Comerica 2014 Annual Report Download

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2014 COMERICA I NCORPORATED A NNUAL R EPORT
Keeping the Promise
®

Table of contents

  • Page 1
    Keeping the Promise 2 014 C O M E R I C A I N C O R P O R AT E D A N N U A L R E P O R T ®

  • Page 2
    ... 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 find Comerica on Facebook, please visit www.facebook.com/ComericaCares. To follow Comerica and Comerica Bank Chief...

  • Page 3
    ...or 10 percent, in residential mortgage loans and $117 million, or 5 percent, in consumer loans. The increase in commercial loans was primarily driven by increases in Technology and Life Sciences, National Dealer Services, Energy and general Middle Market, Deposits partially offset by a decrease in...

  • Page 4
    ... financial services industry, Comerica faces increased regulatory and technology demands. We incurred more than $25 million in expense in 2014 to comply with regulations. We will continue to add staff and invest in technology for regulatory-related projects such as capital planning, stress testing...

  • Page 5
    ... as the largest U.S. commercial bank headquartered in the state, a source of pride for us and our customers. We strengthened our Middle Market Banking team across Texas in 2014 with the addition of bankers in Houston, Dallas and, most recently, Austin. Texas is home to our Energy business, which is...

  • Page 6
    ... value to our customers. Within the Business Bank, our clear strengths are our relationship model and approach to commercial banking. Nationally, we provide a broad spectrum of specialized business lines, such as National Dealer Services, Mortgage Banker Finance, and Technology and Life Sciences...

  • Page 7
    ... Services customers. Comerica's Merchant Services enable businesses to enjoy the convenience of accepting card payments utilizing the latest in technology, including advanced security products and reporting tools. While at year-end 2014 we were just getting started with Vantiv, our pipeline, closed...

  • Page 8
    ...more convenience to our customers. For example, we invested in technology that enabled us to offer a number of enhancements to our consumer mobile banking service in 2014, including alerts, Click&Capture Deposit, person-to-person transfers, and a new, enhanced iPad application. Technology is also at...

  • Page 9
    ... Comerica is working with business owners to address the needs of their businesses, as well as their personal wealth goals. Our Business Owner Advisory Services group within Wealth Management, partnering with the Business Bank, has had impressive results, bringing in some $1 billion in new balances...

  • Page 10
    ... markets. Our employees raised some $2.2 million for the United Way and Black United Fund. In addition, our employees donated their personal time and talents - more than 73,000 hours, far exceeding our goal - back to the communities where they live and work, including on our National Days of Service...

  • Page 11
    ..., such as growing loans and deposits along with managing our expenses. We are in the right markets with the right products and services, and with the right people, who remain focused on building enduring customer relationships. We plan to stay with our relationship banking strategy, which has served...

  • Page 12
    ... Business Affairs Paul R. Obermeyer Executive Vice President and Chief Information Officer Jon W. Bilstrom Executive Vice President Governance, Regulatory Relations and Legal Affairs Peter W. Guilfoile Executive Vice President and Chief Credit Officer Michael T. Ritchie President Comerica Bank...

  • Page 13
    ... 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 Warrants to Purchase...

  • Page 14
    ... and Corporate Governance. Item 11. Executive Compensation. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Item 13. Certain Relationships and Related Transactions, and Director Independence. Item 14. Principal Accountant Fees and Services...

  • Page 15
    ... stock in exchange for each share of Sterling common stock or phantom stock unit. As a result, Comerica issued approximately 24 million common shares with an acquisition date fair value of $793 million, based on Comerica's closing stock price of $32.67 on July 27, 2011. Based on the merger agreement...

  • Page 16
    ... of the Federal Reserve System. The deposits of Comerica Bank and Comerica Bank & Trust, National Association are insured by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC") to the extent provided by law. In Canada, Comerica Bank is supervised by the Office of the...

  • Page 17
    ... as well as among financial institutions, for counter-terrorism purposes. Federal banking regulators are required, 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...

  • Page 18
    ...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. There are statutory and regulatory requirements applicable...

  • Page 19
    ... 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 20
    ... of Comerica and its bank subsidiaries' Tier 1 capital, total capital and riskweighted assets is set forth in Note 20 of the Notes to Consolidated Financial Statements located on pages F-99 through F-100 of the Financial Section of this report. Additional information on the timing and nature...

