Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2010

 

or

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                  to                 

 

Commission file number 1-10706

 

Comerica Incorporated

(Exact name of registrant as specified in its charter)

 

Delaware

 

38-1998421

(State or other jurisdiction of

 

(I.R.S. Employer

Incorporation or organization)

 

Identification No.)

 

Comerica Bank Tower

1717 Main Street, MC 6404

Dallas, Texas  75201

(Address of principal executive offices)

(Zip Code)

 

(214) 462-6831

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of  “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule  12b-2 of the Exchange Act:

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

$5 par value common stock:

 

Outstanding as of July 26, 2010: 176,319,342 shares

 

 

 



Table of Contents

 

COMERICA INCORPORATED AND SUBSIDIARIES

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

 

ITEM 1. Financial Statements

 

 

 

Consolidated Balance Sheets at June 30, 2010 (unaudited), December 31, 2009 and June 30, 2009 (unaudited)

3

 

 

Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2010 and 2009 (unaudited)

4

 

 

Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2010 and 2009 (unaudited)

5

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (unaudited)

6

 

 

Notes to Consolidated Financial Statements (unaudited)

7

 

 

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

41

 

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

71

 

 

ITEM 4. Controls and Procedures

71

 

 

PART II. OTHER INFORMATION

 

 

ITEM 1. Legal Proceedings

71

 

 

ITEM 1A. Risk Factors

71

 

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

73

 

 

ITEM 6. Exhibits

73

 

 

Signature

75

 



Table of Contents

 

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

CONSOLIDATED BALANCE SHEETS

Comerica Incorporated and Subsidiaries

 

 

 

June 30,

 

December 31,

 

June 30,

 

(in millions, except share data)

 

2010

 

2009

 

2009

 

 

 

(unaudited)

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

 

$

816

 

$

774

 

$

948

 

 

 

 

 

 

 

 

 

Federal funds sold and securities purchased under agreements to resell

 

 

 

650

 

Interest-bearing deposits with banks

 

3,409

 

4,843

 

3,542

 

Other short-term investments

 

134

 

138

 

129

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale

 

7,188

 

7,416

 

7,757

 

 

 

 

 

 

 

 

 

Commercial loans

 

21,151

 

21,690

 

24,922

 

Real estate construction loans

 

2,774

 

3,461

 

4,152

 

Commercial mortgage loans

 

10,318

 

10,457

 

10,400

 

Residential mortgage loans

 

1,606

 

1,651

 

1,759

 

Consumer loans

 

2,443

 

2,511

 

2,562

 

Lease financing

 

1,084

 

1,139

 

1,234

 

International loans

 

1,226

 

1,252

 

1,523

 

Total loans

 

40,602

 

42,161

 

46,552

 

Less allowance for loan losses

 

(967

)

(985

)

(880

)

Net loans

 

39,635

 

41,176

 

45,672

 

 

 

 

 

 

 

 

 

Premises and equipment

 

634

 

644

 

667

 

Customers’ liability on acceptances outstanding

 

24

 

11

 

7

 

Accrued income and other assets

 

4,045

 

4,247

 

4,258

 

Total assets

 

$

55,885

 

$

59,249

 

$

63,630

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

15,769

 

$

15,871

 

$

13,558

 

 

 

 

 

 

 

 

 

Money market and NOW deposits

 

16,062

 

14,450

 

12,352

 

Savings deposits

 

1,407

 

1,342

 

1,348

 

Customer certificates of deposit

 

5,893

 

6,413

 

8,524

 

Other time deposits

 

165

 

1,047

 

4,593

 

Foreign office time deposits

 

484

 

542

 

616

 

Total interest-bearing deposits

 

24,011

 

23,794

 

27,433

 

Total deposits

 

39,780

 

39,665

 

40,991

 

 

 

 

 

 

 

 

 

Short-term borrowings

 

200

 

462

 

490

 

Acceptances outstanding

 

24

 

11

 

7

 

Accrued expenses and other liabilities

 

1,048

 

1,022

 

1,478

 

Medium- and long-term debt

 

9,041

 

11,060

 

13,571

 

Total liabilities

 

50,093

 

52,220

 

56,537

 

 

 

 

 

 

 

 

 

Fixed rate cumulative perpetual preferred stock, series F, no par value, $1,000 liquidation value per share:

 

 

 

 

 

 

 

Authorized - 2,250,000 shares at 12/31/09 and 6/30/09

 

 

 

 

 

 

 

Issued - 2,250,000 shares at 12/31/09 and 6/30/09

 

 

2,151

 

2,140

 

Common stock - $5 par value:

 

 

 

 

 

 

 

Authorized - 325,000,000 shares

 

 

 

 

 

 

 

Issued - 203,878,110 shares at 6/30/10 and 178,735,252 shares at 12/31/09 and 6/30/09

 

1,019

 

894

 

894

 

Capital surplus

 

1,467

 

740

 

731

 

Accumulated other comprehensive loss

 

(240

)

(336

)

(342

)

Retained earnings

 

5,124

 

5,161

 

5,257

 

Less cost of common stock in treasury - 27,561,412 shares at 6/30/10, 27,555,623 shares at 12/31/09 and 27,620,471 shares at 6/30/09

 

(1,578

)

(1,581

)

(1,587

)

Total shareholders’ equity

 

5,792

 

7,029

 

7,093

 

Total liabilities and shareholders’ equity

 

$

55,885

 

$

59,249

 

$

63,630

 

 

See notes to consolidated financial statements.

