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Comerica Incorporated
2015 Annual Report

Table of contents

  • Page 1
    Comerica Incorporated 2015 Annual Report

  • Page 2
    ... Wealth Management. Comerica focuses on relationships, and helping people and businesses be successful. In addition to 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.

  • Page 3
    ...loans came from National Dealer Services, Commercial Real Estate, Technology and Life Sciences, and Mortgage Banker Finance. Also, Small Business average loans increased over $100 million, which was partially driven by our banking centers. Additional training, incentives and increased accountability...

  • Page 4
    ... we saw in card fees, cash management service charges and fiduciary income. We did, however, see declines in investment banking fees, due primarily to depressed activity in the energy market, as well as lower noncustomer-related income, such as deferred compensation asset returns. Overall, expenses...

  • Page 5
    ..., California provides us with many opportunities to capitalize on our industry expertise in business lines such as Technology and Life Sciences, National Dealer Services, Commercial Real Estate and Entertainment. We have continuously served the Michigan market since our founding in 1849. Our focus...

  • Page 6
    ... want. For example, in 2015 we introduced Comerica TM Connect Mobile , SM empowering commercial clients to access Comerica Business Connect for information reporting and to approve payments with the convenience of their mobile devices. In addition, our commercial card program is gaining traction and...

  • Page 7
    ...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 $1.8 billion in new balances...

  • Page 8
    ... have access to leading-edge payments processing capabilities. In 2015, we also consolidated our various Wealth Management systems into a single, integrated platform; upgraded our Comerica Web Banking® and Comerica Mobile Banking® platforms; delivered several improvements to ® our commercial cash...

  • Page 9
    ... investments in 2016 that will sustain the long-term growth of our company, including banking center delivery upgrades, modernized payments capabilities such as same-day ACH and improved mobile delivery capabilities for our commercial cash management systems, as well as enhanced reporting and risk...

  • Page 10
    ... superior growth of loans, deposits and fee income. Our balance sheet structure benefits from rising interest rates, and our diverse geographic footprint is well situated to drive sustainable growth. As we, along with the industry, continue to face challenges, we are tightly managing expenses while...

  • Page 11
    ... Compliance Committee (4) Enterprise Risk Committee * Committee Chairperson Robert S. Taubman (4) CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER Taubman Centers, Inc. (REIT that Owns, Develops and Operates Regional Shopping Centers Nationally) and The Taubman Company (Shopping Center Management...

  • Page 12
    ...PRESIDENT Comerica Bank - California Market Michael H. Michalak EXECUTIVE VICE PRESIDENT AND CHIEF RISK OFFICER Paul R. Obermeyer EXECUTIVE VICE PRESIDENT AND CHIEF INFORMATION OFFICER Michael T. Ritchie PRESIDENT Comerica Bank - Michigan Market Peter L. Sefzik PRESIDENT Comerica Bank - Texas Market

  • Page 13
    ... Number) Comerica 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...

  • Page 14
    ...About 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...

  • Page 15
    ..., without limitation, 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 lending, consumer deposit gathering, mortgage loan origination, consumer...

  • Page 16
    ... from other financial intermediaries, including savings and loan associations, consumer finance companies, leasing companies, venture capital funds, credit unions, investment banks, insurance companies and securities firms. Competition among providers of financial products and services continues to...

  • Page 17
    ...-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 with these obligations, Comerica and its various...

  • Page 18
    ... Insurance Corporation Improvement Act ("FDICIA"), "prompt corrective action" regime discussed below, which applies to each of Comerica Bank and Comerica Bank & Trust, National Association, a subject bank is specifically prohibited from paying dividends to its parent company if payment would result...

  • Page 19
    ... and tax credit carry-forwards, if any. Additionally, Comerica has made the election to permanently exclude accumulated other comprehensive income related to debt securities, cash flow hedges, and defined benefit postretirement plans from CET1 capital. Additional Tier 1 capital primarily includes...

  • Page 20
    ... of Comerica and its bank subsidiaries' CET1, Tier 1 capital, total capital and risk-weighted 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...

