“Today we reported third quarter earnings per share of $1.84,” said Curtis C. Farmer, Comerica Chairman and Chief Executive Officer. “We are very proud of the success this quarter in adding new deposits and winning back customer balances. Through strategic balance sheet management, loans moderated and customer deposits grew, allowing us to absorb $6 billion in wholesale funding maturities. Excess cash and significant liquidity capacity provide flexibility as we position ourselves to further prioritize high-return growth in the future. Credit quality remained very strong, and our increased coverage ratio reflected continued, expected normalization. We remain committed to running an efficient organization as we navigate expense pressures. Capital generation from earnings and loan optimization increased our CET1 ratio to 10.79, above our 10% target.”

(a)Noninterest expenses as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities, 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, 2023 ratios are estimated.

Loans decreased $1.4 billion to $54.0 billion.

•Largely driven by decreases of $619 million in Mortgage Banker Finance, $563 million in Equity Fund Services and $472 million in general Middle Market, partially offset by a $505 million increase in Commercial Real Estate.

◦Declines reflect strategic actions, including the planned exit from the Mortgage Banker Finance business, which is expected to be mostly complete by year-end 2023, as well as increased selectivity in other lines of business.

•Average yield on loans (including swaps) increased 16 basis points to 6.34%, reflecting higher short-term rates.

Securities decreased $984 million to $16.9 billion, which reflected a $428 million increase in unrealized losses.

•Period-end unrealized losses on securities increased $710 million to $3.6 billion.

Deposits increased $1.6 billion to $65.9 billion.

•Interest-bearing deposits increased $3.1 billion, reflecting the full-quarter impact of $726 million related to brokered time deposits added in the second quarter, partially offset by a decrease of $1.5 billion in noninterest-bearing deposits.

◦Increases of $569 million in Corporate Banking and $494 million in general Middle Market, partially offset by a decrease of $226 million in Energy.

◦On a period-end basis, deposits increased $1.1 billion, reflecting increases of $862 million in general Middle Market, $642 million in Corporate Banking and $256 million in Retail Banking, partially offset by a $231 million decline in Mortgage Banker Finance related to the above-described planned exit of this business.

•Period-end uninsured deposits as calculated per regulatory guidance totaled $31.5 billion, or 46.9% of total deposits; excluding affiliate deposits, uninsured deposits totaled $27.4 billion, or 40.8% of total deposits.

•The average cost of interest-bearing deposits increased 53 basis points to 290 basis points, mostly reflecting strategic growth in interest-bearing deposits as well as relationship-focused pricing in a higher-rate environment.

Short-term borrowings decreased $1.7 billion to $8.8 billion, due to a reduction in FHLB advances, while medium- and long-term debt decreased $690 million to $6.4 billion, reflecting $850 million in senior notes that matured in the third quarter.

•Total liquidity capacity at period-end totaled $45.1 billion, including cash and available liquidity through the FHLB, the FRB discount window and Bank Term Funding Program.

Net interest income decreased $20 million to $601 million.

•Reduced borrowing balances, higher deposits held at the Federal Reserve Bank and the benefit from one additional day in the quarter were more than offset by increased interest-bearing deposits, a decline in loan balances and the net decrease from higher short-term rates.

•Net interest margin decreased 9 basis points to 2.84%, primarily reflecting higher-cost funding sources.

Provision for credit losses decreased $19 million to $14 million.

•The allowance for credit losses increased $8 million to $736 million at September 30, 2023, reflecting the continuation of an uncertain economic outlook and credit migration, as well as changes in portfolio composition and lower loan volumes. As a percentage of total loans, the allowance for credit losses was 1.38%, an increase of 7 basis points.

Noninterest income decreased $8 million to $295 million.

•Decreases of $7 million in deferred compensation asset returns (offset in noninterest expenses), $4 million in capital markets income (related to reduced derivative income), $3 million in fiduciary income and smaller decreases in other categories, which were partially offset by a $10 million increase in risk management hedging income.

Noninterest expenses increased $20 million to $555 million.

•Increases of $9 million in salaries and benefits expense, $7 million in outside processing fee expense and $3 million each in occupancy and FDIC insurance expense were partially offset by a $5 million decrease in other noninterest expenses.

