"Our third quarter results were very strong. Earnings per share grew to an all-time high of $2.60, increasing 35% relative to the second quarter, driven by record revenue,” said Curtis C. Farmer, Comerica Chairman and Chief Executive Officer. “We produced significant operating leverage and further enhanced our efficiency ratio while absorbing performance-based compensation and modernization expenses. Loan growth was broad-based with balances increasing $1.1 billion, or over 2%. Deposit levels have trended downward as customers use funds in their businesses and we strategically manage our deposit costs. Our overall results reflect not only the benefit of rising interest rates, but also strategic investments to drive organic growth. We are better positioned to achieve sustainable success in any economic environment."

(a)Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding a derivative contract tied to the conversion rate of Visa Class B shares and changes in the value of shares obtained through monetization of warrants.

(b)September 30, 2022 ratios are estimated.

Loans increased $1.1 billion to $51.1 billion.

•Increases of $356 million in Commercial Real Estate, $220 million in National Dealer Services, $209 million in Environmental Services, $141 million in Wealth Management and $116 million in Corporate Banking, partially offset by a decrease of $161 million in Equity Fund Services.

•Average yield on loans (including swaps) increased 100 basis points to 4.64%, primarily driven by higher short-term rates.

Securities increased $1.5 billion to $20.5 billion.

•Increase in mortgage-backed securities reflected the full quarter impact of purchases made in the second quarter.

•Period-end unrealized losses on securities, included in accumulated other comprehensive loss, increased by $1.2 billion to $3.1 billion.

•Average yield on securities increased 16 basis points to 2.08% due to higher yields on purchases and reinvestments.

Deposits decreased $3.6 billion to $74.0 billion.

•Interest-bearing and noninterest-bearing deposits decreased $2.5 billion and $1.1 billion, respectively, due to strategic deposit management as well as customers utilizing balances to fund business activities.

•The average cost of interest-bearing deposits increased 15 basis points to 20 basis points, reflecting relationship-focused pricing.

Net interest income increased $146 million to $707 million.

•Driven by the benefit of higher short-term rates as well as growth in loan and securities balances.

•Net interest margin increased 80 basis points to 3.50%, driven by higher rates and a decrease in lower-yielding deposits held with the Federal Reserve Bank.

Provision for credit losses increased $18 million to $28 million.

•The allowance for credit losses increased $15 million to $624 million at September 30, 2022, reflecting loan growth, continued strong credit metrics and an uncertain economic environment. As a percentage of total loans, the allowance for credit losses was 1.21%, an increase of 3 basis points.

Noninterest income increased $10 million to $278 million.

•Increases of $11 million in deferred compensation asset returns (offset in noninterest expenses), $6 million in derivative income (mostly due to energy) and $2 million in brokerage fees, partially offset by decreases of $4 million in fiduciary income and $2 million in card fees. Fiduciary income was impacted by a seasonal decline in tax fees and reduced market performance, partially offset by higher money market rates.

Noninterest expenses increased $20 million to $502 million.

•Increases of $13 million in salaries and benefits expense, $4 million in occupancy expense and $2 million in outside processing fee expense. Other noninterest expenses included an increase of $5 million in impairment and loss on sale of assets as well as a $4 million favorable state tax ruling recorded in the second quarter, partially offset by decreases of $4 million each in litigation-related expenses and consulting fees.

◦Salaries and benefits expense included increases of $11 million in deferred compensation expense (offset in other noninterest income) and $3 million each in performance-based compensation and staff insurance, partially offset by a $2 million seasonal decrease in 401K expense.

◦For third quarter 2022, expenses for certain modernization initiatives related to transformation of the retail banking delivery model, alignment of corporate facilities and optimization of technology platforms totaled $7 million, comprised of transitional real estate costs (reported in occupancy expense), asset impairments and consulting fees (reported in other noninterest expenses) and contract labor (reported in salaries and benefits expense).

Common equity Tier 1 capital ratio of 9.92% and a Tier 1 capital ratio of 10.44%.

