CMA-2013.9.30 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 September 30, 2013
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 October 24, 2013: 182,910,689 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)
September 30, 2013
 
December 31, 2012
 
(unaudited)
 
 
ASSETS
 
 
 
Cash and due from banks
$
1,384

 
$
1,395

 
 
 
 
Federal funds sold
—

 
100

Interest-bearing deposits with banks
5,704

 
3,039

Other short-term investments
106

 
125

 
 
 
 
Investment securities available-for-sale
9,488

 
10,297

 
 
 
 
Commercial loans
27,897

 
29,513

Real estate construction loans
1,552

 
1,240

Commercial mortgage loans
8,785

 
9,472

Lease financing
829

 
859

International loans
1,286

 
1,293

Residential mortgage loans
1,650

 
1,527

Consumer loans
2,152

 
2,153

Total loans
44,151

 
46,057

Less allowance for loan losses
(604
)
 
(629
)
Net loans
43,547

 
45,428

Premises and equipment
604

 
622

Accrued income and other assets
3,837

 
4,063

Total assets
$
64,670

 
$
65,069

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Noninterest-bearing deposits
$
23,896

 
$
23,279

 
 
 
 
Money market and interest-bearing checking deposits
21,697

 
21,273

Savings deposits
1,645

 
1,606

Customer certificates of deposit
5,180

 
5,531

Foreign office time deposits
491

 
502

Total interest-bearing deposits
29,013

 
28,912

Total deposits
52,909

 
52,191

Short-term borrowings
226

 
110

Accrued expenses and other liabilities
1,001

 
1,106

Medium- and long-term debt
3,565

 
4,720

Total liabilities
57,701

 
58,127

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

 
1,141

Capital surplus
2,171

 
2,162

Accumulated other comprehensive loss
(541
)
 
(413
)
Retained earnings
6,239

 
5,931

Less cost of common stock in treasury - 44,483,659 shares at 9/30/13
and 39,889,610 shares at 12/31/12
(2,041
)
 
(1,879
)
Total shareholders’ equity
6,969

 
6,942

Total liabilities and shareholders’ equity
$
64,670

 
$
65,069

See notes to consolidated financial statements.

1
Table of Contents
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
Comerica Incorporated and Subsidiaries 


 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions, except per share data)
2013
 
2012
 
2013
 
2012
INTEREST INCOME
 
 
 
 
 
 
 
Interest and fees on loans
$
381

 
$
400

 
$
1,159

 
$
1,219

Interest on investment securities
54

 
57

 
159

 
179

Interest on short-term investments
4

 
3

 
10

 
9

Total interest income
439

 
460

 
1,328

 
1,407

INTEREST EXPENSE
 
 
 
 
 
 
 
Interest on deposits
13

 
17

 
43

 
54

Interest on medium- and long-term debt
14

 
16

 
43

 
49

Total interest expense
27

 
33

 
86

 
103

Net interest income
412

 
427

 
1,242

 
1,304

Provision for credit losses
8

 
22

 
37

 
63

Net interest income after provision for credit losses
404

 
405

 
1,205

 
1,241

NONINTEREST INCOME
 
 
 
 
 
 
 
Service charges on deposit accounts
53

 
53

 
161

 
162

Fiduciary income
41

 
39

 
128

 
116

Commercial lending fees
28

 
22

 
71

 
71

Letter of credit fees
17

 
19

 
49

 
54

Card fees
20

 
16

 
55

 
48

Foreign exchange income
9

 
9

 
27

 
29

Bank-owned life insurance
12

 
10

 
31

 
30

Brokerage fees
5

 
5

 
14

 
14

Net securities gains (losses)
1

 
—

 
(1
)
 
11

Other noninterest income
28

 
24

 
87

 
79

Total noninterest income
214

 
197

 
622

 
614

NONINTEREST EXPENSES
 
 
 
 
 
 
 
Salaries
196

 
192

 
566

 
582

Employee benefits
59

 
61

 
185

 
181

Total salaries and employee benefits
255

 
253

 
751

 
763

Net occupancy expense
41

 
40

 
119

 
121

Equipment expense
15

 
17

 
45

 
50

Outside processing fee expense
31

 
27

 
89

 
79

Software expense
22

 
23

 
66

 
67

Merger and restructuring charges
—

 
25

 
—

 
33

FDIC insurance expense
9

 
9

 
26

 
29

Advertising expense
6

 
7

 
18

 
21

Other real estate expense
1

 
2

 
3

 
6

Other noninterest expenses
37

 
46

 
132

 
161

Total noninterest expenses
417

 
449

 
1,249

 
1,330

Income before income taxes
201

 
153

 
578

 
525

Provision for income taxes
54

 
36

 
154

 
134

NET INCOME
147

 
117

 
424

 
391

Less income allocated to participating securities
2

 
1

 
6

 
4

Net income attributable to common shares
$
145

 
$
116

 
$
418

 
$
387

Earnings per common share:
 
