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COMERICA INCORPORATED

(CMA)
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Comerica Incorporated : 2Q21 Regulatory Capital Disclosures

08/13/2021 | 09:52am EDT

COMERICA INCORPORATED

REGULATORY CAPITAL DISCLOSURES

For the Quarter Ended June 30, 2021

1

Table of Contents

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Scope of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5General Credit Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Counterparty Credit Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Credit Risk Mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Equities Not Subject to Market Risk Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Interest Rate Risk for Non-TradingActivities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Forward-LookingStatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Disclosure Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix A

2

OVERVIEW

Organization

Comerica Incorporated ("the Corporation") is a financial services company, incorporated under the laws of the State of Delaware, and headquartered in Dallas, Texas. The Corporation has strategically aligned its operations into three major business segments: the Commercial Bank, the Retail Bank, and Wealth Management and operates in three primary geographic markets: Texas, California and Michigan, as well as in the states of Arizona and Florida, with select businesses operating in several other states, and in Canada and Mexico. The Corporation operates two U.S. banking subsidiaries: Comerica Bank, a Texas banking association, and Comerica Bank and Trust, National Association, a limited purpose trust bank. At June 30, 2021, the Corporation had total assets of approximately $88.4 billion, total deposits of approximately $76.1 billion, total loans of approximately $50.2 billion and shareholders' equity of approximately $7.9 billion.

Regulatory Capital Standards and Disclosures

The Corporation and its U.S. banking subsidiaries are subject to various regulatory capital requirements administered by federal and state banking agencies under the Basel III regulatory framework (Basel III). This regulatory framework establishes comprehensive methodologies for calculating regulatory capital and risk-weighted assets (RWA). Basel III also set minimum capital ratios as well as overall capital adequacy standards.

Definition of capital

Under Basel III, regulatory capital comprises common equity Tier 1 (CET1) capital, additional Tier 1 capital and Tier 2 capital. CET1 capital predominantly includes common shareholders' equity, less certain deductions for goodwill, intangible assets and deferred tax assets that arise from net operating losses and tax credit carry-forwards. Additionally, the Corporation has elected to permanently exclude capital in accumulated other comprehensive income (AOCI) related to debt and equity securities classified as available-for-sale as well as for cash flow hedges and defined benefit postretirement plans from CET1, an option available to standardized approach entities under Basel III. Tier 1 capital incrementally includes noncumulative perpetual preferred stock. Tier 2 capital includes Tier 1 capital as well as subordinated debt qualifying as Tier 2 and qualifying allowance for credit losses. In 2020, the Corporation elected regulatory relief to defer over 5 years the impact of adopting the current expected credit loss (CECL) accounting standard on regulatory capital. At June 30, 2021, the deferral amount was reduced to zero.

Risk-weighted assets

The Corporation computes RWA using the standardized approach. Under the standardized approach, RWA is generally based on supervisory risk-weightings which vary by counterparty type and asset class. Under the Basel III standardized approach, capital is required for credit RWA to cover the risk of unexpected losses due to failure of a customer or counterparty to meet its financial obligations in accordance with contractual terms. If trading assets and liabilities exceed certain thresholds, an entity is also subject to the market risk provisions of Basel III ("market risk rule") and capital is also required for market RWA to cover the risk of losses due to adverse market movements or from position-specific factors.

Disclosures

The qualitative and quantitative disclosures in this report regarding the Corporation's capital structure, capital adequacy, risk exposures, RWA and market risk (if applicable) are based on management's current understanding of Basel III and other factors, which may be subject to change as additional clarification and implementation guidance is received from regulators and the interpretation of the rule evolves over time. The disclosures were reviewed and approved in accordance with the Corporation's regulatory disclosure policy, which has been approved by the Corporation's Board of Directors.

This report should be read in conjunction with the Corporation's Annual Report on Form 10-K for the year ended December 31, 2020 ("2020 Form 10-K"), and Quarterly Report on Form 10-Q for the period ended June 30, 2021 ("Second Quarter 2021 Form 10-Q"), which includes important information on risk management policies and practices. A disclosure index is provided in Appendix A of this report and specific references have been included herein.

(1)The final U.S. Basel III rules applicable to the Corporation and Comerica Bank are codified in 12 C.F.R. Part 217 (Federal Reserve Board).

1

SCOPE OF APPLICATION

Basis of consolidation

The standardized approach to risk-weighted assets under Basel III applies to the Corporation's consolidated financial statements and off-balance sheet exposures. The Corporation's basis of consolidation for both financial and regulatory reporting purposes is in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). Certain of the Corporation's equity investments accounted for under either the proportional method, equity method or cost method are neither consolidated nor deducted from regulatory capital under Basel III, but instead are assigned an appropriate risk weight. There are no entities within the Corporation enterprise that are deconsolidated or whose capital is deducted for Basel III.

  • For further information regarding the Corporation's principles of consolidation, see Note 1 to the consolidated financial statements on page F-52 of the Corporation's 2020 Form 10-K.

Capital in regulated subsidiaries

At June 30, 2021, total capital for each of the Corporation's regulated banking subsidiaries, Comerica Bank and Comerica Bank

  • Trust, National Association, exceeded their respective minimum required regulatory capital amount. The Corporation's regulated broker-dealer subsidiary, Comerica Securities, Inc., was also in compliance with minimum net capital requirements at June 30, 2021.

