Comerica Incorporated : 3rd Quarter 2018 Earnings Release

Dallas, TX/October 16, 2018

COMERICA REPORTS THIRD QUARTER 2018 NET INCOME OF $318 MILLION,

$1.86 PER SHARE

Returned $600 Million to Shareholders Through Share Repurchases and Dividends

Continued Net Interest Income Growth, Strong Credit Quality and Controlled Expenses

Earnings Per Share Increased 48 Percent Compared to Third Quarter 2017

"In the third quarter, we continued to grow revenue, excluding securities losses, as well as maintain favorable credit metrics and well-controlled expenses," said Ralph W. Babb, Jr., chairman and chief executive officer. "We took action to enhance our future returns by significantly increasing our share repurchases and dividend. We expect to continue to return excess capital to shareholders as we work toward a target common equity Tier 1 capital ratio of 9.5 to 10 percent by the end of 2019. In addition, discrete tax benefits provided us the opportunity to reposition a portion of our securities portfolio. With increased loan commitments and seasonal factors, we expect loan growth to trend positive into the end of the year. We remain well positioned to meaningfully benefit from rising rates as we judiciously manage loan and deposit pricing. Our return on assets, return on equity and efficiency ratio clearly demonstrate our commitment to enhancing shareholder value."

(dollar amounts in millions, except per share data)

3rd Qtr '18

2nd Qtr '18

3rd Qtr '17

FINANCIAL RESULTS

Net interest income Provision for credit losses Noninterest income

$

599 -234

$

590 $ 546

(29)24

248 275

Noninterest expenses

452

448

463

381

Pre-tax income

419

334

Provision for income taxes

63

93

108

$

Net income

318

$

326

$

226

Diluted earnings per common share

$ 1.86

$ 1.87

$ 1.26

52.93% 3.60 11.66

Efficiency ratio (a) Net interest margin

Common equity Tier 1 capital ratio (b)

53.24% 3.62 11.89

56.33% 3.28 11.51

Common equity ratio

10.90

11.22

11.16

ADJUSTED FINANCIAL RESULTS (c)

Net interest income

$

Provision for credit losses Noninterest income Noninterest expenses

599$ -

590$ 546

(29) 24

254

248 245

440

437 426

Pre-tax income

413

430

341

98

Provision for income taxes

94

113

Net income

$ 319

$ 332

$ 228

Diluted earnings per common share

$

1.86

$

1.90

$

1.27

Efficiency ratio

51.59%

51.90%

53.71%

(a) Noninterest expenses as a percentage of net interest income and noninterest income excluding net gains (losses) from securities and a derivative contract tied to the conversion rate of Visa Class B shares.

• (b) September 30, 2018 ratio is estimated.

• (c) Financial results presented on an adjusted basis to facilitate trend analysis. See Reconciliation of Non-GAAP Financial Measures.

The following table includes items used to arrive at adjusted net income in the Adjusted Financial Results (see Reconciliation of Non-GAAP Financial Measures).

Securities repositioning, net of tax

$ 15

$ 0.09

$ -

$ -

$ -

$ -

3rd Qtr '18	2nd Qtr '18	3rd Qtr '17
Per	Per	Per
(in millions, except per share data)	Amount Share	Amount Share	Amount Share
Restructuring charges, net of tax

9

0.05

9

0.05

4

0.02

Discrete tax benefits

(23)

(0.14)

(3)

(0.02)

(2)

(0.01)

Third Quarter 2018 Compared to Second Quarter 2018

Average total loans decreased $641 million to $48.6 billion.

• • Primarily reflected seasonality, with decreases in National Dealer Services and general Middle Market as well as an increase in Mortgage Banker Finance.

• • Also included a decline in Private Banking, partially offset by an increase in Technology and Life Sciences.

• • Loan yields increased 11 basis points to 4.74 percent,reflecting increases in short-term rates (+15 basis points), partially offset by a decrease in interest recoveries (-6 basis points).

Average total deposits increased $263 million to $56.1 billion.

• • Driven by a $386 million increase in interest-bearing deposits, partially offset by a $123 million decrease in noninterest-bearing deposits.

• • Interest-bearing deposit costs increased 9 basis points to 0.51 percent due to continued focus on relationship-based deposit pricing as short-term interest rates increased.

Net interest income increased $9 million to $599 million.