 

3



Table of Contents

 

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Comerica Incorporated and Subsidiaries

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

(in millions, except per share data)

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

412

 

$

447

 

$

824

 

$

899

 

Interest on investment securities

 

61

 

103

 

122

 

212

 

Interest on short-term investments

 

3

 

2

 

6

 

4

 

Total interest income

 

476

 

552

 

952

 

1,115

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Interest on deposits

 

29

 

106

 

64

 

231

 

Interest on short-term borrowings

 

 

 

 

2

 

Interest on medium- and long-term debt

 

25

 

44

 

51

 

96

 

Total interest expense

 

54

 

150

 

115

 

329

 

Net interest income

 

422

 

402

 

837

 

786

 

Provision for loan losses

 

126

 

312

 

301

 

515

 

Net interest income after provision for loan losses

 

296

 

90

 

536

 

271

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

52

 

55

 

108

 

113

 

Fiduciary income

 

38

 

41

 

77

 

83

 

Commercial lending fees

 

22

 

19

 

44

 

37

 

Letter of credit fees

 

19

 

16

 

37

 

32

 

Card fees

 

15

 

12

 

28

 

24

 

Foreign exchange income

 

10

 

11

 

20

 

20

 

Bank-owned life insurance

 

9

 

10

 

17

 

18

 

Brokerage fees

 

6

 

8

 

12

 

17

 

Net securities gains

 

1

 

113

 

3

 

126

 

Other noninterest income

 

22

 

13

 

42

 

51

 

Total noninterest income

 

194

 

298

 

388

 

521

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSES

 

 

 

 

 

 

 

 

 

Salaries

 

179

 

171

 

348

 

342

 

Employee benefits

 

45

 

53

 

89

 

108

 

Total salaries and employee benefits

 

224

 

224

 

437

 

450

 

Net occupancy expense

 

40

 

38

 

81

 

79

 

Equipment expense

 

15

 

15

 

32

 

31

 

Outside processing fee expense

 

23

 

25

 

46

 

50

 

Software expense

 

22

 

20

 

44

 

40

 

FDIC insurance expense

 

16

 

45

 

33

 

60

 

Legal fees

 

9

 

10

 

18

 

17

 

Other real estate expense

 

5

 

9

 

17

 

16

 

Litigation and operational losses

 

2

 

2

 

3

 

4

 

Provision for credit losses on lending-related commitments

 

 

(4

)

7

 

(5

)

Other noninterest expenses

 

41

 

45

 

83

 

84

 

Total noninterest expenses

 

397

 

429

 

801

 

826

 

Income (loss) from continuing operations before income taxes

 

93

 

(41

)

123

 

(34

)

Provision (benefit) for income taxes

 

23

 

(59

)

18

 

(60

)

Income from continuing operations

 

70

 

18

 

105

 

26

 

Income from discontinued operations, net of tax

 

 

 

17

 

1

 

NET INCOME

 

70

 

18

 

122

 

27

 

Preferred stock dividends

 

 

34

 

123

 

67

 

Income allocated to participating securities

 

1

 

 

 

 

Net income (loss) attributable to common shares

 

$

69

 

$

(16

)

$

(1

)

$

(40

)

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.40

 

$

(0.11

)

$

(0.11

)

$

(0.28

)

Net income (loss)

 

0.40

 

(0.11

)

(0.01

)

(0.27

)

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

0.39

 

(0.11

)

(0.11

)

(0.28

)

Net income (loss)

 

0.39

 

(0.11

)

(0.01

)

(0.27

)

 

 

 

 

 

 

 

 

 

 

Cash dividends declared on common stock

 

9

 

8

 

18

 

15

 

Cash dividends declared per common share

 

0.05

 

0.05

 

0.10

 

0.10

 

 

See notes to consolidated financial statements.

 

4



Table of Contents

 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

Comerica Incorporated and Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

Other

 

 

 

 

 

Total

 

 

 

Preferred

 

Shares

 

 

 

Capital

 

Comprehensive

 

Retained

 

Treasury

 

Shareholders’

 

(in millions, except per share data)

 

Stock

 

Outstanding

 

Amount

 

Surplus

 

Loss

 

Earnings

 

Stock

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT DECEMBER 31, 2008

 

$

2,129

 

150.5

 

$

894

 

$

722

 

$

(309

)

$

5,345

 

$

(1,629

)

$

7,152

 

Net income

 

 

 

 

 

 

27

 

 

27

 

Other comprehensive loss, net of tax

 

 

 

 

 

(33

)

 

 

(33

)

Total comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6

)

Cash dividends declared on preferred stock

 

 

 

 

 

 

(57

)

 

(57

)

Cash dividends declared on common stock ($0.10 per share)

 

 

 

 

 

 

(15

)

 

(15

)

Purchase of common stock

 

 

(0.1

)

 

 

 

 

(1

)

(1

)

Accretion of discount on preferred stock

 

11

 

 

 

 

 

(11

)

 

 

Net issuance of common stock under employee stock plans

 

 

0.7

 

 

(14

)

 

(32

)

43

 

(3

)

Share-based compensation

 

 

 

 

18

 

 

 

 

18

 

Other

 

 

 

 

5

 

 

 

 

5

 

