COMERICA INC /NEW/ (Form: 10-Q, Received: 05/02/2011 16:30:18)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2011

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

For the transition period from to

Commission file number 1-10706

Comerica Incorporated

(Exact name of registrant as specified in its charter)

Delaware

38-1998421

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Comerica Bank Tower

1717 Main Street, MC 6404

Dallas, Texas 75201

(Address of principal executive offices)

(Zip Code)

(214) 462-6831

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No ¨

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

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

$5 par value common stock:

Outstanding as of April 26, 2011: 176,770,800 shares

COMERICA INCORPORATED AND SUBSIDIARIES

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION


ITEM 1. Financial Statements

Consolidated Balance Sheets at March 31, 2011 (unaudited), December 31, 2010 and March 31, 2010 (unaudited)			1

Consolidated Statements of Income for the Three Months Ended March 31, 2011 and 2010 (unaudited)			2

Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2011 and 2010 (unaudited)			3

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010 (unaudited)			4

Notes to Consolidated Financial Statements (unaudited)			5

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			40

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk			65

ITEM 4. Controls and Procedures			65

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings			65

ITEM 1A. Risk Factors			65

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			65

ITEM 6. Exhibits			66

Signature			68

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

Comerica Incorporated and Subsidiaries


(in millions, except share data)	March 31, 2011			December 31, 2010			March 31, 2010
	(unaudited)						(unaudited)
ASSETS
Cash and due from banks	$	875		$	668		$	769

Interest-bearing deposits with banks		3,570			1,415			3,860
Other short-term investments		154			141			165

Investment securities available-for-sale		7,406			7,560			7,346

Commercial loans		21,360			22,145			20,756
Real estate construction loans		2,023			2,253			3,202
Commercial mortgage loans		9,697			9,767			10,358
Residential mortgage loans		1,550			1,619			1,631
Consumer loans		2,262			2,311			2,472
Lease financing		958			1,009			1,120
International loans		1,326			1,132			1,306

Total loans		39,176			40,236			40,845
Less allowance for loan losses		(849	)		(901	)		(987	)

Net loans		38,327			39,335			39,858
Premises and equipment		637			630			637
Customers’ liability on acceptances outstanding		14			9			21
Accrued income and other assets		4,034			3,909			4,450

Total assets	$	55,017		$	53,667		$	57,106

LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits	$	16,357		$	15,538		$	15,290

Money market and NOW deposits		17,888			17,622			16,009
Savings deposits		1,457			1,397			1,462
Customer certificates of deposit		5,672			5,482			5,979
Other time deposits		—			—			814
Foreign office time deposits		499			432			412

Total interest-bearing deposits		25,516			24,933			24,676

Total deposits		41,873			40,471			39,966
Short-term borrowings		61			130			489
Acceptances outstanding		14			9			21
Accrued expenses and other liabilities		1,076			1,126			1,047
Medium- and long-term debt		6,116			6,138			9,915

Total liabilities		49,140			47,874			51,438
Common stock - $5 par value:
Authorized - 325,000,000 shares
Issued - 203,878,110 shares		1,019			1,019			1,019
Capital surplus		1,464			1,481			1,468
Accumulated other comprehensive loss		(382	)		(389	)		(303	)
Retained earnings		5,317			5,247			5,064
Less cost of common stock in treasury - 27,103,941 shares at 3/31/11, 27,342,518 shares at 12/31/10, and 27,575,283 shares at 3/31/10		(1,541	)		(1,565	)		(1,580	)

Total shareholders’ equity		5,877			5,793			5,668

Total liabilities and shareholders’ equity	$	55,017		$	53,667		$	57,106

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

Comerica Incorporated and Subsidiaries


	Three Months Ended March 31,
(in millions, except per share data)	2011			2010
INTEREST INCOME
Interest and fees on loans	$	375		$	412
Interest on investment securities		57			61
Interest on short-term investments		2			3

Total interest income		434			476
INTEREST EXPENSE
Interest on deposits		22			35
Interest on medium- and long-term debt		17			26

Total interest expense		39			61

Net interest income		395			415
Provision for loan losses		49			175

Net interest income after provision for loan losses		346			240
NONINTEREST INCOME
Service charges on deposit accounts		52			56
Fiduciary income		39			39
Commercial lending fees		21			22
Letter of credit fees		18			18
Card fees		15			13
Foreign exchange income		9			10
Bank-owned life insurance		8			8
Brokerage fees		6			6
Net securities gains		2			2
Other noninterest income		37			20

Total noninterest income		207			194
NONINTEREST EXPENSES
Salaries		188			169
Employee benefits		50			44

Total salaries and employee benefits		238			213
Net occupancy expense		40			41
Equipment expense		15			17
Outside processing fee expense		24			23
Software expense		23			22
FDIC insurance expense		15			17
Legal fees		9			8
Advertising expense		7			8
Other real estate expense		8			12
Litigation and operational losses		3			1
Provision for credit losses on lending-related commitments		(3	)		7
Other noninterest expenses		36			35

Total noninterest expenses		415			404

Income from continuing operations before income taxes		138			30
Provision (benefit) for income taxes		35			(5	)

Income from continuing operations		103			35
Income from discontinued operations, net of tax		—			17

NET INCOME		103			52
Less:
Preferred stock dividends		—			123
Income allocated to participating securities		1			—

Net income (loss) attributable to common shares	$	102		$	(71	)

Basic earnings per common share:
Income (loss) from continuing operations	$	0.58		$	(0.57	)
Net income (loss)		0.58			(0.46	)
Diluted earnings per common share:
Income (loss) from continuing operations		0.57			(0.57	)
Net income (loss)		0.57			(0.46	)
Cash dividends declared on common stock		18			9
Cash dividends declared per common share		0.10			0.05

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

Comerica Incorporated and Subsidiaries


	Preferred Stock			Common Stock					Capital Surplus			Accumulated Other Comprehensive Loss			Retained Earnings			Treasury Stock			Total Shareholders’ Equity
				Shares
(in millions, except per share data)				Outstanding			Amount
BALANCE AT DECEMBER 31, 2009	$	2,151			151.2		$	894	$	740		$	(336	)	$	5,161		$	(1,581	)	$	7,029
Net income		—			—			—		—			—			52			—			52
Other comprehensive income, net of tax		—			—			—		—			33			—			—			33

Total comprehensive income																						85
Cash dividends declared on preferred stock		—			—			—		—			—			(38	)		—			(38	)
Cash dividends declared on common stock ($0.05 per share)		—			—			—		—			—			(9	)		—			(9	)
Purchase of common stock		—			—			—		—			—			—			(2	)		(2	)
Issuance of common stock		—			25.1			125		724			—			—			—			849
Redemption of preferred stock		(2,250	)		—			—		—			—			—			—			(2,250	)
Redemption discount accretion on preferred stock		94			—			—		—			—			(94	)		—			—
Accretion of discount on preferred stock		5			—			—		—			—			(5	)		—			—
Net issuance of common stock under employee stock plans		—			—			—		—			—			(3	)		3			—
Share-based compensation		—			—			—		4			—			—			—			4

BALANCE AT MARCH 31, 2010	$	—			176.3		$	1,019	$	1,468		$	(303	)	$	5,064		$	(1,580	)	$	5,668

BALANCE AT DECEMBER 31, 2010	$	—			176.5		$	1,019	$	1,481		$	(389	)	$	5,247		$	(1,565	)	$	5,793
Net income		—			—			—		—			—			103			—			103
Other comprehensive income, net of tax		—			—			—		—			7			—			—			7

Total comprehensive income																						110
Cash dividends declared on common stock ($0.10 per share)		—			—			—		—			—			(18	)		—			(18	)
Purchase of common stock		—			(0.5	)		—		—			—			—			(21	)		(21	)
Net issuance of common stock under employee stock plans		—			0.8			—		(30	)		—			(15	)		45			—
Share-based compensation		—			—			—		13			—			—			—			13

BALANCE AT MARCH 31, 2011	$	—			176.8		$	1,019	$	1,464		$	(382	)	$	5,317		$	(1,541	)	$	5,877

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Comerica Incorporated and Subsidiaries


	Three Months Ended March 31,
(in millions)	2011			2010
OPERATING ACTIVITIES
Net income	$	103		$	52
Income from discontinued operations, net of tax		—			17

Income from continuing operations, net of tax		103			35
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		49			175
Provision for credit losses on lending-related commitments		(3	)		7
Provision (benefit) for deferred income taxes		13			(126	)
Depreciation and software amortization		29			32
Share-based compensation expense		13			4
Net amortization of securities		7			4
Net securities gains		(2	)		(2	)
Excess tax benefits from share-based compensation arrangements		(1	)		—
Net increase in trading securities		(13	)		(26	)
Net increase in loans held-for-sale		—			(1	)
Net (increase) decrease in accrued income receivable		(2	)		5
Net decrease in accrued expenses		(59	)		(16	)
Other, net		16			201
Discontinued operations, net		—			17

Net cash provided by operating activities		150			309
INVESTING ACTIVITIES
Proceeds from maturities and redemptions of investment securities available-for-sale		592			368
Proceeds from sales of investment securities available-for-sale		—			6
Purchases of investment securities available-for-sale		(448	)		(300	)
Proceeds from sales of indirect private equity and venture capital funds		31			—
Net decrease in loans		946			1,135
Net increase in fixed assets		(30	)		(17	)
Net increase in customers’ liability on acceptances outstanding		(5	)		(10	)
Sales of Federal Home Loan Bank stock		—			41

Net cash provided by investing activities		1,086			1,182
FINANCING ACTIVITIES
Net increase in deposits		1,226			56
Net (decrease) increase in short-term borrowings		(69	)		27
Net increase in acceptances outstanding		5			10
Repayments of medium- and long-term debt		—			(1,165	)
Proceeds from issuance of common stock		—			849
Redemption of preferred stock		—			(2,250	)
Proceeds from issuance of common stock under employee stock plans		2			1
Excess tax benefits from share-based compensation arrangements		1			—
Purchase of common stock for treasury		(21	)		(2	)
Dividends paid on common stock		(18	)		(8	)
Dividends paid on preferred stock		—			(38	)

Net cash provided by (used in) financing activities		1,126			(2,520	)

Net increase (decrease) in cash and cash equivalents		2,362			(1,029	)
Cash and cash equivalents at beginning of period		2,083			5,617

Cash and cash equivalents at end of period	$	4,445		$	4,588


Interest paid	$	34		$	63

Income taxes, tax deposits and tax-related interest paid	$	14		$	69

Noncash investing and financing activities:
Loans transferred to other real estate	$	13		$	9

See notes to consolidated financial statements.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation were included. The results of operations for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. Certain items in prior periods were reclassified to conform to the current presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report of Comerica Incorporated and Subsidiaries (the Corporation) on Form 10-K for the year ended December 31, 2010.

Pending Accounting Pronouncements

In April 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring,” (ASU 2011-02). The Corporation will adopt ASU 2011-02, which clarifies existing guidance used by creditors to determine when a modification represents a concession, in its consolidated financial statements in the third quarter 2011. The provisions of ASU 2011-02 require changes to how troubled debt restructurings are identified. While the provisions of ASU 2011-02 may increase the amount of the Corporation’s receivables that are considered troubled debt restructurings and will expand the Corporation’s disclosures on troubled debt restructurings the Corporation does not expect the adoption of ASU 2011-02 to have a material effect on the Corporation’s financial condition and results of operations.

NOTE 2 – PENDING ACQUISITION

On January 18, 2011, the Corporation announced a definitive agreement to acquire Sterling Bancshares, Inc. (“Sterling”), a bank holding company headquartered in Houston, Texas, in a stock-for-stock transaction. Sterling operates 57 banking centers located in Houston, San Antonio, Fort Worth and Dallas, Texas. At March 31, 2011, Sterling had $5.0 billion in assets, including $2.6 billion of loans and $1.6 billion of investment securities, and $4.4 billion of liabilities, including $4.1 billion of deposits. The merger requires the approval of various regulatory agencies and Sterling’s shareholders. Assuming all approvals are obtained, the merger is expected to be completed in the second quarter 2011. Under the terms of the merger agreement, Sterling common shareholders will receive 0.2365 shares of the Corporation’s common stock in exchange for each share of Sterling common stock. At March 31, 2011, Sterling had approximately 102 million shares of common stock outstanding. On the date of the announcement, the Corporation estimated that the transaction would result in approximately $745 million of goodwill at closing. The actual amount of goodwill will be determined on the date of closing.

NOTE 3 – FAIR VALUE MEASUREMENTS

The Corporation utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The determination of fair values of financial instruments often requires the use of estimates. In cases where quoted market values in an active market are not available, the Corporation uses present value techniques and other valuation methods to estimate the fair values of its financial instruments. These valuation methods require considerable judgment and the resulting estimates of fair value can be significantly affected by the assumptions made and methods used.

Fair value is an estimate of the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (i.e., not a forced transaction, such as a liquidation or distressed sale) between market participants at the measurement date. However, the calculated fair value estimates in many instances cannot be substantiated by comparison to independent markets and, in many cases, may not be realizable in a current sale of the financial instrument.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 3 – FAIR VALUE MEASUREMENTS (continued)

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

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


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

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

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

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

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

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

Trading securities and associated deferred compensation plan liabilities

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

Loans held-for-sale

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

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 3 – FAIR VALUE MEASUREMENTS (continued)

Investment securities available-for-sale

Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available or the market is deemed to be inactive at the measurement date, an adjustment to the quoted prices may be necessary. In some circumstances, the Corporation may conclude that a change in valuation technique or the use of multiple valuation techniques may be appropriate to estimate an instrument’s fair value. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include residential mortgage-backed securities issued by U.S. government-sponsored enterprises, corporate debt securities and state and municipal securities. The fair value of Level 2 securities was determined using quoted prices of securities with similar characteristics or pricing models based on observable market data inputs, primarily interest rates, spreads and prepayment information. Securities classified as Level 3, of which the substantial majority are auction-rate securities (ARS), represent securities in less liquid markets requiring significant management assumptions when determining fair value. Due to the lack of a robust secondary auction-rate securities market with active fair value indicators, fair value at March 31, 2011, December 31, 2010 and March 31, 2010 was determined using an income approach based on a discounted cash flow model utilizing two significant assumptions: discount rate (including a liquidity risk premium) and workout period. The discount rate was calculated using credit spreads of the underlying collateral or similar securities plus a liquidity risk premium. The liquidity risk premium was based on observed industry auction-rate securities valuations by third parties and incorporated the rate at which the various types of similar ARS had been redeemed or sold since acquisition in 2008. The workout period was based on an assessment of publicly available information on efforts to re-establish functioning markets for these securities and the Corporation’s redemption experience. As of March 31, 2011, approximately 55 percent of the aggregate ARS par value had been redeemed or sold since acquisition at or above carrying value.

Loans

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

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

Customers’ liability on acceptances outstanding and acceptances outstanding

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

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 3 – FAIR VALUE MEASUREMENTS (continued)

Derivative assets and derivative liabilities

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

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

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

Nonmarketable equity securities

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

The Corporation also holds restricted equity investments, primarily Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock. Restricted equity securities are not readily marketable and are recorded at cost (par value) and evaluated for impairment based on the ultimate recoverability of the par value. No significant observable market data for these instruments is available. The Corporation considers the profitability and asset quality of the issuer, dividend payment history and recent redemption

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 3 – FAIR VALUE MEASUREMENTS (continued)

experience, when determining the ultimate recoverability of the par value. The Corporation’s investment in FHLB stock totaled $128 million at both March 31, 2011 and December 31, 2010, and its investment in FRB stock totaled $59 million at both March 31, 2011 and December 31, 2010. The Corporation believes its investments in FHLB and FRB stock are ultimately recoverable at par.

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

Other real estate

Other real estate is included in “accrued income and other assets” on the consolidated balance sheets and includes primarily foreclosed property. Foreclosed property is initially recorded at fair value, less costs to sell, at the date of foreclosure, establishing a new cost basis. Subsequently, foreclosed property is carried at the lower of cost or fair value, less costs to sell. Other real estate may be carried at fair value on a nonrecurring basis when fair value is less than cost. Fair value is based upon independent market prices, appraised value or management’s estimate of the value. Foreclosed property carried at fair value based on an observable market price or a current appraised value is classified by the Corporation as nonrecurring Level 2. When management determines that the fair value of the foreclosed property requires additional adjustments, either as a result of a non-current appraisal or when there is no observable market price, the Corporation classifies the foreclosed property as nonrecurring Level 3.

Loan servicing rights

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

Deposit liabilities

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

Short-term borrowings

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

Medium- and long-term debt

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

Credit-related financial instruments

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

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 3 – FAIR VALUE MEASUREMENTS (continued)

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following tables present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of March 31, 2011 and December 31, 2010.


(in millions)	Total		Level 1		Level 2		Level 3
March 31, 2011
Trading securities:
Deferred compensation plan assets	$	90	$	90	$	—	$	—
Residential mortgage-backed securities (a)		4		—		4		—
State and municipal securities		34		—		34		—
Corporate debt securities		2		—		2		—
Other securities		1		1		—		—

Total trading securities		131		91		40		—
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities		130		130		—		—
Residential mortgage-backed securities (a)		6,622		—		6,622		—
State and municipal securities (b)		26		—		—		26
Corporate debt securities:
Auction-rate debt securities		1		—		—		1
Other corporate debt securities		49		—		48		1
Equity and other non-debt securities:
Auction-rate preferred securities		504		—		—		504
Money market and other mutual funds		74		74		—		—

Total investment securities available-for-sale		7,406		204		6,670		532
Derivative assets (c):
Interest rate contracts		476		—		476		—
Energy derivative contracts		159		—		159		—
Foreign exchange contracts		51		—		51		—
Warrants		8		—		—		8

Total derivative assets		694		—		686		8

Total assets at fair value	$	8,231	$	295	$	7,396	$	540

Derivative liabilities (d):
Interest rate contracts	$	212	$	—	$	212	$	—
Energy derivative contracts		159		—		159		—
Foreign exchange contracts		44		—		44		—
Other		2		—		—		2

Total derivative liabilities		417		—		415		2
Deferred compensation plan liabilities (d)		90		90		—		—

Total liabilities at fair value	$	507	$	90	$	415	$	2

(a)

Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

(b)

Primarily auction-rate securities.

(c)

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

(d)

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

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 3 – FAIR VALUE MEASUREMENTS (continued)


(in millions)	Total		Level 1		Level 2		Level 3
December 31, 2010
Trading securities:
Deferred compensation plan assets	$	86	$	86	$	—	$	—
Residential mortgage-backed securities (a)		7		—		7		—
Other government-sponsored enterprise securities		1		—		1		—
State and municipal securities		19		—		19		—
Corporate debt securities		4		—		4		—
Other securities		1		—		—		1

Total trading securities		118		86		31		1
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities		131		131		—		—
Residential mortgage-backed securities (a)		6,709		—		6,709		—
State and municipal securities (b)		39		—		—		39
Corporate debt securities:
Auction-rate debt securities		1		—		—		1
Other corporate debt securities		26		—		25		1
Equity and other non-debt securities:
Auction-rate preferred securities		570		—		—		570
Money market and other mutual funds		84		84		—		—

Total investment securities available-for-sale		7,560		215		6,734		611
Derivative assets (c):
Interest rate contracts		542		—		542		—
Energy derivative contracts		103		—		103		—
Foreign exchange contracts		51		—		51		—
Warrants		7		—		—		7

Total derivative assets		703		—		696		7

Total assets at fair value	$	8,381	$	301	$	7,461	$	619

Derivative liabilities (d):
Interest rate contracts	$	249	$	—	$	249	$	—
Energy derivative contracts		103		—		103		—
Foreign exchange contracts		48		—		48		—
Other		1		—		—		1

Total derivative liabilities		401		—		400		1
Deferred compensation plan liabilities (d)		86		86		—		—

Total liabilities at fair value	$	487	$	86	$	400	$	1

(a)

Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

(b)

Primarily auction-rate securities.

(c)

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

(d)

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

There were no significant transfers of assets or liabilities recorded at fair value on a recurring basis into or out of Level 1 and Level 2 fair value measurements during the three-month periods ended March 31, 2011 and 2010.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 3 – FAIR VALUE MEASUREMENTS (continued)

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three-month periods ended March 31, 2011 and 2010.


			Net Realized/Unrealized Gains (Losses)
	Balance at Beginning of Period		Recorded in Earnings					Recorded in Other Comprehensive Income (Pre-tax)
(in millions)	Balance at Beginning of Period		Realized		Unrealized			Recorded in Other Comprehensive Income (Pre-tax)			Sales			Settlements			Balance at End of Period
Three months ended March 31, 2011
Trading securities:
Other securities	$	1	$	—	$	—		$	—		$	(1	)	$	—		$	—

Total trading securities		1		—		—			—			(1	)		—			—
Investment securities available-for-sale:
State and municipal securities (a)		39		—		—			—			(13	)		—			26
Auction-rate debt securities		1		—		—			—			—			—			1
Other corporate debt securities		1		—		—			—			—			—			1
Auction-rate preferred securities		570		3		—			(11	)		(58	)		—			504

Total investment securities available-for-sale		611		3		—			(11	)		(71	)		—			532
Derivative assets:
Warrants		7		2		1			—			(2	)		—			8
Derivative liabilities:
Other		1		—		(1	)		—			—			—			2

Three months ended March 31, 2010
Investment securities available-for-sale:
State and municipal securities (a)	$	46	$	—	$	—		$	(1	)	$	—		$	—		$	45
Auction-rate debt securities		150		—		—			(5	)		(1	)		—			144
Other corporate debt securities		7		27		—			—			—			(33	)		1
Auction-rate preferred securities		706		2		—			1			(46	)		—			663

Total investment securities available-for-sale		909		29		—			(5	)		(47	)		(33	)		853
Derivative assets:
Warrants		7		2		—			—			(2	)		—			7

(a)	Primarily auction-rate securities

There were no transfers of assets or liabilities recorded at fair value on a recurring basis into or out of Level 3 fair value measurements during the three-month periods ended March 31, 2011 and 2010.

The following table presents the income statement classification of realized and unrealized gains and losses due to changes in fair value recorded in earnings for the three-month periods ended March 31, 2011 and 2010 for recurring Level 3 assets and liabilities, as shown in the previous table.


	Net Securities Gains (Losses)					Other Noninterest Income				Discontinued Operations		Total
(in millions)	Realized		Unrealized			Realized		Unrealized		Realized		Realized		Unrealized
Three months ended March 31, 2011
Investment securities available-for-sale:
Auction-rate preferred securities	$	3	$	—		$	—	$	—	$	—	$	3	$	—

Total investment securities available-for-sale		3		—			—		—		—		3		—
Derivative assets:
Warrants		—		—			2		1		—		2		1
Derivative liabilities:
Other		—		(1	)		—		—		—		—		(1	)

Three months ended March 31, 2010
Investment securities available-for-sale:
Other corporate debt securities	$	—	$	—		$	—	$	—	$	27	$	27	$	—
Auction-rate preferred securities		2		—			—		—		—		2		—

Total investment securities available-for-sale		2		—			—		—		27		29		—
Derivative assets:
Warrants		—		—			2		—		—		2		—

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 3 – FAIR VALUE MEASUREMENTS (continued)

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Corporation may be required, from time to time, to record certain assets and liabilities at fair value on a nonrecurring basis. These include assets that are recorded at the lower of cost or fair value that were recognized at fair value below cost at the end of the period. Assets and liabilities recorded at fair value on a nonrecurring basis are presented in the following table.


(in millions)	Total		Level 2		Level 3
March 31, 2011
Loans held-for-sale:
Residential mortgage	$	4	$	4	$	—
Loans:
Commercial		182		—		182
Real estate construction		181		—		181
Commercial mortgage		403		—		403
Lease financing		7		—		7
International		4		—		4

Total loans		777		—		777
Nonmarketable equity securities		5		—		5
Other real estate		15		—		15
Loan servicing rights		4		—		4

Total assets at fair value	$	805	$	4	$	801

Total liabilities at fair value	$	—	$	—	$	—

December 31, 2010
Loans held-for-sale:
Residential mortgage	$	6	$	6	$	—
Loans:
Commercial		200		—		200
Real estate construction		247		—		247
Commercial mortgage		398		—		398
Lease financing		7		—		7
International		2		—		2

Total loans		854		—		854
Nonmarketable equity securities		9		—		9
Other real estate		33		—		33
Loan servicing rights		5		—		5

Total assets at fair value	$	907	$	6	$	901

Total liabilities at fair value	$	—	$	—	$	—

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 3 – FAIR VALUE MEASUREMENTS (continued)

Estimated Fair Values of Financial Instruments Not Recorded at Fair Value in their Entirety on a Recurring Basis

The Corporation typically holds the majority of its financial instruments until maturity and thus does not expect to realize many of the estimated fair value amounts disclosed. The disclosures also do not include estimated fair value amounts for items that are not defined as financial instruments, but which have significant value. These include such items as core deposit intangibles, the future earnings potential of significant customer relationships and the value of trust operations and other fee generating businesses. The Corporation believes the imprecision of an estimate could be significant.