• • Includes a net benefit from higher short-term interest rates of $13 million from managing loan and deposit pricing in a rising rate environment.

• • Net interest margin decreased 2 basis points to 3.60 percent, including a 8-basis-point increase due to short-term interest rates, offset by decreases from lower interest recoveries and excess liquidity.

No provision for credit losses in third quarter 2018 compared to $29 million release in second quarter 2018.

• • Credit quality remains strong as reflected by a decline in total criticized loans of $95 million or 5 percent and net credit-related charge-offs of $15 million.

Excluding a $20 million loss related to repositioning the securities portfolio, noninterest income increased $6 million.

• • Primarily reflecting increases of $2 million each in customer derivative and investment banking income, as well as smaller increases in other noninterest income categories, partially offset by decreases of $2 million each in syndication fees (a component of commercial lending fees) and letter of credit fees.

• •Additionally reflecting increases of $2 million each in bank-owned life insurance (BOLI) relating to an annual dividend and deferred compensation asset returns (offset in noninterest expenses) as well as an increase of $2 million due to a charge incurred in the second quarter relating to a derivative contract tied to the conversion rate of Visa Class B shares.

• • The $20 million loss on sale of securities resulted from repositioning $1.3 billion of treasury securities by purchasing securities yielding approximately $4 million additional interest per quarter while retaining a duration of 3 years.

Noninterest expenses increased $4 million to $452 million.

• • Primarily reflecting a $4 million increase in salaries and benefits expense driven by higher contract labor related to technology projects, deferred compensation (offset in noninterest income) and one additional day in the quarter, partly offset by a decrease in workforce.

Provision for income taxes decreased $30 million to $63 million.

• • Discrete tax benefit items of $23 million primarily resulting from a review of certain tax capitalization and recovery positions related to software and fixed assets included in the 2017 tax return.

• • Also included the impact from lower pre-tax earnings, primarily as a result of the securities losses from repositioning the securities portfolio and the change in the provision for credit losses.

Capital position remained solid at September 30, 2018.

• • Returned a record $600 million to shareholders, including dividends and the repurchase of $500 million of common stock (5.1 million shares) under the equity repurchase program.

• • Dividend increased 76 percent to 60 cents per share.

Third Quarter 2018 Compared to Third Quarter 2017

Effective January 1, 2018, the Corporation adopted Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers." As a result, revenue from certain products is now presented net of costs. The commentary below discusses noninterest income and noninterest expenses on an adjusted basis to eliminate the variances attributable to the impact of adoption. See Reconciliation of Non-GAAP Financial Measures.

Average total loans remained stable.

• •Reflected decreases in Corporate Banking, Energy and Private Banking, offset by increases in Technology and Life Sciences, Commercial Real Estate and National Dealer Services.

Average total deposits decreased $400 million.

• •Due to a $1.9 billion decrease in noninterest-bearing deposits, offset by a $1.5 billion increase in interest-bearing deposits.

• • Primarily reflected a decrease in general Middle Market (nearly $1 billion decrease in Municipalities), partially offset by a $752 million increase in Technology and Life Sciences and smaller increases in other lines of business. Net interest income increased $53 million.

• •Driven by the net benefit from higher short-term rates, partially offset by a $13 million decrease in interest recoveries from elevated third quarter 2017 levels.

Provision for credit losses decreased $24 million.

• • Reflected declines in total criticized loans of $764 million and net credit-related charge-offs of $10 million.

Adjusted noninterest income increased $9 million.

• •Reflected increases of $5 million in card fees, adjusted for the impact of adoption of the new revenue accounting standard, $3 million in fiduciary income and smaller increases in other noninterest income categories, partially offset by a $3 million decrease in service charges on deposit accounts.

Adjusted noninterest expenses increased $14 million.

• •Reflected a $17 million increase in salaries and benefits expense, driven by higher share-based and incentive compensation tied to financial performance as well as merit increases, partially offset by a decrease in workforce.

• • Also included decreases of $3 million in software expense and $2 million in FDIC insurance expense, partially offset by a $3 million increase in outside processing expense.

Provision for income taxes decreased $45 million.

• • Discrete tax benefit items of $23 million, primarily resulting from a review of certain tax capitalization and recovery positions related to software and fixed assets included in the 2017 tax return.