BALANCE AT JUNE 30, 2009

 

$

2,140

 

151.1

 

$

894

 

$

731

 

$

(342

)

$

5,257

 

$

(1,587

)

$

7,093

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT DECEMBER 31, 2009

 

$

2,151

 

151.2

 

$

894

 

$

740

 

$

(336

)

$

5,161

 

$

(1,581

)

$

7,029

 

Net income

 

 

 

 

 

 

122

 

 

122

 

Other comprehensive income, net of tax

 

 

 

 

 

96

 

 

 

96

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

218

 

Cash dividends declared on preferred stock

 

 

 

 

 

 

(38

)

 

(38

)

Cash dividends declared on common stock ($0.10 per share)

 

 

 

 

 

 

(18

)

 

(18

)

Purchase of common stock

 

 

 

 

 

 

 

(4

)

(4

)

Issuance of common stock

 

 

25.1

 

125

 

724

 

 

 

 

849

 

Redemption of preferred stock

 

(2,250

)

 

 

 

 

 

 

(2,250

)

Redemption discount accretion on preferred stock

 

94

 

 

 

 

 

(94

)

 

 

Accretion of discount on preferred stock

 

5

 

 

 

 

 

(5

)

 

 

Net issuance of common stock under employee stock plans

 

 

 

 

(5

)

 

(4

)

6

 

(3

)

Share-based compensation

 

 

 

 

11

 

 

 

 

11

 

Other

 

 

 

 

(3

)

 

 

1

 

(2

)

BALANCE AT JUNE 30, 2010

 

$

 

176.3

 

$

1,019

 

$

1,467

 

$

(240

)

$

5,124

 

$

(1,578

)

$

5,792

 

 

See notes to consolidated financial statements.

 

5



Table of Contents

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Comerica Incorporated and Subsidiaries

 

 

 

Six Months Ended June 30,

 

(in millions)

 

2010

 

2009

 

OPERATING ACTIVITIES

 

 

 

 

 

Net income

 

$

122

 

$

27

 

Income from discontinued operations, net of tax

 

17

 

1

 

Income from continuing operations, net of tax

 

105

 

26

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Provision for loan losses

 

301

 

515

 

Provision for credit losses on lending-related commitments

 

7

 

(5

)

Provision (benefit) for deferred income taxes

 

1

 

(114

)

Depreciation and software amortization

 

62

 

61

 

Net gain on early termination of leveraged leases

 

 

(8

)

Share-based compensation expense

 

11

 

18

 

Net amortization (accretion) of securities

 

8

 

(5

)

Net securities gains

 

(3

)

(126

)

Net gain on sales of businesses

 

 

(6

)

Contribution to qualified pension plan

 

 

(100

)

Excess tax benefits from share-based compensation arrangements

 

(1

)

 

Net decrease in trading securities

 

5

 

32

 

Net increase in loans held-for-sale

 

(1

)

(3

)

Net decrease (increase) in accrued income receivable

 

9

 

(44

)

Net decrease in accrued expenses

 

(9

)

(122

)

Other, net

 

228

 

(177

)

Discontinued operations, net

 

17

 

1

 

Net cash provided by (used in) operating activities

 

740

 

(57

)

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

Proceeds from sales of investment securities available-for-sale

 

209

 

2,671

 

Proceeds from maturities of investment securities available-for-sale

 

681

 

1,473

 

Purchases of investment securities available-for-sale

 

(521

)

(2,493

)

Sales of Federal Home Loan Bank stock

 

41

 

 

Net decrease in loans

 

1,200

 

3,451

 

Proceeds from early termination of leveraged leases

 

 

107

 

Net increase in fixed assets

 

(36

)

(37

)

Net (increase) decrease in customers’ liability on acceptances outstanding

 

(13

)

7

 

Proceeds from sale of business

 

 

7

 

Discontinued operations, net

 

 

 

Net cash provided by investing activities

 

1,561

 

5,186

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

Net increase (decrease) in deposits

 

126

 

(631

)

Net decrease in short-term borrowings

 

(262

)

(1,259

)

Net increase (decrease) in acceptances outstanding

 

13

 

(7

)

Repayments of medium- and long-term debt

 

(1,951

)

(1,400

)

Repurchases of medium- and long-term debt

 

(165

)

 

Proceeds from issuance of common stock

 

849

 

 

Redemption of preferred stock

 

(2,250

)

 

Proceeds from issuance of common stock under employee stock plans

 

4

 

 

Excess tax benefits from share-based compensation arrangements

 

1

 

 

Purchase of common stock for treasury

 

(4

)

(1

)

Dividends paid on common stock

 

(16

)

(57

)

Dividends paid on preferred stock

 

(38

)

(57

)

Discontinued operations, net

 

 

 

Net cash used in financing activities

 

(3,693

)

(3,412

)

Net (decrease) increase in cash and cash equivalents

 

(1,392

)

1,717

 

Cash and cash equivalents at beginning of period

 

5,617

 

3,423

 

Cash and cash equivalents at end of period

 

$

4,225

 

$

5,140

 

Interest paid

 

$

125

 

$

338

 

Income taxes, tax deposits and tax-related interest paid

 

$

19

 

$

217

 

Noncash investing and financing activities:

 

 

 

 

 

Loans transferred to other real estate

 

$

41

 

$

54

 

 

See notes to consolidated financial statements.

