approximately $614 million and $574 million, respectively, and the fair value, included in customer-initiated interest rate contracts recorded in...

  • Page 124
    ...085 707 3,515 All foreign office time deposits of $349 million and $502 million at December 31, 2013 and 2012, respectively, were in denominations of $100,000 or more. NOTE 11 - SHORT-TERM BORROWINGS Federal funds purchased and securities sold under agreements to repurchase generally mature within...

  • Page 125
    ... TO CONSOLIDATED FINANCIAL STATEMENTS Comerica Incorporated and Subsidiaries The following table provides a summary of short-term borrowings. Federal Funds Purchased and Securities Sold Under Agreements to Repurchase Other Short-term Borrowings (dollar amounts in millions) December 31, 2013 Amount...

  • Page 126
    ...plans and shares purchased from employees to pay for taxes related to restricted stock vesting under the terms of an employee share-based compensation plan during the year ended December 31, 2013. These transactions are not considered part of the Corporation's repurchase program. (c) The Corporation...

  • Page 127
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Comerica Incorporated and Subsidiaries addition, outstanding warrants to purchase Sterling common stock were converted into warrants to purchase shares of common stock of the Corporation at an effective exercise price of $30.36 per share. The options and ...

  • Page 128
    ... 31, 2013, 2012 and 2011, including the amount of income tax expense (benefit) allocated to each component of other comprehensive income (loss). (in millions) Years Ended December 31 2013 2012 2011 Accumulated net unrealized (losses) gains on investment securities availablefor-sale: Balance at...

  • Page 129
    ....36 Share-based compensation expense is charged to "salaries" expense on the consolidated statements of income. The components of share-based compensation expense for all share-based compensation plans and related tax benefits are as follows. (in millions) Years Ended December 31 2013 2012 2011...

  • Page 130
    ... following table: Years Ended December 31 2013 2012 2011 Weighted-average grant-date fair value per option Weighted-average assumptions: Risk-free interest rates Expected dividend yield Expected volatility factors of the market price of Comerica common stock Expected option life (in years) follows...

  • Page 131
    ... FINANCIAL STATEMENTS Comerica Incorporated and Subsidiaries A summary of the Corporation's restricted stock unit activity and related information for the year ended December 31, 2013 follows: Service-Based Units Number of Units (in thousands) Weighted-Average Grant-Date Fair Value per Share...

  • Page 132
    ... balance sheets. n/a - not applicable 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, 2013 and 2012. The following table details the changes in plan assets and benefit...

  • Page 133
    ... service cost (credit) Amortization of net loss Net periodic defined benefit cost Actual return on plan assets Actual rate of return on plan assets Weighted-average assumptions used: Discount rate Expected long-term return on plan assets Rate of compensation increase n/a - not applicable (dollar...

  • Page 134
    ... upon the closing price quoted in an active market exchange, such as the New York Stock Exchange. Level 1 common stock includes domestic and foreign stock and real estate investment trusts. The fair value of American Depositary Receipts is based upon independent pricing models utilizing primarily...

  • Page 135
    ... U.S. government agency mortgage-backed securities Mutual funds Private placements Other assets: Securities purchased under agreements to resell Total investments at fair value December 31, 2012 Cash equivalent securities: Mutual funds Equity securities: Collective investment funds Mutual funds...

  • Page 136
    ... 31, 2013, 2012 and 2011. The Corporation also provides a profit sharing plan for the benefit of substantially all employees who work at least 1,000 hours in a plan year and are not accruing a benefit in the defined benefit pension plan. Under the profit sharing plan, the Corporation makes an annual...

  • Page 137
    ...rate to the Corporation's provision for income taxes and effective tax rate follows: (dollar amounts in millions) Years Ended December 31 2013 Amount Rate Amount 2012 Rate Amount 2011 Rate Tax based on federal statutory rate State income taxes Affordable housing and historic credits Bank-owned life...

  • Page 138
    ...December 31 2013 2012 Deferred tax assets: Allowance for loan losses Deferred compensation Defined benefit plans Loan purchase accounting adjustments Deferred loan origination fees and costs Net unrealized losses on investment securities available-for-sale Foreign tax credit Other tax credits Other...

  • Page 139
    ...$204 million at January 1, 2014, plus 2014 net profits. Substantially all the assets of the Corporation's banking subsidiaries are restricted from transfer to the parent company of the Corporation in the form of loans or advances. The Corporation's subsidiary banks declared dividends of $480 million...

  • Page 140
    ... of customer and the related products and services provided. In addition to the three major business segments, the Finance Division is also reported as a segment. Business segment results are produced by the Corporation's internal management accounting system. This system measures financial results...

