UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For
the quarterly period ended
September 30, 2004
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or
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For
the transition period from
to
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Commission file number 1-10706
Comerica Incorporated
Delaware
(State or other jurisdiction of incorporation or organization) |
38-1998421
(I.R.S. Employer Identification No.) |
Comerica Tower at Detroit Center
Detroit, Michigan
48226
(248) 371-5000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
$5 par value common stock:
Outstanding as of October 31, 2004: 170,560,000 shares
COMERICA INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
ITEM 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
Comerica Incorporated and Subsidiaries
September 30, | December 31, | September 30, | ||||||||||
(in millions, except share data)
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2004
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2003
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2003
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(unaudited) | (unaudited) | |||||||||||
ASSETS
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Cash and due from banks
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$ | 1,560 | $ | 1,527 | $ | 1,955 | ||||||
Short-term investments
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5,055 | 4,013 | 4,805 | |||||||||
Investment securities available-for-sale
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4,198 | 4,489 | 5,086 | |||||||||
Commercial loans
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21,146 | 21,579 | 22,030 | |||||||||
Real estate construction loans
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3,276 | 3,397 | 3,496 | |||||||||
Commercial mortgage loans
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7,931 | 7,878 | 7,631 | |||||||||
Residential mortgage loans
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1,263 | 1,228 | 1,210 | |||||||||
Consumer loans
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2,722 | 2,610 | 2,501 | |||||||||
Lease financing
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1,260 | 1,301 | 1,289 | |||||||||
International loans
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2,117 | 2,309 | 2,478 | |||||||||
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Total loans
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39,715 | 40,302 | 40,635 | |||||||||
Less allowance for loan losses
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(729 | ) | (803 | ) | (802 | ) | ||||||
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Net loans
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38,986 | 39,499 | 39,833 | |||||||||
Premises and equipment
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399 | 374 | 368 | |||||||||
Customers liability on acceptances outstanding
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41 | 27 | 22 | |||||||||
Accrued income and other assets
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2,720 | 2,663 | 2,726 | |||||||||
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Total assets
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$ | 52,959 | $ | 52,592 | $ | 54,795 | ||||||
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LIABILITIES AND SHAREHOLDERS EQUITY
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Noninterest-bearing deposits
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$ | 16,811 | $ | 14,104 | $ | 16,198 | ||||||
Interest-bearing deposits
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25,424 | 27,359 | 27,498 | |||||||||
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Total deposits
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42,235 | 41,463 | 43,696 | |||||||||
Short-term borrowings
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225 | 262 | 296 | |||||||||
Acceptances outstanding
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41 | 27 | 22 | |||||||||
Accrued expenses and other liabilities
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1,021 | 929 | 870 | |||||||||
Medium- and long-term debt
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4,401 | 4,801 | 4,818 | |||||||||
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Total liabilities
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47,923 | 47,482 | 49,702 | |||||||||
Common stock $5 par value:
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Authorized - 325,000,000 shares
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Issued - 178,735,252 shares at 9/30/04, 12/31/03 and 9/30/03
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894 | 894 | 894 | |||||||||
Capital surplus
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408 | 384 | 378 | |||||||||
Accumulated other comprehensive income (loss)
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(24 | ) | 74 | 111 | ||||||||
Retained earnings
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4,222 | 3,973 | 3,909 | |||||||||
Less cost of common stock in treasury - 8,169,292 shares at 9/30/04,
3,735,163 shares at 12/31/03 and 3,421,888 shares at 9/30/03
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(464 | ) | (215 | ) | (199 | ) | ||||||
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Total shareholders equity
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5,036 | 5,110 | 5,093 | |||||||||
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Total liabilities and shareholders equity
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$ | 52,959 | $ | 52,592 | $ | 54,795 | ||||||
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See notes to consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Comerica Incorporated and Subsidiaries
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30,
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September 30,
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(in millions, except per share data)
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2004
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2003
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2004
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2003
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INTEREST INCOME
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Interest and fees on loans
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$ | 514 | $ | 530 | $ | 1,510 | $ | 1,700 | ||||||||
Interest on investment securities
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36 | 37 | 111 | 124 | ||||||||||||
Interest on short-term investments
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8 | 12 | 25 | 28 | ||||||||||||
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Total interest income
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558 | 579 | 1,646 | 1,852 | ||||||||||||
INTEREST EXPENSE
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Interest on deposits
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79 | 86 | 224 | 293 | ||||||||||||
Interest on short-term borrowings
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1 | 1 | 2 | 6 | ||||||||||||
Interest on medium- and long-term debt
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27 | 27 | 76 | 84 | ||||||||||||
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Total interest expense
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107 | 114 | 302 | 383 | ||||||||||||
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Net interest income
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451 | 465 | 1,344 | 1,469 | ||||||||||||
Provision for loan losses
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| 83 | 85 | 300 | ||||||||||||
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Net interest income after provision for loan losses
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451 | 382 | 1,259 | 1,169 | ||||||||||||
NONINTEREST INCOME
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Service charges on deposit accounts
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57 | 60 | 178 | 179 | ||||||||||||
Fiduciary income
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43 | 42 | 128 | 125 | ||||||||||||
Commercial lending fees
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14 | 16 | 41 | 46 | ||||||||||||
Letter of credit fees
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17 | 17 | 49 | 49 | ||||||||||||
Foreign exchange income
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9 | 11 | 28 | 30 | ||||||||||||
Brokerage fees
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9 | 8 | 27 | 24 | ||||||||||||
Investment advisory revenue, net
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8 | 8 | 26 | 22 | ||||||||||||
Bank-owned life insurance
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10 | 12 | 28 | 33 | ||||||||||||
Equity in earnings of unconsolidated subsidiaries
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3 | 2 | 11 | 5 | ||||||||||||
Warrant income
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1 | 1 | 6 | 1 | ||||||||||||
Net securities gains (losses)
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(6 | ) | 4 | | 46 | |||||||||||
Net gain on sales of businesses
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| | 7 | | ||||||||||||
Other noninterest income
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41 | 40 | 125 | 107 | ||||||||||||
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Total noninterest income
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206 | 221 | 654 | 667 | ||||||||||||
NONINTEREST EXPENSES
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Salaries and employee benefits
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225 | 229 | 686 | 670 | ||||||||||||
Net occupancy expense
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32 | 34 | 93 | 96 | ||||||||||||
Equipment expense
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14 | 16 | 43 | 46 | ||||||||||||
Outside processing fee expense
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16 | 18 | 51 | 53 | ||||||||||||
Software expense
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11 | 10 | 31 | 28 | ||||||||||||
Customer services
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8 | 6 | 17 | 18 | ||||||||||||
Litigation and operational losses
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16 | 6 | 27 | 14 | ||||||||||||
Other noninterest expenses
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50 | 58 | 165 | 179 | ||||||||||||
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Total noninterest expenses
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372 | 377 | 1,113 | 1,104 | ||||||||||||
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Income before income taxes
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285 | 226 | 800 | 732 | ||||||||||||
Provision for income taxes
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89 | 69 | 250 | 229 | ||||||||||||
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NET INCOME
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$ | 196 | $ | 157 | $ | 550 | $ | 503 | ||||||||
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Net income applicable to common stock
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$ | 196 | $ | 157 | $ | 550 | $ | 503 | ||||||||
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Basic net income per common share
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$ | 1.15 | $ | 0.90 | $ | 3.19 | $ | 2.88 | ||||||||
Diluted net income per common share
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1.13 | 0.89 | 3.15 | 2.86 | ||||||||||||
Cash dividends declared on common stock
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88 | 88 | 268 | 262 | ||||||||||||
Dividends per common share
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0.52 | 0.50 | 1.56 | 1.50 |
See notes to consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (unaudited)
Comerica Incorporated and Subsidiaries
Accumulated | ||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||
Common | Capital | Comprehensive | Retained | Treasury | Shareholders | |||||||||||||||||||
(in millions, except share data)
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Stock
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Surplus
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Income (Loss)
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Earnings
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Stock
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Equity
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BALANCE AT JANUARY 1, 2003
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$ | 894 | $ | 363 | $ | 237 | $ | 3,684 | $ | (231 | ) | $ | 4,947 | |||||||||||
Net income
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| | | 503 | | 503 | ||||||||||||||||||
Other comprehensive loss, net of tax
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| | (126 | ) | | | (126 | ) | ||||||||||||||||
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Total comprehensive income
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Cash dividends declared on common stock ($1.50 per share)
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Net issuance of common stock under
employee stock plans
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| (5 | ) | | (16 | ) | 32 | 11 | ||||||||||||||||
Recognition of stock-based
compensation expense
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| 20 | | | | 20 | ||||||||||||||||||
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BALANCE AT SEPTEMBER 30, 2003
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$ | 894 | $ | 378 | $ | 111 | $ | 3,909 | $ | (199 | ) | $ | 5,093 | |||||||||||
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BALANCE AT JANUARY 1, 2004
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$ | 894 | $ | 384 | $ | 74 | $ | 3,973 | $ | (215 | ) | $ | 5,110 | |||||||||||
Net income
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| | | 550 | | 550 | ||||||||||||||||||
Other comprehensive loss, net of tax
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| | (98 | ) | | | (98 | ) | ||||||||||||||||
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Total comprehensive income
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| | | | | 452 | ||||||||||||||||||
Cash dividends declared on common stock ($1.56 per share)
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| | | (268 | ) | | (268 | ) | ||||||||||||||||
Purchase of 5,977,723 shares of common stock
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| | | | (336 | ) | (336 | ) | ||||||||||||||||
Net issuance of common stock under
employee stock plans
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| (2 | ) | | (33 | ) | 87 | 52 | ||||||||||||||||
Recognition of stock-based
compensation expense
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| 26 | | | | 26 | ||||||||||||||||||
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BALANCE AT SEPTEMBER 30, 2004
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$ | 894 | $ | 408 | $ | (24 | ) | $ | 4,222 | $ | (464 | ) | $ | 5,036 | ||||||||||
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See notes to consolidated financial statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Comerica Incorporated and Subsidiaries
Nine Months Ended | ||||||||
September 30,
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(in millions)
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2004
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2003
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OPERATING ACTIVITIES
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Net
income
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$ | 550 | $ | 503 | ||||
Adjustments to reconcile net income to net cash provided by
operating activities:
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Provision for loan losses
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85 | 300 | ||||||
Depreciation and software amortization
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52 | 52 | ||||||
Amortization of stock-based compensation expense
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24 | 21 | ||||||
Net amortization of securities
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20 | 23 | ||||||
Net amortization of intangibles
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1 | 1 | ||||||
Net gain on sale of investment securities available-for-sale
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| (46 | ) | |||||
Net gain on sales of businesses
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(7 | ) | | |||||
Contributions to pension plan fund
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(62 | ) | (47 | ) | ||||
Net (increase) decrease in trading securities
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(8 | ) | 8 | |||||
Net decrease in loans held-for-sale
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38 | 49 | ||||||
Net (increase) decrease in accrued income receivable
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(15 | ) | 19 | |||||
Net increase in accrued expenses
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81 | 29 | ||||||
Other, net
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(89 | ) | 75 | |||||
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Total adjustments
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120 | 484 | ||||||
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Net cash provided by operating activities
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670 | 987 | ||||||
INVESTING ACTIVITIES
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Net increase in other short-term investments
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(1,072 | ) | (2,416 | ) | ||||
Proceeds from sales of investment securities available-for-sale
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330 | 3,651 | ||||||
Proceeds from maturities of investment securities available-for-sale
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752 | 4,782 | ||||||
Purchases of investment securities available-for-sale
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(773 | ) | (10,400 | ) | ||||
Decrease in receivables for securities sold pending settlement
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| 1,110 | ||||||
Net decrease in loans
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391 | 1,333 | ||||||
Fixed assets, net
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(65 | ) | (39 | ) | ||||
Net (increase) decrease in customers liability on acceptances outstanding
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(14 | ) | 11 | |||||
Proceeds from sales of businesses
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8 | | ||||||
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Net cash used in investing activities
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(443 | ) | (1,968 | ) | ||||
FINANCING ACTIVITIES
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Net increase in deposits
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772 | 1,926 | ||||||
Net decrease in short-term borrowings
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(37 | ) | (244 | ) | ||||
Net increase (decrease) in acceptances outstanding
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14 | (11 | ) | |||||
Proceeds from issuance of medium- and long-term debt
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359 | 311 | ||||||
Repayments of medium- and long-term debt
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(750 | ) | (700 | ) | ||||
Proceeds from issuance of common stock and other
capital transactions
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52 | 11 | ||||||
Purchase of common stock for treasury and retirement
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(336 | ) | | |||||
Dividends paid
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(268 | ) | (259 | ) | ||||
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Net cash (used in) provided by financing activities
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(194 | ) | 1,034 | |||||
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Net increase in cash and due from banks
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33 | 53 | ||||||
Cash and due from banks at beginning of period
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1,527 | 1,902 | ||||||
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Cash and due from banks at end of period
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$ | 1,560 | $ | 1,955 | ||||
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Interest paid
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$ | 296 | $ | 354 | ||||
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Income taxes paid
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$ | 126 | $ | 130 | ||||
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Noncash investing and financing activities:
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Loans transferred to other real estate
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$ | 21 | $ | 23 | ||||
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See notes to consolidated financial statements.
6
Notes to Consolidated
Financial Statements (unaudited)
Comerica Incorporated and Subsidiaries
Note 1 Basis of Presentation and Accounting Policies
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles 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 U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the nine months ended September 30, 2004, are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. Certain items in prior periods have been 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, 2003.
Reclassifications
The Corporation issues personal purpose loans to individuals associated with commercial lending relationships. These loans, and their associated interest income, were previously classified with commercial loans. In the second quarter of 2004, the Corporation reclassified its personal purpose loans to residential mortgage loans and consumer loans. The financial statements and associated schedules for prior periods have been adjusted to reflect this reclassification. The impact on loan balances at December 31, 2003 was a decrease in commercial loans of approximately $1.4 billion, offset by increases in residential mortgage loans and consumer loans of approximately $0.4 billion and $1.0 billion, respectively.
The Corporation has foreign currency denominated assets and liabilities and hedges the resulting foreign currency exposure with forward foreign exchange contracts. The exchange rate related adjustments required to reflect the foreign currency denominated assets and liabilities at current U.S. dollar equivalent values and to reflect the related forward foreign exchange contracts at market value were previously classified with foreign exchange income. In the third quarter of 2004, the Corporation combined this risk management income with other risk management income, which resulted in a reclassification from foreign exchange income to other noninterest income on the Consolidated Statements of Income. The financial statements for prior periods have been adjusted to reflect this reclassification.
Derivative and Foreign Exchange Contracts
The Corporation uses derivative financial instruments, including foreign exchange contracts, to manage the Corporations exposure to interest rate and foreign currency risks. All derivative instruments are carried at fair value as either assets or liabilities on the balance sheet. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument is determined by whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. For those derivative instruments that qualify as hedging instruments, the Corporation designates the hedging instrument as a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation. For further information, see Note 8.
7
Notes to Consolidated
Financial Statements (unaudited)
Note 1 Basis of Presentation and Accounting Policies (continued)
Stock-Based Compensation
In 2002, the Corporation adopted the fair value recognition provisions of
SFAS No. 123, Accounting for Stock-Based Compensation (as amended by SFAS No.
148, Accounting for Stock-Based Compensation Transition and Disclosure),
which the Corporation is applying prospectively to all stock-based compensation
awards granted to employees after December 31, 2001. Options granted prior to
January 1, 2002 continue to be accounted for under the intrinsic value method,
as outlined in APB Opinion No. 25, Accounting for Stock Issued to Employees.
The effect on net income and earnings per share, if the fair value method had
been applied to all outstanding and unvested awards in each period, is
presented in the table below. For further information on the Corporations
stock-based compensation plans, refer to Note 16 to the consolidated financial
statements in the Corporations 2003 Annual Report.
Impairment
Goodwill and identified intangible assets that have an indefinite useful
life are subject to impairment testing, which the Corporation conducts
annually, or on an interim basis if events or changes in circumstances between
annual tests indicate the assets might be impaired. The Corporation performs
its annual impairment test for goodwill and identified intangible assets that
have an indefinite useful life as of July 1 of each year. The impairment test
involves assigning tangible assets and liabilities, identified intangible
assets and goodwill to reporting units, which are a subset of the Corporations
operating segments, and comparing the fair value of each reporting unit to its
carrying value. If the fair value is less than the carrying value, a further
test is required to measure the amount of impairment. The annual test of
goodwill and intangible assets that have an indefinite life, performed as of
July 1, 2004, did not indicate that an impairment charge was required.
The Corporation reviews finite lived intangible assets and other long
lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable from
projected undiscounted net operating cash flows. If the projected undiscounted
net operating cash flows are less than the carrying amount, the Corporation
recognizes a loss to reduce the carrying amount to fair value. Additional
information regarding the Corporations goodwill, intangible assets and
impairment policies can be found in the Corporations 2003 Annual Report on
page 55 and in Notes 1, 8 and 9 to the consolidated financial statements.
8
Notes to Consolidated
Financial Statements (unaudited)
Note 2 Investment Securities
At September 30, 2004, investment securities having a carrying value of
$1,422 million were pledged where permitted or required by law to secure
liabilities and public and other deposits of $401 million. This included
securities of $886 million pledged with the Federal Reserve Bank to secure
actual borrowings of $13 million at September 30, 2004, and potential
borrowings of up to an additional $837 million. The remaining pledged
securities of $536 million are primarily with state and local government
agencies to secure $388 million of deposits and other liabilities, including
deposits of the State of Michigan of $140 million at September 30, 2004.