  • Page 21
    ...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 plan and the risks inherent in each plan's design...

  • Page 22
    ... venture capital investments is set forth in Note 1 of the Notes to Consolidated Financial Statements located on page F-54 of the Financial Section of this report. Annual Capital Plans and Stress Tests. Comerica is subject to the FRB's annual Comprehensive Capital Analysis and Review (CCAR) process...

  • Page 23
    ... statements or free 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...

  • Page 24
    ... permissible activities, corporate governance and compensation, and changes in fiscal policy, may have long-term effects on the business model and profitability of financial institutions that cannot be foreseen. Moreover, in light of recent events and current conditions in the U.S. financial markets...

  • Page 25
    ...every borrower relationship as new information becomes available, either as a result of periodic reviews of the credit quality or as a result of a change in borrower performance. The goal of the internal risk rating framework is to improve Comerica's risk management capability, including its ability...

  • Page 26
    ...Adjustable rate loans are limited to standard conventional loan programs. EMPLOYEES As of December 31, 2015, Comerica and its subsidiaries had 8,533 full-time and 570 part-time employees. AVAILABLE INFORMATION Comerica maintains an Internet website at www.comerica.com where the Annual Report on Form...

  • Page 27
    ...factors, such as real estate values, energy prices, state and local municipal budget deficits, government spending and the U.S. national debt, outside of our control may, directly and indirectly, adversely affect Comerica. As was the case with the Great Recession of 2008 and 2009, economic downturns...

  • Page 28
    ... to access capital markets on favorable terms. Other conditions and factors that could materially adversely affect Comerica's liquidity and funding include a lack of market or customer confidence in, or negative news about, Comerica or the financial services industry generally which also may result...

  • 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
    ...strategic, high profile event. Comerica's business is based on the trust of its customers, communities, and entire value chain, which makes managing reputational risk extremely important. News or other publicity that impairs Comerica's reputation, or the reputation of the financial services industry...

  • Page 32
    ... to similar risks and difficulties in connection with any future decisions to downsize, 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...

  • Page 33
    ... 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 its financial condition and results of operations. In some cases, Comerica...

  • Page 34
    ... business district of Detroit, Michigan at 411 W. Lafayette, Detroit, Michigan 48226. Such building is owned by Comerica Bank. As of December 31, 2015, Comerica, through its banking affiliates, operated at a total of 604 locations. This includes banking centers, trust services locations, and/or loan...

  • Page 35
    ... to the sections entitled "2015 Overview and 2016 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-45...

  • 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
    ... statements that are filed as part of this report are included in the Financial Section on pages F-46 through F-113. All of the schedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instruction, the required information...

  • Page 38
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  • Page 39
    FINANCIAL REVIEW AND REPORTS Comerica Incorporated and Subsidiaries Performance Graph Selected Financial Data 2015 Overview and 2016 Outlook Results of Operations Strategic Lines of Business Balance Sheet and Capital Funds Analysis Risk Management Critical Accounting Policies Supplemental Financial ...

  • Page 40
    ... reinvestment of dividends) of Comerica Incorporated common stock, the S&P 500 Index, and the KBW 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, 2010 and the reinvestment of all...

  • Page 41
    ...PER SHARE OF COMMON STOCK Diluted earnings per common share Cash dividends declared Common shareholders' equity Tangible common equity (b) 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...

  • Page 42
    ... in commercial loans primarily reflected increases in Mortgage Banker Finance, Technology and Life Sciences, National Dealer Services and Small Business, partially offset by a decrease in Corporate Banking. Average deposits increased $3.5 billion, or 6 percent, to $58.3 billion in 2015, compared...

  • Page 43
    ... December 2015 short-term rate increase, loan growth and a larger securities portfolio more than offsetting higher funding costs. Full-year benefit from the December rise in short-term rates expected to be more than $90 million if deposit prices remain at current levels. Provision for credit losses...

  • Page 44
    ... 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 45
    ... 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 Savings deposits Customer certificates of deposit Foreign office time deposits...

