<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10706
Comerica Incorporated
(Exact name of registrant as specified in its charter)
Delaware 38-1998421
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Comerica Tower at Detroit Center
Detroit, Michigan
48226
(Address of principal executive offices)
(Zip Code)
(313) 222-3300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
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 30, 1994: 118,561,000 shares
<PAGE>
<PAGE> 2
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
COMERICA INCORPORATED AND SUBSIDIARIES
(In thousands, except share data)
March 31, Dec. 31, March 31,
1994 1993 1993
----------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 1,586,946 $ 1,600,695 $ 1,861,001
Interest-bearing deposits with banks 791,607 1,026,473 846,386
Federal funds sold and securities
purchased under agreements to
resell 121,041 1,091,789 33,682
Trading account securities 5,768 3,600 2,859
Mortgages held for sale 194,817 330,667 171,870
Investment securities available
for sale 3,113,396 2,322,101 -
Investment securities held to
maturity (estimated fair value
of $5,310,525 at 3/31/94,
$4,030,492 at 12/31/93 and
$5,631,042 at 3/31/93) 5,365,748 3,977,450 5,474,806
----------- ----------- -----------
Total investment securities 8,479,144 6,299,551 5,474,806
Commercial loans 9,450,856 9,086,757 8,256,345
International loans 1,294,825 1,135,585 758,919
Real estate construction loans 399,478 437,481 432,120
Commercial mortgage loans 2,953,978 2,699,861 2,646,150
Residential mortgage loans 2,161,824 1,856,822 2,037,865
Consumer loans 3,655,422 3,674,256 3,729,968
Lease financing 204,187 209,185 196,213
----------- ----------- -----------
Total loans 20,120,570 19,099,947 18,057,580
Less allowance for loan losses (319,586) (298,685) (310,464)
----------- ----------- -----------
Net loans 19,800,984 18,801,262 17,747,116
Premises and equipment 414,461 399,123 371,693
Customers' liability on acceptances
outstanding 35,329 38,212 36,350
Accrued income and other assets 739,144 703,501 597,111
----------- ----------- -----------
TOTAL ASSETS $32,169,241 $30,294,873 $27,142,874
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits (noninterest-
bearing) $ 5,278,470 $ 4,939,234 $ 4,336,159
Interest-bearing deposits 15,056,736 14,642,834 15,285,562
Deposits in foreign offices 1,285,236 1,367,811 1,243,089
----------- ----------- -----------
Total deposits 21,620,442 20,949,879 20,864,810
Federal funds purchased and securities
sold under agreements to repurchase 1,847,457 450,092 2,052,557
Other borrowed funds 4,152,101 4,950,507 926,703
Acceptances outstanding 35,329 38,212 36,350
Accrued expenses and other
liabilities 310,566 263,969 246,717
Long-term debt 1,885,478 1,460,556 903,068
----------- ----------- -----------
Total liabilities 29,851,373 28,113,215 25,030,205
Common stock - $5 par value:
Authorized - 250,000,000 shares
Issued-119,294,531 shares at 3/31/94,
119,294,531 shares at 12/31/93, and
119,969,288 shares at 3/31/93 596,473 596,473 599,846
Capital surplus 524,523 524,186 539,543
Unrealized gains/(losses) on investment
securities available for sale 8,748 27,473 -
Retained earnings 1,209,647 1,155,280 998,987
Less cost of common stock in
treasury-787,521 shares at 3/31/94,
4,423,603 shares at 12/31/93 and
876,902 shares at 3/31/93 (21,523) (121,754) (25,707)
----------- ----------- -----------
Total shareholders' equity 2,317,868 2,181,658 2,112,669
----------- ----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $32,169,241 $30,294,873 $27,142,874
=========== =========== ===========
/TABLE
<PAGE>
<PAGE> 3
CONSOLIDATED STATEMENTS OF INCOME
COMERICA INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
(In thousands, except per share data)
Three Months Ended
March 31
--------------------
1994 1993
-------- --------
INTEREST INCOME
<S> <C> <C>
Interest and fees on loans $342,112 $340,644