  • Page 21
    ... and practices by representatives of the FRB, the Federal Reserve Bank of Dallas and the Texas Department of Banking since 2011. As part of that review, Comerica has undertaken a thorough analysis of all the incentive compensation programs throughout the organization, the individuals covered by each...

  • Page 22
    ... information on Comerica's portfolio of indirect (through funds) private equity and venture capital investments is set forth in Note 1 of the Notes to Consolidated Financial Statements located on page F-51 of the Financial Section of this report. Annual Capital Plans and Stress Tests. Comerica...

  • Page 23
    ... 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 24
    ... online account information access; (ii) new account error and unauthorized transaction rights; (iii) new "Know Before You Owe" prepaid account disclosures; (iv) public disclosure of account agreements for prepaid accounts and (v) credit protection for linked credit accounts. Comerica is monitoring...

  • Page 25
    ...compliance with the credit policies and modifies the existing policies as necessary. New or modified policies/guidelines require approval by the Strategic Credit Committee, chaired by Comerica's Chief Credit Officer and comprising senior credit, market and risk management executives. Commercial Loan...

  • Page 26
    ...market. Adjustable rate loans are limited to standard conventional loan programs. EMPLOYEES As of December 31, 2014, Comerica and its subsidiaries had 8,499 full-time and 616 part-time employees. AVAILABLE INFORMATION Comerica maintains an Internet website at www.comerica.com where the Annual Report...

  • Page 27
    ... 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 that can be earned on such loans and investments. Changes...

  • Page 28
    ... to continue to fund assets through customer bank deposits or access funding sources on favorable terms or if Comerica suffers an increase in borrowing costs or otherwise fails to manage liquidity effectively, Comerica's liquidity, operating margins, financial condition and results of operations may...

  • Page 29
    ...certain key components of Comerica's business infrastructure, such as data processing and storage, payment processing services, recording and monitoring transactions, internet connections and network access, clearing agency and card processing services. While Comerica conducts due diligence prior to...

  • Page 30
    ... executes transactions with counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients. As a result, defaults by, or even rumors or questions about, one or more financial services institutions...

  • Page 31
    ...a material adverse effect on its business. • Comerica may not be able to utilize technology to efficiently and effectively develop, market, and deliver new products and services to its customers. The financial services industry experiences rapid technological change with regular introductions of...

  • Page 32
    ..., sell or close units or otherwise change the business mix of Comerica. • Management's ability to maintain and expand customer relationships may differ from expectations. The financial services industry is very competitive. Comerica not only vies for business opportunities with new customers, but...

  • Page 33
    ... 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 reporting of financial condition and results of operations. They require management to make estimates...

  • Page 34
    ... 2. Properties. The executive offices of Comerica are located in the Comerica Bank Tower, 1717 Main Street, Dallas, Texas 75201. Comerica Bank occupies five floors of the building, plus additional space on the building's lower level. Comerica leased an additional floor of the building, totaling 25...

  • Page 35
    ... plans and shares purchased from employees to pay for required minimum tax withholding related to restricted stock vesting under the terms of an employee share-based compensation plan during the year ended December 31, 2014. These transactions are not considered part of Comerica's repurchase program...

  • Page 36
    ...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 37
    Item 14. Principal Accountant Fees and Services. The response to this item will be included under the section captioned "Independent Auditors" of Comerica's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 28, 2015, which section is hereby incorporated by...

  • Page 38
    FINANCIAL REVIEW AND REPORTS Comerica Incorporated and Subsidiaries Performance Graph Selected Financial Data 2014 Overview and 2015 Outlook Results of Operations Strategic Lines of Business Balance Sheet and Capital Funds Analysis Risk Management Critical Accounting Policies Supplemental Financial ...

  • Page 39
    ... 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 on December 31, 2009 and the reinvestment of all...

  • Page 40
    ... continuing operations Net income 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 shareholders...

  • Page 41
    ...increase in commercial loans primarily reflected increases in Technology and Life Sciences, National Dealer Services, Energy and general Middle Market, partially offset by a decrease in Mortgage Banker Finance. Average deposits increased $3.1 billion, or 6 percent, to $54.8 billion in 2014, compared...