  • Page 46
    ... financial review. NONINTEREST INCOME (in millions) Years Ended December 31 2015 2014 2013 Card fees Card fees excluding presentation change (a) Service charges on deposit accounts Fiduciary income Commercial lending fees Letter of credit fees Bank-owned life insurance Foreign exchange income...

  • Page 47
    ... information about the impact of the change to the merchant payment processing business model, refer to the "other noninterest income" discussion below and the "outside processing fee expense" discussion under the "Noninterest Expenses" subheading that follows. Service charges on deposit accounts...

  • Page 48
    ... a card program resulted in a change to the accounting presentation of the related revenues and expenses. The effect of this change was an increase of $181 million to outside processing fee expense in 2015. The Corporation believes that this information will assist investors, regulators, management...

  • Page 49
    ... 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 50
    ..., primarily the result of lease termination charges of $10 million taken in 2014 related to real estate optimization. Software expense increased $5 million, or 6 percent, in 2014, primarily due to an increase in amortization expense as a result of the completion of technology projects throughout the...

  • Page 51
    ... crediting rate. The increase in average loans primarily reflected increases in Technology and Life Sciences, Mortgage Banker Finance, National Dealer Services and Commercial Real Estate, partially offset by a decrease in Corporate Banking. Average deposits increased in nearly all lines of business...

  • Page 52
    ... Expenses" subheading in the "Results of Operations" section of this financial review for further discussion of the change to the Corporation's business model for providing merchant payment processing services. Net income for the Retail Bank of $47 million in 2015 increased $3 million, compared to...

  • Page 53
    ... rate and lower loan yields. The increase in average loans and deposits both reflected increases in nearly all lines of business, with the largest increases in Technology and Life Sciences, National Dealer Services, and Commercial Real Estate. The provision for credit losses of $17 million in 2015...

  • Page 54
    ..." subheading in the "Results of Operations" section of this financial review for further discussion of the change to the Corporation's business model for providing merchant payment processing services. The net loss for the Finance & Other category of $376 million in 2015 increased $19 million...

  • Page 55
    ... securities (a) Total investment securities Commercial loans Real estate construction loans Commercial mortgage loans Lease financing International loans: Banks and other financial institutions Commercial and industrial Total international loans Residential mortgage loans Consumer loans: Home equity...

  • Page 56
    ...loans by business line: General Middle 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...

  • Page 57
    ... an increase in commercial mortgage loans in the Commercial Real Estate business line. For more information on commercial real estate loans, refer to "Commercial Real Estate Lending" in the "Risk Management" section of this financial review. ANALYSIS OF INVESTMENT SECURITIES PORTFOLIO (FTE) Maturity...

  • Page 58
    ... short-term investments include federal funds sold, trading securities and loans held-for-sale. Substantially all trading securities are deferred compensation plan assets. Loans held-for-sale typically represent residential mortgage loans originated with management's intention to sell and, from time...

  • Page 59
    ...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, 2015. These transactions are not considered part of the Corporation's repurchase program...

  • Page 60
    ... risk management and capital planning process and are part of the forecasting process used by the Corporation to conduct the enterprise-wide stress test that was part of CCAR. For additional information about risk management processes, refer to the "Risk Management" section of this financial review...

  • Page 61
    ... and its U.S. banking subsidiaries exceeded the capital ratios required for an institution to be considered "well capitalized" by the standards developed under the Federal Deposit Insurance Corporation Improvement Act of 1991. Refer to Note 20 to the consolidated financial statements for further...

  • Page 62
    ... 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, a division...

  • Page 63
    ...31 2015 2014 2013 2012 2011 $ Balance at beginning of year Loan charge-offs: Commercial Real estate construction Commercial mortgage Lease financing International Residential mortgage Consumer Total loan charge-offs Recoveries: Commercial Real estate construction Commercial mortgage Lease financing...

  • Page 64
    ...energy prices. Technology and Life Sciences reserves increased largely as a result of the levels and trends of charge-offs. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES 2015 (dollar amounts in millions) December 31 Business loans Commercial Real estate construction Commercial mortgage Lease financing...

