2014 Q2 10Q
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, 2014
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
incorporation or organization)
(I.R.S. Employer
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 ý 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 ý 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 ý
 
Accelerated
filer o
 
Non-accelerated filer o
(Do not check if a smaller
reporting company)
 
Smaller reporting
company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
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 25, 2014: 180,825,973 shares


Table of Contents

COMERICA INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS
Comerica Incorporated and Subsidiaries
(in millions, except share data)
June 30, 2014
 
December 31, 2013
 
(unaudited)
 
 
ASSETS
 
 
 
Cash and due from banks
$
1,226

 
$
1,140

 
 
 
 
Interest-bearing deposits with banks
2,668

 
5,311

Other short-term investments
109

 
112

 
 
 
 
Investment securities available-for-sale
9,534

 
9,307

 
 
 
 
Commercial loans
30,986

 
28,815

Real estate construction loans
1,939

 
1,762

Commercial mortgage loans
8,747

 
8,787

Lease financing
822

 
845

International loans
1,352

 
1,327

Residential mortgage loans
1,775

 
1,697

Consumer loans
2,261

 
2,237

Total loans
47,882

 
45,470

Less allowance for loan losses
(591
)
 
(598
)
Net loans
47,291

 
44,872

Premises and equipment
562

 
594

Accrued income and other assets
3,935

 
3,888

Total assets
$
65,325

 
$
65,224

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Noninterest-bearing deposits
$
24,774

 
$
23,875

 
 
 
 
Money market and interest-bearing checking deposits
22,555

 
22,332

Savings deposits
1,731

 
1,673

Customer certificates of deposit
4,962

 
5,063

Foreign office time deposits
148

 
349

Total interest-bearing deposits
29,396

 
29,417

Total deposits
54,170

 
53,292

Short-term borrowings
176

 
253

Accrued expenses and other liabilities
990

 
986

Medium- and long-term debt
2,620

 
3,543

Total liabilities
57,956

 
58,074

 
 
 
 
Common stock - $5 par value:
 
 
 
Authorized - 325,000,000 shares
 
 
 
Issued - 228,164,824 shares
1,141

 
1,141

Capital surplus
2,175

 
2,179

Accumulated other comprehensive loss
(304
)
 
(391
)
Retained earnings
6,520

 
6,318

Less cost of common stock in treasury - 47,194,492 shares at 6/30/14
and 45,860,786 shares at 12/31/13
(2,163
)
 
(2,097
)
Total shareholders’ equity
7,369

 
7,150

Total liabilities and shareholders’ equity
$
65,325

 
$
65,224

See notes to consolidated financial statements.

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Table of Contents
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
Comerica Incorporated and Subsidiaries 


 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in millions, except per share data)
2014
 
2013
 
2014
 
2013
INTEREST INCOME
 
 
 
 
 
 
 
Interest and fees on loans
$
385

 
$
388

 
$
761

 
$
778

Interest on investment securities
53

 
52

 
108

 
105

Interest on short-term investments
3

 
3

 
7

 
6

Total interest income
441

 
443

 
876

 
889

INTEREST EXPENSE
 
 
 
 
 
 
 
Interest on deposits
11

 
15

 
22

 
30

Interest on medium- and long-term debt
14

 
14

 
28

 
29

Total interest expense
25

 
29

 
50

 
59

Net interest income
416

 
414

 
826

 
830

Provision for credit losses
11

 
13

 
20

 
29

Net interest income after provision for credit losses
405

 
401

 
806

 
801

NONINTEREST INCOME
 
 
 
 
 
 
 
Service charges on deposit accounts
54

 
53

 
108

 
108

Fiduciary income
45

 
44

 
89

 
87

Commercial lending fees
23

 
22

 
43

 
43

Card fees
19

 
18

 
38

 
35

Letter of credit fees
15

 
16

 
29

 
32

Bank-owned life insurance
11

 
10

 
20

 
19

Foreign exchange income
12

 
9

 
21

 
18

Brokerage fees
4

 
4

 
9

 
9

Net securities (losses) gains

 
(2
)
 
1

 
(2
)
Other noninterest income
37

 
48

 
70

 
86

Total noninterest income
220

 
222

 
428

 
435

NONINTEREST EXPENSES
 
 
 
 
 
 
 
Salaries and benefits expense
240

 
245

 
487

 
496

Net occupancy expense
39

 
39

 
79

 
78

Equipment expense
15

 
15

 
29

 
30

Outside processing fee expense
30

 
30

 
58

 
58

Software expense
25

 
22

 
47

 
44

Litigation-related expense
3

 
1

 
6

 
4

FDIC insurance expense
8

 
8

 
16

 
17

Advertising expense
5

 
6

 
11

 
12

Other noninterest expenses
39

 
50

 
77

 
93

Total noninterest expenses
404

 
416

 
810

 
832

Income before income taxes
221

 
207

 
424

 
404

Provision for income taxes
70

 
64

 
134

 
127

NET INCOME
151

 
143

 
290

 
277

Less income allocated to participating securities
2

 
2

 
4

 
4

Net income attributable to common shares
$
149

 
$
141

 
$
286

 
$
273

Earnings per common share:
 