Interest on investment securities:
Taxable 91,191 82,175
Exempt from federal income tax 8,665 11,606
-------- --------
Total interest on investment
securities 99,856 93,781
Trading account interest (136) 283
Interest on federal funds sold and
securities purchased under agreements
to resell 2,468 1,194
Interest on time deposits with
banks 7,365 7,822
Interest on mortgages held for sale 3,730 3,423
-------- --------
Total interest income 455,395 447,147
INTEREST EXPENSE
Interest on deposits 118,699 140,172
Interest on short-term borrowings:
Federal funds purchased and securities
sold under agreements to repurchase 18,405 9,212
Other borrowed funds 20,195 9,384
Interest on long-term debt 22,291 13,016
Net interest rate swap income (14,486) (6,539)
-------- --------
Total interest expense 165,104 165,245
-------- --------
Net interest income 290,291 281,902
Provision for loan losses 15,000 22,000
-------- --------
Net interest income after
provision for loan losses 275,291 259,902
NONINTEREST INCOME
Income from fiduciary activities 32,005 29,790
Service charges on deposit accounts 29,174 30,493
Customhouse broker fees 9,725 9,140
Revolving credit fees 7,931 7,902
Securities gains 424 634
Other noninterest income 32,686 31,719
-------- --------
Total noninterest income 111,945 109,678
NONINTEREST EXPENSES
Salaries and employee benefits 131,704 134,715
Net occupancy expense 24,578 24,359
Equipment expense 16,197 14,486
FDIC insurance expense 10,709 11,972
Other noninterest expenses 68,518 66,903
-------- --------
Total noninterest expenses 251,706 252,435
-------- --------
Income before income taxes 135,530 117,145
Provision for income taxes 44,667 34,020
-------- --------
NET INCOME $ 90,863 $ 83,125
======== ========
Net income applicable to common stock $ 90,863 $ 83,083
======== ========
NET INCOME PER SHARE:
Primary $.79 $.69
Fully diluted $.79 $.69
Primary average shares 115,464 120,014
Cash dividends declared $31,931 $29,677
Dividends per share $.28 $.255
</TABLE>
<PAGE> 4
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Comerica Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Redeemable Unrealized Total
Preferred Common Capital Gains/ Retained Treasury Shareholders'
(in thousands) Stock Stock Surplus (Losses) Earnings Stock Equity
--------- --------- --------- ---------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT
JANUARY 1, 1993 $ 37,605 $ 291,725 $ 516,290 $ - $ 1,205,788 $ (4,917) $ 2,046,491
Pooling-of-
interests
adjustments - 17,494 21,807 - 33,290 (23,945) 48,646
-------- --------- --------- ---------- ----------- ---------- -----------
BALANCES AT
JANUARY 1, 1993,
AS RESTATED 37,605 309,219 538,097 - 1,239,078 (28,862) 2,095,137
Net income for
1993 - - - - 83,125 - 83,125
Cash dividends
declared:
Preferred stock - - - - (42) - (42)
Common stock - - - - (29,677) - (29,677)
Issuance of common
stock under
employee stock
plans and for
conversion of
debentures - 3,048 1,276 - (1,744) 3,155 5,735
Stock split - 287,579 - - (287,579) - -
Amortization of
deferred
compensation - - 170 - - - 170
Redemption of
preferred
stock (37,605) - - - (4,174) - (41,779)
-------- --------- --------- ---------- ----------- ---------- -----------
BALANCES AT
MARCH 31, 1993 $ - $ 599,846 $ 539,543 $ - $ 998,987 $ (25,707) $ 2,112,669
-------- --------- --------- ---------- ----------- ---------- -----------
BALANCES AT
JANUARY 1,
1994 $ - $ 596,473 $ 524,186 $ 27,473 $ 1,155,280 $(121,754) $ 2,181,658
Net income for
1994 - - - - 90,863 - 90,863
Cash dividends
declared on
common stock - - - - (31,931) - (31,931)
Purchase of
981,700 shares
of common stock - - - - - (26,330) (26,330)
Issuance of common
stock:
Employee stock
plans - - 178 - (707) 1,340 811
Acquisition of
Pacific Western - - - - (3,858) 125,221 121,363
Amortization of
deferred
compensation - - 159 - - - 159
Change in
unrealized gains/
(losses) on
investment
securities
available for