  • Page 65
    ... in millions) December 31 2015 2014 2013 2012 2011 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 66
    ... loans sold 55 (d) Includes net changes related to nonaccrual loans with balances less than $2 million, payments on nonaccrual loans with book balances greater than $2 million, transfers of nonaccrual loans to foreclosed property and retail loan gross charge-offs. Excludes business loan gross charge...

  • Page 67
    ... 31, 2015 Loans Transferred to Nonaccrual (a) Net Loan Charge-Offs (Recoveries) Mining, Quarrying and Oil & Gas Extraction (b) $ Real Estate and Home Builders Services Retail Trade Residential Mortgage Manufacturing (b) Health Care and Social Assistance Contractors (b) Holding and Other Investment...

  • Page 68
    ... net loan charge-offs in 2015 and 2014. For further information regarding significant group concentrations of credit risk, refer to Note 5 to the consolidated financial statements. Commercial Real Estate Lending The following table summarizes the Corporation's commercial real estate loan portfolio...

  • Page 69
    The Corporation limits risk inherent in its commercial real estate lending activities by limiting exposure to those borrowers directly involved in the commercial real estate markets, diversifying credit risk by geography and project type, and maintaining conservative policies on loan-to-value ratios...

  • Page 70
    ...Small Business, and Technology and Life Sciences. These companies include downstream businesses such as refineries and petrochemical companies, companies that sell products to E&P, midstream and energy services companies, companies involved in developing new technologies for the oil and gas industry...

  • Page 71
    ..., finance, economics, lending, deposit gathering and risk management. The Treasury Department mitigates market and liquidity risk through the actions it takes to manage the Corporation's market, liquidity and capital positions under the direction of ALCO. Market Risk Analytics, within the Office of...

  • Page 72
    ... assets (HQLA) needed for compliance with the LCR, and expected funding maturities are included. In addition, the model reflects deposit pricing based on historical price movements with short-term interest rates and loan spread held at current levels. Changes in actual economic activity may result...

  • Page 73
    ... from changes in interest rates. These tools assist management in achieving the desired interest rate risk management objectives. Activity related to derivative instruments currently involves interest rate swaps effectively converting fixed-rate medium- and long-term debt to floating rate. F-35

  • Page 74
    ... 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, 2015...

  • Page 75
    ... Market Risks" section below and Note 8 to the consolidated 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...

  • Page 76
    ..., stressed environments. In conjunction with the quarterly 200 basis point interest rate simulation analyses, discussed in the "Interest Rate Sensitivity" section of this financial review, liquidity ratios and potential funding availability are examined. Each quarter, the Corporation also evaluates...

  • Page 77
    ... unit risk coordinators responsible for managing operational risk specific to the respective business lines. COMPLIANCE RISK Compliance risk represents the risk of regulatory sanctions or financial loss resulting from the Corporation's failure to comply with regulations and standards of good banking...

  • Page 78
    ... from management estimates would primarily affect the Business Bank segment. FAIR VALUE MEASUREMENT Investment securities available-for-sale, derivatives and deferred compensation plan assets and associated liabilities are recorded at fair value on a recurring basis. Additionally, from time to time...

  • Page 79
    ... management methodologies on the basis of each reporting unit's credit, operational and interest rate risks, as well as goodwill. To determine regulatory capital, each reporting unit is assigned sufficient capital such that their respective Tier 1 ratio, based on allocated risk-weighted assets...

  • Page 80
    ...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 81
    ... for the non-qualified defined benefit pension plan. For further information, refer to Note 1 to the consolidated financial statements. Defined benefit pension expense is recorded in "employee benefits" expense on the consolidated statements of income and is allocated to business segments based on...

  • Page 82
    ...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: Trust preferred securities Tier 1 common capital Risk-weighted assets (a) Tier 1 risk-based capital ratio Tier 1 common capital ratio Tangible...

  • Page 83
    ..., financial and capital markets, specific industries, and the Corporation; changes in accounting standards could materially impact the Corporation's financial statements; and the Corporation's accounting policies and processes are critical to the reporting of financial condition and results of...