 
 
 
 
 
 
Basic
$
0.80

 
$
0.61

 
$
2.28

 
$
2.00

Diluted
0.78

 
0.61

 
2.23

 
2.00

 
 
 
 
 
 
 
 
Comprehensive income
144

 
165

 
296

 
494

 
 
 
 
 
 
 
 
Cash dividends declared on common stock
31

 
29

 
95

 
78

Cash dividends declared per common share
0.17

 
0.15

 
0.51

 
0.40

See notes to consolidated financial statements.

2
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, 2011
197.3

 
$
1,141

 
$
2,170

 
$
(356
)
 
$
5,546

 
$
(1,633
)
 
$
6,868

Net income
—

 
—

 
—

 
—

 
391

 
—

 
391

Other comprehensive income, net of tax
—

 
—

 
—

 
103

 
—

 
—

 
103

Cash dividends declared on common stock ($0.40 per share)
—

 
—

 
—

 
—

 
(78
)
 
—

 
(78
)
Purchase of common stock
(7.1
)
 
—

 
—

 
—

 
—

 
(215
)
 
(215
)
Net issuance of common stock under employee stock plans
1.2

 
—

 
(48
)
 
—

 
(28
)
 
62

 
(14
)
Share-based compensation
—

 
—

 
29

 
—

 
—

 
—

 
29

Other
—

 
—

 
2

 
—

 
—

 
(2
)
 
—

BALANCE AT SEPTEMBER 30, 2012
191.4

 
$
1,141

 
$
2,153

 
$
(253
)
 
$
5,831

 
$
(1,788
)
 
$
7,084

 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE AT DECEMBER 31, 2012
188.3

 
$
1,141

 
$
2,162

 
$
(413
)
 
$
5,931

 
$
(1,879
)
 
$
6,942

Net income
—

 
—

 
—

 
—

 
424

 
—

 
424

Other comprehensive loss, net of tax
—

 
—

 
—

 
(128
)
 
—

 
—

 
(128
)
Cash dividends declared on common stock ($0.51 per share)
—

 
—

 
—

 
—

 
(95
)
 
—

 
(95
)
Purchase of common stock
(5.8
)
 
—

 
—

 
—

 
—

 
(218
)
 
(218
)
Net issuance of common stock under employee stock plans
1.2

 
—

 
(18
)
 
—

 
(21
)
 
56

 
17

Share-based compensation
—

 
—

 
27

 
—

 
—

 
—

 
27

BALANCE AT SEPTEMBER 30, 2013
183.7

 
$
1,141

 
$
2,171

 
$
(541
)
 
$
6,239

 
$
(2,041
)
 
$
6,969

See notes to consolidated financial statements.



3
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Comerica Incorporated and Subsidiaries


 
Nine Months Ended September 30,
(in millions)
2013
 
2012
OPERATING ACTIVITIES
 
 
 
Net income
$
424

 
$
391

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for credit losses
37

 
63

Provision (benefit) for deferred income taxes
(6
)
 
69

Depreciation and amortization
92

 
100

Net periodic defined benefit cost
65

 
60

Share-based compensation expense
27

 
29

Net amortization of securities
21

 
35

Accretion of loan purchase discount
(26
)
 
(58
)
Net securities losses (gains)
1

 
(11
)
Excess tax benefits from share-based compensation arrangements
(3
)
 
(1
)
Net change in:
 
 
 
Trading securities
15

 
14

Accrued income receivable
9

 
3

Accrued expenses payable
(13
)
 
(21
)
Other, net
(193
)
 
72

Net cash provided by operating activities
450

 
745

INVESTING ACTIVITIES
 
 
 
Investment securities available-for-sale:
 
 
 
Maturities and redemptions
2,418

 
2,817

Purchases
(1,899
)
 
(3,194
)
Net change in loans
1,864

 
(1,620
)
Sales of Federal Home Loan Bank stock
41

 
3

Other, net
(60
)
 
(29
)
Net cash provided by (used in) investing activities
2,364

 
(2,023
)
FINANCING ACTIVITIES
 
 
 