sale - - - (18,725) - - (18,725)
-------- --------- --------- ---------- ----------- --------- -----------
BALANCES AT
MARCH 31, 1994 $ - $ 596,473 $ 524,523 $ 8,748 $ 1,209,647 $ (21,523) $ 2,317,868
======== ========= ========= ========== =========== ========== ===========
</TABLE>
<PAGE>
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Comerica Incorporated and Subsidiaries
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------------
1994 1993
OPERATING ACTIVITIES: ------------ ------------
<S> <C> <C>
Net income $ 90,863 $ 83,125
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 15,000 22,000
Depreciation 14,215 13,377
Net (increase) decrease in trading account
securities (2,168) 106,520
Net decrease in mortgages held for sale 135,850 62,842
Net increase in accrued income receivable (13,827) (4,654)
Net increase in accrued expenses 62,138 49,043
Net amortization of intangibles 6,557 8,462
Other, net 5,066 57,868
------------ ------------
Total adjustments 222,831 315,458
------------ ------------
Net cash provided by operating
activities 313,694 398,583
INVESTING ACTIVITIES:
Net decrease in interest-bearing deposits
with banks 234,866 475,129
Net decrease in federal funds sold and
securities purchased under agreements
to resell 970,748 52,950
Proceeds from maturity of investment
securities available for sale 131,797 -
Purchases of investment securities
available for sale (1,002,000) -
Proceeds from maturity of investment
securities held to maturity 655,278 635,506
Purchase of investment securities
held to maturity (1,800,860) (928,587)
Net (increase) decrease in loans
(other than purchased loans) (236,522) 148,660
Purchase of loans (206,723) (7,988)
Fixed assets, net (16,168) (10,779)
Net (increase) decrease in customers'
liability on acceptances outstanding 2,883 (10,686)
Net cash provided by acquisition 79,076 -
------------ ------------
Net cash provided by (used in)
investing activities (1,187,625) 354,205
FINANCING ACTIVITIES:
Net decrease in deposits (102,749) (334,708)
Net increase (decrease) in
short-term borrowings 598,428 (242,449)
Net increase (decrease) in acceptances
outstanding (2,883) 10,686
Proceeds from issuance of long-term debt 500,000 175,000
Repayments and purchases of long-term
debt (75,078) (13,125)
Proceeds from issuance of common stock
and other capital transactions 970 5,905
Purchase of common stock for treasury (26,330) -
Redemption of preferred stock - (41,779)
Dividends paid (32,176) (31,059)
------------ ------------
Net cash provided by (used in)
financing activities 860,182 (471,529)
------------ ------------
Net increase in cash and due from banks (13,749) 281,259
Cash and due from banks at beginning of year 1,600,695 1,579,742
------------ ------------
Cash and due from banks at end of period $ 1,586,946 $ 1,861,001
============ ============
Interest paid $ 159,842 $ 159,021
============ ============
Income taxes paid $ 75 $ 40
============ ============
Noncash investing and financing activities:
Loan transfers to other real estate $ 1,629 $ 4,135
============ ============
Conversion of debentures to equity $ - $ 623
============ ============
Treasury stock issued for acquisition $ 121,363 $ -
============ ============
</TABLE> <PAGE>
<PAGE> 6
Notes to Consolidated Financial Statements
Comerica Incorporated and Subsidiaries
Note 1 - Basis of Presentation
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1994 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 1994. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Comerica Incorporated and Subsidiaries' annual report on Form 10-K for the
year ended December 31, 1993.
Note 2 - Investment Securities
At March 31, 1994 investment securities having a carrying value of
$5,277,443,000 were pledged where permitted or required by law to secure
liabilities and public and other deposits including deposits of the State
of Michigan of $29,176,000.