 
 
 
 
 
 
Basic
$
0.83

 
$
0.77

 
$
1.59

 
$
1.48

Diluted
0.80

 
0.76

 
1.54

 
1.46

 
 
 
 
 
 
 
 
Comprehensive income
172

 
15

 
377

 
152

 
 
 
 
 
 
 
 
Cash dividends declared on common stock
36

 
32

 
71

 
64

Cash dividends declared per common share
0.20

 
0.17

 
0.39

 
0.34

See notes to consolidated financial statements.

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Table of Contents
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)
Comerica Incorporated and Subsidiaries


 
Common Stock
 
 
 
Accumulated
Other
Comprehensive
Loss
 
 
 
 
 
Total
Shareholders’
Equity
(in millions, except per share data)
Shares
Outstanding
 
Amount
 
Capital
Surplus
 
 
Retained
Earnings
 
Treasury
Stock
 
BALANCE AT DECEMBER 31, 2012
188.3

 
$
1,141

 
$
2,162

 
$
(413
)
 
$
5,928

 
$
(1,879
)
 
$
6,939

Net income

 

 

 

 
277

 

 
277

Other comprehensive loss, net of tax

 

 

 
(125
)
 

 

 
(125
)
Cash dividends declared on common stock ($0.34 per share)

 

 

 

 
(64
)
 

 
(64
)
Purchase of common stock
(4.1
)
 

 

 

 

 
(146
)
 
(146
)
Net issuance of common stock under employee stock plans
1.0

 

 
(19
)
 

 
(17
)
 
45

 
9

Share-based compensation

 

 
18

 

 

 

 
18

Other

 

 
(1
)
 

 

 
1

 

BALANCE AT JUNE 30, 2013
185.2

 
$
1,141

 
$
2,160

 
$
(538
)
 
$
6,124

 
$
(1,979
)
 
$
6,908

 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE AT DECEMBER 31, 2013
182.3

 
$
1,141

 
$
2,179

 
$
(391
)
 
$
6,318

 
$
(2,097
)
 
$
7,150

Net income

 

 

 

 
290

 

 
290

Other comprehensive income, net of tax

 

 

 
87

 

 

 
87

Cash dividends declared on common stock ($0.39 per share)

 

 

 

 
(71
)
 

 
(71
)
Purchase of common stock
(3.0
)
 

 

 

 

 
(141
)
 
(141
)
Net issuance of common stock under employee stock plans
1.6

 

 
(25
)
 

 
(17
)
 
74

 
32

Share-based compensation

 

 
22

 

 

 

 
22

Other

 

 
(1
)
 

 

 
1

 

BALANCE AT JUNE 30, 2014
180.9

 
$
1,141

 
$
2,175

 
$
(304
)
 
$
6,520

 
$
(2,163
)
 
$
7,369

See notes to consolidated financial statements.



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Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Comerica Incorporated and Subsidiaries


 
Six Months Ended June 30,
(in millions)
2014
 
2013
OPERATING ACTIVITIES
 
 
 
Net income
$
290

 
$
277

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for credit losses
20

 
29

Provision (benefit) for deferred income taxes
(13
)
 
26

Depreciation and amortization
61

 
62

Net periodic defined benefit cost
19

 
44

Share-based compensation expense
22

 
18

Net amortization of securities
5

 
18

Accretion of loan purchase discount
(22
)
 
(18
)
Net securities (gains) losses
(1
)
 
2

Net (gains) losses on foreclosed property
(2
)
 
5

Excess tax benefits from share-based compensation arrangements
(6
)
 
(2
)
Net change in:
 
 
 
Trading securities
5

 
4

Accrued income receivable
(1
)
 
(5
)
Accrued expenses payable
(60
)
 
(35
)
Other, net
29

 
(169
)
Net cash provided by operating activities
346

 
256

INVESTING ACTIVITIES
 
 
 
Investment securities available-for-sale:
 
 
 
Maturities and redemptions
825

 
1,761

Purchases
(940
)
 
(1,355
)
Net change in loans
(2,422
)
 
563

Proceeds from sales of foreclosed property
9

 
29

Net increase in premises and equipment
(31
)
 
(42
)
Sales of Federal Home Loan Bank stock
41

 
41

Other, net
1

 
5

Net cash (used in) provided by investing activities
(2,517
)
 
1,002

FINANCING ACTIVITIES
 
 
 
Net change in:
 
 
 
Deposits
763

 
(636
)
Short-term borrowings
(77
)
 
21

Medium- and long-term debt:
 
 
 
Maturities and redemptions
(1,256
)
 