  • Page 141
    ...and services, including commercial loans and lines of credit, deposits, cash management, capital market products, international trade finance, letters of credit, foreign exchange management services and loan syndication services. The Retail Bank includes small business banking and personal financial...

  • Page 142
    ... STATEMENTS Comerica Incorporated and Subsidiaries Business segment financial results are as follows: (dollar amounts in millions) Year Ended December 31, 2013 Business Bank Retail Bank Wealth Management Finance Other Total Earnings summary: Net interest income (expense) (FTE) Provision for credit...

  • Page 143
    ... TO CONSOLIDATED FINANCIAL STATEMENTS Comerica Incorporated and Subsidiaries (dollar amounts in millions) Year Ended December 31, 2011 Business Bank Retail Bank Wealth Management Finance Other Total Earnings summary: Net interest income (expense) (FTE) Provision for credit losses Noninterest...

  • Page 144
    ...) for income taxes (FTE) Net income (loss) Net credit-related charge-offs Selected average balances: Assets Loans Deposits Statistical data: Return on average assets (a) Efficiency ratio (b) (dollar amounts in millions) Year Ended December 31, 2011 $ $ $ 777 (16) 385 707 165 306 41 $ $ $ 692...

  • Page 145
    ... COMPANY FINANCIAL STATEMENTS BALANCE SHEETS - COMERICA INCORPORATED (in millions, except share data) December 31 2013 2012 Assets Cash and due from subsidiary bank Short-term investments with subsidiary bank Other short-term investments Investment in subsidiaries, principally banks Premises...

  • Page 146
    ... taxes Excess tax benefits from share-based compensation arrangements Other, net Net cash provided by operating activities Investing Activities Proceeds from sales of indirect private equity and venture capital investments Cash and cash equivalents acquired in acquisition of Sterling Bancshares, Inc...

  • Page 147
    ... STATEMENTS (UNAUDITED) The following quarterly information is unaudited. However, in the opinion of management, the information reflects all adjustments, which are necessary for the fair presentation of the results of operations, for the periods presented. 2013 (in millions, except per share data...

  • Page 148
    ...statements. Management assessed, with participation 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...

  • Page 149
    ... with the standards of the Public Company Accounting Oversight Board (United States), the 2013 consolidated financial statements of Comerica Incorporated and subsidiaries and our report dated February 14, 2014 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Dallas, TX February 14...

  • Page 150
    ... balance sheets of Comerica Incorporated and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2013. These financial...

  • Page 151
    ...) Years Ended December 31 2013 2012 2011 2010 2009 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 Lease financing International...

  • Page 152
    ... charges on deposit accounts Fiduciary income Commercial lending fees Card fees Letter of credit fees Bank-owned life insurance Foreign exchange income Brokerage fees Net securities gains (losses) Other noninterest income Total noninterest income NONINTEREST EXPENSES Salaries Employee benefits...

  • Page 153
    ... 31 2013 2012 2011 2010 2009 Average Rates (Fully Taxable Equivalent Basis) 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...

  • Page 154
    ... as of February 14, 2014. 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 155
    ... Registrant's Annual Report on Form 10-K for the year ended December 31, 2011, and incorporated herein by reference) . Form of Standard Comerica Incorporated Non-Qualified Stock Option Agreement under the Comerica Incorporated Amended and Restated 2006 Long-Term Incentive Plan (2014 version) (filed...

  • Page 156
    ....41 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2009, and incorporated herein by reference). Form of Standard Comerica Incorporated Restricted Stock Unit Agreement under the Amended and Restated Comerica Incorporated 2006 Long-Term Incentive Plan (2011 version) (filed...

  • Page 157
    ...'s Annual Report on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference). Form of Standard Comerica Incorporated Non-Employee Director Restricted Stock Unit Agreement under the Comerica Incorporated Amended and Restated Incentive Plan for Non-Employee Directors...

  • Page 158
    ... periodcurrent) (filed as Exhibit 10.42 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2009, and incorporated herein by reference). Schedule of Named Executive Officers Party to Change of Control Employment Agreement (BE4 and Higher Version without gross-up or window...

  • Page 159
    ...-Oxley Act of 2002). (not applicable) (not applicable) (not applicable) (not applicable) Financial statements from Annual Report on Form 10-K of the Registrant for the year ended December 31, 2013, formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the...

  • Page 160
    ...savings or checking account at any bank that is a member of the National Automated Clearing House (ACH) system. Information describing this service and an authorization form can be requested from the transfer agent shown above. CORPORATE ETHICS The Corporate Governance section of Comerica's website...

  • Page 161
    ® C OMERICA C ORPORATE H EADQUARTERS C OMERICA BANK TOWER 1717 MAIN STREET DALLAS, TEXAS 75201 The original document was printed on FSC-certified paper.