<PAGE>
<PAGE> 7
Notes to Consolidated Financial Statements
Comerica Incorporated and Subsidiaries
Note 3 - Allowance for Loan Losses
The following analyzes the changes in the allowance for loan losses
included in the consolidated balance sheets:
1994 1993
--------- ---------
Balance at January 1 $ 298,685 $ 308,007
Allowance acquired 16,517 -
Loans charged off (18,203) (27,402)
Recoveries on loans previously
charged off 7,587 7,859
--------- ---------
Net loans charged off (10,616) (19,543)
Provision for loan losses 15,000 22,000
--------- ---------
Balance at March 31 $ 319,586 $ 310,464
========= =========
Note 4 - Long-term Debt
Long-term debt consisted of the following at March 31, 1994 and
December 31, 1993:
<TABLE>
<CAPTION>
March 31, 1994 Dec. 31, 1993
-------------- -----------------
<S> <C> <C>
9.75% equity subordinated notes
due 1999 $ 74,534 $ 74,511
10.125% subordinated debentures due
1998 74,661 74,641
---------- ----------
Total Parent Company 149,195 149,152
7.25% subordinated notes due 2002 148,659 148,619
Medium-term fixed rate notes bearing
interest at rates ranging from 3.28%
to 5.95% and maturing on dates ranging
from 1994 through 1997 1,329,183 904,285
6.875% subordinated notes due 2008 98,932 98,913
7.125% subordinated notes due 2013 147,807 147,779
FDIC subordinated note due 1994
to 1995 8,978 8,941
Notes payable bearing interest at
rates ranging from 6.29% to 13%
and maturing on dates ranging
from 1994 through 1996 2,724 2,867
---------- ----------
Total Subsidiaries 1,736,283 1,311,404
---------- ----------
Total Comerica Incorporated $1,885,478 $1,460,556
========== ==========
</TABLE>
Note 5 - Income Taxes
The provision for income taxes is computed by applying statutory
federal income tax rates to income before income taxes as reported in the
financial statements after deducting non-taxable items, principally
interest income on state and municipal securities.
<PAGE>
<PAGE> 8
Notes to Consolidated Financial Statements
Comerica Incorporated and Subsidiaries
Note 6 - Derivatives
Derivative financial instruments are contracts whose value is
derived from the value of underlying interest rate, foreign exchange, or
equity instruments (or related indices). The notional, or contractual,
amounts of these instruments express the extent of involvement the
Corporation has in each particular instrument. The Corporation utilizes
derivatives, primarily interest rate swaps, to manage interest rate and
currency risk exposures related to specified groups of assets and
liabilities, as well as to accommodate the needs of its customers. The
Corporation's use of derivatives takes place predominantly in the interest
rate market, and involves the use of forwards, futures, swaps, caps,
floors, and options.
The notional amounts of the Corporation's off-balance sheet
derivative instrument portfolio is shown below:
March 31, December 31,
(in millions) 1994 1993
--------- ------------
Interest rate contracts
Swaps $ 4,160 $ 3,634
Futures and forwards 40 65
Options written 282 283
Options purchased 156 56
------- -------
Total interest rate
contracts 4,638 4,038
Foreign exchange rate contracts
Swaps 18 -
Spot, forwards, and futures 633 356
------- -------
Total exchange rate
contracts 651 356
Total derivatives contracts $ 5,289 $ 4,394
======= =======
The notional amounts used to express the extent of the Corporation's
involvement in derivatives are not indicative of the potential for gain or
loss on such positions. Likewise, notional amounts do not represent the
credit or market risks of the positions held, estimated as the cost
required to replace the transaction. The Corporation evaluates the
creditworthiness of all off-balance sheet counterparties adhering to the
same standards used in other credit transactions. At March 31, 1994, and
December 31, 1993, replacement costs of outstanding off-balance sheet
derivatives approximated $176 million and $114 million, respectively.