◦Salaries and benefits expense included increases of $8 million in temporary labor, $4 million in incentive compensation and $3 million in stock-based compensation, partially offset by decreases of $7 million in deferred compensation expense (offset in other noninterest income) and $3 million in severance costs.

◦The decrease in other noninterest expenses was primarily due to $21 million in gains on the sale of real estate and a $5 million decrease in legal fees, partially offset by increases of $10 million in litigation and regulatory-related expenses, $9 million in consulting expenses and $5 million in operational losses.

Common equity Tier 1 capital ratio of 10.79% and a Tier 1 capital ratio of 11.29%.

•Declared dividends of $94 million on common stock and $6 million on preferred stock.

•Tangible common equity ratio was 4.62%.

Net interest income decreased $20 million, and net interest margin decreased 9 basis points, compared to second quarter 2023. Amounts shown in parentheses represent the impacts to net interest income and net interest margin, respectively, with impacts of hedging strategy included with rate.

•Interest income on loans increased $10 million and improved net interest margin by 5 basis points, driven by higher short-term rates (+$27 million, +12 basis points) and one additional day in the quarter (+$9 million), partially offset by lower loan balances (-$26 million, -7 basis points).

•Interest income on investment securities decreased $3 million and improved net interest margin by 1 basis point, primarily due to the impact of a decline in lower-yielding securities balances.

•Interest income on short-term investments increased $22 million and improved net interest margin by 6 basis points, primarily reflecting an increase of $1.0 billion in deposits with the Federal Reserve Bank (+$14 million, +3 basis points), higher short-term rates (+$7 million, +3 basis points) and one additional day in the quarter (+$1 million).

•Interest expense on deposits increased $70 million and reduced net interest margin by 32 basis points, reflecting higher average interest-bearing deposit balances (-$36 million, -17 basis points), higher rates ($-32 million, -15 basis points) and one additional day in the quarter (-$2 million).

•Interest expense on debt decreased $21 million and improved net interest margin by 11 basis points, primarily driven by decreases of $1.7 billion in short-term FHLB advances (+$24 million, +11 basis points) and $690 million in medium- and long-term debt (+$5 million, +3 basis points), partially offset by higher rates (-$6 million, -3 basis points) and one additional day in the quarter (-$2 million).

The net impact of higher rates to third quarter 2023 net interest income was a decrease of $4 million and a reduction of 3 basis points to net interest margin.

“With only modest net charge-offs, following three consecutive quarters of net recoveries, our credit quality remained very strong,” said Farmer. “Credit migration continued in line with expectations and was more concentrated in customers or businesses with greater relative exposure to elevated rates and inflationary pressures. While the economic forecast improved slightly from the prior quarter, the economic outlook remained uncertain which, coupled with lower loan balances, contributed to an uptick in the allowance for credit losses to 1.38% of total loans. Consistent with our proven credit discipline, we continue to closely monitor our portfolio and expect further migration to remain manageable.”

•The allowance for credit losses (which totaled $736 million at September 30, 2023) increased by 7 basis points to 1.38% of total loans, reflecting the continuation of an uncertain economic outlook and credit migration, as well as changes in portfolio composition and lower loan volumes.

•Criticized loans increased $242 million to $2.3 billion, or 4.3% 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 Commercial Real Estate.

•Nonperforming assets decreased $32 million to $154 million, or 0.29% of total loans and foreclosed property, compared to 0.33% in second quarter 2023.

•Net charge-offs totaled $6 million, compared to net recoveries of $2 million in second quarter 2023.

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 press release. 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, 2023. A discussion of business segment year-to-date results will be included in Comerica’s Third Quarter 2023 Form 10-Q.