Note 3 Allowance for Loan Losses
The following summarizes the changes in the allowance for loan losses:
9
Notes to Consolidated
Financial Statements (unaudited)
Note 3 Allowance for Loan Losses (continued)
SFAS No. 114, Accounting by Creditors for Impairment of a Loan,
considers a loan impaired when it is probable that interest and principal
payments will not be made in accordance with the contractual terms of the loan
agreement. Consistent with this definition, all nonaccrual and reduced-rate
loans (with the exception of residential mortgage and consumer loans) are
impaired. Impaired loans that are restructured and meet the requirements to be
on accrual status are included with total impaired loans for the remainder of
the calendar year of the restructuring. There were no loans included in the
$358 million of impaired loans at September 30, 2004 that were restructured and
met the requirements to be on accrual status. Impaired loans averaged $392
million and $448 million for the three and nine month periods ended September
30, 2004, compared to $590 million and $599 million, respectively, for the
comparable periods in the prior year. The following presents information
regarding the period-end balances of impaired loans:
Those impaired loans not requiring an allowance represent loans for which
the fair value exceeded the recorded investments in such loans.
10
Notes to Consolidated Financial Statements (unaudited)
Note 4 Medium- and Long-term Debt
Medium- and long-term debt consisted of the following at September 30,
2004 and December 31, 2003:
The carrying value of medium- and long-term debt has been adjusted to
reflect the gain or loss attributable to the risk hedged. In May 2004, Comerica
Bank, a subsidiary of Comerica Incorporated, issued $250 million of 5.70%
Subordinated Notes which are classified in medium- and long-term debt. The
notes pay interest on June 1 and December 1 of each year, beginning with
December 1, 2004, and mature June 1, 2014. Comerica Bank used the net proceeds
for general corporate purposes.
Note 5 Income Taxes
The provision for income taxes is computed by applying statutory federal
income tax rates to income before income taxes as reported in the financial
statements after deducting non-taxable items, principally income on bank-owned
life insurance and interest income on state and municipal securities. State and
foreign taxes are then added to the federal provision.
11
Notes to Consolidated Financial Statements (unaudited)
Note 6 Accumulated Other Comprehensive Income (Loss)
Other comprehensive income includes the change in net unrealized gains and
losses on investment securities available-for-sale, the change in accumulated
gains and losses on cash flow hedges, the change in the accumulated foreign
currency translation adjustment and the change in accumulated minimum pension
liability adjustment. The Consolidated Statements of Changes in Shareholders
Equity on page 5 include only combined other comprehensive income, net of tax.
The following table presents reconciliations of the components of accumulated
other comprehensive income (loss) for the nine months ended September 30, 2004
and 2003. Total comprehensive income totaled $452 million and $377 million, for
the nine months ended September 30, 2004 and 2003, respectively, and $254
million and $87 million for the three months ended September 30, 2004 and 2003,
respectively. The $75 million increase in total comprehensive income in the
nine month period ended September 30, 2004 when compared to the same period in
the prior year resulted principally from an increase in net income ($47
million) and a decrease in net unrealized losses on investment securities
available-for-sale ($30 million), due to changes in the interest rate
environment.
12
Notes to Consolidated Financial Statements (unaudited)
Note 7 Employee Benefit Plans
The components of net periodic benefit cost for the Corporations
qualified pension plan, non-qualified pension plan and postretirement benefit
plan are as follows:
In January 2004, the Financial Accounting Standards Board (FASB) issued
FASB Staff Position (FSP) 106-1, Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and Modernization Act of
2003, subsequently revised in April 2004. FSP 106-1 permits a sponsor of a
postretirement health care plan that provides a prescription drug benefit to
make a one-time election to defer accounting for the effects of the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (the Act) and
requires certain disclosures pending issuance of accounting guidance for the
federal subsidy resulting from the Act. The Act introduces a Medicare
prescription drug benefit as well as a federal subsidy to sponsors of retiree
health care benefit plans that provide a benefit that is at least actuarially
equivalent to the Medicare benefit. The Corporation elected to defer the
accounting for the Act in accordance with FSP 106-1.
In May 2004, the FASB issued FSP 106-2, which provides guidance on the
accounting for the federal subsidy resulting from the Act. FSP 106-2 requires
the subsidy to be accounted for under current guidance for other postretirement
benefits. As such, the effects of the subsidy on the benefits attributable to
past services are accounted for as an actuarial gain. The Corporations entire
postretirement prescription drug related liability is attributable to past
services as the benefits were only provided to employees that retired prior to
December 31, 1992.
The Corporation adopted the provisions of FSP 106-2 in the quarter ended
September 30, 2004. In accordance with the FSP 106-2, the Corporation has
determined its postretirement drug benefits to be actuarially equivalent.
However, the enactment of the Act is not considered a significant event;
therefore, its effects will be incorporated at December 31, 2004, the regularly
scheduled measurement date for its plan assets and obligation. For further
information on the Corporations employee benefit plans, refer to Note 17 to the
consolidated financial statements in the Corporations 2003 Annual Report.
13
Notes to Consolidated
Financial Statements (unaudited)
Note 8 Derivatives and Foreign Exchange Contracts
The following table presents the composition of derivative financial
instruments and foreign exchange contracts, excluding commitments, held or
issued for risk management and in connection with customer-initiated and other
activities.
(2) Unrealized gains represent receivables from derivative counterparties, and therefore exposes the Corporation to credit risk. This risk is measured
as the cost to replace, at current market rates, contracts in a profitable position. Credit risk is calculated before consideration is given to
bilateral collateral agreements or master netting arrangements that effectively reduce credit risk.
(3) The fair values of derivatives and foreign exchange contracts generally represent the estimated amounts the Corporation would receive or pay to
terminate or otherwise settle the contracts at the balance sheet date. The fair values of all derivatives and foreign exchange contracts are reflected
in the consolidated balance sheets.
14
Notes to Consolidated
Financial Statements (unaudited)
Note 8 Derivatives and Foreign Exchange Contracts (continued)
Risk Management
Fluctuations in net interest income due to interest rate risk result from
the composition of assets and liabilities and the mismatches in the timing of
the repricing of these assets and liabilities. In addition, external factors
such as interest rates, and the dynamics of yield curve and spread
relationships can affect net interest income. The Corporation utilizes
simulation analyses to project the sensitivity of the Corporations net
interest income to changes in interest rates. The Corporation employs cash
instruments, such as investment securities, as well as derivative financial
instruments, to manage exposure to these and other risks, including liquidity
risk.
As an end-user, the Corporation accesses the interest rate markets to
obtain derivative instruments for use principally in connection with asset and
liability management activities. As part of a fair value hedging strategy, the
Corporation has entered into interest rate swap agreements for interest rate
risk management purposes. The interest rate swap agreements effectively modify
the Corporations exposure to interest rate risk by converting fixed-rate
deposits and debt to a floating rate. These agreements involve the receipt of
fixed rate interest amounts in exchange for floating rate interest payments
over the life of the agreement, without an exchange of the underlying principal
amount. For instruments that support a fair value hedging strategy, no
ineffectiveness was required to be recorded in the statement of income.
As part of a cash flow hedging strategy, the Corporation has entered into
predominantly 2 to 3 year interest rate swap agreements (weighted average
original maturity of 2.7 years) that effectively convert a portion of its
existing and forecasted floating-rate loans to a fixed-rate basis, thus
reducing the impact of interest rate changes on future interest income over the
next 2 to 3 years. Approximately 27 percent ($10.6 billion) of the
Corporations outstanding loans were designated as the hedged items to interest
rate swap agreements at September 30, 2004. During the three and nine month
periods ended September 30, 2004, interest rate swap agreements designated as
cash flow hedges increased interest and fees on loans by $45 million and $154
million, respectively, compared to $62 million and $231 million, respectively,
for the comparable periods last year. Other noninterest income in the three and
nine month periods ended September 30, 2004 included $2 million of ineffective
cash flow hedge gains and $1 million of ineffective cash flow hedge losses,
respectively. If interest rates, interest yield curves and notional amounts
remain at their current levels, the Corporation expects to reclassify $35
million of net gains on derivative instruments from accumulated other
comprehensive income to earnings during the next twelve months due to receipt
of variable interest associated with the existing and forecasted floating-rate
loans.
Foreign exchange rate risk arises from changes in the value of certain
assets and liabilities denominated in foreign currencies. The Corporation
employs cash instruments, such as investment securities, as well as derivative
financial instruments and foreign exchange contracts, to manage exposure to
these and other risks. In addition, the Corporation uses foreign exchange
forward and option contracts to protect the value of its foreign currency
investment in foreign subsidiaries. Realized and unrealized gains and losses
from these hedges are not included in the statement of income, but are shown in
the accumulated foreign currency translation adjustment account included in
other comprehensive income, with the related amounts due to or from
counterparties included in other liabilities or other assets. During the three
and nine month periods ended September 30, 2004, the Corporation recognized an
immaterial amount of net gains in accumulated foreign currency translation
adjustment, related to the forward foreign exchange contracts.
Management believes these strategies achieve the desired relationship
between the rate maturities of assets and their funding sources which, in turn,
reduces the overall exposure of net interest income to interest rate risk,
although, there can be no assurance that such strategies will be successful.
The Corporation also uses various other types of financial instruments to
mitigate interest rate and foreign currency risks associated with specific
assets or liabilities, which are reflected in the preceding table. Such
instruments include interest rate caps and floors, foreign exchange forward
contracts, foreign exchange option contracts and foreign exchange
cross-currency swaps.
15
Notes to Consolidated
Financial Statements (unaudited)
Note 8 Derivatives and Foreign Exchange Contracts (continued)
The following table summarizes the expected maturity distribution of the
notional amount of interest rate swaps used for risk management purposes and
indicates the weighted average interest rates associated with amounts to be
received or paid on interest rate swap agreements as of September 30, 2004. The
swaps are grouped by the assets or liabilities to which they have been
designated.
Remaining Expected Maturity of Risk Management Interest Rate Swaps as of September 30, 2004:
(2) Variable rates received are based on three-month and six-month LIBOR or one-month and three-month Canadian Dollar Offered Rate (CDOR) rates in effect at September 30,
2004.
16
Notes to Consolidated
Financial Statements (unaudited)
Note 8 Derivatives and Foreign Exchange Contracts (continued)
The Corporation had commitments to purchase investment securities for its
trading account and available-for-sale portfolios totaling $10 million at
September 30, 2004 and $3 million at December 31, 2003. Commitments to sell
investment securities related to the trading account totaled $8 million at
September 30, 2004 and $2 million at December 31, 2003. Outstanding commitments
expose the Corporation to both credit and market risk.
Customer-Initiated and Other
On a limited scale, fee income is earned from entering into various
transactions, principally foreign exchange contracts and interest rate
contracts at the request of customers. Market risk inherent in customer
contracts is often mitigated by taking offsetting positions. The Corporation
generally does not speculate in derivative financial instruments for the
purpose of profiting in the short-term from favorable movements in market
rates.
Fair values for customer-initiated and other derivative and foreign
exchange contracts represent the net unrealized gains or losses on such
contracts and are recorded in the consolidated balance sheets. Changes in fair
value are recognized in the consolidated income statements. The following table
provides the average unrealized gains and unrealized losses and noninterest
income generated on customer-initiated and other interest rate contracts and
foreign exchange contracts.
Derivative and Foreign Exchange Activity
The following table provides a reconciliation of the beginning and ending
notional amounts for interest rate derivatives and foreign exchange contracts
for the nine months ended September 30, 2004.
Additional information regarding the nature, terms and associated risks of
the above derivatives and foreign exchange contracts, can be found in the
Corporations 2003 Annual Report on page 49 and in Notes 1 and 22 to the
consolidated financial statements.
Note 9 Standby and Commercial Letters of Credit and Financial Guarantees
The total contractual amounts of standby letters of credit and financial
guarantees and commercial letters of credit at September 30, 2004 and December
31, 2003, which represents the Corporations credit risk associated with these
instruments, are shown in the table below.
17
Notes to Consolidated
Financial Statements (unaudited)
Note 9 Standby and Commercial Letters of Credit and Financial Guarantees
(continued)
Standby and commercial letters of credit and financial guarantees
represent conditional obligations of the Corporation to guarantee the
performance of a customer to a third party. Standby letters of credit and
financial guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing and similar
transactions. These contracts expire in decreasing amounts through the year
2012. Commercial letters of credit are issued to finance foreign or domestic
trade transactions and are short-term in nature. The Corporation may enter into
participation arrangements with third parties, that effectively reduce the
maximum amount of future payments which may be required under standby letters
of credit. These risk participations covered $501 million of the $6,307 million
of standby letters of credit and financial guarantees outstanding at September
30, 2004. At September 30, 2004, the carrying value of the Corporations
standby and commercial letters of credit and financial guarantees, which is
included in accrued expenses and other liabilities on the consolidated
balance sheet, totaled $76 million.
Note 10 Contingent Liabilities
Tax Contingency
In the ordinary course of business, the Corporation enters into certain
transactions that have tax consequences. From time to time, the IRS questions
and/or challenges the tax position taken by the Corporation with respect to
those transactions. The Corporation engaged in certain types of structured
leasing transactions and a series of loans to foreign borrowers that the IRS is
challenging. The Corporation believes that its tax position related to both
transaction groups referred to above is proper based upon applicable statutes,
regulations and case law in effect at the time of the transactions. The
Corporation intends to defend its position vigorously in accordance with its
view of the law controlling these activities. However, a court, or
administrative authority, if presented with the transactions, could disagree
with the Corporations interpretation of the tax law. The ultimate outcome is
not known.
The Corporation currently believes it has adequate tax reserves to cover
this and any other potential tax exposures the IRS could raise, based on
probability assessment of various potential outcomes. Probabilities and
outcomes are reviewed as events unfold, and adjustments to the reserves are
made when necessary.
See Part II. Item 1. Legal Proceedings for information regarding the
Corporations legal contingencies.
18
Notes to Consolidated
Financial Statements (unaudited)
Note 11 Business Segment Information
The Corporation has strategically aligned its operations into three major
lines of business: the Business Bank, Small Business and Personal Financial
Services, and Wealth and Institutional Management. These lines of business are
differentiated based on the products and services provided. In addition to the
three major lines of business, the Finance Division is also reported as a
segment. The Finance segment includes the Corporations securities portfolio
and asset and liability management activities. This segment is responsible for
managing the Corporations funding, liquidity and capital needs, performing
interest sensitivity gap and earnings simulation analysis and executing various
strategies to manage the Corporations exposure to liquidity, interest rate
risk and foreign exchange risk. The Other category includes divested business
lines, the income and expense impact of equity, cash and loan loss reserves not
assigned to specific business lines, tax benefits not assigned to specific
business lines and miscellaneous other expenses of a corporate nature. The loan
loss reserves include the unallocated allowance for loan losses and the portion
of the allowance allocated based on industry specific and geographic risks.
Lines of business results are produced by the Corporations internal management
accounting system. This system measures financial results based on the internal
business unit structure of the Corporation. Information presented is not
necessarily comparable with similar information for any other financial
institution. The management accounting system assigns balance sheet and income
statement items to each line of business using certain methodologies, which are
constantly being refined. For comparability purposes, amounts in all periods
are based on lines of business and methodologies in effect at September 30,
2004. These methodologies may be modified as management accounting systems are
enhanced and changes occur in the organizational structure or product lines.
For a description of the business activities of each line of business and the
methodologies, which form the basis for these results, refer to Note 26 in the
Corporations 2003 Annual Report. In the second quarter of 2004, the
Corporation changed the assumptions used in allocating internal funding credits
for deposits to better capture the value of deposits in line of business and
market segment reports. Accordingly, the Corporation has adjusted current and
prior year information to reflect these new assumptions. A discussion of the
financial results and the factors impacting performance for the nine months
ended September 30, 2004 can be found in the section entitled Strategic Lines
of Business in Item 2. Managements Discussion and Analysis of Results of
Operations and Financial Condition.
19
Notes to Consolidated
Financial Statements (unaudited)
Note 11 Business Segment Information (continued)
Lines of business/business segment financial results for the nine months
ended September 30, 2004 and 2003 are shown in the table below.
N/M Not Meaningful
20
Notes to Consolidated
Financial Statements (unaudited)
Note 11 Business Segment Information (continued)
The Corporations management accounting system also produces market
segment results for the Corporations four primary geographic regions: Midwest
and Other Markets, Western, Texas, and Florida.
Midwest and Other Markets includes all markets in which the Corporation
has operations except for the Western, Texas and Florida regions, as described
below. Substantially all of the Corporations international operations are
included in the Midwest and Other Markets segment. Currently, Michigan
operations represent the significant majority of this geographic region.
The Western region consists of the states of California, Arizona, Nevada,
Colorado and Washington. Currently, California operations represent the
significant majority of the Western region.
The Texas and Florida regions consist of the states of Texas and Florida,
respectively.
The Finance and Other Businesses segment includes the Corporations
securities portfolio, asset and liability management activities, divested
business lines, the income and expense impact of equity, cash and loan loss
reserves not assigned to specific business lines/market segments, tax benefits
not assigned to specific business lines/market segments and miscellaneous other
expenses of a corporate nature. This segment includes responsibility for
managing the Corporations funding, liquidity and capital needs, performing
interest sensitivity gap and earnings simulation analysis and executing various
strategies to manage the Corporations exposure to liquidity, interest rate
risk and foreign exchange risk.
A discussion of the market segment financial results and the factors
impacting performance for the nine months ended September 30, 2004 can be found
in the section entitled Market Segments in Item 2. Managements Discussion
and Analysis of Results of Operations and Financial Condition.
21
Notes to Consolidated
Financial Statements (unaudited)
Note 11 Business Segment Information (continued)
Market segment financial results for the nine months ended September 30,
2004 and 2003 are shown in the table below.