  • Page 42
    ... seasonality in Mortgage Banker Finance and National Dealer Services throughout the year and continued focus on pricing and structure discipline. Net interest income relatively stable, assuming no rise in interest rates, reflecting a decrease of about $30 million in purchase accounting accretion, to...

  • Page 43
    ... deposits with banks 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 44
    ... securities Other investment securities Total investment securities (c) Interest-bearing deposits with banks Other short-term investments Total interest income (FTE) Interest Expense: Money market and interest-bearing checking deposits Customer certificates of deposit Foreign office time deposits...

  • Page 45
    ... in net loan charge-offs in 2014, compared to 2013, reflected decreases in almost all business lines, with the largest decreases in Commercial Real Estate and general Middle Market, partially offset by an increase in Technology and Life Sciences. The provision for credit losses on lending-related...

  • Page 46
    ...compensation plan asset returns was offset by a decrease in deferred compensation expense in salaries and benefits expense. The decrease in income from the Corporation's third-party credit card provider was primarily the result of a change in the timing of the recognition of incentives from annually...

  • Page 47
    ... gains on investment securities available-for-sale, a 2014 contribution to the defined benefit pension plan net of an increase in related unrealized losses, legal reserves, accretion of the purchase discount on the acquired loan portfolio and stock-based compensation benefits. Deferred tax assets of...

  • Page 48
    ...the Corporation's risk profile used in determining the quarterly assessment rate. Advertising expense decreased $6 million in 2013, primarily due to timing changes related to certain marketing campaigns. Merger and restructuring charges related to the acquisition of Sterling Bancshares, Inc. in 2011...

  • Page 49
    ... National Dealer Services and Corporate Banking were mostly offset by increases in Mortgage Banker Finance, Energy, and Technology and Life Sciences. Net creditrelated charge-offs of $15 million decreased $28 million in 2014, compared to 2013, primarily reflecting decreases in Commercial Real Estate...

  • Page 50
    ... a benefit of $12 million in the prior year. Net credit-related charge-offs of $8 million for 2014 increased $2 million from the prior year, primarily reflecting increases in general Middle Market and Commercial Real Estate, partially offset by decreases in most other lines of business. Noninterest...

  • Page 51
    ...primarily reflecting increases in Energy, Commercial Real Estate and Technology and Life Sciences, partially offset by a decrease in Small Business. Refer to the "Allowance for Credit Losses" and "Energy Lending" subheadings in the Risk Management section of this financial review for a discussion of...

  • Page 52
    ... securities Corporate debt securities Equity and other non-debt securities Total investment securities available-for-sale Investment securities held to maturity: Residential mortgage-backed securities (a) Total investment securities Commercial loans Real estate construction loans Commercial mortgage...

  • Page 53
    ... 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 54
    ..., in commercial loans. The increase in commercial loans primarily reflected increases in Energy ($670 million), Technology and Life Sciences ($601 million), National Dealer Services ($405 million), Mortgage Banker Finance ($377 million) and smaller increases in most other lines of business. ANALYSIS...

  • Page 55
    ... December 31 2014 2013 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 56
    ... stock Purchase of common stock Other comprehensive income (loss): Investment securities available-for-sale Defined benefit and other postretirement plans Total other comprehensive income (loss) Issuance of common stock under employee stock plans Share-based compensation Balance at December 31, 2014...

  • Page 57
    ... under the Federal Deposit Insurance Corporation Improvement Act of 1991. Refer to Note 20 to the consolidated financial statements for further discussion of regulatory capital requirements and capital ratio calculations. The Corporation periodically conducts stress tests to evaluate potential...

  • Page 58
    ... provides the resources to manage the line of business transactional credit risk, assuring that all exposure is risk rated according to the requirements of the credit risk rating policy and providing business segment reporting support as necessary. The Corporation's Asset Quality Review function...

  • Page 59
    ... interest rates, even as the U.S. Federal Reserve ended its bond buying program. Falling oil and gas prices through the second half of 2014 added to financial market uncertainty. The Corporation believes it has reached near cycle-low levels of criticized loans and loan charge-offs. This is balanced...

