COMERICA INCORPORATED FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. In addition, the Corporation may make other written and oral communications from time to time that contain such statements. All statements regarding the Corporation's expected financial position, strategies and growth prospects and general economic conditions expected to exist in the future are forward-looking statements. The words, "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 the Corporation or its management, are intended to identify forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of the Corporation's management based on information known to the Corporation's management as of the date of this report and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of the Corporation's management for future or past operations, products or services and forecasts of the Corporation'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 the Corporation'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, the Corporation'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 the Corporation'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 (the Corporation's ability to maintain adequate sources of funding and liquidity; reductions in the Corporation'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 inComerica'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 the Corporation's reputation; the Corporation'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 the Corporation's markets; the implementation of the Corporation'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 the Corporation's accounting policies; and the volatility of the Corporation's stock price). The Corporation 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 theSecurities and Exchange Commission . In particular, please refer to "Item 1A. Risk Factors" beginning on page 13 of the Corporation's Annual Report on Form 10-K for the year endedDecember 31, 2021 . Forward-looking statements speak only as of the date they are made. The Corporation 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 report or in any documents, the Corporation claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. 33
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RESULTS OF OPERATIONS
In accordance with Item 303(c) of Regulation S-K, the Corporation is providing a
comparison of the quarter ended June 30, 2022 against the preceding sequential
quarter. The Corporation believes providing a sequential discussion of its
results of operations provides more relevant information for investors and
stakeholders to understand and analyze the business. For additional information
related to the three months ended June 30, 2021, please refer to our Quarterly
Report on Form 10-Q dated June 30, 2021 , filed with the Securities and
Exchange Commission on July 29, 2021 .
Three Months Ended
Net income for the three months endedJune 30, 2022 was$261 million , compared to$189 million for the three months endedMarch 31, 2022 . The$72 million increase in net income was driven by higher net interest income and noninterest income, partially offset by increases in provision for credit losses and noninterest expenses. The provision for income taxes increased$27 million to$76 million due mostly to higher pre-tax income. Net income per diluted common share was$1.92 and$1.37 for the three months endedJune 30, 2022 andMarch 31, 2022 , respectively, an increase of$0.55 per diluted common share. 34
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Analysis of Net Interest Income
Three Months Ended
June 30, 2022 March 31, 2022
Average Average Average Average
(dollar amounts in millions) Balance Interest Rate Balance Interest Rate Commercial loans (a) (b)
$ 29,918 $ 282 3.77 %$ 28,275 $ 232 3.34 % Real estate construction loans 2,332 24 4.05 2,659 24 3.62 Commercial mortgage loans 11,947 99 3.33 11,647 84 2.92 Lease financing 642 4 3.01 635 5 2.89 International loans 1,303 12 3.66 1,220 9 3.09 Residential mortgage loans 1,773 14 3.16 1,785 11 2.51 Consumer loans 2,112 19 3.64 2,052 18 3.47 Total loans (c) 50,027 454 3.64 48,273 383 3.22 Mortgage-backed securities (d) 16,218 93 2.07 14,413 70 1.88 U.S. Treasury securities (e) 2,811 7 0.98 2,914 7 1.00 Total investment securities 19,029 100 1.92 17,327 77 1.74 Interest-bearing deposits with banks 10,861 23 0.85 17,781 9 0.19 Other short-term investments 176 - 0.66 189 - 0.19 Total earning assets 80,093 577 2.83 83,570 469 2.26 Cash and due from banks 1,421 1,446 Allowance for loan losses (555) (581) Accrued income and other assets 7,851 6,715 Total assets$ 88,810 $ 91,150 Money market and interest-bearing checking deposits$ 29,513 3 0.05$ 30,506 3 0.04 Savings deposits 3,330 - 0.02 3,213 - 0.01 Customer certificates of deposit 1,774 1 0.18 1,921 1 0.19 Other time deposits 1 - 0.30 - - - Foreign office time deposits 53 - 0.54 44 - 0.11 Total interest-bearing deposits 34,671 4 0.05 35,684 4 0.05 Short-term borrowings 5 - 0.64 1 - 0.13 Medium- and long-term debt 2,656 12 1.85 2,767 9 1.27 Total interest-bearing sources 37,332 16 0.19 38,452 13 0.14 Noninterest-bearing deposits 42,918 43,419 Accrued expenses and other liabilities 2,035 1,541 Shareholders' equity 6,525 7,738 Total liabilities and shareholders' equity$ 88,810 $ 91,150 Net interest income/rate spread$ 561 2.64$ 456 2.12 Impact of net noninterest-bearing sources of funds 0.10 0.07 Net interest margin (as a percentage of average 2.74 % 2.19 %
earning assets)
(a)Interest income on commercial loans included$25 million and$22 million of business loan swap income for the three months endedJune 30, 2022 andMarch 31, 2022 , respectively. (b)Included Paycheck Protection Program (PPP) loans with average balances of$149 million and$335 million , interest income of$4 million and$5 million and average yields of 9.63% and 6.54% for the three months endedJune 30, 2022 andMarch 31, 2022 , respectively. (c)Nonaccrual loans are included in average balances reported and in the calculation of average rates. (d)Average balances included$(1.7) billion and$(562) million of unrealized gains and losses for the three months endedJune 30, 2022 andMarch 31, 2022 , respectively; yields calculated gross of these unrealized gains and losses. (e)Average balances included$(118) million and$(57) million of unrealized gains and losses for the three months endedJune 30, 2022 andMarch 31, 2022 , respectively; yields calculated gross of these unrealized gains and losses. 35
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Rate/Volume Analysis
Three Months Ended
June 30, 2022/March 31, 2022
Increase
Increase Due to (Decrease) Due
(in millions) Rate to Volume (a) Net Increase
Interest Income:
Loans $ 56 $ 15 $ 71
Investment securities 4 19 23
Interest-bearing deposits with banks 29 (15) 14
Total interest income 89 19 108
Interest Expense:
Medium- and long-term debt 3 - 3
Total interest expense 3 - 3
Net interest income $ 86 $ 19 $ 105
(a)Impact of additional days reflected as part of rate impact, rate/volume variances are allocated to variances due to volume.
Net interest income was$561 million for the three months endedJune 30, 2022 , an increase of$105 million compared to$456 million for the three months endedMarch 31, 2022 . The increase in net interest income was driven by higher short-term rates and growth in loans and investment securities. Net interest margin was 2.74 percent for the three months endedJune 30, 2022 , an increase of 55 basis points from 2.19 percent for the three months endedMarch 31, 2022 , primarily driven by higher short-term rates and a decrease of$6.9 billion in lower-yielding deposits with theFederal Reserve . Average earning assets decreased$3.5 billion , due to the decrease in deposits with theFederal Reserve , partially offset by increases of$1.8 billion in loans and$1.7 billion in investment securities. A decrease in interest-bearing deposits drove a$1.1 billion decrease in average interest-bearing funding sources.
For further discussion of the effects of market rates on net interest income, refer to the "Market and Liquidity Risk" section of this financial review.
Provision for Credit Losses
The provision for credit losses, which includes the provision for loan losses and the provision for credit losses on lending-related commitments, was an expense of$10 million for the three months endedJune 30, 2022 , compared to a benefit of$11 million for the three months endedMarch 31, 2022 , reflecting loan growth, strong credit metrics and an uncertain economic environment. There were no net loan charge-offs for the three months endedJune 30, 2022 , compared to$8 million for the three months endedMarch 31, 2022 . Increases in Energy and general Middle Market net recoveries were partially offset by an increase in Technology and Life Sciences net charge-offs. Provision for credit losses on lending-related commitments decreased$14 million compared to the three months endedMarch 31, 2022 . An analysis of the allowance for credit losses and a summary of nonperforming assets are presented under the "Credit Risk" subheading in the "Risk Management" section of this financial review. 36
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Noninterest Income
Three Months Ended
(in millions) June 30, 2022 March 31, 2022
Card fees $ 69 $ 69
Fiduciary income 62 58
Service charges on deposit accounts 50 48
Commercial lending fees 30 22
Derivative income 29 22
Bank-owned life insurance 12 13
Letter of credit fees 9 9
Brokerage fees 4 4
Other noninterest income (a) 3 (1)
Total noninterest income $ 268 $ 244
(a)The table below provides further details on certain categories included in other noninterest income.
Noninterest income increased$24 million to$268 million for the three months endedJune 30, 2022 , reflecting increases in commercial lending fees (mostly syndication agent activity), derivative income and fiduciary income. The increase in derivative income was due to favorable credit valuation adjustments and increased customer activity, while the increase in fiduciary income was driven by higher institutional trust revenue and seasonal items impacting personal trust fees. The increase in other noninterest income was due to higher principal investing and warrant-related income from market-driven valuation adjustments and increased gains on monetization, partially offset by a decrease in deferred compensation asset returns (offset in noninterest expenses).
The following table presents certain categories included in other noninterest income on the Consolidated Statements of Comprehensive Income.
Three Months Ended
(in millions) June 30, 2022 March 31, 2022
Securities trading income $ 2 $ 3
Principal investing and warrant-related income 2 (6)
Investment banking fees 1 1
Deferred compensation asset returns (a) (14) (7)
All other noninterest income 12 8
Other noninterest income $ 3 $ (1)
(a) Compensation deferred by the Corporation's officers and directors is invested based on investment selections of the officers and directors. Income earned on these assets is reported in other noninterest income and the offsetting change in deferred compensation plan liabilities is reported in salaries and benefits expense.