N/M Not Meaningful
22
Notes to Consolidated
Financial Statements (unaudited)
Note 12 Pending Accounting Pronouncements
In March 2004, the Emerging Issues Task Force (EITF), a standard setting
body working under the FASB, reached a revised consensus on EITF No. 03-01,
The Meaning of Other than Temporary Impairment and its Application to Certain
Investments. The revised consensus contained a model to be used in determining
whether an investment is other-than-temporarily impaired and guidance on the
recognition of other-than-temporary impairment. The other-than-temporary
impairment evaluation and recognition guidance was to be effective on July 1,
2004. In September 2004, the FASB issued FASB Staff Position (FSP) EITF 03-1-1,
which delayed the effective date of the guidance in EITF 03-01 related to the
evaluation and recognition of impairment on investments. The FASB plans to
issue final authoritative guidance on this topic in the fourth quarter of 2004.
When this occurs, the effect of this guidance on the Corporations financial
condition and results of operations, if any, will be determined.
23
ITEM 2.
Managements Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net income for the quarter ended September 30, 2004 was $196 million, an
increase of $39 million or 25 percent, from $157 million reported for the third
quarter of 2003. Quarterly diluted net income per share increased 27 percent to
$1.13 from $0.89 a year ago. Return on average common shareholders equity was
15.68 percent and return on average assets was 1.55 percent, compared to 12.55
percent and 1.16 percent, respectively, for the comparable quarter last year.
The increase in earnings in the third quarter of 2004 over the comparable
quarter last year resulted primarily from a $83 million decrease in the
provision for loan losses, partially offset by a $15 million decline in
noninterest income and a $14 million decline in net interest income.
Net income for the first nine months of 2004 was $550 million, an increase
of $47 million, or nine percent, from $503 million for the comparable period
last year. Diluted net income per share for the first nine months of 2004
increased ten percent to $3.15 from $2.86 a year ago. Return on average common
shareholders equity was 14.57 percent and return on average assets was 1.44
percent for the first nine months of 2004, compared to 13.39 percent and 1.25
percent, respectively, for the first nine months of 2003. The increase in
earnings for the nine months ended September 30, 2004 over the same period a
year ago was due primarily to a $215 million decline in the provision for loan
losses, partially offset by a $125 million decline in net interest income.
Net Interest Income
The rate-volume analysis in Table I details the components of the change
in net interest income on a fully taxable equivalent (FTE) basis for the
quarter ended September 30, 2004. On a FTE basis, net interest income decreased
$14 million to $452 million for the three months ended September 30, 2004, from
$466 million for the comparable quarter in 2003. The decrease in net interest
income resulted from lower average earning assets, which decreased $3.4
billion, or seven percent, when compared to the third quarter of last year, and
included a $1.6 billion decline in average short-term investments, resulting
from a reduction in short-term liquidity. The net interest margin for the three
months ended September 30, 2004 was 3.86%, as compared to 3.70% for the
comparable period in 2003. The increase in net interest margin was the result
of improved rate spreads in a higher rate environment, as well as the reduction
in the low-spread short-term liquidity position held by the Corporation in the
third quarter of 2004, as compared to the same period in 2003. For further
discussion of the effects of market rates on net interest income, refer to
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Table II provides an analysis of net interest income for the first nine
months of 2004. On a FTE basis, net interest income for the nine months ended
September 30, 2004 was $1,346 million, a decrease of $125 million, compared to
$1,471 million for the same period in 2003. The decline in net interest income
in the first nine months of 2004, when compared to the same period in 2003,
resulted from a $2.3 billion, or five percent, decline in average earning
assets. The net interest margin for the nine months ended September 30, 2004
decreased to 3.82 percent from 3.99 percent for the same period in 2003, due to
interest rate swap maturities and a restructuring of the investment portfolio,
designed to achieve more consistent cash flows, as well as loan spread
compression experienced in the second half of 2003 and early 2004.
The Corporation expects full-year 2004 net interest margin, on average, to
be about 3.85%.
24
Table I Quarterly Analysis of Net Interest Income & Rate/Volume (FTE)
25
Table I Quarterly Analysis of Net Interest Income & Rate/Volume (FTE)
(continued)
26
Table II Year-to-date Analysis of Net Interest Income & Rate/Volume (FTE)
27
Table II Year-to-date Analysis of Net Interest Income & Rate/Volume (FTE)
(continued)
28
Provision for Loan Losses
There was no provision for loan losses for the third quarter of 2004
compared to $83 million for the same period in 2003. The provision for the
first nine months of 2004 was $85 million compared to $300 million for the same
period in 2003. The Corporation establishes this provision to maintain an
adequate allowance for loan losses, which is discussed in the section entitled
Allowance for Loan Losses and Nonperforming Assets. The decrease in the
provision for loan losses in the three and nine month periods ended September
30, 2004 over the comparable periods last year is primarily the result of
improving credit quality trends, which are reflective of improved economic
conditions in the Michigan market, where the Corporation has a geographic
concentration of credit. Upturns in the Southeast Michigan Purchasing
Management Survey and Michigan Business Activity Indices began in the fourth
quarter of 2003 and accelerated in the first half of 2004. Forward-looking
indicators suggest this positive movement should continue, but not accelerate,
for the remainder of 2004 and 2005.
Noninterest Income
Noninterest income was $206 million for the three months ended September
30, 2004, a decrease of $15 million, or seven percent, over the same period in
2003. Noninterest income in the third quarter of 2004 included $6 million of
net securities losses, principally due to a credit-related write-down of an
investment in a private equity fund that is consolidated on the Corporations
balance sheet, and $3 million of income distributions (net of write-downs) from
unconsolidated venture capital and private equity investments, compared to $4
million of net securities gains and insignificant income distributions (net of
write-downs) from unconsolidated venture capital and private equity investments
in the third quarter of 2003. In addition, activity-based fees, defined as
service charges on deposit accounts, commercial lending fees and letter of
credit fees, were $88 million for the quarter ended September 30, 2004, a
decrease of $5 million from the comparable quarter in 2003.
For the first nine months of 2004, noninterest income was $654 million, a
decrease of $13 million, or two percent, from the first nine months of 2003. In
the first nine months of 2004, the Corporation recognized warrant income of $6
million, a $7 million net gain on the sale of a portion of the Corporations
merchant card processing business and $10 million of income distributions (net
of write-downs) from unconsolidated venture capital and private equity
investments, compared to warrant income of $1 million and a write-down (net of
income distributions) of $8 million from unconsolidated venture capital and
private equity investments recognized in the nine months ended September 30,
2003. Noninterest income in the first nine months of 2003 also included $46
million in net securities gains. Activity-based fees, as defined above,
declined $6 million to $268 million for the first nine months of 2004 from the
comparable period in 2003.
Management currently expects low single-digit noninterest income growth,
excluding securities gains, in the full-year 2004 compared to 2003.
Noninterest Expenses
Noninterest expenses were $372 million for the quarter ended September 30,
2004, a decrease of $5 million, or one percent, from the comparable quarter in
2003. The decrease in noninterest expenses is primarily due to a $7 million
reduction in stock-based compensation due to employee forfeitures and revisions
to employee forfeiture assumptions for stock options. Litigation and
operational losses, which include traditionally defined operating losses, such
as fraud or processing problems, as well as uninsured losses and losses
triggered by litigation, increased $10 million in the third quarter of 2004,
when compared with the third quarter of 2003. These expenses are subject to
fluctuation due to timing of insurance receipts and litigation settlements.
This increase was substantially offset by a decline in other noninterest
expenses. Severance expense was $1 million in both the third quarter 2004 and
the third quarter 2003.
Noninterest expenses for the nine months ended September 30, 2004 were
$1,113 million, an increase of $9 million, or one percent, from the first nine
months of 2003. Salary and employee benefits expenses increased $16 million, to
$686 million in the third quarter of 2004, from $670 million in the third
quarter of 2003 as a result of annual merit increases, increased levels of
management incentive expense and severance expenses, partially offset by a
full-time equivalent employee reduction in staff size of approximately 400
employees from September 30, 2003 to September 30, 2004. Litigation and
operational losses, as defined in the quarterly discussion above, were $27
million in the first nine months of 2004, an increase of $13 million from the
comparable period last year. These increases were partially offset by a decline
in other noninterest expenses, including a $4 million decline in the provision
for credit losses on lending-related commitments. For the first nine months of
2004, severance expense was $8 million, compared to $1 million for the same
period in 2003.
29
Management is currently targeting to reduce full-year 2004 noninterest
expenses by $5 million $10 million from 2003 levels, excluding severance
expenses. Management expects total 2004 noninterest expenses, including
severance expenses, to hold flat with 2003.
Provision for Income Taxes
The provision for income taxes for the third quarter of 2004 was $89
million, compared to $69 million for the same period a year ago. The effective
tax rate was 31 percent for both the third quarter of 2004 and 2003. The
provision for the first nine months of 2004 was $250 million compared to $229
million for the same period in 2003. The effective tax rate was 31 percent for
both the first nine months of 2004 and 2003. Taxes in the first nine months of
2004 were reduced by a $4 million (after-tax) adjustment to the state tax
reserves that resulted from the first quarter of 2004 settlement of a tax
liability with the state of California. Management currently expects the
effective tax rate to be 31 percent to 32 percent for the full-year 2004.
Strategic Lines of Business
The Corporations operations are strategically aligned into three major
lines of business: the Business Bank, Small Business and Personal Financial
Services, and Wealth and Institutional Management. These lines of business are
differentiated based on the products and services provided. In addition to the
three major lines of business, the Finance Division is also reported as a
segment. The Other category includes items not directly associated with these
lines of business or the Finance Division. Note 11 to the consolidated
financial statements presents financial results of these businesses for the
nine months ended September 30, 2004 and 2003. For a description of the
business activities of each line of business and the methodologies, which form
the basis for these results, refer to Note 26 in the Corporations 2003 Annual
Report. In the second quarter of 2004, the Corporation changed the assumptions
used in allocating internal funding credits for deposits to better capture the
value of deposits in line of business and market segment reports. Accordingly,
the Corporation has adjusted current and prior year information to reflect
these new assumptions.
The following table presents net income (loss) by line of business.
The Business Banks net income increased $74 million, or 16 percent, to
$526 million in the nine months ended September 30, 2004, compared to the nine
months ended September 30, 2003. Contributing to this increase was a $199
million decline in the provision for loan losses, primarily the result of
improving credit quality trends, as discussed in Provision for Loan Losses
above. Also contributing was a $15 million increase in noninterest income and a
$21 million decrease in noninterest expenses. The increase in noninterest
income was primarily due to a $20 million increase in income distributions (net
of write-downs) from unconsolidated venture capital and private equity
investments and a $7 million net gain on the sale of a portion of the
Corporations merchant card processing business, partially
offset by a $7
million decrease in net securities gains. The decrease in noninterest expenses
was primarily due to a $13 million decline in corporate overhead expenses, a
majority of which was due to timing differences between when an expense was
reflected as a consolidated expense and when allocated to the segments, and a
$10 million decline in salaries and related employee benefit expenses.
Partially offsetting these increases to net income was a $123 million decline
in net interest income, primarily due to a $2.6 billion (8 percent) decline in
average loans and lower funding credits received on liabilities and equity.
Small Business and Personal Financial Services net income increased $9
million, or seven percent, to $136 million for the nine months ended September
30, 2004, compared to the nine months ended September 30, 2003. The
30
increase in net income was primarily due to a $14 million decline in the provision for loan
losses and a $26 million decline in noninterest expenses, partially offset by a $24 million
decrease in net interest income. The decline in noninterest expenses was
primarily due to a $12 million decrease in corporate overhead expenses, a
majority of which was due to timing differences between when an expense was
reflected as a consolidated expense and when allocated to the segments, a $7
million decline in processing charges due to lower branch and other consumer
related activity and a $2 million decrease in the provision for credit losses
on lending-related commitments. The decline in net interest income was
primarily due to lower funding credits received on liabilities and equity.
Wealth and Institutional Managements net income increased $28 million, or
77 percent, to $64 million for the nine months ended September 30, 2004,
compared to the nine months ended September 30, 2003. The increase in net
income is primarily the result of a $20 million decline in the provision for
loan losses and a $12 million increase in noninterest income, largely due to
increases in fiduciary income and investment advisory fees.
The net loss for the Finance division was $121 million for the nine months
ended September 30, 2004, compared to a net loss of $78 million for the nine
months ended September 30, 2003. The higher net loss resulted primarily from a
$40 million decline in net securities gains.
The net loss for the Other category was $55 million for the nine months
ended September 30, 2004, compared to a net loss of $34 million for the nine
months ended September 30, 2003. The primary reason for the higher net loss
was an $18 million increase in unallocated loan loss provision.
Market Segments
The Corporations management accounting system also produces market
segment results for the Corporations four primary geographic regions: Midwest
and Other Markets, Western, Texas, and Florida. Note 11 to the consolidated
financial statements presents financial results of these market segments for
the nine months ended September 30, 2004 and 2003.
The following table presents net income (loss) by market segment.
Midwest and Other Markets net income increased $87 million, or 27
percent, to $412 million for the nine months ended September 30, 2004, compared
to the nine months ended September 30, 2003. Contributing to this increase was
a $177 million decline in the provision for loan losses, primarily the result
of improving credit quality trends, as discussed in Provision for Loan Losses
above. Also contributing were a $16 million increase in noninterest income and
an $18 million decline in noninterest expenses. The increase in noninterest
income was primarily due to a $19 million increase in income distributions (net
of write-downs) from unconsolidated venture capital and private equity
investments, offset by a $6 million decrease in net securities gains. The
decrease in noninterest expenses was primarily due to a $17 million decline in
corporate overhead expenses, a majority of which was due to timing differences
between when an expense was reflected as a consolidated expense and when
allocated to the segments. Partially offsetting these increases to net income
was an $81 million decline in net interest income, primarily due to a $1.9
billion (8 percent) decline in average loans and lower funding credits received
on liabilities and equity.
The Western Regions net income increased $12 million, or six percent, to
$229 million for the nine months ended September 30, 2004, compared to the nine
months ended September 30, 2003. Contributing to this increase were a $41
million decline in the provision for loan losses and a $24 million decline in
noninterest expenses. The decline in noninterest expenses was primarily due to
a $9 million decline in corporate overhead expenses, a majority of which was
due to timing differences between when an expense was reflected as a
consolidated expense and when allocated to the
31
segments, and a $9 million decrease in salaries and related employee benefits expenses. Partially
offsetting these increases to net income was a $50 million decline in net
interest income, primarily from lower funding credits received on liabilities and equity, and a $477 million (4 percent) decline in loan
balances. Of the $50 million decline in net interest income, $29 million was
due to lower title and escrow deposits in the Corporations Financial Services
Group.
The Texas Regions net income increased $9 million, or 14 percent, to $72
million for the nine months ended September 30, 2004, compared to the nine
months ended September 30, 2003. Contributing to this increase was a $16
million decline in the provision for loan losses and an $11 million decline in
noninterest expenses. The decline in noninterest expenses was primarily due to
$4 million decrease in corporate overhead expenses, a $2 million decrease in
salaries and related employee benefits expenses and a $2 million decrease in
the provision for credit losses on lending-related commitments. Partially
offsetting these increases to net income was a $14 million decline in net
interest income, primarily due to a $438 million (10 percent) decline in
average deposits, which reduced the regions funding credits.
The Florida Regions net income increased $3 million, or 30 percent, to
$13 million for the nine months ended September 30, 2004, compared to the nine
months ended September 30, 2003. Noninterest expenses decreased $3 million,
primarily due to insurance proceeds related to a legal settlement.
The net loss for the Finance and Other Businesses segment was $176 million
for the nine months ended September 30, 2004, compared to a net loss of $112
million for the nine months ended September 30, 2003. The higher net loss was
primarily due to a $40 million decline in net securities gains and an $18
million increase in unallocated loan loss provision.
Financial Condition
Total assets were $53.0 billion at September 30, 2004 compared with $52.6
billion at year-end 2003 and $54.8 billion at September 30, 2003. Total period
end loans decreased one percent from December 31, 2003 to September 30, 2004.
Within loans, on an average basis, there was growth in the Private Banking (13
percent), Specialty Businesses (9 percent) and National Dealer Services (6
percent) loan portfolios, from the fourth quarter 2003 to the third quarter
2004. Average loans declined in the same periods in the Global Corporate
Banking (11 percent) and Personal Financial Services (7 percent) loan
portfolios. Short-term investments increased $1.0 billion from December 31,
2003 to September 30, 2004 as a result of the significant increase in
short-term deposits discussed below.
Management currently expects a mid-single digit decrease in average loans
in 2004, when compared to 2003 levels. Year-end 2004 loan balances are expected
to remain flat when compared to year-end 2003.
Total liabilities increased $441 million, or one percent, from $47.5
billion at December 31, 2003, to $47.9 billion at September 30, 2004. Total
deposits increased two percent to $42.2 billion at September 30, 2004, from
$41.5 billion at year-end. Deposits in the Corporations Financial Services
Group, which benefit from high home mortgage financing and refinancing activity
and some of which are not expected to be long-lived, increased to $9.8 billion
at September 30, 2004 from $7.0 billion at December 31, 2003, primarily due to
strong mortgage business activity. Medium- and long-term debt decreased $400
million to $4.4 billion at September 30, 2004 from year-end levels, as a result
of the maturity of $750 million of medium-term notes, partially offset by the
issuance of $100 million in medium-term notes and the issuance of $250 million
of subordinated notes.