  • Page 84
    ...except share data) December 31 2015 2014 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 85
    ... INCOME Card fees Service charges on deposit accounts Fiduciary income Commercial lending fees Letter of credit fees Bank-owned life insurance Foreign exchange income Brokerage fees Net securities losses Other noninterest income Total noninterest income NONINTEREST EXPENSES Salaries and benefits...

  • Page 86
    ...Net losses realized as a yield adjustment in interest on investment securities Change in net unrealized (losses) gains before income taxes Defined benefit pension and other postretirement plans adjustment: Actuarial (loss) gain arising during the period Prior service credit arising during the period...

  • Page 87
    ..., except per share data) BALANCE AT DECEMBER 31, 2012 Net income Other comprehensive income, net of tax Cash dividends declared on common stock ($0.68 per share) Purchase of common stock Net issuance of common stock under employee stock plans Share-based compensation Other BALANCE AT DECEMBER 31...

  • Page 88
    ...Noncash investing and financing activities: Loans transferred to other real estate Loans transferred from portfolio to held-for-sale Lease residual transferred to other assets Securities transferred from available-for-sale to held-to-maturity See notes to consolidated financial statements. 2015 2014...

  • Page 89
    ... and equity method investments are recorded in "other noninterest income" on the consolidated statements of income. Assets held in an agency or fiduciary capacity are not assets of the Corporation and are not included in the consolidated financial statements. See Note 9 for additional information...

  • Page 90
    ...the assumptions market participants would use when pricing an asset or liability. Trading securities, investment securities available-for-sale, derivatives and deferred compensation plan liabilities are recorded at fair value on a recurring basis. Additionally, from time to time, the Corporation may...

  • Page 91
    ... short-term investments" and "accrued expenses and other liabilities," respectively, on the consolidated balance sheets. Level 1 trading securities include assets related to employee deferred compensation plans, which are invested in mutual funds, U.S. Treasury securities that are traded by dealers...

  • Page 92
    ...The Corporation also holds restricted equity investments, primarily Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock. Restricted equity securities are not readily marketable and are recorded at cost (par value) in "accrued income and other assets" on the consolidated balance sheets...

  • Page 93
    ... value. The Corporation classifies the estimated fair value of credit-related financial instruments as Level 3. 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. Trading...

  • Page 94
    ... for credit losses. The Corporation's portfolio segments are business loans and retail loans. Business loans include the commercial, real estate construction, commercial mortgage, lease financing and international loan portfolios. Retail loans consist of traditional residential mortgage, home equity...

  • Page 95
    ... added risk, or changes in the level and quality of experience held by lending management. An additional allowance for risk rating errors is calculated based on the results of risk rating accuracy assessments performed on samples of business loans conducted by the Corporation's asset quality review...

  • Page 96
    ... appraised values less costs to sell no later than 180 days past due. In addition, junior lien home equity loans less than 90 days past due are placed on nonaccrual status if they have underlying risk characteristics that place full collection of the loan in doubt, such as when the related senior...

  • Page 97
    ... 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 98
    ... 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 99
    ..., investment advisory and other services provided to personal and institutional 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...

  • Page 100
    ...over the future service periods of active employees expected to receive benefits under the plan. Actuarial gains and losses result from experience different from that assumed and from changes in assumptions (excluding asset gains and losses not yet reflected in market-related value). Amortization of...

  • Page 101
    ... of Financial Assets and Financial Liabilities," (ASU 2016-01), which makes targeted amendments to fair value measurement and disclosure guidance. ASU 2016-01 requires equity investments (other than equity method investments) to be measured at fair value with changes in fair value recognized...

  • Page 102
    ... 3 December 31, 2015 Trading securities: Deferred compensation plan assets Equity and other non-debt securities Total trading securities Investment securities available-for-sale: U.S. Treasury and other U.S. government agency securities Residential mortgage-backed securities (a) State and municipal...

  • Page 103
    ... FINANCIAL STATEMENTS Comerica Incorporated and Subsidiaries (in millions) Total Level 1 Level 2 Level 3 December 31, 2014 Trading securities: Deferred compensation plan assets Investment securities available-for-sale: U.S. Treasury and other U.S. government agency securities Residential mortgage...