The carrying amount and estimated fair value of financial instruments not recorded at fair value in their entirety on a recurring basis on the Corporation’s consolidated balance sheets are as follows:


	March 31, 2011						December 31, 2010
(in millions)	Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value
Assets
Cash and due from banks	$	875		$	875		$	668		$	668
Interest-bearing deposits with banks		3,570			3,570			1,415			1,415
Loans held-for-sale		23			23			23			23
Total loans, net of allowance for loan losses (a)		38,327			38,369			39,335			39,212
Customers’ liability on acceptances outstanding		14			14			9			9
Nonmarketable equity securities (b)		18			29			47			77
Loan servicing rights (c)		4			4			5			5
Liabilities
Demand deposits (noninterest-bearing)		16,357			16,357			15,538			15,538
Interest-bearing deposits		25,516			25,521			24,933			24,945

Total deposits		41,873			41,878			40,471			40,483
Short-term borrowings		61			61			130			130
Acceptances outstanding		14			14			9			9
Medium- and long-term debt		6,116			6,009			6,138			6,008
Credit-related financial instruments		(96	)		(96	)		(99	)		(99	)

(a)

Included $777 million and $854 million of impaired loans recorded at fair value on a nonrecurring basis at March 31, 2011 and December 31, 2010, respectively.

(b)

Included $5 million and $9 million of nonmarketable equity securities recorded at fair value on a nonrecurring basis at March 31, 2011 and December 31, 2010, respectively.

(c)

Included $4 million and $5 million of loan servicing rights recorded at fair value on a nonrecurring basis at March 31, 2011 and December 31, 2010, respectively.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 4 – INVESTMENT SECURITIES

A summary of the Corporation’s investment securities available-for-sale follows:


(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2011
U.S. Treasury and other U.S. government agency securities	$	130	$	—	$	—	$	130
Residential mortgage-backed securities (a)		6,561		100		39		6,622
State and municipal securities (b)		32		—		6		26
Corporate debt securities:
Auction-rate debt securities		1		—		—		1
Other corporate debt securities		49		—		—		49
Equity and other non-debt securities:
Auction-rate preferred securities		542		2		40		504
Money market and other mutual funds		74		—		—		74

Total investment securities available-for-sale	$	7,389	$	102	$	85	$	7,406

December 31, 2010
U.S. Treasury and other U.S. government agency securities	$	131	$	—	$	—	$	131
Residential mortgage-backed securities (a)		6,653		95		39		6,709
State and municipal securities (b)		46		—		7		39
Corporate debt securities:
Auction-rate debt securities		1		—		—		1
Other corporate debt securities		26		—		—		26
Equity and other non-debt securities:
Auction-rate preferred securities		597		3		30		570
Money market and other mutual funds		84		—		—		84

Total investment securities available-for-sale	$	7,538	$	98	$	76	$	7,560

(a)

Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

(b)

Primarily auction-rate securities.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 4 – INVESTMENT SECURITIES (continued)

A summary of the Corporation’s investment securities available-for-sale in an unrealized loss position as of March 31, 2011 and December 31, 2010 follows:


	Impaired
	Less than 12 months				12 months or more				Total
(in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2011
Residential mortgage-backed securities (a)	$	1,763	$	39	$	—	$	—	$	1,763	$	39
State and municipal securities (b)		—		—		25		6		25		6
Equity and other non-debt securities:
Auction-rate preferred securities		—		—		406		40		406		40

Total impaired securities	$	1,763	$	39	$	431	$	46	$	2,194	$	85

December 31, 2010
Residential mortgage-backed securities (a)	$	1,702	$	39	$	—	$	—	$	1,702	$	39
State and municipal securities (b)		—		—		38		7		38		7
Equity and other non-debt securities:
Auction-rate preferred securities		—		—		436		30		436		30

Total impaired securities	$	1,702	$	39	$	474	$	37	$	2,176	$	76

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

(b)	Primarily auction-rate securities.

As of March 31, 2011, 95 percent of the Corporation’s auction-rate portfolio was rated Aaa/AAA by the credit rating agencies.

At March 31, 2011, the Corporation had 254 securities in an unrealized loss position with no credit impairment, including 191 auction-rate preferred securities, 37 residential mortgage-backed securities and 26 state and municipal auction-rate securities. The unrealized losses for these securities resulted from changes in market interest rates and liquidity. The Corporation ultimately expects full collection of the carrying amount of these securities, does not intend to sell the securities in an unrealized loss position, and it is not more-likely-than-not that the Corporation will be required to sell the securities in an unrealized loss position prior to recovery of amortized cost. The Corporation does not consider these securities to be other-than-temporarily impaired at March 31, 2011.

Sales, calls and write-downs of investment securities available-for-sale resulted in the following gains and losses, recorded in “net securities gains” on the consolidated statements of income, computed based on the adjusted cost of the specific security.


	Three Months Ended March 31,
(in millions)	2011			2010
Securities gains	$	3		$	3
Securities losses		(1	)		(1	)

Total net securities gains	$	2		$	2

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 4 – INVESTMENT SECURITIES (continued)

The table below summarizes the amortized cost and fair values of debt securities by contractual maturity. Securities with multiple maturity dates are classified in the period of final maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


(in millions) March 31, 2011	Amortized Cost		Fair Value
Contractual maturity
Within one year	$	179	$	179
After one year through five years		213		222
After five years through ten years		82		82
After ten years		6,299		6,345

Subtotal		6,773		6,828
Equity and other nondebt securities:
Auction-rate preferred securities		542		504
Money market and other mutual funds		74		74

Total investment securities available-for-sale	$	7,389	$	7,406

Included in the contractual maturity distribution in the table above were auction-rate securities with a total amortized cost and fair value of $32 million and $25 million, respectively. Auction-rate securities are long-term, floating rate instruments for which interest rates are reset at periodic auctions. At each successful auction, the Corporation has the option to sell the security at par value. Additionally, the issuers of auction-rate securities generally have the right to redeem or refinance the debt. As a result, the expected life of auction-rate securities may differ significantly from the contractual life. Also included in the table above were residential mortgage-backed securities with a total amortized cost and fair value of $6,561 million and $6,622 million, respectively. The actual cash flows of mortgage-backed securities may differ from contractual maturity as the borrowers of the underlying loans may exercise prepayment options.

At March 31, 2011, investment securities with a carrying value of $2.3 billion were pledged where permitted or required by law to secure $1.6 billion of liabilities, primarily public and other deposits of state and local government agencies and derivative instruments.

NOTE 5 – CREDIT QUALITY AND ALLOWANCE FOR CREDIT LOSSES

The following table summarizes nonperforming assets as of March 31, 2011 and December 31, 2010.


(in millions)	March 31, 2011		December 31, 2010
Nonaccrual loans	$	996	$	1,080
Reduced-rate loans (a)		34		43

Total nonperforming loans		1,030		1,123
Foreclosed property		74		112

Total nonperforming assets	$	1,104	$	1,235

(a)	Reduced-rate business loans totaled $16 million and $26 million, respectively, and reduced-rate retail loans totaled $18 million and $17 million, respectively, at March 31, 2011 and December 31, 2010.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 5 – CREDIT QUALITY AND ALLOWANCE FOR CREDIT LOSSES (continued)

The following presents an aging analysis of loans as of March 31, 2011 and December 31, 2010.


	Loans Past Due and Still Accruing
(in millions)	30-59 Days		60-89 Days		90 Days or More		Total		Nonaccrual Loans		Current Loans		Total Loans
March 31, 2011
Business loans:
Commercial	$	51	$	21	$	15	$	87	$	226	$	21,047	$	21,360
Real estate construction:
Commercial Real Estate business line (a)		69		27		10		106		195		1,305		1,606
Other business lines (b)		5		—		2		7		3		407		417

Total real estate construction		74		27		12		113		198		1,712		2,023
Commercial mortgage:
Commercial Real Estate business line (a)		29		25		6		60		197		1,661		1,918
Other business lines (b)		56		27		8		91		293		7,395		7,779

Total commercial mortgage		85		52		14		151		490		9,056		9,697
Lease financing		—		—		—		—		7		951		958
International		3		—		—		3		4		1,319		1,326

Total business loans		213		100		41		354		925		34,085		35,364
Retail loans:
Residential mortgage		24		15		17		56		58		1,436		1,550
Consumer:
Home equity		12		4		9		25		6		1,630		1,661
Other consumer		4		1		5		10		7		584		601

Total consumer		16		5		14		35		13		2,214		2,262

Total retail loans		40		20		31		91		71		3,650		3,812

Total loans	$	253	$	120	$	72	$	445	$	996	$	37,735	$	39,176

December 31, 2010
Business loans:
Commercial	$	84	$	28	$	3	$	115	$	252	$	21,778	$	22,145
Real estate construction:
Commercial Real Estate business line (a)		27		—		17		44		259		1,523		1,826
Other business lines (b)		2		—		5		7		4		416		427

Total real estate construction		29		—		22		51		263		1,939		2,253
Commercial mortgage:
Commercial Real Estate business line (a)		8		1		—		9		181		1,747		1,937
Other business lines (b)		28		25		16		69		302		7,459		7,830

Total commercial mortgage		36		26		16		78		483		9,206		9,767
Lease financing		—		—		—		—		7		1,002		1,009
International		1		—		—		1		2		1,129		1,132

Total business loans		150		54		41		245		1,007		35,054		36,306
Retail loans:
Residential mortgage		33		23		7		63		55		1,501		1,619
Consumer:
Home equity		11		4		10		25		5		1,674		1,704
Other consumer		4		2		4		10		13		584		607

Total consumer		15		6		14		35		18		2,258		2,311

Total retail loans		48		29		21		98		73		3,759		3,930

Total loans	$	198	$	83	$	62	$	343	$	1,080	$	38,813	$	40,236

(a)	Primarily loans to real estate investors and developers.

(b)	Primarily loans secured by owner-occupied real estate.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 5 – CREDIT QUALITY AND ALLOWANCE FOR CREDIT LOSSES (continued)

The following table details the changes in the allowance for loan losses and related loan amounts.


	Three Months Ended March 31, 2011
(in millions)	Business Loans			Retail Loans			Total			Three Months Ended March 31, 2010
Allowance for loan losses:
Balance at January 1	$	839		$	62		$	901		$	985
Loan charge-offs		(113	)		(10	)		(123	)		(184	)
Recoveries on loans previously charged-off		21			1			22			11

Net loan charge-offs		(92	)		(9	)		(101	)		(173	)
Provision for loan losses		39			10			49			175

Balance at March 31	$	786		$	63		$	849		$	987

Allowance for loan losses:
Individually evaluated for impairment	$	168		$	5		$	173		$	192
Collectively evaluated for impairment		618			58			676			795

Total allowance for loan losses	$	786		$	63		$	849		$	987

As a percentage of total loans		2.22	%		1.65	%		2.17	%		2.42	%

Loans:
Individually evaluated for impairment	$	854		$	46		$	900		$	978
Collectively evaluated for impairment		34,510			3,766			38,276			39,867

Total loans evaluated for impairment	$	35,364		$	3,812		$	39,176		$	40,845

Changes in the allowance for credit losses on lending-related commitments, included in “accrued expenses and other liabilities” on the consolidated balance sheets, are summarized in the following table.


	Three Months Ended March 31,
(in millions)	2011			2010
Balance at beginning of period	$	35		$	37
Provision for credit losses on lending-related commitments		(3	)		7

Balance at end of period	$	32		$	44

Unfunded lending-related commitments sold	$	2		$	—

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 5 – CREDIT QUALITY AND ALLOWANCE FOR CREDIT LOSSES (continued)

The following table presents additional information regarding individually evaluated impaired loans.


	Recorded Investment In:
(in millions)	Impaired Loans with No Related Allowance		Impaired Loans with Related Allowance		Total Impaired Loans		Unpaid Principal Balance		Related Allowance for Loan Losses
March 31, 2011
Business loans:
Commercial	$	3	$	214	$	217	$	368	$	47
Real estate construction:
Commercial Real Estate business line (a)		6		183		189		313		38
Other business lines (b)		—		—		—		—		—

Total real estate construction		6		183		189		313		38
Commercial mortgage:
Commercial Real Estate business line (a)		—		201		201		268		40
Other business lines (b)		—		236		236		304		40

Total commercial mortgage		—		437		437		572		80
Lease financing		—		7		7		16		1
International		—		4		4		10		2

Total business loans		9		845		854		1,279		168
Retail loans:
Residential mortgage		2		38		40		45		3
Consumer loans:
Other consumer		—		6		6		11		2

Total consumer		—		6		6		11		2

Total retail loans		2		44		46		56		5

Total individually evaluated impaired loans	$	11	$	889	$	900	$	1,335	$	173

December 31, 2010
Business loans:
Commercial	$	9	$	237	$	246	$	398	$	55
Real estate construction:
Commercial Real Estate business line (a)		—		249		249		400		51
Other business lines (b)		—		—		—		—		—

Total real estate construction		—		249		249		400		51
Commercial mortgage:
Commercial Real Estate business line (a)		—		178		178		282		35
Other business lines (b)		—		245		245		325		49

Total commercial mortgage		—		423		423		607		84
Lease financing		—		7		7		15		1
International		—		2		2		2		1

Total business loans		9		918		927		1,422		192
Retail loans:
Residential mortgage		8		29		37		41		3
Consumer loans:
Other consumer		—		10		10		14		2

Total consumer		—		10		10		14		2

Total retail loans		8		39		47		55		5

Total individually evaluated impaired loans	$	17	$	957	$	974	$	1,477	$	197

(a)	Primarily loans to real estate investors and developers.

(b)	Primarily loans secured by owner-occupied real estate.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 5 – CREDIT QUALITY AND ALLOWANCE FOR CREDIT LOSSES (continued)

The following table presents information regarding average individually evaluated impaired loans and the related interest recognized for the three months ended March 31, 2011 and 2010.


	2011				2010
(in millions)	Average Impaired Loans for the Period		Interest Income Recognized for the Period		Average Impaired Loans for the Period		Interest Income Recognized for the Period
Three Months Ended March 31
Business loans:
Commercial	$	231	$	1	$	201	$	—
Real estate construction:
Commercial Real Estate business line (a)		219		—		399		—
Other business lines (b)		—		—		2		—

Total real estate construction		219		—		401		—
Commercial mortgage:
Commercial Real Estate business line (a)		189		—		148		—
Other business lines (b)		241		1		172		—

Total commercial mortgage		430		1		320		—
Lease financing		7		—		13		—
International		3		—		18		1

Total business loans		890		2		953		1
Retail loans:
Residential mortgage		39		—		28		—
Consumer loans:
Other consumer		8		—		1		—

Total consumer		8		—		1		—

Total retail loans		47		—		29		—

Total individually evaluated impaired loans	$	937	$	2	$	982	$	1

(a)	Primarily loans to real estate investors and developers.

(b)	Primarily loans secured by owner-occupied real estate.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 5 – CREDIT QUALITY AND ALLOWANCE FOR CREDIT LOSSES (continued)

The following table presents loans by credit quality indicator, based on internal risk ratings assigned to each business loan at the time of approval and subjected to subsequent periodic reviews by the Corporation’s senior management, and to pools of retail loans with similar risk characteristics.


	Internally Assigned Rating
(in millions)	Pass (a)		Special Mention (b)		Substandard (c)		Nonaccrual (d)		Total
March 31, 2011
Business loans:
Commercial	$	19,267	$	926	$	941	$	226	$	21,360
Real estate construction:
Commercial Real Estate business line (e)		975		256		180		195		1,606
Other business lines (f)		374		21		19		3		417

Total real estate construction		1,349		277		199		198		2,023
Commercial mortgage:
Commercial Real Estate business line (e)		1,068		396		257		197		1,918
Other business lines (f)		6,552		467		467		293		7,779

Total commercial mortgage		7,620		863		724		490		9,697
Lease financing		916		12		23		7		958
International		1,231		46		45		4		1,326

Total business loans		30,383		2,124		1,932		925		35,364
Retail loans:
Residential mortgage		1,447		16		29		58		1,550
Consumer:
Home equity		1,607		28		20		6		1,661
Other consumer		573		8		13		7		601

Total consumer		2,180		36		33		13		2,262

Total retail loans		3,627		52		62		71		3,812

Total loans	$	34,010	$	2,176	$	1,994	$	996	$	39,176


December 31, 2010
Business loans:
Commercial	$	19,884	$	1,015	$	994	$	252	$	22,145
Real estate construction:
Commercial Real Estate business line (e)		1,025		333		209		259		1,826
Other business lines (f)		383		20		20		4		427

Total real estate construction		1,408		353		229		263		2,253
Commercial mortgage:
Commercial Real Estate business line (e)		1,104		372		280		181		1,937
Other business lines (f)		6,595		508		425		302		7,830

Total commercial mortgage		7,699		880		705		483		9,767
Lease financing		962		13		27		7		1,009
International		963		112		55		2		1,132

Total business loans		30,916		2,373		2,010		1,007		36,306
Retail loans:
Residential mortgage		1,541		6		17		55		1,619
Consumer:
Home equity		1,662		26		11		5		1,704
Other consumer		575		8		11		13		607

Total consumer		2,237		34		22		18		2,311

Total retail loans		3,778		40		39		73		3,930

Total loans	$	34,694	$	2,413	$	2,049	$	1,080	$	40,236

(a)	Includes all loans not included in the categories of special mention, substandard or nonaccrual.

(b)

Special mention loans have potential credit weaknesses that deserve management’s close attention. Included in the special mention category were $482 million and $546 million at March 31, 2011 and December 31, 2010, respectively, of loans proactively monitored by management that were considered “pass” by regulatory authorities.

(c)	Substandard loans are accruing loans that have a well-defined weakness, or weaknesses, that jeopardizes the orderly repayment of the loan. This category is generally consistent with the Substandard category as defined by regulatory authorities.

(d)

Nonaccrual loans are loans for which full collection of principal or interest is unlikely, or for which principal and/or interest payments are 90 days or more past due, unless the loan is fully collateralized and in the process of collection. This category is generally consistent with the Doubtful category as defined by regulatory authorities.

(e)	Primarily loans to real estate investors and developers.

(f)	Primarily loans secured by owner-occupied real estate.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 6 – DERIVATIVE AND CREDIT-RELATED FINANCIAL INSTRUMENTS

In the normal course of business, the Corporation enters into various transactions involving derivative and credit-related financial instruments to manage exposure to fluctuations in interest rate, foreign currency and other market risks and to meet the financing needs of customers. These financial instruments involve, to varying degrees, elements of market and credit risk. Derivatives are carried at fair value in the consolidated financial statements. Market and credit risk are included in the determination of fair value.

Market risk is the potential loss that may result from movements in interest rates, foreign currency exchange rates or energy commodity prices that cause an unfavorable change in the value of a financial instrument. The Corporation manages this risk by establishing monetary exposure limits and monitoring compliance with those limits. Market risk inherent in interest rate and energy contracts entered into on behalf of customers is mitigated by taking offsetting positions, except in those circumstances when the amount, tenor and/or contract rate level results in negligible economic risk, whereby the cost of purchasing an offsetting contract is not economically justifiable. The Corporation mitigates most of the inherent market risk in foreign exchange contracts entered into on behalf of customers by taking offsetting positions and manages the remainder through individual foreign currency position limits and aggregate value-at-risk limits. These limits are established annually and reviewed quarterly. Market risk inherent in derivative instruments held or issued for risk management purposes is typically offset by changes in the fair value of the assets or liabilities being hedged.

Credit risk is the possible loss that may occur in the event of nonperformance by the counterparty to a financial instrument. For customer-initiated derivatives, the Corporation attempts to minimize credit risk arising from financial instruments by evaluating the creditworthiness of each counterparty, adhering to the same credit approval process used for traditional lending activities and obtaining collateral as deemed necessary.

For derivatives with dealer counterparties, the Corporation utilizes both counterparty risk limits and monitoring procedures as well as master netting arrangements and bilateral collateral agreements to facilitate the management of credit risk. Master netting arrangements effectively reduce credit risk by permitting settlement, on a net basis, of contracts entered into with the same counterparty. Bilateral collateral agreements require daily exchange of cash or highly rated securities issued by the U.S. Treasury or other U.S. government agencies to collateralize amounts due to either party beyond certain risk limits. At March 31, 2011, counterparties had pledged marketable investment securities to secure approximately 75 percent of the fair value of contracts with bilateral collateral agreements in an unrealized gain position. For those counterparties not covered under bilateral collateral agreements, collateral is obtained, if deemed necessary, based on the results of management’s credit evaluation of the counterparty. Collateral varies, but may include cash, investment securities, accounts receivable, equipment or real estate. Included in the fair value of derivative instruments are credit valuation adjustments reflecting counterparty credit risk. These adjustments are determined by applying a credit spread for the counterparty or the Corporation, as appropriate, to the total expected exposure of the derivative.

The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on March 31, 2011 was $137 million, for which the Corporation had pledged collateral of $117 million in the normal course of business. The credit-risk-related contingent features require the Corporation’s debt to maintain an investment grade credit rating from each of the major credit rating agencies. If the Corporation’s debt were to fall below investment grade, the counterparties to the derivative instruments could require additional overnight collateral on derivative instruments in net liability positions. If the credit-risk-related contingent features underlying these agreements had been triggered on March 31, 2011, the Corporation would have been required to assign an additional $20 million of collateral to its counterparties.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 6 – DERIVATIVE AND CREDIT-RELATED FINANCIAL INSTRUMENTS (continued)

Derivative Instruments

The following table presents the composition of the Corporation’s derivative instruments held or issued for risk management purposes or in connection with customer-initiated and other activities at March 31, 2011 and December 31, 2010. The table excludes commitments, warrants accounted for as derivatives and a derivative related to the Corporation’s 2008 sale of its remaining ownership of Visa shares.


	March 31, 2011						December 31, 2010
	Notional/ Contract Amount (b)		Fair Value (a)				Notional/ Contract Amount (b)		Fair Value (a)
(in millions)	Notional/ Contract Amount (b)		Asset Derivatives		Liability Derivatives		Notional/ Contract Amount (b)		Asset Derivatives		Liability Derivatives
Risk management purposes
Derivatives designated as hedging instruments
Interest rate contracts:
Swaps - cash flow - receive fixed/pay floating	$	—	$	—	$	—	$	800	$	3	$	—
Swaps - fair value - receive fixed/pay floating		1,450		233		—		1,600		263		—

Total risk management interest rate swaps designated as hedging instruments		1,450		233		—		2,400		266		—

Derivatives used as economic hedges
Foreign exchange contracts:
Spot, forwards and swaps		287		2		—		220		2		—

Total risk management purposes	$	1,737	$	235	$	—	$	2,620	$	268	$	—

Customer-initiated and other activities
Interest rate contracts:
Caps and floors written	$	657	$	—	$	6	$	697	$	—	$	7
Caps and floors purchased		657		6		—		697		7		—
Swaps		8,842		237		206		9,126		269		242

Total interest rate contracts		10,156		243		212		10,520		276		249

Energy derivative contracts:
Caps and floors written		1,306		—		106		1,106		—		62
Caps and floors purchased		1,306		106		—		1,106		62		—
Swaps		398		53		53		411		41		41

Total energy derivative contracts		3,010		159		159		2,623		103		103

Foreign exchange contracts:
Spot, forwards, futures, options and swaps		2,675		49		44		2,497		49		48

Total customer-initiated and other activities	$	15,841	$	451	$	415	$	15,640	$	428	$	400

Total derivatives	$	17,578	$	686	$	415	$	18,260	$	696	$	400

(a)

Asset derivatives are included in “accrued income and other assets” and liability derivatives are included in “accrued expenses and other liabilities” on the consolidated balance sheets. Included in the fair value of derivative assets and liabilities are credit valuation adjustments reflecting counterparty credit risk and credit risk of the Corporation. The fair value of derivative assets included credit valuation adjustments for counterparty credit risk totaling $3 million and $5 million at March 31, 2011 and December 31, 2010, respectively.