Allowance for Loan Losses and Nonperforming Assets
The allowance for loan losses represents managements assessment of
probable losses inherent in the Corporations loan portfolio. The allowance
provides for probable losses that have been identified with specific customer
relationships and for probable losses believed to be inherent in the loan
portfolio, but that have not been specifically identified. Internal risk
ratings are assigned to each business loan at the time of approval and are
subject to subsequent periodic reviews by senior management. The Corporation
performs a detailed credit quality review quarterly on large business loans and
certain large personal purpose loans to individuals that have deteriorated
below certain levels of credit risk, and may allocate a specific portion of the
allowance to such loans based upon this review. The Corporation defines
business loans as those belonging to the commercial, real estate construction,
commercial mortgage, lease financing and international loan portfolios. A
portion of the allowance is allocated to the remaining business loans by
applying projected loss ratios, based on numerous factors identified below, to
the loans within each risk rating. In addition, a portion of the allowance is
allocated to these remaining loans based on industry specific and geographic
risks inherent in certain portfolios, including portfolio exposures to
automotive suppliers, retailers, contractors, technology-related,
32
entertainment, air transportation and healthcare industries, small business
administration loans and certain Latin American risks. The portion of the
allowance allocated to loans originated in the Personal Financial Services
division is
determined by applying projected loss ratios to various segments of the
loan portfolio. Projected loss ratios incorporate factors such as recent
charge-off experience, current economic conditions and trends, trends with
respect to past due and nonaccrual amounts, and are supported by underlying
analysis, including information from certain portfolios on migration and loss
given default studies from each geographic market. The allocated portion of the
allowance was $657 million at September 30, 2004, a decrease of $105 million
from December 31, 2003.
Actual loss ratios experienced in the future may vary from those
projected. The uncertainty occurs because factors affecting the determination
of probable losses inherent in the loan portfolio may exist which are not
necessarily captured by the application of projected loss ratios or identified
industry specific and geographic risks. An unallocated portion of the allowance
is maintained to capture these probable losses. The unallocated allowance
reflects managements view that the allowance should recognize the margin for
error inherent in the process of estimating expected loan losses. Factors that
were considered in the evaluation of the adequacy of the Corporations
unallocated allowance include the imprecision in the risk rating system,
limited historical perspective in the application of the Corporations recently
enhanced portfolio analytic tools and the risk associated with new customer
relationships. The unallocated portion of the allowance was $72 million at
September 30, 2004, an increase of $31 million from December 31, 2003.
The total allowance, including the unallocated amount, is available to
absorb losses from any segment within the portfolio. Unanticipated economic
events, including political, economic and regulatory stability in countries
where the Corporation has a concentration of loans, could cause changes in the
credit characteristics of the portfolio and result in an unanticipated increase
in the allocated allowance. Inclusion of other industry specific and geographic
portfolio exposures in the allocated allowance, as well as significant
increases in the current portfolio exposures, could also increase the amount of
the allocated allowance. Any of these events, or some combination, may result
in the need for additional provision for loan losses in order to maintain an
adequate allowance.
At September 30, 2004, the allowance for loan losses was $729 million, a
decrease of $74 million from $803 million at December 31, 2003. The allowance
for loan losses as a percentage of total period-end loans decreased to 1.83
percent from 1.99 percent at December 31, 2003. The Corporation also had an
allowance for credit losses on lending-related commitments of $24 million and
$33 million, at September 30, 2004 and December 31, 2003, respectively, which
is recorded in accrued expenses and other liabilities on the consolidated
balance sheets. These lending-related commitments include unfunded loan
commitments and letters of credit.
Nonperforming assets at September 30, 2004 were $388 million, as compared
to $538 million at December 31, 2003, a decrease of $150 million, or 28
percent. The allowance for loan losses as a percentage of nonperforming assets
increased to 188 percent at September 30, 2004, from 149 percent at December
31, 2003.
33
Nonperforming assets at September 30, 2004 and December 31, 2003 were
categorized as follows:
The following table presents a summary of changes in nonaccrual loans.
34
Loans with balances greater than $2 million transferred to nonaccrual
status were $106 million in the third quarter of 2004, up from $63 million and
$92 million in the second and first quarters of 2004, respectively. There were
two loans greater than $10 million transferred to nonaccrual during the third
quarter of 2004. These loans totaled $30 million and are to companies in the
automotive industry, one of which was an international customer.
The following table presents a summary of total internally classified
nonaccrual and watch list loans (generally consistent with regulatory defined
special mention, substandard and doubtful loans) at September 30, 2004, June
30, 2004 and December 31, 2003. Consistent with the decrease in nonaccrual
loans from December 31, 2003 to September 30, 2004, total nonaccrual and watch
list loans decreased both in dollars and as a percentage of the total loan
portfolio.
The following table presents a summary of nonaccrual loans at September
30, 2004 and loans transferred to nonaccrual and net charge-offs during the
three months ended September 30, 2004, based on the Standard Industrial
Classification (SIC) code.
Shared National Credit Program (SNC) loans comprised approximately 17
percent of total nonperforming loans at September 30, 2004 and 20 percent at
December 31, 2003. SNC loans are facilities greater than $20 million shared by
three or more federally supervised financial institutions which are reviewed by
regulatory authorities at the agent bank level. SNC loans comprised
approximately 15 percent and 14 percent of total loans at September 30, 2004
and December 31, 2003, respectively. SNC loans comprised approximately $1
million of third quarter 2004 total net charge-offs.
Net charge-offs for the third quarter of 2004 were $33 million, or 0.33
percent of average total loans, compared with $83 million, or 0.79 percent, for
the third quarter of 2003. The carrying value of nonaccrual loans as a
percentage of contractual value declined to 53 percent at September 30, 2004
compared to 58 percent at December 31, 2003. There was no provision for loan
losses for the third quarter of 2004, compared to $83 million for the same
period in 2003.
Management currently expects full-year 2004 average net charge-offs to be
approximately 50 basis points.
35
Capital
Common shareholders equity was $5.0 billion at September 30, 2004, a
decrease of $74 million from December 31, 2003. The following table presents a
summary of changes in common shareholders equity in the first nine months of
2004:
See Part II.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds for
information regarding the Corporations stock repurchases.
The Corporations capital ratios exceed minimum regulatory requirements as
follows:
At September 30, 2004, the Corporation and its banking subsidiaries
exceeded the ratios required to be considered well capitalized (total
risk-based capital, tier 1 risk-based capital and leverage ratios greater than
10 percent, 6 percent and 5 percent, respectively).
Critical Accounting Policies
The Corporations consolidated financial statements are prepared based on
the application of accounting policies, the most significant of which are
described in Note 1 to the consolidated financial statements included in the
Corporations 2003 Annual Report, as updated in Note 1 to the unaudited
consolidated financial statements in this report. These policies require
numerous estimates and strategic or economic assumptions, which may prove
inaccurate or subject to variations. Changes in underlying factors, assumptions
or estimates could have a material impact on the Corporations future financial
condition and results of operations. The most critical of these significant
accounting policies are the policies for allowance for loan losses, pension
plan accounting and goodwill. These policies are reviewed with the Audit and
Legal Committee of the Corporations Board of Directors and are discussed more
fully on pages 53-55 of the Corporations 2003 Annual Report. As of the date of
this report, the Corporation does not believe that there has been a material
change in the nature or categories of its critical accounting policies or its
estimates and assumptions from those discussed in its 2003 Annual Report.
36
ITEM 3.
Quantitative
and Qualitative Disclosures About Market Risk
Net interest income is the predominant source of revenue for the
Corporation. Interest rate risk arises primarily through the Corporations
core business activities of extending loans and accepting deposits. The
Corporation actively manages its material exposure to interest rate risk.
Management attempts to evaluate the effect of movements in interest rates on
net interest income and uses interest rate swaps and other instruments to
manage its interest rate risk exposure. The primary tool used by the
Corporation in determining its exposure to interest rate risk is net interest
income simulation analysis. The net interest income simulation analysis
performed at the end of each quarter reflects changes to both interest rates
and loan, investment and deposit volumes. Management evaluates base net
interest income under what is believed to be the most likely balance sheet
structure and interest rate environment. This base net interest income is
then evaluated against interest rate scenarios that increase and decrease 200
basis points (but no lower than zero percent) from the most likely rate
environment. For purposes of this analysis, the rise or decline in short-term
interest rates occurs ratably over four months. The measurement of risk
exposure at September 30, 2004 for a decline in short-term interest rates to
zero percent identified approximately $71 million, or four percent, of
forecasted net interest income at risk over the next 12 months. If short-term
interest rates rise 200 basis points, forecasted net interest income would be
enhanced by approximately $103 million, or six percent. Corresponding measures
of risk exposure at December 31, 2003 were approximately $41 million of net
interest income at risk for a decline in rates to zero percent and an
approximately $82 million enhancement of net interest income for a 200 basis
point rise in rates. Corporate policy limits adverse change to no more than
five percent of managements most likely net interest income forecast and the
Corporation is operating within this policy guideline.
Secondarily, the Corporation utilizes an economic value of equity analysis
and a traditional interest sensitivity gap measure as alternative measures of
interest rate risk exposure. At September 30, 2004, all three measures of
interest rate risk were within established corporate policy guidelines.
At September 30, 2004, the Corporation had a $127 million portfolio of
indirect (through funds) private equity and venture capital investments, and
had commitments of $55 million to fund additional investments in future
periods. The value of these investments is at risk to changes in equity
markets, general economic conditions and a variety of other factors. The majority
of these investments are not marketable and are reported in other assets. The
investments are individually reviewed for impairment on a quarterly basis, by
comparing the carrying value to the estimated fair value. The Corporation bases
estimates of fair value for the majority of its indirect private equity and
venture capital investments on the percentage ownership in the fair value of
the entire fund, as reported by the fund management. In general, the
Corporation does not have the benefit of the same information regarding the
funds underlying investments as does fund management. Therefore, after
indication that fund management adheres to accepted, sound and recognized
valuation techniques, the Corporation generally utilizes the fair values
assigned to the underlying portfolio investments by fund management. For those
funds where fair value is not reported by fund management, 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 management, 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 uncertainty in the economy and
equity markets may affect the values of the fund investments.
Certain components of the Corporations noninterest income, primarily
fiduciary income and investment advisory revenue, are at risk to fluctuations
in the market values of underlying assets, particularly equity securities.
Other components of noninterest income, primarily brokerage fees, are at risk
to changes in the level of market activity.
For further discussion of market risk, see Note 8 and pages 46-52 of the
Corporations 2003 Annual Report.
ITEM 4.
Controls and
Procedures
37
Forward-looking
statements
This report includes forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. All statements regarding the
Corporations expected financial position, strategies and growth prospects and
general economic conditions expected to exist in the future are forward-looking
statements. The words, anticipates, believes, feels, expects,
estimates, seeks, strives, plans, intends, outlook, forecast,
position, target, mission, assume, achievable, potential,
strategy, goal, aspiration, outcome, continue, remain, maintain,
trend and variations of such words and similar expressions, or future or
conditional verbs such as will, would, should, could, might, can,
may or similar expressions as they relate to the Corporation or its
management, are intended to identify forward-looking statements.
The Corporation cautions that forward-looking statements are subject to
numerous assumptions, risks and uncertainties, which change over time.
Forward-looking statements speak only as of the date the statement is made, and
the Corporation does not undertake to update forward-looking statements to
reflect facts, circumstances, assumptions or events that occur after the date
the forward-looking statements are made. Actual results could differ materially
from those anticipated in forward-looking statements and future results could
differ materially from historical performance.
In addition to factors mentioned elsewhere in this report or previously
disclosed in the Corporations SEC reports (accessible on the SECs website at
www.sec.gov or on the Corporations website at www.comerica.com), the following
factors, among others, could cause actual results to differ materially from
forward-looking statements and future results could differ materially from
historical performance. The Corporation cautions that these factors are not
exclusive.
38
PART II. OTHER INFORMATION
ITEM 1.
Legal Proceedings
The Corporation and certain of its subsidiaries are subject to various
pending or threatened legal proceedings, including certain purported class
actions, arising out of the normal course of business or operations. In view of
the inherent difficulty of predicting the outcome of such matters, the
Corporation cannot state what the eventual outcome of these matters will be.
However, based on current knowledge and after consultation with legal counsel,
management believes that current reserves are adequate and the amount of any
incremental liability arising from these matters will not have a material
adverse effect on the Corporations consolidated financial condition or results
of operations.
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
On December 1, 2003, the Corporation announced it would resume its share
repurchase program pursuant to its August 2001 Board of Directors resolutions,
authorizing the repurchase of up to 10 million shares of the Corporations
outstanding common stock. On March 23, 2004, the Board of Directors of the
Corporation authorized the additional purchase of up to 10 million shares of
Comerica Incorporated outstanding common stock. All share repurchases under the
Corporations share repurchase program are transacted in the open market and
are within the scope of Rule 10b-18, which provides a safe harbor for purchases
in a given day if an issuer of equity securities satisfies the manner, timing,
price and volume conditions of the rule when purchasing its own common shares
in the open market. The following table summarizes the Corporations share
repurchase activity for the nine months ended September 30, 2004.