  • Page 104
    ... 23 1 112 136 4 (a) Auction-rate securities. (b) Realized and unrealized gains and losses due to changes in fair value recorded in "net securities losses" on the consolidated statements of income. (c) Recorded in "net unrealized (losses) gains on investment securities available-for-sale" in other...

  • Page 105
    ... 31, 2015 Loans held-for-sale: Commercial Loans: Commercial Commercial mortgage International Total loans Nonmarketable equity securities Other real estate Total assets at fair value December 31, 2014 Loans: Commercial Commercial mortgage Total loans Nonmarketable equity securities Other real estate...

  • Page 106
    ... of deposit Total deposits Short-term borrowings Acceptances outstanding Medium- and long-term debt Credit-related financial instruments December 31, 2014 Assets Cash and due from banks Interest-bearing deposits with banks Investment securities held-to-maturity Loans held-for-sale (a) Total loans...

  • Page 107
    ... Fair Value December 31, 2015 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 108
    ...more Fair Value Unrealized Losses Fair Value Total Unrealized Losses December 31, 2015 U.S. Treasury and other U.S. government agency securities Residential mortgage-backed securities (a) State and municipal securities (b) Corporate debt securities (b) Equity and other non-debt securities (b) Total...

  • Page 109
    ... underlying loans may exercise prepayment options. At December 31, 2015, investment securities with a carrying value of $2.4 billion were pledged where permitted or required by law to secure $1.2 billion of liabilities, primarily public and other deposits of state and local government agencies and...

  • Page 110
    ... business line (a) Other business lines (b) Total real estate construction 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...

  • Page 111
    ... least annually, and to pools of retail loans with similar risk characteristics. Internally Assigned Rating Special Substandard (c) Mention (b) (in millions) Pass (a) Nonaccrual (d) Total December 31, 2015 Business loans: Commercial Real estate construction: Commercial Real Estate business line...

  • Page 112
    ...retail loans secured by residential real estate properties in process of foreclosure of $1 million at December 31, 2015. Allowance for Credit Losses The following table details the changes in the allowance for loan losses and related loan amounts. Business Loans 2015 Retail Loans Business Loans 2014...

  • Page 113
    ... sheets, are summarized in the following table. (in millions) Years Ended December 31 2015 2014 2013 Balance at beginning of period Charge-offs on lending-related commitments (a) Provision for credit losses on lending-related commitments Balance at end of period (a) Charge-offs result from the sale...

  • Page 114
    ... Investment In: Impaired Impaired Total Loans with Loans with Impaired No Related Related Loans Allowance Allowance Related Allowance for Loan Losses (in millions) Unpaid Principal Balance December 31, 2015 Business loans: Commercial Commercial mortgage: Commercial Real Estate business line...

  • Page 115
    ...business line (a) Commercial mortgage: Commercial Real Estate business line (a) Other business lines (b) Total commercial mortgage International Total business loans Retail loans: Residential mortgage Consumer: Home equity Other consumer Total consumer Total retail loans Total individually evaluated...

  • Page 116
    ...estate developers. Primarily loans secured by owner-occupied real estate. Includes bankruptcy loans for which the court has discharged the borrower's obligation and the borrower has not reaffirmed the debt. At December 31, 2015 and 2014, commitments to lend additional funds to borrowers whose terms...

  • Page 117
    ... regional financial services holding company with a geographic concentration of its on-balance-sheet 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...

  • Page 118
    ... Corporation's portfolio of commercial real estate loans, which includes real estate construction and commercial mortgage loans, was as follows. (in millions) December 31 2015 2014 Real estate construction loans: Commercial Real Estate business line (a) Other business lines (b) Total real estate...

  • Page 119
    ...credit risk are included in the determination of fair value. Market risk is the potential loss that may result from movements in interest rates, foreign currency exchange rates or energy commodity prices that cause an unfavorable change in the value of a financial instrument. The Corporation manages...

  • Page 120
    ... degree of credit risk and liquidity risk than exchange-traded contracts, which have standardized 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...