Noninterest Expenses
Three Months Ended
(in millions) June 30, 2022 March 31, 2022
Salaries and benefits expense $ 294 $ 289
Outside processing fee expense 62 62
Software expense 41 39
Occupancy expense 40 38
Equipment expense 13 11
Advertising expense 8 7
FDIC insurance expense 8 8
Other noninterest expenses 16 19
Total noninterest expenses $ 482 $ 473
Noninterest expenses increased $9 million to $482 million , primarily reflecting
increases in certain technology-related costs, salaries and benefits expense,
litigation-related expense and occupancy expense, partially offset by a decrease
in operational losses and a refund received in the second quarter related to a
favorable state tax ruling (included in other noninterest expenses).
Technology-related costs included consulting fees, software expense and
equipment expense. Salaries and benefits expense included increases in
performance-based compensation, contract labor, staff insurance and merit
increases, partially offset by a decline in deferred compensation expense
(offset in other noninterest income) as well as a net decrease in seasonal
items. The net decrease in seasonal items included declines in annual
stock-based compensation and payroll taxes, partially offset by higher 401K
expense and additional salary expense from one additional day in the second
quarter. The second quarter of 2022 included $7 million of expenses for asset
impairments and consulting fees (reported in other noninterest
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expenses) as well as severance costs and contract labor (reported in salaries and benefits) for certain modernization initiatives related to transformation of the retail banking delivery model, alignment of corporate facilities and optimization of technology platform, compared to$6 million recorded in the first quarter 2022.
Six Months Ended
Net income decreased$228 million to$450 million for the six months endedJune 30, 2022 , compared to$678 million for the six months endedJune 30, 2021 . The decrease was driven by a$316 million increase in the provision for credit losses resulting from an elevated benefit recorded in first half of 2021 as theU.S. economy recovered from the COVID-19 pandemic, partially offset by an increase in net interest income. Net income was also impacted by lower noninterest income and higher noninterest expenses. The provision for income taxes decreased$66 million to$125 million for the six months endedJune 30, 2022 , compared to$191 million for the same period in 2021, driven by lower pre-tax income. Net income per diluted common share decreased$1.47 to$3.29 for the six months endedJune 30, 2022 , compared to$4.76 for the six months endedJune 30, 2021 . 38
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Analysis of Net Interest Income
Six Months Ended
June 30, 2022 June 30, 2021
Average Average Average Average
(dollar amounts in millions) Balance Interest Rate Balance Interest Rate
Commercial loans (a) (b) $ 29,101 $ 514 3.56 % $ 30,502 $ 507 3.36 %
Real estate construction loans 2,494 48 3.82 4,164 69 3.34
Commercial mortgage loans 11,798 183 3.13 10,022 142 2.86
Lease financing (c) 639 9 2.95 585 (8) (2.87)
International loans 1,262 21 3.38 999 16 3.19
Residential mortgage loans 1,779 25 2.83 1,813 28 3.11
Consumer loans 2,082 37 3.55 2,121 36 3.39
Total loans (d) 49,155 837 3.43 50,206 790 3.17
Mortgage-backed securities (e) 15,321 163 1.99 10,657 105 1.98
U.S. Treasury securities (f) 2,862 14 0.99 4,493 34 1.56
Total investment securities 18,183 177 1.83 15,150 139 1.86
Interest-bearing deposits with banks 14,302 32 0.44 14,507 9 0.11
Other short-term investments 182 - 0.42 173 - 0.24
Total earning assets 81,822 1,046 2.54 80,036 938 2.36
Cash and due from banks 1,434 976
Allowance for loan losses (568) (835)
Accrued income and other assets 7,286 6,041
Total assets $ 89,974 $ 86,218
Money market and interest-bearing checking deposits $ 30,008 6 0.05 $ 29,505 10 0.07
Savings deposits 3,272 - 0.02 2,911 - 0.02
Customer certificates of deposit 1,847 2 0.18 2,141 2 0.23
Foreign office time deposits 48 - 0.34 52 - 0.09
Total interest-bearing deposits 35,175 8 0.05 34,609 12 0.07
Short-term borrowings 3 - 0.56 2 - 0.05
Medium- and long-term debt 2,711 21 1.55 3,232 18 1.07
Total interest-bearing sources 37,889 29 0.16 37,843 30 0.15
Noninterest-bearing deposits 43,167 38,858
Accrued expenses and other liabilities 1,790 1,469
Shareholders' equity 7,128 8,048
Total liabilities and shareholders' equity $ 89,974 $ 86,218
Net interest income/rate spread $ 1,017 2.38 $ 908 2.21
Impact of net noninterest-bearing sources of funds 0.09 0.08
Net interest margin (as a percentage of average 2.47 % 2.29 %
earning assets)
(a)Interest income on commercial loans included$47 million and$48 million of business loan swap income for the six months endedJune 30, 2022 and 2021, respectively. (b)Included PPP loans with average balances of$242 million and$3.5 billion , interest income of$9 million and$62 million and average yields of 7.50% and 3.57% for the six months endedJune 30, 2022 and 2021, respectively. (c)The six months ended June 30, 2021 included residual value adjustments totaling$17 million , which impacted the average yield on loans by 7 basis points. (d)Nonaccrual loans are included in average balances reported and in the calculation of average rates. (e)Average balances included$(1.1) billion and$124 million of unrealized gains and losses for the six months endedJune 30, 2022 and 2021, respectively; yields calculated gross of these unrealized gains and losses. (f)Average balances included$(88) million and$45 million of unrealized gains and losses for the six months endedJune 30, 2022 and 2021, respectively; yields calculated gross of these unrealized gains and losses. 39
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Rate/Volume Analysis
Six Months Ended
June 30, 2022/June 30, 2021
(Decrease)
Increase (Decrease) Increase Due Net Increase
(in millions) Due to Rate to Volume (a) (Decrease)
Interest Income:
Loans $ 68 $ (21) $ 47
Investment securities (17) 55 38
Interest-bearing deposits with banks 23 - 23
Total interest income 74 34 108
Interest Expense:
Interest-bearing deposits (4) - (4)
Medium- and long-term debt 3 - 3
Total interest expense (1) - (1)
Net interest income $ 75 $ 34 $ 109
(a)Impact of additional days reflected as part of rate impact, rate/volume variances are allocated to variances due to volume.
Net interest income was$1.0 billion for the six months endedJune 30, 2022 , an increase of$109 million compared to the six months endedJune 30, 2021 . The increase in net interest income reflected higher short-term rates and growth in earning assets, partially offset by the net impact of PPP loans and reinvestment in lower-yielding securities. Net interest margin was 2.47 percent for the six months endedJune 30, 2022 , an increase of 18 basis points compared to 2.29 percent for the comparable period in 2021. The increase in net interest margin was primarily driven by higher short-term rates.
Average earning assets increased
For further discussion of the effects of market rates on net interest income, refer to the "Market and Liquidity Risk" section of this financial review.
Provision for Credit Losses
The provision for credit losses was a benefit of$1 million for the six months endedJune 30, 2022 , compared to a benefit of$317 million for the six months endedJune 30, 2021 , which primarily reflected an elevated benefit recorded in the first half of 2021 as theU.S. economy began to recover from the COVID-19 pandemic. Net loan charge-offs increased$16 million to$8 million for the six months endedJune 30, 2022 , compared to net recoveries of$8 million for the six months endedJune 30, 2021 , largely driven by increases of$18 million in Energy and$8 million in Technology and Life Sciences, partially offset by a decrease of$6 million in Corporate Banking. Provision for credit losses on lending-related commitments increased$29 million to$16 million for the six months endedJune 30, 2022 .
An analysis of the allowance for credit losses and nonperforming assets is presented under the "Credit Risk" subheading in the "Risk Management" section of this financial review.
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Noninterest Income
Six Months Ended June 30,
(in millions) 2022 2021
Card fees $ 138 $ 155
Fiduciary income 120 113
Service charges on deposit accounts 98 95
Commercial lending fees 52 45
Derivative income 51 52
Bank-owned life insurance 25 20
Letter of credit fees 18 20
Brokerage fees 8 8
Other noninterest income (a) 2 46
Total noninterest income $ 512 $ 554 (a)The table below provides further details on certain categories included in other noninterest income.
Noninterest income decreased$42 million to$512 million , driven by a decrease in card fees, partially offset by increases in fiduciary income and syndication agent fees (a component of commercial lending fees). The decrease in card fees reflected elevated activity from stimulus payments during the first half of 2021, while the increase in fiduciary income was driven by higher personal trust fees. The decrease in other noninterest income was driven by declines in deferred compensation asset returns (offset in noninterest expense) and warrant-related income mostly due to elevated gains on monetization in the 2021 period.
The following table presents certain categories included in other noninterest income on the Consolidated Statements of Comprehensive Income.