 

6



Table of Contents

 

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

 

Note 1 - Basis of Presentation and Accounting Policies

 

The accompanying unaudited consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation were included. The results of operations for the six months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. Certain items in prior periods were reclassified to conform to the current presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report of Comerica Incorporated and Subsidiaries (the Corporation) on Form 10-K for the year ended December 31, 2009.

 

Recently Adopted Accounting Changes

 

Consolidation

 

On January 1, 2010, the Corporation adopted Accounting Standards Update (ASU) No. 2009-17, “Improvements in Financial Reporting by Enterprises Involved with Variable Interest Entities,” (ASU 2009-17).  ASU 2009-17 amends consolidation guidance related to variable interest entities (VIEs) by replacing a quantitative approach for determining which enterprise, if any, is the primary beneficiary and required to consolidate a VIE with a qualitative approach.  The qualitative approach is focused on identifying which enterprise has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits that could be significant to the VIE.  ASU 2009-17 requires reconsideration of the primary beneficiary whenever circumstances change and eliminates the exception for qualifying special-purpose entities from consolidation guidance.

 

In February 2010, the Financial Accounting Standards Board (FASB) issued ASU No. 2010-10, “Amendments for Certain Investment Funds,” (ASU 2010-10). ASU 2010-10 indefinitely defers the requirements of ASU 2009-17 for certain investment funds with attributes of an investment company specified in the accounting guidance, including, but not limited to, venture capital funds, private equity funds and mutual funds. The deferral is also applicable to a reporting enterprise’s interest in an entity that is required to comply with or operates in accordance with requirements similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. For funds that qualify for the deferral, the Corporation will continue to analyze whether such funds should be consolidated under authoritative guidance that existed prior to the issuance of ASU 2009-17.

 

The Corporation was not required to consolidate any additional VIEs with which the Corporation is involved as a result of implementing the guidance in ASU 2009-17, as amended by ASU 2010-10.  See Note 6 for additional information about the Corporation’s involvement with VIEs.

 

Transfers of Financial Assets

 

On January 1, 2010, the Corporation adopted ASU No. 2009-16, “Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets,” (ASU 2009-16).  ASU 2009-16 eliminates the concept of qualifying special-purpose entities and establishes conditions for reporting the transfer of a portion of a financial asset as a sale.  If the transfer does not meet these established conditions, the transferor and transferee must account for the transfer as a secured borrowing.  An enterprise that continues to transfer portions of a financial asset that do not meet these established conditions is eligible to record a sale only after it has transferred all of its interest in that asset.  The adoption of ASU 2009-16 was not material to the Corporation’s financial condition and results of operations.

 

Fair Value Measurements

 

In the first quarter 2010, the Corporation fully adopted ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements,” (ASU 2010-06).  ASU 2010-06 requires separate disclosures of significant transfers in and out of Level 1 and Level 2 fair value measurements and the reasons for the transfers and requires disclosure of purchases, sales, issuances and settlements activity on a gross (rather than net) basis in the Level 3 reconciliation of fair value measurements for assets and liabilities measured at fair value on a recurring basis. In addition, ASU 2010-6 clarifies that fair value measurement disclosures should be provided for each class of assets and liabilities and that disclosures of inputs and valuation techniques should be provided for both recurring and nonrecurring Level 2 and Level 3 fair value measurements.  For further information concerning fair value measurements, refer to Note 2.

 

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Table of Contents

 

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

 

Note 1 - Basis of Presentation and Accounting Policies (continued)

 

Pending Accounting Pronouncements

 

In July 2010, the FASB issued ASU No. 2010-20, “Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses,” (ASU 2010-20). ASU 2010-20 requires enhanced disclosures about an entity’s credit quality of financing receivables and the related allowance for credit losses. The Corporation will adopt the period-end provisions of ASU 2010-20 in its consolidated financial statements for the year ended December 31, 2010 and the activity-related provisions of ASU 2010-20 in the first quarter 2011.  While the provisions of ASU 2010-20 will require significant expansion of the Corporation’s disclosures on the credit quality of financing receivables and the allowance for credit losses, the Corporation does not expect the adoption of ASU 2010-20 to have a material effect on the Corporation’s financial condition and results of operations.

 

Note 2 — Fair Value Measurements

 

The Corporation utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Trading securities, investment securities available-for-sale, derivatives and deferred compensation plan liabilities are recorded at fair value on a recurring basis. Additionally, from time to time, the Corporation may be required to record other assets and liabilities at fair value on a nonrecurring basis, such as impaired loans, other real estate (primarily foreclosed property), nonmarketable equity securities and certain other assets and liabilities. These nonrecurring fair value adjustments typically involve write-downs of individual assets or application of lower of cost or fair value accounting.

 

The Corporation categorizes assets and liabilities recorded at fair value into a three-level hierarchy, based on  the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

 

Level 1          Valuation is based upon quoted prices for identical instruments traded in active markets.

 

Level 2          Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

 

Level 3          Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

 

Following is a description of the valuation methodologies and key inputs used to measure financial assets and liabilities recorded at fair value, as well as a description of the methods and significant assumptions used to estimate fair value disclosures for financial instruments not recorded at fair value in their entirety on a recurring basis.  For financial assets and liabilities recorded at fair value, the description includes an indication of the level of the fair value hierarchy in which the assets or liabilities are classified.  Transfers of assets or liabilities between levels of the fair value hierarchy  are recognized at the beginning of the reporting period, when applicable.