• • Also included the impact of the decrease in the statutory tax rate in 2018, partially offset by an increase in pre-tax income.

Net Interest Income

3rd Qtr '182nd Qtr '183rd Qtr '17

(dollar amounts in millions)

Net interest income

$ 599

$ 590

$ 546

3.60%

Net interest margin

3.62%

3.28%

Selected average balances:

Total earning assets

$

Total loans

Total investment securities Federal Reserve Bank deposits

Total deposits

Total noninterest-bearing deposits

65,842 $ 48,58411,761 5,180 56,09329,193

65,114 $ 66,084 49,22548,663 11,799 12,244 3,717 4,889 55,83056,493 29,316 31,057

Medium- and long-term debt

6,153

5,584

4,936

Net interest income increased $9 million to $599 million in the third quarter 2018, compared to the second quarter 2018.

• • The net increase from higher short-term rates was $13 million, reflecting interest benefits to loans (+$19 million), short-term investments (+$2 million) and securities (+$2 million), partly offset by increases in deposit (-$6 million)and debt (-$4 million) costs.

• • Net interest income also benefited from higher average short-term investments (+$8 million) and one additional day in the quarter (+$6 million), offset by lower interest recoveries (-$8 million), lower average loan balances (-$7 million) and higher wholesale funding (-$5 million).

The net interest margin decreased 2 basis points to 3.60 percent in the third quarter 2018, compared to the second quarter 2018.

• • The net benefit from short-term rates (+8 basis points) was more than offset by the expected decrease in interest recoveries from elevated second quarter levels (-5 basis points), higher average debt from a third quarter 2018 issuance (-3 basis points) and an increase in lower-yielding average short-term investments (-3 basis points).

• • The net benefit from higher short-term rates primarily reflected higher loan (+12 basis points) and securities yields (+1 basis point), partially offset by higher deposit (-4 basis points) and debt (-2 basis points) costs.

Credit Quality

"With net charge-offs of 13 basis points and a further decline in criticized loans, which now represent 3.4 percent of total loans at quarter end, our credit quality is strong," said Babb. "Gross charge-offs remained low at $25 million, while recoveries declined to $10 million, following unusually high recoveries in the second quarter. Nonaccrual loans comprised only 47 basis points of our total loans. The positive credit migration resulted in a reserve release and a reserve ratio of 1.35 percent. The economy is strong and our customers are performing well. We remain vigilant; however, at this point, we are not seeing any concerning trends."

3rd Qtr '182nd Qtr '183rd Qtr '17

(dollar amounts in millions)

Credit-related charge-offs

$ 25

$ 20

$ 37

10

Recoveries

23

12

Net credit-related charge-offs (recoveries)

15

(3)

25

0.13% -$ 239240 0.49%

Net credit-related charge-offs (recoveries)/Average total loans Provision for credit losses

(0.02)% 0.21%

$

(29)$ 24

Nonperforming loans Nonperforming assets (NPAs) NPAs/Total loans and foreclosed property

262 452

264 458

0.53%0.93%

Loans past due 90 days or more and still accruing

$

28 $

20 $ 12

Allowance for loan losses 664

677 712

Allowance for credit losses on lending-related commitments (a)

33

34 41

Total allowance for credit losses

697

711

753

Allowance for loan losses/Period-end total loans

1.35%

1.36 % 1.45%

Allowance for loan losses/Nonperforming loans

2.8x

2.6x

1.6x

(a) Included in "Accrued expenses and other liabilities" on the consolidated balance sheets.

• •The allowance for loan losses decreased to $664 million at September 30, 2018, or 1.35 percent of total loans, reflecting improvements in credit quality of the portfolio.

• • Criticized loans decreased $95 million to $1.7 billion at September 30, 2018, compared to $1.8 billion at June 30, 2018, including a $50 million decrease in Energy. Criticized loans as a percentage of total loans were 3.4 percent at September 30, 2018, compared to 3.5 percent at June 30, 2018. Criticized loans are generally consistent with the Special Mention, Substandard and Doubtful categories defined by regulatory authorities.

• • Nonperforming loans decreased $23 million to $239 million at September 30, 2018, compared to $262 million at June 30, 2018. Nonperforming loans as a percentage of total loans decreased to 0.49 percent at September 30, 2018, compared to 0.53 percent at June 30, 2018.