Net change in:
 
 
 
Deposits
999

 
2,141

Short-term borrowings
116

 
(7
)
Medium- and long-term debt:
 
 
 
Maturities and redemptions
(1,080
)
 
(193
)
Common stock:
 
 
 
Repurchases
(218
)
 
(215
)
Cash dividends paid
(92
)
 
(69
)
Excess tax benefits from share-based compensation arrangements
3

 
1

Other, net
12

 
2

Net cash (used in) provided by financing activities
(260
)
 
1,660

Net increase in cash and cash equivalents
2,554

 
382

Cash and cash equivalents at beginning of period
4,534

 
3,556

Cash and cash equivalents at end of period
$
7,088

 
$
3,938

Interest paid
$
88

 
$
101

Income taxes, tax deposits and tax-related interest paid
104

 
38

Noncash investing and financing activities:
 
 
 
Loans transferred to other real estate
10

 
31

See notes to consolidated financial statements.

4
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 nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. 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, 2012.
Allowance for Loan Losses
The allowance for loan losses represents management’s assessment of probable, estimable losses inherent in the Corporation’s loan portfolio. The allowance for loan losses includes specific allowances, based on individual evaluations of certain loans, and allowances for homogeneous pools of loans with similar risk characteristics.
The allowance for business loans which do not meet the criteria to be evaluated individually is determined by applying standard reserve factors to the pool of business loans within each internal risk rating. In the first quarter 2013, the Corporation enhanced the approach utilized for determining standard reserve factors by changing from a dollar-based migration method for developing probability of default statistics to a count-based method. Under the dollar-based method, each dollar that moved to default received equal weight in the determination of standard reserve factors for each internal risk rating. As a result, the movement of larger loans impacted standard reserve factors more than the movement of smaller loans. By moving to a count-based approach, where each loan that moves to default receives equal weighting, unusually large or small loans will not have a disproportionate influence on the standard reserve factors. The change resulted in a $40 million increase to the allowance for loan losses at March 31, 2013.
Recently Adopted Accounting Pronouncements
In the first quarter 2013, the Corporation adopted amendments to GAAP which require enhanced disclosures about the nature and effect or potential effect of an entity's rights of setoff associated with its derivative and certain other financial instruments. The required disclosures are provided in Note 5 to these unaudited financial statements.
In the third quarter 2013, the Financial Accounting Standards Board (FASB) issued an amendment to GAAP which permits the Overnight Index Swap Rate, also referred to as the Fed Funds Effective Swap Rate, to be used as a benchmark interest rate for hedge accounting purposes, effective for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The amendment also removed the restriction on using different benchmark rates for similar hedges. While the adoption of this amendment had no impact on the Corporation's financial condition and results of operations, to the extent to Corporation enters into new (or redesignates existing) hedging relationships in the future, the Overnight Index Swap Rate will be included in the spectrum of available benchmark interest rates for hedge accounting.
Pending Accounting Pronouncements
In July 2013, the FASB issued Accounting Standards Update (ASU) No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” (ASU 2013-11). ASU 2013-11 requires an unrecognized tax benefit be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward (collectively referred to as a “tax attribute carryforward”), unless the jurisdiction from which the tax attribute carryforward arose does not allow for such treatment. To the extent that a company does not have a tax attribute carryforward as of the reporting date, the unrecognized tax benefit is to be reported as a liability. The Corporation will adopt ASU 2013-11 in the first quarter 2014. The Corporation does not expect the adoption of ASU 2013-11 to have a material effect on the Corporation's financial condition and results of operations.

5
Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

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 and investment securities, 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
Securities held for trading purposes 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 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 residential 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

6
Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

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. 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. 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 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, of which the substantial majority is 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 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. Additionally, as the discount rate incorporates the liquidity risk premium, a change in an assumption used for the liquidity risk premium would be accompanied by a directionally similar change in the discount rate. 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 not recorded at fair value. 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.