39
ITEM 6. Exhibits
40
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 5, 2004
41
EXHIBIT INDEX
Comerica Incorporated and Subsidiaries
Three Months Ended
Nine Months Ended
September 30,
September 30,
(in millions, except per share data)
2004
2003
2004
2003
$
196
$
157
$
550
$
503
1
4
15
13
3
6
20
19
$
194
$
155
$
545
$
497
$
1.15
$
0.90
$
3.19
$
2.88
1.14
0.89
3.16
2.85
1.13
0.89
3.15
2.86
1.12
0.88
3.13
2.82
Table of Contents
Comerica Incorporated and Subsidiaries
Nine Months Ended
September 30,
(in millions)
2004
2003
$
803
$
791
162
228
2
1
2
1
4
19
12
19
16
1
9
8
9
4
11
54
213
311
38
12
2
1
2
3
1
11
6
54
22
159
289
85
300
$
729
$
802
Table of Contents
Comerica Incorporated and Subsidiaries
Table of Contents
Comerica Incorporated and Subsidiaries
(dollar amounts in millions)
September 30, 2004
December 31, 2003
$
165
$
170
305
301
357
355
827
826
219
225
272
276
111
114
108
110
260
270
171
172
263
199
198
200
197
58
59
1,861
1,621
485
1,135
100
100
99
100
1,011
997
18
22
3,574
3,975
$
4,401
$
4,801
Table of Contents
Comerica Incorporated and Subsidiaries
Table of Contents
Comerica Incorporated and Subsidiaries
Three Months Ended
Nine Months Ended
Qualified Defined Benefit Pension Plan
September 30,
September 30,
(in millions)
2004
2003
2004
2003
$
6
$
6
$
18
$
14
13
15
38
33
(21
)
(21
)
(63
)
(48
)
1
1
3
4
9
9
$
1
$
4
$
3
$
9
Table of Contents
Comerica Incorporated and Subsidiaries
September 30, 2004
December 31, 2003
Notional/
Notional/
Contract
Unrealized
Unrealized
Fair
Contract
Unrealized
Unrealized
Fair
Amount
Gains
Losses
Value
Amount
Gains
Losses
Value
(in millions)
(1)
(2)
(3)
(1)
(2)
(3)
$
12,888
$
274
$
27
$
247
$
10,818
$
383
$
1
$
382
350
7
1
6
340
23
1
22
70
1
(1
)
99
1
(1
)
420
7
2
5
439
23
2
21
13,308
281
29
252
11,257
406
3
403
281
1
(1
)
443
3
(3
)
328
1
1
443
3
3
1,719
22
19
3
1,416
24
21
3
2,328
23
20
3
2,302
27
24
3
3,166
59
51
8
1,879
41
37
4
28
25
1
1
3,194
59
51
8
1,904
42
38
4
5,522
82
71
11
4,206
69
62
7
$
18,830
$
363
$
100
$
263
$
15,463
$
475
$
65
$
410
Table of Contents
Comerica Incorporated and Subsidiaries
Table of Contents
Comerica Incorporated and Subsidiaries
Sept. 30,
Dec. 31,
2004
2003
(dollar amounts in millions)
2004
2005
2006
2007
2008
2009-2026
Total
Total
$
2,000
$
3,800
$
3,000
$
1,800
$
$
$
10,600
$
8,800
5.76
%
6.11
%
4.01
%
4.10
%
%
%
5.11
%
6.17
%
4.60
4.64
3.15
2.73
3.89
4.00
$
1
$
$
$
$
$
$
1
$
13
1
1
2
2
1
7
5
2.29
%
2.18
%
2.18
%
2.19
%
2.19
%
%
2.21
%
3.41
%
3.64
3.54
3.54
3.53
3.52
3.56
4.12
$
$
30
$
$
$
$
$
30
$
%
1.42
%
%
%
%
%
1.42
%
%
1.82
1.82
$
$
250
$
100
$
450
$
350
$
1,100
$
2,250
$
2,000
%
7.04
%
2.95
%
5.82
%
6.17
%
6.17
%
6.05
%
6.09
%
1.71
1.78
1.88
1.40
1.72
1.70
1.16
$
2,002
$
4,081
$
3,102
$
2,252
$
351
$
1,100
$
12,888
$
10,818
Table of Contents
Comerica Incorporated and Subsidiaries
Nine Months Ended
Year Ended
Nine Months Ended
(in millions)
September 30, 2004
December 31, 2003
September 30, 2003
$
70
$
74
$
75
61
67
69
26
35
30
Risk Management
Customer-Initiated and Other
Interest Rate
Foreign Exchange
Interest Rate
Foreign Exchange
(in millions)
Contracts
Contracts
Contracts
Contracts
$
10,818
$
439
$
2,302
$
1,904
3,580
11,534
523
67,504
(1,510
)
(11,553
)
(368
)
(66,214
)
(129
)
$
12,888
$
420
$
2,328
$
3,194
(in millions)
September 30, 2004
December 31, 2003
$
6,307
$
6,045
379
261
Table of Contents
Comerica Incorporated and Subsidiaries
Table of Contents
Comerica Incorporated and Subsidiaries
Table of Contents
Comerica Incorporated and Subsidiaries
Small Business and
Wealth and
Personal Financial
Institutional
(dollar amounts in millions)
Business Bank
Services
Management
Nine Months Ended September 30,
2004
2003
2004
2003
2004
2003
$
1,016
$
1,139
$
438
$
462
$
110
$
107
(3
)
196
9
23
(1
)
19
216
201
163
164
227
215
419
440
379
405
237
246
290
252
77
71
37
21
$
526
$
452
$
136
$
127
$
64
$
36
$
142
$
257
$
13
$
24
$
4
$
8
$
33,037
$
35,661
$
6,125
$
6,026
$
3,352
$
3,160
31,814
34,446
5,678
5,519
3,109
2,906
19,308
19,920
16,811
16,858
2,529
2,114
19,915
20,437
16,804
16,852
2,536
2,129
2,450
2,750
784
788
410
390
2.12
%
1.69
%
1.04
%
0.96
%
2.54
%
1.52
%
28.59
21.96
23.25
21.50
20.75
12.32
33.93
32.95
62.99
64.57
70.37
76.38
Finance
Other
Total
Nine Months Ended September 30,
2004
2003
2004
2003
2004
2003
$
(232
)
$
(239
)
$
14
$
2
$
1,346
$
1,471
80
62
85
300
48
87
654
667
6
6
72
7
1,113
1,104
(69
)
(80
)
(83
)
(33
)
252
231
$
(121
)
$
(78
)
$
(55
)
$
(34
)
$
550
$
503
$
$
$
$
$
159
$
289
$
7,231
$
7,524
$
1,146
$
1,146
$
50,891
$
53,517
40,601
42,871
1,368
2,923
67
106
40,083
41,921
6,236
8,751
371
337
45,862
48,506
677
855
708
228
5,029
5,011
(2.24
)%
(1.08
)%
N/M
N/M
1.44
%
1.25
%
(23.91
)
(12.19
)
N/M
N/M
14.57
13.39
(3.20
)
(3.18
)
N/M
N/M
55.66
52.77
Table of Contents
Comerica Incorporated and Subsidiaries
Table of Contents
Comerica Incorporated and Subsidiaries
Midwest and Other
(dollar amounts in millions)
Markets
Western
Texas
Nine Months Ended September 30,
2004
2003
2004
2003
2004
2003
$
792
$
873
$
567
$
617
$
177
$
191
(20
)
157
27
68
(4
)
12
432
416
105
98
58
56
634
652
256
280
128
139
198
155
160
150
39
33
$
412
$
325
$
229
$
217
$
72
$
63
$
82
$
167
$
71
$
104
$
6
$
18
$
24,064
$
26,008
$
12,539
$
12,951
$
4,605
$
4,651
22,959
24,832
11,862
12,339
4,484
4,537
19,003
18,565
15,571
15,852
3,845
4,283
19,633
19,110
15,560
15,843
3,835
4,273
2,122
2,304
1,024
1,102
435
459
2.28
%
1.67
%
1.84
%
1.71
%
2.08
%
1.76
%
25.88
18.86
29.82
26.24
22.04
18.19
51.60
50.70
38.11
39.25
54.57
56.05
Finance and Other
Florida
Businesses
Total
Nine Months Ended September 30,
2004
2003
2004
2003
2004
2003
$
28
$
27
$
(218
)
$
(237
)
$
1,346
$
1,471
2
1
80
62
85
300
11
10
48
87
654
667
17
20
78
13
1,113
1,104
7
6
(152
)
(113
)
252
231
$
13
$
10
$
(176
)
$
(112
)
$
550
$
503
$
$
$
$
$
159
$
289
$
1,306
$
1,168
$
8,377
$
8,739
$
50,891
$
53,517
1,296
1,163
40,601
42,871
229
192
1,435
3,029
40,083
41,921
227
192
6,607
9,088
45,862
48,506
63
63
1,385
1,083
5,029
5,011
1.33
%
1.21
%
N/M
N/M
1.44
%
1.25
%
27.83
22.28
N/M
N/M
14.57
13.39
44.37
52.68
N/M
N/M
55.66
52.77
Table of Contents
Comerica Incorporated and Subsidiaries
Table of Contents
Table of Contents
Three Months Ended
September 30, 2004
September 30, 2003
Average
Average
Average
Average
(dollar amounts in millions)
Balance
Interest
Rate
Balance
Interest
Rate
$
22,096
$
234
4.21
%
$
23,314
$
237
4.02
%
3,273
46
5.58
3,500
44
4.94
7,951
104
5.22
7,617
101
5.23
1,239
18
5.63
1,188
17
5.92
2,671
31
4.68
2,461
30
4.94
1,266
11
3.46
1,273
15
4.63
2,149
26
4.87
2,528
25
3.95
45
62
40,645
515
5.04
41,881
531
5.03
4,225
36
3.31
4,817
37
3.00
1,556
8
2.17
3,148
12
1.49
46,426
559
4.78
49,846
580
4.61
1,652
1,872
(774
)
(831
)
3,044
3,034
$
50,348
$
53,921
$
17,526
47
1.06
$
17,665
49
1.09
1,652
1
0.36
1,566
2
0.43
5,826
26
1.79
7,607
31
1.63
718
5
2.76
571
4
2.81
25,722
79
1.22
27,409
86
1.24
251
1
1.36
447
1
1.06
4,462
27
2.45
5,173
27
2.07
30,435
107
1.40
33,029
114
1.37
14,012
15,079
911
813
4,990
5,000
$
50,348
$
53,921
$
452
3.38
$
466
3.24
$
1
$
1
0.48
0.46
3.86
%
3.70
%
Table of Contents
Three Months Ended
September 30, 2004/September 30, 2003
Increase
Increase
(Decrease)
(Decrease)
Net
Due to
Due to
Increase
(in millions)
Rate
Volume *
(Decrease)
$
$
(16
)
$
(16
)
4
(5
)
(1
)
5
(9
)
(4
)
9
(30
)
(21
)
(7
)
(7
)
1
(1
)
5
(5
)
6
(13
)
(7
)
$
3
$
(17
)
$
(14
)
Table of Contents
Nine Months Ended
September 30, 2004
September 30, 2003
Average
Average
Average
Average
(dollar amounts in millions)
Balance
Interest
Rate
Balance
Interest
Rate
$
21,997
$
669
4.06
%
$
24,295
$
751
4.13
%
3,293
129
5.24
3,554
134
5.05
7,989
304
5.08
7,452
303
5.44
1,225
52
5.71
1,178
55
6.21
2,650
92
4.62
2,452
95
5.16
1,276
39
4.05
1,280
44
4.59
2,171
73
4.46
2,660
89
4.47
154
231
40,601
1,512
4.97
42,871
1,702
5.31
4,411
111
3.32
4,440
124
3.72
1,948
25
1.73
1,988
28
1.88
46,960
1,648
4.68
49,299
1,854
5.03
1,681
1,847
(805
)
(831
)
3,055
3,202
$
50,891
$
53,517
$
17,772
131
0.99
$
17,146
160
1.25
1,636
5
0.38
1,565
6
0.52
6,110
76
1.66
8,421
111
1.76
655
12
2.47
639
16
3.30
26,173
224
1.14
27,771
293
1.41
275
2
1.05
622
6
1.24
4,607
76
2.22
5,176
84
2.17
31,055
302
1.30
33,569
383
1.53
13,910
14,150
897
787
5,029
5,011
$
50,891
$
53,517
$
1,346
3.38
$
1,471
3.50
$
2
$
2
0.44
0.49
3.82
%
3.99
%
Table of Contents
Nine Months Ended
September 30, 2004/September 30, 2003
Increase
Increase
(Decrease)
(Decrease)
Net
Due to
Due to
Increase
(in millions)
Rate
Volume *
(Decrease)
$
(107
)
$
(83
)
$
(190
)
(12
)
(1
)
(13
)
(2
)
(1
)
(3
)
(121
)
(85
)
(206
)
(46
)
(23
)
(69
)
(1
)
(3
)
(4
)
2
(10
)
(8
)
(45
)
(36
)
(81
)
$
(76
)
$
(49
)
$
(125
)
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
(dollar amounts in millions)
September 30, 2004
June 30, 2004
December 31, 2003
$
2,476
$
2,639
$
3,284
6.2
%
6.6
%
8.2
%
Table of Contents
(in millions)
$
5,110
282
26
52
(98
)
(336
)
$
5,036
September 30,
December 31,
2004
2003
8.16
%
8.04
%
8.81
8.72
13.06
12.71
10.28
10.13
Table of Contents
Table of Contents
general political, economic or industry conditions, either domestically or internationally, may be less favorable than
expected;
developments concerning credit quality in various industry sectors may result in an increase in the level of the
Corporations provision for credit losses, nonperforming assets, net charge-offs and reserve for credit losses;
demand for commercial loans and investment advisory products may not accelerate as expected;
the mix of interest rates and maturities of the Corporations interest earning assets and interest-bearing liabilities
(primarily loans and deposits) may be less favorable than expected;
interest rate margin changes may be greater than expected;
there could be fluctuations in inflation or interest rates;
there could be changes in trade, monetary and fiscal policies, including, but not limited to, the interest rate policies of
the Board of Governors of the Federal Reserve System;
customer borrowing, repayment, investment and deposit practices generally may be different than anticipated;
managements ability to maintain and expand customer relationships may differ from expectations;
the introductions, withdrawal, success and timing of business initiatives and strategies, including, but not limited to the
opening of new branches or private banking offices, and plans to grow personal financial services and wealth management,
may be less successful or may be different than anticipated;
competitive product and pricing pressures among financial institutions within the Corporations markets may change;
Table of Contents
instruments, systems and strategies used to hedge or otherwise manage exposure to various types of market, credit,
operational and enterprise-wide risk could be less effective than anticipated, and the Corporation may not be able to
effectively mitigate its risk exposures in particular market environments or against particular types of risk;
there could be terrorist activities or other hostilities, which may adversely affect the general economy, financial and
capital markets, specific industries, and the Corporation;
there could be changes in applicable laws and regulations, including, but not limited to, those concerning taxes, banking,
securities, and insurance; and
there could be adverse conditions in the stock market.
Table of Contents
Form of Standard Comerica Incorporated Non-Employee Director
Restricted Stock Unit Agreement under the Comerica Incorporated
Incentive Plan for Non-Employee Directors
Form of Standard Comerica Incorporated Restricted Stock Award
Agreement (Cliff Vesting) under the Amended and Restated Comerica
Incorporated 1997 Long-Term Incentive Plan
Form of Standard Comerica Incorporated Restricted Stock Award
Agreement (Non-Cliff Vesting) under the Amended and Restated
Comerica Incorporated 1997 Long-Term Incentive Plan
Form of Standard Comerica Incorporated Non-Qualified Stock Option
Agreement under the Amended and Restated Comerica Incorporated 1997
Long-Term Incentive Plan
Form of Standard Comerica Incorporated No Sale Agreement under the
Amended and Restated Comerica Incorporated Management Incentive Plan
Comerica Incorporated Amended and Restated Employee Stock Purchase
Plan
Statement re: Computation of Net Income Per Common Share
Chairman, President and CEO Rule 13a-14(a)/15d-14(a) Certification
of Periodic Report (pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002)
Executive Vice President and CFO Rule 13a-14(a)/15d-14(a)
Certification of Periodic Report (pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002)
Section 1350 Certification of Periodic Report (pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002)
Table of Contents
COMERICA INCORPORATED
(Registrant)
/s/ Elizabeth S. Acton
Elizabeth S. Acton
Executive Vice President and
Chief Financial Officer
/s/ Marvin J. Elenbaas
Marvin J. Elenbaas
Senior Vice President and Controller
(Principal Accounting Officer)
Table of Contents
Exhibit No.
Description
Form of Standard Comerica Incorporated Non-Employee Director
Restricted Stock Unit Agreement under the Comerica Incorporated
Incentive Plan for Non-Employee Directors
Form of Standard Comerica Incorporated Restricted Stock Award
Agreement (Cliff Vesting) under the Amended and Restated Comerica
Incorporated 1997 Long-Term Incentive Plan
Form of Standard Comerica Incorporated Restricted Stock Award
Agreement (Non-Cliff Vesting) under the Amended and Restated
Comerica Incorporated 1997 Long-Term Incentive Plan
Form of Standard Comerica Incorporated Non-Qualified Stock
Option Agreement under the Amended and Restated Comerica
Incorporated 1997 Long-Term Incentive Plan
Form of Standard Comerica Incorporated No Sale Agreement
under the Amended and Restated Comerica Incorporated Management
Incentive Plan
Comerica Incorporated Amended and Restated Employee Stock
Purchase Plan
Statement re: Computation of Net Income Per Common Share
Chairman, President and CEO Rule 13a-14(a)/15d-14(a)
Certification of Periodic Report (pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002)
Executive Vice President and CFO Rule 13a-14(a)/15d-14(a)
Certification of Periodic Report (pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002)
Section 1350 Certification of Periodic Report (pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002)
EXHIBIT 10.1
COMERICA INCORPORATED
NON-EMPLOYEE DIRECTOR
RESTRICTED STOCK UNIT AGREEMENT
THIS AGREEMENT is made as of the ____ day of __________, 2___, by and between Comerica Incorporated, a Delaware corporation (hereinafter referred to as the "Corporation"), and _______________ (hereinafter referred to as the "Director"). Any undefined terms appearing herein as defined terms shall have the same meaning as they do in the Comerica Incorporated Incentive Plan for Non-Employee Directors, as amended from time to time (the "Plan").
WITNESSETH THAT:
WHEREAS, the Corporation desires to grant to the Director an award of Restricted Stock Units ("RSUs") under the Plan and the terms hereinafter set forth:
NOW, THEREFORE, in consideration of the premises, and of the mutual agreements hereinafter set forth, it is covenanted and agreed as follows:
1. AWARD. Pursuant to the provisions of the Plan, the Corporation awards _________<insert number> RSUs (the "Award") to the Director on ___________, 2___ (the "Date of Award"). Each RSU shall represent an unfunded, unsecured right for the Director to receive one (1) share of the Corporation's common stock, par value $5.00 per share (the "Common Stock").
2. OWNERSHIP RIGHTS. The Director has no voting or other ownership rights in the Corporation arising from the Award of RSUs under this Agreement.
3. DIVIDENDS. The Director shall be credited with dividend equivalents equal to the dividends the Director would have received if the Director had been the owner of a number of shares of Common Stock equal to the number of RSUs credited to the Director on such dividend payment date (the "Dividend Equivalent"). Any Dividend Equivalent deriving from a cash dividend shall be converted into additional RSUs based on the Fair Market Value of Common Stock on the dividend payment date. Any Dividend Equivalent deriving from a dividend of shares of Common Stock shall be converted into additional RSUs on a one-for-one basis. The Director shall continue to be credited with Dividend Equivalents until the Settlement Date (defined below). The Dividend Equivalents so credited shall be subject to the same terms and conditions as the corresponding Award, and they shall vest (or, if applicable, be forfeited) and be settled in the same manner and at the same time as the corresponding Award, as if they had been granted at the same time as such Award.
4. VESTING. The Award shall vest one year after the Date of Award, with such vesting contingent upon the Director's continued service as a director of the Corporation for a period of one year after the Date of Award. Except as provided in Section 6, if a Director's service as a director of the Corporation terminates for any reason prior to the one (1) year anniversary of the Date of Award, the Award and all corresponding Dividend Equivalents shall be forfeited, and no shares of Common Stock or other payment shall be made to the Director in respect of the Award or any corresponding Dividend Equivalents.
5. SETTLEMENT. Once vested, the Award will be settled as follows:
(a) IN GENERAL. Subject to Section 6 hereof, the Award will be settled in
Common Stock. Settlement of the Award shall occur as of the one-year anniversary
of the date that the Director's service as a director of the Corporation
terminates or, in the case of the Director's cessation of service due to death
or disability or upon a Change of Control, such earlier date as set forth in
Section 6 hereof (the "Settlement Date"). On the Settlement Date, the
Corporation shall issue or cause there to be transferred to the Director a
number of shares of Common Stock equal to the aggregate number of RSUs granted
to the Director under this Agreement (including, without limitation, the RSUs
attributable to Dividend Equivalents) (the "Settlement Shares").
(b) TERMINATION OF RIGHTS. Upon the issuance or transfer of Settlement Shares in settlement of the Award (including, without limitation, the RSUs attributable to Dividend Equivalents), the Award shall be settled in full and the Director (or his or her designated beneficiary or estate, in the case of death) shall have no further rights in respect of the Award.
(c) CERTIFICATES OR BOOK ENTRY. As of the Settlement Date, the Corporation shall, at the discretion of the Committee or its designee, either issue one or more certificates in the Director's name for such Settlement Shares or evidence book-entry registration of the Settlement Shares in the Director's name (or, in the case of death, to the Director's designated beneficiary, if any).
(d) CONDITIONS TO DELIVERY. Notwithstanding any other provision of this Agreement, the Corporation shall not be required to evidence book-entry registration or issue or deliver any certificate or certificates representing Settlement Shares prior to fulfillment of all of the following conditions:
(1) Listing or approval for listing upon notice of issuance, of the Settlement Shares on the New York Stock Exchange, Inc., or such other securities exchange as may at the time be the principal market for the Common Stock;
(2) Any registration or other qualification of the Settlement Shares under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Committee shall, in its sole and absolute discretion upon the advice of counsel, deem necessary or advisable; and
(3) Obtaining any other consent, approval, or permit from any state or federal governmental agency which the Committee shall, in its sole and absolute discretion after receiving the advice of counsel, determine to be necessary or advisable.