(1,055
)
Issuances
349

 

Common stock:
 
 
 
Repurchases
(141
)
 
(146
)
Cash dividends paid
(65
)
 
(61
)
Issuances under employee stock plans
36

 
12

Excess tax benefits from share-based compensation arrangements
6

 
2

Other, net
(1
)
 
(4
)
Net cash used in financing activities
(386
)
 
(1,867
)
Net decrease in cash and cash equivalents
(2,557
)
 
(609
)
Cash and cash equivalents at beginning of period
6,451

 
4,534

Cash and cash equivalents at end of period
$
3,894

 
$
3,925

Interest paid
$
50

 
$
61

Income taxes and tax-related interest paid
110

 
22

Noncash investing and financing activities:
 
 
 
Loans transferred to other real estate
11

 
9

See notes to consolidated financial statements.

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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
Organization
The accompanying unaudited consolidated financial statements were prepared in accordance with United States (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, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. 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, 2013.
Allowance for Credit Losses
In the second quarter 2014, the Corporation enhanced the approach used to determine the standard reserve factors used in estimating the allowance for credit losses, which had the effect of capturing certain elements in the standard reserve component that had formerly been included in the qualitative assessment. The impact of the change was largely neutral to the total allowance for loan losses at June 30, 2014. However, because standard reserves are allocated to the segments at the loan level, while qualitative reserves are allocated at the portfolio level, the impact of the methodology change on the allowance of each segment reflected the characteristics of the individual loans within each segment's portfolio, causing segment reserves to increase or decrease accordingly.
Recently Adopted Accounting Pronouncement
Effective January 1, 2014, the Corporation early adopted Accounting Standards Update (ASU) No. 2014-01, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects,” an amendment to GAAP which enables companies that invest in affordable housing projects that qualify for the low-income housing tax credit (LIHTC) to elect to use the proportional amortization method if certain conditions are met. Under the proportional amortization method, the initial investment cost of the project is amortized in proportion to the amount of tax credits and other benefits received, with the results of the investment presented on a net basis as a component of the provision for income taxes. Previously, LIHTC investments were accounted for under the cost or equity method, and the amortization was recorded as a reduction to other noninterest income, with the tax credits and other benefits received recorded as a component of the provision for income taxes. The Corporation believes the proportional amortization method better represents the economics of LIHTC investments and provides users with a better understanding of the returns from such investments than the cost or equity method.
The cumulative effect of the retrospective application of the change in amortization method was a $3 million decrease to both "accrued income and other assets" and "retained earnings" on the consolidated balance sheets as of January 1, 2013. The unaudited consolidated financial statements have been retrospectively adjusted to reflect the prior period effect of the adoption of the amendment, which resulted in increases of $14 million and $27 million to both "other noninterest income" and "provision for income taxes" for the three- and six-month periods ended June 30, 2013, respectively. The adoption of ASU 2014-01 had no effect on net income or earnings per common share for any period presented.
See Note 6 to these unaudited consolidated financial statements for additional information regarding LIHTC and other tax credit investments.
Pending Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (ASU 2014-09), which is intended to improve and converge the financial reporting requirements for revenue contracts with customers. Previous GAAP comprised broad revenue recognition concepts along with numerous industry-specific requirements. The new guidance establishes a five-step model which entities must follow to recognize revenue and removes inconsistencies and weaknesses in existing guidance. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2016, and must be retrospectively applied. Entities will have the option of presenting prior periods as impacted by the new guidance or presenting the cumulative effect of initial application along with supplementary disclosures. Early adoption is prohibited. The Corporation is currently evaluating the impact of adopting ASU 2014-09.
In June 2014, the FASB issued ASU No. 2014-12, “Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period,” (ASU 2014-12). The new guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The Corporation's current accounting treatment of

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Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

performance conditions for employees who are or become retirement eligible prior to the achievement of the performance target are consistent with ASU 2014-12, and as such does not expect the new guidance to have a material effect on the Corporation’s financial condition and results of operations. The Corporation expects to prospectively adopt ASU 2014-12 in the first quarter 2015.
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. The determination of fair values of financial instruments often requires the use of estimates. In cases where quoted market values in an active market are not available, the Corporation uses present value techniques and other valuation methods to estimate the fair values of its financial instruments. These valuation methods require considerable judgment and the resulting estimates of fair value can be significantly affected by the assumptions made and methods used.
Fair value is an estimate of the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (i.e., not a forced transaction, such as a liquidation or distressed sale) between market participants at the measurement date. However, the calculated fair value estimates in many instances cannot be substantiated by comparison to independent markets and, in many cases, may not be realizable in a current sale of the financial instrument.
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 on a recurring or nonrecurring basis and the estimated fair value of financial instruments not recorded at fair value on a recurring basis 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.
 
