Comerica 2013 Annual Report Download - page 122

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
F-89
Fair values of customer-initiated and other derivative instruments represent the net unrealized gains or losses on such
contracts and are recorded in the consolidated balance sheets. Changes in fair value are recognized in the consolidated statements
of income. The net gains recognized in income on customer-initiated derivative instruments, net of the impact of offsetting positions,
were as follows.
(in millions)
Years Ended December 31 Location of Gain 2013 2012
Interest rate contracts Other noninterest income $ 22 $ 22
Energy contracts Other noninterest income 33
Foreign exchange contracts Foreign exchange income 35 35
Total $ 60 $ 60
Credit-Related Financial Instruments
The Corporation issues off-balance sheet financial instruments in connection with commercial and consumer lending
activities. The Corporation’s credit risk associated with these instruments is represented by the contractual amounts indicated in
the following table.
(in millions)
December 31 2013 2012
Unused commitments to extend credit:
Commercial and other $ 27,728 $ 25,659
Bankcard, revolving check credit and home equity loan commitments 1,889 1,681
Total unused commitments to extend credit $ 29,617 $ 27,340
Standby letters of credit $ 4,297 $ 4,985
Commercial letters of credit 103 78
Other credit-related financial instruments 21
The Corporation maintains an allowance to cover probable credit losses inherent in lending-related commitments,
including unused commitments to extend credit, letters of credit and financial guarantees. At December 31, 2013 and 2012, the
allowance for credit losses on lending-related commitments, included in “accrued expenses and other liabilities” on the consolidated
balance sheets, was $36 million and $32 million, respectively. In 2011, the Corporation recorded a purchase discount for acquired
lending-related commitments. An allowance for credit losses will be recorded on acquired lending-related commitments only to
the extent that the required allowance exceeds the remaining purchase discount. At December 31, 2013 and 2012, no allowance
was recorded for acquired lending-related commitments, and $1 million and $2 million of purchase discount remained at each
respective period.
Unused Commitments to Extend Credit
Commitments to extend credit are legally binding agreements to lend to a customer, provided there is no violation of any
condition established in the contract. These commitments generally have fixed expiration dates or other termination clauses and
may require payment of a fee. Since many commitments expire without being drawn upon, the total contractual amount of
commitments does not necessarily represent future cash requirements of the Corporation. Commercial and other unused
commitments are primarily variable rate commitments. The allowance for credit losses on lending-related commitments included
$28 million and $19 million at December 31, 2013 and 2012, respectively, for probable credit losses inherent in the Corporation’s
unused commitments to extend credit.
Standby and Commercial Letters of Credit
Standby letters of credit represent conditional obligations of the Corporation which guarantee the performance of a
customer to a third party. Standby letters of credit are primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing and similar transactions. Commercial letters of credit are issued to finance foreign
or domestic trade transactions. These contracts expire in decreasing amounts through the year 2022. The Corporation may enter
into participation arrangements with third parties that effectively reduce the maximum amount of future payments which may be
required under standby and commercial letters of credit. These risk participations covered $259 million and $325 million,
respectively, of the $4.4 billion and $5.1 billion standby and commercial letters of credit outstanding at December 31, 2013 and
2012, respectively.
The carrying value of the Corporation’s standby and commercial letters of credit, included in “accrued expenses and
other liabilities” on the consolidated balance sheets, totaled $59 million at December 31, 2013, including $51 million in deferred