Six Months Ended June 30,
(in millions) 2022 2021
Securities trading income $ 5 $ 3
Investment banking fees 2 6
Principal investing and warrant-related income (a) (4) 9
Deferred compensation asset returns (b) (21) 9
All other noninterest income 20 19
Other noninterest income $ 2 $ 46 (a) Includes changes in value of shares obtained through monetization of warrants, previously reported in securities trading income. (b) Compensation deferred by the Corporation's officers and directors is invested based on investment selections of the officers and directors. Income earned on these assets is reported in other noninterest income and the offsetting change in deferred compensation plan liabilities is reported in salaries and benefits expense.
Noninterest Expenses
Six Months Ended June 30,
(in millions) 2022 2021
Salaries and benefits expense $ 583 $ 559
Outside processing fee expense 124 135
Software expense 80 77
Occupancy expense 78 77
Equipment expense 24 25
Advertising expense 15 15
FDIC insurance expense 16 13
Other noninterest expenses 35 9
Total noninterest expenses $ 955 $ 910
Noninterest expenses increased $45 million to $955 million , due to increases in
salaries and benefits expense, operational losses and consulting fees, partially
offset by a decrease in outside processing fee expense. The increase in salaries
and benefits expense was driven by higher performance-related compensation, the
impact of annual merit increases, severance payments and technology-related
contract labor, partially offset by lower deferred compensation expense (offset
in other noninterest income). The decrease in outside processing fee expense was
driven by lower volumes of government card transactions (tied to card fee
revenue). The six months ended June 30, 2022 included $13 million for asset
impairments and consulting fees (reported in other noninterest expenses) as well
as severance costs and contract labor (reported in salaries and benefits) for
certain modernization initiatives related to transformation of the retail
banking delivery model, alignment of corporate facilities and optimization of
technology platform.
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STRATEGIC LINES OF BUSINESS
The Corporation has strategically aligned its operations into three major
business segments: the Commercial Bank , the Retail Bank and Wealth Management.
These business segments are differentiated based on the type of customer and the
related products and services provided. In addition to the three major business
segments, the Finance Division is also reported as a segment. The Other category
includes items not directly associated with the business segments or the Finance
segment. The performance of the business segments is not comparable with the
Corporation's consolidated results and is not necessarily comparable with
similar information for any other financial institution. Additionally, because
of the interrelationships of the various segments, the information presented is
not indicative of how the segments would perform if they operated as independent
entities. Note 13 to the consolidated financial statements describes the
business activities of each business segment and presents financial results of
the business segments for the three- and six-month periods ended June 30, 2022
and 2021.
The Corporation's management accounting system assigns balance sheet and income
statement items to each segment using certain methodologies, which are regularly
reviewed and refined. These methodologies may be modified as the management
accounting system is enhanced and changes occur in the organizational structure
and/or product lines. Note 22 to the consolidated financial statements in the
Corporation's 2021 Annual Report describes the Corporation's segment reporting
methodology.
Net interest income for each segment reflects the interest income generated by
earning assets less interest expense on interest-bearing liabilities plus the
net impact from associated internal funds transfer pricing (FTP). The FTP
methodology allocates credits to each business segment for deposits and other
funds provided as well as charges for loans and other assets being funded. FTP
crediting rates on deposits and other funds provided reflect the long-term value
of deposits and other funding sources based on their implied maturities. Due to
the longer-term nature of implied maturities, FTP crediting rates are generally
less volatile than changes in interest rates observed in the market. FTP charge
rates for funding loans and other assets reflect a matched cost of funds based
on the pricing and duration characteristics of the assets. As a result of
applying matched funding, interest revenue for each segment resulting from loans
and other assets is generally not impacted by changes in interest rates.
Therefore, net interest income for each segment primarily reflects the volume of
loans and other earning assets at the spread over the matched cost of funds, as
well as the volume of deposits at the associated FTP crediting rates. Generally,
in periods of rising interest rates, FTP charge rates for funding loans and FTP
crediting rates on deposits will increase, with FTP crediting rates for deposits
typically repricing at a slower pace than FTP charge rates for funding loans.
Business Segments
The following sections present a summary of the performance of each of the
Corporation's business segments for the six months ended
Commercial Bank Six Months Ended June 30, Percent (dollar amounts in millions) 2022 2021 Change Change Earnings summary: Net interest income $ 755$ 784 $ (29) (4) % Provision for credit losses (15) (300) 285 (95) Noninterest income 292 326 (34) (10) Noninterest expenses 471 419 52 12 Provision for income taxes 135 224 (89) (40) Net income $ 456$ 767 $ (311) (41)% Net credit-related charge-offs (recoveries) $ 11$ (10) $ 21 n/m Selected average balances: Loans (a)$ 42,364 $ 42,625 $ (261) (1) % Deposits 44,886 42,399 2,487 6
(a)Included PPP loans with average balances of
Average loans decreased$261 million , driven by a$2.5 billion decline in PPP loans. Excluding the impact of PPP loans, average loans increased$2.3 billion . Average deposits increased$2.5 billion , reflecting an increase in noninterest-bearing deposits, partially offset by a decline in interest-bearing deposits.The Commercial Bank's net income decreased$311 million . Net interest income decreased$29 million due to an increase in allocated net FTP charges and the net impact of PPP loans, partially offset by an increase in loan income. The provision for credit losses increased$285 million , reflecting increases in Energy, general Middle Market,Commercial Real Estate , Business Banking and Technology and Life Sciences. Net credit-related charge-offs increased$21 million to$11 million , primarily due to increases in Energy and Technology and Life 42
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Sciences, partially offset by net recoveries in Corporate Banking and Business Banking. Noninterest income decreased$34 million , driven by a decrease in card fees due to higher activity in 2021 from stimulus payments, as well as lower principal investing and warrant-related income, derivative income and investment banking fees, partially offset by an increase in commercial lending fees. Noninterest expenses increased$52 million , primarily reflecting increases in corporate overhead, salaries and benefits expense, litigation-related expenses and operational losses, partially offset by a decrease in outside processing fee expense.Retail Bank Six Months Ended June 30, Percent (dollar amounts in millions) 2022 2021 Change Change Earnings summary: Net interest income $ 277$ 278 $ (1) - % Provision for credit losses 5 (1) 6 n/m Noninterest income 60 58 2 3 Noninterest expenses 337 322 15 5 (Benefit) provision for income taxes (2) 1 (3) n/m Net (loss) income $ (3)$ 14 $ (17) n/m Net credit-related (recoveries) charge-offs $ (1)$ 2 $ (3) n/m Selected average balances: Loans (a)$ 2,014 $ 2,576 $ (562) (22 %) Deposits 27,004 24,951 2,053 8
(a)Included PPP loans with average balances of
Average loans decreased$562 million due to a$576 million decline in PPP loans. Average deposits increased$2.1 billion , reflecting increases in all deposit categories with the exception of time deposits.The Retail Bank's net income decreased$17 million to a net loss of$3 million , including a$6 million increase in the provision for credit losses. Net interest income and noninterest income were relatively stable, while noninterest expenses increased$15 million , primarily due to increases in corporate overhead and operational losses, partially offset by a decrease in litigation-related expenses.
Wealth Management
Six Months Ended June 30, Percent
(dollar amounts in millions) 2022 2021 Change Change
Earnings summary:
Net interest income $ 83 $ 85 $ (2) (2) %
Provision for credit losses 6 (16) 22 n/m
Noninterest income 149 138 11 8
Noninterest expenses 172 153 19 13
Provision for income taxes 13 19 (6) (34)
Net income $ 41 $ 67 $ (26) (39)
Net credit-related recoveries $ (2) $ - $ (2) n/m
Selected average balances:
Loans (a) $ 4,773 $ 4,998 $ (225) (4) %
Deposits 5,636 4,965 671 14
(a)Included PPP loans with average balances of
Average loans decreased$225 million to$4.8 billion , while average deposits increased$671 million , reflecting increases in all deposit categories with the exception of savings deposits. Wealth Management's net income decreased$26 million to$41 million . Net interest income decreased$2 million , while provision for credit losses increased$22 million to an expense of$6 million due to an increase in Private Banking. Noninterest income increased$11 million due to increases in fiduciary income and securities trading income. Noninterest expenses increased$19 million , primarily reflecting increases in salaries and benefits expense and corporate overhead. 43
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Finance & Other
Six Months Ended June 30, Percent
(dollar amounts in millions) 2022 2021 Change Change
Earnings summary:
Net interest expense $ (98) $ (239) $ 141 (59)%
Provision for credit losses 3 - 3 n/m
Noninterest income 11 32 (21) (68)
Noninterest expenses (25) 16 (41) n/m
Benefit for income taxes (21) (53) 32 (61)
Net loss $ (44) $ (170) $ 126 (75)%
Selected average balances:
Loans $ 4 $ 7 $ (3) (45%)
Deposits 816 1,152 (336) (29)
n/m - not meaningful
Average deposits, which primarily consist of brokered and reciprocal deposits,
decreased $336 million . Net loss for the Finance and Other category decreased
$126 million to $44 million . Net interest expense decreased $141 million to
$98 million , primarily reflecting an increase in net FTP revenue as a result of
higher rates charged to the business segments under the Corporation's internal
FTP methodology. Noninterest income decreased $21 million to $11 million , driven
by a decrease in securities trading income, partially offset by increases in
bank-owned life insurance and derivative income. Noninterest expenses decreased
$41 million , primarily reflecting an increase in corporate overhead allocated to
other lines of business.
The following table lists the Corporation's banking centers by geographic
market.