<PAGE> 9
Notes to Consolidated Financial Statements
Comerica Incorporated and Subsidiaries
Note 6 - Derivatives (Continued)
Unrealized gains and losses on interest rate derivative products at
March 31, 1994 and December 31, 1993 are summarized as follows:
March 31, December 31,
(in thousands) 1994 1993
--------- ------------
Unrealized gains $ 24,019 $ 65,371
Unrealized losses (97,838) (20,838)
-------- --------
Net unrealized
gain (loss) $(73,819) $ 44,533
======== ========
Summary information with respect to the Corporation's off-balance
sheet interest rate derivative activity follows:
<TABLE>
<CAPTION>
Three Months
Ended Year Ended
March 31, December 31,
(in millions) 1994 1993
----------- ------------
<S> <C> <C>
Notional balance at
beginning of period $ 4,038 $ 2,728
Additions 1,650 2,402
Maturities/Amortizations (1,050) (1,092)
Terminations - -
------- -------
Notional balance at end
of period $ 4,638 $ 4,038
======= =======
</TABLE>
Interest rate swap agreements involve the exchange of fixed and
floating rate interest payments based on an underlying notional amount,
and constitute a major portion of the Corporation's derivative portfolio.
The Corporation utilizes swaps as an end-user to manage risk; therefore,
net interest income is recognized as it accrues. At March 31, 1994,
interest rate swaps generated $15 million of net interest income, compared
to $7 million for the same period in 1993, and $32 million for all of
1993.
<PAGE>
<PAGE> 10
Notes to Consolidated Financial Statements
Comerica Incorporated and Subsidiaries
Note 6 - Derivatives (Continued)
The table below summarizes the expected maturities and weighted
average interest rates to be paid and received on the Corporation's
interest rate swap portfolio as of March 31, 1994.
Remaining Maturity of Interest Rate Swaps:
<TABLE>
<CAPTION>
Notional Average Average
(in millions) Amount Pay Rate Receive Rate
-------- -------- ------------
<S> <C> <C> <C>
1994 $1,429 3.86% 4.83%
1995 $1,200 3.93% 4.56%
1996 $451 4.01% 5.44%
1997 $447 3.47% 5.70%
1998 $175 3.45% 5.21%
1999-2013 $458 3.63% 6.66%
</TABLE>
<PAGE>
<PAGE> 11
ITEM 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
Comerica Incorporated reported net income of $91 million for the
three months ended March 31, 1994, an increase of 9 percent compared to
$83 million reported for the same period in 1993. On a per share basis,
net income was $0.79 for the first quarter of 1994, compared to $0.69 for
the first quarter of 1993. Return on average common shareholders' equity
was 16.68 percent, and return on average assets was 1.22 percent for the
first three months of 1994, versus 16.10 percent and 1.26 percent,
respectively, for the same period in 1993.
Acquisitions
On March 30, 1994 the Corporation completed the acquisition of the
$1 billion Pacific Western Bancshares in San Jose, California for $121
million of common stock (4,567,974 shares), in a transaction accounted for
as a purchase.
On April 4, 1994 the Corporation entered into an Agreement and Plan
of Merger with the $331 million Lockwood Banc Group Inc. in Houston, Texas
for the acquisition of Lockwood by Comerica for approximately $44 million
in cash. Consummation of the acquisition, subject to regulatory and
shareholder approval, is expected in the fourth quarter of 1994, and is
anticipated to be accounted for as a purchase.
Net Interest Income
Net interest income for the first quarter of 1994, on a fully
taxable equivalent (FTE) basis, increased by $7 million, or 2 percent,
versus the comparable period a year earlier. Net interest income growth
was principally attributable to an increase in average earning assets, and
partially offset by a lower net interest margin compared to the first
quarter of 1993. Total average earning assets increased by 13 percent,
led by increases in the investment securities and loan portfolios. Within
average earning assets, however, the relative mix shifted away from loans
and short-term assets towards a greater concentration of securities, which
<PAGE>
<PAGE> 12
were added to reduce the Corporation's asset sensitivity. The net
interest margin fell 44 basis points, from 4.77 to 4.33, as the change in
the mix of earning assets towards lower-yielding securities coupled with
the repricing of assets in a declining rate environment to reduce the rate
spread.