Comerica will host a conference call and live webcast to review third quarter 2023 financial results at 7 a.m. CT Friday, October 20, 2023. Interested parties may access the conference call by calling (877) 484-6065 or (201) 689-8846. 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 business segments: the Commercial Bank, the Retail Bank and Wealth Management. Comerica is one of the 25 largest U.S. commercial bank financial holding companies and focuses on building relationships and helping people and businesses be successful. Comerica provides more than 400 banking centers across the country with locations in Arizona, California, Florida, Michigan and Texas. Founded 174 years ago in Detroit, Michigan, Comerica continues to expand into new regions, including its Southeast Market, based in North Carolina, and Mountain West Market in Colorado. Comerica has offices in 17 states and services 14 of the 15 largest U.S. metropolitan areas, as well as 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 (changes in customer behavior; unfavorable developments concerning credit quality; and declines or other changes in the businesses or industries of Comerica's customers); 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 (changes in general economic, political or industry conditions; negative effects from inflation; the effectiveness of methods of reducing risk exposures; the effects of catastrophic events, including pandemics; physical or transition risks related to climate change; changes in accounting standards; 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, 2022, as updated by "Item 1A. Risk Factors" beginning on page 63 of Comerica's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023. 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
			2023												2022
(in millions)			3rd Qtr						2nd Qtr			1st Qtr						4th Qtr									3rd Qtr
Balance at beginning of period:
Allowance for loan losses			$	684					$	641		$	610					$	576								$	563
Allowance for credit losses on lending-related commitments			44						52			51						48									46
Allowance for credit losses			728						693			661						624									609
Loan charge-offs:
Commercial			9						9			11						10									25
Commercial mortgage			3						—			—						—									—
International			1						1			—						—									—
Consumer			1						1			1						1									1
Total loan charge-offs			14						11			12						11									26
Recoveries on loans previously charged-off:
Commercial			5						12			13						13									12
Real estate construction			—						—			—						1									—
Commercial mortgage			2						1			—						—									—
Residential mortgage			—						—			—						—									1
Consumer			1						—			1						1									—
Total recoveries			8						13			14						15									13
Net loan charge-offs (recoveries)			6						(2)			(2)						(4)									13
Provision for credit losses:
Provision for loan losses			16						41			29						30									26
Provision for credit losses on lending-related commitments			(2)						(8)			1						3									2
Provision for credit losses			14						33			30						33									28
Balance at end of period:
Allowance for loan losses			694						684			641						610									576
Allowance for credit losses on lending-related commitments			42						44			52						51									48
Allowance for credit losses			$	736					$	728		$	693					$	661								$	624
Allowance for credit losses as a percentage of total loans			1.38		%				1.31		%	1.26		%				1.24		%							1.21		%
Net loan charge-offs (recoveries) as a percentage of average total loans			0.05						(0.01)			(0.01)						(0.03)									0.10

    

(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 $(432) million and $45 million of business loan swap (expense) income for the nine months ended September 30, 2023 and 2022, respectively.

(b)Average balances included $2.8 billion and $1.4 billion of unrealized losses for the nine months ended September 30, 2023 and 2022, respectively; yields calculated gross of these unrealized gains and losses.

(c)Average balances included $122 million and $103 million of unrealized losses for the nine months ended September 30, 2023 and 2022, respectively; yields calculated gross of these unrealized gains and losses.

(d)Average balances included $2 million and excluded $996 million of collateral posted and netted against derivative liability positions for the nine months ended September 30, 2023 and 2022, respectively; yields calculated gross of derivative netting amounts.

(e)Average balances excluded $213 million and $110 million of collateral received and netted against derivative asset positions for the nine months ended September 30, 2023 and 2022, respectively; rates calculated gross of derivative netting amounts.

(a)Interest income on commercial loans included $163 million, $150 million and $2 million of business loan swap expense for the three months ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively.

(b)Average balances included $3.1 billion, $2.7 billion and $2.0 billion of unrealized losses for the three months ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively; yields calculated gross of these unrealized losses.

(c)Average balances included $115 million, $117 million and $134 million of unrealized losses for the three months ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively; yields calculated gross of these unrealized losses.

(d)Average balances included $59 million, included $46 million and excluded $917 million of collateral posted and netted against derivative liability positions for the three months ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively; yields calculated gross of derivative netting amounts.

(e)Average balances excluded $161 million, $231 million and $164 million of collateral received and netted against derivative asset positions for the three months ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively; rates calculated gross of derivative netting amounts.