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.
The Corporation generally utilizes third-party pricing services to value Level 1 and Level 2 trading securities and investment securities available-for-sale, as well as certain derivatives designated as fair value hedges. Management reviews the methodologies and assumptions used by the third-party pricing services and evaluates the values provided, principally by comparison with other available market quotes for similar instruments and/or analysis based on internal models using available third-party market data. The Corporation may occasionally adjust certain values provided by the third-party pricing service when management believes, as the result of its review, that the adjusted price most appropriately reflects the fair value of the particular security.
Following are descriptions 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. The descriptions include 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 interest-bearing deposits with banks
Due to their short-term nature, the carrying amount of these instruments approximates the estimated fair value. As such, the Corporation classifies the estimated fair value of these instruments as Level 1.
Trading securities and associated deferred compensation plan liabilities
Trading securities include securities held for trading purposes as well as assets held related to employee deferred compensation plans. Trading securities and associated deferred compensation plan liabilities are recorded at fair value on a recurring basis and included in “other short-term investments” and “accrued expenses and other liabilities,” respectively, on the consolidated

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Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

balance sheets. Level 1 trading securities 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 residential mortgage-backed securities issued by U.S. government-sponsored entities and corporate debt securities. 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. Loans held-for-sale may be carried at fair value on a nonrecurring basis when fair value is less than cost. The fair value is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Corporation classifies both loans held-for-sale subjected to nonrecurring fair value adjustments and the estimated fair value of loans held-for sale as Level 2.
Investment securities available-for-sale
Investment securities available-for-sale are recorded at fair value on a recurring basis. 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 agencies and U.S. government-sponsored entities and corporate debt 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 represent securities in less liquid markets requiring significant management assumptions when determining fair value. Auction-rate securities comprise Level 3 investment securities available-for-sale. Due to the lack of a robust secondary auction-rate securities market with active fair value indicators, fair value for all periods presented was determined using an income approach based on a discounted cash flow model. The discounted cash flow model utilizes two significant inputs: discount rate 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 derived from the rate at which various types of similar auction-rate securities had been redeemed or sold. 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 own redemption experience. Significant increases in any of these inputs in isolation would result in a significantly lower fair value. The Corporate Development Department, with appropriate oversight and approval provided by senior management, is responsible for determining the valuation methodology for auction-rate securities and for updating significant inputs based on changes to the factors discussed above. Valuation results, including an analysis of changes to the valuation methodology and significant inputs, are provided to senior management for review on a quarterly basis.
Loans
The Corporation does not record loans at fair value on a recurring basis. However, the Corporation may establish a specific allowance for an impaired loan based on the fair value of the underlying collateral. Such loan values are reported as nonrecurring fair value measurements. Collateral values supporting individually evaluated impaired loans are evaluated quarterly. 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 Level 3. The Special Assets Group is responsible for performing quarterly credit quality reviews for all impaired loans as part of the quarterly allowance for loan losses process overseen by the Chief Credit Officer, during which valuation adjustments to updated collateral values are determined.
The Corporation discloses fair value estimates for loans. The estimated fair value is determined based on characteristics such as loan category, repricing features and remaining maturity, and includes prepayment and credit loss estimates. For variable rate business loans that reprice frequently, the estimated fair value is based on carrying values adjusted for estimated credit losses inherent in the portfolio at the balance sheet date. For other business loans and retail loans, fair values are estimated using a discounted cash flow model that employs a discount rate that reflects the Corporation's current pricing for loans with similar characteristics and remaining maturity, adjusted by an amount for estimated credit losses inherent in the portfolio at the balance sheet date. The rates take into account the expected yield curve, as well as an adjustment for prepayment risk, when applicable. The Corporation classifies the estimated fair value of loans held for investment as Level 3.

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Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