June 30,
2022 2021
Michigan 188 188
Texas 124 123
California 95 95
Other Markets 26 25
Total 433 431
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FINANCIAL CONDITIONSecond Quarter 2022 Compared to Fourth Quarter 2021
Period-End Balances
Total assets decreased$7.7 billion to$86.9 billion driven by a$15.5 billion decrease in interest-bearing deposits with banks (primarily deposits with theFederal Reserve Bank ) which declined from the elevated levels seen atDecember 31, 2021 and was partially offset by increases of$3.8 billion in investment securities due to deployment of excess liquidity and$2.2 billion in loans. The increase in loans included growth of$735 million in general Middle Market,$654 million in National Dealer Services and$525 million in Corporate Banking, partially offset by a$548 million decrease in Mortgage Banker Finance. Total liabilities decreased$6.3 billion to$80.5 billion , reflecting decreases of$3.5 billion and$3.1 billion in noninterest-bearing and interest-bearing deposits, respectively.Commercial Bank andRetail Bank deposits declined, partially offset by an increase in Wealth Management deposits, reflecting strategic deposit management as well as customers utilizing balances to fund business activities. Total shareholders' equity decreased$1.5 billion , primarily due to the net impact of valuation changes in investment securities.
Average Balances
Total assets decreased$7.9 billion to$88.8 billion driven by a$14.4 billion decrease in interest-bearing deposits with banks, which was partially offset by increases of$2.4 billion in investment securities and$2.2 billion in loans. The following table provides information about the change in the Corporation's average loan portfolio by loan type. Three Months Ended Percent (dollar amounts in millions) June 30, 2022 December 31, 2021 Change Change Commercial loans (a)$ 29,918 $ 27,925$ 1,993 7 % Real estate construction loans 2,332 2,968 (636) (21) Commercial mortgage loans 11,947 11,212 735 7 Lease financing 642 634 8 1 International loans 1,303 1,177 126 11 Residential mortgage loans 1,773 1,810 (37) (2) Consumer loans 2,112 2,099 13 1 Total loans$ 50,027 $ 47,825$ 2,202 5 %
(a)Included PPP loans of
The$2.2 billion increase in loans, which included a$540 million decline in PPP loans, was primarily driven by increases of$818 million in general Middle Market,$748 million in Corporate Banking,$661 million in Equity Fund Services and$600 million in National Dealer Services, which was partially offset by a$725 million decrease in Mortgage Banker Finance. Total liabilities decreased$6.6 billion to$82.3 billion , primarily reflecting decreases of$3.9 billion and$3.1 billion in interest-bearing and noninterest-bearing deposits, respectively.Commercial Bank deposits declined while deposits increased inRetail Bank and Wealth Management. Total shareholders' equity decreased$1.3 billion , primarily due to the net impact of valuation changes in investment securities. 45
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Capital
The following table presents a summary of changes in total shareholders' equity
for the six months ended
(in millions) Balance atJanuary 1, 2022 $ 7,897 Net income 450 Cash dividends declared on common stock
(178)
Cash dividends declared on preferred stock
(11)
Purchase of common stock
(36)
Other comprehensive (loss) income, net of tax: Investment securities$ (1,396) Cash flow hedges (348) Defined benefit and other postretirement plans 2 Total other comprehensive loss, net of tax
(1,742)
Net issuance of common stock under employee stock plans 16 Share-based compensation 39 Balance atJune 30, 2022 $ 6,435
The following table summarizes the Corporation's repurchase activity during the
six months ended
Total Number of Shares
Purchased as Remaining Share Total Number Average Price
Part of Publicly Announced Repurchase of Shares Paid Per
(shares in thousands) Repurchase Plans or Programs Authorization (a) Purchased (b) Share
Total first quarter 2022 377 4,997 399 $ 92.58
April 2022 - 4,997 2 90.85
May 2022 - 4,997 - -
June 2022 - 4,997 2 73.86
Total second quarter 2022 - 4,997 4 82.52
(a)Maximum number of shares that may be repurchased under the publicly announced
plans or programs.
(b)Includes approximately 26,000 shares purchased pursuant to deferred
compensation plans and shares purchased from employees to pay for taxes related
to restricted stock vesting under the terms of an employee share-based
compensation plan during the six months ended June 30, 2022 . These transactions
are not considered part of the Corporation's repurchase program.
The Corporation continues to target a Common Equity Tier 1 (CET1) capital ratio
of approximately 10 percent with active capital management. At June 30, 2022 ,
the Corporation's estimated CET1 capital ratio was 9.72 percent, down from 10.13
percent at December 31, 2021 , primarily due to loan growth. The Corporation
expects to accrete capital closer to the target CET1 ratio through earnings
generation in the current environment. Since the inception of the share
repurchase program in 2010, a total of 97.2 million shares have been authorized
for repurchase. There is no expiration date for the share repurchase program.
The timing and actual amount of share repurchases are subject to various
factors, including the Corporation's earnings generation, capital needs to fund
future loan growth and market conditions.
The following table presents the minimum ratios required.
Common equity tier 1 capital to risk-weighted assets 4.5 %
Tier 1 capital to risk-weighted assets 6.0
Total capital to risk-weighted assets 8.0
Capital conservation buffer (a) 2.5
Tier 1 capital to adjusted average assets (leverage ratio) 4.0
(a)In addition to the minimum risk-based capital requirements, the Corporation
is required to maintain a minimum capital conservation buffer, in the form of
common equity, in order to avoid restrictions on capital distributions and
discretionary bonuses.
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The Corporation's capital ratios exceeded minimum regulatory requirements as
follows:
June 30, 2022 December 31, 2021 (dollar amounts in millions) Capital/Assets Ratio Capital/Assets Ratio
Common equity tier 1 (a), (b) $ 7,348 9.72 % $ 7,064 10.13 % Tier 1 risk-based (a), (b) 7,742 10.24 7,458 10.70 Total risk-based (a) 8,882 11.75 8,608 12.35 Leverage (a) 7,742 8.63 7,458 7.74 Common shareholders' equity 6,041 6.95 7,503 7.93 Tangible common equity (b) 5,396 6.26 6,857 7.30 Risk-weighted assets (a) 75,584 69,708
(a)
The common shareholders' equity ratio decreased 98 basis points to 6.95 percent atJune 30, 2022 primarily due to the change in unrealized losses in the Corporation's securities portfolio and, to a lesser extent, its cash flow hedge portfolio. The unrealized losses in the Corporation's available-for-sale security portfolio are due to market valuations since the time of initial acquisition which, in substantially all cases, are not expected to be realized. The tangible common equity ratio, which excludes goodwill and other intangible assets, decreased 104 basis points to 6.26 percent for the same reasons. The impact of cumulative unrealized losses recorded within other comprehensive loss atJune 30, 2022 to both ratios was approximately 225 basis points. RISK MANAGEMENT The following updated information should be read in conjunction with the "Risk Management" section on pages F-17 through F-33 in the Corporation's 2021 Annual Report. Credit Risk Allowance for Credit Losses The allowance for credit losses includes both the allowance for loan losses and the allowance for credit losses on lending-related commitments. The allowance for credit losses decreased$9 million from$618 million atDecember 31, 2021 to$609 million atJune 30, 2022 . As a percentage of total loans, the allowance for credit losses was 1.18 percent atJune 30, 2022 , compared to 1.26 percent atDecember 31, 2021 . The allowance for credit losses covered 2.3 times total nonperforming loans atJune 30, 2022 andDecember 31, 2021 . The economic forecasts informing the current expected credit loss (CECL) model primarily reflected strong credit quality and strengthening of the labor markets in the first half of 2022. Excess savings and pent-up demand from consumers, as well as robust labor markets, have supported growth in the broaderU.S. economy. However, there are increasing downside risks from the impacts of theRussia -Ukraine conflict,China's lockdowns and supply chain issues, the slowing housing market, future monetary and fiscal policy actions and inflationary pressures. These factors shaped the 2-year reasonable and supportable forecasts used by the Corporation in its CECL estimate atJune 30, 2022 . TheU.S. economy is expected to continue to grow, with the pace of expansion declining in 2023 before returning to long-term growth rates in 2024. Certain economic variables, like oil prices, are expected to normalize over the forecast period while others, like the unemployment rate, are projected to remain at current levels. Interest rates are forecasted to increase, reflecting theFederal Reserve's expectations, while corporate bond spreads are expected to reflect normalized default risk. The following table summarizes select economic variables representative of the economic forecasts used to develop the allowance for credit losses estimate atJune 30, 2022 . Economic Variable Base Forecast Growth above 3.5 percent in third quarter 2022, Real Gross Domestic Product (GDP) growth subsequently declining to under 1 percent by second quarter 2023 before returning to a long-term growth rate by first quarter 2024. Unemployment rate Stable between 3.5 percent and 3.6 percent throughout forecast period. Corporate BBB bond to 10-yearTreasury Reflect a normalized level of default risk. bond spreads Oil Prices Prices steadily decline from current levels to below$75 per barrel by the end of the forecast period. Due to the high level of uncertainty regarding significant assumptions, the Corporation evaluated a range of economic scenarios, including more benign and more severe economic forecasts. In a more severe scenario, real GDP is expected to contract through third quarter 2023, subsequently improving to a growth rate of 1.6 percent by the end of the forecast period. 47
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Other key economic variables follow a similar pattern of short-term contractions followed by a recovery. Selecting the more severe forecast would result in an increase in the quantitative calculation of allowance for credit losses by approximately$182 million as ofJune 30, 2022 . However, factoring in model overlays and qualitative adjustments could result in a materially different estimate under a more severe scenario.