Components of the change in net interest income (FTE) due to
variations in interest rates and changes in volume are shown in Table I,
the Rate-Volume Analysis.
Provision for Loan Losses
The provision for loan losses was $15 million in the first quarter
of 1994 versus $22 million in the first quarter of 1993. The provision is
predicated upon maintaining an adequate allowance for loan losses, which
is further discussed under the section entitled "Financial Condition".
Continued improvement in overall credit quality, as evidenced by fewer net
charge-offs, led the Corporation to reduce the provision from the first
quarter of 1993.
Noninterest Income
Noninterest income for the three months ended March 31, 1994 rose $2
million to $112 million, a 2 percent increase over the same period in
1994.
Income from fiduciary activities increased $2 million, or 7 percent,
over the first quarter of 1993. The increase was concentrated in Personal
Trust fees, which benefited from a revised fee structure, as well as
market appreciation of managed assets.
Service charges on deposit accounts decreased by $1 million, or 4
percent, in response to higher earnings credit allowances used in the
calculation of fees on commercial accounts as compared to the first
quarter of 1993.
Other noninterest income increased $1 million, or 3 percent over the
first three months of 1993, benefiting from a $3 million gain on the sale
of mortgage servicing rights in the first quarter of 1994, and a $2
million decrease in the amortization of purchased mortgage servicing
rights (PMSRs) over the same period in 1993, reflecting lower levels of
mortgage prepayments.
<PAGE> 13
<TABLE>
<CAPTION>
TABLE I - QUARTERLY ANALYSIS OF NET INTEREST INCOME & RATE/VOLUME (FTE)
Three Months Ended
-------------------------------------------------------------
March 31, 1994 March 31, 1993
----------------------------- -----------------------------
Average Average Average Average
(in millions) Balance Interest Rate Balance Interest Rate
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans $19,108 $ 344 7.27% $17,788 $ 343 7.78%
Investment securities 7,112 104 5.90 5,274 100 7.55
Other earning assets 1,377 14 3.94 1,329 12 3.87
- - ----------------------------------------------------------------------------------------------
Total earning assets 27,597 462 6.75 24,391 455 7.52
Interest-bearing deposits 16,196 119 2.97 16,630 140 3.42
Short-term borrowings 4,968 24 1.98 2,652 12 1.86
Long-term debt 1,688 22 5.28 831 13 6.27
- - ----------------------------------------------------------------------------------------------
Total interest-bearing
sources $22,852 165 2.92 $20,113 165 3.33
----------------- -----------------
Net interest income/
Rate spread (FTE) $ 297 3.83 $ 290 4.19
====== ======
FTE adjustment $ 6 $ 8
====== ======
Impact of net noninterest-bearing
sources of funds 0.50 0.58
- - ----------------------------------------------------------------------------------------------
Net interest margin as a percent of
average earning assets (FTE) 4.33% 4.77%
==============================================================================================
Increase Increase
(Decrease) (Decrease) Net
Due to Due to Increase
Rate Volume* (Decrease)
---------- ---------- ----------
(in millions)
Loans $ (16) $ 17 $ 1
Investment securities (19) 24 5
Other earning assets (1) 2 1
------------------------------
Total earning assets (36) 43 7
Interest-bearing deposits (16) (5) (21)
Short-term borrowings (6) 18 12
Long-term debt (2) 11 9
------------------------------
Total interest-bearing sources (24) 24 -
------------------------------
Net interest income/Rate spread (FTE) $ (12) $ 19 $ 7
==============================
* Rate/Volume variances are allocated to variances due to volume.
/TABLE
<PAGE>
<PAGE> 14
Noninterest Expenses
Noninterest expenses totaled $252 million for the first quarter of
1994, a $1 million decrease from the same period in 1993.
First quarter salaries and employee benefits expenses fell $3
million, or 2 percent, in 1994 over 1993 due to staff reductions related
to the merger, and decreased levels of temporary staff and contract
labor used to complete merger-related systems conversions.
Equipment expense for the quarter increased $2 million, or 12
percent, due to increased depreciation related to computer and system
upgrades in 1993, and expenses associated with equipment maintenance.