Customers’ liability on acceptances outstanding and acceptances outstanding
Customers' liability on acceptances outstanding is included in "accrued income and other assets" and acceptances outstanding are included in "accrued expenses and other liabilities" on the consolidated balance sheets. Due to their short-term nature, the carrying amount of these instruments approximates the estimated fair value. As such, the Corporation classifies the estimated fair value of these instruments as Level 1.
Derivative assets and derivative liabilities
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 on a recurring basis using internally developed models that use primarily market observable inputs, such as yield curves and option volatilities. The Corporation manages credit risk on its derivative positions based on whether the derivatives are being settled through a clearinghouse or bilaterally with each counterparty. For derivative positions settled on a counterparty-by-counterparty basis, the Corporation calculates credit valuation adjustments, included in the fair value of these instruments, on the basis of its relationships at the counterparty portfolio/master netting agreement level. These credit valuation 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 classifies 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.
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 on a recurring basis using a Black-Scholes valuation model. The Black-Scholes valuation model utilizes five inputs: risk-free rate, expected life, volatility, exercise price, and the per share market value of the underlying company. The Corporation holds a portfolio of warrants for generally nonmarketable equity securities with a fair value of $4 million at June 30, 2014, included in "accrued income and other assets" on the consolidated balance sheets. These warrants are primarily from non-public technology companies obtained as part of the loan origination process. The Corporate Development Department is responsible for the warrant valuation process, which includes reviewing all significant inputs for reasonableness, and for providing valuation results to senior management. Increases in any of these inputs in isolation, with the exception of exercise price, would result in a higher fair value. Increases in exercise price in isolation would result in a lower fair value. The Corporation classifies warrants accounted for as derivatives as Level 3.
The Corporation also 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. At June 30, 2014, the fair value of the contract was a liability of $2 million. The recurring fair value of the derivative contract is based on unobservable inputs consisting of management's estimate of the litigation outcome, timing of litigation settlements and payments related to the derivative. Significant increases in the estimate of litigation outcome and the timing of litigation settlements in isolation would result in a significantly higher liability fair value. Significant increases in payments related to the derivative in isolation would result in a significantly lower liability fair value. The Corporation classifies the derivative liability as Level 3.
Nonmarketable equity securities
The Corporation has a portfolio of indirect (through funds) private equity and venture capital investments with a carrying value and unfunded commitments of $12 million and $5 million, respectively, at June 30, 2014. 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 16 years. Recently issued federal regulations may require the Corporation to sell certain of these funds prior to liquidation. The investments are accounted for either 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. These investments may be carried at fair value on a nonrecurring basis when they are deemed to be impaired and written down to fair value. 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 net asset value, 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

8

Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

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. On a quarterly basis, the Corporate Development Department is responsible, with appropriate oversight and approval provided by senior management, for performing the valuation procedures and updating significant inputs, as are primarily provided by the underlying fund's management. The Corporation classifies fair value measurements of nonmarketable equity securities as Level 3. Commitments to fund additional investments in nonmarketable equity securities recorded at fair value on a nonrecurring basis were not significant at June 30, 2014 or December 31, 2013.
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) in "accrued income and other assets" on the consolidated balance sheets 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 $7 million and $48 million at June 30, 2014 and December 31, 2013, respectively, and its investment in FRB stock totaled $85 million at both June 30, 2014 and December 31, 2013. The Corporation believes its investments in FHLB and FRB stock are ultimately recoverable at par. Therefore, the carrying amount for these restricted equity investments approximates fair value. The Corporation classifies the estimated fair value of such investments as Level 1.
Other real estate
Other real estate is included in “accrued income and other assets” on the consolidated balance sheets and includes primarily foreclosed property. Foreclosed property is initially recorded at fair value, less costs to sell, at the date of foreclosure, establishing a new cost basis. Subsequently, foreclosed property is carried at the lower of cost or fair value, less costs to sell. Other real estate may be carried at fair value on a nonrecurring basis when fair value is less than cost. Fair value is based upon independent market prices, appraised value or management's estimate of the value of the property. The Special Assets Group obtains updated independent market prices and appraised values, as required by state regulation or deemed necessary based on market conditions, and determines if additional write-downs are necessary. On a quarterly basis, senior management reviews all other real estate and determines whether the carrying values are reasonable, based on the length of time elapsed since receipt of independent market price or appraised value and current market conditions. When management determines that the fair value of other real estate requires additional adjustments, either as a result of a non-current appraisal or when there is no observable market price, the Corporation classifies the other real estate 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. As such, the Corporation classifies the estimated fair value of deposit liabilities as Level 2.
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. As such, the Corporation classifies the estimated fair value of short-term borrowings as Level 1.
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 when available. If quoted market values are not available, the estimated fair value is based on the market values of debt with similar characteristics. The Corporation classifies the estimated fair value of medium- and long-term debt as Level 2.
Credit-related financial instruments
Credit-related financial instruments include unused commitments to extend credit and letters of credit. These instruments generate ongoing fees which are recognized over the term of the commitment. In situations where credit losses are probable, the Corporation records an allowance. The carrying value of these instruments included in "accrued expenses and other liabilities" on the consolidated balance sheets, which includes the carrying value of the deferred fees plus the related allowance, approximates the estimated fair value. The Corporation classifies the estimated fair value of credit-related financial instruments as Level 3.

9

Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

ASSETS AND LIABLILITIES 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, 2014 and December 31, 2013.
(in millions)
Total
 
Level 1
 
Level 2
 
Level 3
 
June 30, 2014
 
 
 
 
 
 
 
 
Trading securities:
 
 
 
 
 
 
 
 
Deferred compensation plan assets
$
96

 
$
96

 
$

 
$

 
Equity and other non-debt securities
2

 
2

 

 

 
Residential mortgage-backed securities (a)
3

 

 
3

 

 
State and municipal securities
1

 

 
1

 

 
Corporate debt securities
1

 

 
1

 

 
Total trading securities
103

 
98

 
5

 

 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
65

 
65

 

 

 
Residential mortgage-backed securities (a)
9,141

 