Allowance for Loan Losses
The allowance for loan losses represents management's estimates of current expected credit losses in the Corporation's loan portfolio. Pools of loans with similar risk characteristics are collectively evaluated, while loans that no longer share risk characteristics with loan pools are evaluated individually. Collective loss estimates are determined by applying reserve factors, designed to estimate current expected credit losses, to amortized cost balances over the remaining contractual life of the collectively evaluated portfolio. Loans with similar risk characteristics are aggregated into homogeneous pools. The allowance for loan losses also includes qualitative adjustments to bring the allowance to the level management believes is appropriate based on factors that have not otherwise been fully accounted for, including adjustments for foresight risk, input imprecisions and model imprecision. Credit losses for loans that no longer share risk characteristics with the loan pools are estimated on an individual basis. Individual credit loss estimates are typically performed for nonaccrual loans and modified loans classified as troubled debt restructurings (TDRs) and are based on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.
Allowance for Credit Losses on Lending-Related Commitments
The allowance for credit losses on lending-related commitments estimates current expected credit losses on collective pools of letters of credit and unused commitments to extend credit based on reserve factors, determined in a manner similar to business loans, multiplied by a probability of draw estimate based on historical experience and credit risk, applied to commitment amounts. The allowance for credit losses on lending-related commitments increased$16 million to$46 million atJune 30, 2022 , compared to$30 million atDecember 31, 2021 .
The following table presents metrics of the allowance for credit losses and nonperforming loans.
June 30, 2022 December 31, 2021
Allowance for credit losses as a percentage of total loans 1.18 % 1.26 %
Allowance for credit losses as a multiple of total 2.3x 2.3x
nonaccrual loans
Allowance for credit losses as a multiple of total 2.3x 2.3x
nonperforming loans
For additional information regarding the allowance for credit losses, refer to the "Critical Accounting Estimates" section and pages F-51 through F-52 in Note 1 to the consolidated financial statements of the Corporation's 2021 Annual Report.
Nonperforming Assets
Nonperforming assets include loans on nonaccrual status, TDRs which have been renegotiated to less than the original contractual rates (reduced-rate loans) and foreclosed assets. TDRs include performing and nonperforming loans, with nonperforming TDRs on either nonaccrual or reduced-rate status. In accordance with the provisions of the CARES Act, the Corporation elected not to consider qualifying COVID-19-related modifications, primarily deferrals, as TDRs and did not designate such loans as past due or nonaccrual atDecember 31, 2021 . The temporary relief provided under the CARES Act applied to modifications made from the start of the COVID-19 pandemic throughDecember 31, 2021 . For additional information regarding the Corporation's accounting policies for the CARES Act, refer to page F-50 in Note 1 to the consolidated financial statements of the Corporation's 2021 Annual Report.
The following table presents a summary of nonperforming assets and past due loans.
(dollar amounts in millions)June 30 ,
2022
Nonaccrual loans 262 264 Reduced-rate loans 3 4 Total nonperforming loans 265 268 Foreclosed property 1 1 Total nonperforming assets $ 266 $ 269 Nonaccrual loans as a percentage of total loans 0.51 % 0.54 % Nonperforming loans as a percentage of total loans 0.52 0.54 Nonperforming assets as a percentage of total loans and 0.52 0.55
foreclosed property
Loans past due 90 days or more and still accruing $ 12 $ 27
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Nonperforming assets decreased$3 million to$266 million atJune 30, 2022 , from$269 million atDecember 31, 2021 . The decrease in nonperforming assets was primarily due to a decrease of$17 million in nonaccrual business loans, partially offset by a$15 million increase in nonaccrual retail loans, as temporary legislative relief for COVID-19-related deferrals ended onDecember 31, 2021 . Nonperforming loans were 0.52 percent of total loans atJune 30, 2022 , compared to 0.54 percent atDecember 31, 2021 . For further information regarding the composition of nonaccrual loans, refer to Note 4 to the consolidated financial statements.
The following table presents a summary of changes in nonaccrual loans.
Three Months Ended
(in millions) June 30, 2022 March 31, 2022 December 31, 2021
Balance at beginning of period $ 269 $ 264 $ 291
Loans transferred to nonaccrual (a) 30 41 15
Nonaccrual loan gross charge-offs (13) (18) (20)
Loans transferred to accrual status (a) - (4) -
Nonaccrual loans sold (9) - -
Payments/other (b) (15) (14) (22)
Balance at end of period $ 262 $ 269 $ 264
(a)Based on an analysis of nonaccrual loans with book balances greater than
(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. There were three borrowers with a balance greater than$2 million , totaling$30 million , transferred to nonaccrual status in second quarter 2022, compared to ten borrowers totaling$41 million in first quarter 2022 and three borrowers totaling$15 million in fourth quarter 2021. For further information about the composition of loans transferred to nonaccrual during the current period, refer to the nonaccrual information by industry category table below.
The following table presents the composition of nonaccrual loans by balance and
the related number of borrowers at
June 30, 2022 December
31, 2021
Number of Number of
(dollar amounts in millions) Borrowers Balance Borrowers
Balance
Under $2 million 518 $ 67 580 $ 63
$2 million - $5 million 10 33 14 46
$5 million - $10 million 9 58 7 54
$10 million - $25 million 6 76 5 69
Greater than $25 million 1 28 1 32
Total 544 $ 262 607 $ 264
The following table presents a summary of nonaccrual loans at June 30, 2022 as
well as loans transferred to nonaccrual and net loan charge-offs (recoveries)
for the three months ended June 30, 2022 , based on North American Industry
Classification System (NAICS) categories.
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June 30, 2022 Three Months Ended June 30, 2022
(dollar amounts in millions) Loans Transferred to Net Loan Charge-Offs
Industry Category Nonaccrual Loans Nonaccrual (a) (Recoveries)
Manufacturing $ 57 22 % $ 30 100 % $ 12
Residential Mortgage 49 19 - - -
Transportation & Warehousing 28 11 - - (6)
Real Estate & Home Builders 24 9 - - -
Wholesale Trade 24 9 - - -
Services 17 6 - - (3)
Information & Communication 11 4 - - -
Mining, Quarrying and Oil & Gas Extraction 11 4 - - (1)
Health Care & Social Assistance 8 3 - - -
Arts, Entertainment & Recreation 8 3 - - -
Management of Companies and Enterprises 7 3 - - -
Other (b) 18 7 - - (2)
Total $ 262 100 % $ 30 100 % $ -
(a)Based on an analysis of nonaccrual loans with book balances greater than $2
million .
(b)Consumer, excluding residential mortgage and certain personal purpose
nonaccrual loans and net charge-offs, are included in the Other category.
Loans past due 90 days or more and still accruing interest generally represent
loans that are well-collateralized and in the process of collection. Loans past
due 90 days or more decreased $15 million to $12 million at June 30, 2022 ,
compared to $27 million at December 31, 2021 . Loans past due 30-89 days
increased $55 million to $208 million at June 30, 2022 , compared to $153 million
at December 31, 2021 . Loans past due 30 days or more and still accruing interest
as a percentage of total loans were 0.43 percent and 0.36 percent at June 30,
2022 and December 31, 2021 , respectively. An aging analysis of loans included in
Note 4 to the consolidated financial statements provides further information
about the balances comprising past due loans.
The following table presents a summary of total criticized loans. The
Corporation's criticized list is consistent with the Special Mention,
Substandard and Doubtful categories defined by regulatory authorities.
Criticized loans with balances of $2 million or more on nonaccrual status or
loans with balances of $1 million or more whose terms have been modified in a
TDR are individually subjected to quarterly credit quality reviews, and the
Corporation may establish specific allowances for such loans. A table of loans
by credit quality indicator included in Note 4 to the consolidated financial
statements provides further information about the balances comprising total
criticized loans.
(dollar amounts in millions) June 30, 2022 March 31, 2022 December 31, 2021
Total criticized loans $ 1,534 $ 1,647 $ 1,573
As a percentage of total loans 3.0 % 3.3 % 3.2 %
The$39 million decrease in criticized loans during the six months endedJune 30, 2022 included decreases of$70 million in Entertainment Lending,$62 million in Business Banking,$28 million in Energy and$21 million in Corporate Banking, partially offset by increases of$69 million in Technology and Life Sciences,$54 million in general Middle Market and$34 million in Environmental Services.