7
Table of Contents
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 for its over-the-counter derivative positions on a counterparty-by-counterparty basis and 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 $2 million at September 30, 2013. These warrants are primarily from high technology, non-public 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 September 30, 2013, 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 $13 million and $6 million, respectively, at September 30, 2013. 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. 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. 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 Corporation's percentage ownership in the fund and 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 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

8
Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

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 insignificant and $2 million at September 30, 2013 and December 31, 2012, respectively.
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 $48 million and $89 million at September 30, 2013 and December 31, 2012, respectively, and its investment in FRB stock totaled $85 million at both September 30, 2013 and December 31, 2012. 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. Other real estate carried at fair value based on an observable market price or a current appraised value is classified by the Corporation as Level 2. 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.
Loan servicing rights
Loan servicing rights with a carrying value of $1 million at September 30, 2013, included in “accrued income and other assets” on the consolidated balance sheets and primarily related to Small Business Administration loans, are subject to impairment testing. Loan servicing rights may be carried at fair value on a nonrecurring basis when impairment testing indicates that the fair value of the loan servicing rights is less than the recorded value. A valuation model is used for impairment testing on a quarterly basis, which utilizes a discounted cash flow model, using interest rates and prepayment speed assumptions currently quoted for comparable instruments and a discount rate determined by management. On a quarterly basis, the Accounting Department is responsible for performing the valuation procedures and updating significant inputs, which are primarily obtained from available third-party market data, with appropriate oversight and approval provided by senior 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 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.

9
Table of Contents
Notes to Consolidated Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries

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 standby and commercial 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.
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 September 30, 2013 and December 31, 2012.
(in millions)
Total
 
Level 1
 
Level 2
 
Level 3
 
September 30, 2013
 
 
 
 
 
 
 
 
Trading securities:
 
 
 
 
 
 
 
 
Deferred compensation plan assets
$
92

 
$
92

 
$
—

 
$
—

 
Equity and other non-debt securities
6

 
6

 
—

 
—

 
Residential mortgage-backed securities (a)
3

 
—

 
3

 
—

 
State and municipal securities
2

 
—

 
2

 
—

 
Corporate debt securities
1

 
—

 
1

 
—

 
Total trading securities
104

 
98

 
6

 
—

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

 
45

 
—

 
—

 
Residential mortgage-backed securities (a)
9,089

 
—

 
9,089

 
—

 
State and municipal securities
25

 
—

 
—

 
25

(b)
Corporate debt securities
57

 
—

 
56

 
1

(b)
Equity and other non-debt securities
272

 
131

 
—

 
141

(b)
Total investment securities available-for-sale
9,488

 
176

 
9,145

 
167

 
Derivative assets:
 
 
 
 
 
 
 
 
Interest rate contracts
416

 
—

 
416

 
—

 
Energy derivative contracts
128

 
—

 
128

 
—

 
Foreign exchange contracts
19

 
—

 
19

 
—

 
Warrants
2

 
—

 
—

 
2

 
Total derivative assets
565

 
—

 
563

 
2

 
Total assets at fair value
$
10,157

 
$
274

 
$
9,714

 
$
169

 
Derivative liabilities:
 
 
 
 
 
 
 
 
Interest rate contracts
$
147

 
$
—

 
$
147

 
$
—

 
Energy derivative contracts
126

 
—

 
126

 
—

 
Foreign exchange contracts
13

 
—

 
13

 
—

 
Other
2

 
—

 
—

 
2

 
Total derivative liabilities
288

 
—

 
286

 
2

 
Deferred compensation plan liabilities
92

 
92

 
—

 
—

 
Total liabilities at fair value
$
380

 
$
92

 
$
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, 2012
 
 
 
 
 
 
 
 
Trading securities:
 
 
 
 
 
 
 
 
Deferred compensation plan assets
$
88

 
$
88

 
$
—

 
$
—

 
Residential mortgage-backed securities (a)
4

 
—

 
4

 
—

 
State and municipal securities
19

 
—

 
19

 
—

 
Corporate debt securities
3

 
—

 
3

 
—

 
Total trading securities
114

 
88

 
26

 
—

 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
35

 
35

 
—

 
—

 
Residential mortgage-backed securities (a)
9,920

 
—

 
9,920

 
—

 
State and municipal securities
23

 
—

 
—

 
23

(b)
Corporate debt securities
58

 
—

 
57

 
1

(b)
Equity and other non-debt securities
261

 
105

 
—

 
156

(b)
Total investment securities available-for-sale
10,297

 
140

 
9,977

 
180

 
Derivative assets:
 
 
 
 
 
 
 
 
Interest rate contracts
556

 
—

 
556

 
—

 
Energy derivative contracts
173

 
—

 
173

 
—

 
Foreign exchange contracts
21

 
—

 
21

 
—

 
Warrants
3

 
—

 
—

 
3

 
Total derivative assets
753

 
—

 
750

 
3

 
Total assets at fair value
$
11,164

 
$
228

 
$
10,753

 
$
183

 
Derivative liabilities:
 
 
 
 
 
 
 
 
Interest rate contracts
$
218

 
$
—

 
$
218

 
$
—

 
Energy derivative contracts
172

 
—

 
172

 
—

 
Foreign exchange contracts
18

 
—

 
18

 
—

 
Other
1

 
—

 
—

 
1

 
Total derivative liabilities
409

 
—

 
408

 
1

 
Deferred compensation plan liabilities
88

 
88

 
—

 
—

 
Total liabilities at fair value
$
497

 
$
88

 
$
408

 
$
1

 
(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 the three- and nine-month periods ended September 30, 2013 and 2012.