 
9,141

 

 
State and municipal securities
23

 

 

 
23

(b)
Corporate debt securities
55

 

 
54

 
1

(b)
Equity and other non-debt securities
250

 
132

 

 
118

(b)
Total investment securities available-for-sale
9,534

 
197

 
9,195

 
142

 
Derivative assets:
 
 
 
 
 
 
 
 
Interest rate contracts
344

 

 
344

 

 
Energy derivative contracts
153

 

 
153

 

 
Foreign exchange contracts
20

 

 
20

 

 
Warrants
4

 

 

 
4

 
Total derivative assets
521

 

 
517

 
4

 
Total assets at fair value
$
10,158

 
$
295

 
$
9,717

 
$
146

 
Derivative liabilities:
 
 
 
 
 
 
 
 
Interest rate contracts
$
115

 
$

 
$
115

 
$

 
Energy derivative contracts
151

 

 
151

 

 
Foreign exchange contracts
20

 

 
20

 

 
Other
2

 

 

 
2

 
Total derivative liabilities
288

 

 
286

 
2

 
Deferred compensation plan liabilities
96

 
96

 

 

 
Total liabilities at fair value
$
384

 
$
96

 
$
286

 
$
2

 
(a)
Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.
(b)
Auction-rate securities.

10

Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

(in millions)
Total
 
Level 1
 
Level 2
 
Level 3
 
December 31, 2013
 
 
 
 
 
 
 
 
Trading securities:
 
 
 
 
 
 
 
 
Deferred compensation plan assets
$
96

 
$
96

 
$

 
$

 
Equity and other non-debt securities
7

 
7

 

 

 
Residential mortgage-backed securities (a)
2

 

 
2

 

 
State and municipal securities
3

 

 
3

 

 
Total trading securities
108

 
103

 
5

 

 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
45

 
45

 

 

 
Residential mortgage-backed securities (a)
8,926

 

 
8,926

 

 
State and municipal securities
22

 

 

 
22

(b)
Corporate debt securities
56

 

 
55

 
1

(b)
Equity and other non-debt securities
258

 
122

 

 
136

(b)
Total investment securities available-for-sale
9,307

 
167

 
8,981

 
159

 
Derivative assets:
 
 
 
 
 
 
 
 
Interest rate contracts
380

 

 
380

 

 
Energy derivative contracts
105

 

 
105

 

 
Foreign exchange contracts
15

 

 
15

 

 
Warrants
3

 

 

 
3

 
Total derivative assets
503

 

 
500

 
3

 
Total assets at fair value
$
9,918

 
$
270

 
$
9,486

 
$
162

 
Derivative liabilities:
 
 
 
 
 
 
 
 
Interest rate contracts
$
133

 
$

 
$
133

 
$

 
Energy derivative contracts
102

 

 
102

 

 
Foreign exchange contracts
14

 

 
14

 

 
Other
2

 

 

 
2

 
Total derivative liabilities
251

 

 
249

 
2

 
Deferred compensation plan liabilities
96

 
96

 

 

 
Total liabilities at fair value
$
347

 
$
96

 
$
249

 
$
2

 
(a)
Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.
(b)
Auction-rate securities.
There were no transfers of assets or liabilities recorded at fair value on a recurring basis into or out of Level 1, Level 2 and Level 3 fair value measurements during each of the three- and six-month periods ended June 30, 2014 and 2013.

11

Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

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, 2014 and 2013.
 
 
 
Net Realized/Unrealized Gains (Losses) (Pretax)
 
 
 
 
 
 
 
 
 
 
 
 
Balance 
at
Beginning
of Period
 
Recorded in Earnings
Recorded in
Other
Comprehensive
Income
 
 
 
Balance 
at
End of 
Period
 
 
 
 
 
 
 
 
 
(in millions)
 
Realized
Unrealized
 
Sales
 
Three Months Ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities (a)
$
23

 
$

 
$

 
$

 
 
$

 
$
23

Corporate debt securities (a)
1

 

 

 

 
 

 
1

Equity and other non-debt securities (a)
118

 

 

 
1

(b)
 
(1
)
 
118

Total investment securities
available-for-sale
142

 

 

 
1

(b)
 
(1
)
 
142

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
Warrants
3

 
4

(d)

 

 
 
(3
)
 
4

Derivative liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Other
2

 

 

 

 
 

 
2

Three Months Ended June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities (a)
$
23

 
$

 
$

 
$
2

(b)
 
$

 
$
25

Corporate debt securities (a)
1

 

 

 

 
 

 
1

Equity and other non-debt securities (a)
153

 

 

 
(7
)
(b)
 

 
146

Total investment securities
available-for-sale
177

 

 

 
(5
)
(b)
 

 
172

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
Warrants
3

 

 
1

(d)

 
 
(1
)
 
3

Derivative liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Other
1

 

 
(2
)
(c)

 
 