Other noninterest expense rose $2 million, or 2 percent, in the
first quarter of 1994, reflecting the Corporation's ability to control
growth to less than normal inflationary increases.
Provision for Income Taxes
The provision for income taxes increased $11 million in the first
three months of 1994 versus the comparable period in 1993. The
Corporation revised its estimated annual tax rate in the third quarter
of 1993 to reflect an increase in the federal statutory tax rate from
34% to 35%, affecting comparability between periods.
The provision for income taxes differs from taxes calculated at
the statutory rate, principally from tax-exempt income on state and
municipal securities.
Financial Condition
Total assets at March 31, 1994 increased $1.9 billion to $32.2
billion, a 6 percent increase since December 31, 1993.
Earning assets increased by 7 percent, or $1.9 billion, led by
increases in both the investment securities and loan portfolios, which
were partially offset by declines in federal funds sold.
Investment securities rose $2.2 billion since year-end 1993,
largely related to increased purchases of mortgage-backed Government
Agency securities, which offer superior credit quality, and relatively
attractive yields.
<PAGE>
<PAGE> 15
The $1.0 billion increase in the loan portfolio was concentrated
in commercial and residential mortgage loans, which increased $364
million and $305 million, respectively, since year-end 1993, due
principally to the Pacific Western acquisition, and the purchase of two
residential mortgage loan portfolios during the quarter.
Liabilities increased by $1.7 billion, or 6 percent, since
December 31, 1993.
For the first quarter of 1994, total deposits increased by $671
million, due to the Pacific Western acquisition.
Short-term borrowings increased by $596 million since December 31,
1993. Within short-term borrowings, federal funds purchased increased
by $1.4 billion, while other borrowed funds fell $798 million, due
primarily to large decreases in treasury, tax and loan borrowings from
the U.S. Government.
The Corporation's long-term debt increased $425 million since
year-end 1993, due primarily to the issuance of $500 million of medium-
term notes. This increase was partially offset by the maturation of $75
million of medium-term notes. An analysis of long-term debt is
contained in the notes to the consolidated financial statements.
Allowance for Loan Losses
The allowance for loan losses at March 31, 1994 was $320 million,
an increase of $21 million since December 31, 1993. As a percent of
total loans, the allowance was 1.59 percent at March 31, 1994, compared
to 1.56 percent at December 31, 1993. Net charge-offs were $11 million
for the first quarter of 1994, and $20 million for the comparable 1993
period. An analysis of the allowance for loan losses is contained in
the notes to the consolidated financial statements.
Management determines the adequacy of the allowance for loan
losses by applying projected loss ratios to the risk-ratings of loans
both individually, and by category. The projected loss ratios
incorporated a variety of factors such as recent loss experience,
current economic conditions, trends in past due and nonaccrual amounts,
risk characteristics of the various categories and concentrations of
loans, and other factors.
<PAGE>
<PAGE> 16
Nonperforming assets have increased since December 31, 1993, and
were categorized as follows:
(in thousands) March 31, 1994 December 31, 1993
-------------- -----------------
Nonaccrual loans
Commercial loans $ 83,078 $ 71,268
International loans 215 215
Real estate construction
loans 17,459 18,748
Commercial and residential
real estate loans 90,376 63,688
--------- ---------
Total 191,128 153,919
Reduced-rate loans 2,189 5,057
--------- ---------
Total nonperforming
loans 193,317 158,976
Other real estate 57,296 50,174
--------- ---------
Total nonperforming
assets $ 250,613 $ 209,150
========= =========
Loans past due 90 days $ 46,827 $ 45,880
========= =========
Excluding the Pacific Western acquisition, nonperforming assets
would have declined by $10 million since year-end 1993. Nonperforming
assets as a percentage of total loans and other real estate at March 31,
1994 and December 31, 1993 were 1.24 percent and 1.09 percent,
respectively.