  • Page 60
    ... reserves in Corporate Banking, Private Banking, and Small Business, partially offset by increased reserves in Energy and Technology and Life Sciences. By market, reserves decreased in Michigan and Other Markets and increased in Texas (primarily due to Energy) and California. Oil and gas prices...

  • Page 61
    ... in millions) December 31 2014 2013 2012 2011 2010 Nonaccrual loans: Business loans: Commercial Real estate construction Commercial mortgage Lease financing International Total nonaccrual business loans Retail loans: Residential mortgage Consumer: Home equity Other consumer Total consumer...

  • Page 62
    ...) Industry Category Nonaccrual Loans Year Ended December 31, 2014 Loans Transferred to Nonaccrual (a) Net Loan Charge-Offs (Recoveries) Real Estate and Home Builders Services Residential Mortgage Contractors Retail Trade Health Care and Social Assistance Holding and Other Investment Companies...

  • Page 63
    ... with their modified terms. Performing TDRs included $23 million of commercial mortgage loans (primarily in Small Business and Commercial Real Estate) and $20 million of commercial loans (primarily in Middle Market and Small Business) at December 31, 2014. Loans past due 90 days or more and...

  • Page 64
    ...National Dealer Services business line. Loans in the National Dealer Services business line primarily include floor plan financing and other loans to automotive dealerships. Floor plan loans, included in "commercial loans" in the consolidated balance sheets, totaled $3.8 billion at December 31, 2014...

  • Page 65
    ...) Geographic market: Michigan California Texas Other Markets Total % of Total % of Total 53% 29 15 3 100% $ 48% $ 34 15 3 100% $ Residential real estate loans, which consist of traditional residential mortgages and home equity loans and lines of credit, totaled $3.5 billion at December 31, 2014...

  • Page 66
    ...the direction of ALCO. Market Risk Analytics, of the Office of Enterprise Risk, supports ALCO in measuring, monitoring and managing interest rate and liquidity risks and coordinating all other market risks. Key activities encompass: (i) providing information and analysis of the Corporation's balance...

  • Page 67
    ... in the repricing and cash flow characteristics of assets and liability, primarily through the Corporation's core business activities of extending loans and acquiring deposits. The Corporation's balance sheet is predominantly characterized by floating-rate loans funded by a combination of core...

  • Page 68
    ... offerings and pricing as well as how interest rate risk is managed. How the Corporation chooses to make additional investments in high-quality, liquid assets (HQLA) and fund such investments may have an impact on sensitivity. Changes in economic activity may result in a balance sheet structure...

  • Page 69
    ... assets and liabilities (e.g., customer loans or deposits denominated in foreign currencies). Such instruments may include foreign exchange forward contracts and foreign exchange swap agreements. The aggregate notional amounts of these risk management derivative instruments at December 31, 2014...

  • Page 70
    ... minimum payments above. 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 71
    ... 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, 2014 included the ability to purchase federal funds, sell securities under agreements...

  • Page 72
    ... 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 73
    ... and execute business plans, failure to assess current and new opportunities in business, markets and products, failure to determine appropriate consideration for risks accepted, and any other event not identified in the defined risk categories of credit, market, operational or compliance risks...

  • Page 74
    ... values, the amounts and timing of expected future cash flows, and for lending-related commitments, estimates of the probability of draw on unused commitments. In determining the allowance for credit losses, the Corporation individually evaluates certain impaired loans, applies standard reserve...

  • Page 75
    ... similar to the reporting unit, a size risk premium and a market equity risk premium. The annual test of goodwill impairment was performed as of the beginning of the third quarter 2014. The Corporation's assumptions included maintaining the low Federal funds target rate through mid-2015 with modest...

  • Page 76
    ...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 77
    ...'s share of salaries expense. Accordingly, defined benefit pension expense was allocated approximately 43 percent, 28 percent, 24 percent and 5 percent to the Retail Bank, Business Bank, Wealth Management and Finance segments, respectively, in 2014. INCOME TAXES The calculation of the Corporation...

  • Page 78
    ... common equity per share of common stock removes the effect of intangible assets from common shareholders' equity per share of common stock. The Corporation believes these measurements are meaningful measures of capital adequacy used by investors, regulators, management and others to evaluate the...