Concentrations of Credit Risk
Concentrations of credit risk may exist when a number of borrowers are engaged in similar activities, or activities in the same geographic region, and have similar economic characteristics that would cause them to be similarly impacted by changes in economic or other conditions. The Corporation has concentrations of credit risk with the commercial real estate and automotive industries. All other industry concentrations, as defined by management, individually represented less than 10 percent of total loans atJune 30, 2022 . 50
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Commercial Real Estate Lending
At
June 30, 2022 December 31, 2021
Commercial Real Commercial Real
Estate business Estate business
(in millions) line (a) Other (b) Total line (a) Other (b) Total
Real estate construction loans $ 1,949
$ 2,465 $ 2,391$ 557 $ 2,948 Commercial mortgage loans 3,647 8,208 11,855 3,338 7,917 11,255 Total commercial real estate $ 5,596$ 8,724 $ 14,320 $ 5,729$ 8,474 $ 14,203 (a)Primarily loans to real estate developers. (b)Primarily loans secured by owner-occupied real estate. The Corporation limits risk inherent in its commercial real estate lending activities by monitoring borrowers directly involved in the commercial real estate markets and adhering to conservative policies on loan-to-value ratios for such loans. Commercial real estate loans, consisting of real estate construction and commercial mortgage loans, totaled$14.3 billion atJune 30, 2022 . Of the total,$5.6 billion , or 39 percent, were to borrowers in theCommercial Real Estate business line, which includes loans to real estate developers, a decrease of$133 million compared toDecember 31, 2021 . Commercial real estate loans in other business lines totaled$8.7 billion , or 61 percent, atJune 30, 2022 , an increase of$250 million compared toDecember 31, 2021 . These loans consisted primarily of owner-occupied commercial mortgages, which bear credit characteristics similar to non-commercial real estate business loans. Generally, loans previously reported as real estate construction are classified as commercial mortgage loans upon receipt of a certificate of occupancy. The real estate construction loan portfolio primarily contains loans made to long-tenured customers with satisfactory completion experience. There were no criticized real estate construction loans in theCommercial Real Estate business line at bothJune 30, 2022 andDecember 31, 2021 . In other business lines, criticized real estate construction loans totaled$4 million atJune 30, 2022 , compared to$35 million atDecember 31, 2021 .
The following table summarizes net charge-offs related to the Corporation's commercial real estate loan portfolio.
Three Months Ended Six Months Ended
(in millions) June 30, 2022 March 31, 2022 June 30, 2022 June 30, 2021
Real estate construction loan charge-offs $ - $ 1 $ 1 $ -
Commercial mortgage loans are loans where the primary collateral is a lien on
any real property and are primarily loans secured by owner-occupied real estate.
Real property is generally considered primary collateral if the value of that
collateral represents more than 50 percent of the commitment at loan approval.
Loans in the commercial mortgage portfolio generally mature within three to five
years. Criticized commercial mortgage loans in the Commercial Real Estate
business line totaled $18 million and $29 million at June 30, 2022 and
December 31, 2021 , respectively. In other business lines, $194 million and $219
million of commercial mortgage loans were criticized at June 30, 2022 and
December 31, 2021 , respectively. There were no commercial mortgage loan net
charge-offs during the three months ended June 30, 2022 and March 31, 2022 , or
in the six-month periods ended June 30, 2022 and 2021.
Automotive Lending - Dealer
The following table presents a summary of dealer loans.
June 30, 2022 December 31, 2021
Loans Percent of Loans Percent of
(in millions) Outstanding Total Loans Outstanding Total Loans
Dealer:
Floor plan $ 1,144 $ 681
Other 3,672 3,481
Total dealer $ 4,816 9.4 % $ 4,162 8.4 %
Substantially all dealer loans are in the National Dealer Services business line
and primarily include floor plan financing and other loans to automotive
dealerships. Floor plan loans, included in commercial loans in the Consolidated
Balance Sheets, totaled $1.1 billion at June 30, 2022 , an increase of $463
million compared to $681 million at December 31, 2021 , as an imbalance in supply
and demand impacted by a shortage in microchips used in automotive production
continues to depress floor plan loan balances. Other loans to automotive dealers
in the National Dealer Services business line totaled $3.7
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billion, including
There were no nonaccrual dealer loans at bothJune 30, 2022 andDecember 31, 2021 . Additionally, there were no net charge-offs of dealer loans during three months endedJune 30, 2022 andMarch 31, 2022 , or in the six months endedJune 30, 2022 and 2021.
Automotive Lending- Production
The following table presents a summary of loans to borrowers involved with automotive production.
June 30, 2022 December 31, 2021
Loans Percent of Loans Percent of
(in millions) Outstanding Total Loans Outstanding (a) Total Loans
Production:
Domestic $ 836 $ 789
Foreign 346 323
Total production $ 1,182 2.3 % $ 1,112 2.3 %
(a)Excludes PPP loans.
Loans to borrowers involved with automotive production, primarily Tier 1 and
Tier 2 suppliers, totaled $1.2 billion and $1.1 billion at June 30, 2022 and
December 31, 2021 , respectively. These borrowers have faced, and could face in
the future, financial difficulties due to disruptions in auto production as well
as their supply chains and logistics operations. As such, management continues
to monitor this portfolio.
Nonaccrual loans to borrowers involved with automotive production totaled $10
million at June 30, 2022 compared to none at December 31, 2021 . There were no
automotive production loan net charge-offs during the three months ended June
30, 2022 and March 31, 2022 . Additionally, there were no loan net charge-offs
during the six months ended June 30, 2022 , compared to $1 million for the same
period in 2021.
Residential Real Estate Lending
AtJune 30, 2022 , residential real estate loans represented 7 percent of total loans. The following table summarizes the Corporation's residential mortgage and home equity loan portfolios by geographic market. June 30, 2022 December 31, 2021 Residential Home Residential Home (dollar amounts in Mortgage % of Equity % of Mortgage % of Equity % of millions) Loans Total Loans Total Loans Total Loans Total Geographic market: Michigan$ 437 25 %$ 476 29 % $ 434 24 %$ 484 32 % California 852 49 746 46 870 49 660 43 Texas 263 15 343 21 245 14 329 21 Other Markets 201 11 67 4 222 13 60 4 Total$ 1,753 100 %$ 1,632 100 %$ 1,771 100 %$ 1,533 100 % Residential real estate loans, which consist of traditional residential mortgages and home equity loans and lines of credit, totaled$3.4 billion atJune 30, 2022 . The residential real estate portfolio is principally located within the Corporation's primary geographic markets. Substantially all residential real estate loans past due 90 days or more are placed on nonaccrual status, and substantially all junior lien home equity loans that are current or less than 90 days past due are placed on nonaccrual status if full collection of the senior position is in doubt. At no later than 180 days past due, such loans are charged off to current appraised values less costs to sell. Residential mortgages totaled$1.8 billion atJune 30, 2022 , and were primarily larger, variable-rate mortgages originated and retained for certain private banking relationship customers. Of the$1.8 billion of residential mortgage loans outstanding,$49 million were on nonaccrual status atJune 30, 2022 , an increase of$13 million as temporary legislative relief for COVID-19-related deferrals ended onDecember 31, 2021 . The home equity portfolio totaled$1.6 billion atJune 30, 2022 , of which 96 percent was outstanding under primarily variable-rate, interest-only home equity lines of credit, 3 percent were in amortizing status and 1 percent were closed-end home equity loans. Of the$1.6 billion of home equity loans outstanding,$13 million were on nonaccrual status atJune 30, 2022 . A majority of the home equity portfolio was secured by junior liens atJune 30, 2022 . 52
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Energy Lending
The Corporation has a portfolio of Energy loans that are included entirely in
commercial loans in the Consolidated Balance Sheets. Customers in the
Corporation's Energy business line are engaged in three segments of the oil and
gas business: exploration and production (E&P), midstream and energy services.
E&P generally includes such activities as searching for potential oil and gas
fields, drilling exploratory wells and operating active wells. Commitments to
E&P borrowers are generally subject to semi-annual borrowing base
re-determinations based on a variety of factors including updated prices
(reflecting market and competitive conditions), energy reserve levels and the
impact of hedging. The midstream sector is generally involved in the
transportation, storage and marketing of crude and/or refined oil and gas
products. The Corporation's legacy energy services customers provide products
and services primarily to the E&P segment.
The following table summarizes information about loans in the Corporation's
Energy business line.
June 30, 2022 December 31, 2021 (dollar amounts in millions) Outstandings Nonaccrual Criticized (a)
Outstandings Nonaccrual Criticized (a)
Exploration and production $ 1,139 83 % $ 11 $ 24 $ 971 80 % $ 14 $ 46
(E&P)
Midstream 219 16 - - 212 18 - -
Services 15 1 - 6 21 2 - 12
Total Energy business line $ 1,373 100 % $ 11 $ 30 $ 1,204 100 % $ 14 $ 58
As a percentage of total Energy loans 1 % 2 % 1 % 5 %
(a) Includes nonaccrual loans.
Loans in the Energy business line totaled$1.4 billion , or less than 3 percent of total loans, atJune 30, 2022 , an increase of$169 million compared toDecember 31, 2021 . Total exposure, including unused commitments to extend credit and letters of credit, was$3.1 billion atJune 30, 2022 (a utilization rate of 42 percent) and$2.9 billion atDecember 31, 2021 , respectively. Nonaccrual Energy loans decreased$3 million to$11 million atJune 30, 2022 compared toDecember 31, 2021 . Criticized Energy loans decreased$28 million to$30 million , or 2 percent of total criticized loans, atJune 30, 2022 compared toDecember 31, 2021 .
The following table summarizes net charge-offs related to the Corporation's Energy business line.