Capital
Shareholder's equity increased $136 million from December 31, 1993
to March 31, 1994, principally through the retention of earnings, and
the issuance of $121 million of treasury stock in connection with the
Pacific Western acquisition. The increase was partially offset by $26
million of stock repurchases (981,700 shares), related to the Pacific
Western acquisition and for reissuance under employee stock plans, and a
$19 million decrease in unrealized gains on investment securities
available for sale.
Capital ratios continue to comfortably exceed regulatory minimums
and were as follows:
March 31, December 31,
1994 1993
------------- ------------
Minimum leverage ratio
(3.00 - minimum) 7.11% 7.04%
Tier 1 risk-based capital
(4.0 - minimum) 8.26 8.21
Total risk-based capital
(8.0 - minimum) 11.59 11.58
<PAGE>
<PAGE> 17
At March 31, 1994, the capital ratios of all of the Corporation's
banking subsidiaries exceeded the minimum ratios required of a "well
capitalized" institution as defined in the final rule under FDICIA.
Other Matters
As disclosed in Part I, Item 3 of Form 10-K for the year ended
December 31, 1993, the State of Michigan filed on July 24, 1990 a
lawsuit against Manufacturers Bank, N.A. (which was merged with and into
Comerica Bank in September, 1992) seeking to impose strict, joint, and
several liabilities upon Manufacturers Bank pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), the Resource Conservation and Recovery Act, and the Michigan
Water Resources Commission Act. Plaintiff alleged that Manufacturers
Bank was an operator of certain facilities which have environmental
problems and that Manufacturers Bank had indicia of ownership under
CERCLA. The facilities involved were actually owned and operated by
Auto Specialties Manufacturing Company ("AUSCO"), now in bankruptcy.
Plaintiff seeks cleanup costs and damages and has expressed the
opinion that the claim will be well in excess of $30,000,000. On
January 12, 1993, the United States District Court for the Western
District of Michigan granted Manufacturers Bank its motion for summary
judgment. The Attorney General has appealed the Court's order for
summary judgement. Comerica's management believes that this action will
not have a materially adverse effect on Comerica's consolidated
financial position, although it may, depending upon the amount of
ultimate liability, if any, and the consolidated results of operations
in the year of final resolution, have a materially adverse effect on the
consolidated results of operation in that year.
<PAGE>
<PAGE> 18
PART II
ITEM 6. Exhibits
(a) Exhibits
11. Statements re: computation of earnings per share
(b) Reports on Form 8-K
None<PAGE>
<PAGE> 19
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/Paul H. Martzowka
--------------------------------------
Paul H. Martzowka
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/Arthur W. Hermann
--------------------------------------
Arthur W. Hermann
Senior Vice President and Controller
(Principal Accounting Officer)
Date: May 11, 1994
<PAGE>
<PAGE> 1
Exhibit (11) - Statement Re: Computation of Earnings Per Share
COMPUTATION OF EARNINGS PER SHARE
Comerica Incorporated and Subsidiaries
<TABLE>
<CAPTION>
(In thousands, except per share data)
Three Months Ended
March 31
-------------------
1994 1993
-------- -------
<S> <C> <C>
Primary:
Average shares outstanding 114,571 118,664
Common stock equivalent:
Net effect of the assumed
exercise of stock options 893 1,350
-------- --------
Primary average shares 115,464 120,014
======== ========
Net income $ 90,863 $ 83,125
Less preferred stock dividends - 42
-------- --------
Income applicable to common
stock $ 90,863 $ 83,083
======== ========
Primary net income per share $0.79 $0.69
Fully diluted:
Average shares outstanding 114,571 118,664
Common stock equivalents:
Net effect of the assumed
exercise of stock options 893 1,414
Average shares reserved for
conversion of convertible
debt - 486
-------- --------
Fully diluted average shares 115,464 120,564
======== ========
Net income $ 90,863 $ 83,125
Less preferred stock dividends - 42
-------- --------
Income applicable to common
stock $ 90,863 $ 83,083
Interest on convertible debt
less related income tax effect - 69
-------- --------
Net income applicable to common
stock excluding above interest
(net of income tax effect) $ 90,863 $ 83,152
======== ========
Fully diluted net income
per share $0.79 $0.69
</TABLE>