  • Page 121
    ..., 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 122
    .... For customer-initiated foreign exchange contracts where offsetting positions have not been taken, the Corporation manages the remaining inherent market risk through individual foreign currency position limits and aggregate value-at-risk limits. These limits are established annually and reviewed...

  • Page 123
    ...Location of Gain 2015 2014 Other noninterest income $ Other noninterest income Foreign exchange income $ 16 2 37 55 $ $ 20 2 38 60 Credit-Related Financial Instruments The Corporation issues off-balance sheet financial instruments in connection with commercial and consumer lending activities...

  • Page 124
    ...related loan participation agreement for such borrowers. The Corporation manages its credit risk on the credit risk participation agreements by monitoring the creditworthiness of the borrowers, which is based on the normal credit review process had it entered into the derivative instruments directly...

  • Page 125
    ...All foreign office time deposits of $32 million and $135 million at December 31, 2015 and 2014, 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 126
    ...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 (dollar amounts in millions) December 31, 2015 Amount outstanding at year-end Weighted average interest rate...

  • Page 127
    ... STATEMENTS Comerica Incorporated and Subsidiaries In 2015, the Corporation early adopted accounting guidance that amended the presentation of debt issuance costs in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than as a deferred charge...

  • Page 128
    ... Change in net unrealized (losses) gains on investment securities, 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 Actuarial (loss) gain arising during the period Prior service...

  • Page 129
    ... 31, 2015 Total unrecognized share-based compensation expense Weighted-average expected recognition period (in years) $ 49 2.8 The Corporation has share-based compensation plans under which it awards shares of restricted stock and restricted stock units to executive officers, directors and...

  • Page 130
    ...00 34 6.4 A summary of the Corporation's stock option activity and related information for the year ended December 31, 2015 Weighted-Average Number of Options (in thousands) Exercise Price per Share Remaining Contractual Term (in years) Aggregate Intrinsic Value (in millions) Outstanding-January...

  • Page 131
    ... stock units and future grants of restricted stock by issuing shares of common stock out of treasury. At December 31, 2015, the Corporation held 52.5 million shares in treasury. For further information on the Corporation's share-based compensation plans, refer to Note 1. NOTE 17 - EMPLOYEE BENEFIT...

  • Page 132
    ... these plans. Defined Benefit Pension Plans Qualified 2015 Non-Qualified 2015 2014 Postretirement Benefit Plan 2015 2014 (dollar amounts in millions) 2014 Change in fair value of plan assets: Fair value of plan assets at January 1 Actual return on plan assets Employer contributions Benefits paid...

  • 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
    ... and foreign stock 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...

  • Page 135
    ... assets: TBA mortgage-backed securities Total investments at fair value December 31, 2014 Cash equivalent securities: Mutual funds Equity securities: Collective investment funds Mutual funds Common stock Fixed income securities: U.S. Treasury and other U.S. government agency securities Corporate...

  • Page 136
    ... 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 137
    ...on investment securities available-for-sale or the change in defined benefit pension and other postretirement plans adjustment included in accumulated other comprehensive loss. Refer to Note 14 for additional information on accumulated other comprehensive loss. The income tax effects of transactions...

  • Page 138
    ... origination fees and costs Other temporary differences, net Total deferred tax asset before valuation allowance Valuation allowance Total deferred tax assets Deferred tax liabilities: Lease financing transactions Defined benefit plans Net unrealized gains on investment securities available-for-sale...

  • Page 139
    ...the same time for comparable transactions with other customers and did not, in management's opinion, involve more than normal risk of collectibility or present other unfavorable features. The aggregate amount of loans attributable to persons who were related parties at December 31, 2015, totaled $79...

  • Page 140
    ...092 10.36 % 12.02 10.20 $ Legal Proceedings Comerica Bank, a wholly owned subsidiary of the Corporation, was named in November 2011 as a third-party defendant in Butte Local Development v. Masters Group v. Comerica Bank ("the case"), for lender liability. The case was tried in January 2014, in the...

  • Page 141
    ... is allocated based on loans and letters of credit, deposit balances, non-earning assets, trust assets under management, certain noninterest income items, and the nature and extent of expenses incurred by business units. Virtually all interest rate risk is assigned to Finance, as are the Corporation...