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 nine-month periods ended September 30, 2013 and 2012.
 
 
 
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
 
Settlements

 
Three Months Ended September 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities (a)
$
25

 
$
—

 
$
—

 
$
—

 
 
$
—

 
$
—

 
$
25

Corporate debt securities (a)
1

 
—

 
—

 
—

 
 
—

 
—

 
1

Equity and other non-debt securities (a)
146

 
1

(c)
—

 
5

(b)
 
(11
)
 
—

 
141

Total investment securities
available-for-sale
172

 
1

(c)
—

 
5

(b)
 
(11
)
 
—

 
167

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants
3

 
7

(d)
—

 
—

 
 
(2
)
 
(6
)
 
2

Derivative liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
3

 
—

 
—

 
—

 
 
—

 
(1
)
 
2

Three Months Ended September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities (a)
$
24

 
$
—

 
$
—

 
$
(1
)
(b)
 
$
—

 
$
—

 
$
23

Corporate debt securities (a)
1

 
—

 
—

 
—

 
 
—

 
—

 
1

Equity and other non-debt securities (a)
215

 
1

(c)
—

 
—

 
 
(12
)
 
—

 
204

Total investment securities
available-for-sale
240

 
1

(c)
—

 
(1
)
(b)
 
(12
)
 
—

 
228

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants
3

 
—

 
—

 
—

 
 
—

 
—

 
3

Derivative liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
—

 
(1
)
(c)
—

 
—

 
 
—

 
(1
)
 
—

Nine Months Ended September 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

 
1

(c)
—

 
(1
)
(b)
 
(15
)
 
—

 
141

Total investment securities
available-for-sale
180

 
1

(c)
—

 
1

(b)
 
(15
)
 
—

 
167

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants
3

 
8

(d)
1

(d)
—

 
 
(4
)
 
(6
)
 
2

Derivative liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
1

 
—

 
(2
)
(c)
—

 
 
—

 
(1
)
 
2

Nine Months Ended September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities (a)
$
24

 
$
—

 
$
—

 
$
—

 
 
$
(1
)
 
$
—

 
$
23

Corporate debt securities (a)
1

 
—

 
—

 
—

 
 
—

 
—

 
1

Equity and other non-debt securities (a)
408

 
12

(c)
—

 
11

(b)
 
(227
)
 
—

 
204

Total investment securities
available-for-sale
433

 
12

(c)
—

 
11

(b)
 
(228
)
 
—

 
228

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants
3

 
3

(d)
1

(d)
—

 
 
(4
)
 
—

 
3

Derivative liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
6

 
(1
)
(c)
—

 
—

 
 
—

 
(7
)
 
—

(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 (losses)" 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 September 30, 2013 and December 31, 2012 and are presented in the following table. No liabilities were recorded at fair value on a nonrecurring basis at September 30, 2013 and December 31, 2012.
(in millions)
 
Level 3
September 30, 2013
 
 
Loans:
 
 
Commercial
 
$
70

Real estate construction
 
23

Commercial mortgage
 
96

Total loans
 
189

Nonmarketable equity securities
 
1

Other real estate
 
12

Loan servicing rights
 
1

Total assets at fair value
 
$
203

December 31, 2012
 
 
Loans:
 
 
Commercial
 
$
42

Real estate construction
 
25

Commercial mortgage
 
145

Lease financing
 
2

Total loans
 
214

Nonmarketable equity securities
 
2

Other real estate
 
24

Loan servicing rights
 
2

Total assets at fair value
 
$
242

Level 3 assets recorded at fair value on a nonrecurring basis at September 30, 2013 and December 31, 2012 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 September 30, 2013 and December 31, 2012. 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 the low interest rate environment continuing into 2015. The September 30, 2013 discount rates reflect changes in liquidity premiums based on sustained illiquid market conditions for the securities during the third quarter 2013.
 