(b)

Notional or contract amounts, which represent the extent of involvement in the derivatives market, are used to determine the contractual cash flows required in accordance with the terms of the agreement. These amounts are typically not exchanged, significantly exceed amounts subject to credit or market risk and are not reflected in the consolidated balance sheets.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 6 – DERIVATIVE AND CREDIT-RELATED FINANCIAL INSTRUMENTS (continued)

Risk Management

As an end-user, the Corporation employs a variety of financial instruments for risk management purposes, including cash instruments, such as investment securities, as well as derivative instruments. Activity related to these instruments is centered predominantly in the interest rate markets and mainly involves interest rate swaps. Various other types of instruments also may be used to manage exposures to market risks, including interest rate caps and floors, total return swaps, foreign exchange forward contracts and foreign exchange swap agreements.

As part of a fair value hedging strategy, the Corporation entered into interest rate swap agreements for interest rate risk management purposes. These interest rate swap agreements effectively modify the Corporation’s exposure to interest rate risk by converting fixed-rate 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.

Risk management fair value interest rate swaps generated net interest income of $18 million and $19 million for the three-month periods ended March 31, 2011 and 2010, respectively.

The net gains (losses) recognized in other noninterest income (i.e., the ineffective portion) in the consolidated statements of income on risk management derivatives designated as fair value hedges of fixed-rate debt was as follows.


	Three Months Ended March 31,
(in millions)	2011		2010
Interest rate swaps	$	1	$	(1	)

As part of a cash flow hedging strategy, the Corporation had entered into interest rate swap agreements that effectively converted a portion of 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 life of the agreements. In the first quarter 2011, the remaining $800 million notional amount of interest rate swap agreements outstanding at December 31, 2010 matured. As of March 31, 2011 the Corporation had no interest rate swap agreements designated as cash flow hedges of loans outstanding.

The net gains (losses) recognized in income and OCI on risk management derivatives designated as cash flow hedges of loans for the three-month periods ended March 31, 2011 and 2010 are displayed in the table below.


	Three Months Ended March 31,
(in millions)	2011			2010
Interest rate swaps
Gain (loss) recognized in OCI (effective portion)	$	(2	)	$	6
Gain (loss) recognized in other noninterest income (ineffective portion)		1			(3	)
Gain reclassified from accumulated OCI into interest and fees on loans (effective portion)		1			8

Foreign exchange rate risk arises from changes in the value of certain assets and liabilities denominated in foreign currencies. The Corporation employs spot and forward contracts in addition to swap contracts to manage exposure to these and other risks.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 6 – DERIVATIVE AND CREDIT-RELATED FINANCIAL INSTRUMENTS (continued)

The Corporation recognized an insignificant amount of net gains (losses) on risk management derivative instruments used as economic hedges in other noninterest income in the consolidated statements of income in both the three-month periods ended March 31, 2011 and 2010.

The following table summarizes the expected weighted average remaining maturity of the notional amount of risk management interest rate swaps and the weighted average interest rates associated with amounts expected to be received or paid on interest rate swap agreements as of March 31, 2011 and December 31, 2010.


			Weighted Average
(dollar amounts in millions)	Notional Amount		Remaining Maturity (in years)		Receive Rate			Pay Rate (a)
March 31, 2011
Swaps - fair value - receive fixed/pay floating rate Medium- and long-term debt designation	$	1,450		6.2		5.45	%		0.47	%

Total risk management interest rate swaps	$	1,450

December 31, 2010
Swaps - cash flow - receive fixed/pay floating rate Variable rate loan designation	$	800		0.1		4.75	%		3.25	%
Swaps - fair value - receive fixed/pay floating rate Medium- and long-term debt designation		1,600		7.1		5.73			0.85

Total risk management interest rate swaps	$	2,400

(a)

Variable rates paid on receive fixed swaps are based on prime and six-month LIBOR rates in effect at March 31, 2011 and December 31, 2010.

Management believes these hedging strategies achieve the desired relationship between the rate maturities of assets and funding sources which, in turn, reduce the overall exposure of net interest income to interest rate risk, although there can be no assurance that such strategies will be successful.

Customer-Initiated and Other

Fee income is earned from entering into various transactions at the request of customers (customer-initiated contracts), principally foreign exchange contracts, interest rate contracts and energy derivative contracts. For customer-initiated foreign exchange contracts, the Corporation mitigates most of the inherent market risk by taking offsetting positions and manages the remainder through individual foreign currency position limits and aggregate value-at-risk limits. These limits are established annually and reviewed quarterly.

For those customer-initiated derivative contracts which were not offset or where the Corporation holds a speculative position within the limits described above, the Corporation recognized an insignificant amount of net gains in “other noninterest income” in the consolidated statements of income in both the three-month periods ended March 31, 2011 and 2010.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 6 – DERIVATIVE AND CREDIT-RELATED FINANCIAL INSTRUMENTS (continued)

Fair values of customer-initiated and other derivative instruments 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 statements of income. The net gains recognized in income on customer-initiated derivative instruments, net of the impact of offsetting positions, were as follows.


		Three Months Ended March 31,
(in millions)	Location of Gain	2011		2010
Interest rate contracts	Other noninterest income	$	6	$	3
Foreign exchange contracts	Foreign exchange income		8		9

Total		$	14	$	12

Additional information regarding the nature, terms and associated risks of derivative instruments can be found in the Corporation’s 2010 Annual Report on page 55 and in Notes 1 and 9 to the consolidated financial statements.

Credit-Related Financial Instruments

The Corporation issues off-balance sheet financial instruments in connection with commercial and consumer lending activities. The Corporation’s credit risk associated with these instruments is represented by the contractual amounts indicated in the following table.


(in millions)	March 31, 2011		December 31, 2010
Unused commitments to extend credit:
Commercial and other	$	24,559	$	23,578
Bankcard, revolving check credit and home equity loan commitments		1,542		1,568

Total unused commitments to extend credit	$	26,101	$	25,146

Standby letters of credit	$	5,251	$	5,453
Commercial letters of credit		117		93
Other credit-related financial instruments		2		1

The Corporation maintains an allowance to cover probable credit losses inherent in lending-related commitments, including unused commitments to extend credit, letters of credit and financial guarantees. At March 31, 2011 and December 31, 2010, the allowance for credit losses on lending-related commitments, included in “accrued expenses and other liabilities” on the consolidated balance sheets, was $32 million and $35 million, respectively.

Unused Commitments to Extend Credit

Commitments to extend credit are legally binding agreements to lend to a customer, provided there is no violation of any condition established in the contract. These commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments expire without being drawn upon, the total contractual amount of commitments does not necessarily represent future cash requirements of the Corporation. Commercial and other unused commitments are primarily variable rate commitments. The allowance for credit losses on lending-related commitments included $13 million and $16 million, at March 31, 2011 and December 31, 2010, respectively, for probable credit losses inherent in the Corporation’s unused commitments to extend credit.

At March 31, 2011 and December 31, 2010, commitments to lend additional funds to borrowers whose terms have been modified in troubled debt restructurings totaled $8 million and $7 million, respectively.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 6 – DERIVATIVE AND CREDIT-RELATED FINANCIAL INSTRUMENTS (continued)

Standby and Commercial Letters of Credit

Standby letters of credit represent conditional obligations of the Corporation which guarantee the performance of a customer to a third party. Standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. Commercial letters of credit are issued to finance foreign or domestic trade transactions. These contracts expire in decreasing amounts through the year 2019. 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 and commercial letters of credit. These risk participations covered $294 million and $298 million of the $5.4 billion and $5.5 billion standby and commercial letters of credit outstanding at March 31, 2011 and December 31, 2010, respectively.

The carrying value of the Corporation’s standby and commercial letters of credit, included in “accrued expenses and other liabilities” on the consolidated balance sheet, totaled $83 million at March 31, 2011, including $64 million of deferred fees and $19 million in the allowance for credit losses on lending-related commitments. At December 31, 2010, the comparable amounts were $83 million, $64 million and $19 million, respectively.

The following table presents a summary of total internally classified watch list standby and commercial letters of credit at March 31, 2011 and December 31, 2010. The Corporation’s internal watch list is generally consistent with loans in the Special Mention, Substandard and Doubtful (nonaccrual) categories defined by regulatory authorities. The Corporation manages credit risk through underwriting, periodically reviewing and approving its credit exposures using Board committee approved credit policies and guidelines.


(dollar amounts in millions)	March 31, 2011			December 31, 2010
Total watch list standby and commercial letters of credit	$	206		$	243
As a percentage of total outstanding standby and commercial letters of credit		3.8	%		4.4	%

Other credit-related financial instruments

The Corporation enters into credit risk participation agreements, under which the Corporation assumes credit exposure associated with a borrower’s performance related to certain interest rate derivative contracts. The Corporation is not a party to the interest rate derivative contracts and only enters into these credit risk participation agreements in instances in which the Corporation is also a party to the related loan participation agreement for such borrowers. The Corporation manages its credit risk on the credit risk participation agreements by monitoring the creditworthiness of the borrowers, which is based on the normal credit review process had it entered into the derivative instruments directly with the borrower. The notional amount of such credit risk participation agreement reflects the pro-rata share of the derivative instrument, consistent with its share of the related participated loan. As of March 31, 2011 and December 31, 2010, the total notional amount of the credit risk participation agreements was approximately $309 million and $316 million, respectively, and the fair value, included in customer-initiated interest rate contracts recorded in “accrued expenses and other liabilities” on the consolidated balance sheets, was insignificant for each period. The maximum estimated exposure to these agreements, as measured by projecting a maximum value of the guaranteed derivative instruments, assuming 100 percent default by all obligors on the maximum values, was approximately $11 million and $12 million at March 31, 2011 and December 31, 2010, respectively. In the event of default, the lead bank has the ability to liquidate the assets of the borrower, in which case the lead bank would be required to return a percentage of the recouped assets to the participating banks. As of March 31, 2011, the credit risk participation agreements had a weighted average remaining maturity for outstanding agreements of 2.8 years.

In 2008, the Corporation sold its remaining ownership of Visa Class B shares and entered into a derivative contract. Under the terms of the derivative contract, the Corporation will compensate the counterparty primarily for dilutive adjustments made to the conversion factor of the Visa Class B shares to Class A shares based on the ultimate outcome of litigation involving Visa. Conversely, the Corporation will be compensated by the counterparty for any increase in the conversion factor from anti-dilutive adjustments. The notional amount of the derivative contract was equivalent to approximately 780 thousand Visa Class B shares. The fair value of the derivative liability was $2 million and $1 million at March 31, 2011 and December 31, 2010, respectively, included in “accrued expenses and other liabilities” on the consolidated balance sheets.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 7 – VARIABLE INTEREST ENTITIES (VIEs)

The Corporation evaluates its interest in certain entities to determine if these entities meet the definition of a VIE and whether the Corporation is the primary beneficiary and should consolidate the entity based on the variable interests it held both at inception and when there is a change in circumstances that require a reconsideration. The following provides a summary of the VIEs in which the Corporation has an interest.

The Corporation has a limited partnership interest in 147 low income housing tax credit/historic rehabilitation tax credit partnerships. These entities meet the definition of a VIE; however, the Corporation is not the primary beneficiary of the entities, as the general partner has both the power to direct the activities that most significantly impact the economic performance of the entities and the obligation to absorb losses or the right to receive benefits that could be significant to the entities. While the partnership agreements allow the limited partners, through a majority vote, to remove the general partner, this right is not deemed to be substantive as the general partner can only be removed for cause.

The Corporation accounts for its interest in these partnerships on either the cost or equity method. Exposure to loss as a result of the Corporation’s involvement with these entities at March 31, 2011 was limited to the book basis of the Corporation’s investment of approximately $326 million, which includes unused commitments for future investments.

As a limited partner, the Corporation obtains income tax credits and deductions from the operating losses of these low income housing tax credit/historic rehabilitation tax credit partnerships, which are recorded as a reduction of income tax expense (or an increase to income tax benefit) and a reduction of federal income taxes payable. These income tax credits and deductions are allocated to the funds’ investors based on their ownership percentages. Investment balances, including all legally binding commitments to fund future investments, are included in “accrued income and other assets” on the consolidated balance sheets, with amortization and other write-downs of investments recorded in “other noninterest income” on the consolidated statements of income. In addition, a liability is recognized in “accrued expenses and other liabilities” on the consolidated balance sheets for all legally binding unfunded commitments to fund low income housing partnerships ($64 million at March 31, 2011).

The Corporation provided no financial or other support that was not contractually required to any of the above VIEs during the three-month periods ended March 31, 2011 and 2010.

The following table summarizes the impact of these VIEs on line items on the Corporation’s consolidated statements of income.


(in millions)	Three Months Ended March 31,
Classification in Earnings	2011			2010
Other noninterest income	$	(13	)	$	(12	)
Provision (benefit) for income taxes (a)		(13	)		(12	)

(a)	Income tax credits from low income housing tax credit/historic rehabilitation tax credit partnerships.

Additional information regarding the Corporation’s consolidation policy can be found in Note 1 to the consolidated financial statements in the Corporation’s 2010 Annual Report.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 8 – MEDIUM- AND LONG-TERM DEBT

Medium- and long-term debt are summarized as follows:


(in millions)	March 31, 2011		December 31, 2010
Parent company
Subordinated notes:
4.80% subordinated notes due 2015	$	333	$	337
Medium-term notes:
3.00% notes due 2015		298		298

Total parent company		631		635
Subsidiaries
Subordinated notes:
5.70% subordinated notes due 2014		277		280
5.75% subordinated notes due 2016		687		691
5.20% subordinated notes due 2017		561		568
8.375% subordinated notes due 2024		190		191
7.875% subordinated notes due 2026		209		213

Total subordinated notes		1,924		1,943
Medium-term notes:
Floating-rate based on LIBOR indices due 2011 to 2012		1,018		1,017
Federal Home Loan Bank advances:
Floating-rate based on LIBOR indices due 2011 to 2014		2,500		2,500
Other notes:
6.0% - 6.4% fixed-rate notes due 2020		43		43

Total subsidiaries		5,485		5,503

Total medium- and long-term debt	$	6,116	$	6,138

The carrying value of medium- and long-term debt was adjusted to reflect the gain or loss attributable to the risk hedged with interest rate swaps.

All subordinated notes with maturities greater than one year qualify as Tier 2 capital.

Comerica Bank (the Bank), a subsidiary of the Corporation, is a member of the FHLB, which provides short- and long-term funding collateralized by mortgage-related assets to its members. FHLB advances bear interest at variable rates based on LIBOR and were secured by a blanket lien on $15 billion of real estate-related loans at March 31, 2011.

NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) includes the change in net unrealized gains and losses on investment securities available-for-sale, the change in accumulated net gains and losses on cash flow hedges and the change in the accumulated defined benefit and other postretirement plans adjustment. Total comprehensive income was $110 million and $85 million for the three months ended March 31, 2011 and 2010, respectively. The $25 million increase in total comprehensive income for the three months ended March 31, 2011, when compared to the same period in the prior year, resulted primarily from a $51 million increase in net income, partially offset by a $33 million after-tax decrease in net unrealized gains on investment securities available-for-sale. The following table presents reconciliations of the components of accumulated other comprehensive income (loss) for the three months ended March 31, 2011 and 2010.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 9 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (continued)


	Three Months Ended March 31,
(in millions)	2011			2010
Accumulated net unrealized gains on investment securities available-for-sale:
Balance at beginning of period, net of tax	$	14		$	11
Net unrealized holding gains (losses) arising during the period		(3	)		48
Less: Reclassification adjustment for net gains included in net income		2			2

Change in net unrealized gains (losses) before income taxes		(5	)		46
Less: Provision (benefit) for income taxes		(1	)		17

Change in net unrealized gains on investment securities available-for-sale, net of tax		(4	)		29

Balance at end of period, net of tax	$	10		$	40
Accumulated net gains on cash flow hedges:
Balance at beginning of period, net of tax	$	2		$	18
Net cash flow hedge gains (losses) arising during the period		(2	)		6
Less: Reclassification adjustment for net gains included in net income		1			8

Change in net cash flow hedge gains (losses) before income taxes		(3	)		(2	)
Less: Provision (benefit) for income taxes		(1	)		(1	)

Change in net cash flow hedge gains, net of tax		(2	)		(1	)

Balance at end of period, net of tax	$	—		$	17
Accumulated defined benefit pension and other postretirement plans adjustment:
Balance at beginning of period, net of tax	$	(405	)	$	(365	)
Net defined benefit pension and other postretirement adjustment arising during the period		8			—
Less: Adjustment for amounts recognized as components of net periodic benefit cost during the period		(12	)		(8	)

Change in defined benefit pension and other postretirement plans adjustment before income taxes		20			8
Less: Provision for income taxes		7			3

Change in defined benefit pension and other postretirement plans adjustment, net of tax		13			5

Balance at end of period, net of tax	$	(392	)	$	(360	)

Total accumulated other comprehensive loss at end of period, net of tax	$	(382	)	$	(303	)

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 10 – NET INCOME (LOSS) PER COMMON SHARE

Basic and diluted income (loss) from continuing operations per common share and net income (loss) per common share for the three-month periods ended March 31, 2011 and 2010 are presented in the following table.


	Three Months Ended March 31,
(in millions, except per share data)	2011		2010
Basic and diluted
Income from continuing operations	$	103	$	35
Less:
Preferred stock dividends		—		29
Redemption discount accretion on preferred stock		—		94
Income allocated to participating securities		1		—

Income (loss) from continuing operations attributable to common shares	$	102	$	(88	)

Net income	$	103	$	52
Less:
Preferred stock dividends		—		29
Redemption discount accretion on preferred stock		—		94
Income allocated to participating securities		1		—

Net income (loss) attributable to common shares	$	102	$	(71	)

Basic average common shares		175		155

Basic income (loss) from continuing operations per common share	$	0.58	$	(0.57	)
Basic net income (loss) per common share		0.58		(0.46	)

Basic average common shares		175		155
Dilutive common stock equivalents:
Net effect of the assumed exercise of stock options		1		—
Net effect of the assumed exercise of warrants		2		—

Diluted average common shares		178		155

Diluted income (loss) from continuing operations per common share	$	0.57	$	(0.57	)
Diluted net income (loss) per common share		0.57		(0.46	)

The following average shares related to outstanding options to purchase shares of common stock were not included in the computation of diluted net income (loss) per common share because the exercise prices of the options were greater than the average market price of common shares for the period.


	Three Months Ended March 31,
(shares in millions)	2011	2010
Average outstanding options	15.5	16.7
Range of exercise prices	$39.10 - $64.50	$36.24 - $64.50

Due to the net loss from continuing operations attributable to common shares for the three months ended March 31, 2010, common stock equivalents for options to purchase 3.1 million shares and a warrant to purchase 11.5 million shares, with average exercise prices less than the average market price of common shares for the period, were excluded from the computation of diluted net loss per common share, as their inclusion would have been anti-dilutive.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 11 – EMPLOYEE BENEFIT PLANS

Net periodic benefit costs are charged to “employee benefits expense” on the consolidated statements of income. The components of net periodic benefit cost for the Corporation’s qualified pension plan, non-qualified pension plan and postretirement benefit plan are as follows:


Qualified Defined Benefit Pension Plan	Three Months Ended
	March 31,
(in millions)	2011			2010
Service cost	$	8		$	7
Interest cost		19			17
Expected return on plan assets		(29	)		(29	)
Amortization of unrecognized prior service cost		1			2
Amortization of unrecognized net loss		9			4

Net periodic benefit cost	$	8		$	1


Non-Qualified Defined Benefit Pension Plan	Three Months Ended
	March 31,
(in millions)	2011			2010
Service cost	$	1		$	1
Interest cost		2			2
Amortization of unrecognized net loss		1			1

Net periodic benefit cost	$	4		$	4


Postretirement Benefit Plan	Three Months Ended
	March 31,
(in millions)	2011			2010
Interest cost	$	1		$	1
Expected return on plan assets		(1	)		(1	)
Amortization of unrecognized transition obligation		1			1

Net periodic benefit cost	$	1		$	1

For further information on the Corporation’s employee benefit plans, refer to Note 18 to the consolidated financial statements in the Corporation’s 2010 Annual Report.

NOTE 12 – INCOME TAXES AND TAX-RELATED ITEMS

The provision (benefit) for federal income taxes is computed by applying the statutory federal income tax rate to income (loss) before income taxes as reported in the consolidated financial statements after deducting non-taxable items, principally income on bank-owned life insurance, and deducting tax credits related to investments in low income housing partnerships. Tax interest, state taxes and foreign taxes are then added to the federal tax provision.

In the first quarter 2011, the Corporation applied an estimated annual effective tax rate to interim period pre-tax income to calculate the income tax provision for the quarter, in accordance with the principal method prescribed by the accounting guidance established for computing income taxes in interim periods. Prior to 2011, specifically for the interim periods beginning second quarter 2009 through December 31, 2010, the Corporation applied an alternative method permitted under the accounting guidance to calculate interim period income taxes. Under the alternative method, interim period income taxes were based on each discrete quarter’s pre-tax income (loss), and the method was used by the Corporation due the volatility and uncertainty in the economy in the prior periods. Given the diminishing economic volatility and the Corporation’s ability to render more reliable estimates of pre-tax income in 2011, the principal method was applied in the first quarter 2011. The Corporation determined it was impracticable to retroactively apply the principal method to the prior interim periods.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 12 – INCOME TAXES AND TAX-RELATED ITEMS (continued)

In the ordinary course of business, the Corporation enters into certain transactions that have tax consequences. From time to time, the Internal Revenue Service (IRS) may question and/or challenge specific interpretative tax positions taken by the Corporation with respect to those transactions. The Corporation believes that its tax returns were filed based upon applicable statutes, regulations and case law in effect at the time of the transactions. The IRS, an administrative authority or a court, if presented with the transactions, could disagree with the Corporation’s interpretation of the tax law. After evaluating the risks and opportunities, the best outcome may result in a settlement. The ultimate outcome for each position is not known.

During 2010, the IRS proposed an adjustment to taxable income for the years 2001-2006 which could result in the repatriation of foreign earnings of a certain structured investment transaction. Repatriation of these earnings could require the Corporation to pay income taxes of $53 million, plus any interest and penalties that may be applicable, on foreign earnings of approximately $146 million. The Corporation continues to believe that these earnings were properly excluded from U.S. taxation and has filed a protest to that effect with the IRS Appeals Office. The Corporation anticipates it will enter the post-appeals mediation process of IRS appeals in the second quarter of 2011. The Corporation intends to reinvest these earnings indefinitely and believes it is more likely than not that this tax position will be sustained. The Corporation has reserved for this tax position accordingly.

Based on current knowledge and probability assessment of various potential outcomes, the Corporation believes that current tax reserves are adequate to cover the matter discussed above, and the amount of any incremental liability arising from this matter is not expected to have a material adverse effect on the Corporation’s consolidated financial condition or results of operations. Probabilities and outcomes are reviewed as events unfold, and adjustments to the reserves are made when necessary.

NOTE 13 – CONTINGENT LIABILITIES

Legal Proceedings

The Corporation and certain of its subsidiaries are subject to various pending or threatened legal proceedings arising out of the normal course of business or operations. The Corporation believes it has meritorious defenses to the claims asserted against it in its currently outstanding legal proceedings and, with respect to such legal proceedings, intends to continue to defend itself vigorously, litigating or settling cases according to management’s judgment as to what is in the best interests of the Corporation and its shareholders. On at least a quarterly basis, the Corporation assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. On a case-by-case basis, reserves are established for those legal claims for which it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated. The actual costs of resolving these claims may be substantially higher or lower than the amounts reserved. Litigation-related expense of $1 million and an insignificant amount were included in “litigation and operational losses” on the consolidated statements of income for the three months ended March 31, 2011 and 2010, respectively. 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 is not expected to have a material adverse effect on the Corporation’s consolidated financial condition.

The damages alleged by plaintiffs or claimants may be overstated, unsubstantiated by legal theory, unsupported by the facts, and/or bear no relation to the ultimate award that a court, jury or agency might impose. In view of the inherent difficulty of predicting the outcome of such matters, the Corporation cannot state with confidence a range of reasonably possible losses, nor what the eventual outcome of these matters will be. However, based on current knowledge and after consultation with legal counsel, management believes the maximum amount of reasonably possible losses would not have a material adverse effect on the Corporation’s consolidated financial condition.

For information regarding income tax contingencies, refer to Note 12.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 14 – BUSINESS SEGMENT INFORMATION

The Corporation has strategically aligned its operations into three major business segments: the Business Bank, the Retail Bank, and Wealth & Institutional Management. These business segments are differentiated based on the type of customer and the related products and services provided. In addition to the three major business segments, the Finance Division is also reported as a segment. Business segment results are produced by the Corporation’s 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 business segment using certain methodologies, which are regularly reviewed and refined. For comparability purposes, amounts in all periods are based on business segments and methodologies in effect at March 31, 2011. These methodologies may be modified as the management accounting system is enhanced and changes occur in the organizational structure and/or product lines.