  • Page 142
    ...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 143
    ... Management Finance Other 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 loan charge-offs (recoveries) Selected average balances: Assets Loans Deposits...

  • Page 144
    ...Bank Wealth Management Finance Other 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 loan charge-offs Selected average balances: Assets Loans Deposits...

  • Page 145
    ... Texas Other Markets Finance & Other 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 loan charge-offs Selected average balances: Assets Loans Deposits...

  • Page 146
    ... COMPANY FINANCIAL STATEMENTS BALANCE SHEETS - COMERICA INCORPORATED (in millions, except share data) December 31 2015 2014 Assets Cash and due from subsidiary bank Short-term investments with subsidiary bank Other short-term investments Investment in subsidiaries, principally banks Premises...

  • Page 147
    ... by 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 Purchase and retirement of warrants Excess tax benefits from share-based compensation...

  • Page 148
    ...The results reported in this Annual Report reflect the impact of this event. Subsequent to December 31, 2015, oil and gas prices dropped significantly. The allowance for loan losses allocation for energy and energy-related loans was based upon energy prices and conditions in existence at the balance...

  • Page 149
    ... or timely detection of unauthorized acquisition, use or disposition of the Corporation's assets that could have a material effect on the consolidated financial statements. Management assessed, with participation of the Corporation's Chief Executive Officer and Chief Financial Officer, internal...

  • Page 150
    ... standards of the Public Company Accounting Oversight Board (United States), the 2015 consolidated financial statements of Comerica Incorporated and subsidiaries and our report dated February 26, 2016 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Dallas, TX February 26, 2016 F-112

  • Page 151
    ... Incorporated We have audited the accompanying consolidated balance sheets of Comerica Incorporated and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the three years...

  • Page 152
    ... FINANCIAL INFORMATION (in millions) Years Ended December 31 2015 2014 2013 2012 2011 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 153
    ... Net interest income after provision for loan losses NONINTEREST INCOME Card fees Service charges on deposit accounts Fiduciary income Commercial lending fees Letter of credit fees Bank-owned life insurance Foreign exchange income Brokerage fees Net securities (losses) gains Other noninterest income...

  • Page 154
    ... FINANCIAL INFORMATION Years Ended December 31 2015 2014 2013 2012 2011 Average Rates (Fully Taxable Equivalent Basis) Interest-bearing deposits with banks Other short-term investments Investment securities Commercial loans Real estate construction loans Commercial mortgage loans Lease financing...

  • Page 155
    ... duly authorized as of February 26, 2016. COMERICA INCORPORATED By: /s/ Ralph W. Babb, Jr. Ralph W. Babb, Jr. Chairman 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 in...

  • Page 156
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  • Page 157
    ... by reference). Form of Standard Comerica Incorporated Non-Qualified Stock Option Agreement under the Comerica Incorporated Amended and Restated 2006 Long-Term Incentive Plan (2011 version) (filed as Exhibit 10.44 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2010, and...

  • Page 158
    ...2010, 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 2) (filed as Exhibit 10.5 to Registrant's Quarterly Report on Form 10-Q for the quarter...

  • Page 159
    ...Report on Form 8-K dated April 26, 2011, and incorporated herein by reference). Form of Standard Comerica Incorporated No Sale Agreement under the Comerica Incorporated Amended and Restated Management Incentive Plan (filed as Exhibit 10.5 to Registrant's Quarterly Report on Form 10-Q for the quarter...

  • Page 160
    ...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 161
    ... applicable) Financial statements from Annual Report on Form 10-K of the Registrant for the year ended December 31, 2015, formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Changes...

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  • Page 163
    ... to its Annual Report on Form 10-K for the fiscal year ended December 31, 2015. Investor Relations on the Internet Go to investor.comerica.com to find the latest investor relations information about Comerica, including stock quotes, news releases and financial data. * Dividend yield is calculated...

  • Page 164
    Comerica Corporate Headquarters Comerica Bank Tower 1717 Main Street Dallas, Texas 75201