 

Cash and due from banks, federal funds sold and securities purchased under agreements to resell, and interest-bearing deposits with banks

 

Due to the short-term nature, the carrying amount of these instruments approximates the estimated fair value.

 

8



Table of Contents

 

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

 

Note 2 — Fair Value Measurements (continued)

 

Trading securities and associated deferred compensation plan liabilities

 

Securities held for trading purposes and associated deferred compensation plan liabilities are recorded at fair value and included in “other short-term investments” and ‘‘accrued expenses and other liabilities,” respectively, on the consolidated balance sheets. Level 1 securities held for trading purposes include assets related to employee deferred compensation plans, which are invested in mutual funds, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and other securities traded on an active exchange, such as the New York Stock Exchange.  Deferred compensation plan liabilities represent the fair value of the obligation to the employee, which corresponds to the fair value of the invested assets.  Level 2 trading securities include municipal bonds and mortgage-backed securities issued by U.S. government-sponsored entities and corporate debt securities. Securities classified as Level 3 include securities in less liquid markets and securities not rated by a credit agency.  The methods used to value trading securities are the same as the methods used to value investment securities available-for-sale, discussed below.

 

Loans held-for-sale

 

Loans held-for-sale, included in “other short-term investments” on the consolidated balance sheets, are  recorded at the lower of cost or fair value. The fair value of loans held-for-sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Corporation classifies loans held-for-sale subjected to nonrecurring fair value adjustments as Level 2.

 

Investment securities available-for-sale

 

Investment securities available-for-sale are recorded at fair value on a recurring basis.  Fair value measurement is based upon quoted prices, if available. If quoted prices are not available or the market is deemed to be inactive at the measurement date, an adjustment to the quoted prices may be necessary. In some circumstances, the Corporation may conclude that a change in valuation technique or the use of multiple valuation techniques may be appropriate to estimate an instrument’s fair value. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds.  Level 2 securities include residential mortgage-backed securities issued by U.S. government-sponsored enterprises, corporate debt securities and state and municipal securities. The fair value of Level 2 securities was determined using quoted prices of securities with similar characteristics or pricing models based on observable market data inputs, primarily interest rates, spreads and prepayment information. Securities classified as Level 3, of which the substantial majority are auction-rate securities, represent securities in less liquid markets requiring significant management assumptions when determining fair value.  Due to the lack of a robust secondary auction-rate securities market with active fair value indicators, fair value at June 30, 2010, December 31, 2009 and June 30, 2009 was determined using an income approach based on a discounted cash flow model utilizing two significant assumptions: discount rate (including a liquidity risk premium) and workout period.  The discount rate was calculated using credit spreads of the underlying collateral or similar securities plus a liquidity risk premium.  The liquidity risk premium was based on observed industry auction-rate securities valuations by third parties and incorporated the rate at which the various types of ARS had been redeemed or sold since acquisition in 2008.  As of June 30, 2010, approximately 34% of the aggregate ARS portfolio had been redeemed or sold at par since acquisition. The workout period was based on an assessment of publicly available information on efforts to re-establish functioning markets for these securities and the Corporation’s redemption experience.

 

Loans

 

The Corporation does not record loans at fair value on a recurring basis. However, periodically, the Corporation records nonrecurring adjustments to the carrying value of loans based on fair value measurements.  Loans for which it is probable that payment of interest or principal will not be made in accordance with the contractual terms of the original loan agreement are considered impaired.  Impaired loans are reported as nonrecurring fair value measurements when an allowance is established based on the fair value of collateral.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Corporation classifies the impaired loan as nonrecurring Level 2.  When management determines that the fair value of the collateral requires additional adjustments, either as a result of non-current appraisal value or when there is no observable market price, the Corporation classifies the impaired loan as nonrecurring Level 3.

 

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Table of Contents

 

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

 

Note 2 — Fair Value Measurements (continued)

 

Business loans consist of commercial, real estate construction, commercial mortgage, lease financing and international loans.  The estimated fair value for variable rate business loans that reprice frequently is based on carrying values adjusted for estimated credit losses and other adjustments that would be expected to be made by a market participant in an active market.  The fair value for other business loans, consumer loans and residential mortgage loans are estimated using a discounted cash flow model that employs interest rates currently offered on the loans, adjusted by an amount for estimated credit losses and other adjustments that would be expected to be made by a market participant in an active market. The rates take into account the expected yield curve, as well as an adjustment for prepayment risk, when applicable.

 

Customers’ liability on acceptances outstanding and acceptances outstanding

 

The carrying amount of these instruments approximates the estimated fair value, due to their short-term nature.

 

Derivative assets and derivative liabilities

 

Derivative assets and derivative liabilities are included in “accrued income and other assets” and “accrued expenses and other liabilities,” respectively, on the consolidated balance sheets. Derivative instruments held or issued for risk management or customer-initiated activities are traded in over-the-counter markets where quoted market prices are not readily available. Fair value for over-the-counter derivative instruments is measured using internally developed models that use primarily market observable inputs, such as yield curves and option volatilities. Included in the fair value of over-the-counter derivative instruments are credit valuation adjustments reflecting counterparty credit risk and credit risk of the Corporation. These adjustments are determined by applying a credit spread for the counterparty or the Corporation, as appropriate, to the total expected exposure of the derivative after considering collateral and other master netting arrangements.  These adjustments, which are considered Level 3 inputs, are based on estimates of current credit spreads to evaluate the likelihood of default. The Corporation assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Corporation classified its over-the-counter derivative valuations in Level 2 of the fair value hierarchy. Examples of Level 2 derivative instruments are interest rate swaps and energy derivative and foreign exchange contracts.