(e) LEGENDS. The Settlement Shares shall be subject to such stop transfer orders and other restrictions as the Committee may deem reasonably advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Settlement Shares are listed, any applicable federal or state laws or the Corporation's Certificate of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on or otherwise apply to any certificates or book-entry position representing Settlement Shares to make appropriate reference to such restrictions.
6. CHANGE OF CONTROL; DEATH, DISABILITY OR RETIREMENT. Notwithstanding anything in this Agreement to the contrary:
(a) Upon a Change of Control, the Award (including, without limitation, the RSUs attributable to Dividend Equivalents) shall immediately and fully vest and become nonforfeitable, any deferral or other restriction shall lapse and such Award shall be settled in cash (rather than Settlement Shares) as promptly as is practicable, but in no event later than 30 days following the date of such Change of Control.
(b) In the event of the death, disability or retirement of the Director while serving as a director with the Corporation, the Award (including, without limitation, the RSUs attributable to Dividend Equivalents) shall immediately and fully vest and become nonforfeitable, any deferral or other restriction shall lapse and the Award shall be settled as set forth in Section 5; provided, however, that in the case of the Director's cessation of service due to death or disability, the Corporation shall issue or cause there to be transferred to the Director (or, in the case of death, to the Director's designated beneficiary or, if no designated beneficiary is living on the date of the Director's death, the Director's estate) the Settlement Shares as promptly as is practicable following the date of the Director's cessation of service.
(c) The Committee shall have the sole and absolute discretion to determine whether the termination of the Director's membership on the board of directors of the Corporation is by reason of disability or retirement.
7. TRANSFERABILITY. Unless otherwise determined by the Committee, the RSUs subject to this Award (including, without limitation, Dividend Equivalents) may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Director otherwise than by will or by the laws of intestacy, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Corporation or any Subsidiary or Affiliate; provided, however, that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
8. ADJUSTMENT IN AWARD. In the event the number of outstanding shares of Common Stock changes as a result of any stock split, stock dividend, recapitalization, merger, consolidation, reorganization, combination, or exchange of shares, split-up, split-off, spin-off, liquidation or other similar change in capitalization, or any distribution made to holders of Common Stock other than cash dividends, the number or kind of shares subject to this Award shall be automatically adjusted, and the Committee shall be authorized to make such other equitable adjustments of the Award or shares of Common Stock issuable pursuant thereto so that the value of the interest of the Director shall not be decreased by reason of the occurrence of such event. Any such adjustment shall be deemed conclusive and binding on the Corporation, the Director, his or her beneficiaries and all other interested parties.
9. ADMINISTRATION; AMENDMENT. This Award has been made pursuant to a determination by the Committee and/or the Board of Directors of the Corporation, and the Committee shall have plenary authority to interpret, in its sole and absolute discretion, any provision of this Agreement and to make any determinations necessary or advisable for the administration of this Agreement. All such interpretations and determinations shall be final and binding on all persons, including the Corporation, the Director, his or her beneficiaries and all other interested parties. Subject to the terms of the Plan, this Agreement may be amended, in whole or in part, at any time by the Committee; provided, however, that no amendment to this Agreement may adversely affect the Director's rights under this Agreement without the Director's consent except such an amendment made to cause the Award to comply with applicable law, stock exchange rules or accounting rules.
10. BINDING NATURE OF PLAN. The Award is subject to the Plan. The Director agrees to be bound by all terms and provisions of the Plan and related administrative rules and procedures, including, without limitation, terms and provisions and administrative rules and procedures adopted and/or modified after the granting of the Award. In the event any provisions hereof are inconsistent with those of the Plan, the provisions of the Plan shall control, except to the extent expressly modified herein pursuant to authority granted under the Plan.
11. APPLICABLE LAW. The validity, construction, and effect of this Agreement and any rules and regulations relating to the Agreement shall be determined in accordance with the laws of the State of Delaware, without giving effect to the choice of law principles thereof.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed on its behalf, and the Director has signed this Agreement to evidence the Director's acceptance of the terms hereof, all as of the date first above written.
COMERICA INCORPORATED
By:______________________________
DIRECTOR
EXHIBIT 10.2
COMERICA INCORPORATED
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT (the "Agreement") between Comerica Incorporated (the "Company") and _________ ("you") is effective as of _______________, 2___. Any undefined terms appearing herein as defined terms shall have the same meaning as they do in the Amended and Restated Comerica Incorporated 1997 Long-Term Incentive Plan (the "Plan"). The Company will provide a copy of the Plan to you upon your request.
WITNESSETH:
1. AWARD OF STOCK. Pursuant to the provisions of the Plan, the Company hereby awards you, subject to the terms and conditions of the Plan (incorporated herein by reference), and subject further to the terms and conditions in this Agreement ____________ shares of $5.00 par value common stock of the Company (the "Stock Award").
2. VESTING OF STOCK AWARD. Your Stock Award will be subject to forfeiture during the Restriction Period. The Restriction Period will begin on the date of this Agreement and end on ___________. Subject to the terms of the Plan and this Agreement, including, without limitation, your fulfillment of the employment requirements in paragraph 4 below, your Stock Award will vest and become free of restrictions at the end of the Restriction Period (except in the case of your earlier death or Disability or an earlier Change of Control of the Company, as set forth below). As soon as administratively feasible after the lapse of restrictions on and vesting of your Stock Award and your payment of any applicable taxes, the Company will deliver to you (or to your designated beneficiary if you are not then living) evidence of your ownership (by book entry or certificate), of the shares subject to the Stock Award that have vested and for which you have paid any applicable taxes. You will have a taxable event on the date the Restriction Period ends.
3. CANCELLATION OF STOCK AWARD. The Committee has the right to cancel all or any portion of the Stock Award in accordance with Section 4 of the Plan if the Committee determines in good faith that you have done any of the following: (i) committed a felony; (ii) committed fraud; (iii) embezzled; (iv) disclosed confidential information or trade secrets; (v) were terminated for cause; (vi) engaged in any activity in competition with the business of the Company or any subsidiary or affiliate of the Company; or (vii) engaged in conduct that adversely affected the Company. The Delegate shall have the power and authority to suspend all or any portion of the Stock Award if the Delegate makes in good faith the determination described in the foregoing sentence. Any such suspension of a Stock Award shall remain in effect until the suspension shall be presented to and acted on by the Committee at its next meeting. This paragraph 3 shall have no application for a two year period following a Change of Control of the Company.
4. EMPLOYMENT REQUIREMENTS. Except as provided herein, you must remain employed by the Company or one of its Affiliates during the entire Restriction Period to retain the Stock Award. If your employment ceases for any reason (other than due to your death or Disability) during the Restriction Period, including, without limitation, due to your Retirement, you will forfeit the Stock Award as of the date your employment ceases unless the Committee determines otherwise. If your employment terminates due to your death or Disability during the Restriction Period, your Stock Award will vest and become free of restriction as of the date of your death or termination of employment due to your Disability.
5. EFFECT OF A CHANGE OF CONTROL. Your Stock Award will vest and become free of restrictions on the date a Change of Control of the Company occurs.
6. NONTRANSFERABILITY. During the Restriction Period, you may not assign or transfer the Stock Award nor any of your rights pertaining thereto by any means other than by will or the laws of descent and distribution.
7. VOTING AND DIVIDENDS. During the Restriction Period, you shall have the right to vote shares subject to the Stock Award and to receive any cash dividends or cash distributions that may be paid with respect thereto. In the event of a stock dividend, stock distribution, stock split, division of shares or other corporate structure change during the Restriction Period which results in the issuance of additional shares with respect to your Stock Award, such shares will be subject to the same restrictions as your Stock Award.
8. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan or this Agreement shall confer on you any right to continue in the employment of the Company or its Affiliates for any given period or on any specified
terms nor in any way affect the Company's or its Affiliates' right to terminate your employment without prior notice at any time for any reason or for no reason.
9. COMPLIANCE WITH LAWS AND REGULATIONS. The Stock Award and the obligation of the Company to deliver the shares subject to the Stock Award are subject to compliance with all applicable laws, rules and regulations, to receipt of any approvals by any government or regulatory agency as may be required, and to any determinations the Company may make regarding the application of all such laws, rules and regulations.
10. BINDING NATURE OF PLAN. You agree to be bound by all terms and provisions of the Plan and related administrative rules and procedures, including terms and provisions and administrative rules and procedures adopted and/or modified after the granting of the Stock Award. In the event any provisions hereof are inconsistent with those of the Plan, the provisions of the Plan shall control. For purposes of all of your restricted stock awards granted under the Plan, you understand and agree that "Retirement" and any derivation of such term used in your restricted stock award agreements means a retirement that is approved by the Committee as required by Section 6(C) of the Plan.
11. NOTICES. Any notice to the Company under this Agreement shall be in writing to the following address or facsimile number: Human Resources - Executive Compensation, Comerica Incorporated, 500 Woodward Ave., MC 3122, Detroit, MI 48226; Facsimile Number: 313-964-3153. The Company will address any notice to you to your current address according to the Company's personnel files. All written notices provided in accordance with this paragraph shall be deemed to be given when (a) delivered to the appropriate address(es) by hand or by a nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile to the appropriate facsimile number, with confirmation by telephone of transmission receipt; or (c) received by the addressee, if sent by U.S. mail to the appropriate address or by Company inter-office mail to the appropriate mail code. Either party may designate in writing some other address or facsimile number for notice under this Agreement.
12. FORCE AND EFFECT. The various provisions of this Agreement are severable in their entirety. Any judicial or legal determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions.
13. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the successors of the respective parties.
IN WITNESS WHEREOF, Comerica Incorporated has caused this Agreement to be executed by an appropriate officer and you (the Stock Award recipient) have executed this Agreement, both as of the day and year first above written.
COMERICA INCORPORATED
By:________________________
Name: Title: ______________________ _______________________ __________________ Recipient's Signature Print Name Social Security No. |
EXHIBIT 10.3
COMERICA INCORPORATED
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT (the "Agreement") between Comerica Incorporated (the "Company") and __________ ("you") is effective as of _______________, 2___. Any undefined terms appearing herein as defined terms shall have the same meaning as they do in the Amended and Restated Comerica Incorporated 1997 Long-Term Incentive Plan (the "Plan"). The Company will provide a copy of the Plan to you upon your request.
WITNESSETH:
1. AWARD OF STOCK. Pursuant to the provisions of the Plan, the Company hereby awards you, subject to the terms and conditions of the Plan (incorporated herein by reference), and subject further to the terms and conditions in this Agreement __________ shares of $5.00 par value common stock of the Company (the "Stock Award").
2. VESTING OF STOCK AWARD. The unvested portion of your Stock Award is subject to forfeiture. Subject to the terms of the Plan and this Agreement, including without limitation, your fulfillment of the employment requirements in paragraph 4 below, your Stock Award will vest and become free of restrictions in accordance with the following schedule (except in the case of your earlier death or Disability or an earlier Change of Control of the Company):
Percentage of Stock Award That Will Vest Date and Become Free of Restrictions ---- ------------------------------- On ________[generally 3 years from grant date] ___% On ________[generally 4 years from grant date] ___% On ________[generally 5 years from grant date] ___% |
As soon as administratively feasible after the vesting of any portion of your Stock Award and your payment of any applicable taxes, the Company will deliver to you (or to your designated beneficiary if you are not then living) evidence of your ownership (by book entry or certificate), of the shares subject to the Stock Award that have vested and for which you have paid any applicable taxes. You will have a taxable event on the date that each tranche of your Stock Award vests.
3. CANCELLATION OF STOCK AWARD. The Committee has the right to cancel all or any portion of the Stock Award in accordance with Section 4 of the Plan if the Committee determines in good faith that you have done any of the following: (i) committed a felony; (ii) committed fraud; (iii) embezzled; (iv) disclosed confidential information or trade secrets; (v) were terminated for cause; (vi) engaged in any activity in competition with the business of the Company or any subsidiary or affiliate of the Company; or (vii) engaged in conduct that adversely affected the Company. The Delegate shall have the power and authority to suspend all or any portion of the Stock Award if the Delegate makes in good faith the determination described in the foregoing sentence. Any such suspension of a Stock Award shall remain in effect until the suspension shall be presented to and acted on by the Committee at its next meeting. This paragraph 3 shall have no application for a two year period following a Change of Control of the Company.
4. EMPLOYMENT REQUIREMENTS. Except as provided herein, you must remain employed by the Company or one of its Affiliates until your Stock Award (or portion thereof) has vested to retain the Stock Award (or portion thereof, as the case may be). If your employment ceases for any reason (other than due to your death or Disability) before your entire Stock Award has fully vested, including, without limitation, due to your Retirement, you will forfeit that portion of the Stock Award that has not vested as of the date your employment ceases unless the Committee determines otherwise. If your employment terminates due to your death or Disability prior to your Stock Award fully vesting, the unvested portion of your Stock Award will vest as of the date of your death or termination of employment due to your Disability.
5. EFFECT OF A CHANGE OF CONTROL. Your Stock Award will vest and become free of restrictions on the date a Change of Control of the Company occurs.
6. NONTRANSFERABILITY. Until it has vested, you may not assign or transfer any portion the Stock Award nor any of your rights pertaining thereto by any means other than by will or the laws of descent and distribution.
7. VOTING AND DIVIDENDS. You shall have the right to vote shares comprising any portion of the Stock Award that has not vested and to receive any cash dividends or cash distributions that may be paid with respect
thereto. In the event of a stock dividend, stock distribution, stock split, division of shares or other corporate structure change which results in the issuance of additional shares with respect to any unvested share of your Stock Award, such additional shares will be subject to the same restrictions as is such unvested share of your Stock Award.
8. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan or this Agreement shall confer on you any right to continue in the employment of the Company or its Affiliates for any given period or on any specified terms nor in any way affect the Company's or its Affiliates' right to terminate your employment without prior notice at any time for any reason or for no reason.
9. COMPLIANCE WITH LAWS AND REGULATIONS. The Stock Award and the obligation of the Company to deliver the shares subject to the Stock Award are subject to compliance with all applicable laws, rules and regulations, to receipt of any approvals by any government or regulatory agency as may be required, and to any determinations the Company may make regarding the application of all such laws, rules and regulations.
10. BINDING NATURE OF PLAN. You agree to be bound by all terms and provisions of the Plan and related administrative rules and procedures, including terms and provisions and administrative rules and procedures adopted and/or modified after the granting of the Stock Award. In the event any provisions hereof are inconsistent with those of the Plan, the provisions of the Plan shall control. For purposes of all of your restricted stock awards granted under the Plan, you understand and agree that "Retirement" and any derivation of such term used in your restricted stock award agreements means a retirement that is approved by the Committee as required by Section 6(C) of the Plan.
11. NOTICES. Any notice to the Company under this Agreement shall be in writing to the following address or facsimile number: Human Resources - Executive Compensation, Comerica Incorporated, 500 Woodward Ave., MC 3122, Detroit, MI 48226; Facsimile Number: 313-964-3153. The Company will address any notice to you to your current address according to the Company's personnel files. All written notices provided in accordance with this paragraph shall be deemed to be given when (a) delivered to the appropriate address(es) by hand or by a nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile to the appropriate facsimile number, with confirmation by telephone of transmission receipt; or (c) received by the addressee, if sent by U.S. mail to the appropriate address or by Company inter-office mail to the appropriate mail code. Either party may designate in writing some other address or facsimile number for notice under this Agreement.
12. FORCE AND EFFECT. The various provisions of this Agreement are severable in their entirety. Any judicial or legal determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions.
13. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the successors of the respective parties.
IN WITNESS WHEREOF, Comerica Incorporated has caused this Agreement to be executed by an appropriate officer and you (the Stock Award recipient) have executed this Agreement, both as of the day and year first above written.
COMERICA INCORPORATED
By:________________________
Name: Title: ______________________ _______________________ __________________ Recipient's Signature Print Name Social Security No. |
EXHIBIT 10.4
COMERICA INCORPORATED
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of __________, 2___ is between Comerica Incorporated (the "Company") and __________ (the "Optionee"). Unless otherwise defined herein, capitalized terms used herein which are defined in the Amended and Restated Comerica Incorporated 1997 Long-Term Incentive Plan (the "Plan") have the same respective meanings as are set forth in the Plan. A copy of the Plan will be provided to the Optionee upon request.
WITNESSETH:
1. GRANT OF OPTION. Pursuant to the provisions of the Plan, the Company hereby awards the Optionee, subject to the terms and conditions of the Plan (incorporated herein by reference), and subject further to the terms and conditions in this Agreement, the right and option to purchase from the Company, all or any part of an aggregate of __________ shares (the "Shares") of common stock ($5.00 par value per Share) of the Company ("Common Stock") at the purchase price of $_____ per Share (the "Option").
2. EXPIRATION DATE. The Option shall expire on _________, unless it expires or is canceled earlier in accordance with the provisions of the Plan.