  • Page 79
    ...management's ability to retain key officers and employees may change; legal and regulatory proceedings and related matters with respect to the financial services industry, including those directly involving the Corporation and its subsidiaries, could adversely affect the Corporation or the financial...

  • Page 80
    ...except share data) December 31 2014 2013 ASSETS Cash and due from banks Interest-bearing deposits with banks Other short-term investments Investment securities available-for-sale Investment securities held-to-maturity Commercial loans Real estate construction loans Commercial mortgage loans Lease...

  • Page 81
    ... Service 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 and benefits...

  • Page 82
    ... (losses) gains on investment securities available-for-sale: Net unrealized holding gains (losses) arising during the period Less: Reclassification adjustment for net securities gains included in net income Change in net unrealized gains (losses) before income taxes Defined benefit pension and other...

  • Page 83
    ... STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Comerica Incorporated and Subsidiaries Common Stock Accumulated Other Comprehensive Loss (in millions, except per share data) BALANCE AT DECEMBER 31, 2011 Net income Other comprehensive loss, net of tax Cash dividends declared on common stock...

  • Page 84
    ... and redemptions Purchases Net change in loans Sales of Federal Home Loan Bank stock Proceeds from sales of foreclosed property Net increase in premises and equipment Other, net Net cash (used in) provided by investing activities FINANCING ACTIVITIES Net change in: Deposits Short-term borrowings...

  • Page 85
    ... 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 86
    ... 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 87
    ...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 88
    ...the underlying fund's management. The Corporation classifies fair value measurements of nonmarketable equity securities as Level 3. The Corporation also holds restricted equity investments, primarily Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock. Restricted equity securities are...

  • Page 89
    ... by discounting the scheduled cash flows using the periodend rates offered on these instruments. As such, the Corporation classifies the estimated fair value of deposit liabilities as Level 2. Short-term borrowings The carrying amount of federal funds purchased, securities sold under agreements to...

  • Page 90
    ... credit risk, interest rate and prepayment risk models that incorporate management's best estimate of current key assumptions such as default rates, loss severity and payment speeds. The excess of the undiscounted total cash flows expected to be collected over the fair value of the related PCI loans...

  • Page 91
    ... 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 further information on...

  • Page 92
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Comerica Incorporated and Subsidiaries the lending and credit groups responsible for assigning the initial internal risk rating at the time of approval. Qualitative adjustments for market conditions are determined based on an established framework. The ...

  • Page 93
    ... three reporting units: the Business Bank, the Retail Bank and Wealth Management. The Corporation performs its annual evaluation of goodwill impairment in the third quarter of each year and on an interim basis if events or changes in circumstances between annual tests suggest additional testing may...

  • Page 94
    ... in indirect private equity and venture capital funds and restricted equity investments, which are securities the Corporation is required to hold for various reasons, primarily Federal Home Loan Bank of Dallas (FHLB) and Federal Reserve Bank (FRB) stock. These investments are accounted for on the...

  • Page 95
    ...'s share-based compensation plans is included in Note 16. Revenue Recognition The following summarizes the Corporation's revenue recognition policies as they relate to certain noninterest income line items in the consolidated statements of income. Service charges on deposit accounts include fees for...

  • Page 96
    ... trust customers. Revenue is recognized on an accrual basis at the time the services are performed and are based on either the market value of the assets managed or the services provided. Commercial lending fees primarily include fees assessed on the unused portion of commercial lines of credit...

  • Page 97
    ... 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 98
    ... STATEMENTS Comerica Incorporated and Subsidiaries achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The Corporation's current accounting...

  • Page 99
    ...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 100
    ...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 101
    ... Auction-rate securities. (b) Recorded in "net unrealized gains (losses) on investment securities available-for-sale" in other comprehensive income. (c) Realized and unrealized gains and losses due to changes in fair value recorded in "net securities gains (losses)" on the consolidated statements of...

  • Page 102
    ...31, 2014 Loans: Commercial Commercial mortgage Total loans Nonmarketable equity securities (a) Other real estate Total assets at fair value December 31, 2013 Loans: Commercial Real estate construction Commercial mortgage International Total loans Nonmarketable equity securities (a) Other real estate...

