Comerica 2014 Annual Report Download - page 49

F-12
STRATEGIC LINES OF BUSINESS
The Corporation's operations are strategically aligned into three major business segments: the Business Bank, the Retail
Bank and Wealth Management. These business segments are differentiated based upon the products and services provided. In
addition to the three major business segments, Finance is also reported as a segment. The Other category includes items not directly
associated with these business segments or the Finance segment. The performance of the business segments is not comparable
with the Corporation's consolidated results and is not necessarily comparable with similar information for any other financial
institution. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of
how the segments would perform if they operated as independent entities. Market segment results are also provided for the
Corporation's three primary geographic markets: Michigan, California and Texas. In addition to the three primary geographic
markets, Other Markets is also reported as a market segment. Note 22 to the consolidated financial statements describes the
Corporation's segment reporting methodology as well as the business activities of each business segment and presents financial
results of these business segments for the years ended December 31, 2014, 2013 and 2012.
The Corporation's management accounting system assigns balance sheet and income statement items to each segment
using certain methodologies, which are regularly reviewed and refined. These methodologies may be modified as the management
accounting system is enhanced and changes occur in the organizational structure and/or product lines.
In the second quarter 2014, the Corporation enhanced the approach used to determine the standard reserve factors used
in estimating the allowance for credit losses, which had the effect of capturing certain elements in the standard reserve component
that had formerly been included in the qualitative assessment. The impact of the change was largely neutral to the total allowance
for loan losses. However, because standard reserves are allocated to the segments at the loan level, while qualitative reserves are
allocated at the portfolio level, the impact of the methodology change on the allowance of each segment reflected the characteristics
of the individual loans within each segment's portfolio, causing segment reserves to increase or decrease accordingly. As a result,
the current year provision for credit losses within each segment is not comparable to prior year amounts.
BUSINESS SEGMENTS
The following table presents net income (loss) by business segment.
(dollar amounts in millions)
Years Ended December 31 2014 2013 2012
Business Bank $ 816 86% $ 785 86% $ 826 88%
Retail Bank 43 4 42 5 50 5
Wealth Management 91 10 87 9 67 7
950 100% 914 100% 943 100%
Finance (357) (376) (382)
Other (a) —3 (40)
Total $ 593 $ 541 $ 521
(a) Includes items not directly associated with the three major business segments or the Finance Division.
The Business Bank's net income of $816 million in 2014 increased $31 million, compared to $785 million in 2013. Net
interest income (FTE) of $1.5 billion increased $9 million in 2014, primarily the result of the benefit from an increase in average
loans of $1.9 billion, an increase in net funds transfer pricing (FTP) credits and lower deposit costs, partially offset by lower loan
yields, a decrease in accretion of the purchase discount on the acquired loan portfolio and the impact of a $9 million negative
residual value adjustment to assets in the leasing portfolio. The increase in net FTP credits primarily reflected the benefit from a
$2.4 billion increase in average deposits in 2014, compared to 2013. The provision for credit losses decreased $1 million, to $53
million in 2014, compared to the prior year. Provision decreases in Environmental Services, National Dealer Services and Corporate
Banking were mostly offset by increases in Mortgage Banker Finance, Energy, and Technology and Life Sciences. Net credit-
related charge-offs of $15 million decreased $28 million in 2014, compared to 2013, primarily reflecting decreases in Commercial
Real Estate, general Middle Market and Environmental Services, partially offset by an increase in Technology and Life Sciences.
Noninterest income of $376 million in 2014 decreased $6 million from the prior year, primarily reflecting a $7 million decrease
in letter of credit fees and small decreases in most other categories of noninterest income, partially offset by a $6 million increase
in card fees. Noninterest expenses of $590 million in 2014 decreased $53 million compared to the prior year, primarily due to a
$50 million decrease in litigation-related expenses, a $10 million decrease in salaries and benefits expense and a $7 million decrease
in expenses related to foreclosed properties, partially offset by a $14 million increase in corporate overhead expense. The increase
in corporate overhead expense was primarily related to certain actions taken in the third quarter 2014 including a contribution to
the Comerica Charitable Foundation, charges associated with real estate optimization and several other efficiency-related actions.
Net income for the Retail Bank of $43 million in 2014 increased $1 million, compared to net income of $42 million in
2013. Net interest income (FTE) of $596 million decreased $14 million in 2014, primarily due to lower loan yields, a decrease in
accretion of the purchase discount on the acquired loan portfolio and a decrease in net funds transfer pricing (FTP) credits due to