DALLAS, Oct. 16, 2013 /PRNewswire/ -- Comerica Incorporated (NYSE: CMA) today reported third quarter 2013 net income of $147 million, compared to $143 million for the second quarter 2013 and $117 million for the third quarter 2012. Earnings per diluted share were 78 cents for the third quarter 2013, compared to 76 cents for the second quarter 2013 and 61 cents for the third quarter 2012.

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"Fee income growth, expense control and continued solid credit quality contributed to our 28 percent year-over-year increase in earnings per share," said Ralph W. Babb Jr., chairman and chief executive officer. "Average total loans were up $497 million, or 1 percent, on a year-over-year basis, but decreased $799 million, or 2 percent, compared to the second quarter. Loan volume in the third quarter compared to the second quarter was impacted by the continued economic uncertainty and the understandable caution of our customers, as well as seasonality in auto-dealer floor plan loans and a decline in refinance volumes impacting our mortgage warehouse business.

"Average total deposits increased $2 billion, or 4 percent, year-over-year, and $417 million, or 1 percent over second quarter, to $51.9 billion. Net interest income remained relatively stable, credit quality continued to be strong, and noninterest income grew quarter over quarter, reflecting an increase in customer-driven fee income. Our capital position continued to be a source of strength to support our growth.

"We believe our footprint is well situated in Texas, California and Michigan, and that our relationship banking strategy contributes to our continued success."

Third Quarter 2013 Compared to Third Quarter 2012 

• Average total loans increased $497 million, or 1 percent, primarily reflecting an increase of $1.1 billion, or 4 percent, in commercial loans, partially offset by a decrease of $594 million, or 5 percent, in combined commercial mortgage and real estate construction loans. The increase in commercial loans was primarily driven by increases in National Dealer Services, general Middle Market and Energy, partially offset by a decrease in Corporate Banking.
• Average total deposits increased $2.0 billion, or 4 percent, primarily reflecting increases of $1.1 billion, or 4 percent, in interest-bearing deposits and $910 million, or 4 percent, in noninterest-bearing deposits.
• Net income increased by $30 million, or 25 percent, primarily as a result of improving credit quality reflected in lower provision for credit losses, higher customer-driven fees and lower noninterest expenses, partially offset by a decrease in net interest income. The decrease in net interest income was primarily due to a decrease in loan yields and a decrease in accretion on the acquired loan portfolio, partially offset by loan growth and a decrease in funding costs.

Third Quarter 2013 Compared to Second Quarter 2013

• Average total loans decreased $799 million, or 2 percent, to $44.1 billion, primarily reflecting decreases of $634 million, or 2 percent, in commercial loans and $180 million, or 2 percent, in combined commercial mortgage and real estate construction loans. The decrease in commercial loans was primarily driven by decreases in general Middle Market, National Dealer Services and Mortgage Banker Finance, partially offset by an increase in Technology and Life Sciences. The declines generally reflected subdued demand due to economic uncertainty, a seasonal decline in auto dealer floor plan loans and a decrease in mortgage refinancing activity. Period-end total loans decreased $1.3 billion to $44.2 billion, primarily reflecting a $1.3 billion decrease in commercial loans. The decrease in commercial loans was primarily driven by decreases in Mortgage Banker Finance and National Dealer Services.
• Investment securities available-for-sale decreased $413 million, or 4 percent, to $9.4 billion on an average basis and decreased $143 million, or 1 percent, to $9.5 billion on period-end basis as a result of a full quarter impact of the decline in the fair value of the portfolio due to the rise in long-term rates and a slowdown in the pace of purchases to replace repayments.
• Average total deposits increased $417 million, or 1 percent, to $51.9 billion, reflecting increases in most lines of business. Period-end deposits increased $1.7 billion, primarily reflecting an increase of $2.0 billion in noninterest-bearing deposits.
• Net interest income remained relatively stable at $412 million in the third quarter 2013, compared to $414 million in the second quarter 2013, as the benefit from one additional day in the third quarter and improved yields in the securities portfolio was more than offset by the impact of a decline in loan balances and lower loan yields.
• The provision for credit losses decreased $5 million to $8 million in the third quarter 2013, compared to $13 million in the second quarter 2013, reflecting continued strong credit quality and decreases in loan balances.
• Noninterest income increased $6 million to $214 million in the third quarter 2013 primarily reflecting an increase in customer-driven income of $4 million.
• Noninterest expenses increased $1 million to $417 million in the third quarter 2013, primarily reflecting a $10 million increase in salaries and employee benefits expense, partially offset by a $6 million decrease in litigation-related expenses and a $4 million decrease in write-downs on other foreclosed assets.
• Comerica repurchased 1.7 million shares of common stock ($72 million) in the third quarter 2013 under the share repurchase program. Combined with dividends, 70 percent of net income was returned to shareholders in the third quarter 2013.
• Capital remained solid at September 30, 2013, as evidenced by an estimated Tier 1 common capital ratio of 10.74 percent and a tangible common equity ratio of 9.87 percent.

 

• Net interest income of $412 million in the third quarter 2013 decreased $2 million compared to the second quarter 2013.
  • Interest on loans decreased by $7 million, primarily reflecting a decrease in loan volumes, including volume shifts in business mix ($6 million); lower loan yields due to a decline in LIBOR ($1 million); and other loan portfolio dynamics, reflecting positive credit migration and other shifts in portfolio mix ($5 million); partially offset by one additional day in the third quarter ($4 million) and an increase in the accretion of the purchase discount on the acquired loan portfolio ($1 million).
  • Interest on mortgage-backed investment securities increased net interest income by $2 million, primarily as a result of improvement in yields due to slowing prepayment speeds ($4 million), partially offset by a decrease in average balances ($2 million).
  • Interest on other short-term investments increased net interest income by $1 million as a result of an increase in balances deposited with the Federal Reserve Bank.
  • A decrease in funding costs increased net interest income by $2 million, primarily reflecting lower deposit pricing and a shift in the deposit mix, as well as a lower interest expense as a result of a full-quarter impact from the maturity of debt in the second quarter 2013.
• The net interest margin of 2.79 percent decreased 4 basis points compared to the second quarter 2013. The decrease in net interest margin was primarily due to an increase in excess liquidity (-5 basis points) and lower loan yields (-3 basis points), partially offset by the impact of yield improvements on mortgage-backed securities (+3 basis points) and lower funding costs (+1 basis point).
• Average earning assets remained stable at $58.9 billion in the third quarter 2013, compared to the second quarter 2013, as an increase of $1.2 billion in excess liquidity offset decreases of $799 million in average loans and $413 million in average investment securities available-for-sale.

Noninterest Income

Noninterest income increased $6 million to $214 million for the third quarter 2013, compared to $208 million for the second quarter 2013. Customer-driven fee income increased $4 million and noncustomer-driven income increased $2 million. The increase in customer-driven fee income was primarily due to an increase in commercial lending fees of $6 million. The increase in noncustomer-driven income was primarily due to a $5 million increase in warrant income, partially offset by a decrease in income recognized from our third-party credit card provider reflecting a change in the timing of the recognition of incentives from annually to quarterly in the third quarter.

Noninterest Expenses

Noninterest expenses of $417 million in the third quarter 2013 remained relatively stable compared to the second quarter 2013, as a $10 million increase in salaries and employee benefits expense was largely offset by a $6 million decrease in litigation-related expenses as well as a $4 million decrease in write-downs on other foreclosed assets. The increase in salaries and employee benefits reflected one additional day in the third quarter 2013 and year-to-date adjustments to incentive compensation based on favorable performance relative to peers.

Credit Quality

"Credit quality continued to be strong resulting in an $8 million provision," said Babb. "Net charge-offs increased slightly from their low level, while nonperforming assets and watch list loans declined."

• Nonaccrual loans decreased $12 million, to $437 million at September 30, 2013, compared to $449 million at June 30, 2013.
• Internal watch list loans decreased $210 million, to $2.7 billion at September 30, 2013, compared to $2.9 billion at June 30, 2013.
• During the third quarter 2013, $50 million of borrower relationships over $2 million were transferred to nonaccrual status, an increase of $13 million from the second quarter 2013.

Balance Sheet and Capital Management

Total assets and common shareholders' equity were $64.7 billion and $7.0 billion, respectively, at September 30, 2013, compared to $62.9 billion and $6.9 billion, respectively, at June 30, 2013. The $1.8 billion increase in total assets primarily reflected an increase of $2.9 billion in excess liquidity, partially offset by a decrease in loans of $1.3 billion.

There were approximately 184 million common shares outstanding at September 30, 2013. Diluted weighted average shares of 187 million at September 30, 2013 were unchanged compared to June 30, 2013, as the impact of the repurchase of $72 million of common stock (1.7 million shares) under the share repurchase program during the third quarter 2013 was offset by the impact of an increase in share dilution from options and warrants due to an increase in Comerica's stock price. Combined with the dividend of $0.17 per share, share repurchases under the share repurchase program and dividends returned 70 percent of third quarter 2013 net income to shareholders.

Comerica's tangible common equity ratio was 9.87 percent at September 30, 2013, a decrease of 17 basis points from June 30, 2013. The estimated Tier 1 common capital ratio increased 31 basis points, to 10.74 percent at September 30, 2013, from June 30, 2013. The estimated Tier 1 common ratio under fully phased-in Basel III capital rules and excluding most elements of AOCI was 10.4 percent percent at September 30, 2013.

Full-Year and Fourth Quarter 2013 Outlook

Management expectations for full-year 2013 compared to full-year 2012 have not changed from the previously provided outlook, with the exception of customer-driven fees, which are expected to be modestly higher based on strong third quarter results.

For fourth quarter 2013, management expects the following, assuming a continuation of the current slow growing economic environment:

• Average loans for the fourth quarter 2013 are expected to be stable compared to third quarter 2013, reflecting auto-dealer floor plan loans rebounding from seasonal low along with continued decline in mortgage warehouse lending and economic uncertainty impacting demand.
• Net interest income is expected to be lower for the fourth quarter 2013, compared to third quarter 2013, due to the continued impact from the low rate environment and a decrease in purchase accounting accretion.
• The provision for credit losses for the fourth quarter 2013 is expected to remain low, similar to the levels in previous 2013 quarters.
• Customer-driven noninterest income for the fourth quarter 2013 is expected to be relatively stable compared to third quarter 2013, while noncustomer-driven noninterest income is expected to be lower.
• Fourth quarter 2013 noninterest expense is expected to be slightly lower compared to third quarter 2013, reflecting continued tight expense control.

Business Segments

Comerica's operations are strategically aligned into three major business segments: the Business Bank, the Retail Bank and Wealth Management. The Finance Division is also reported as a segment. The financial results below are based on the internal business unit structure of the Corporation and methodologies in effect at September 30, 2013 and are presented on a fully taxable equivalent (FTE) basis. The accompanying narrative addresses third quarter 2013 results compared to second quarter 2013.

The following table presents net income (loss) by business segment.

• Average loans decreased $777 million, primarily reflecting decreases in general Middle Market, National Dealer Services and Mortgage Banker Finance, partially offset by an increase in Technology and Life Sciences.
• Average deposits increased $297 million, primarily reflecting increases in general Middle Market and Commercial Real Estate.
• Net interest income decreased $4 million, primarily due to a decrease in average loans and lower loan yields, partially offset by the benefit provided by one additional day in the quarter and higher purchase accounting accretion.
• The provision for credit losses decreased $11 million, primarily reflecting improved credit quality and decreases in loan balances.
• Noninterest income increased $9 million, primarily due to an increase in commercial lending fees and income from principal investments and warrants.
• Noninterest expenses increased $6 million, primarily due to an increase in salaries expense and corporate overhead expenses, partially offset by a decrease in write-downs on other foreclosed assets.

• Average loans increased $14 million, primarily due to an increase in Small Business, partially offset by a decrease in Retail Banking.
• Average deposits increased $16 million, primarily due to an increase in Small Business, largely offset by a decrease in Retail Banking.
• Net interest income decreased $3 million, primarily due to decreases in funds transfer pricing (FTP) credits and purchase accounting accretion, partially offset by the benefit provided by one additional day in the quarter.
• The provision for credit losses increased $5 million, primarily due to an increase in specific reserves for individually evaluated loans.
• Noninterest income remained relatively stable, primarily due to a decrease in incentive payments received from Comerica's third-party credit card provider, partially offset by a decrease in net securities losses.

• Average loans decreased $36 million, primarily due to a decrease in Private Banking.
• Average deposits increased $81 million, primarily due to an increase in Private Banking.
• The provision for credit losses increased $4 million, primarily due to an increase in specific reserves pertaining to a small number of individually evaluated loans.
• Noninterest income decreased $4 million, primarily reflecting decreases in fiduciary income, investment banking fees and other small decreases in several categories.
• Noninterest expenses increased $4 million, primarily due to an increase in salaries expense and corporate overhead expenses.

Geographic Market Segments

Comerica also provides market segment results for 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. Other Markets includes Florida, Arizona, the International Finance division and businesses that have a significant presence outside of the three primary geographic markets. The tables below present the geographic market results based on the methodologies in effect at September 30, 2013 and are presented on a fully taxable equivalent (FTE) basis.

The following table presents net income (loss) by market segment.

• Average loans decreased $322 million and $237 million in Michigan and Texas, respectively, and increased $90 million in California. Decreases in Michigan and Texas primarily reflected decreases in Middle Market loans. The increase in California was primarily due to increases in Commercial Real Estate and Private Banking.
• Average deposits increased $306 million in Michigan primarily due to an increase in general Middle Market, partially offset by a decrease in Retail Banking. In California, average deposits decreased $111 million primarily reflecting a decrease in Corporate Banking, partially offset by an increase in Commercial Real Estate. The increase in Texas of $104 million was primarily due to an increase in Corporate Banking, partially offset by a decrease in general Middle Market.
• Credit quality improved in all geographic markets resulting in decreases to the provision for credit losses in Michigan and California. The increase in the provision for credit losses in Texas was primarily due to an increase in specific reserves pertaining to a small number of individually evaluated loans.

 

 

Conference Call and Webcast

Comerica will host a conference call to review third quarter 2013 financial results at 7 a.m. CT Wednesday, October 16, 2013. Interested parties may access the conference call by calling (800) 309-2262 or (706) 679-5261 (event ID No. 60015337). The call and supplemental financial information can also be accessed via Comerica's "Investor Relations" page at www.comerica.com. A replay of the Webcast can be accessed via Comerica's "Investor Relations" page at www.comerica.com.

Comerica Incorporated is a financial services company headquartered in Dallas, Texas, and strategically aligned by three major business segments: The Business Bank, The Retail Bank and 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.

This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding Comerica's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as a reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Forward-looking Statements

Any statements in this news release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as "anticipates," "believes," "contemplates," "feels," "expects," "estimates," "seeks," "strives," "plans," "intends," "outlook," "forecast," "position," "target," "mission," "assume," "achievable," "potential," "strategy," "goal," "aspiration," "opportunity," "initiative," "outcome," "continue," "remain," "maintain," "on course," "trend," "objective," "looks forward" and variations of such words and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "might," "can," "may" or similar expressions, as they relate to Comerica or its management, are intended to identify forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of Comerica's management based on information known to Comerica's management as of the date of this news release and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of Comerica's management for future or past operations, products or services, and forecasts of Comerica's revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries, estimates of credit trends and global stability. Such statements reflect the view of Comerica's management as of this date with respect to future events and are subject to risks and uncertainties. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, Comerica's actual results could differ materially from those discussed. Factors that could cause or contribute to such differences are changes in general economic, political or industry conditions; changes in monetary and fiscal policies, including the interest rate policies of the Federal Reserve Board; volatility and disruptions in global capital and credit markets; changes in Comerica's credit rating; the interdependence of financial service companies; changes in regulation or oversight; unfavorable developments concerning credit quality; any future acquisitions or divestitures; the effects of more stringent capital or liquidity requirements; declines or other changes in the businesses or industries of Comerica's customers; the implementation of Comerica's strategies and business models; Comerica's ability to utilize technology to efficiently and effectively develop, market and deliver new products and services; operational difficulties, failure of technology infrastructure or information security incidents; changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing; competitive product and pricing pressures among financial institutions within Comerica's markets; changes in customer behavior; management's ability to maintain and expand customer relationships; management's ability to retain key officers and employees; the impact of legal and regulatory proceedings or determinations; the effectiveness of methods of reducing risk exposures; the effects of terrorist activities and other hostilities; the effects of catastrophic events including, but not limited to, hurricanes, tornadoes, earthquakes, fires, droughts and floods; changes in accounting standards and the critical nature of Comerica's accounting policies. Comerica cautions that the foregoing list of factors is not exclusive. For discussion of factors that may cause actual results to differ from expectations, please refer to our filings with the Securities and Exchange Commission. In particular, please refer to "Item 1A. Risk Factors" beginning on page 13 of Comerica's Annual Report on Form 10-K for the year ended December 31, 2012 and on page 68 of the Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013. Forward-looking statements speak only as of the date they are made. Comerica does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. For any forward-looking statements made in this news release or in any documents, Comerica claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Tier 1 common capital ratio removes preferred stock and qualifying trust preferred securities from Tier 1 capital as defined by and calculated in conformity with bank regulations. The Basel III Tier 1 common capital ratio further adjusts Tier 1 common capital and risk-weighted assets to account for the final rule approved by U.S. banking regulators in July 2013 for the U.S. adoption of the Basel III regulatory capital framework. The final Basel III capital rules are effective January 1, 2015 for banking organizations subject to the standardized approach. The tangible common equity ratio removes preferred stock and the effect of intangible assets from capital and the effect of intangible assets from total assets. Tangible common equity per share of common stock removes the effect of intangible assets from common shareholders equity per share of common stock. Comerica believes these measurements are meaningful measures of capital adequacy used by investors, regulators, management and others to evaluate the adequacy of common equity and to compare against other companies in the industry.

 

 

SOURCE Comerica Incorporated