 

The Corporation also holds a portfolio of warrants for generally nonmarketable equity securities.  These warrants are primarily from high technology, non-public companies obtained as part of the loan origination process. Warrants which contain a net exercise provision or a non-contingent put right embedded in the warrant agreement are accounted for as derivatives and recorded at fair value using a Black-Scholes valuation model with five inputs: risk-free rate, expected life, volatility, exercise price, and the per share market value of the underlying company.  The Corporation classifies warrants accounted for as derivatives as recurring Level 3.

 

The Corporation holds a derivative contract associated with the 2008 sale of its remaining ownership of Visa Inc. (Visa) Class B shares. Under the terms of the derivative contract, the Corporation will compensate the counterparty primarily for dilutive adjustments made to the conversion factor of the Visa Class B to Class A shares based on the ultimate outcome of litigation involving Visa. Conversely, the Corporation will be compensated by the counterparty for any increase in the conversion factor from anti-dilutive adjustments.  The fair value of the derivative contract was based on unobservable inputs consisting of management’s estimate of the litigation outcome, timing of litigation settlements and payments related to the derivative. The Corporation classifies the derivative liability as recurring Level 3.

 

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Table of Contents

 

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

 

Note 2 — Fair Value Measurements (continued)

 

Nonmarketable equity securities

 

The Corporation has a portfolio of indirect (through funds) private equity and venture capital investments. These funds generally cannot be redeemed and the majority are not readily marketable. Distributions from these funds are received by the Corporation as a result of the liquidation of underlying investments of the funds and/or as income distributions. It is estimated that the underlying assets of the funds will be liquidated over a period of up to 15 years. The value of these investments is at risk to changes in equity markets, general economic conditions and a variety of other factors. The investments are accounted for on the cost or equity method and are individually reviewed for impairment on a quarterly basis by comparing the carrying value to the estimated fair value. Fair value measurement guidance permits the measurement of investments of this type on the basis of net asset value, provided the net asset value is calculated by the fund in compliance with fair value measurement guidance applicable to investment companies.  Where there is not a readily determinable fair value, the Corporation estimates fair value for indirect private equity and venture capital investments based on the Corporation’s percentage ownership in the net asset value of the entire fund, as reported by the fund, after indication that the fund adheres to applicable fair value measurement guidance. For those funds where the net asset value is not reported by the fund, the Corporation derives the fair value of the fund by estimating the fair value of each underlying investment in the fund. In addition to using qualitative information about each underlying investment, as provided by the fund, the Corporation gives consideration to information pertinent to the specific nature of the debt or equity investment, such as relevant market conditions, offering prices, operating results, financial conditions, exit strategy and other qualitative information, as available. The lack of an independent source to validate fair value estimates, including the impact of future capital calls and transfer restrictions, is an inherent limitation in the valuation process.

 

The Corporation also holds restricted equity investments, primarily Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock. Restricted equity securities are not readily marketable and are recorded at cost (par value) and evaluated for impairment based on the ultimate recoverability of the par value. No significant observable market data for these instruments is available. The Corporation considers the profitability and asset quality of the issuer, dividend payment history and recent redemption experience, when determining the ultimate recoverability of the par value. The Corporation’s investment in FHLB stock totaled $230 million and $271 million at June 30, 2010 and December 31, 2009, respectively, and its investment in FRB stock totaled $60 million and $59 million at June 30, 2010 and December 31, 2009, respectively.  The Corporation believes its investments in FHLB and FRB stock are ultimately recoverable at par.

 

The Corporation classifies nonmarketable equity securities subjected to nonrecurring fair value adjustments as Level 3.

 

Other real estate

 

Other real estate is included in “accrued income and other assets” on the consolidated balance sheets and includes primarily foreclosed property. Upon transfer from the loan portfolio, foreclosed property is adjusted to and subsequently carried at the lower of carrying value or fair value, less estimated costs to sell. Fair value is based upon independent market prices, appraised value or management’s estimation of the value.  When the fair value of the property is based on an observable market price or a current appraised value, the Corporation classifies the foreclosed property as nonrecurring Level 2.  When management determines that the fair value of the foreclosed property requires additional adjustments, either as a result of non-current appraisal value or when there is no observable market price, the Corporation classifies the foreclosed property as nonrecurring Level 3.

 

Loan servicing rights

 

Loan servicing rights, included in “accrued income and other assets” on the consolidated balance sheets, are subject to impairment testing.  A valuation model is used for impairment testing, which utilizes a discounted cash flow analysis using interest rates and prepayment speed assumptions currently quoted for comparable instruments and a discount rate determined by management.  If the valuation model reflects a value less than the carrying value, loan servicing rights are adjusted to fair value through a valuation allowance as determined by the model.  As such, the Corporation classifies loan servicing rights subjected to nonrecurring fair value adjustments as Level 3.