  • Page 103
    ... Restricted equity investments Liabilities Demand deposits (noninterest-bearing) Interest-bearing deposits Customer certificates of deposit Total deposits Short-term borrowings Acceptances outstanding Medium- and long-term debt Credit-related financial instruments December 31, 2013 Assets Cash and...

  • Page 104
    ... Fair Value December 31, 2014 Investment securities available-for-sale: U.S. Treasury and other U.S. government agency securities $ Residential mortgage-backed securities (a) State and municipal securities Corporate debt securities Equity and other non-debt securities $ Total investment securities...

  • Page 105
    ...value of auction-rate securities have been redeemed or sold since acquisition, of which approximately 95 percent were redeemed at or above cost. The unrealized losses for these securities resulted from changes in market interest rates and liquidity. The Corporation ultimately expects full collection...

  • Page 106
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Comerica Incorporated and Subsidiaries Sales, calls and write-downs 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 ...

  • Page 107
    ... recorded balance of loans. Loans Past Due and Still Accruing 30-59 60-89 90 Days Total Days Days or More (in millions) Nonaccrual Loans Current Loans Total Loans December 31, 2014 Business loans: Commercial Real estate construction: Commercial Real Estate business line (a) Other business lines...

  • Page 108
    ... business line (e) Other business lines (f) Total real estate construction Commercial mortgage: Commercial Real Estate business line (e) Other business lines (f) Total commercial mortgage Lease financing International Total business loans Retail loans: Residential mortgage Consumer: Home equity...

  • Page 109
    ... the changes in the allowance for loan losses and related loan amounts. 2014 (in millions) Business Loans Retail Loans Total Business Loans 2013 Retail Loans Total Business Loans 2012 Retail Loans Total Years Ended December 31 Allowance for loan losses: Balance at beginning of period $ Loan charge...

  • Page 110
    ... Balance December 31, 2014 Business loans: Commercial Real estate construction: Other business lines (b) Commercial mortgage: Commercial Real Estate business line (a) Other business lines (b) Total commercial mortgage Total business loans Retail loans: Residential mortgage Consumer: Home equity...

  • Page 111
    ... 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 112
    ...(in millions) Years Ended December 31 Business loans: Commercial Commercial mortgage: Commercial Real Estate business line (c) Other business lines (d) Total commercial mortgage Total business loans Retail loans: Residential mortgage Consumer: Home equity Other consumer Total consumer Total retail...

  • Page 113
    ... 31 (in millions) Principal deferrals: Business loans: Commercial Commercial mortgage: Commercial Real Estate business line (a) Other business lines (b) Total commercial mortgage Total business loans Retail loans: Residential mortgage Consumer: Home equity Other consumer Total consumer Total retail...

  • Page 114
    ... and off-balance-sheet activities in Michigan, California and Texas. As outlined below, the Corporation has a concentration of credit risk with the automotive industry. Loans to automotive dealers and to borrowers involved with automotive production are reported as automotive, as management believes...

  • Page 115
    ...) December 31 2014 2013 2012 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 goodwill impairment in the third quarter of each year and on an interim basis if events or changes in...

  • Page 116
    ...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 117
    ... terms and readily available price information. The Corporation reduces exposure to market and liquidity risks from over-the-counter derivative instruments entered into for risk management purposes, and transactions entered into to mitigate the market risk associated with customer-initiated...

  • Page 118
    ..., 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 119
    ... 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 related to medium- and long-term debt for interest rate risk management...

  • Page 120
    ...Location of Gain 2014 2013 Other noninterest income $ Other noninterest income Foreign exchange income $ 20 2 38 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 121
    ... tax credits to investors (other tax credit entities) are accounted for under either the cost or equity method. Exposure to loss as a result of the Corporation's involvement in other tax credit entities at December 31, 2014 was limited to approximately $8 million. Investment balances, including...

  • Page 122
    ... foreign office time deposits of $135 million and $349 million at December 31, 2014 and 2013, respectively, were in denominations of $250,000 or more. NOTE 11 - SHORT-TERM BORROWINGS Federal funds purchased and securities sold under agreements to repurchase generally mature within one to four days...

