Comerica 2014 Annual Report Download - page 41

F-4
2014 OVERVIEW AND 2015 OUTLOOK
Comerica Incorporated (the Corporation) is a financial holding company headquartered in Dallas, Texas. The Corporation's
major business segments are the Business Bank, the Retail Bank and Wealth Management. The core businesses are tailored to
each of the Corporation's three primary geographic markets: Michigan, California and Texas. Information about the activities of
the Corporation's business segments is provided in Note 22 to the consolidated financial statements.
As a financial institution, the Corporation's principal activity is lending to and accepting deposits from businesses and
individuals. The primary source of revenue is net interest income, which is principally derived from the difference between interest
earned on loans and investment securities and interest paid on deposits and other funding sources. The Corporation also provides
other products and services that meet the financial needs of customers which generate noninterest income, the Corporation's
secondary source of revenue. Growth in loans, deposits and noninterest income is affected by many factors, including economic
conditions in the markets the Corporation serves, the financial requirements and economic health of customers, and the ability to
add new customers and/or increase the number of products used by current customers. Success in providing products and services
depends on the financial needs of customers and the types of products desired.
The accounting and reporting policies of the Corporation and its subsidiaries conform to generally accepted accounting
principles (GAAP) in the United States (U.S.). The Corporation's consolidated financial statements are prepared based on the
application of accounting policies, the most significant of which are described in Note 1 to the consolidated financial statements.
The most critical of these significant accounting policies are discussed in the “Critical Accounting Policies” section of this financial
review.
OVERVIEW
• Net income was $593 million in 2014, an increase of $52 million, or 10 percent, compared to $541 million in 2013. Net
income per diluted common share was $3.16 in 2014, compared to $2.85 in 2013. Excluding the impact to 2013 results of
an unfavorable jury verdict in a lender liability case, which decreased 2013 net income by $28 million, or 15 cents per
share, 2014 net income increased $24 million, or 4 percent, and earnings per diluted share increased 16 cents, or 5 percent.
• Average loans were $46.6 billion in 2014, an increase of $2.2 billion, or 5 percent, compared to 2013. The increase in
average loans primarily reflected an increase of $1.7 billion, or 6 percent, in commercial loans, $158 million, or 10 percent,
in residential mortgage loans and $117 million, or 5 percent, in consumer loans. The 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 to 2013. The increase in average
deposits reflected increases of $2.6 billion, or 12 percent, in average noninterest-bearing deposits and $1.2 billion, or 5
percent, in money market and interest-bearing checking deposits, partially offset by a decrease of $602 million, or 11 percent,
in customer certificates of deposit. The increase in average deposits reflected increases in almost all lines of business and
in all geographic markets.
• Net interest income was $1.7 billion in 2014, a decrease of $17 million, or 1 percent, compared to 2013. The decrease in
net interest income resulted primarily from a $15 million decrease in the accretion of the purchase discount on the acquired
loan portfolio. The benefit from an increase in average earning assets of $2.5 billion and lower funding costs was offset by
continued pressure on yields from the low-rate environment and loan portfolio dynamics.
• The provision for credit losses decreased $19 million in 2014, compared to 2013, primarily due to continued improvements
in credit quality. Improvements in credit quality included a decline of $367 million in the Corporation's criticized loan list
from December 31, 2013 to December 31, 2014. The Corporation's criticized loan list is consistent with loans in the Special
Mention, Substandard and Doubtful categories defined by regulatory authorities. Additional indicators of improved credit
quality included a $48 million decrease in net credit-related charge-offs in 2014, compared to 2013.
• Noninterest income decreased $14 million or 2 percent, in 2014, compared to 2013, primarily the result of a $19 million
decrease in noncustomer-driven income categories, with the largest decreases in deferred compensation asset returns,
securities trading income and warrant income, partially offset by a $5 million increase in customer-driven fees, largely
driven by increases in fiduciary income and card fees, partially offset by a decrease in letter of credit fees.
• Noninterest expenses decreased $96 million, or 6 percent, in 2014, compared to 2013, primarily reflecting decreases of $48
million in litigation-related expenses and $47 million in pension expense.
• The quarterly dividend was increased to 19 cents per common share in January 2014 and further increased to 20 cents per
share in April 2014, increases of 12 percent and 5 percent, respectively.
• Shares repurchased under the share repurchase program totaled 5.2 million shares in 2014. Together with dividends of $0.79
per share, $392 million, or 66 percent of 2014 net income, was returned to shareholders.