3. EXERCISE OF OPTION. This Option is exercisable in the following manner:
Maximum Percentage of Shares Date Available for Exercise ---- ---------------------------- On or after______________________ [generally 1 year from January of grant year] 25% On or after______________________ [generally 2 years from January of grant year] 50% On or after______________________ [generally 3 years from January of grant year] 75% On or after______________________ [generally 4 years from January of grant year] 100% |
In the event of the Optionee's termination of employment for any reason
(including, without limitation, by reason of the Optionee's death or Disability)
other than Retirement, prior to the date the Optionee's Option is 100% vested,
the Optionee's Option shall be exercisable, to the extent vested at the date of
the Optionee's termination, for the period specified in Section 6(A)(4) of the
Plan. In the event of the Optionee's termination due to Retirement, this Option
will be canceled if it was granted in the year of Retirement; if it was not
granted in the year of Retirement, it will continue to vest and be exercisable
as specified in Section 6(A)(4)(a) of the Plan. Notwithstanding the foregoing,
the Optionee's Option shall be 100% fully and immediately exercisable upon the
occurrence of a Change of Control of the Company.
Any exercise shall be initiated by written notice to the Compensation Department of the Company specifying the number of Shares being exercised and the year of grant, and shall be accompanied by payment of the aggregate purchase price for such Shares. Optionee shall be subject to applicable tax withholding required in connection with any Option exercise.
4. CANCELLATION OF OPTION. The Committee has the right to cancel all or any portion of the Option granted herein in accordance with Section 4 of the Plan if the Committee determines in good faith that the Optionee has done any of the following: (i) committed a felony; (ii) committed fraud; (iii) embezzled; (iv) disclosed confidential information or trade secrets; (v) were terminated for cause; (vi) engaged in any activity in competition with the business of the Company or any subsidiary or affiliate of the Company; or (vii) engaged in conduct that adversely affected the Company. The Delegate shall have the power and authority to suspend all or any portion of the Option granted herein if the Delegate makes in good faith the determination described in the foregoing sentence. Any such suspension of an Option shall remain in effect until the suspension shall be presented to and acted on by the Committee at its next meeting. This paragraph 4 shall have no application for a two year period following a Change of Control of the Company.
5. COMPLIANCE WITH LAWS AND REGULATIONS. This Option and the obligation of the Company to sell and deliver the Shares hereunder shall be subject to all applicable laws, rules and regulations, and to such approvals by any government or regulatory agency as may be required.
6. OPTIONEE BOUND BY PLAN. Optionee agrees to be bound by all terms and provisions of this Agreement and of the Plan, including terms and provisions adopted after the granting of this Option but prior to the complete exercise of the Option. In the event any provisions hereof are inconsistent with those of the Plan, the provisions of the Plan shall control.
7. NOTICES. Any notice to the Company under this Agreement shall be in writing to the following address or facsimile number: Human Resources - Compensation, Comerica Incorporated, 500 Woodward Ave., MC 3122, Detroit, MI 48226; Facsimile Number: 313-964-3153. The Company will address any notice to the Optionee to the Optionee's current address according to the Company's personnel files. All written notices provided in accordance with this paragraph shall be deemed to be given when (a) delivered to the appropriate address(es) by hand or by a nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile to the appropriate facsimile number(s), with confirmation by telephone of transmission receipt; or (c) received by the addressee(s), if sent by U.S. mail to the appropriate address or by Company inter-office mail to the appropriate mail code. Either party may designate in writing some other address or facsimile number for notice under this Agreement.
8. NONTRANSFERABILITY. This Option shall not be transferable other than by will or by the laws of descent and distribution, and during the lifetime of the Optionee shall be exercisable only by the Optionee, or by the Optionee's guardian or legal representative.
9. FORCE AND EFFECT. The various provisions of this Agreement are severable in their entirety. Any judicial or legal determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions.
10. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the successors of the respective parties.
11. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan or this Agreement shall confer on an employee any right to continue in the employment of the Company or its Affiliates or in any way affect the Company's or its Affiliates' right to terminate the employee's employment without prior notice at any time for any reason or for no reason.
IN WITNESS WHEREOF, Comerica Incorporated has caused this Agreement to be executed by an appropriate officer and the Optionee has executed this Agreement, both as of the day and year first above written.
COMERICA INCORPORATED
By:________________________
Name: Title: _____________________ _______________________ ___________________ Recipient's Signature Print Name Social Security No. |
EXHIBIT 10.5
COMERICA INCORPORATED
NO SALE AGREEMENT
THIS AGREEMENT (the "Agreement") between Comerica Incorporated (the "Company") and __________ (the "Award Recipient") is effective as of ________, 2___. Any undefined terms appearing herein as defined terms shall have the same meaning as they do in the Amended and Restated Comerica Incorporated Management Incentive Plan (the "Plan"). The Company will provide a copy of the Plan to the Award Recipient upon request.
1. SHARES. This Agreement applies to __________ shares of Company common stock, par value $5.00 per share (the "Shares"), earned by the Award Recipient in connection with that portion of a three-year Incentive Payment under the Plan for the ____-____ Performance Period that is automatically invested in shares of Company common stock.
2. RESTRICTIONS ON TRANSFER OF SHARES. Subject to Section 4 below, the Shares will not be transferable during the period beginning on the date of grant and ending upon the termination for any reason (including death, disability, retirement, voluntary resignation or involuntary termination, whether or not for "cause") of the Award Recipient's employment with the Company or any of its Affiliates (the "No Sale Period"). The Shares will become immediately transferable at the end of the No Sale Period. As soon as practical after termination of the Award Recipient's employment or a Change of Control of the Company, the Company will terminate the no sale restriction and, if the Award Recipient so requests (or, if the Award Recipient is not then living and if his or her designated beneficiary so requests), the Company will, at its option, either: (a) deliver to the Award Recipient (or, if the Award Recipient is not then living, to his or her designated beneficiary) a certificate that does not contain any restrictive legends, evidencing his or her ownership of the Shares (free of restrictions on transfer); or (b) make a book entry of such Shares evidencing his or her ownership of the Shares free of restrictions on transfer.
3. NONTRANSFERABILITY. The Award Recipient may not sell, assign, transfer, pledge or otherwise encumber the Shares, nor any of his or her rights pertaining thereto, during the No Sale Period, other than by will or the laws of intestacy.
4. EFFECT OF A CHANGE OF CONTROL. The No Sale Period will lapse as of the date that a Change of Control, as defined in Section 6 of the Plan, occurs.
5. COMPLIANCE WITH LAWS AND REGULATIONS. The obligation of the Company to deliver the Shares covered by this Agreement is subject to all applicable federal and state laws, rules and regulations, to any approvals by any government or regulatory agency as may be required, and to any determinations the Company may make regarding the application of all such laws, rules and regulations.
6. REINVESTMENT OF DIVIDENDS. During the No Sale Period, the Company will reinvest cash dividends paid with respect to the Shares in additional shares of common stock of the Company, and shares received pursuant to such reinvestment will be subject to the same restrictions as the Shares. In addition, in the event of a stock dividend, stock distribution, stock split, division of shares or other corporate structure change which results in the issuance of additional shares with respect to the Shares, such additional shares will be subject to the same restrictions as the Shares.
7. BINDING NATURE OF THE PLAN. The Award Recipient agrees to be bound by all terms and provisions of the Plan and related administrative rules and procedures, including terms and
provisions and administrative rules and procedures adopted and/or modified after the date of this Agreement. In the event any provisions hereof are inconsistent with those of the Plan, the provisions of the Plan shall control.
8. NOTICES. Any notice to the Company under this Agreement shall be in writing to the following address: Human Resources - Executive Compensation, Comerica Incorporated, 500 Woodward Ave., MC 3122, Detroit, MI 48226. The Company will address any notice to the Award Recipient to the Award Recipient's current address according to the Company's personnel files. All written notices provided in accordance with this paragraph shall be deemed to be given when (a) delivered to the appropriate address by hand or by a nationally recognized overnight courier service (costs prepaid); or (b) received by the addressee, if sent by U.S. mail to the appropriate address or by Company inter-office mail to the appropriate mail code. Either party may designate in writing some other address for notice under this Agreement.
9. FORCE AND EFFECT. The various provisions of this Agreement are severable in their entirety. Any judicial or legal determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions.
10. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the successors of the respective parties.
11. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan or this Agreement shall confer on the Award Recipient any right to continue in the employment of the Company for any given period or on any specified terms, nor in any way affect the Company's right to terminate the Award Recipient's employment without prior notice at any time for any reason or for no reason.
IN WITNESS WHEREOF, Comerica Incorporated has caused this Agreement to be executed by an appropriate officer and the Award Recipient has executed this Agreement, both as of the day and year first above written.
COMERICA INCORPORATED
By:________________________
Name:
Title:
EXHIBIT 10.6
Original Plan approved by the Compensation Committee on 11/15/96
This Amended and Restated Plan approved and ratified by the Compensation Committee on 3/22/04
This Amended and Restated Plan approved and ratified by the Board of Directors on 3/23/04
This Amended and Restated Plan approved and ratified by the Stockholders on 5/18/04
COMERICA INCORPORATED
AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE
PLAN
COMERICA INCORPORATED
AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
TABLE OF CONTENTS
SECTION I - PURPOSE..................................................... 1 SECTION II - DEFINITIONS................................................ 1 SECTION III - INTRODUCTION.............................................. 4 SECTION IV - PARTICIPATION.............................................. 5 SECTION V - CONTRIBUTIONS............................................... 6 SECTION VI - ACQUISITION OF CORPORATION SHARES.......................... 9 SECTION VII - RIGHTS WITH RESPECT TO SHARES HELD IN PLAN................ 9 SECTION VIII - WITHDRAWALS FROM PLAN.................................... 9 SECTION IX - MISCELLANEOUS PROVISIONS................................... 10 SECTION X - EFFECTIVE DATE OF PLAN...................................... 12 |
SECTION I - PURPOSE
The Board of Directors of Comerica Incorporated (the "Corporation") believes that the interests of the Corporation are served through share ownership of the Corporation by its employees. Such ownership strengthens the sense of identity between the Corporation and its employees and furthers a unity of purpose among the Corporation, its employees and its stockholders. It is the purpose of this Comerica Incorporated Amended and Restated Employee Stock Purchase Plan to provide a convenient means through which employees of the Corporation and its subsidiaries and affiliates may acquire shares in the Corporation.
SECTION II - DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set forth below.
A. "Account" means an account established for each Participant under the Plan to hold Corporation Shares acquired for the Participant's account with Payroll Withholding Contributions, Other Permitted Contributions, Service Award Contributions, Matching Contributions, Share Retention Contributions and/or Reinvested Cash Dividends.
B. "Beneficiary(ies)" means the individual(s) to whom the balance of the Participant's Account is to be distributed in the event assets remain in such Account at the time of the Participant's death, or by whom any rights of the Participant, after the Participant's death, may be exercised.
C. "Beneficiary Designation Form" means the form used to designate the Participant's Beneficiary(ies), as such form may be modified by the Committee or the Plan Administrator from time to time.
D. "Bi-Weekly Base Pay" means the gross amount of cash compensation a Participant receives during each bi-weekly pay period, including, without limitation, base pay, incentive compensation paid through the Management Incentive Plan, or through a specific business unit incentive plan, referral awards, ROAR payments, overtime, shift differential and commissions, lump sum merit bonuses (effective as of January 22, 1999) and/or such other payments as the Committee or the Plan Administrator may determine appropriate from time to time for such purposes. Bi-Weekly Base Pay shall not include any amount which is deferred under the Deferred Compensation Plan(s).
E. "Board" means the Board of Directors of Comerica Incorporated.
F. "Code" means the Internal Revenue Code of 1986, as amended. All references to sections of the Code shall be deemed to refer to any successor provisions to such sections.
G. "Committee" means the committee appointed by the Board to administer the Plan as provided herein. Unless otherwise determined by the Board, the Compensation Committee of the Board shall be the Committee.
H. "Corporation" means Comerica Incorporated, a Delaware corporation. For purposes of Plan provisions relating to eligibility to participate or receive or make contributions, it shall also include subsidiaries and affiliates of the Corporation.
I. "Corporation Shares" means shares of $5.00 par value common stock of the Corporation.
J. "Custodian Bank" means Comerica Bank, a Michigan banking corporation, or such other institution as may be appointed by the Corporation to hold Corporation Shares in Accounts of Participants under the Plan.
K. "Deferred Compensation Plan(s)" means the 1999 Comerica Incorporated Deferred Compensation Plan, together with any and all amendments, restatements and/or modifications thereof, and/or the 1999 Comerica Incorporated Amended and Restated Common Stock Deferred Incentive Award Plan, together with any and all amendments, restatements and/or modifications thereof, or any plan adopted by the Corporation as a successor to the foregoing.
L. "Disability" has the meaning set forth in Section V(D) hereof.
M. "Employee" means an individual who renders service to the Corporation or one of its subsidiaries or affiliates as a common law employee or officer.
N. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
O. "Management Incentive Plan" means the Amended and Restated Comerica Incorporated Management Incentive Plan, together with any and all amendments, restatements and/or modifications thereof, or any plan adopted by the Corporation as a successor to the foregoing.
P. "Matching Contribution" means, subject to the limitations of Section V(C) hereof, a contribution by the Corporation, the gross amount of which shall equal 15% of the aggregate amount of Payroll Withholding Contributions, Service Award Contributions and/or Other Permitted Contributions made during the previous
quarter. The Matching Contribution, net of all applicable withholding and deductions, shall be used to purchase Corporation Shares.
Q. "Other Permitted Contribution" means a non-periodic contribution of a Participant to the Plan pursuant to guidelines approved by the Committee or the Plan Administrator from time to time.
R. "Participant" means an Employee or former Employee who has an Account under the Plan.
S. "Payroll Withholding Contribution" means a contribution of a Participant under the Plan equal to the percentage of the Participant's gross Bi-Weekly Base Pay such Participant has elected to contribute to the Plan; provided, however, that in the event the Participant's pay, less all applicable withholding and deductions, is less than the amount of his or her elected contribution, the contribution shall be reduced so as not to exceed 100% of the Participant's net pay. Payroll Withholding Contributions shall be withheld by the Corporation and forwarded to the Custodian Bank, which shall utilize such contributions to purchase Corporation Shares for allocation to the Employee's Account in accordance with the provisions of the Plan.
T. "Plan" means the Comerica Incorporated Amended and Restated Employee Stock Purchase Plan, as set forth herein and as hereinafter amended and/or restated from time to time.
U. "Plan Administrator" means, unless determined otherwise by the Board or the Committee, the Director of Corporate Human Resources (or, if no individual is the Director of Corporate Human Resources, then the designated acting Director of Corporate Human Resources).
V. "Plan Year" means the fiscal year on which the records of the Plan are kept, which shall be the calendar year; provided, however, that the first Plan Year shall be the period commencing April 1, 1997 and ending December 31, 1997.
W. "Reinvested Cash Dividends" means cash dividends paid on Corporation Shares allocated to a Participant's Account which are utilized to purchase additional Corporation Shares for such Participant's Account.
X. "Retirement" has the meaning set forth in Section V(D) hereof.
Y. "Section 16 Insider" means any Participant who is designated by the Corporation as a reporting person under Section 16 of the Exchange Act.
Z. "Service Award" means a discretionary award, in the form of a Service Award Contribution, made by the Corporation in recognition of an Employee's service to the Corporation.
AA. "Service Award Contribution" means a discretionary contribution by the Corporation to be allocated to a Participant's Account in recognition of an Employee's service to the Corporation. The Service Award Contribution, net of any applicable withholding and deductions, shall be used to purchase Corporation Shares.
BB. "Share Retention Contribution" means, subject to fulfillment of the requirements in Section V(D) hereof, a contribution by the Corporation to be allocated to a Participant's Account in a Plan Year equal to 5% of the amount of Payroll Withholding Contributions, Service Award Contributions and/or Other Permitted Contributions made to such Participant's Account in the first of the two immediately preceding Plan Years as set forth in Section V(D). Share Retention Contributions shall be utilized to purchase additional Corporation Shares for the Participant's Account.
CC. "Two-Plan-Year-Period" means the two Plan Years immediately preceding the Plan Year in which a Share Retention Contribution is made.
SECTION III - INTRODUCTION
A. Administration. The Plan shall be administered by the Committee; provided, however, that the Board shall have the authority to exercise any and all duties and responsibilities assigned to the Committee under the Plan. The Committee may delegate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it, including, without limitation, the Plan Administrator. In addition, unless determined otherwise by the Board or Committee, the Plan Administrator shall handle the day-to-day administration of the Plan. The Plan Administrator may employ accountants, legal counsel and any other experts he or she deems advisable to assist in the administration of the Plan.
B. Corporation Shares. The aggregate number of Corporation Shares which may be purchased, or awarded as Service Award Contributions, under the Plan shall not exceed 5,000,000.
C. Adjustments. In the event the number of outstanding Corporation Shares changes as a result of any stock split, stock dividend, recapitalization, merger, consolidation, reorganization, combination, or exchange of shares, split-up, split-off, spin-off, liquidation or other similar change in capitalization, or any distribution made to holders of Corporation Shares other than cash dividends, the number of Corporation
Shares that may be purchased, or awarded as Service Award Contributions, under the Plan shall be automatically adjusted, and the Committee shall be authorized to make such other equitable adjustments as it deems necessary so that the value of the interest of the Participants shall not be decreased by reason of the occurrence of such event. Any such adjustment shall be deemed conclusive and binding on the Corporation, each Participant, his or her Beneficiaries and all other interested parties.
D. Supplements. From time to time, supplements may be attached by amendment to and form a part of this Plan and shall be given the same effect that such provision would have if it was incorporated within the basic text of the Plan. Such supplements may modify or supplement the provisions of the Plan as they apply to particular groups of Employees or groups of Participants, shall specify the persons affected by such supplements and shall supersede the other provisions of the Plan to the extent necessary to eliminate inconsistencies between the Plan provisions and the provisions of such supplements.