For a description of the business activities of each business segment and further information on the methodologies, which form the basis for these results, refer to Note 23 to the consolidated financial statements in the Corporation’s 2010 Annual Report.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 14 – BUSINESS SEGMENT INFORMATION (continued)

Business segment financial results for the three months ended March 31, 2011 and 2010 are shown in the following table.


(dollar amounts in millions) Three Months Ended March 31, 2011	Business Bank			Retail Bank			Wealth & Institutional Management			Finance			Other			Total
Earnings summary:
Net interest income (expense) (FTE)	$	341		$	139		$	44		$	(135	)	$	7		$	396
Provision for loan losses		18			23			8			—			—			49
Noninterest income		77			42			64			16			8			207
Noninterest expenses		160			162			78			3			12			415
Provision (benefit) for income taxes (FTE)		73			(2	)		8			(46	)		3			36

Net income (loss)	$	167		$	(2	)	$	14		$	(76	)	$	—		$	103

Net credit-related charge-offs	$	73		$	23		$	5		$	—		$	—		$	101
Selected average balances:
Assets	$	30,091		$	5,558		$	4,809		$	9,314		$	4,003		$	53,775
Loans		29,609			5,106			4,807			22			7			39,551
Deposits		20,084			17,360			2,800			249			105			40,598
Statistical data:
Return on average assets (a)		2.22	%		(0.05	)%		1.14	%		N/M			N/M			0.77	%
Net interest margin (b)		4.66			3.25			3.76			N/M			N/M			3.25
Efficiency ratio		38.14			89.19			74.38			N/M			N/M			69.05

Three Months Ended March 31, 2010	Business Bank			Retail Bank			Wealth & Institutional Management			Finance			Other			Total
Earnings summary:
Net interest income (expense) (FTE)	$	341		$	130		$	42		$	(105	)	$	8		$	416
Provision for loan losses		137			31			12			—			(5	)		175
Noninterest income		76			44			60			12			2			194
Noninterest expenses		162			154			73			2			13			404
Provision (benefit) for income taxes (FTE)		29			(4	)		6			(36	)		1			(4	)
Income from discontinued operations, net of tax		—			—			—			—			17			17

Net income (loss)	$	89		$	(7	)	$	11		$	(59	)	$	18		$	52

Net credit-related charge-offs	$	137		$	26		$	10		$	—		$	—		$	173
Selected average balances:
Assets	$	31,293		$	6,106		$	4,862		$	9,416		$	5,842		$	57,519
Loans		30,918			5,599			4,789			9			(2	)		41,313
Deposits		17,750			16,718			2,791			1,218			94			38,571
Statistical data:
Return on average assets (a)		1.13	%		(0.17	)%		0.92	%		N/M			N/M			0.36	%
Net interest margin (b)		4.48			3.18			3.53			N/M			N/M			3.18
Efficiency ratio		38.78			88.44			73.18			N/M			N/M			66.45

(a)	Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.

(b)	Net interest margin is calculated based on the greater of average earning assets or average deposits and purchased funds.

FTE - Fully Taxable Equivalent

N/M - Not Meaningful

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 14 – BUSINESS SEGMENT INFORMATION (continued)

The Corporation’s management accounting system also produces market segment results for the Corporation’s four primary geographic markets: Midwest, Western, Texas and Florida. In addition to the four primary geographic markets, Other Markets and International are also reported as market segments. Market segment results are provided as supplemental information to the business segment results and may not meet all operating segment criteria as set forth in ASC Topic 280, Segment Reporting. For comparability purposes, amounts in all periods are based on market segments and methodologies in effect at March 31, 2011.

The Midwest market consists of operations located in the states of Michigan, Ohio and Illinois. Currently, Michigan operations represent the significant majority of the Midwest market.

The Western market consists of the states of California, Arizona, Nevada, Colorado and Washington. Currently, California operations represent the significant majority of the Western market.

The Texas and Florida markets consist of operations located in the states of Texas and Florida, respectively.

Other Markets include businesses with a national perspective, the Corporation’s investment management and trust alliance businesses as well as activities in all other markets in which the Corporation has operations, except for the International market, as described below.

The International market represents the activity of the Corporation’s international finance division, which provides banking services primarily to foreign-owned, North American-based companies and secondarily to international operations of North American-based companies.

The Finance & Other Businesses segment includes the Corporation’s securities portfolio, asset and liability management activities, discontinued operations, the income and expense impact of equity and cash not assigned to specific business/market segments, tax benefits not assigned to specific business/market segments and miscellaneous other expenses of a corporate nature. This segment includes responsibility for managing the Corporation’s funding, liquidity and capital needs, performing interest sensitivity analysis and executing various strategies to manage the Corporation’s exposure to liquidity, interest rate risk and foreign exchange risk.

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 14 – BUSINESS SEGMENT INFORMATION (continued)

Market segment financial results for the three months ended March 31, 2011 and 2010 are shown in the following table.


(dollar amounts in millions) Three Months Ended March 31, 2011	Midwest			Western			Texas			Florida			Other Markets			International			Finance & Other Businesses			Total
Earnings summary:
Net interest income (expense) (FTE)	$	203		$	164		$	87		$	11		$	41		$	18		$	(128	)	$	396
Provision for loan losses		34			11			4			8			(7	)		(1	)		—			49
Noninterest income		100			37			23			4			11			8			24			207
Noninterest expenses		188			109			61			12			21			9			15			415
Provision (benefit) for income taxes (FTE)		28			30			16			(1	)		—			6			(43	)		36

Net income (loss)	$	53		$	51		$	29		$	(4	)	$	38		$	12		$	(76	)	$	103

Net credit-related charge-offs	$	46		$	26		$	8		$	8		$	9		$	4		$	—		$	101
Selected average balances:
Assets	$	14,307		$	12,590		$	7,031		$	1,553		$	3,242		$	1,735		$	13,317		$	53,775
Loans		14,104			12,383			6,824			1,580			2,960			1,671			29			39,551
Deposits		18,230			12,235			5,786			367			2,298			1,328			354			40,598
Statistical data:
Return on average assets (a)		1.08	%		1.54	%		1.65	%		(0.93	)%		4.70	%		2.79	%		N/M			0.77	%
Net interest margin (b)		4.49			5.37			5.17			2.82			5.73			4.34			N/M			3.25
Efficiency ratio		61.99			54.36			55.39			80.08			42.38			34.62			N/M			69.05

Three Months Ended March 31, 2010	Midwest			Western			Texas			Florida			Other Markets			International			Finance & Other Businesses			Total
Earnings summary:
Net interest income (expense) (FTE)	$	204		$	161		$	79		$	10		$	41		$	18		$	(97	)	$	416
Provision for loan losses		80			59			17			3			24			(3	)		(5	)		175
Noninterest income		102			36			20			3			10			9			14			194
Noninterest expenses		186			105			60			9			21			8			15			404
Provision (benefit) for income taxes (FTE)		14			11			8			—			(10	)		8			(35	)		(4	)
Income from discontinued operations, net of tax		—			—			—			—			—			—			17			17

Net income (loss)	$	26		$	22		$	14		$	1		$	16		$	14		$	(41	)	$	52

Net credit-related charge-offs	$	55		$	64		$	25		$	10		$	14		$	5		$	—		$	173
Selected average balances:
Assets	$	15,208		$	13,175		$	6,892		$	1,576		$	3,782		$	1,628		$	15,258		$	57,519
Loans		14,964			12,980			6,704			1,576			3,494			1,588			7			41,313
Deposits		17,056			11,927			4,957			361			1,985			973			1,312			38,571
Statistical data:
Return on average assets (a)		0.57	%		0.65	%		0.84	%		0.17	%		1.63	%		3.50	%		N/M			0.36	%
Net interest margin (b)		4.84			5.04			4.79			2.54			4.84			4.64			N/M			3.18
Efficiency ratio		60.60			53.32			60.46			72.04			43.95			29.12			N/M			66.45

(a)	Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.

(b)	Net interest margin is calculated based on the greater of average earning assets or average deposits and purchased funds.

FTE - Fully Taxable Equivalent

N/M - Not Meaningful

Notes to Consolidated Financial Statements (unaudited)

Comerica Incorporated and Subsidiaries

NOTE 15 – DISCONTINUED OPERATIONS

In December 2006, the Corporation sold its ownership interest in Munder Capital Management (Munder), an investment advisory subsidiary, to an investor group. The sale agreement included an interest-bearing contingent note.

In the first quarter 2010, the Corporation and the investor group that acquired Munder negotiated a cash settlement of the note receivable for $35 million, which resulted in a $27 million gain ($17 million, after tax), recorded in “income from discontinued operations, net of tax” on the consolidated statements of income. The settlement paid the note in full and concluded the Corporation’s financial arrangements with Munder.

The components of net income from discontinued operations for the three-month period ended March 31, 2010 are shown in the following table. There was no income from discontinued operations for the three-month period ended March 31, 2011.


	Three Months Ended
	March 31,
(in millions, except per share data)	2010
Income from discontinued operations before income taxes	$	27
Provision for income taxes		10

Net income from discontinued operations	$	17

Earnings per common share from discontinued operations:
Basic	$	0.11
Diluted		0.11

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report includes forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Any statements in this report that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “believes,” “feels,” “expects,” “estimates,” “seeks,” “strives,” “plans,” “intends,” “outlook,” “forecast,” “position,” “target,” “mission,” “assume,” “achievable,” “potential,” “strategy,” “goal,” “aspiration,” “opportunity,” “initiative,” “outcome,” “continue,” “remain,” “maintain,” “trend,” “objective,” “looks forward” and variations of such words and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions, as they relate to the Corporation or its management, are intended to identify forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of the Corporation’s management based on information known to the Corporation’s management as of the date of this report and do not purport to speak as of any other date. Forward-looking statements may include descriptions of plans and objectives of the Corporation’s management for future or past operations, products or services, and forecasts of the Corporation’s revenue, earnings or other measures of economic performance, including statements of profitability, business segments and subsidiaries, estimates of credit trends and global stability. Such statements reflect the view of the Corporation’s management as of this date with respect to future events and are subject to risks and uncertainties. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, the Corporation’s actual results could differ materially from those discussed. Factors that could cause or contribute to such differences are changes in general economic, political or industry conditions and related credit and market conditions; changes in trade, monetary and fiscal policies, including the interest rate policies of the Federal Reserve Board; adverse conditions in the capital markets; the interdependence of financial service companies; changes in regulation or oversight, including the effects of recently enacted legislation, actions taken by or proposed by the U.S. Treasury, the Board of Governors of the Federal Reserve System, the Texas Department of Banking and the Federal Deposit Insurance Corporation, legislation or regulations enacted in the future, and the impact and expiration of such legislation and regulatory actions; unfavorable developments concerning credit quality; the proposed acquisition of Sterling Bancshares, Inc., or any future acquisitions; the effects of more stringent capital or liquidity requirements; declines or other changes in the businesses or industries in which the Corporation has a concentration of loans, including, but not limited to, the automotive production industry and the real estate business lines; the implementation of the Corporation’s strategies and business models, including the anticipated performance of any new banking centers; the Corporation’s ability to utilize technology to efficiently and effectively develop, market and deliver new products and services; operational difficulties or information security problems; changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing; the entry of new competitors in the Corporation’s markets; changes in customer borrowing, repayment, investment and deposit practices; management’s ability to maintain and expand customer relationships; management’s ability to retain key officers and employees; the impact of legal and regulatory proceedings; the effectiveness of methods of reducing risk exposures; the effects of war and other armed conflicts or acts of terrorism and the effects of catastrophic events including, but not limited to, hurricanes, tornadoes, earthquakes, fires, droughts and floods. The Corporation cautions that the foregoing list of factors is not exclusive. For discussion of factors that may cause actual results to differ from expectations, please refer to our filings with the Securities and Exchange Commission. In particular, please refer to “Item 1A. Risk Factors” beginning on page 16 of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2010 and “Item 1A. Risk Factors” beginning on page 65 of the Corporation’s Quarterly Report on Form 10Q for the quarter ended March 31, 2011. Forward-looking statements speak only as of the date they are made. The Corporation does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. For any forward-looking statements made in this report, the Corporation claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Results of Operations

Net income for the three months ended March 31, 2011 was $103 million, an increase of $51 million from $52 million reported for the three months ended March 31, 2010. The increase in net income in the first quarter 2011, compared to the same period in 2010, was primarily due to a $136 million decrease in the provision for credit losses ($126 million decrease in the provision for loan losses and a $10 million decrease in the provision for credit losses on lending-related commitments), partially offset by increases of $40 million in the provision for income taxes and $19 million in salaries expense and a $20 million decrease in net interest income. Net income attributable to common shares was $102 million for the first quarter 2011, compared to a net loss attributable to common shares of $71 million for the same period one year ago. As a result of the first quarter 2010 full redemption of $2.25 billion of preferred stock issued to the U.S. Treasury, there were no preferred stock dividends included in net income attributable to common shares for the three months ended March 31, 2011, compared to $123 million of preferred stock dividends, including a $94 million, one-time redemption charge, reflected in the net loss attributable to common shares for the same period one year ago. Net income per diluted common share was $0.57 in the first quarter 2011, compared to a net loss per diluted common share of $0.46 for the same period one year ago.

Full-Year 2011 Outlook

For the full-year 2011, management expects the following, compared to full-year 2010, based on a continuation of modest growth in the economy. This outlook does not include any impact from the pending acquisition of Sterling Bancshares, Inc.

•

A low single-digit decrease in average loans. Excluding the Commercial Real Estate business line, a low single-digit increase in average loans.

•

Average earning assets of approximately $48.5 billion, reflecting lower excess liquidity in addition to a decrease in average loans.

•

An average net interest margin of 3.25 percent to 3.30 percent, based on no increase in the Federal Funds rate.

•

Net credit-related charge-offs between $350 million and $400 million for full-year 2011. The provision for credit losses is expected to be between $150 and $200 million for full-year 2011.

•

A low single-digit decline in noninterest income compared to 2010, primarily due to the impact of regulatory changes. In the event that the implementation of the interchange rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act is delayed past year-end 2011, management expects 2011 full-year noninterest income to be stable relative to 2010.

•

A low single-digit increase in noninterest expenses compared to 2010, primarily due to an increase in employee benefits expense.

•

Income tax expense to approximate 36 percent of income before income taxes less approximately $60 million of permanent differences related to low-income housing and bank-owned life insurance.

•

Continue share repurchase program that, combined with dividend payments, results in a payout up to 50 percent of full-year 2011 earnings.

Net Interest Income

Net interest income was $395 million for the three months ended March 31, 2011, a decrease of $20 million compared to $415 million for the same period in 2010. The decrease in net interest income in the first quarter 2011, compared to the same period in 2010, resulted primarily from a decline in average earning assets, maturities of higher-yield fixed-rate loans and expirations of loan rate floors, partially offset by a continued shift in the funding sources toward lower-cost funds, maturities and redemptions of higher-cost medium- and long-term debt. The “Quarterly Analysis of Net Interest Income & Rate/Volume – Fully Taxable Equivalent” table of this financial review details the components of the change in net interest income on a fully taxable equivalent (FTE) basis for the three months ended March 31, 2011, compared to the same period in the prior year. Average earning assets decreased $3.6 billion, or seven percent, to $49.3 billion in the first quarter 2011, compared to $52.9 billion in the first quarter 2010, primarily due to decreases of $1.8 billion, or 43 percent, in average interest-bearing deposits with banks and $1.8 billion, or four percent, in average loans. The net interest margin (FTE) for the three months ended March 31, 2011 increased seven basis points to 3.25 percent, from 3.18 percent for the comparable period in 2010, primarily due to a reduction in excess liquidity and the continued shift in funding sources toward lower-cost funds, maturities and redemptions of higher-cost medium- and long-term debt, partially offset by the maturity of interest rate swaps at positive spreads and the reduced contribution of noninterest-bearing funds in a lower rate environment. The net interest margin was reduced by approximately 14 basis points and 24 basis points in the first quarters of 2011 and 2010, respectively, from excess liquidity. Excess liquidity was represented by $2.3 billion and $4.1 billion of average balances deposited with the Federal Reserve Bank (FRB) in the first quarters of 2011 and 2010, respectively, included in “interest-bearing deposits with banks” in the consolidated balance sheets.

For further discussion of the effects of market rates on net interest income, refer to the “Market Risk” section of this financial review.

For full-year 2011, management expects an average net interest margin of 3.25 percent to 3.30 percent based on no increase in the Federal Funds rate. This outlook does not include any impact from the pending acquisition of Sterling Bancshares, Inc.

Quarterly Analysis of Net Interest Income & Rate/Volume - Fully Taxable Equivalent (FTE)


	Three Months Ended
	March 31, 2011								March 31, 2010
(dollar amounts in millions)	Average Balance			Interest		Average Rate			Average Balance			Interest		Average Rate
Commercial loans	$	21,496		$	200		3.76	%	$	21,015		$	205		3.96	%
Real estate construction loans		2,179			19		3.51			3,386			25		2.95
Commercial mortgage loans		9,790			95		3.95			10,387			107		4.18
Residential mortgage loans		1,599			21		5.24			1,632			22		5.41
Consumer loans		2,281			19		3.42			2,481			22		3.58
Lease financing		987			9		3.62			1,130			11		3.75
International loans		1,219			12		3.87			1,282			12		3.93
Business loan swap income		—			1		—			—			8		—

Total loans		39,551			376		3.85			41,313			412		4.04
Auction-rate securities available-for-sale		554			1		0.88			879			2		0.93
Other investment securities available-for-sale		6,757			56		3.37			6,503			60		3.72

Total investment securities available-for-sale		7,311			57		3.17			7,382			62		3.38
Federal funds sold and securities purchased under agreements to resell		3			—		0.32			—			—		—
Interest-bearing deposits with banks (a)		2,354			1		0.26			4,122			2		0.25
Other short-term investments		128			1		2.68			124			1		1.75

Total earning assets		49,347			435		3.57			52,941			477		3.65
Cash and due from banks		884								788
Allowance for loan losses		(908	)							(1,058	)
Accrued income and other assets		4,452								4,848

Total assets	$	53,775							$	57,519

Money market and NOW deposits	$	17,797			12		0.26		$	15,055			12		0.32
Savings deposits		1,421			—		0.09			1,384			—		0.07
Customer certificates of deposit		5,509			10		0.76			6,173			15		1.02

Total interest-bearing core deposits		24,727			22		0.36			22,612			27		0.50
Other time deposits		—			—		—			877			8		3.53
Foreign office time deposits		412			—		0.49			458			—		0.21

Total interest-bearing deposits		25,139			22		0.37			23,947			35		0.60
Short-term borrowings		94			—		0.31			234			—		0.11
Medium- and long-term debt		6,128			17		1.10			10,775			26		0.95

Total interest-bearing sources		31,361			39		0.51			34,956			61		0.71
Noninterest-bearing deposits		15,459								14,624
Accrued expenses and other liabilities		1,120								1,075
Total shareholders’ equity		5,835								6,864

Total liabilities and shareholders’ equity	$	53,775							$	57,519

Net interest income/rate spread (FTE)				$	396		3.06					$	416		2.94

FTE adjustment				$	1							$	1

Impact of net noninterest-bearing sources of funds							0.19								0.24

Net interest margin (as a percentage of average earning assets) (FTE) (a)							3.25	%							3.18	%

(a)

Excess liquidity, represented by average balances deposited with the FRB, reduced the net interest margin by 14 basis points and 24 basis points in the first quarters of 2011 and 2010, respectively. Excluding excess liquidity, the net interest margin would have been 3.39% and 3.42% in each respective period. See Supplemental Financial Data section for reconcilements of non-GAAP financial measures.

Quarterly Analysis of Net Interest Income & Rate/Volume – Fully Taxable Equivalent (FTE) (continued)


	Three Months Ended March 31, 2011/March 31, 2010
(in millions)	Increase (Decrease) Due to Rate			Increase (Decrease) Due to Volume (a)			Net Increase (Decrease)
Loans	$	(20	)	$	(16	)	$	(36	)
Investment securities available-for-sale		(6	)		1			(5	)
Interest-bearing deposits with banks		—			(1	)		(1	)

Total earning assets		(26	)		(16	)		(42	)

Interest-bearing deposits		(13	)		—			(13	)
Medium- and long-term debt		4			(13	)		(9	)

Total interest-bearing sources		(9	)		(13	)		(22	)


Net interest income/rate spread (FTE)	$	(17	)	$	(3	)	$	(20	)

(a)	Rate/Volume variances are allocated to variances due to volume.

Provision for Credit Losses

The provision for credit losses includes both the provision for loan losses and the provision for credit losses on lending-related commitments. The provision for loan losses was $49 million for the first quarter 2011, compared to $175 million for the same period in 2010. The Corporation establishes this provision to maintain an adequate allowance for loan losses, which is discussed under the “Credit Risk” subheading in the “Risk Management” section of this financial review. The decrease of $126 million in the provision for loan losses in the three month period ended March 31, 2011, when compared to the same period in 2010, resulted primarily from improvements in credit quality. Improvements in credit quality included a decline of $376 million, to $5.2 billion, in the Corporation’s watch list loans from December 31, 2010 to March 31, 2011, compared to a decrease of $228 million, to $7.5 billion, in the same period in 2010. The Corporation’s internal watch list is generally consistent with loans in the Special Mention, Substandard and Doubtful (nonaccrual) categories defined by regulatory authorities. Additional indicators of improved credit quality included a decrease in the inflow to nonaccrual (based on an analysis of nonaccrual loans with book balances greater than $2 million) of $79 million and a decrease in net credit-related charge-offs of $72 million in the three month period ended March 31, 2011, compared to the same period in the prior year.

Growth in the national economy rebounded in the second half of 2010, driven mainly by a private-sector lead recovery, but remained at a moderate level due to the depressed housing sector and reduced spending by state and local governments. Real gross domestic product reached a milestone in the fourth quarter 2010 as it surpassed the previous peak reached in the fourth quarter 2007. The economic outlook for 2011 improved slightly as private-sector hiring accelerated in the first quarter and the national unemployment rate declined by a percentage point in the four months leading into March 2011. However, surging energy prices in reaction to the turmoil in North Africa and the Middle East could dampen growth later in 2011. Texas continued to outperform the national economy in early 2011, with notable strength in manufacturing and energy exploration. Reflecting the broadening recovery in Texas, job growth in January 2011 and February 2011 was approximately three percent, more than double the national rate. The Michigan economy is showing signs of a stronger recovery than the nation. In the twelve months prior to February 2011, Michigan had a three percentage point drop in the unemployment rate and nonfarm payroll grew almost twice as fast as the nation. The California economy lagged the national recovery in 2010, but appears to be improving in early 2011. Payrolls in the first two months of 2011 grew at a five percent annual rate, four times faster than nationally. California’s housing sector appears to have improved as home prices are now more aligned to income and the inventory of unsold homes has declined. Forward-looking indicators suggest that economic conditions in the Corporation’s primary geographic markets are likely to continue to strengthen gradually against a background of moderate national and global expansions.

Total net credit-related charge-offs include net charge-offs on both loans and lending-related commitments. Net loan charge-offs for the first quarter 2011 decreased $72 million to $101 million, or 1.03 percent of average total loans, compared to $173 million, or 1.68 percent for the first quarter 2010. The decrease in net loan charge-offs in the first quarter 2011, compared to the first quarter 2010, consisted primarily of decreases in net loan charge-offs in the Commercial Real Estate ($75 million), Leasing, included in Specialty Businesses ($6 million) and Private Banking ($5 million) business lines, partially offset by an increase in net loan charge-offs in the Middle Market

business line ($20 million). By geographic market, net loan charge-offs decreased in all markets in the first quarter 2011, compared to the same period in 2010.

The provision for credit losses on lending-related commitments was a negative provision of $3 million for the three month period ended March 31, 2011, compared to a provision of $7 million for the comparable period in 2010. The $10 million decrease for the three-month period ended March 31, 2011, when compared to the same period in 2010, resulted primarily from improved credit quality in unfunded commitments in the Midwest and Texas market. The Corporation establishes this provision to maintain an adequate allowance to cover probable credit losses inherent in lending-related commitments, which is discussed under the “Credit Risk” subheading in the “Risk Management” section of this financial review. Lending-related commitment charge-offs were insignificant in both the three month periods ended March 31, 2011 and 2010.

An analysis of allowance for credit losses and nonperforming assets is presented under the “Credit Risk” subheading in the “Risk Management” section of this financial review.

Management expects net credit-related charge-offs between $350 million and $400 million for full-year 2011. The provision for credit losses is expected to be between $150 million and $200 million for full-year 2011. This outlook does not include any impact from the pending acquisition of Sterling Bancshares, Inc.

Noninterest Income

Noninterest income was $207 million for the three months ended March 31, 2011, an increase of $13 million, or seven percent, compared to $194 million for the same period in 2010, resulting primarily from increases of $6 million in risk management hedge gains and $5 million in net income from principal investing and warrants.

Management expects a low single-digit decline in noninterest income for full-year 2011, compared to full-year 2010, primarily due to the impact of regulatory changes. In the event that the implementation of the interchange rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act is delayed past year-end 2011, management expects 2011 full-year noninterest income to be stable relative to 2010. This outlook does not include any impact from the pending acquisition of Sterling Bancshares, Inc.

Noninterest Expenses

Noninterest expenses were $415 million for the three months ended March 31, 2011, an increase of $11 million, or three percent, from $404 million for the comparable period in 2010, resulting primarily from an increase in salaries expense ($19 million), reflecting an increase in incentive compensation, and employee benefits expense ($6 million), partially offset by decreases in the provision for credit losses on lending-related commitments ($10 million) and other real estate expense ($4 million).

Management expects a low single-digit increase in noninterest expenses for full-year 2011, compared to full-year 2010, primarily due to an increase in employee benefits expense. This outlook does not include any impact from the pending acquisition of Sterling Bancshares, Inc.

Provision for Income Taxes

The provision for income taxes for the first quarter 2011 was $35 million, compared to a benefit of $5 million for the same period in 2010. The $40 million increase in the provision for income taxes in the three-month period ended March 31, 2011, compared to the same period in 2010, primarily reflects an increase in income before taxes. For further information on income taxes, refer to Note 12 to these unaudited consolidated financial statements.

Net deferred tax assets were $363 million at March 31, 2011, compared to $383 million at December 31, 2010, a decrease of $20 million, resulting primarily from a reduction in deferred tax assets due to a decrease in the allowance for loan losses. Deferred tax assets were evaluated for realization and it was determined that no valuation allowance was needed at both March 31, 2011 and December 31, 2010. This conclusion was based on available evidence of loss carryback capacity, projected future reversals of existing taxable temporary differences and assumptions made regarding future events.

Management expects income tax expense to approximate 36 percent of income before income taxes less approximately $60 million of permanent differences related to low-income housing and bank-owned life insurance. This outlook does not include any impact from the pending acquisition of Sterling Bancshares, Inc.

Income from Discontinued Operations, Net of Tax

In the first three months of 2011, there was no income from discontinued operations, net of tax. Income from discontinued operations, net of tax, in the first quarter 2010 of $17 million reflected an after-tax gain from the cash settlement of a note receivable related to the 2006 sale of an investment advisory subsidiary. For further information on the cash settlement of the note and discontinued operations, refer to Note 15 to these unaudited consolidated financial statements.

Business Segments

The Corporation’s operations are strategically aligned into three major business segments: the Business Bank, the Retail Bank and Wealth & Institutional Management. These business segments are differentiated based on the products and services provided. In addition to the three major business segments, the Finance Division is also reported as a segment. The Other category includes discontinued operations and items not directly associated with these business segments or the Finance Division. Note 14 to these unaudited consolidated financial statements presents financial results of these business segments for the three months ended March 31, 2011 and 2010. For a description of the business activities of each business segment and the methodologies which form the basis for these results, refer to Note 14 to these unaudited consolidated financial statements and Note 23 to the consolidated financial statements in the Corporation’s 2010 Annual Report.

The following table presents net income (loss) by business segment.


	Three Months Ended March 31,
(dollar amounts in millions)	2011					2010
Business Bank	$	167		93	%	$	89		96	%
Retail Bank		(2	)	(1	)		(7	)	(8	)
Wealth & Institutional Management		14		8			11		12

		179		100	%		93		100	%
Finance		(76	)				(59	)
Other (a)		—					18

Total	$	103				$	52

(a)	Includes discontinued operations and items not directly associated with the three major business segments or the Finance Division.

The Business Bank’s net income of $167 million increased $78 million in the three months ended March 31, 2011, compared to the three months ended March 31, 2010. Net interest income (FTE) of $341 million was unchanged in the three months ended March 31, 2011 compared to the same period in the prior year, as the benefit provided by a $2.3 billion increase in average deposits was offset by a $1.3 billion decrease in average loans. The provision for loan losses of $18 million decreased $119 million from the comparable period in the prior year, reflecting decreases in the Commercial Real Estate (in all markets) and Middle Market (primarily in the Midwest market and Other Markets) business lines. Net credit-related charge-offs of $73 million decreased $64 million from the comparable period in the prior year, primarily due to a decrease in charge-offs in the Commercial Real Estate business line, partially offset by an increase in charge-offs in the Middle Market business line. Noninterest income of $77 million increased $1 million from the comparable prior year period, primarily due to increases in warrant income ($2 million) and customer derivative income ($2 million), partially offset by a decrease in service charges on deposit accounts ($2 million). Noninterest expenses of $160 million decreased $2 million from the same period in the prior year, primarily due to decreases in the provision for credit losses on lending commitments ($10 million), other real estate expenses ($4 million), outside processing costs ($3 million) and nominal decrease in other noninterest expense categories, partially offset by increases in allocated corporate overhead expenses ($9 million) and incentive compensation ($8 million). The provision for income taxes (FTE) of $73 million for the three month period ended March 31, 2011, increased $44 million, compared to $29 million for the comparable period the prior year, primarily resulting from an increase in income before income taxes.

The net loss for the Retail Bank was $2 million in the three months ended March 31, 2011, compared to a net loss of $7 million in the three months ended March 31, 2010. Net interest income (FTE) of $139 million increased $9 million from the comparable period in the prior year, primarily due to an increase in loan and deposit spreads and the benefit provided by a $642 million increase in average deposits, partially offset by a $493 million decrease in average loans. The provision for loan losses decreased $8 million from the comparable period in the prior year, reflecting decreases in the Small Business (primarily the Midwest market) and Personal Banking business lines. Net credit-related charge-offs of $23 million decreased $3 million from the comparable period in the prior

year, due to decreases in charge-offs in the Small Business and Personal Banking business lines. Noninterest income of $42 million decreased $2 million from the comparable prior year period, primarily due to a $2 million decline in service charges on deposit accounts. Noninterest expenses of $162 million increased $8 million from the same period in the prior year, primarily due to an increase in allocated corporate overhead expenses ($5 million).

Wealth & Institutional Management’s net income of $14 million increased $3 million in the three months ended March 31, 2011, compared to the three months ended March 31, 2010. Net interest income (FTE) of $44 million increased $2 million from the comparable period in the prior year, primarily due to increases in loan and deposit spreads. The provision for loan losses decreased $4 million from the comparable period in the prior year, primarily reflecting decreases in the Midwest and Western markets, partially offset by an increase in the Florida market. Net credit-related charge-offs of $5 million decreased $5 million from the comparable period in the prior year, primarily due to a decrease in the Private Banking business line. Noninterest income of $64 million increased $4 million from the comparable period in the prior year, primarily due to nominal increases in various noninterest income categories. Noninterest expenses of $78 million increased $5 million, primarily due to an increase in allocated corporate overhead expense ($3 million).

The net loss for the Finance Division was $76 million in the three months ended March 31, 2011, compared to a net loss of $59 million in the three months ended March 31, 2010. Net interest expense (FTE) increased $30 million in the three months ended March 31, 2011, compared to the same period in the prior year. Net interest expense (FTE) in the Finance Division is primarily impacted by the Corporation’s internal funds transfer methodology. The methodology is designed to centralize interest rate risk in the Finance Division and to measure profitability across all interest rate environments. To that end, the Finance Division pays the three major business segments for the long-term value of deposits based on their assumed lives. The three major business segments pay the Finance Division for funding based on the repricing and term characteristics of their loans. Noninterest income increased $4 million from the comparable period in the prior year, primarily due to a $6 million increase in risk management hedge income, partially offset by a $2 million gain on the repurchase of subordinated debt in the first quarter 2010. Noninterest expenses increased $1 million in the first quarter 2011 compared to the same period in the prior year.

The Other category’s net income decreased $18 million in the three months ended March 31, 2011, compared to the three months ended March 31, 2010. The decrease in net income primarily reflected the $17 million after-tax discontinued operations gain recorded in the first quarter 2010.

Market Segments

The Corporation’s management accounting system also produces market segment results for the Corporation’s four primary geographic markets: Midwest, Western, Texas and Florida. In addition to the four primary geographic markets, Other Markets and International are also reported as market segments. Note 14 to these unaudited consolidated financial statements contains a description and presents financial results of these market segments for the three months ended March 31, 2011 and 2010.

The following table presents net income (loss) by market segment.


	Three Months Ended March 31,
(dollar amounts in millions)	2011					2010
Midwest	$	53		30	%	$	26		28	%
Western		51		28			22		23
Texas		29		16			14		16
Florida		(4	)	(2	)		1		1
Other Markets		38		21			16		17
International		12		7			14		15

		179		100	%		93		100	%
Finance & Other Businesses (a)		(76	)				(41	)

Total	$	103				$	52

(a)	Includes discontinued operations and items not directly associated with the market segments.

The Midwest market’s net income of $53 million increased $27 million in the three months ended March 31, 2011, compared to the three months ended March 31, 2010. Net interest income (FTE) of $203 million decreased $1 million from the comparable period in the prior year, primarily due to an $860 million decrease in average loans, partially offset by a increase in loan and deposit spreads and the benefit provided by a $1.2 billion increase in average deposits. The provision for loan losses decreased $46 million, reflecting decreases in the Middle Market, Private Banking, Commercial Real Estate, Leasing and Small Business business lines. Net credit-related charge-offs of $46 million decreased $9 million from the comparable period in the prior year, primarily due to decreases in charge-offs in the Commercial Real Estate and Leasing business lines, partially offset by an increase in the Middle Market business line. Noninterest income of $100 million decreased $2 million from the comparable period in the prior year, primarily due to a decrease in service charges on deposit accounts ($3 million). Noninterest expenses of $188 million increased $2 million from the same period in the prior year, primarily due to an increase in allocated corporate overhead expenses ($8 million), other real estate expenses ($3 million), and salaries expense ($2 million), partially offset by a decrease in the provision for credit losses on lending-related commitments ($12 million). The provision for income taxes (FTE) of $28 million for the three month period ended March 31, 2011, increased $14 million, compared to the same period in the prior year, primarily resulting from an increase in income before income taxes.

The Western market’s net income of $51 million increased $29 million in the three months ended March 31, 2011, compared to the three months ended March 31, 2010. Net interest income (FTE) of $164 million increased $3 million from the comparable prior year period, primarily due to an increase in loan and deposit spreads and the benefit provided by a $308 million increase in average deposits, partially offset by a $597 million decrease in average loans. The provision for loan losses decreased $48 million, primarily reflecting decreases in the Commercial Real Estate and Middle Market business lines. Net credit-related charge-offs of $26 million decreased $38 million from the comparable period in the prior year, primarily due to a decrease in charge-offs in the Commercial Real Estate business line. Noninterest income of $37 million increased $1 million from the comparable period in the prior year. Noninterest expenses of $109 million increased $4 million from the same period in the prior year, primarily due to increases in allocated corporate overhead expenses ($5 million), the provision for credit losses on lending-commitments ($2 million) and salaries expense ($2 million), partially offset by a decrease in other real estate expenses ($4 million). The provision for income taxes (FTE) of $30 million for the three month period ended March 31, 2011, increased $19 million, compared to $11 million for the comparable period the prior year, primarily resulting from an increase in income before income taxes.

The Texas market’s net income increased $15 million to $29 million in the three months ended March 31, 2011, compared to the three months ended March 31, 2010. Net interest income (FTE) of $87 million increased $8 million from the comparable period in the prior year, primarily due to an increase in loan and deposit spreads and the benefit provided by increases of $829 million in average deposits and $120 million in average loans. The provision for loan losses decreased $13 million, primarily reflecting a decrease in the Commercial Real Estate business line, partially offset by an increase in the Middle Market business line. Net credit-related charge-offs of $8 million decreased $17 million from the comparable period in the prior year, primarily due to a decrease in the Commercial Real Estate business line, partially offset by an increase in the Middle Market business line. Noninterest income of $23 million increased $3 million from the comparable period in the prior year due to nominal increases in several noninterest income categories. Noninterest expenses of $61 million increased $1 million from the comparable period in the prior year. The provision for income taxes (FTE) of $16 million for the three month period ended March 31, 2011, increased $8 million, compared to $8 million for the comparable period the prior year, primarily resulting from an increase in income before income taxes.

The net loss in the Florida market was $4 million in the three months ended March 31, 2011, compared to net income of $1 million in the three months ended March 31, 2010. Net interest income (FTE) of $11 million increased $1 million from the comparable period in the prior year primarily due to an increase in loan spreads. The provision for loan losses increased $5 million in the three months ended March 31, 2011 compared to the same period in the prior year, reflecting increases in the Private Banking and Middle Market business lines, partially offset by a decrease in the Commercial Real Estate business line. Net credit-related charge-offs of $8 million decreased $2 million from the comparable period in the prior year. Noninterest income of $4 million increased $1 million from the comparable period in the prior year. Noninterest expenses of $12 million increased $3 million from the comparable period in the prior year, primarily due to nominal increases in several noninterest expense categories.

The Other Markets’ net income increased $22 million, to $38 million, in the three months ended March 31, 2011, compared to the three months ended March 31, 2010. Net interest income (FTE) of $41 million was unchanged from the comparable period in the prior year as increases in loan and deposit spreads and the benefit provided by a $313 million increase in average deposits was offset by the impact of a $534 million decrease in average loans. The provision for loan losses decreased $31 million, primarily reflecting decreases in the Middle

Market and Commercial Real Estate business lines. Net credit-related charge-offs of $9 million decreased $5 million from the comparable period in the prior year, primarily due to a decrease in charge-offs in the Commercial Real Estate business line, partially offset by an increase in charge-offs in the Middle Market business line. Noninterest income of $11 million increased $1 million from the comparable period in the prior year. Noninterest expenses were $21 million for both the three month period ended March 31, 2011 and the comparable period the prior year.

The International market’s net income decreased $2 million to $12 million in the three months ended March 31, 2011, compared to the three months ended March 31, 2010. Net interest income (FTE) of $18 million was unchanged from the comparable period in the prior year as the benefit provided by increases of $355 million in average deposits and $83 million in average loans were offset by a decline in loan spreads. The provision for loan losses increased $2 million to a negative provision of $1 million in the three months ended March 31, 2011, compared to a negative provision of $3 million for the same period in 2010, primarily due to decreases in specific allowances. Noninterest income of $8 million decreased $1 million from the comparable period in the prior year. Noninterest expenses of $9 million increased $1 million from the comparable period in the prior year.

The net loss for Finance & Other Businesses was $76 million in the three months ended March 31, 2011, compared to a net loss of $41 million in the three months ended March 31, 2010. The $35 million increase in net loss was due to the same reasons noted in the Finance Division and the Other category discussions under the “Business Segments” heading above.

The following table lists the number of the Corporation’s banking centers by market segment.


	March 31,
	2011		2010
Midwest (Michigan)		217		232
Western:
California		104		99
Arizona		17		16

Total Western		121		115
Texas		95		91
Florida		11		10
International		1		1

Total		445		449

Financial Condition

Total assets increased $1.3 billion to $55.0 billion at March 31, 2011, compared to $53.7 billion at December 31, 2010, primarily due to an increase in interest-bearing deposits with banks of $2.2 billion, partially offset by a decrease in total loans of $1.1 billion. On an average basis, total assets were $53.8 million for both the first quarter 2011 and the fourth quarter 2010.

The following tables show the change in average loans by business line and geographic market in the first quarter 2011, compared to the fourth quarter 2010.


	Three Months Ended
(dollar amounts in millions)	March 31, 2011		December 31, 2010		Change			Percent Change

Average Loans By Business Line:
Middle Market	$	11,864	$	11,770	$	94			1	%
Commercial Real Estate		4,416		4,740		(324	)		(7	)
Global Corporate Banking		4,620		4,344		276			6
National Dealer Services		3,797		3,763		34			1
Specialty Businesses (a)		4,912		5,330		(418	)		(8	)

Total Business Bank		29,609		29,947		(338	)		(1	)
Small Business		3,375		3,407		(32	)		(1	)
Personal Financial Services		1,731		1,785		(54	)		(3	)

Total Retail Bank		5,106		5,192		(86	)		(2	)
Private Banking		4,807		4,820		(13	)		0

Total Wealth & Institutional Management		4,807		4,820		(13	)		0
Finance/Other		29		40		(11	)		(28	)

Total loans	$	39,551	$	39,999	$	(448	)		(1	)%


Average Loans By Geographic Market:
Midwest	$	14,104	$	14,219	$	(115	)		(1	)%
Western		12,383		12,497		(114	)		(1	)
Texas		6,824		6,435		389			6
Florida		1,580		1,612		(32	)		(2	)
Other Markets		2,960		3,651		(691	)		(19	)
International		1,671		1,545		126			8
Finance/Other		29		40		(11	)		(28	)

Total loans	$	39,551	$	39,999	$	(448	)		(1	)%

(a)	Includes Energy, Technology and Life Sciences, Mortgage Banker Finance, Leasing, Entertainment and Financial Services Division

N/M - not meaningful

Average loans decreased $448 million, or one percent, to $39.6 billion at March 31, 2011, compared to December 31, 2010, reflecting increases in the Global Corporate Banking ($276 million), Energy Lending ($154 million), included in Specialty Businesses, and Middle Market ($94 million) business lines. These increases were more than offset by decreases in the Mortgage Banker Finance ($535 million), included in Specialty Businesses, and Commercial Real Estate ($324 million) business lines. Mortgage Banker Finance provides short-term financing to borrowers in the mortgage banking industry who originate and refinance residential mortgage loans which they subsequently sell in the secondary market (mortgage warehousing loans). Average loans in Mortgage Banker Finance, included in “Commercial Loans” on the consolidated balance sheets, declined 49 percent to $566 million at March 31, 2011, compared to $1.1 billion at December 31, 2010, primarily due to a decline in consumer refinance volumes in the first quarter 2011 compared to the fourth quarter 2010. Average loans in the Commercial Real Estate line of business continued to run-off as expected. By market, increases in average loans in the Texas ($389 million) and International ($126 million) markets were more than offset by decreases in Other Markets ($691 million), which included Mortgage Banker Finance, the Midwest ($115 million) and Western ($114 million) markets.

Management anticipates the crisis in Japan, triggered by natural disasters, will cause a disruption in the automotive supply chain which may result in a temporary decline in average loans outstanding in the National Dealer Services business line from the first quarter 2011.

Management expects average earning assets of approximately $48.5 billion for the full-year 2011, reflecting lower excess liquidity in addition to a low single-digit decrease in average loans for full-year 2011 compared to full-year 2010. Excluding the Commercial Real Estate business line, management expects a low single-digit increase in average loans for full-year 2011 compared to full-year 2010. This outlook does not include any impact from the pending acquisition of Sterling Bancshares, Inc.

Total liabilities increased $1.3 billion, or three percent, to $49.1 billion at March 31, 2011, compared to December 31, 2010, primarily due to a $1.4 billion increase in total deposits. On an average basis, liabilities were

$47.9 billion for both the first quarter 2011 and fourth quarter 2010. Average core deposits, which exclude other time deposits and foreign office time deposits, were $40.2 billion for the first quarter 2011, compared to $39.9 billion for the fourth quarter 2010, primarily reflecting an increase of $495 million in money market and NOW deposits, partially offset by decreases of $148 million in noninterest-bearing deposits and $93 million in customer certificates of deposit. Within average core deposits, increases from the fourth quarter 2010 to the first quarter 2011 were noted in the Global Corporate Banking ($351 million), Technology and Life Sciences ($231 million) and Personal Banking ($181 million) business lines, partially offset by decreases in the Middle Market ($160 million), Financial Services Division ($150 million) and Commercial Real Estate ($103 million) business lines. By market, average core deposits increased in the Midwest ($271 million) and Texas ($229 million) markets in the first quarter 2011, compared to the fourth quarter 2010, partially offset by a decrease in the Western market ($216 million).

Capital

Total shareholders’ equity increased $84 million to $5.9 billion at March 31, 2011, compared to December 31, 2010. The following table presents a summary of changes in total shareholders’ equity for the three months ended March 31, 2011.


(in millions)
Balance at January 1, 2011				$	5,793
Retention of earnings (net income less cash dividends declared)					85
Change in accumulated other comprehensive income (loss):
Investment securities available-for-sale	$	(3	)
Cash flow hedges		(2	)
Defined benefit and other postretirement plans		12

Total change in accumulated other comprehensive income (loss)					7
Repurchase of common stock					(21	)
Share-based compensation					13

Balance at March 31, 2011				$	5,877

On November 16, 2010, the Board of Directors authorized the Corporation to repurchase up to 12.6 million shares of Comerica Incorporated outstanding common stock, and authorized the purchase of up to all 11.5 million outstanding warrants. There is no expiration date for the Corporation’s share repurchase program. For further information regarding the repurchase program, refer to Note 14 to the consolidated financial statements in the Corporation’s 2010 Annual Report. The following table summarizes the Corporation’s repurchase activity during the three months ended March 31, 2011.


(shares in thousands)	Total Number of Shares and Warrants Purchased (a)		Average Price Paid Per Share		Average Price Paid Per Warrant (b)		Total Number of Shares and Warrants Purchased as Part of Publicly Announced Repurchase Plans or Programs		Remaining Repurchase Authorization (c)
January 2011		83	$	39.29	$	—		—		24,056
February 2011		464		39.42		—		400		23,656
March 2011		1		36.72		—		—		23,656

Total first quarter 2011		548	$	39.40	$	—		400		23,656

(a)	Included approximately 148 thousand shares purchased pursuant to deferred compensation plans and shares purchased from employees to pay for taxes related to restricted stock vesting under the terms of an employee share-based compensation plan.

These transactions are not considered part of the Corporation’s repurchase program.

(b)	The Corporation made no repurchases of warrants under the repurchase program during the three months ended March 31, 2011.

(c)	Maximum number of shares and warrants that may yet be purchased under the publicly announced plans or programs.

Management expects to continue the share repurchase program that, combined with dividend payments, results in a payout up to 50 percent of earnings for full-year 2011.

Risk-based regulatory capital standards are designed to make regulatory capital requirements more sensitive to differences in credit risk profiles among banking institutions and to account for off-balance sheet exposure. Assets and off-balance sheet items are assigned to broad risk categories, each with specified risk-weighting factors. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. As shown in the table below, the Tier 1 common capital, Tier 1 risk-based capital, Total risk-based capital and leverage ratios increased from December 31, 2010 to March 31, 2011. These increases were primarily due to a decrease in risk-weighted assets resulting from a decrease in loans, partially offset by an increase in interest-bearing deposits with banks, which carry a lower risk weight. The tangible common equity ratio

decreased 11 basis points primarily due to an increase in tangible assets, reflecting an increase in interest-bearing deposits with banks, partially offset by a decrease in loans.

In December 2009, the Basel Committee on Banking Supervision (the Basel Committee) released proposed Basel III guidance on bank capital and liquidity. In September 2010, the Basel Committee proposed higher global minimum capital standards, including a minimum Tier 1 common capital ratio and additional capital and liquidity requirements, with rules expected to be implemented between 2013 and 2019. Adoption in the U.S. is expected to occur over a similar timeframe, but the final form of the U.S. rules is uncertain. The Corporation believes that the expected impacts from changes in the components of capital and the calculation of risk-weighted assets would not be material. A higher degree of uncertainty exists regarding the implementation and interpretation of the liquidity rules. If subject to these rules, the Corporation expects the liquidity requirements to be manageable. While uncertainty exists in both the final form of the Basel III guidance and whether or not the Corporation will be required to adopt the guidelines, the Corporation is closely monitoring the development of the guidance.

The Corporation’s capital ratios exceeded minimum regulatory requirements as follows:


	March 31, 2011					December 31, 2010
(dollar amounts in millions)	Capital		Ratio			Capital		Ratio
Tier 1 common (a) (b)	$	6,105		10.37	%	$	6,027		10.13	%
Tier 1 risk-based (4.00% - minimum) (b)		6,105		10.37			6,027		10.13
Total risk-based (8.00% - minimum) (b)		8,726		14.83			8,651		14.54
Leverage (3.00% - minimum) (b)		6,105		11.37			6,027		11.26
Tangible common equity (a)		5,722		10.43			5,637		10.54

(a)	See Supplemental Financial Data section for reconcilements of non-GAAP financial measures.

(b)	March 31, 2011 capital and ratios are estimated.

At March 31, 2011, the Corporation and its U.S. banking subsidiaries exceeded the ratios required for an institution to be considered “well capitalized” (Tier 1 risk-based capital, total risk-based capital and leverage ratios greater than six percent, 10 percent and five percent, respectively).

Risk Management

The following updated information should be read in conjunction with the “Risk Management” section on pages 38-60 in the Corporation’s 2010 Annual Report.

Credit Risk

Allowance for Credit Losses and Nonperforming Assets

The allowance for credit losses includes both the allowance for loan losses and the allowance for credit losses on lending-related commitments. The allowance for loan losses represents management’s assessment of probable, estimable losses inherent in the Corporation’s loan portfolio. The allowance for loan losses includes specific allowances, based on individual evaluations of certain loans and loan relationships, and allowances for pools of loans with similar risk characteristics for the remaining business and retail loans. The Corporation defines business loans as those belonging to the commercial, real estate construction, commercial mortgage, lease financing and international loan portfolios. Retail loans consist of traditional residential mortgage, home equity and other consumer loans.

The total allowance for loan losses is sufficient to absorb incurred losses inherent in the total loan portfolio. Unanticipated economic events, including political, economic and regulatory instability could cause changes in the credit characteristics of the portfolio and result in an unanticipated increase in the allowance. Inclusion of other industry-specific portfolio exposures in the allowance, as well as significant increases in the current portfolio exposures, could also increase the amount of the allowance. Any of these events, or some combination thereof, may result in the need for additional provision for loan losses in order to maintain an allowance that complies with credit risk and accounting policies. The allowance for loan losses was $849 million at March 31, 2011, compared to $901 million at December 31, 2010, a decrease of $52 million, or six percent. The decrease resulted primarily from improvements in credit quality, including a decline of $376 million in the Corporation’s watch list loans from December 31, 2010 to March 31, 2011, and a decrease in loan balances. The decrease in the allowance for loan losses consisted of decreases in the Midwest and Other Markets of the Middle Market business line and the Commercial Real Estate (primarily the Western market) and Global Corporate Banking business lines, partially

offset by increases in the Western Market of the Middle Market business line and the Private Banking business line. The allowance for loan losses as a percentage of total period-end loans was 2.17 percent at March 31, 2011, compared to 2.24 percent at December 31, 2010. Nonperforming loans of $1.0 billion at March 31, 2011 decreased $93 million, compared to December 31, 2010. All large nonperforming loans are individually reviewed each quarter for potential charge-offs and reserves. Charge-offs are taken as amounts are determined to be uncollectible. A measure of the level of charge-offs already taken on nonperforming loans is the current book balance as a percentage of the contractual amount owed. At both March 31, 2011 and December 31, 2010, nonperforming loans were charged-off to 54 percent of the contractual amount. This level of write-downs is consistent with losses experienced on loan defaults in the first three months of 2011 and in recent years. The allowance as a percentage of total nonperforming loans, a ratio which results from the actions noted above, was 82 percent at March 31, 2011, compared to 80 percent at December 31, 2010. The Corporation’s loan portfolio is primarily composed of business loans, which, in the event of default, are typically carried on the books at fair value as nonperforming assets for a longer period of time than are consumer loans, resulting in a lower nonperforming loan allowance coverage when compared to banking organizations with higher concentrations of consumer loans.

The allowance for credit losses on lending-related commitments, included in “accrued expenses and other liabilities” on the consolidated balance sheets, includes specific allowances, based on individual evaluations of certain letters of credit in a manner consistent with business loans, and allowances based on the pool of the remaining letters of credit and all unused commitments to extend credit with each internal risk rating. A probability of draw estimate is applied to the commitment amount, and the result is multiplied by standard reserve factors consistent with business loans. In general, the probability of draw for letters of credit is considered certain for all letters of credit supporting loans and for letters of credit assigned an internal risk rating generally consistent with regulatory defined substandard or doubtful. Other letters of credit and all unfunded commitments have a lower probability of draw.

The allowance for credit losses on lending-related commitments was $32 million at March 31, 2011, a decrease of $3 million from $35 million at December 31, 2010.

Nonperforming assets include loans on nonaccrual status, loans which have been renegotiated to less than the original contractual rates (reduced-rate loans) and real estate which has been acquired through foreclosure and awaiting disposition (foreclosed property). Nonperforming assets decreased $131 million to $1.1 billion at March 31, 2011, from $1.2 billion at December 31, 2010, and are summarized in the following table.


(in millions)	March 31, 2011			December 31, 2010
Nonaccrual loans:
Business loans:
Commercial	$	226		$	252
Real estate construction:
Commercial Real Estate business line (a)		195			259
Other business lines (b)		3			4

Total real estate construction		198			263
Commercial mortgage:
Commercial Real Estate business line (a)		197			181
Other business lines (b)		293			302

Total commercial mortgage		490			483
Lease financing		7			7
International		4			2

Total nonaccrual business loans		925			1,007
Retail loans:
Residential mortgage		58			55
Consumer:
Home equity		6			5
Other consumer		7			13

Total consumer		13			18

Total nonaccrual retail loans		71			73

Total nonaccrual loans		996			1,080
Reduced-rate loans		34			43

Total nonperforming loans		1,030			1,123
Foreclosed property		74			112

Total nonperforming assets	$	1,104		$	1,235


Nonperforming loans as a percentage of total loans		2.63	%		2.79	%
Nonperforming assets as a percentage of total loans and foreclosed property		2.81			3.06
Allowance for loan losses as a percentage of total nonperforming loans		82			80
Loans past due 90 days or more and still accruing	$	72		$	62
Loans past due 90 days or more and still accruing as a percentage of total loans		0.18	%		0.15	%

(a)	Primarily loans to real estate investors and developers.

(b)	Primarily loans secured by owner-occupied real estate.

The following table presents a summary of changes in nonaccrual loans.


	Three Months Ended
(in millions)	March 31, 2011			December 31, 2010
Nonaccrual loans at beginning of period	$	1,080		$	1,163
Loans transferred to nonaccrual (a)		166			180
Nonaccrual business loan gross charge-offs (b)		(111	)		(120	)
Loans transferred to accrual status (a)		(4	)		(4	)
Nonaccrual business loans sold (c)		(60	)		(41	)
Payments/Other (d)		(75	)		(98	)

Nonaccrual loans at end of period	$	996		$	1,080

(a)	Based on an analysis of nonaccrual loans with book balances greater than $2 million.

(b)	Analysis of gross loan charge-offs:


Nonaccrual business loans	$	111	$	120
Performing watch list loans		2		—
Retail		10		20

Total gross loan charge-offs	$	123	$	140

(c)	Analysis of loans sold:


Nonaccrual business loans	$	60	$	41
Performing watch list loans		35		29

Total loans sold	$	95	$	70

(d)

Includes net changes related to nonaccrual loans with balances less than $2 million, payments on nonaccrual loans with book balances greater than $2 million, transfers of nonaccrual loans to foreclosed property and retail loan charge-offs. Excludes business loan gross charge-offs and business nonaccrual loans sold.

The following table presents the number of nonaccrual loan relationships and balance by size of relationship at March 31, 2011.


(dollar amounts in millions) Nonaccrual Relationship Size	Number of Relationships		Balance
Under $2 million (a)		932	$	229
$2 million - $5 million		66		206
$5 million - $10 million		24		163
$10 million - $25 million		22		340
Greater than $25 million		2		58

Total loan relationships at March 31, 2011		1,046	$	996

(a)	For nonaccrual balances under $2 million, number of relationships is represented by the number of borrowers.

There were 21 loan relationships with balances greater than $2 million, totaling $166 million, transferred to nonaccrual status in the first quarter 2011, a decrease of $14 million from $180 million in the fourth quarter 2010. Of the transfers to nonaccrual in the first quarter 2011, $101 million were from the Middle Market business line, primarily in the Midwest Market and Other Markets and $37 million were from Commercial Real Estate business line in the Midwest market. There were 4 loan relationships greater than $10 million, totaling $98 million, transferred to nonaccrual in the first quarter 2011, including $61 million and $37 million to companies in the Middle Market and Commercial Real Estate business lines, respectively.

In the first quarter of 2011, the Corporation sold $60 million of nonaccrual business loans at prices approximating carrying value plus reserves, which were substantially all from the Commercial Real Estate and Global Corporate Banking business lines.

The following table presents a summary of nonaccrual loans at March 31, 2011 and loan relationships transferred to nonaccrual and net loan charge-offs for the three months ended March 31, 2011, based primarily on the Standard Industrial Classification (SIC) industry categories.


(dollar amounts in millions)	March 31, 2011				Three Months Ended March 31, 2011
Industry Category	Nonaccrual Loans				Loans Transferred to Nonaccrual (a)				Net Loan Charge-Offs (Recoveries)
Real Estate	$	505	51	%	$	45	27	%	$	26	25	%
Services		98	10			13	8			13	13
Residential Mortgage		58	6			—	—			2	2
Retail Trade		55	6			6	3			4	4
Transportation & Warehousing		48	5			41	25			12	12
Contractors		34	3			33	20			10	10
Manufacturing		33	3			10	6			5	5
Hotels, etc.		30	3			—	—			7	7
Holding & Other Invest. Co.		29	3			5	3			—	—
Wholesale Trade		23	2			5	3			3	3
Entertainment		21	2			—	—			3	3
Information		20	2			—	—			1	1
Automotive Supplier		15	2			—	—			3	3
Finance		12	1			—	—			2	2
Natural Resources		8	1			—	—			—	—
Consumer Non-Durables		3	—			8	5			6	6
Other (b)		4	—			—	—			4	4

Total	$	996	100	%	$	166	100	%	$	101	100	%

(a)	Based on an analysis of nonaccrual loan relationships with book balances greater than $2 million.

(b)	Consumer, excluding residential mortgage and certain personal purpose, nonaccrual loans and net charge-offs, are included in the “Other” category.

Business loans are generally placed on nonaccrual status when management determines that full collection of principal or interest is unlikely or when principal or interest payments are 90 days past due, unless the loan is fully collateralized and in the process of collection. Residential mortgage and home equity loans are generally placed on nonaccrual status and charged off to current appraised values, less costs to sell, during the foreclosure process, normally no later than 180 days past due. Other consumer loans are generally not placed on nonaccrual status and are charged off at no later than 120 days past due, earlier if deemed uncollectible. Loan amounts in excess of probable future cash collections are charged off to an amount that management ultimately expects to collect. At the time a loan is placed on nonaccrual status, interest previously accrued but not collected is charged against current income. Income on such loans is then recognized only to the extent that cash is received and the future collection of principal is probable. Generally, a loan may be returned to accrual status when all delinquent principal and interest have been received and the Corporation expects repayment of the remaining contractual principal and interest, or when the loan is both well secured and in the process of collection. For a further discussion of impaired loans refer to Note 1 to the consolidated financial statements in the Corporation’s 2010 Annual Report.

At March 31, 2011, troubled debt restructurings totaled $202 million, of which $146 million were included in nonperforming loans ($112 million nonaccrual loans and $34 million reduced-rate loans) and $56 million were included in performing loans. Performing restructured loans included $41 million of commercial loans (mostly in the Middle Market business line) and $14 million of commercial mortgage loans (across several business lines) at March 31, 2011. At December 31, 2010, troubled debt restructurings totaled $165 million, including $44 million performing restructured loans, $78 million nonaccrual loans and $43 million reduced-rate loans. The $37 million increase in troubled debt restructurings was primarily due to increases in the Technology and Life Sciences and Middle Market business lines.

Loans past due 90 days or more and still accruing interest generally represent loans that are well collateralized and in a continuing process that is expected to result in repayment or restoration to current status. Loans past due 90 days or more and still accruing increased $10 million, to $72 million at March 31, 2011, compared to $62 million at December 31, 2010 and are summarized in the following table. Loans past due 30-89 days increased $92 million to $373 million at March 31, 2011, compared to $281 million at December 31, 2010.

Loans past due 90 days or more and still accruing are summarized in the following table.


(in millions)	March 31, 2011		December 31, 2010
Business loans:
Commercial	$	15	$	3
Real estate construction		12		22
Commercial mortgage		14		16

Total business loans		41		41
Retail loans:
Residential mortgage		17		7
Consumer		14		14

Total retail loans		31		21

Total loans past due 90 days or more and still accruing	$	72	$	62

The following table presents a summary of total internally classified watch list loans. Watch list loans that meet certain criteria are individually subjected to quarterly credit quality reviews, and the Corporation may establish specific allowances for such loans. The $376 million decrease in total watch list loans, compared to December 31, 2010, is reflected in the decrease in the allowance for loan losses in the same period.


(dollar amounts in millions)	March 31, 2011			December 31, 2010
Total watch list loans	$	5,166		$	5,542
As a percentage of total loans		13.2	%		13.8	%

The following table presents a summary of foreclosed property by property type.


(in millions)	March 31, 2011		December 31, 2010
Construction, land development and other land	$	36	$	60
Single family residential properties		13		20
Multi-family residential properties		1		—
Other non-land, nonresidential properties		24		32

Total foreclosed property	$	74	$	112

At March 31, 2011, foreclosed property totaled $74 million and consisted of approximately 188 properties, compared to $112 million and approximately 230 properties at December 31, 2010.

The following table presents a summary of changes in foreclosed property.


	Three Months Ended
(in millions)	March 31, 2011			December 31, 2010
Foreclosed property at beginning of period	$	112		$	120
Acquired in foreclosure		13			21
Write-downs		(7	)		(5	)
Foreclosed property sold (a)		(44	)		(25	)
Capitalized expenditures		—			1

Foreclosed property at end of period	$	74		$	112

(a) Net gain on foreclosed property sold	$	2		$	4

At March 31, 2011, there were seven foreclosed properties with a carrying value greater than $2 million, totaling $33 million, compared to 10 foreclosed properties totaling $61 million at December 31, 2010. Of the foreclosed properties with balances greater than $2 million at March 31, 2011, $21 million and $10 million were in the Commercial Real Estate and the Middle Market business lines, respectively. At March 31, 2011, there was one foreclosed property with a carrying value greater than $10 million, totaling $12 million, compared to two foreclosed properties, totaling $29 million at December 31, 2010.

Commercial and Residential Real Estate Lending

The following table summarizes the Corporation’s commercial real estate loan portfolio by loan category as of March 31, 2011 and December 31, 2010.


(in millions)	March 31, 2011		December 31, 2010
Real estate construction loans:
Commercial Real Estate business line (a)	$	1,606	$	1,826
Other business lines (b)		417		427

Total real estate construction loans	$	2,023	$	2,253

Commercial mortgage loans:
Commercial Real Estate business line (a)	$	1,918	$	1,937
Other business lines (b)		7,779		7,830

Total commercial mortgage loans	$	9,697	$	9,767

(a)	Primarily loans to real estate investors and developers.

(b)	Primarily loans secured by owner-occupied real estate.

The Corporation limits risk inherent in its commercial real estate lending activities by limiting exposure to those borrowers directly involved in the commercial real estate markets and adhering to conservative policies on loan-to-value ratios for such loans. Commercial real estate loans, consisting of real estate construction and commercial mortgage loans, totaled $11.7 billion at March 31, 2011, of which $3.5 billion, or 30 percent, were to borrowers in the Commercial Real Estate business line, which includes loans to residential real estate investors and developers. The remaining $8.2 billion, or 70 percent, of commercial real estate loans in other business lines consisted primarily of owner-occupied commercial mortgages which bear credit characteristics similar to non-commercial real estate business loans.

The real estate construction portfolio totaled $2.0 billion at March 31, 2011. The real estate construction loan portfolio primarily contains loans made to long-time customers with satisfactory completion experience. However, the significant and sudden decline in residential real estate activity that began in late 2008 in the Western, Florida and Midwest markets proved extremely difficult for many of the smaller residential real estate developers. Of the $1.6 billion of real estate construction loans in the Commercial Real Estate business line, $195 million were on nonaccrual status at March 31, 2011, including single family projects totaling $63 million (primarily in the Western and Florida markets), residential land development projects totaling $53 million (primarily in the Western market), multi-use projects totaling $46 million (primarily in the Western market) and retail projects totaling $25 million (Western and Midwest markets). Real estate construction loan net charge-offs in the Commercial Real Estate business line totaled $8 million for the three months ended March 31, 2011, including $3 million from multi-use projects (Western market), $3 million from single family projects (primarily the Western market) and $2 million from multi-family projects (primarily the Florida market).

The commercial mortgage loan portfolio totaled $9.7 billion at March 31, 2011 and included $1.9 billion in the Commercial Real Estate business line and $7.8 billion in other business lines. Of the $1.9 billion of commercial mortgage loans in the Commercial Real Estate business line, $197 million were on nonaccrual status at March 31, 2011, including retail projects totaling $55 million (primarily in the Midwest market), multi-family projects totaling $28 million (primarily in the Florida market), single family projects totaling $25 million (primarily in the Other Markets) and residential land carry projects totaling $24 million. Commercial mortgage loan net charge-offs in the Commercial Real Estate business line totaled $2 million for the three months ended March 31, 2011, primarily including net charge-offs of $3 million from retail projects (Midwest market) and $2 million from multi-use projects (Midwest market), partially offset by a $4 million net recovery from residential land carry projects (primarily in the Western market).

The geographic distribution and project type of commercial real estate loans are important factors in diversifying credit risk within the portfolio. The following table reflects real estate construction and commercial mortgage loans to borrowers in the Commercial Real Estate business line by project type and location of property.


(dollar amounts in millions)	March 31, 2011
	Location of Property															December 31, 2010
Project Type:	Western		Michigan		Texas		Florida		Other Markets		Total		% of Total			Total		% of Total
Real estate construction loans:
Commercial Real Estate business line:
Residential:
Single family	$	87	$	18	$	19	$	34	$	17	$	175		11	%	$	196		10	%
Land development		57		8		34		9		23		131		8			157		9

Total residential		144		26		53		43		40		306		19			353		19
Other construction:
Multi-family		129		—		206		129		67		531		33			579		32
Retail		87		46		223		26		30		412		26			485		27
Multi-use		74		6		52		—		28		160		10			201		11
Office		57		5		44		14		—		120		7			119		6
Commercial		—		10		20		—		—		30		2			47		3
Land development		1		9		9		—		—		19		1			24		1
Other		26		—		—		2		—		28		2			18		1

Total	$	518	$	102	$	607	$	214	$	165	$	1,606		100	%	$	1,826		100	%


Commercial mortgage loans:
Commercial Real Estate business line:
Residential:
Single family	$	14	$	4	$	15	$	6	$	42	$	81		4	%	$	69		4	%
Land carry		41		31		20		31		11		134		7			133		6

Total residential		55		35		35		37		53		215		11			202		10
Other commercial mortgage:
Multi-family		75		52		122		114		45		408		21			404		22
Retail		153		98		50		64		40		405		21			386		20
Multi-use		114		35		39		—		67		255		13			249		13
Land carry		134		45		19		12		13		223		12			239		12
Office		140		33		7		11		14		205		11			221		11
Commercial		49		38		17		—		24		128		7			121		6
Other		7		44		7		—		21		79		4			115		6

Total	$	727	$	380	$	296	$	238	$	277	$	1,918		100	%	$	1,937		100	%

Residential real estate development outstandings of $521 million at March 31, 2011 decreased $34 million, or six percent, from $555 million at December 31, 2010.

The following table summarizes the Corporation’s residential mortgage and home equity loan portfolio by geographic market as of March 31, 2011.


	March 31, 2011
(dollar amounts in millions)	Residential Mortgage Loans		% of Total			Home Equity Loans		% of Total
Geographic market:
Midwest	$	554		36	%	$	1,011		61	%
Western		540		35			450		27
Texas		233		15			152		9
Florida		220		14			48		3
Other Markets		3		—			—		—

Total	$	1,550		100	%	$	1,661		100	%

Residential real estate loans, which consist of traditional residential mortgages and home equity loans and lines of credit, totaled $3.2 billion at March 31, 2011. Residential mortgages totaled $1.6 billion at March 31, 2011, and were primarily larger, variable-rate mortgages originated and retained for certain private banking relationship customers. Of the $1.6 billion of residential mortgage loans outstanding, $58 million were on nonaccrual status at March 31, 2011. The home equity portfolio totaled $1.6 billion at March 31, 2011, of which $1.5 billion was outstanding under primarily variable-rate, interest-only home equity lines of credit and $197 million consisted of closed-end home equity loans. Of the $1.6 billion of home equity loans outstanding, $6 million were on nonaccrual status at March 31, 2011. A substantial majority of the home equity portfolio was secured by junior liens.

The Corporation rarely originates residential real estate loans with a loan-to-value ratio above 100 percent at origination, has no sub-prime mortgage programs and does not originate payment-option adjustable-rate mortgages or other nontraditional mortgages that allow negative amortization. A significant majority of residential mortgage originations are sold in the secondary market. Since 2008, the Corporation has used a third party to originate, document and underwrite residential mortgage loans on behalf of the Corporation. Under this arrangement, the third party assumes any repurchase liability for the loans it originates. The Corporation has repurchase liability exposure for residential mortgage loans originated prior to 2008, however based on historical experience, the Corporation believes such exposure, which could be triggered by early payment defaults by borrowers or by underwriting discrepancies, is minimal. The residential real estate portfolio is principally located within the Corporation’s primary geographic markets. The economic recession and significant declines in home values in the Western, Florida and Midwest markets following the financial market turmoil beginning in the fall of 2008 adversely impacted the residential real estate portfolio. At March 31, 2011, the Corporation estimated that, of the $17 million total residential mortgage loans past due 90 days or more and still accruing interest, approximately $2 million exceeded 90 percent of the current value of the underlying collateral, based on S&P/Case-Shiller home price indices. To account for this exposure, the Corporation factors changes in home values into estimated loss ratios for residential real estate loans, using index-based estimates by major metropolitan area, resulting in an increased allowance allocated for residential real estate loans when home values decline. Additionally, to mitigate increasing credit exposure due to depreciating home values, the Corporation periodically reviews home equity lines of credit and makes line reductions or converts outstanding balances at line maturity to closed-end, amortizing loans when necessary.

Shared National Credits

Shared National Credit (SNC) loans are facilities greater than $20 million shared by three or more federally supervised financial institutions that are reviewed by regulatory authorities at the agent bank level. The Corporation generally seeks to obtain ancillary business at the origination of a SNC relationship. Loans classified as SNC loans (approximately 920 borrowers at March 31, 2011) totaled $7.3 billion at both March 31, 2011 and December 31, 2010. SNC net loan charge-offs totaled $1 million and $17 million for the three- periods ended March 31, 2011 and December 31, 2010, respectively. SNC loans, diversified by both business line and geographic market, comprised approximately 19 percent and 18 percent of total loans at March 31, 2011 and December 31, 2010, respectively. SNC loans are held to the same credit underwriting standards as the remainder of the loan portfolio and face similar credit challenges.

Automotive Lending

Loans to borrowers involved with automotive production totaled approximately $900 million at March 31, 2011, compared to $831 million at December 31, 2010. Loans in the National Dealer Services business line totaled $4.0 billion at both March 31, 2011 and December 31, 2010. Of the $4.0 billion of outstanding loans in the National Dealer Services business line at March 31, 2011, approximately $2.5 billion, or 62 percent, were to foreign franchises, $1.0 billion, or 26 percent, were to domestic franchises and $469 million, or 12 percent, were to other. Other dealer loans include obligations where a primary franchise was indeterminable, such as loans to large public dealership consolidators and rental car, leasing, heavy truck and recreation vehicle companies.

For further discussion of credit risk, see the “Credit Risk” section on pages 38-52 in the Corporation’s 2010 Annual Report.

Market and Liquidity Risk

Interest Rate Risk

Net interest income is the predominant source of revenue for the Corporation. Interest rate risk arises primarily through the Corporation’s core business activities of extending loans and accepting deposits. The Corporation’s balance sheet is predominantly characterized by floating-rate loans funded by a combination of core deposits and wholesale borrowings. Approximately 80 percent of the Corporation’s loans were floating at March 31, 2011, of which approximately 70 percent were based on LIBOR and 30 percent were based on prime. This creates a natural imbalance between the floating-rate loan portfolio and the more slowly repricing deposit products. The result is that growth and/or contraction in the Corporation’s core businesses will lead to sensitivity to interest rate movements without mitigating actions. Examples of such actions are purchasing investment securities, primarily fixed-rate, which provide liquidity to the balance sheet and act to mitigate the inherent interest sensitivity, and hedging the sensitivity with interest rate swaps. The Corporation actively manages its exposure to interest rate risk, with the principal objective of optimizing net interest income and the economic value of equity while operating within acceptable limits established for interest rate risk and maintaining adequate levels of funding and liquidity.

The Corporation frequently evaluates net interest income under various balance sheet and interest rate scenarios, looking at both 12 and 24 month time horizons, using simulation modeling analysis as its principal risk management evaluation technique. The results of these analyses provide the information needed to assess the balance sheet structure. Changes in economic activity, whether domestic or international, different from those management included in its simulation analyses could translate into a materially different interest rate environment than currently expected. Management evaluates a base case net interest income under an unchanged interest rate environment and what is believed to be the most likely balance sheet structure. This base case net interest income is then evaluated against non-parallel interest rate scenarios that increase and decrease 200 basis points in a linear fashion from the base case over twelve months resulting in a 100 basis points average change in interest rates over the period. Due to the current low level of interest rates, the analysis reflects a declining interest rate scenario of a 25 basis point drop, to zero percent. In addition, consistent with each interest rate scenario, adjustments to asset prepayment levels, yield curves, and overall balance sheet mix and growth assumptions are made. These assumptions are inherently uncertain and, as a result, the model may not precisely predict the impact of higher or lower interest rates on net interest income. Actual results may differ from simulated results due to timing, magnitude and frequency of changes in interest rates, market conditions and management strategies, among other factors. However, the model can indicate the likely direction of change. Existing derivative instruments entered into for risk management purposes are included in these analyses, but no additional hedging is forecasted.

The table below, as of March 31, 2011 and December 31, 2010, displays the estimated impact on net interest income during the next 12 months by relating the base case scenario results to those from the rising and declining rate scenarios described above.


	March 31, 2011						December 31, 2010
(dollar amounts in millions)	Amount			%			Amount			%
Sensitivity on net interest income to changes in interest rates:
+200 basis points	$	101			7	%	$	104			7	%
- 25 basis points (to zero percent)		(16	)		(1	)		(15	)		(1	)

In addition to the simulation analysis, an economic value of equity analysis is performed for a longer term view of the interest rate risk position. The economic value of equity analysis begins with an estimate of the economic value of the financial assets and liabilities on the Corporation’s balance sheet, derived through discounting cash flows based on actual rates at the end of the period, and then applies the estimated impact of rate movements to the economic value of assets, liabilities and off-balance sheet instruments. The economic value of equity is then calculated as the difference between the estimated market value of assets and liabilities net of the impact of off-balance sheet instruments. As with net interest income shocks, a variety of alternative scenarios are performed to measure the impact on economic value of equity, including changes in the level, slope and shape of the yield curve.

The table below, as of March 31, 2011 and December 31, 2010, displays the estimated impact on the economic value of equity from a 200 basis point immediate parallel increase or decrease in interest rates. Similar to the simulation analysis above, due to the current low level of interest rates, the economic value of equity analyses below reflect an interest rate scenario of an immediate 25 basis point drop, to zero percent, while the rising interest rate scenario reflects an immediate 200 basis point rise. The change in the sensitivity of the economic value of equity to a 200 basis point parallel increase in rates between December 31, 2010 and March 31, 2011 was primarily driven by changes in market interest rates, deposit mix, and the Corporation’s mortgage-backed securities portfolio’s forecasted prepayments.


	March 31, 2011						December 31, 2010
(dollar amounts in millions)	Amount			%			Amount			%
Sensitivity of economic value of equity to changes in interest rates:
+200 basis points	$	282			3	%	$	435			5	%
- 25 basis points (to zero percent)		(80	)		(1	)		(100	)		(1	)

Wholesale Funding

The Corporation satisfies liquidity requirements with either liquid assets or various funding sources. Liquid assets, which totaled $9.7 billion at March 31, 2011, compared to $7.8 billion at December 31, 2010, provide a reservoir of liquidity. Liquid assets include cash and due from bank, federal funds sold and securities purchased under agreements to resell, interest-bearing deposits with banks, other short-term investments and unencumbered investment securities available-for-sale. At March 31, 2011, the Corporation held excess liquidity, represented by $3.5 billion deposited with the FRB, compared to $1.3 billion at December 31, 2010.

The Corporation may access the purchased funds market when necessary, which includes certificates of deposit issued to institutional investors in denominations in excess of $100,000 and to retail customers in denominations of less than $100,000 through brokers (“other time deposits” on the consolidated balance sheets), foreign office time deposits and short-term borrowings. Purchased funds totaled $560 million at March 31, 2011, compared to $562 million at December 31, 2010. Capacity for incremental purchased funds at March 31, 2011, consisted largely of federal funds purchased, brokered certificates of deposits and securities sold under agreements to repurchase. In addition, the Corporation is a member of the Federal Home Loan Bank of Dallas, Texas (FHLB), which provides short- and long-term funding to its members through advances collateralized by real estate-related assets. The actual borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. As of March 31, 2011, the Corporation had $2.5 billion of outstanding borrowings from the FHLB with remaining maturities ranging from June 2011 to May 2014. The Corporation also maintains a shelf registration statement with the Securities and Exchange Commission from which it may issue debt and/or equity securities. Additionally, the Bank had the ability to issue up to $14.0 billion of debt at March 31, 2011 under an existing $15 billion medium-term senior note program which allows the issuance of debt with maturities between three months and 30 years.

Other Market Risks

Certain components of the Corporation’s noninterest income, primarily fiduciary income, are at risk to fluctuations in the market values of underlying assets, particularly equity and debt securities. Other components of noninterest income, primarily brokerage fees, are at risk to changes in the volume of market activity.

At March 31, 2011, the Corporation had a $18 million portfolio of investments in indirect private equity and venture capital funds, with commitments of $8 million to fund additional investments in future periods, compared to a portfolio of $47 million at December 31, 2010. In the first quarter 2011, the Corporation sold 44 funds for a total of $31 million and recognized a net gain of $2 million. 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 readily marketable and are included in “accrued income and other assets” on the consolidated

balance sheets. The investments are individually reviewed for impairment on a quarterly basis by comparing the carrying value to the estimated fair value.

For further discussion of market risk, see Note 6 to these unaudited consolidated financial statements and pages 52-59 in the Corporation’s 2010 Annual Report.

The Dodd-Frank Wall Street Reform and Consumer Protection Act

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Financial Reform Act”) was signed into law. The Financial Reform Act provides for, among other matters, increased regulatory supervision and examination of financial institutions, the imposition of more stringent capital requirements on financial institutions and increased regulation of derivatives and hedging transactions. Provided below is an overview of key elements of the Financial Reform Act relevant to the Corporation. Most of the provisions contained in the Financial Reform Act will be effective immediately upon enactment; however, many have delayed effective dates. Implementation of the Financial Reform Act will require many new mandatory and discretionary rules to be made by federal regulatory agencies over the next several years. The estimates of the impact on the Corporation discussed below are based on the limited information currently available and, given the uncertainty of the timing and scope of the impact, are subject to change until final rulemaking is complete.

•

Interest on Demand Deposits: Allows interest on commercial demand deposits, which could lead to increased cost of commercial demand deposits, depending on the interplay of interest, deposit credits and service charges.

•

Unlimited Deposit Insurance Extension: Provides unlimited deposit insurance on noninterest-bearing accounts from December 31, 2010 to December 31, 2012. There will not be a separate assessment for unlimited deposit insurance coverage for this period.

•

Deposit Insurance: Changes the definition of assessment base from domestic deposits to net assets (average consolidated total assets less average tangible equity), increases the deposit insurance fund’s minimum reserve ratio and permanently increases general deposit insurance coverage from $100,000 to $250,000. The Corporation expects 2011 FDIC insurance expense to be slightly lower than the 2010 expense.

•

Derivatives: Allows continued trading of foreign exchange and interest rate derivatives. Requires banks to shift energy, uncleared commodities and agriculture derivatives to a separately capitalized subsidiary within their holding company. Directly impacts client-driven energy derivatives business (approximately $1 million in annual revenue, based on full-year 2010).

•

Interchange Fee: Limits debit card transaction processing fees that card issuers can charge to merchants. Based on the options currently contemplated in the draft, estimated annual revenue from debit card PIN and signature-based interchange fees in 2011 is expected to decrease by approximately $13 million to $15 million.

•

Trust Preferred Securities: Prohibits holding companies with more than $15 billion in assets from including trust preferred securities as Tier 1 capital, and allows for a phase-in period of three years, beginning January 1, 2013. As of March 31, 2011, the Corporation had no outstanding trust preferred securities.

Critical Accounting Policies

The Corporation’s consolidated financial statements are prepared based on the application of accounting policies, the most significant of which are described in Note 1 to the consolidated financial statements included in the Corporation’s 2010 Annual Report. These policies require numerous estimates and strategic or economic assumptions, which may prove inaccurate or subject to variations. Changes in underlying factors, assumptions or estimates could have a material impact on the Corporation’s future financial condition and results of operations. At December 31, 2010, the most critical of these significant accounting policies were the policies related to allowance for credit losses, valuation methodologies, goodwill, pension plan accounting and income taxes. These policies were reviewed with the Audit Committee of the Corporation’s Board of Directors and are discussed more fully on pages 60-68 in the Corporation’s 2010 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 the critical accounting policies or estimates and assumptions from those discussed in the Corporation’s 2010 Annual Report.

Supplemental Financial Data

The following tables provide a reconciliation of non-GAAP financial measures used in this financial review with financial measures defined by GAAP.


	Three Months Ended March 31,
(dollar amounts in millions)	2011			2010
Impact of Excess Liquidity on Net Interest Margin (FTE):
Net interest income (FTE)	$	396		$	416
Less:
Interest earned on excess liquidity (a)		1			3

Net interest income (FTE), excluding excess liquidity	$	395		$	413

Average earning assets	$	49,347		$	52,941
Less:
Average net unrealized gains on investment securities available-for-sale		22			62

Average earning assets for net interest margin (FTE)		49,325			52,879
Less:
Excess liquidity (a)		2,297			4,092

Average earning assets for net interest margin (FTE), excluding excess liquidity	$	47,028		$	48,787

Net interest margin (FTE)		3.25	%		3.18	%
Net interest margin (FTE), excluding excess liquidity		3.39			3.42
Impact of excess liquidity on net interest margin (FTE)		(0.14	)		(0.24	)


	March 31, 2011			December 31, 2010
Tier 1 Common Capital Ratio:
Tier 1 capital (b) (c)	$	6,105		$	6,027
Tier 1 common capital (c)		6,105			6,027

Risk-weighted assets (b) (c)	$	58,849		$	59,506
Tier 1 capital ratio (c)		10.37	%		10.13	%
Tier 1 common capital ratio (c)		10.37			10.13

Tangible Common Equity Ratio:
Total shareholders’ equity	$	5,877		$	5,793
Less:
Goodwill		150			150
Other intangible assets		5			6

Tangible common equity	$	5,722		$	5,637

Total assets	$	55,017		$	53,667
Less:
Goodwill		150			150
Other intangible assets		5			6

Tangible assets	$	54,862		$	53,511

Common equity ratio		10.68	%		10.80	%
Tangible common equity ratio		10.43			10.54

(a)	Excess liquidity represented by interest earned on and average balances deposited with the Federal Reserve Bank (FRB).

(b)	Tier 1 capital and risk-weighted assets as defined by regulation.

(c)	March 31, 2011 Tier 1 capital and risk-weighted assets are estimated.

The net interest margin (FTE), excluding excess liquidity, removes interest earned on balances deposited with the FRB from net interest income (FTE) and average balances deposited with the FRB from average earning assets from the numerator and denominator of the net interest margin (FTE) ratio, respectively. The Corporation believes this measurement provides meaningful information to investors, regulators, management and others of the impact on net interest income and net interest margin resulting from the Corporation’s short-term investment in low yielding instruments.

The Tier 1 common capital ratio removes preferred stock and qualifying trust preferred securities from Tier 1 capital as defined by and calculated in conformity with bank regulations. The tangible common equity ratio removes preferred stock and the effect of intangible assets from capital and the effect of intangible assets from total assets. The Corporation believes these measurements are meaningful measures of capital adequacy used by investors, regulators, management and others to evaluate the adequacy of common equity and to compare against other companies in the industry.

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and qualitative disclosures for the current period can be found in the “Market and Liquidity Risk” section of “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

ITEM 4.

Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures . The Corporation maintains a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed by the Corporation in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Corporation’s management, including the Corporation’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management has evaluated, with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Corporation’s disclosure controls and procedures as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on the evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, the Corporation’s disclosure controls and procedures are effective.

(b)

Changes in Internal Control Over Financial Reporting . During the period to which this report relates, there have not been any changes in the Corporation’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or that are reasonably likely to materially affect, such controls.

PART II. OTHER INFORMATION

ITEM 1.

Legal Proceedings

For information regarding the Corporation’s legal proceedings, see “Part I. Item 1. Note 13—Contingent Liabilities,” which is incorporated herein by reference.

ITEM 1A.

Risk Factors

There has been no material change in the Corporation’s risk factors as previously disclosed in our Form 10-K for the fiscal year ended December 31, 2010 in response to Part I, Item 1A. of such Form 10-K. Such risk factors are incorporated herein by reference.

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

For information regarding the Corporation’s purchase of equity securities, see “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital,” which is incorporated herein by reference.

ITEM 6.

Exhibits


(2.1)		Agreement and Plan of Merger, dated as of January 16, 2011, by and between Comerica Incorporated and Sterling Bancshares, Inc. (the schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K) (filed as Annex B to Amendment No. 2 to Registrant’s Registration Statement on Form S-4 (File No. 333-172211), and incorporated herein by reference).

(3.1)		Restated Certificate of Incorporation of Comerica Incorporated (filed as Exhibit 3.1 to Registrant’s Current Report on Form 8-K dated August 4, 2010, and incorporated herein by reference).

(3.2)		Certificate of Amendment to Restated Certificate of Incorporation of Comerica Incorporated.

(3.3)		Amended and Restated Bylaws of Comerica Incorporated.

(4)		[Reference is made to Exhibits 3.1, 3.2 and 3.3 in respect of instruments defining the rights of security holders. In accordance with Regulation S-K Item No. 601(b)(4)(iii), the Registrant is not filing copies of instruments defining the rights of holders of long-term debt because none of those instruments authorizes debt in excess of 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. The Registrant hereby agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.]

(10.1)		Comerica Incorporated 2006 Amended and Restated Long-Term Incentive Plan (filed as Exhibit 10.1 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference).

(10.2)		Comerica Incorporated Amended and Restated Employee Stock Purchase Plan (amended and restated November 16, 2010, with amendments effective January 1, 2011) (filed as Exhibit 10.4 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference).

(10.3)		Restrictive Covenants and General Release Agreement by and between Mary Constance Beck and Comerica Incorporated dated January 21, 2011 (filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated January 21, 2011, and incorporated herein by reference).

(10.4)		Form of Standard Comerica Incorporated Non-Qualified Stock Option Agreement under the Comerica Incorporated Amended and Restated 2006 Long-Term Incentive Plan (2011 version) (filed as Exhibit 10.44 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference).

(10.5)		Form of Standard Comerica Incorporated Restricted Stock Award Agreement (cliff vesting) under the Comerica Incorporated 2006 Amended and Restated Long-Term Incentive Plan (2011 version) (filed as Exhibit 10.45 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference).

(10.6)		Form of Standard Comerica Incorporated Restricted Stock Award Agreement (non-cliff vesting) under the Amended and Restated Comerica Incorporated 2006 Long-Term Incentive Plan (2011 version) (filed as Exhibit 10.46 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference).

(10.7)		Form of Standard Comerica Incorporated Restricted Stock Unit Agreement under the Amended and Restated Comerica Incorporated 2006 Long-Term Incentive Plan (2011 version) (filed as Exhibit 10.47 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference).



(10.8)		Comerica Incorporated 2011 Management Incentive Plan (filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated April 26, 2011, and incorporated herein by reference).

(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)

(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)

(32)		Section 1350 Certification of Periodic Report (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

(101)		Financial statements from Quarterly Report on Form 10-Q of the Corporation for the quarter ended March 31, 2011, formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Changes in Shareholders’ Equity, (iv) the Consolidated Statement of Cash Flows and (v) the Notes to Consolidated Financial Statements. †

†	As provided in Rule 406T of Regulation S-T, this information shall not be deemed “filed” for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 or otherwise subject to liability under those sections.

SIGNATURE

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.

COMERICA INCORPORATED

(Registrant)

/s/ Muneera S. Carr

Muneera S. Carr

Senior Vice President and Chief Accounting Officer

Date: May 2, 2011

EXHIBIT INDEX


Exhibit No.		Description

2.1		Agreement and Plan of Merger, dated as of January 16, 2011, by and between Comerica Incorporated and Sterling Bancshares, Inc. (the schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K) (filed as Annex B to Amendment No. 2 to Registrant’s Registration Statement on Form S-4 (File No. 333-172211), and incorporated herein by reference).

3.1		Restated Certificate of Incorporation of Comerica Incorporated (filed as Exhibit 3.1 to Registrant’s Current Report on Form 8-K dated August 4, 2010, and incorporated herein by reference).

3.2		Certificate of Amendment to Restated Certificate of Incorporation of Comerica Incorporated.

3.3		Amended and Restated Bylaws of Comerica Incorporated.

4		[Reference is made to Exhibits 3.1, 3.2 and 3.3 in respect of instruments defining the rights of security holders. In accordance with Regulation S-K Item No. 601(b)(4)(iii), the Registrant is not filing copies of instruments defining the rights of holders of long-term debt because none of those instruments authorizes debt in excess of 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. The Registrant hereby agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.]

10.1		Comerica Incorporated 2006 Amended and Restated Long-Term Incentive Plan (filed as Exhibit 10.1 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference).

10.2		Comerica Incorporated Amended and Restated Employee Stock Purchase Plan (amended and restated November 16, 2010, with amendments effective January 1, 2011) (filed as Exhibit 10.4 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference).

10.3		Restrictive Covenants and General Release Agreement by and between Mary Constance Beck and Comerica Incorporated dated January 21, 2011 (filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated January 21, 2011, and incorporated herein by reference).

10.4		Form of Standard Comerica Incorporated Non-Qualified Stock Option Agreement under the Comerica Incorporated Amended and Restated 2006 Long-Term Incentive Plan (2011 version) (filed as Exhibit 10.44 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference).

10.5		Form of Standard Comerica Incorporated Restricted Stock Award Agreement (cliff vesting) under the Comerica Incorporated 2006 Amended and Restated Long-Term Incentive Plan (2011 version) (filed as Exhibit 10.45 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference).



10.6		Form of Standard Comerica Incorporated Restricted Stock Award Agreement (non-cliff vesting) under the Amended and Restated Comerica Incorporated 2006 Long-Term Incentive Plan (2011 version) (filed as Exhibit 10.46 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference).

10.7		Form of Standard Comerica Incorporated Restricted Stock Unit Agreement under the Amended and Restated Comerica Incorporated 2006 Long-Term Incentive Plan (2011 version) (filed as Exhibit 10.47 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010, and incorporated herein by reference).

10.8		Comerica Incorporated 2011 Management Incentive Plan (filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated April 26, 2011, and incorporated herein by reference).

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).

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).

32		Section 1350 Certification of Periodic Report (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

101		Financial statements from Quarterly Report on Form 10-Q of the Corporation for the quarter ended March 31, 2011, formatted in Extensible Business Reporting Language: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Changes in Shareholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements. †

†	As provided in Rule 406T of Regulation S-T, this information shall not be deemed “filed” for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 or otherwise subject to liability under those sections.

Exhibit 3.2

COMERICA INCORPORATED

Certificate of Amendment

Restated Certificate of Incorporation

Comerica Incorporated (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify as follows:

FIRST : The Restated Certificate of Incorporation of the Corporation is hereby amended by deleting Article SEVENTH thereof in its entirety and inserting the following in lieu thereof:

“ SEVENTH

The directors shall have the power to make, alter, amend, change, add to or repeal the Bylaws of the Corporation not inconsistent with the provisions of this Restated Certificate of Incorporation. The approval and adoption of any amendment, alteration, change, addition to or repeal of Article II, Section (5) and Article III, Section (12) of the Bylaws of the Corporation proposed by any Shareholder of the Corporation shall require the affirmative vote of the holders of not less than a majority of the stock entitled to vote on such matter that is present in person or represented by proxy at a meeting at which a quorum is present and such matter is brought.”

SECOND : The Restated Certificate of Incorporation of the Corporation is hereby amended by deleting Article EIGHTH thereof in its entirety and inserting the following in lieu thereof:

“ EIGHTH

[Reserved]”

THIRD : The Restated Certificate of Incorporation of the Corporation is hereby amended by deleting Article NINTH thereof in its entirety and inserting the following in lieu thereof:

“ NINTH

Any action required or permitted to be taken at any Annual or Special Meeting of Shareholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of not less than a majority of the outstanding shares of capital stock of the Corporation entitled to vote on the matter that is the subject of the consent.”

FOURTH : The foregoing amendments were duly adopted and approved in accordance with the provisions of Section 242 of the DGCL and the applicable provisions of the Restated Certificate of Incorporation of the Corporation.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed by its duly authorized officer on this 27th day of April, 2011.


By:		/s/ Nicole V. Gersch
Name: Nicole V. Gersch
Title: Senior Vice President and Assistant Secretary

Exhibit 3.3

[As amended and restated

effective April 26, 2011]

AMENDED AND RESTATED

BYLAWS

COMERICA INCORPORATED

ARTICLE I

OFFICES

SECTION 1. REGISTERED OFFICE. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware.

SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 1. PLACE OF MEETING. All meetings of the stockholders of this Corporation shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting.

SECTION 2. ANNUAL MEETING OF STOCKHOLDERS. The annual meeting of stockholders shall be held on the third Tuesday of May of each year, if not a legal holiday, and, if a legal holiday, then on the next secular day following, at 9:30 a.m., or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. The purpose or purposes of said meeting shall be to elect directors, and to transact such other business as may properly be brought before the meeting.

SECTION 3. NOTICE OF MEETING OF STOCKHOLDERS. Written notice of every meeting of stockholders stating the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting.

SECTION 4. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

SECTION 5. SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Corporation’s certificate of incorporation, may be called by the Chairman of the Board of Directors or, during the absence or disability of the Chairman or while that office is vacant, by the President; and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning, in the aggregate, at least a majority of the capital stock of the Corporation issued and outstanding and entitled to vote at such special meeting. Such request shall state the purpose or purposes of the proposed meeting.

SECTION 6. QUORUM OF STOCKHOLDERS. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by statute or by the Corporation’s certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

SECTION 7. REQUIRED VOTE. When a quorum is present at any meeting, the vote of the holders of a majority of the stock present in person or represented by proxy at the meeting and entitled to vote on the matter in question shall decide any question brought before such meeting, unless the question is one upon which a different vote is required by statute, these bylaws or by the Corporation’s certificate of incorporation.

SECTION 8. ONE VOTE PER SHARE. Unless otherwise provided in the Corporation’s certificate of incorporation or in a certificate filed pursuant to Section 151(g) of the General

Corporation Law of Delaware, as amended, each stockholder shall at every meeting of the stockholders be entitled to one vote, in person or by proxy, for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted after three (3) years from its date, unless the proxy provides for a longer period.

SECTION 9. NATURE OF BUSINESS. At any meeting of stockholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Board of Directors or by any stockholder who complies with the procedures set forth in this Section 9. No business may be transacted at any meeting of stockholders, other than business that is either:

(a)	specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof);

(b)	otherwise properly brought before such meeting of stockholders by or at the direction of the Board of Directors (or any duly authorized committee thereof); or

(c)

in the case of an annual meeting of stockholders, otherwise properly brought before such meeting by any stockholder (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 9 and on the record date for the determination of stockholders entitled to vote at such annual meeting of stockholders; and (ii) who complies with the notice procedures set forth in this Section 9.

Time of Stockholder’s Notice . In addition to any other applicable requirements, such as the requirements set forth in Article III, Section 12 of the Corporation’s bylaws regarding director candidate nominations, for business to be properly brought before an annual meeting of stockholders by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder’s notice to the Secretary of the Corporation must be delivered to or mailed and received at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the immediately preceding year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting of stockholders is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder in order to be timely must be so received not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting of stockholders was first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. For purpose of this Section 9, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service, or in a document publicly filed by the Corporation with the Securities

and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Notwithstanding anything in the second sentence of the immediately preceding paragraph to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this bylaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered to the Secretary or mailed and received at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

Form of Stockholder’s Notice . To be in proper written form, a stockholder’s notice to the Secretary of the Corporation must set forth as to each matter such stockholder proposes to bring before the annual meeting of stockholders: (a) a brief description of the business desired to be brought before the annual meeting of stockholders and the reasons for conducting such business at the annual meeting of stockholders; (b) the name and address of such stockholder and beneficial owner, if any, as they appear on the Corporation’s books; (c) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder as of the record date for the meeting (if such date shall then have been made publicly available and shall have occurred); (d) as of the date of such notice, a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business; (e) any other information which would be required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitation of proxies for the proposal pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder if such stockholder were engaged in such a solicitation; and (f) a representation that such stockholder intends to appear in person or by proxy at the annual meeting of stockholders to bring such business before the meeting.

No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting of stockholders in accordance with the procedures set forth in this Section 9, provided, however, that once business has been properly brought before the annual meeting of stockholders in accordance with such procedures, nothing in this Section 9 shall be deemed to preclude discussion by any stockholder of any such business. If the Chairman of an annual meeting of stockholders determines that business was not properly brought before the annual meeting of stockholders in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. When a meeting is adjourned to another time or place, notice of the adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken, unless the adjournment is for more than thirty (30) days, or unless after the

adjournment a new record date is fixed for the adjourned meeting, in which case notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting at which a quorum is present or represented, any business may be transacted which might have been transacted at the original meeting as originally notified.

ARTICLE III

DIRECTORS

SECTION 1. POWERS. The business of the Corporation shall be managed by or under the direction of its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things which are not by statute or by the Corporation’s certificate of incorporation or by these bylaws directed or required to be exercised or done by the stockholders.

SECTION 2. LOCATION OF MEETINGS. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware.

SECTION 3. ORGANIZATION MEETING OF BOARD. The first meeting of each newly elected Board of Directors shall be held at the place of holding the annual meeting of stockholders, and immediately following the same, for the purpose of electing officers and transacting any other business properly brought before it, provided that the organization meeting in any year may be held at a different time and place than that herein provided by a consent of a majority of the directors of such new Board of Directors. No notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, unless said meeting is not held at the place of holding and immediately following the annual meeting of stockholders.

SECTION 4. REGULAR MEETINGS OF BOARD. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors.

SECTION 5. SPECIAL MEETINGS OF BOARD. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors, or, during the absence or disability of the Chairman or while that office is vacant, by the President on one (1) day’s notice to each director; and special meetings shall be called by the President or Secretary on like notice on the written request of five (5) or more directors.

SECTION 6. QUORUM AND REQUIRED VOTE. At all meetings of the Board of Directors a majority of the total number of directors shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Corporation’s certificate of incorporation. If a quorum is not present at any meeting of the Board of Directors, the directors present

thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

SECTION 7. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless otherwise restricted by the Corporation’s certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee.

SECTION 8. COMMITTEES OF DIRECTORS.

(a) General Authority . The Board of Directors may, to the fullest extent permitted by Section 141(c)(2) of the Delaware General Corporation Law as the same may be hereinafter amended from time to time, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Ex officio members of any committee provided for in these bylaws shall have all the same rights (including, without limitation, the right to vote) and all the same responsibilities as any other member thereof. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not (s)he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in these bylaws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters (except as permitted by Delaware General Corporation Law as the same may be hereinafter amended from time to time): (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required to be submitted to stockholders for approval; or (ii) adopting, amending or repealing any bylaw of the Corporation.

(b) Governance, Compensation and Nominating Committee . The Board of Directors shall establish a Governance, Compensation and Nominating Committee of the Board of Directors. The Governance, Compensation and Nominating Committee may: (i) nominate candidates for election as directors of the Corporation at any meeting of stockholders called for election of directors (an “Election Meeting”); (ii) nominate candidates to fill any vacancies on the Board of Directors which may exist from time to time; and (iii) have such other powers and authority as the Board of Directors may delegate to it from time to time.

(c) Audit Committee . The Board of Directors shall establish an Audit Committee of the Board of Directors. The Audit Committee shall have such powers and authority as the Board of Directors may delegate to it from time to time.

SECTION 9. COMMITTEE MINUTES. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

SECTION 10. COMPENSATION OF DIRECTORS. Unless otherwise restricted by the Corporation’s certificate of incorporation, the Board of Directors shall have authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting and/or training session of the Board of Directors and may be paid a fixed sum for attendance at each meeting and/or training session of the Board of Directors and/or paid a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

SECTION 11. PARTICIPATION IN MEETING BY TELEPHONE OR OTHER ELECTRONIC MEDIA. Unless otherwise restricted by the Corporation’s certificate of incorporation or these bylaws, members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or committee by means of conference telephone, internet conferencing or similar communications equipment by means of which all persons participating in the meeting can hear or otherwise communicate with each other, and such participation in a meeting shall constitute presence in person at such meeting.

SECTION 12. NOMINATIONS OF DIRECTOR CANDIDATES. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Corporation’s certificate of incorporation with respect to the right of directors to fill any vacancies on the Board of Directors, and the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, and shall be made:

(a)	by or at the direction of the Board of Directors (or any duly authorized committee thereof, including the Governance, Compensation and Nominating Committee); or

(b)

by any stockholder of the Corporation: (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 12 and on the record date for the determination of stockholders entitled to vote at such meeting; and (ii) who complies with the notice procedures set forth in this Section 12.

In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder’s notice to the Secretary of the Corporation must be delivered to or mailed and received at the principal executive offices of the Corporation:

(a)

in the case of an annual meeting of stockholders, not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the immediately preceding year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting of stockholders is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder in order to be timely must be so received not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting of stockholders was first made; and

(b)

in the case of a special meeting of stockholders called for the purpose of electing directors, not earlier than the close of business on the one hundred twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder’s notice as described above. For purpose of this Section 12, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service, or reported in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

To be in proper written form, a stockholder’s notice to the Secretary of the Corporation must set forth:

(a)

as to each person whom the stockholder proposes to nominate for election as a director: (i) the name, age, business address and residence address of the person; (ii) the principal occupation or employment of the person; (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person as of the record date for the meeting (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice; and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder; and

(b)

as to the stockholder giving the notice: (i) the name and address of such stockholder and beneficial owner, if any, as they appear on the Corporation’s books; (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder as of the record date for the meeting (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice; (iii) a description of all

arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nominations are to be made by such stockholder; (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by the written consent to such nomination of each person proposed as a nominee and such person’s written consent to serve as a director if elected.

In addition, to be eligible to be a nominee for election or reelection as a director of the Corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under Article II, Section 9 and Article III, Section 12 of these bylaws, in the case of director nominations by stockholders) to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such person and, if applicable, the background of any other person or entity (other than the Board of Directors) on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (A) will abide by the requirements of Article III, Section 13 of these bylaws, (B) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (2) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (C) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, and (D) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.

No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 12, or as otherwise provided in the Corporation’s certificate of incorporation with respect to the right of directors to fill any vacancies on the Board of Directors, and the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

SECTION 13. ELECTION OF DIRECTORS. At any meeting for the election of directors at which a quorum is present, each nominee shall be elected by the vote of the majority of the votes cast with respect to the director, provided that if the number of nominees exceeds the number of directors to be elected, the directors shall be elected by the vote of a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. For purposes of this Section 13, a majority of the votes cast means that the number of shares voted “for” a director must exceed 50% of the votes cast with respect to that director. Votes cast shall include only votes cast with respect to stock present in person or represented by proxy at the meeting and entitled to vote and shall exclude abstentions with respect to the election of a director.

If a nominee for director who is an incumbent director is not elected and no successor has been elected at such meeting, the director will promptly tender his or her resignation to the Board of Directors. The Governance, Compensation and Nominating Committee of the Board of Directors shall make a recommendation to the Board of Directors as to whether to accept or reject the tendered resignation, or whether other actions should be taken. The Board of Directors shall act on the tendered resignation, taking into account the Governance, Compensation and Nominating Committee’s recommendation, and publicly disclose (by a press release, a filing with the Securities and Exchange Commission or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of the certification of the election results. The Governance, Compensation and Nominating Committee in making its recommendation, and the Board of Directors in making its decision, may each consider any factors or other information that it considers appropriate and relevant. The director who tenders his or her resignation shall not participate in the recommendation of the Governance, Compensation and Nominating Committee or the decision of the Board of Directors with respect to his or her resignation. If such incumbent director’s resignation is not accepted by the Board of Directors, such director shall continue to serve until the next annual meeting and until his or her successor is duly elected, or his or her earlier resignation or removal. If a director’s resignation is accepted by the Board of Directors pursuant to these bylaws, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors, in its sole discretion, may fill any resulting vacancy pursuant to the Corporation’s certificate of incorporation or may decrease the size of the Board of Directors pursuant to the Corporation’s certificate of incorporation.

ARTICLE IV

NOTICES

SECTION 1. NOTICE. Whenever any notice is required to be given to any director or stockholder under any provision of statute or of the Corporation’s certificate of incorporation or of these bylaws, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at

his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given orally in person or by electronic mail to the electronic mail address, if any, provided by such director, telegram, telex, radiogram or cablegram, and such notice shall be deemed to be given when the recipient receives the notice personally, by telephone or internet or when the notice, addressed as provided above, has been delivered to the company, or to the equipment transmitting such notice.

SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be given under any provision of statute or of the Corporation’s certificate of incorporation or of these bylaws, a written waiver thereof, signed (manually or electronically by electronic mail) by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Corporation’s certificate of incorporation or these bylaws. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

ARTICLE V

OFFICERS

SECTION 1. SELECTION. The Board of Directors may appoint such officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by or at the direction of the Board of Directors. The officers so appointed may include a Chairman of the Board, President, one or more Vice Chairmen, one or more Vice Presidents (including Executive, Senior, First, regular and Assistant Vice Presidents), a Secretary and a Treasurer, and one or more lesser officers as may be deemed appropriate. The Chief Executive Officer also may appoint officers of the level of Executive Vice President (BE3) and below and such agents as the Chief Executive Officer shall deem necessary, at any time, which officers and agents shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by or at the direction of the Board of Directors or the Chief Executive Officer. Any number of offices may be held by the same person, unless the Certificate of Incorporation otherwise provides.

SECTION 2. COMPENSATION. The salaries of all executive officers of the Corporation shall be fixed by the Board of Directors or by the Compensation Committee or another authorized committee of the Board of Directors.

SECTION 3. TERM, REMOVAL AND VACANCIES. Each officer of the Corporation shall hold office until his or her successor is elected and qualified, or until his or her earlier resignation or removal from office. Any officer elected or appointed by the Board of Directors may be removed from office at any time, with or without cause, by the affirmative vote of a majority of the Board of Directors. Any officer also may be removed from office at any time by the Chief Executive Officer. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors or by the Chief Executive Officer.

SECTION 4. CHIEF EXECUTIVE OFFICER AND CHIEF OPERATING OFFICER.

(a)

Chief Executive Officer . At the first meeting of each newly-elected Board of Directors, the Board of Directors shall designate the Chairman of the Board or President as the Chief Executive Officer of the Corporation; provided, however, that if a motion is not made and carried to change the designation, the designation shall be same as the designation for the preceding year; provided, further, that the designation of the Chief Executive Officer may be changed at any regular or special meeting of the Board of Directors. The Chief Executive Officer shall be responsible to the Board of Directors for the general supervision and management of the business and affairs of the Corporation. The Chairman of the Board or President who is not the Chief Executive Officer shall be subject to the authority of the Chief Executive Officer, but shall exercise all of the powers and discharge all of the duties of the Chief Executive Officer, during the absence or disability of the Chief Executive Officer.

(b)

Chief Operating Officer . At any meeting of the Board of Directors, the Board of Directors may designate a Chief Operating Officer of the Corporation. The Chief Operating Officer shall perform all duties incident to that office and such other duties as may be delegated to him or her by or at the direction of the Board of Directors or the Chief Executive Officer.

SECTION 5. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of Directors shall be selected by, and from among the membership of, the Board of Directors. He or she shall preside at all meetings of the stockholders and of the Board of Directors. He or she shall perform all other duties and functions incident to the office of Chairman of the Board of Directors, and such other duties and functions as may be assigned to him or her from time to time by the Board of Directors. Except where by law the signature of the President of this Corporation is required, the Chairman of the Board of Directors shall possess the same power and authority as the President to sign all certificates, contracts, instruments, papers and documents of every conceivable kind and character whatsoever, in the name and on behalf of this Corporation, which may be authorized by the Board of Directors. During the absence or disability of the President, the Chairman of the Board of Directors shall exercise all of the powers and discharge all of the duties of the President.

SECTION 6. PRESIDENT. The President shall be selected by the Board of Directors. During the absence or disability of the Chairman of the Board of Directors, or while such office is vacant, the President shall perform all duties and functions, and while so acting shall have all of the powers and authority of the Chairman of the Board of Directors. The President shall perform all duties incident to the office of President, and such other duties as may be prescribed by or at the direction of the Board of Directors or the Chief Executive Officer.

SECTION 7. VICE CHAIRMEN. One or more Vice Chairmen (who need not be members of the Board of Directors) may be selected by the Board of Directors. The Vice Chairmen shall perform all duties incident to their office, and such other duties as may be delegated to them by or at the direction of the Board of Directors or the Chief Executive Officer.

SECTION 8. SECRETARY. The Secretary or an Assistant Secretary, or, during their absence or disability, a Secretary Pro Tem designated by the Board of Directors or the Chief Executive Officer, shall attend all meetings of the Board of Directors and all meetings of the stockholders, shall record all the proceedings thereof in a book to be kept for that purpose, and shall perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, all notices required by statute, bylaw or resolution, and shall perform such other duties incident to his or her office or as may be prescribed by or at the direction of the Board of Directors or the Chief Executive Officer. The Secretary shall have custody of the corporate seal of the Corporation and the Secretary and Assistant Secretaries shall have authority to affix the same to any instrument when its use is required or appropriate.

SECTION 9. ASSISTANT SECRETARIES. The Assistant Secretary or Assistant Secretaries shall, in the absence of the Secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Secretary, and shall perform such other duties and have such other powers incident to his or her office or as may be prescribed from time to time by or at the direction of the Board of Directors or the Chief Executive Officer.

SECTION 10. TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by or at the direction of the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by or at the direction of the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his or her transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall deliver to the Corporation, and shall keep in force, a bond, in such form and amount, and with such surety or sureties as shall be satisfactory to the Board of Directors, for the faithful performance of the duties of his or her office and for the restoration to the Corporation, in case of his or her death, resignation, retirement or removal from office, of

all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation.

SECTION 11. ASSISTANT TREASURERS. The Assistant Treasurer or Assistant Treasurers shall, in the absence of the Treasurer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Treasurer, and shall perform such other duties and have such other powers incident to his or her office or as may be prescribed from time to time by or at the direction of the Board of Directors or the Chief Executive Officer.

SECTION 12. INDEMNIFICATION AND INSURANCE.

(a)

To the fullest extent permitted by these bylaws and by applicable law and regulation, as presently existing or hereafter amended, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he or she is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Any person who is or was an agent of the Corporation may be indemnified to the same extent as provided above. In addition, in the event any such action, suit or proceeding is threatened or instituted against a spouse to whom a director or officer is legally married at the time the director or officer is covered under the indemnification provided herein, which action, suit or proceeding arises solely out of his or her status as the spouse of a director or officer, including, without limitation, an action, suit or proceeding that seeks damages recoverable from marital community property of the director or officer and his or her spouse, property owned jointly by them or property purported to have been transferred from the director or officer to his or her spouse, then the spouse of the director or officer shall be indemnified to the same extent as provided above. At the Corporation’s election, and in its sole discretion, any person who is or was the spouse of an employee or agent of the Corporation may be indemnified to the same extent as provided above. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, raise any inference that he or she had reasonable cause to believe that his or her conduct was unlawful.

(b)

To the fullest extent permitted by these bylaws and by applicable law and regulation, as presently existing or hereafter amended, the Corporation shall indemnify any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor, by reason of the fact that he or she is or was a director or officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Any person who is or was an agent of the Corporation may be indemnified to the same extent as provided above. In addition, in the event any such action or suit is threatened or instituted against a spouse to whom a director or officer is legally married at the time the director or officer is covered under the indemnification provided herein, which action or suit arises solely out of his or her status as the spouse of a director or officer, including, without limitation, an action or suit that seeks damages recoverable from marital community property of the director or officer and his or her spouse, property owned jointly by them or property purported to have been transferred from the director or officer to his or her spouse, then the spouse of the director or officer shall be indemnified to the same extent as provided above. At the Corporation’s election, and in its sole discretion, any person who is or was the spouse of an employee or agent of the Corporation may be indemnified to the same extent as provided above.

(c)

To the extent that a present or former director, officer, or spouse of the director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this Section, or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith.

(d)

Any indemnification under subsections (a) and (b) of this Section (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, spouse of the director or officer, employee, agent or spouse of the employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this Section. Unless

prohibited by applicable law or regulation, or otherwise required by Section 18(k) of the Federal Deposit Insurance Act, as amended, such determination shall be made with respect to a person who is a director or officer or the spouse of a director or officer at the time of the determination (a “D&O Claimant”) by Independent Legal Counsel (as defined below) in a written opinion to the Board of Directors, a copy of which shall be delivered to the D&O Claimant, as follows:

The Disinterested Directors (as defined below) shall select Independent Legal Counsel by majority vote, even if such Disinterested Directors constitute less than a quorum, and direct that the determination be made by such counsel (or, if there are no Disinterested Directors, the full Board of Directors shall select Independent Legal Counsel by majority vote and shall direct that the determination be made by such counsel); unless there shall have occurred within two years prior to the date of the commencement of the Proceeding for which indemnification is claimed a “Change of Control” as defined in the Amended and Restated Comerica Incorporated 1997 Long-Term Incentive Plan as in effect on September 24, 2002 (or, if applicable, as in effect on such later date as determined by written agreement between the Corporation and the D&O Claimant), in which case the Independent Legal Counsel shall be selected by the D&O Claimant unless the D&O Claimant shall request that such selection be made by the Board of Directors. If it is so determined that the D&O Claimant is entitled to indemnification, payment to the D&O Claimant shall be made within 10 days after such determination.

The term “Disinterested Directors” shall mean directors that are not and were not parties, and who are not and were not threatened to be made parties, to such Proceeding.

“Independent Legal Counsel” shall mean a law firm, a member of a law firm, or an independent practitioner, that is experienced in matters of corporation law and that, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the Corporation or the D&O Claimant in an action to determine the D&O Claimant’s rights under this Section.

Such determination may be made with respect to any person other than a D&O Claimant seeking indemnification under subsections (a) and (b) of this Section by the Corporation’s Chairman, Chief Executive Officer, President, Vice Chairman or General Counsel, or by their designees.

(e)

Expenses (including attorney’s fees) incurred by an officer, director or spouse of an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer or spouse to repay such amount if it shall ultimately

be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Section. Such expenses (including attorneys’ fees) incurred by former directors or officers, their spouses or other employees and agents may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate.

(f)

The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this Section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or Disinterested Directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office.

(g)

The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, spouse of a director or officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Section.

(h)

For the purposes of this Section, references to “the Corporation” include, in addition to the resulting or surviving corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers, spouses of directors or officers, and employees or agents, so that any person who is or was a director, officer, spouse of a director or officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued.

(i)

For purposes of this Section, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Section.

(j)

The indemnification and advancement of expenses provided by, or granted pursuant to, this Section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent, and with respect to any spouse of a director or officer, shall continue following the time the director or officer spouse ceases to be a director or officer even if the marriage of the individuals terminates prior to the end of the period of coverage, and shall inure to the benefit of the heirs, executors and administrators of such a person.

(k)

The Court of Chancery shall have exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this Section or under any agreement, vote of stockholders or Disinterested Directors, or otherwise. The Court of Chancery may summarily determine the Corporation’s obligation to advance expenses (including attorneys’ fees).

ARTICLE VI

STOCK AND TRANSFERS

SECTION 1. CERTIFICATES OF STOCK. Shares of the Corporation’s stock may be certificated or uncertificated, as provided under Delaware law at any time. All certificated shares of stock shall exhibit on the certificate the holders’ name and number of shares and shall be signed by, or in the name of the Corporation by the Chairman or a Vice Chairman of the Board of Directors, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation. Any or all the signatures on the certificate may be by facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. All holdings of shares of stock of the Corporation shall be numbered and shall be entered into the books of the Corporation as they are issued. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof, and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation may issue to represent such class or series of stock or, in the case of uncertificated shares, contained in a written notice that shall be sent to the registered owner within a reasonable time after the issuance or transfer of such uncertificated stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation may issue to represent such class or series of stock or, in the case of uncertificated shares, contained in the written notice sent to the registered holder as set forth above, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and

relative, participating, optional or other special rights of each class of stock or series thereof, and the qualifications, limitations or restrictions of such preferences and/or rights.

SECTION 2. LOST CERTIFICATES. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation, alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing the issuance of a new certificate the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against it with respect to the certificate alleged to have been lost, stolen or destroyed.

SECTION 3. TRANSFERS OF STOCK. The Corporation shall make transfers of stock on the Corporation’s books only by the record holder of such stock or by his or her duly authorized agent or attorney-in-fact, and, in the case of stock represented by a certificate, upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares, duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer.

SECTION 4. FIXING RECORD DATE. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

SECTION 5. REGISTERED STOCKHOLDERS. The Corporation shall have the right to treat the person registered on its books as the owner of shares as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VII

GENERAL PROVISIONS

SECTION 1. DIVIDENDS. The Board of Directors, subject to any restrictions contained in its Certificate of Incorporation, may declare and pay any dividends upon the shares of its capital stock either (a) out of surplus as defined in and computed in accordance with the provisions of the governing statute, or (b) in case there shall be no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Dividends may be paid in cash, in property, or in shares of the Corporation’s capital stock, subject to the provisions of the statute and of the Corporation’s certificate of incorporation.

SECTION 2. RESERVES. The Board of Directors shall have power and authority to set apart, out of any funds available for dividends, such reserve or reserves, for any proper purpose, as the Board of Directors in its discretion shall approve, and the Board of Directors shall have the power and authority to abolish any reserve created by the Board of Directors.

SECTION 3. VOTING SECURITIES. Unless otherwise directed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President, or, in the case of their absence or inability to act, the Vice Chairmen or Vice Presidents, in order of their seniority, shall have full power and authority on behalf of the Corporation to attend and to act and to vote, or to execute in the name or on behalf of the Corporation, a proxy authorizing an agent or attorney-in-fact for the Corporation to attend and vote at any meetings of security holders of Corporations in which the Corporation may hold securities, and at such meetings (s)he or his or her duly authorized agent or attorney-in-fact shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Corporation might have possessed and exercised if present. The Board of Directors by resolution from time to time may confer like power upon any other person or persons.

SECTION 4. CHECKS. All checks, drafts and orders for the payment of money shall be signed in the name of the Corporation in such manner and by such officer or officers or such other person or persons as the Board of Directors shall from time to time designate for that purpose.

SECTION 5. CONTRACTS, CONVEYANCES, ETC. When the execution of any contract, conveyance or other instruments has been authorized without specification of the executing officers, the Chairman of the Board, Chief Executive Officer, President, any Vice Chairman or any Vice President, and the Secretary or any Assistant Secretary, may execute the same in the name and on behalf of this Corporation and may affix the corporate seal thereto. The Board of Directors shall have power to designate the officers and agents of this Corporation or any of its subsidiaries or affiliates who shall have authority to execute any instrument on behalf of this Corporation.

SECTION 6. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

SECTION 7. SEAL. The corporate seal shall have inscribed thereon the name of the Corporation and the words “Corporate Seal” and “Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced.

SECTION 8. MICHIGAN CONTROL SHARE STATUTE. Pursuant to Section 794 of the Michigan Business Corporation Act (“MBCA”), Chapter 7B of the MBCA shall not apply to the Corporation or control share acquisitions (as such term is defined in Section 791 of the MBCA) of the shares of the Corporation’s capital stock.

ARTICLE VIII

AMENDMENTS

SECTION 1. AMENDMENT BY REGULAR VOTE. These bylaws may be altered, amended or repealed or new bylaws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the Corporation’s certificate of incorporation, at any regular meeting of the stockholders or of the Board of Directors, or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new bylaws is contained in the notice of such special meeting.

Exhibit 31.1

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 March 31, 2011;

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;

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

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

(d)

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 (or persons performing the equivalent functions):

(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: May 2, 2011		/s/ Ralph W. Babb, Jr.
		Ralph W. Babb, Jr.
		Chairman, President and Chief Executive Officer

Exhibit 31.2

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 March 31, 2011;

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;

(a)

(b)

(c)

(d)

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 (or persons performing the equivalent functions):

(a)

(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: May 2, 2011		/s/ Elizabeth S. Acton
		Elizabeth S. Acton
		Executive Vice President and Chief Financial Officer

Exhibit 32

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 March 31, 2011 (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: May 2, 2011		/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