 
3

Six Months Ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities (a)
$
22

 
$

 
$

 
$
1

(b)
 
$

 
$
23

Corporate debt securities (a)
1

 

 

 

 
 

 
1

Equity and other non-debt securities (a)
136

 
1

(c)

 
6

(b)
 
(25
)
 
118

Total investment securities
available-for-sale
159

 
1

(c)

 
7

(b)
 
(25
)
 
142

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
Warrants
3

 
4

(d)
1

(d)

 
 
(4
)
 
4

Derivative liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Other
2

 

 

 

 
 

 
2

Six Months Ended June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities (a)
$
23

 
$

 
$

 
$
2

(b)
 
$

 
$
25

Corporate debt securities (a)
1

 

 

 

 
 

 
1

Equity and other non-debt securities (a)
156

 

 

 
(6
)
(b)
 
(4
)
 
146

Total investment securities
available-for-sale
180

 

 

 
(4
)
(b)
 
(4
)
 
172

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
Warrants
3

 
1

(d)
1

(d)

 
 
(2
)
 
3

Derivative liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Other
1

 

 
(2
)
(c)

 
 

 
3

(a)
Auction-rate securities.
(b)
Recorded in "net unrealized gains (losses) on investment securities available-for-sale" in other comprehensive income.
(c)
Realized and unrealized gains and losses due to changes in fair value recorded in "net securities gains" on the consolidated statements of comprehensive income.
(d)
Realized and unrealized gains and losses due to changes in fair value recorded in "other noninterest income" on the consolidated statements of comprehensive income.

12

Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

ASSETS AND LIABILITIES RECORDED AT FAIR VALUE ON A NONRECURRING BASIS
The Corporation may be required, from time to time, to record certain assets and liabilities at fair value on a nonrecurring basis. These include assets that are recorded at the lower of cost or fair value that were recognized at fair value below cost at the end of the period. All assets recorded at fair value on a nonrecurring basis were classified as Level 3 at June 30, 2014 and December 31, 2013 and are presented in the following table. No liabilities were recorded at fair value on a nonrecurring basis at June 30, 2014 and December 31, 2013.
(in millions)
 
Level 3
June 30, 2014
 
 
Loans:
 
 
Commercial
 
$
10

Real estate construction
 
17

Commercial mortgage
 
68

Total loans
 
95

Nonmarketable equity securities
 
1

Other real estate
 
1

Total assets at fair value
 
$
97

December 31, 2013
 
 
Loans:
 
 
Commercial
 
$
43

Real estate construction
 
20

Commercial mortgage
 
61

International
 
4

Total loans
 
128

Nonmarketable equity securities
 
2

Other real estate
 
5

Total assets at fair value
 
$
135

Level 3 assets recorded at fair value on a nonrecurring basis at June 30, 2014 and December 31, 2013 included loans for which a specific allowance was established based on the fair value of collateral and other real estate for which fair value of the properties was less than the cost basis. For both asset classes, the unobservable inputs were the additional adjustments applied by management to the appraised values to reflect such factors as non-current appraisals and revisions to estimated time to sell. These adjustments are determined based on qualitative judgments made by management on a case-by-case basis and are not quantifiable inputs, although they are used in the determination of fair value.
The following table presents quantitative information related to the significant unobservable inputs utilized in the Corporation's Level 3 recurring fair value measurement as of June 30, 2014 and December 31, 2013. The Corporation's Level 3 recurring fair value measurements include auction-rate securities where fair value is determined using an income approach based on a discounted cash flow model. The inputs in the table below reflect management's expectation of continued illiquidity in the secondary auction-rate securities market due to a lack of market activity for the issuers remaining in the portfolio, a lack of market incentives for issuer redemptions, and the expectation for a continuing low interest rate environment. The June 30, 2014 workout periods reflect management's view that short-term interest rates could begin to rise in 2015.
 
 
 
Discounted Cash Flow Model
 
 
 
Unobservable Input
 
Fair Value
(in millions)
 
Discount Rate
 
Workout Period (in years)
June 30, 2014
 
 
 
 
 
State and municipal securities (a)
$
23

 
3% - 10%
 
1 - 3.5
Equity and other non-debt securities (a)
118

 
4% - 8%
 
1 - 2.5
December 31, 2013
 
 
 
 
 
State and municipal securities (a)
$
22

 
5% - 10%
 
3 - 4
Equity and other non-debt securities (a)
136

 
5% - 8%
 
2 - 3
(a)
Auction-rate securities.