  • Page 123
    ...31, 2014, Comerica Bank (the Bank), a subsidiary of the Corporation, had pledged loans totaling $25 billion which provided for up to $19 billion of available collateralized borrowing with the FRB. The following table provides a summary of short-term borrowings. Federal Funds Purchased and Securities...

  • Page 124
    ... provides short- and long-term funding to its members through advances collateralized by real-estate related assets. Actual borrowing capacity is contingent upon the amount of collateral available to be pledged to the FHLB. At December 31, 2014, $14 billion of real estate-related loans were pledged...

  • Page 125
    ...TO CONSOLIDATED FINANCIAL STATEMENTS Comerica Incorporated and Subsidiaries NOTE 13 - SHAREHOLDERS' EQUITY The Federal Reserve completed its 2014 Comprehensive Capital Analysis and Review (CCAR) of the Corporation's 2014-2015 capital plan in March 2014 and did not object to the capital distributions...

  • Page 126
    ... gains included in net income, net of tax Change in net unrealized gains (losses) on investment securities available-forsale, net of tax $ Balance at end of period, net of tax Accumulated defined benefit pension and other postretirement plans adjustment: Balance at beginning of period, net of tax...

  • Page 127
    ....36 Share-based compensation expense is charged to "salaries and benefits" 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 2014...

  • Page 128
    ...market price of Comerica common stock Expected option life (in years) follows: $ 13.21 2.95% 3.00 31 5.8 $ 9.07 1.94% 3.00 34 6.4 $ 8.63 2.16% 3.00 39 6.1 A summary of the Corporation's stock option activity and related information for the year ended December 31, 2014 Weighted-Average Number...

  • Page 129
    ... shares of common stock out of treasury. At December 31, 2014, the Corporation held 49.1 million shares in treasury. For further information on the Corporation's share-based compensation plans, refer to Note 1. NOTE 17 - EMPLOYEE BENEFIT PLANS Defined Benefit Pension and Postretirement Benefit Plans...

  • Page 130
    ... 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, 2014 and 2013. The following table details the changes in plan assets and benefit...

  • Page 131
    ... 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 132
    ...and real estate investment trusts. U.S. Treasury and other U.S. government agency securities Fair value measurement is based upon quoted prices in an active market exchange, such as the New York Stock Exchange. Level 1 securities include U.S. Treasury securities that are traded by dealers or brokers...

  • Page 133
    ...agency securities Corporate and municipal bonds and notes Collateralized mortgage obligations Private placements Total investments at fair value December 31, 2013 Cash equivalent securities: Mutual funds Equity securities: Collective investment funds Mutual funds Common stock Fixed income securities...

  • Page 134
    ... to do so, the Corporation invests actual funds into the deemed investments as directed by employees, resulting in a deferred compensation asset, recorded in "other short-term investments" on the consolidated balance sheets that offsets the liability to employees under the plan, recorded in "accrued...

  • Page 135
    ...millions) Years Ended December 31 2014 Amount Rate Amount 2013 Rate Amount 2012 Rate Tax based on federal statutory rate State income taxes Affordable housing and historic credits Bank-owned life insurance Other changes in unrecognized tax benefits Tax-related interest and penalties Other Provision...

  • Page 136
    ...compensation Defined benefit plans Loan purchase accounting adjustments Deferred loan origination fees and costs Net unrealized losses on investment securities available-for-sale Other temporary differences, net Total deferred tax assets Deferred tax liabilities: Lease financing transactions Defined...

  • Page 137
    ... updated in Forms 10Q for the quarterly periods ended March 31, 2014, June 30, 2014 and September 30, 2014, Comerica Bank, a wholly owned subsidiary of the Corporation, was sued in November 2011 as a third-party defendant in Butte Local Development v. Masters Group v. Comerica Bank ("the case"), for...

  • Page 138
    ...of funds based on the pricing and term characteristics of the assets. For acquired loans and deposits, matched maturity funding is determined based on origination date. Accordingly, the FTP process reflects the transfer of interest rate risk exposures to the Treasury group within the Finance segment...

  • Page 139
    ...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 140
    ... credit-related charge-offs (recoveries) Selected average balances: Assets Loans Deposits Statistical data: Return on average assets (a) Efficiency ratio (b) (dollar amounts in millions) Year Ended December 31, 2013 $ 1,512 53 376 590 429 $ 816 $ 15 $ 37,332 36,353 28,554 2.18% 31.24 Business Bank...