Restrictions on funds and capital transfers

Various federal laws limit borrowings by the Corporation and its nonbank subsidiaries from its affiliate insured banking subsidiaries, and also limit various other transactions between the Corporation and its nonbank subsidiaries, on the one hand, and the Corporation's affiliate insured banking subsidiaries, on the other.

  • Refer to "Transactions with Affiliates" in Part I, Item 1 on page 6 of the Corporation's 2020 Form 10-K for further information.

There are statutory and regulatory requirements restricting the payment of dividends by subsidiary banks to the Corporation, as well as by the Corporation to its shareholders.

  • For further information, see "Dividends" on page 5 in Part I, Item 1 and Note 20 to the consolidated financial statements on page F-96 of the Corporation's 2020 Form 10-K.

Shares of common stock can only be redeemed by the Corporation through repurchases.

  • For additional information about capital and the Corporation's share repurchase program, see "Capital" in Part I, Item 2 on page 50 of the Corporation's Second Quarter 2021 Form 10-Q.

The Federal Reserve requires depository institutions to maintain a stated ratio in cash reserves with a Federal Reserve Bank. In 2020 the Federal Reserve Board reduced this ratio to zero, eliminating reserve requirements for all depository institutions.

  • See Note 20 to the consolidated financial statements on page F-96 of the Corporation's 2020 Form 10-K for further information.

CAPITAL STRUCTURE

Regulatory capital instruments

The Corporation's currently qualifying regulatory capital instruments consist of common stock, preferred stock and subordinated debt. Each share of the Corporation's common stock entitles the holder to one vote for the election of directors and for all other matters to be voted on by the Corporation's shareholders. Upon a liquidation, dissolution or similar proceeding, the holders of common stock would share proportionally in the residual assets remaining after all claims have been satisfied. Shares of common stock can only be redeemed by the Corporation through repurchases.

Each depositary share of the Corporations's preferred stock entitles the holder to proportional rights and preferences (including dividend, voting, redemption and liquidation rights). The terms of the preferred stock have been established to satisfy the criteria for "additional Tier 1 capital" instruments consistent with Basel III as set forth in the joint final rulemaking issued in July 2013 by the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.

  • For additional information about capital and the Corporation's share repurchase program, see "Capital" in Part I, Item 2 on page 50 of the Corporation's Second Quarter 2021 Form 10-Q.

2

  • For additional information about the terms of the preferred stock and depositary shares, see Note 13 to the consolidated financial statements on page F-85 of the Corporation's 2020 Form 10-K, as well as the Form 8-K filed by the Corporation on May 26, 2020 and Exhibits 3.1 and 4.1 thereto.

The Corporation's subordinated debt contains no financial covenants. The subordinated debt is subject to standard events of default, including those related to payment of principal and interest, bankruptcy, insolvency, receivership and other similar actions and compliance with typical legal covenants.

  • For further details regarding subordinated debt as of June 30, 2021, see Note 7 to the consolidated financial statements on page 23 of the Corporation's Second Quarter 2021 Form 10-Q.

Regulatory capital components

Table 1: Reconciliation of Shareholders' Equity to Total Capital

A reconciliation of total shareholders' equity to CET1 capital, Tier 1 capital and Total capital is presented below.

(in millions)

June 30, 2021

Preferred stock

$

394

Common stock

1,141

Capital surplus

2,163

Accumulated other comprehensive loss

(120)

Retained earnings

10,202

Less cost of common stock in treasury

(5,849)

Total shareholders' equity before adjustments and deductions

7,931

Less: Preferred Stock

394

Total Common stockholders' equity

7,537

Less adjustments and deductions:

AOCI opt-out election related adjustments

(120)

Goodwill

635

Other adjustments and deductions

18

Total CET1 capital

7,004

Add: Preferred stock

394

Total Tier 1 capital

7,398

Qualifying subordinated debt

682

Allowance for credit losses includable in Tier 2 capital

683

Tier 2 capital

1,365

Total capital

$

8,763

Further details about the Corporation's regulatory capital can be found in Schedule HC-R to the June 30, 2021 Consolidated Financial Statements for Holding Companies - Form FR Y-9C.

CAPITAL ADEQUACY

Capital adequacy assessment process

The Corporation assesses capital adequacy against the risk inherent in the balance sheet, recognizing that unexpected loss is the common denominator of risk and that common equity has the greatest capacity to absorb unexpected loss. The Corporation periodically conducts stress tests to evaluate potential impacts to the Corporation's forecasted financial condition under various economic scenarios and business conditions. These stress tests are a normal part of the Corporation's overall risk management and capital planning process and are part of the forecasting process used by the Corporation to conduct enterprise-wide stress tests.

3

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Disclaimer

Comerica Inc. published this content on 13 August 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 August 2021 13:51:11 UTC.


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Sales 2021 2 917 M - -
Net income 2021 1 083 M - -
Net Debt 2021 - - -
P/E ratio 2021 10,5x
Yield 2021 3,28%
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Curtis Chatman Farmer Chairman, President & Chief Executive Officer
James J. Herzog Chief Financial Officer & Executive Vice President
Megan D. Crespi Chief Technology & Operations Services Officer
John Kevin Lynch Chief Investment Officer
Robert S. Taubman Independent Director
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