 

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Table of Contents

 

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

 

Note 2 — Fair Value Measurements (continued)

 

Goodwill

 

Goodwill, included in “accrued income and other assets” on the consolidated balance sheets, is subject to impairment testing that requires an estimate of the fair value of the Corporation’s reporting units. Estimating the fair value of reporting units is a subjective process involving the use of estimates and judgments, particularly related to future cash flows, discount rates (including market risk premiums) and market multiples. The fair values of the reporting units are determined using a blend of two commonly used valuation techniques: the market approach and the income approach. The Corporation gives consideration to two valuation techniques, as either technique can be an indicator of value.  For the market approach, valuations of reporting units are based on an analysis of relevant price multiples in market trades in industries similar to the reporting unit. Market trades do not consider a control premium associated with an acquisition or a sale transaction. For the income approach, estimated future cash flows and terminal value (value at the end of the cash flow period, based on price multiples) were discounted. The discount rate was based on the imputed cost of equity capital appropriate for each reporting unit.  Material assumptions used in the valuation models include the comparable public company price multiples used in the terminal value, future cash flows and the market risk premium component of the discount rate. Due to the general uncertainty and depressed earning capacity in the financial services industry as of the measurement date, the Corporation concluded that the valuation under the income approach more clearly reflected the long-term future earning capacity of the reporting units, rather than the valuation under the market approach, and thus gave greater weight to the income approach.

 

If goodwill impairment testing resulted in impairment, the Corporation would classify goodwill subjected to nonrecurring fair value adjustments as Level 3.

 

Deposit liabilities

 

The estimated fair value of checking, savings and certain money market deposit accounts is represented by the amounts payable on demand. The estimated fair value of term deposits is calculated by discounting the scheduled cash flows using the period-end rates offered on these instruments.

 

Short-term borrowings

 

The carrying amount of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings approximates the estimated fair value.

 

Medium- and long-term debt

 

The carrying value of variable-rate FHLB advances approximates the estimated fair value. The estimated fair value of the Corporation’s remaining variable- and fixed-rate medium- and long-term debt is based on quoted market values. If quoted market values are not available, the estimated fair value is based on the market values of debt with similar characteristics.

 

Credit-related financial instruments

 

The estimated fair value of unused commitments to extend credit and standby and commercial letters of credit is represented by the estimated cost to terminate or otherwise settle the obligations with the counterparties. This amount is approximated by the fees currently charged to enter into similar arrangements, considering the remaining terms of the agreements and any changes in the credit quality of counterparties since the agreements were executed. This estimate of fair value does not take into account the significant value of the customer relationships and the future earnings potential involved in such arrangements as the Corporation does not believe that it would be practicable to estimate a representational fair value for these items.

 

12



Table of Contents

 

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

 

Note 2 — Fair Value Measurements (continued)

 

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

 

The following tables present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of June 30, 2010 and December 31, 2009.

 

(in millions)

 

Total

 

Level 1

 

Level 2

 

Level 3

 

June 30, 2010

 

 

 

 

 

 

 

 

 

Trading securities:

 

 

 

 

 

 

 

 

 

Deferred compensation plan assets

 

$

83

 

$

83

 

$

 

$

 

U.S. Treasury and other U.S. government agency securities

 

1

 

1

 

 

 

Government-sponsored enterprise residential mortgage-backed securities

 

5

 

 

5

 

 

State and municipal securities

 

12

 

 

9

 

3

 

Corporate debt securities

 

2

 

 

2

 

 

Total trading securities

 

103

 

84

 

16

 

3

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

U.S. Treasury and other U.S. government agency securities

 

121

 

121

 

 

 

Government-sponsored enterprise residential mortgage-backed securities

 

6,265

 

 

6,265

 

 

State and municipal securities (a)

 

42

 

 

 

42

 

Corporate debt securities:

 

 

 

 

 

 

 

 

 

Auction-rate debt securities

 

52

 

 

 

52

 

Other corporate debt securities

 

1

 

 

 

1

 

Equity and other non-debt securities:

 

 

 

 

 

 

 

 

 

Auction-rate preferred securities

 

609

 

 

 

609

 

Money market and other mutual funds

 

98

 

98

 

 

 

Total investment securities available-for-sale

 

7,188

 

219

 

6,265

 

704

 

 

 

 

 

 

 

 

 

 

 

Derivative assets (b):

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

623

 

 

623

 

 

Energy derivative contracts

 

89

 

 

89

 

 

Foreign exchange contracts

 

58

 

 

58

 

 

Warrants

 

7

 

 

 

7

 

Total derivative assets

 

777

 

 

770

 

7

 

Total assets at fair value

 

$

8,068

 

$

303

 

$

7,051

 

$

714

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities (c):

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

$

285

 

$

 

$

285

 

$

 

Energy derivative contracts

 

88

 

 

88

 

 

Foreign exchange contracts

 

52

 

 

52

 

 

Other

 

2

 

 

 

2

 

Total derivative liabilities

 

427

 

 

425

 

2

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan liabilities (c)

 

83

 

83

 

 

 

Total liabilities at fair value

 

$

510

 

$

83

 

$

425

 

$

2

 

 


(a) Primarily auction-rate securities.

(b) Recorded in “accrued income and other assets” on the consolidated balance sheets.

(c) Recorded in “accrued expenses and other liabilities” on the consolidated balance sheets.