•Declared dividends of $89 million on common stock and $6 million on preferred stock.

•Issued $500 million of bank subordinated debt, which increases Tier 2 capital to support loan growth.

Loans increased $3.0 billion, or 6%.

•Excluding the impact of a $1.6 billion decline in PPP loans, loans increased $4.6 billion, or 10%.

•Increases in Corporate Banking, general Middle Market, National Dealer Services, Environmental Services and Equity Fund Services, partially offset by decreases in Mortgage Banker Finance and Business Banking.

•Average yield on loans increased 125 basis points, primarily driven by the increase in short-term rates and higher loan balances, partially offset by the net impact of PPP loans.

Securities increased $4.6 billion, or 29%.

•Reflects investment of a portion of excess liquidity into mortgage-backed securities, partly offset by maturities of Treasury securities.

•Average yield on securities increased 32 basis points from higher yields on reinvestments.

Deposits decreased $5.1 billion, or 6%.

•Interest-bearing and noninterest-bearing deposits decreased $5.0 billion and $164 million, respectively, due to strategic deposit management and customers utilizing balances to fund business activities.

•The average cost of interest-bearing deposits increased 14 basis points, reflecting relationship-focused pricing.

Net interest income increased $232 million.

•Higher short-term rates and volume of earning assets, partially offset by the net impact of PPP loans.

Provision for credit losses increased to an expense of $28 million from a benefit of $42 million.

•The allowance for credit losses decreased $15 million from higher pandemic-driven balances, primarily due to continued strong credit quality and sustained improvements in the economic forecast. As a percentage of total loans, the allowance for credit losses decreased 12 basis points.

Noninterest income decreased $2 million.

•Increase in derivative income was more than offset by decreases in warrant-related income (included in other noninterest income), card fees (higher activity in 2021 from stimulus payments) and deferred compensation asset returns (offset in noninterest expenses).

Noninterest expenses increased $37 million.

•Increases in salaries and benefits expense, FDIC insurance expense, occupancy expense, operational losses and loss on sale of assets, partially offset by decreases in consulting fees and non-salary pension expense.

Net interest income increased $146 million, and net interest margin increased 80 basis points compared to second quarter 2022. Amounts shown in parenthesis represent impact to net interest income and net interest margin, respectively.

•Interest income on loans increased $143 million and improved net interest margin by 65 basis points, driven by higher short-term rates (+$128 million, +64 basis points), higher loan balances (+$13 million, +2 basis points) and one additional day in the quarter (+$4 million), partially offset by other portfolio dynamics (-$2 million, -1 basis point).

•Interest income on investment securities increased $19 million and improved net interest margin by 1 basis point, due to portfolio growth of lower-yielding securities (+$15 million, -1 basis point) and higher rates (+$4 million, +2 basis points).

•Interest income on short-term investments increased $11 million and improved net interest margin by 26 basis points, reflecting higher short-term rates (+$43 million, +21 basis points), offset by a decrease of $5.4 billion in lower-yielding deposits with the Federal Reserve (-$32 million, +5 basis points).

•Interest expense on deposits increased $12 million and reduced net interest margin by 5 basis points, due to higher rates (-$13 million, -6 basis points), partly offset by lower average deposit balances (+$1 million, +1 basis point).

•Interest expense on debt increased $15 million and reduced net interest margin by 7 basis points, driven by higher rates (-$11 million, -5 basis points) and an increase in average debt from a third quarter issuance (-$4 million,-2 basis points).

The net impact of higher rates to the third quarter 2022 net interest income was an increase of $151 million and 76 basis points to the net interest margin.

"Credit quality remained excellent in the third quarter with net charge-offs of only 10 basis points,” said Farmer. “Customers' financial positions remained strong overall and the percentage of criticized and nonaccrual loans are well below our historical averages. With heightened economic uncertainty, our allowance for credit losses increased modestly to 1.21%. With our proven approach to credit management, coupled with our reserve that covers nonaccrual loans 2.4 times, we believe we are well positioned to navigate economic stress."

•The allowance for credit losses increased $15 million to $624 million at September 30, 2022, or 1.21% of total loans, reflecting loan growth, strong credit metrics and an uncertain economic environment.

•Criticized loans increased $92 million to $1.6 billion, or 3% of total loans. Criticized loans are generally consistent with the Special Mention, Substandard and Doubtful categories defined by regulatory authorities.

◦The increase in criticized loans was primarily driven by Technology and Life Sciences and Environmental Services, partially offset by decreases in Business Banking and Corporate Banking.

•Nonperforming assets decreased $4 million to $262 million, or 0.51% of total loans and foreclosed property, compared to 0.52% in second quarter 2022.

◦The decrease was primarily driven by Business Banking, Technology and Life Sciences and Entertainment, partially offset by increases in Residential Mortgage and Corporate Banking.

•Net charge-offs totaled $13 million, compared to no net charge-offs in second quarter 2022.

Comerica's operations are strategically aligned into three major business segments: the Commercial Bank, the Retail Bank and Wealth Management. The Finance Division is also reported as a segment. For a summary of business segment quarterly results, see the Business Segment Financial Results tables included later in this report. From time to time, Comerica may make reclassifications among the segments to reflect management's current view of the segments, and methodologies may be modified as the management accounting system is enhanced and changes occur in the organizational structure and/or product lines. The financial results provided are based on the internal business unit structures of Comerica and methodologies in effect at September 30, 2022. A discussion of business segment year-to-date results will be included in Comerica's Third Quarter 2022 Form 10-Q.

Comerica will host a conference call to review third quarter 2022 financial results at 7 a.m. CT Wednesday, October 19, 2022. Interested parties may access the conference call by calling (877) 336-4440 or (409) 207-6984 (Event ID No. 4619582). The call and supplemental financial information, as well as a replay of the Webcast, can also 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 Commercial 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.

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 track,” “trend,” “objective,” “looks forward,” “projects,” “models” 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 as well as 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 include credit risks (unfavorable developments concerning credit quality; declines or other changes in the businesses or industries of Comerica's customers; and changes in customer behavior); market risks (changes in monetary and fiscal policies; fluctuations in interest rates and their impact on deposit pricing; and transitions away from LIBOR towards new interest rate benchmarks); liquidity risks (Comerica's ability to maintain adequate sources of funding and liquidity; reductions in Comerica's credit rating; and the interdependence of financial service companies); technology risks (cybersecurity risks and heightened legislative and regulatory focus on cybersecurity and data privacy); operational risks (operational, systems or infrastructure failures; reliance on other companies to provide certain key components of business infrastructure; the impact of legal and regulatory proceedings or determinations; losses due to fraud; and controls and procedures failures); compliance risks (changes in regulation or oversight, or changes in Comerica’s status with respect to existing regulations or oversight; the effects of stringent capital requirements; and the impacts of future legislative, administrative or judicial changes to tax regulations); strategic risks (damage to Comerica's reputation; Comerica's ability to utilize technology to efficiently and effectively develop, market and deliver new products and services; competitive product and pricing pressures among financial institutions within Comerica's markets; the implementation of Comerica's strategies and business initiatives; management's ability to maintain and expand customer relationships; management's ability to retain key officers and employees; and any future strategic acquisitions or divestitures); and other general risks (impacts from the COVID-19 global pandemic; changes in general economic, political or industry conditions; the effectiveness of methods of reducing risk exposures; the effects of catastrophic events; changes in accounting standards and the critical nature of Comerica's accounting policies; and the volatility of Comerica’s stock price). Comerica cautions that the foregoing list of factors is not all-inclusive. 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, 2021. 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.

ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES (unaudited)
Comerica Incorporated and Subsidiaries
			2022															2021
(in millions)			3rd Qtr						2nd Qtr									1st Qtr									4th Qtr						3rd Qtr
Balance at beginning of period:
Allowance for loan losses			$	563					$	554								$	588								$	609					$	652
Allowance for credit losses on lending-related commitments			46						45									30									30						31
Allowance for credit losses			609						599									618									639						683
Loan charge-offs:
Commercial			25						13									15									14						24
Real estate construction			—						—									1									—						—
Commercial mortgage			—						—									1									2						—
International			—						—									—									3						2
Consumer			1						—									1									1						—
Total loan charge-offs			26						13									18									20						26
Recoveries on loans previously charged-off:
Commercial			12						12									8									23						22
Commercial mortgage			—						—									1									—						—
Residential mortgage			1						—									—									1						1
Consumer			—						1									1									—						1
Total recoveries			13						13									10									24						24
Net loan charge-offs (recoveries)			13						—									8									(4)						2
Provision for credit losses:
Provision for loan losses			26						9									(26)									(25)						(41)
Provision for credit losses on lending-related commitments			2						1									15									—						(1)
Provision for credit losses			28						10									(11)									(25)						(42)
Balance at end of period:
Allowance for loan losses			576						563									554									588						609
Allowance for credit losses on lending-related commitments			48						46									45									30						30
Allowance for credit losses			$	624					$	609								$	599								$	618					$	639
Allowance for credit losses as a percentage of total loans			1.21		%				1.18		%							1.21		%							1.26		%				1.33		%
Allowance for credit losses as a percentage of total loans excluding PPP loans			1.21						1.19									1.22									1.27						1.35
Net loan charge-offs (recoveries) as a percentage of average total loans			0.10						—									0.06									(0.03)						0.01

    

(a)Based on an analysis of nonaccrual loans with book balances greater than $2 million.

(b)Includes net changes related to nonaccrual loans with balances less than or equal to $2 million, payments on nonaccrual loans with book balances greater than $2 million and transfers of nonaccrual loans to foreclosed property.

(a)Interest income on commercial loans included $45 million and $72 million of business loan swap income for the nine months ended September 30, 2022 and 2021, respectively.

(b)Included PPP loans with average balances of $183 million and $2.9 billion, interest income of $10 million and $96 million and average yields of 7.53% and 4.43% for the nine months ended September 30, 2022 and 2021, respectively.

(c)The nine months ended September 30, 2021 included residual value adjustments totaling $20 million, or a 6 basis point impact to average loan yield.

(d)Average balances included $(1.4) billion and $109 million of unrealized (losses) gains for the nine months ended September 30, 2022 and 2021, respectively; yields calculated gross of these unrealized gains and losses.

(e)Average balances included $(103) million and $37 million of unrealized (losses) gains for the nine months ended September 30, 2022 and 2021, respectively; yields calculated gross of these unrealized gains and losses.

(f)Average balances excluded $1.1 billion and $313 million of collateral posted and netted against derivative liability positions for the nine months ended September 30, 2022 and 2021, yields calculated gross of derivative netting amounts.

(g)Average balances excluded $163 million and $153 million of collateral received and netted against derivative asset positions for the nine months ended September 30, 2022 and 2021, rates calculated gross of derivative netting amounts.

(a)Interest income on commercial loans included $(2) million, $25 million and $24 million of business loan swap (loss) income for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

(b)Included PPP loans with average balances of $67 million, $149 million and $1.7 billion, interest income of $1 million, $4 million and $34 million and average yields of 7.71%, 9.63% and 8.02% for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

(c)Average balances included $(2.0) billion, $(1.7) billion and $78 million of unrealized (losses) gains for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively; yields calculated gross of these unrealized gains and losses.

(d)Average balances included $(134) million, $(118) million and $23 million of unrealized (losses) gains for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively; yields calculated gross of these unrealized gains and losses.

(e)Average balances excluded $1.1 billion, $1.4 billion and $531 million of collateral posted and netted against derivative liability positions for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively; yields calculated gross of derivative netting amounts.

(f)Average balances excluded $189 million, $131 million and $142 million of collateral received and netted against derivative asset positions for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively; rates calculated gross of derivative netting amounts.