Three Months Ended Six Months Ended
(in millions) June 30, 2022 March 31, 2022 June 30, 2022 June 30, 2021
Net credit-related Energy charge-offs $ (1) $ 6 $ 5 $ (13)
(recoveries)
Leveraged Loans
Certain loans in the Corporation's commercial portfolio are considered leveraged
transactions. These loans are typically used for mergers, acquisitions, business
recapitalizations, refinancing and equity buyouts. To help mitigate the risk
associated with these loans, the Corporation focuses on middle market companies
with highly capable management teams, strong sponsors and solid track records of
financial performance. Industries prone to cyclical downturns and acquisitions
with a high degree of integration risk are generally avoided. Other
considerations include the sufficiency of collateral, the level of balance sheet
leverage and the adequacy of financial covenants. During the underwriting
process, cash flows are stress-tested to evaluate the borrowers' abilities to
handle economic downturns and an increase in interest rates.
The FDIC defines higher-risk commercial and industrial (HR C&I) loans for
assessment purposes as loans generally with leverage of four times total debt to
earnings before interest, taxes and depreciation (EBITDA) as well as three times
senior debt to EBITDA, excluding certain collateralized loans.
The following tables summarize information about HR C&I loans, which represented
7 percent and 6 percent of total loans at June 30, 2022 and December 31, 2021 ,
respectively.
(in millions) June 30, 2022 December 31, 2021
Outstandings $ 3,562 $ 2,927
Criticized 340 299
Three Months Ended Six Months Ended
(in millions) June 30, 2022 March 31, 2022 June 30, 2022 June 30, 2021
Net loan charge-offs $ 5 $ 3 $ 8 $ 4
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Market and Liquidity Risk
Market risk represents the risk of loss due to adverse movement in prices, including interest rates, foreign exchange rates, commodity prices and equity prices. Liquidity risk represents the risk that the Corporation does not have sufficient access to funds to maintain its normal operations at all times or does not have the ability to raise or borrow funds at a reasonable cost at all times.The Asset and Liability Policy Committee (ALCO) of the Corporation establishes and monitors compliance with the policies and risk limits pertaining to market and liquidity risk management activities. ALCO meets regularly to discuss and review market and liquidity risk management strategies and consists of executive and senior management from various areas of the Corporation, including treasury, finance, economics, lending, deposit gathering and risk management. CorporateTreasury mitigates market and liquidity risk under the direction of ALCO through the actions it takes to manage the Corporation's market, liquidity and capital positions.
The Corporation performs monthly liquidity stress testing to evaluate its
ability to meet funding needs in hypothetical stressed environments. Such
environments cover a series of scenarios, including both idiosyncratic and
market-wide in nature, which vary in terms of duration and severity. The
evaluation as of
In addition to assessing liquidity risk on a consolidated basis, CorporateTreasury also monitors the parent company's liquidity and has established liquidity coverage requirements for meeting expected obligations without the support of additional dividends from subsidiaries. ALCO's policy on liquidity risk management requires the parent company to maintain sufficient liquidity to meet expected cash obligations over a period of no less than 12 months. The Corporation had liquid assets of$1.4 billion on an unconsolidated basis atJune 30, 2022 . CorporateTreasury and the Enterprise Risk Division support ALCO in measuring, monitoring and managing interest rate risk as well as all other market risks. Key activities encompass: (i) providing information and analyses of the Corporation's balance sheet structure and measurement of interest rate and all other market risks; (ii) monitoring and reporting of the Corporation's positions relative to established policy limits and guidelines; (iii) developing and presenting analyses and strategies to adjust risk positions; (iv) reviewing and presenting policies and authorizations for approval; and (v) monitoring of industry trends and analytical tools to be used in the management of interest rate and all other market and liquidity risks.
Interest Rate Risk
Net interest income is the primary source of revenue for the Corporation. Interest rate risk arises in the normal course of business due to differences in the repricing and cash flow characteristics of assets and liabilities, primarily through the Corporation's core business activities of extending loans and acquiring deposits. The Corporation's balance sheet is predominantly characterized by floating-rate loans funded by core deposits. Including the impact of interest rate swaps converting floating-rate loans to fixed, the Corporation's loan composition atJune 30, 2022 was 53 percent 30-day or less rate (primarily LIBOR and BSBY), 29 percent fixed-rate, 12 percent prime and 6 percent comprised of 90-day and greater rates. Included in the above loan composition metrics, 28 percent of total loans had non-zero interest rate floors protecting against future rate declines. The composition of the loan portfolio creates sensitivity to interest rate movements due to the imbalance between the faster repricing of the floating-rate loan portfolio versus deposit products. In addition, the growth and/or contraction in the Corporation's loans and deposits may lead to changes in sensitivity to interest rate movements in the absence of mitigating actions. Examples of such actions are purchasing fixed-rate investment securities, which provide liquidity to the balance sheet and act to mitigate the inherent interest rate sensitivity, as well as hedging with interest rate swaps and options. Other mitigating factors include interest rate floors on a portion of the loan portfolio. The Corporation actively manages its exposure to interest rate risk with the principal objective of optimizing net interest income and the economic value of equity while operating within acceptable limits established for interest rate risk and maintaining adequate levels of funding and liquidity. Based on the current rate environment and balance sheet composition, the Corporation anticipates it will continue to add fixed-rate assets (primarily interest rate swaps) to manage its interest rate risk within acceptable risk levels by reducing its sensitivity to rate movements and specifically to protect against declining rates. Since no single measurement system satisfies all management objectives, a combination of techniques is used to manage interest rate risk. These techniques examine the impact of interest rate risk on net interest income and the economic value of equity under a variety of alternative scenarios, including changes in the level, slope and shape of the yield curve utilizing multiple simulation analyses. Simulation analyses produce only estimates of net interest income as the assumptions used are inherently uncertain. Actual results may differ from simulated results due to many factors, including, but not limited to, the timing, magnitude and frequency of changes in interest rates, market conditions, regulatory impacts and management strategies. 54
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Sensitivity of Net Interest Income to Changes in Interest Rates
The analysis of the impact of changes in interest rates on net interest income under various interest rate scenarios is management's principal risk management technique. Management models a base-case net interest income under an unchanged interest rate environment. Model assumptions in this base case atJune 30, 2022 included a modest increase in loan balances, loan spreads held at current levels, a moderate decrease in deposit balances with an interest-bearing deposit beta of approximately 30%, securities portfolio held at current level and no additions to interest swaps modeled. The average balance of the securities portfolio was$19.0 billion for the three months endedJune 30, 2022 with an average yield of 1.92%. During the second quarter of 2022, the Corporation purchased$3.5 billion in mortgage-backed securities with an average yield of 3.50% and effective duration of 7.5 years. AtJune 30, 2022 , the effective duration of the entire securities portfolio was 5.5 years. The table below details components of the cash flow hedge portfolio atJune 30, 2022 . Cash Flow Hedges (dollar amounts in millions) Notional Amount Weighted Average Yield Years to Maturity (a) Swaps under contract at June 30, 2022$ 19,250 2.19 % 4.7
(b)
Weighted average notional active per period: First quarter 2022 5,478 1.81 1.8 Second quarter 2022 8,298 1.91 3.4 Third quarter 2022 12,829 2.11 4.6 Fourth quarter 2022 16,634 2.23 4.9 Full year 2023 16,830 2.22 5.0 Full year 2024 15,586 2.28 5.4 (a)Years to maturity calculated from a starting date ofJune 30, 2022 . (b)Includes forward starting swaps of$5.9 billion starting in third quarter 2022,$2.8 billion starting in fourth quarter 2022 and$1.0 billion starting after fourth quarter 2022. Excluding forward starting swaps, the weighted average yield was 1.95%. Additionally, as ofJuly 25, 2022 ,$1.0 billion of cash flow hedges with a weighted average yield of 2.87% and an average initial term of 4.2 years were entered into in the third quarter of 2022, with start dates inOctober 2022 . These third quarter 2022 hedges are not included in the interest rate sensitivity analysis. The analysis also includes interest rate swaps that convert$2.7 billion of fixed-rate medium- and long-term debt to variable rates through fair value hedges. Additionally, included in this analysis are$14.6 billion of loans that were subject to an average interest rate floor of 58 basis points atJune 30, 2022 . This base-case net interest income is then compared against interest rate scenarios in which short-term rates rise or decline 100 basis points (with a floor of zero percent) in a linear, parallel fashion from the base case over 12 months, resulting in an average change of 50 basis points over the period.
Each scenario includes assumptions such as loan growth, investment security prepayment levels, depositor behavior, yield curve changes, loan and deposit pricing, and overall balance sheet mix and growth which are in line with historical patterns. Changes in actual economic activity may result in a materially different interest rate environment as well as a balance sheet structure that is different from the changes management included in its simulation analysis.
The table below, as of
Estimated Annual Change
June 30, 2022 December 31, 2021
(dollar amounts in Amount % Amount %
millions)
Change in Interest Rates: Change in Interest Rates:
Rising 100 basis points $ 86 3 % Rising 100 basis points $ 205 12 %
(50 basis points on average) (50 basis points on average)
Declining 100 basis (155) (6) Declining to zero percent (46) (3)
points
Sensitivity to declining interest rates increased from December 31, 2021 to
June 30, 2022 primarily due to the May and June increases in fed funds to 175
basis points, allowing for a full 100 basis point repricing of the balance
sheet. This was partially offset by additional cash flow hedges and investment
securities added in 2022 and non-maturity deposit runoff. Sensitivity to rising
interest rates decreased due to increased cash flow hedges and non-maturity
deposit runoff but was partially offset by the increased repricing potential of
floating-rate loans as they moved above their contractual floor rates.