E. Non-Resident Aliens. With respect to non-resident alien Employees, the Committee or Plan Administrator may adopt one or more sets of procedures and provisions, which may be different than those included in this Plan for other Participants, with each set of procedures and provisions applying to some or all of such non-resident alien Employees, as determined by the Committee in its sole discretion or the Plan Administrator in his or her sole discretion, in order to comply with the applicable laws of the respective jurisdiction(s) in which such non-resident alien Employees live or work and/or to take into account other legal, tax, accounting and similar issues arising by virtue of the participation of such non-resident alien Employees. The adoption of any such procedures and provisions shall not be deemed an amendment to this Plan.
F. Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of Delaware shall be the controlling law in all matters relating to this Plan.
SECTION IV - PARTICIPATION
A. Eligibility. Any person who is or becomes an Employee may commence participation in the Plan as soon as administratively feasible on or subsequent to such individual's date of hire; provided, however, that for purposes of the Plan, the Committee or the Plan Administrator may exclude from eligibility non-resident aliens (or classes of non-resident aliens), if any, if the requirements of local law, rules or regulations, including without limitation, the tax, labor, accounting or securities laws, rules, regulations or consequences, make participation by such non-resident aliens (or class(es) of non-resident aliens) impractical, as determined by the Committee in its sole discretion or the Plan Administrator in his or her sole discretion.
B. Enrollment. Enrollment in the Plan shall be accomplished by such procedures as are established by the Committee or the Plan Administrator from time to time. Unless determined otherwise by the Committee or the Plan Administrator, Payroll Withholding Contributions will commence as of the first pay period which begins not less than ten days following a Participant's communication of instructions to commence such contributions. Other Permitted Contributions will be made as soon as is administratively feasible, as determined by the Committee or the Plan Administrator, following the Corporation's receipt of instructions to commence such contributions.
C. Election Changes. A Participant may increase, decrease, cease or resume the amount of his or her Payroll Withholding Contributions by communicating further instructions pursuant to such procedures as are established by the Committee or the Plan Administrator from time to time. Election changes shall become effective as soon as administratively feasible after instructions have been properly communicated. There shall be no limitation on the number of election changes a Participant may make. A discontinuance of contributions in and of itself shall not constitute a withdrawal from the Plan.
SECTION V - CONTRIBUTIONS
A. Payroll Withholding Contributions. Any Payroll Withholding Contribution shall equal at least 0.5% but not exceed 100% of a Participant's Bi-Weekly Base Pay, net of all other applicable withholding and deductions. The Corporation shall remit these contributions to the Custodian Bank promptly.
B. Other Permitted Contributions. A Participant may make Other Permitted Contributions in a single sum at such time or times permitted by the Committee or the Plan Administrator.
C. Matching Contributions. The Corporation shall make a Matching Contribution equal to 15% of the Payroll Withholding Contributions, Service Award Contributions and/or Other Permitted Contributions made by, or on behalf of, each Participant during any calendar quarter, provided there have been no withdrawals from the Participant's Account during such quarter. Matching Contributions will not be made with respect to Share Retention Contributions. In addition, Matching Contributions will not be made with respect to Payroll Withholding Contributions, Service Award Contributions and/or Other Permitted Contributions made during any Plan Year to the extent such contributions exceed $25,000 in the aggregate. Matching Contributions will be made at or after the end of each calendar quarter and shall be net of all applicable withholding and deductions. A Participant shall be eligible to receive a Matching Contribution with respect to a calendar quarter if there have been no withdrawals during such quarter, even if the Participant's employment terminated during such quarter for any reason.
D. Share Retention Contributions. Subject to the conditions and limitations of this Section V(D), the Corporation shall allocate Share Retention Contributions to the Accounts of those Participants who qualify therefor. Subject to the conditions and limitations of this Section V(D), a Participant shall qualify for a Share Retention Contribution in a Plan Year if the Participant is employed on the last day of the relevant Two-Plan-Year-Period, and if, during such Two-Plan-Year-Period, there has not been a withdrawal of any of the following:
i. Payroll Withholding Contributions, Service Award Contributions or Other Permitted Contributions made during such period;
ii. Matching Contributions made during such period;
iii. Corporation Shares purchased with any contributions referred to in to
Section V(D)(i) or (ii); or
iv. Corporation Shares purchased with dividends paid with respect to any shares referred to in Section V(D)(iii).
Share Retention Contributions will not be made with respect to Matching Contributions. In addition, Share Retention Contributions will not be made with respect to Payroll Withholding Contributions, Service Award Contributions and/or Other Permitted Contributions made during any Plan Year to the extent such contributions exceed $25,000 in the aggregate. Share Retention Contributions shall be made as soon as reasonably practicable after the first day of the Plan Year following a Two-Plan-Year-Period and shall be net of all applicable withholding and deductions.
Notwithstanding anything in this Section V(D) to the contrary, a Participant whose employment terminates by reason of Retirement, death or Disability prior to the end of a Two-Plan-Year-Period shall be eligible to receive a Share Retention Contribution with respect to such partial Two-Plan-Year-Period (consisting of the Plan Year during which the Participant's employment so terminates and the immediately preceding Plan Year) if and only if there have been no withdrawals during such period (prior to termination of employment). The Share Retention Contribution made on behalf of any such eligible terminated Participant with respect to such period shall be prorated based on the number of days during the final Plan Year that the Participant was employed.
For purposes of this Section V(D), a Participant's employment shall be considered to have terminated by reason of Retirement if he or she terminates employment with eligibility for, and elects to commence receipt of, an early or normal retirement benefit under a tax-qualified defined benefit retirement plan maintained by the Corporation, and a Participant's employment shall be considered to have terminated by reason of Disability if he or she terminates employment with eligibility for,
and is awarded, disability benefits under a long-term disability plan maintained by the Corporation.(1)
E. Service Award Contributions. The Corporation may make Service Award Contributions to the Accounts of those Employees whom it wishes to recognize for service to the Corporation. Service Award Contributions are made at the discretion of the Corporation. All Corporation Service Awards related to Corporation Shares shall be made under this Plan through such Service Award Contributions.
F. Assignment of Rights Under the Plan. Unless otherwise determined by the Committee, a Participant's Account shall not be transferable by a Participant otherwise than by will or by the laws of intestacy; provided, however, that, a Participant may, in accordance with Section IX(A) and in the manner established by the Committee, designate one or more Beneficiaries to exercise the rights of the Participant and to receive any property payable or distributable with respect to such Participant's Account upon the death of the Participant. Except as otherwise set forth in the Plan, during the Participant's lifetime, only the Participant (or, if permissible under applicable law, the Participant's guardian or legal representative) may make elections or withdrawals with respect to such Participant's Account. Unless otherwise determined by the Committee, a Participant's Account, or rights with respect to such Account, may not be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Corporation or any of its subsidiaries or affiliates.
SECTION VI - ACQUISITION OF CORPORATION SHARES
A. Application of Current Contributions. As soon as reasonably practicable following its receipt of Payroll Withholding Contributions, Other Permitted Contributions, Service Award Contributions, Matching Contributions and/or Share Retention Contributions, the Custodian Bank shall purchase the maximum number of Corporation Shares that the funds allocated to each Participant's Account may purchase at the then-prevailing market prices. Such purchases may be in the open market or directly from the Corporation. Corporation Shares so acquired shall be allocated to the relevant Participant's Account.
B. Reinvested Cash Dividends. Any cash dividends paid on Corporation Shares allocated to any Participant's Account shall be utilized by the Custodian Bank to purchase additional Corporation Shares at prices and in the manner specified above.
C. Book Entry. Unless otherwise determined by the Committee or the Plan Administrator, Corporation Shares held under the Plan shall be held in book entry form, and the Custodian Bank or its nominee shall be identified as the owner thereof while such Corporation Shares remain in the Plan.
SECTION VII - RIGHTS WITH RESPECT TO SHARES HELD IN PLAN
All rights accruing to an owner of record of Corporation Shares shall belong to and be vested in the Participant for whose Account such Corporation Shares are being held by the Custodian Bank, including, without limitation, the right to receive all dividends payable in respect of such Corporation Shares, the right to receive all notices of stockholders' meetings, the right to vote and the right to tender or refrain from tendering such Corporation Shares in response to a tender offer.
SECTION VIII - WITHDRAWALS FROM PLAN
A. In-Service Withdrawals. A Participant may withdraw all or any portion of the balance of his or her Account from the Plan during the Participant's employment. Unless determined otherwise by the Committee or the Plan Administrator, if the value of the Participant's Account at the time the in-service withdrawal is requested is less than the value of ten Corporation Shares at such time, distribution will be made to the Participant in cash. Otherwise, the Participant may elect to receive a distribution in the form of cash or Corporation Shares. Any brokerage commissions incurred in connection with the sale of Corporation Shares to facilitate a distribution shall be charged to the Participant's Account. A Participant shall not be entitled to receive a Matching Contribution with respect to any Payroll Withholding Contributions, Service Award Contributions and/or Other Permitted Contributions made during a calendar quarter if the Participant has made an in-service withdrawal during such quarter.
B. Termination Withdrawals. A Participant or his or her Beneficiary(ies) must submit an application to withdraw the balance of his or her account not later than ninety days after the Participant's employment terminates due to death, Disability, Retirement, voluntary resignation, involuntary dismissal or any other reason, or within ninety days after the Participant or his or her legal representative receives notice that the Plan has terminated. A withdrawal application will be provided to the Participant or Beneficiary(ies) upon the occurrence of any of the aforementioned circumstances. The application must be returned to the Custodian Bank within ninety days of receipt. If the Custodian Bank does not receive a withdrawal application by the specified deadline, it will distribute the balance of the Participant's Account to the Participant or his or her legal representative in the form of whole Corporation Shares registered in the Participant's name; provided, however, that unless determined otherwise by the Committee or the Plan Administrator, if the value of the Participant's Account on the date of distribution is less than the value of ten Corporation Shares at such time, the distribution will be made in cash. If the Custodian Bank receives a withdrawal application by the specified deadline and the value of the Participant's Account at the time the termination withdrawal is requested is less than the value of ten Corporation Shares at such time, then unless determined otherwise by the Committee or the Plan Administrator, the distribution will be made in cash. Otherwise, the Participant or his or her Beneficiary(ies) may elect to receive a distribution in the form of cash or Corporation Shares.
C. Fractional Shares and Brokerage Commissions. In all cases, cash will be paid in lieu of fractional Corporation Shares. Any brokerage commissions incurred in connection with the sale of Corporation Shares to facilitate a distribution will be charged to the Participant's Account.
D. Special Rule Applicable To Section 16 Insiders. Except as otherwise
determined by the Committee, a Section 16 Insider shall not be permitted to
receive a cash distribution from the Plan, if, within the previous six months,
he or she (or any other person whose transactions are attributed to the Section
16 Insider under Section 16 of the Exchange Act) either (i) acquired Corporation
Shares in the open market or pursuant to a private transaction; or (ii) made an
election under the Plan (or under any other Plan sponsored by the Corporation)
that resulted in an acquisition of equity securities of the Corporation within
the meaning of that term under Section 16 of the Exchange Act. The Committee or
Plan Administrator may make such other rules as are necessary to comply with
Section 16 of the Exchange Act, as amended from time to time.
SECTION IX - MISCELLANEOUS PROVISIONS
A. Designation of Beneficiary. Upon becoming a Participant of the Plan, each Participant shall submit to Comerica Incorporated, Human Resources - Compensation, 411 West Lafayette, MC 3122, Detroit, MI 48226 (or to such other unit
or person as designated by the Committee from time to time) a Beneficiary Designation Form designating one or more Beneficiaries to whom the balance of the Participant's Account is to be distributed in the event assets remain in such Account at the time of the Participant's death, or by whom any rights of the Participant, after the Participant's death, may be exercised. A Beneficiary Designation Form will be effective only if it is signed by the Participant and submitted before the Participant's death. Any subsequent Beneficiary Designation Form properly submitted will supersede any previous Beneficiary Designation Form so submitted. If a Participant designates a spouse as a Beneficiary, such designation shall automatically terminate and be of no effect following the divorce of the Participant and such individual, unless ratified in writing post-divorce.
If the primary Beneficiary shall predecease the Participant or the primary Beneficiary and the Participant die in a common disaster under such circumstances that it is impossible to determine who survived the other, the balance of the Participant's Account shall be distributed to the alternate Beneficiary(ies) who survive(s) the Participant in accordance with this Plan. If there are no alternate Beneficiaries living or in existence at the date of the Participant's death, or if the Participant has not submitted a valid Beneficiary Designation Form to the Corporation, the balance of the Participant's Account shall be distributed in accordance with the terms of the Plan to the legal representative for the benefit of the Participant's estate.
The Corporation reserves the right to distribute the balance of a Participant's Account to his or her estate notwithstanding the designation of a Beneficiary, if the Corporation is unable to locate the Beneficiary, a dispute arises among Beneficiaries or under any other circumstances the Corporation deems appropriate.
B. Withholding of Taxes. The Corporation shall withhold from any amounts payable to the Participant all Federal, state, city, or other taxes and/or other amounts as legally required by reason of Participant's participation in this Plan.
C. Expenses. All charges of the Custodian Bank, the cost of maintenance of the Accounts of Participants, the purchase of Corporation Shares, and the cost of transferring Corporation Shares to the Participants and Beneficiaries shall be borne by the Corporation; provided, however, that brokerage charges involved in the sale of Corporation Shares, if any, shall be charged to the relevant Participant's Account.
D. Compliance With Legal Requirements. The Corporation shall be bound by all applicable laws in operating this Plan and shall administer and interpret this Plan in accordance with legal requirements.
E. Amendment, Term and Termination. The Committee reserves the right to amend and/or restate the Plan at any time or to terminate the Plan. The Plan shall continue indefinitely until terminated by the Committee.
SECTION X - EFFECTIVE DATE OF PLAN
This Plan will be effective as of June 30, 2003, subject to approval by at least a majority of the outstanding shares of common stock of the Corporation present and having voting power at the meeting at which this Plan is put to a vote.
COMERICA INCORPORATED
By: /s/ James E. Lake ------------------ James E. Lake Its: Senior Vice President and Director of Human Resources |
Comerica Bank, as Custodian Bank, hereby signifies the acceptance of its responsibilities contained herein.
COMERICA BANK AS CUSTODIAN BANK
By: /s/ Cheryl A. Derezinski ------------------------- Cheryl A. Derezinski Its: Senior Vice President |
.
.
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EXHIBIT (11) - STATEMENT RE: COMPUTATION OF NET INCOME PER COMMON SHARE
COMPUTATION OF NET INCOME PER COMMON SHARE
Comerica Incorporated and Subsidiaries
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ (in millions, except per share data) 2004 2003 2004 2003 ------------------------------------ ---- ---- ---- ---- Basic: Net income applicable to common stock $ 196 $ 157 $ 550 $ 503 ----- ----- ----- ----- Average common shares outstanding 170 175 172 175 ----- ----- ----- ----- Basic net income per common share $1.15 $0.90 $3.19 $2.88 ===== ===== ===== ===== Diluted: Net income applicable to common stock $ 196 $ 157 $ 550 $ 503 ----- ----- ----- ----- Average common shares outstanding 170 175 172 175 Nonvested stock 1 - 1 - Common stock equivalent: Net effect of the assumed exercise of stock options 2 1 1 1 ----- ----- ----- ----- Diluted average common shares 173 176 174 176 ----- ----- ----- ----- Diluted net income per common share $1.13 $0.89 $3.15 $2.86 ===== ===== ===== ===== |
Options to purchase an average 6.4 million and 9.1 million shares of common stock at exercise prices ranging from $59.24 - $71.58 and $48.92 - $71.58 were outstanding during the three months ended September 30, 2004 and 2003, respectively, and options to purchase an average 6.4 million and 9.2 million shares of common stock at exercise prices ranging from $56.19 - $71.58 and $44.91 - $71.58 were outstanding during the nine months ended September 30, 2004 and 2003, respectively, but were not included in the computation of diluted net income per common share because the options' exercise prices were greater than the average market price of common shares for the period.
EXHIBIT (31.1) - CHAIRMAN, PRESIDENT AND CEO RULE 13a-14(a)/15d-14(a)
CERTIFICATION OF PERIODIC REPORT (PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ralph W. Babb, Jr., Chairman, President and Chief Executive Officer of Comerica Incorporated (the "Registrant"), certify that:
1. I have reviewed this report on Form 10-Q of the Registrant for the quarterly period ended September 30, 2004;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
(b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
Date: November 5, 2004 /s/ Ralph W. Babb, Jr. ---------------------- Ralph W. Babb, Jr. Chairman, President and Chief Executive Officer |
EXHIBIT (31.2) - EXECUTIVE VICE PRESIDENT AND CFO RULE 13a-14(a)/15d-14(a)
CERTIFICATION OF PERIODIC REPORT (PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Elizabeth S. Acton, Executive Vice President and Chief Financial Officer of Comerica Incorporated (the "Registrant"), certify that:
1. I have reviewed this report on Form 10-Q of the Registrant for the quarterly period ended September 30, 2004;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
(b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.
Date: November 5, 2004 /s/ Elizabeth S. Acton ---------------------- Elizabeth S. Acton Executive Vice President and Chief Financial Officer |
EXHIBIT (32)-SECTION 1350 CERTIFICATION OF PERIODIC REPORT (PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Ralph W. Babb, Jr., Chairman, President and Chief Executive Officer, and Elizabeth S. Acton, Executive Vice President and Chief Financial Officer, of Comerica Incorporated (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1) The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2004 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 5, 2004 /s/ Ralph W. Babb, Jr. ---------------------- Ralph W. Babb, Jr. Chairman, President and Chief Executive Officer /s/ Elizabeth S. Acton ---------------------- Elizabeth S. Acton Executive Vice President and Chief Financial Officer |