13

Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS NOT RECORDED AT FAIR VALUE ON A RECURRING BASIS
The Corporation typically holds the majority of its financial instruments until maturity and thus does not expect to realize many of the estimated fair value amounts disclosed. The disclosures also do not include estimated fair value amounts for items that are not defined as financial instruments, but which have significant value. These include such items as core deposit intangibles, the future earnings potential of significant customer relationships and the value of trust operations and other fee generating businesses. The Corporation believes the imprecision of an estimate could be significant.
The carrying amount and estimated fair value of financial instruments not recorded at fair value in their entirety on a recurring basis on the Corporation’s consolidated balance sheets are as follows:
 
Carrying
Amount
 
Estimated Fair Value
(in millions)
 
Total
 
Level 1
 
Level 2
 
Level 3
June 30, 2014
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
1,226

 
$
1,226

 
$
1,226

 
$

 
$

Interest-bearing deposits with banks
2,668

 
2,668

 
2,668

 

 

Loans held-for-sale
6

 
6

 

 
6

 

Total loans, net of allowance for loan losses (a)
47,291

 
47,236

 

 

 
47,236

Customers’ liability on acceptances outstanding
10

 
10

 
10

 

 

Nonmarketable equity securities (b)
12

 
19

 

 

 
19

Restricted equity investments
92

 
92

 
92

 

 

Liabilities
 
 
 
 
 
 
 
 
 
Demand deposits (noninterest-bearing)
24,774

 
24,774

 

 
24,774

 

Interest-bearing deposits
24,434

 
24,434

 

 
24,434

 

Customer certificates of deposit
4,962

 
4,955

 

 
4,955

 

Total deposits
54,170

 
54,163

 

 
54,163

 

Short-term borrowings
176

 
176

 
176

 

 

Acceptances outstanding
10

 
10

 
10

 

 

Medium- and long-term debt
2,620

 
2,593

 

 
2,593

 

Credit-related financial instruments
(94
)
 
(94
)
 

 

 
(94
)
December 31, 2013
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
1,140

 
$
1,140

 
$
1,140

 
$

 
$

Interest-bearing deposits with banks
5,311

 
5,311

 
5,311

 

 

Loans held-for-sale
4

 
4

 

 
4

 

Total loans, net of allowance for loan losses (a)
44,872

 
44,801

 

 

 
44,801

Customers’ liability on acceptances outstanding
11

 
11

 
11

 

 

Nonmarketable equity securities (b)
12

 
19

 

 

 
19

Restricted equity investments
133

 
133

 
133

 

 

Liabilities
 
 
 
 
 
 
 
 
 
Demand deposits (noninterest-bearing)
23,875

 
23,875

 

 
23,875

 

Interest-bearing deposits
24,354

 
24,354

 

 
24,354

 

Customer certificates of deposit
5,063

 
5,055

 

 
5,055

 

Total deposits
53,292

 
53,284

 

 
53,284

 

Short-term borrowings
253

 
253

 
253

 

 

Acceptances outstanding
11

 
11

 
11

 

 

Medium- and long-term debt
3,543

 
3,540

 

 
3,540

 

Credit-related financial instruments
(88
)
 
(88
)
 

 

 
(88
)
(a)
Included $95 million and $128 million of impaired loans recorded at fair value on a nonrecurring basis at June 30, 2014 and December 31, 2013, respectively.
(b)
Included $1 million and $2 million of nonmarketable equity securities recorded at fair value on a nonrecurring basis at June 30, 2014 and December 31, 2013, respectively.

14

Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

NOTE 3 - INVESTMENT SECURITIES
A summary of the Corporation’s investment securities available-for-sale follows:
(in millions)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
June 30, 2014
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
$
65

 
$

 
$

 
$
65

Residential mortgage-backed securities (a)
9,129

 
125

 
113

 
9,141

State and municipal securities
24

 

 
1

 
23

Corporate debt securities
55

 

 

 
55

Equity and other non-debt securities
253

 

 
3

 
250

Total investment securities available-for-sale (b)
$
9,526

 
$
125

 
$
117

 
$
9,534

 
 
 
 
 
 
 
 
December 31, 2013
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
$
45

 
$

 
$

 
$
45

Residential mortgage-backed securities (a)
9,023

 
91

 
188

 
8,926

State and municipal securities
24

 

 
2

 
22

Corporate debt securities
56

 

 

 
56

Equity and other non-debt securities
266

 
1

 
9

 
258

Total investment securities available-for-sale (b)
$
9,414

 
$
92

 
$
199

 
$
9,307

(a)
Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.
(b)
Included auction-rate securities at amortized cost and fair value of $145 million and $142 million, respectively, as of June 30, 2014 and $169 million and $159 million, respectively, as of December 31, 2013.
A summary of the Corporation’s investment securities available-for-sale in an unrealized loss position as of June 30, 2014 and December 31, 2013 follows:
 
Temporarily Impaired
 
Less than 12 Months
 
12 Months or more
 
Total
(in millions)
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed securities (a)
$
911

 
$
5

 
 
$
3,408

 
$
108

 
 
$
4,319

 
$
113

 
State and municipal securities (b)

 

 
 
22

 
1

 
 
22

 
1

 
Corporate debt securities (b)

 

 
 
1

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