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Sensitivity of Economic Value of Equity to Changes in Interest Rates
In addition to the simulation analysis on net interest income, an economic value of equity analysis provides an alternative view of the interest rate risk position. The economic value of equity is the difference between the estimate of the economic value of the Corporation's financial assets, liabilities and off-balance sheet instruments, derived through discounting cash flows based on actual rates at the end of the period, and the estimated economic value after applying the estimated impact of rate movements. The Corporation primarily monitors the percentage change on the base-case economic value of equity. The economic value of equity analysis is based on an immediate parallel 100 basis point shock with a floor of zero percent.
The table below, as of
June 30, 2022 December 31, 2021
(dollar amounts in Amount % Amount %
millions)
Change in Interest Rates: Change in Interest Rates:
Rising 100 basis points $ (205) (1 %) Rising 100 basis points $ 1,353 9 %
Declining 100 basis 106 1 Declining to zero percent (446) (3)
points
The sensitivity of the economic value of equity to rising rates changed from an
increase as of December 31, 2021 to a reduction as of June 30, 2022 due to the
additional cash flow hedges, growth of the securities portfolio and deposit
runoff. Sensitivity to declining rates now increases economic value of equity
due to the same factors.
LIBOR Transition
On July 27, 2017 , the United Kingdom's Financial Conduct Authority (FCA), which
regulates LIBOR, publicly announced that it intends to stop persuading or
compelling banks to submit LIBOR rates after 2021. Effective March 2021 , the FCA
confirmed that certain LIBOR tenors will no longer be supported after December
31, 2021 and that the remaining tenors, including those most commonly used by
the Corporation, will cease to be supported after June 30, 2023 . The Corporation
has substantial exposure to LIBOR-based products, including loans and
derivatives, and is preparing for a transition from LIBOR toward alternative
rates.
As of July 1, 2021 , the Corporation was operationally ready to issue new Secured
Overnight Financing Rate (SOFR)-based cash and derivative products.
Additionally, as of September 30, 2021 , the Corporation was operationally ready
to issue new Bloomberg Short-Term Bank Yield Index (BSBY)-based cash and
derivative products. The Corporation ceased originating LIBOR-based products in
the fourth quarter of 2021. As of June 30, 2022 , the Corporation estimates that
approximately 38 percent of its LIBOR-based commercial loans have maturity dates
prior to the cessation of LIBOR. Of the remaining loans with maturity dates
beyond the cessation date, the Corporation estimates that 42 percent incorporate
fallback language and is confident that it will achieve timely remediation of
all other loans. Cessation planning for consumer loans is in process, as the
Corporation has completed a review of the fallback terms for residential
adjustable-rate mortgages and identified alternate benchmarks for other smaller
portfolio segments. Communications and learning activities to support customers
and colleagues are ongoing.
In addition to remediation activity on LIBOR-based loans, the Corporation has
enacted the International Swaps and Derivatives Association (ISDA) protocols
related to derivatives. Once events occur that trigger a fallback, the reference
rate for the variable leg of the swap will fall back from LIBOR to the ISDA
Fallback Rate, which is the daily SOFR plus a spread.
The Corporation's enterprise transition timelines are closely aligned with
recommendations from the Alternative Reference Rates Committee for both best
practices and recommended objectives. The Corporation will continue to align
with industry and regulatory guidelines regarding the cessation of LIBOR as well
as monitor market developments for transitioning to alternative reference rates.
For a discussion of the various risks facing the Corporation in relation to the
transition away from LIBOR, see the market risk discussion within "Item 1A. Risk
Factors" beginning on page 13 of the Corporation's Annual Report on Form 10-K
for the year ended December 31, 2021 .
Sources of Liquidity
The Corporation maintains a liquidity position that it believes will adequately satisfy its financial obligations while taking into account potential commitment draws and deposit run-off that may occur in the normal course of business. The majority of the Corporation's balance sheet is funded by customer deposits. Cash flows from loan repayments, increases in deposit accounts, activity in the securities portfolio and the purchased funds market serve as the Corporation's primary liquidity sources.
The Corporation satisfies incremental liquidity needs with either liquid assets
or external funding sources. The Corporation had access to liquid assets of
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which included cash on deposit with the
In addition, the Corporation may access external funding sources when necessary, which include FHLB advances, federal funds, reverse repurchase agreements, brokered depositsand Corporation -issued bonds. The Corporation maintains a shelf registration statement with theSecurities and Exchange Commission from which it may issue debt and equity securities. Purchased funds decreased to$20 million atJune 30, 2022 compared to$50 million atDecember 31, 2021 . AtJune 30, 2022 , the Bank had pledged loans totaling$23.9 billion which provided for up to$20.2 billion of available collateralized borrowing with theFederal Reserve Bank (FRB). The Bank is also a member of the FHLB ofDallas, Texas , which provides short- and long-term funding to its members through advances collateralized by real estate-related loans, certain government agency-backed securities and other eligible assets. Actual borrowing capacity is contingent on the amount of collateral pledged to the FHLB. AtJune 30, 2022 ,$18.1 billion of real estate-related loans were pledged to the FHLB as collateral providing$10.5 billion for potential future borrowings. The ability of the Corporation and the Bank to raise funds at competitive rates is impacted by rating agencies' views of the credit quality, liquidity, capital, earnings and other relevant factors related to the Corporation and the Bank. As ofJune 30, 2022 , the three major rating agencies had assigned the following ratings to long-term senior unsecured obligations of the Corporation and the Bank. A security rating is not a recommendation to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. Comerica Incorporated Comerica Bank June 30, 2022 Rating Outlook Rating Outlook Moody's Investors Service A3 Stable A3 Stable Fitch Ratings A- Stable A- Stable Standard and Poor's BBB+ Stable A- Stable 57
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CRITICAL ACCOUNTING ESTIMATES
The Corporation's consolidated financial statements are prepared based on the
application of accounting policies, the most significant of which are described
in Note 1 to the consolidated financial statements included in the Corporation's
2021 Annual Report. These policies require numerous estimates and strategic or
economic assumptions, which may prove inaccurate or subject to variations.
Changes in underlying factors, assumptions or estimates could have a material
impact on the Corporation's future financial condition and results of
operations. At December 31, 2021 , the most critical of these estimates related
to the allowance for credit losses, fair value measurement, goodwill, pension
plan accounting and income taxes. These estimates were reviewed with the Audit
Committee of the Corporation's Board of Directors and are discussed more fully
on pages F-34 through F-37 in the Corporation's 2021 Annual Report. As of the
date of this report, there have been no significant changes to the Corporation's
critical accounting estimates.
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SUPPLEMENTAL FINANCIAL DATA
The Corporation believes non-GAAP measures are meaningful because they reflect
adjustments commonly made by management, investors, regulators and analysts to
evaluate the adequacy of common equity and our performance trends. Tangible
common equity is used by the Corporation to measure the quality of capital and
the return relative to balance sheet risk.
Common equity tier 1 capital ratio removes preferred stock from the Tier 1
capital ratio as defined by and calculated in conformity with bank regulations.
The tangible common equity ratio removes the effect of intangible assets from
capital and 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. The Corporation believes that the presentation of
tangible common equity adjusted for the impact of accumulated other
comprehensive loss provides a greater understanding of ongoing operations and
enhances comparability with prior periods.
The following table provides a reconciliation of non-GAAP financial measures and
regulatory ratios used in this financial review with financial measures defined
by GAAP.
(dollar amounts in millions) June 30, 2022 December 31, 2021
Common Equity Tier 1 Capital (a):
Tier 1 capital $ 7,742 $ 7,458
Less:
Fixed-rate reset non-cumulative perpetual preferred stock 394 394
Common equity tier 1 capital $ 7,348 $ 7,064
Risk-weighted assets $ 75,584 $ 69,708
Tier 1 capital ratio 10.24 % 10.70 %
Common equity tier 1 capital ratio 9.72 10.13
Tangible Common Equity Ratio:
Total shareholders' equity $ 6,435 $ 7,897
Less:
Fixed-rate reset non-cumulative perpetual preferred stock 394 394
Common shareholders' equity $ 6,041 $ 7,503
Less:
Goodwill 635 635
Other intangible assets 10 11
Tangible common equity $ 5,396 $ 6,857
Total assets $ 86,889 $ 94,616
Less:
Goodwill 635 635
Other intangible assets 10 11
Tangible assets $ 86,244 $ 93,970
Common equity ratio 6.95 % 7.93 %
Tangible common equity ratio 6.26 7.30
Tangible Common Equity per Share of Common Stock:
Common shareholders' equity $ 6,041 $ 7,503
Tangible common equity 5,396 6,857
Shares of common stock outstanding (in millions) 131 131
Common shareholders' equity per share of common stock $ 46.19 $ 57.41
Tangible common equity per share of common stock 41.25 52.46
Impact of Accumulated Other Comprehensive Loss to Tangible Common Equity: Accumulated other comprehensive loss (AOCI)
$ (1,954) $ (212) Tangible common equity, excluding AOCI 7,350 7,069 Tangible common equity ratio, excluding AOCI 8.52 % 7.52 %
Tangible common equity per share of common stock, excluding
(a)
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