  • Page 141
    ... net securities gains. FTE - Fully Taxable Equivalent N/M - not meaningful The Corporation operates in three primary markets - Texas, California, and Michigan, as well as in Arizona and Florida, with select businesses operating in several other states, and in Canada and Mexico. The Corporation...

  • Page 142
    ... Michigan California Texas Total Earnings summary: Net interest income (expense) (FTE) Provision for credit losses Noninterest income Noninterest expenses Provision (benefit) for income taxes (FTE) Net income (loss) Net credit-related charge-offs Selected average balances: Assets Loans Deposits...

  • Page 143
    ... COMPANY FINANCIAL STATEMENTS BALANCE SHEETS - COMERICA INCORPORATED (in millions, except share data) December 31 2014 2013 Assets Cash and due from subsidiary bank Short-term investments with subsidiary bank Other short-term investments Investment in subsidiaries, principally banks Premises...

  • Page 144
    ...change in premises and equipment Net cash provided by (used in) investing activities Financing Activities Medium- and long-term debt: Maturities and redemptions Issuances Common Stock: Repurchases Cash dividends paid Issuances of common stock under employee stock plans Excess tax benefits from share...

  • Page 145
    ... 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. 2014 (in millions, except per share data...

  • Page 146
    ...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 147
    ... standards of the Public Company Accounting Oversight Board (United States), the 2014 consolidated financial statements of Comerica Incorporated and subsidiaries and our report dated February 17, 2015 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Dallas, TX February 17, 2015 F-110

  • Page 148
    ... 31, 2014 and 2013, 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, 2014. These financial statements are the responsibility of the Corporation's management. Our...

  • Page 149
    ... FINANCIAL INFORMATION (in millions) Years Ended December 31 2014 2013 2012 2011 2010 ASSETS Cash and due from banks Interest-bearing deposits with banks Other short-term investments Investment securities Commercial loans Real estate construction loans Commercial mortgage loans Lease financing...

  • Page 150
    ... Service 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 and benefits...

  • Page 151
    ... DATA Comerica Incorporated and Subsidiaries CONSOLIDATED FINANCIAL INFORMATION Years Ended December 31 2014 2013 2012 2011 2010 Average Rates (Fully Taxable Equivalent Basis) Interest-bearing deposits with banks Other short-term investments Investment securities Commercial loans Real estate...

  • Page 152
    ... as of February 17, 2015. 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 153
    ... July 22, 2014, and incorporated herein by reference). Form of Standard Comerica Incorporated Restricted Stock Award Agreement (non-cliff vesting) under the Amended and Restated Comerica Incorporated 2006 Long-Term Incentive Plan (filed as Exhibit 10.11 to Registrant's Annual Report on Form 10-K for...

  • Page 154
    ... reference). Form of Standard Comerica Incorporated Senior Executive Long-Term Performance Restricted Stock Unit Award Agreement under the Amended and Restated Comerica Incorporated 2006 Long-Term Incentive Plan (2014 version 2) (filed as Exhibit 10.3 to Registrant's Current Report on Form 8-K dated...

  • Page 155
    ...Plan for Non-Employee Directors (Version 3) (filed as Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, and incorporated herein by reference). Form of Standard Comerica Incorporated Non-Employee Director Restricted Stock Unit Agreement under the Comerica...

  • Page 156
    ...). Waiver of Senior Executive Officers dated November 14, 2008 (filed as Exhibit 10.2 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 reference). Statement regarding Computation of Net...

  • Page 157
    ...35 95 99 100 101 (not applicable) (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, 2014, formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets...

  • Page 158
    Shareholder Information Stock Comerica's common stock trades on the New York Stock Exchange (NYSE) under the symbol CMA. STOCK PRICES, DIVIDENDS AND YIELDS Quarter High Low Dividends Per Share Dividend Yield* Shareholder Assistance Inquiries related to shareholder records, change of name, address ...

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    ® C OMERICA C ORPORATE H EADQUARTERS Comerica Bank Tower 1717 Main Street Dallas, Texas 75201