 
 
Discounted Cash Flow Model
 
 
 
Unobservable Input
 
Fair Value
(in millions)
 
Discount Rate
 
Workout Period (in years)
September 30, 2013
 
 
 
 
 
State and municipal securities (a)
$
25

 
5% - 11%
 
4 - 5
Equity and other non-debt securities (a)
141

 
6% - 8%
 
2 - 3
December 31, 2012
 
 
 
 
 
State and municipal securities (a)
$
23

 
6% - 10%
 
4 - 6
Equity and other non-debt securities (a)
156

 
4% - 6%
 
2 - 4
(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
September 30, 2013
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
1,384

 
$
1,384

 
$
1,384

 
$
—

 
$
—

Interest-bearing deposits with banks
5,704

 
5,704

 
5,704

 
—

 
—

Loans held-for-sale
7

 
7

 
—

 
7

 
—

Total loans, net of allowance for loan losses (a)
43,547

 
43,541

 
—

 
—

 
43,541

Customers’ liability on acceptances outstanding
8

 
8

 
8

 
—

 
—

Nonmarketable equity securities (b)
13

 
19

 
—

 
—

 
19

Restricted equity investments
133

 
133

 
133

 
—

 
—

Liabilities
 
 
 
 
 
 
 
 
 
Demand deposits (noninterest-bearing)
23,896

 
23,896

 
—

 
23,896

 
—

Interest-bearing deposits
23,833

 
23,833

 
—

 
23,833

 
—

Customer certificates of deposit
5,180

 
5,175

 
—

 
5,175

 
—

Total deposits
52,909

 
52,904

 
—

 
52,904

 
—

Short-term borrowings
226

 
226

 
226

 
—

 
—

Acceptances outstanding
8

 
8

 
8

 
—

 
—

Medium- and long-term debt
3,565

 
3,548

 
—

 
3,548

 
—

Credit-related financial instruments
(90
)
 
(90
)
 
—

 
—

 
(90
)
December 31, 2012
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
1,395

 
$
1,395

 
$
1,395

 
$
—

 
$
—

Federal funds sold
100

 
100

 
100

 
—

 
—

Interest-bearing deposits with banks
3,039

 
3,039

 
3,039

 
—

 
—

Loans held-for-sale
12

 
12

 
—

 
12

 
—

Total loans, net of allowance for loan losses (a)
45,428

 
45,649

 
—

 
—

 
45,649

Customers’ liability on acceptances outstanding
18

 
18

 
18

 
—

 
—

Nonmarketable equity securities (b)
13

 
22

 
—

 
—

 
22

Restricted equity investments
174

 
174

 
174

 
—

 
—

Liabilities
 
 
 
 
 
 
 
 
 
Demand deposits (noninterest-bearing)
23,279

 
23,279

 
—

 
23,279

 
—

Interest-bearing deposits
23,381

 
23,381

 
—

 
23,381

 
—

Customer certificates of deposit
5,531

 
5,535

 
—

 
5,535

 
—

Total deposits
52,191

 
52,195

 
—

 
52,195

 
—

Short-term borrowings
110

 
110

 
110

 
—

 
—

Acceptances outstanding
18

 
18

 
18

 
—

 
—

Medium- and long-term debt
4,720

 
4,685

 
—

 
4,685

 
—

Credit-related financial instruments
(103
)
 
(103
)
 
—

 
—

 
(103
)
(a)
Included $189 million and $214 million of impaired loans recorded at fair value on a nonrecurring basis at September 30, 2013 and December 31, 2012, respectively.
(b)
Included $1 million and $2 million of nonmarketable equity securities recorded at fair value on a nonrecurring basis at September 30, 2013 and December 31, 2012, 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
September 30, 2013
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
$
45

 
$
—

 
$
—

 
$
45

Residential mortgage-backed securities (a)
9,113

 
121

 
145

 
9,089

State and municipal securities
27

 
—

 
2

 
25

Corporate debt securities
57

 
—

 
—

 
57

Equity and other non-debt securities
279

 
1

 
8

 
272

Total investment securities available-for-sale (b)
$
9,521

 
$
122

 
$
155

 
$
9,488

 
 
 
 
 
 
 
 
December 31, 2012
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
$
35

 
$
—

 
$
—

 
$
35

Residential mortgage-backed securities (a)
9,672

 
248

 
—

 
9,920

State and municipal securities
27

 
—

 
4

 
23

Corporate debt securities
58

 
—

 
—

 
58

Equity and other non-debt securities
268

 
—