 

13



Table of Contents

 

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

 

Note 2 — Fair Value Measurements (continued)

 

(in millions)

 

Total

 

Level 1

 

Level 2

 

Level 3

 

December 31, 2009

 

 

 

 

 

 

 

 

 

Trading securities:

 

 

 

 

 

 

 

 

 

Deferred compensation plan assets

 

$

86

 

$

86

 

$

 

$

 

Government-sponsored enterprise residential mortgage-backed securities

 

3

 

 

3

 

 

State and municipal securities

 

15

 

 

15

 

 

Corporate debt securities

 

3

 

 

3

 

 

Total trading securities

 

107

 

86

 

21

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

U.S. Treasury and other U.S. government agency securities

 

103

 

103

 

 

 

Government-sponsored enterprise residential mortgage-backed securities

 

6,261

 

 

6,261

 

 

State and municipal securities (a)

 

47

 

 

1

 

46

 

Corporate debt securities:

 

 

 

 

 

 

 

 

 

Auction-rate debt securities

 

150

 

 

 

150

 

Other corporate debt securities

 

50

 

 

43

 

7

 

Equity and other non-debt securities:

 

 

 

 

 

 

 

 

 

Auction-rate preferred securities

 

706

 

 

 

706

 

Money market and other mutual funds

 

99

 

99

 

 

 

Total investment securities available-for-sale

 

7,416

 

202

 

6,305

 

909

 

 

 

 

 

 

 

 

 

 

 

Derivative assets (b):

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

492

 

 

492

 

 

Energy derivative contracts

 

137

 

 

137

 

 

Foreign exchange contracts

 

35

 

 

35

 

 

Warrants

 

7

 

 

 

7

 

Total derivative assets

 

671

 

 

664

 

7

 

Total assets at fair value

 

$

8,194

 

$

288

 

$

6,990

 

$

916

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities (c):

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

$

240

 

$

 

$

240

 

$

 

Energy derivative contracts

 

136

 

 

136

 

 

Foreign exchange contracts

 

34

 

 

34

 

 

Total derivative liabilities

 

410

 

 

410

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan liabilities (c)

 

86

 

86

 

 

 

Total liabilities at fair value

 

$

496

 

$

86

 

$

410

 

$

 

 


(a) Primarily auction-rate securities.

(b) Recorded in “accrued income and other assets” on the consolidated balance sheets.

(c) Recorded in “accrued expenses and other liabilities” on the consolidated balance sheets.

 

There were no significant transfers of assets or liabilities recorded at fair value on a recurring basis into or out of Level 1 and Level 2 fair value measurements during the three- and six-month periods ended June 30, 2010 and 2009.

 

14



Table of Contents

 

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

 

Note 2 — Fair Value Measurements (continued)

 

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three- and six-month periods ended June 30, 2010 and 2009.

 

 

 

 

 

Net Realized/Unrealized Gains (Losses)

 

 

 

 

 

 

 

 

 

 

 

Balance at

 

 

 

Recorded in Other

 

 

 

 

 

 

 

Balance at

 

 

 

Beginning of

 

Recorded in Earnings

 

Comprehensive

 

 

 

 

 

 

 

End of

 

(in millions)

 

 Period

 

Realized

 

Unrealized

 

Income (Pre-tax)

 

Purchases

 

Sales

 

Settlements

 

Period

 

Three months ended June 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and municipal securities

 

$

 

$

 

$

 

$

 

$

3

 

$

 

$

 

$

3

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and municipal securities (a)

 

45

 

 

 

(3

)

 

 

 

42

 

Auction-rate debt securities

 

144

 

2

 

 

9

 

 

(103

)

 

52

 

Other corporate debt securities

 

1

 

 

 

 

 

 

 

1

 

Auction-rate preferred securities

 

663

 

3

 

 

(9

)

 

(48

)

 

609

 

Total investment securities available-for-sale

 

853

 

5

 

 

(3

)

 

(151

)

 

704

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants

 

7

 

 

1

 

 

 

(1

)

 

7

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

(1

)

(2

)

 

 

 

(1

)

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

3

 

$

 

$

 

$

 

$

 

$

(3

)

$

 

$

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and municipal securities (a)

 

55

 

 

 

(1

)

 

 

 

54

 

Auction-rate debt securities

 

146

 

 

 

 

 

 

 

146

 

Other corporate debt securities

 

7

 

 

 

 

 

 

 

7

 

Auction-rate preferred securities

 

888

 

3

 

 

(7

)

 

(64

)

 

820

 

Total investment securities available-for-sale

 

1,096

 

3

 

 

(8

)

 

(64

)

 

1,027

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants

 

8

 

 

1

 

 

 

(1

)

 

8

 

Other assets

 

 

 

1

 

 

 

 

 

1

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

1

 

 

(2

)

 

 

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and municipal securities

 

$

 

$

 

$

 

$

 

$

3

 

$

 

$

 

$

3

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and municipal securities (a)

 

46

 

 

 

(4

)

 

 

 

42

 

Auction-rate debt securities

 

150

 

2

 

 

4

 

 

(104

)

 

52

 

Other corporate debt securities

 

7

 

27

 

 

 

 

 

(33

)

1

 

Auction-rate preferred securities

 

706

 

5

 

 

(8

)

 

(94

)

 

609

 

Total investment securities available-for-sale

 

909

 

34

 

 

(8

)

 

(198

)

(33

)

704

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants

 

7

 

 

1

 

 

 

 

(1

)

 

7

 

Derivative liabilities: