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Comerica

Comerica Incorporated

2015 Annual Report

Our Core Values

Customer-centricity

Collaboration

Integrity

Excellence

Agility

Diversity

Involvement

Comerica Incorporated (NYSE: CMA) is a financial services company headquartered in Dallas, Texas, and strategically aligned by three business segments: The Business Bank, The Retail Bank, and Wealth Management. Comerica focuses on relationships, and helping people and businesses be successful. In addition to Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico.

To Our Shareholders

Ralph Bapp
Ralph W. Babb Jr.
Chairman and Chief Executive Officer

The challenging environment for financial institutions continued in 2015 due to persistently low interest rates, combined with a host of increasing regulatory and technology demands. Furthermore, we are facing headwinds created by the energy cycle. As always, we embrace such challenges and move forward to address them. I am proud to write that the Comerica team persevered and continues to stand strong. In 2015, our average loans topped $48 billion, average deposits grew to a record $58 billion and credit quality remained solid. Through our equity repurchase program and dividends, we returned $389 million, or 75 percent of 2015 net income, to shareholders. We remain focused on creating value for you, our loyal shareholders, by building quality relationships and providing the products and services our clients need and deserve.

The cornerstone of our success is our relationship banking strategy, whereby we strive to be the trusted advisor to our clients. By firmly grasping their financial goals, we are positioned to provide a wide array of financial products and services to assist them in being successful. We believe balanced growth and increased profitability are achieved by delivering a higher level of banking that nurtures lifelong relationships with unwavering integrity and financial prudence. This approach has served us well for 166 years, through the ups and downs of various economic cycles, and should continue to serve us well in the future. Furthermore, our diverse geographic footprint is well situated and provides industry diversity, resulting in opportunities for significant long-term growth.

We are driven by doing what is right for our clients, employees, shareholders and the communities we serve. That is the Comerica way. It is how we raise expectations of what a bank can be.

2015 Financial Highlights

We had good balance sheet growth in 2015. Average loans increased $2 billion, or more than 4 percent, to $48.6 billion, in 2015. And, average deposits increased $3.5 billion, or 6 percent, to a record $58.3 billion.

The most notable increases in average loans came from National Dealer Services, Commercial Real Estate, Technology and Life Sciences, and Mortgage Banker Finance. Also, Small Business average loans increased over $100 million, which was partially driven by our banking centers. Additional training, incentives and increased accountability resulted in a 49 percent increase in the number of new loans booked and a 21 percent increase in dollars of new loans booked through our retail banking centers. In addition, we had a highly successful home equity sales campaign in the spring of 2015, resulting in record new loan volumes and a $110 million, or 7 percent, increase in average home equity loans.

Deposits have grown steadily over the last four years and reflect our focus on building long-term relationships. Our average total deposit growth included a 12 percent increase in noninterest-bearing deposits and a 2 percent increase in interest-bearing deposits. Deposits increased in every business line and all three of our major markets, as many of our clients have significant liquidity and choose to hold it at Comerica.

We successfully raised over $1 billion in senior and subordinated debt in 2015. This was done in part to position Comerica to meet the new Liquidity Coverage Ratio (LCR) rule. Under the rule, we are required to hold a minimum level of high quality liquid assets to cover net cash outflows under a 30-day systematic liquidity stress scenario. The rule became effective for us on January 1, 2016. During 2016, we are required to maintain a minimum LCR of 90 percent. Beginning January 1, 2017, and thereafter, the minimum required LCR will be 100 percent. As of year-end 2015, our ratio was well in excess of 100 percent.

We had $1.7 billion of net interest income in 2015, an increase of 2 percent, primarily the result of our solid loan growth.

Credit quality continued to be strong. The provision for credit losses increased from the historically low level we saw in the prior year. Net charge-offs were well below our through-the-cycle average. We did see an increase in our criticized loans, which also remains below our historical average and was driven by energy loans, which I will discuss below. The remainder of the portfolio continued to perform well.

We continue to focus on expanding our cross-sell penetration and are pleased with the increases we saw in card fees, cash management service charges and fiduciary income. We did, however, see declines in investment banking fees, due primarily to depressed activity in the energy market, as well as lower noncustomer-related income, such as deferred compensation asset returns.

Overall, expenses remained well controlled. Technology and regulatory expenses increased, which I will expand on below, and pension costs were higher. These were partially offset by lower litigation-related expenses, primarily from a legal reserve release in 2015 for a case on appeal, and other expense-saving actions.

In March 2015, we announced that the Federal Reserve did not object to our 2015 Capital Plan submission, which covers the second quarter 2015 through the second quarter of 2016. In April 2015, the board of directors increased the quarterly cash dividend for common stock by 5 percent to 21 cents per share. We repurchased 5.1 million shares and 500,000 warrants in 2015 under our equity repurchase program. As I mentioned earlier, through the buyback and dividends, we returned $389 million, or 75 percent, of 2015 net income to shareholders. This reflects our strong capital position and solid financial performance. Our regulatory capital levels remain comfortably above the threshold to be considered well capitalized. We will again participate in the Capital Plan process for 2016, and we expect that the results will be announced in June.

In summary, the contribution from loan growth was more than offset by an increase in our provision for credit losses, as well as higher pension, technology and regulatory expenses. Our 2015 net income was $521 million, a $72 million decrease from a year ago. However, our tangible book value per share increased more than 4 percent over the past year, to $39.33, as we continue to focus on creating long-term shareholder value.*

*See Supplemental Financial Data section for reconcilements of non-GAAP financial measures.

Our Framework for Delivering Enhanced Shareholder Value

We are guided by a strategic plan which we believe will drive our long-term success and enhancement of shareholder value. While our business model has served us well for 166 years, we know that we cannot rest on our laurels – we must regularly examine, refine and adapt our model in order to deliver the most value to our shareholders. Our board, which is composed of highly experienced professionals with the right mix of skills, expertise and insights to drive Comerica forward, plays an important role of reviewing, scrutinizing and approving the plan. Our plan is based on six key interlinking pillars: Growth, Balance, Relationships, Risk Management, Diversity, and Accountability.

As we look to 2016 and beyond, we have identified seven core focus areas for Comerica:

  1. Building new and expanding existing relationships to create enduring, satisfied clients
  2. Driving our expense discipline and risk management to the next level while leveraging investments in technology to meet increasing regulatory demands and evolving client requirements
  3. Maximizing growth opportunities resulting from our diverse geographic footprint and extensive knowledge of faster growing industries, including cross-selling value-added products
  4. Maintaining strong credit quality as we navigate the energy cycle
  5. Attracting, retaining and motivating our most valuable asset, our people
  6. Continuing our strong commitment to community, diversity and sustainability
  7. Providing a satisfactory return for our shareholders

Geographic Balance is a Key to our Long-Term Growth Strategy

We are located in seven of the 10 largest cities in the U.S., as well as many just outside the top 10. We maintain geographic balance between our markets with a strong presence in the major metropolitan areas of Texas, California and Michigan. We also have a presence in Arizona and Florida.

Our unique footprint provides important counterbalances for us as economic conditions change. For example, as Texas faced headwinds due to low oil and gas prices throughout 2015, the economies of Michigan and California had many segments that benefited from lower commodity prices, including the resurgent auto industry and consumer spending, generally.

As the largest U.S. commercial bank headquartered in Texas, we take great pride in the strength and resiliency of the state economy. Also, the business-friendly environment fosters a spirit of entrepreneurship, which has helped diversify the economic base. We've been operating in Texas for nearly three decades and have developed a solid client base in areas such as general Middle Market, Small Business and Commercial Real Estate, in addition to Energy.

We have had a presence in California for more than two decades. As the largest state economy, California provides us with many opportunities to capitalize on our industry expertise in business lines such as Technology and Life Sciences, National Dealer Services, Commercial Real Estate and Entertainment.

We have continuously served the Michigan market since our founding in 1849. Our focus is on maintaining our leadership position, as we have the second-largest deposit market share in the state, according to the FDIC. Increased auto sales continue to boost the state's economy. While competition in Michigan is strong, as it is in all of our markets, we continue to benefit from our reputation as a steady, reliable bank committed to the region. Our Michigan portfolio includes a strong focus on general Middle Market, Private Banking, Small Business and Retail Banking, among others.

Relationship Banking Strategy is Based on Creating Value for our Clients

Our model is weighted toward commercial banking through our Business Bank and complemented by the Retail Bank and Wealth Management, which assist us in building deep, enduring relationships with clients. By providing the products and services our clients desire, we not only generate fee income but also build loyal relationships.

As the 12th largest commercial lender in the U.S., it is no surprise Comerica has a substantial Business Bank, which provides companies of various sizes with a wide array of credit and noncredit financial products and services. Our 17 distinct lines of business within the Business Bank are led by managers with an average tenure of 25 years, demonstrating the depth and breadth of our expertise, as well as the seasoned management team we have in place.

We continue to bring to the marketplace the cutting-edge tools that clients demand, designed for the intuitive usability they want. For example, in 2015 we introduced Comerica TM Connect MobileSM, empowering commercial clients to access Comerica Business ConnectSM for information reporting and to approve payments with the convenience of their mobile devices. In addition, our commercial card program is gaining traction and is an important component of our integrated payables offering as clients seek efficient, paperless solutions to meet their cash management needs.

Where it makes sense, we form key strategic partnerships to leverage the expertise of others in order to provide comprehensive financial services for our clients. In 2015, we successfully converted our merchant services platform to our new partner, Vantiv, Inc., to deliver industry-leading, highly competitive payment processing solutions for our merchant clients. Additionally, we have referral arrangements in which we introduce our clients who are pursuing ownership changes in their businesses to third parties that provide merger and acquisition advisory services. This is an example of the way we raise the expectations of what a bank can be.

Within the Retail Bank, we focused on delivering cost-effective products that provided improved fraud protection. Comerica Web Banking® was completely redesigned in 2015, with added features and functionality making it more user-friendly while also increasing security measures to better protect our customers and their financial information. To further protect our customers, the Retail Bank introduced IDMonitor (powered by TrustedID®, an Equifax® Company), an enhanced identity theft monitoring tool offering greater flexibility, protection and peace of mind against identity fraud. Comerica also introduced American Express® and Visa® EMV Credit Cards with smart chip technology, which, when linked to a Comerica checking account, provides overdraft and fraud protection.

In addition, the Retail Bank continues to leverage technology to better serve our customers. During 2015, we increased automation in banking centers, such as deploying teller cash recyclers, which are designed to fully automate the handling of cash. We also opened additional Experience Centers, banking centers of the future, to pilot technology, facility design and customer service concepts.

As we enhance our retail product offerings, we are encouraged by the great progress our Corporate Marketing area has made on the Marketing Analytics Platform (MAP). MAP combines over 30 different account and transactional data systems across the organization into a single platform that will allow us to reach out to customers with more relevant, timely and value-added offers. In 2016, MAP will include a closed-loop tracking of all customer communications, a more complete picture of our customer relationships, and campaigns that can be tracked to measure revenue impact.

As reported in 2014, Comerica was designated to serve as the financial agent for the U.S. Department of Treasury's myRA program, a new savings option for those who do not have access to a retirement savings plan at work. After conducting an initial pilot phase of the program to get feedback and ensure that the user experience was as simple and straightforward as possible, Treasury announced the national launch of myRA in November 2015.

Wealth Management continues to provide us the ability to bring private banking, investment management and fiduciary services to our Business Bank and Retail Bank clients. A key strength of Comerica is working with business owners to address the needs of their businesses, as well as their personal wealth goals. Our Business Owner Advisory Services group within Wealth Management, partnering with the Business Bank, has had impressive results, bringing in some $1.8 billion in new balances in 2015, and over $4 billion since its inception in 2012.

Also within Wealth Management is our Professional Trust Alliance, which we established more than 20 years ago. We have alliances with third-party broker-dealers and registered investment advisers to provide trust administration and investment monitoring for their clients. We currently have agreements with 17 alliance partners, of which four were added in 2015. This business has become a significant contributor to our noninterest income, and assets under management continue to grow at an attractive pace. We serve our alliance partners and clients with 13 offices throughout the United States dedicated to building our Professional Trust Alliance business.

The Licensed Financial Specialist (LFS) program is a partnership between Comerica Securities and the Retail Bank. The LFS program is designed to expand the offerings available to our Retail Bank clients and to give them access to professional advice outside of traditional banking products and services. The program was launched in February 2014 and has resulted in over $466 million in new assets and over $7.2 million in new revenue since inception. It was another successful year for the LFS program in 2015, with revenues growing more than 30 percent year-over-year.

Comerica's Balance Sheet is Well Positioned to Benefit from Rising Rates

The Federal Reserve increased its benchmark rate 25 basis points in December 2015, marking the first change it has made to the short-term benchmark rate in seven years. This signaled that the economy is performing well and should continue to expand at a moderate pace going forward.

Our revenue, and that of most banks, has been impacted by the persistent, near zero interest rate environment. Our balance sheet is sensitive to movement in interest rates. The majority of our revenue is derived from the interest we receive on the loans we provide to our clients. Our loan portfolio represents over two-thirds of our total assets as of December 31, 2015, and over 85 percent of our loans are floating rate. Therefore, as rates rise, our portfolio is expected to reprice quickly. Furthermore, over 50 percent of our deposits are noninterest-bearing so are less impacted by rate movement. This provides us a source of low-cost funding as loan growth continues. We benefitted from the December increase in short-term rates and are positioned to continue to benefit from any further rate increases.

Navigating Through the Energy Cycle

As oil prices declined, we have been closely monitoring our energy clients. We have extensive knowledge of energy lending, with a 30-plus-year history of managing a solid portfolio that has performed exceptionally well through a number of cycles. We underwrite this business to withstand the typical volatility you see in the sector.

Our customer base is primarily well-established, larger middle market companies. We have a robust energy credit policy, which includes parameters for engineering review, well and field diversity, and hedging requirements. We maintain a granular portfolio with about 200 clients. At December 31, 2015, about 69 percent of our outstanding loans come from companies involved in exploration and production of both oil and gas, with the remainder derived from midstream and energy services.

As of year-end, our Energy line of business loans totaled about $3.1 billion, or about 6 percent of our total loans. Balances declined throughout the year as our clients took the necessary actions to adjust their cash flow and reduce their bank debt, such as cutting their expenses, disposing of assets and tapping the capital markets. However, the stress of sustained low prices impacted companies' cash flows, resulting in overall weakening of credit quality in this segment. As a result, in each quarter of 2015, we increased our reserves for energy loans. We remain committed to the energy sector and believe that in cycles such as the current one, we can further cement our reputation with our clients.

As far as the impact on the Texas economy, with lower oil prices, we have seen the Texas economy moderate from the strong growth we have experienced over the past few years. However, the Texas economy is more diverse than many realize (energy makes up only 15 percent of the state's economy) and remains a strong attractor of businesses from out of state. Population growth is supporting new non-energy jobs, and a solid U.S. economy is creating demand for Texas goods and services. All in all, ongoing low oil prices could cause a further drag on the state economy.

Carefully Managing Expenses While Facing Headwinds

Comerica has a culture of prudent expense management. By carefully managing our workforce, we have been able to drive efficiency. The ratio of loans and deposits per employee has consistently increased for the past five years, demonstrating our ability to further enhance productivity. This includes adding over 150 colleagues to our Enterprise Risk Management area to meet the increasing regulatory demands. We are continually reallocating resources to areas that have better growth prospects and providing technology solutions to enable our colleagues to be more productive. Also, we have maintained tight control of occupancy expense by consolidating our real estate, reducing our square footage by 3 percent over the past year.

As we continue to face headwinds from the persistently low-rate environment and navigate our way through the energy cycle, we are undergoing an even more intense review of our expense base. This includes reviewing opportunities to judiciously re-negotiate vendor contracts, reduce real estate, and rationalize some operations. We expect that these efforts will ultimately help to further offset rising regulatory and technology demands. In short, we remain focused on maintaining our expense discipline, even as rates rise, as we drive toward our long-term goal of an efficiency ratio below 60 percent.

Technology Investments to Meet Increasing Regulatory Demands and Evolving Client Requirements

Technology expense is rising for us and the industry. In 2015, we experienced higher technology expenses primarily related to changes required by the credit card industry, stress test automation, cybersecurity and implementation of LCR. Also, we launched a comprehensive effort to enhance our technology platforms, infrastructure and capabilities. Though this investment plan will span several years, in 2015 we initiated projects to significantly upgrade our transaction processing capabilities, including check and cash processing systems, wire, card management and card processing systems, thus ensuring our clients will have access to leading-edge payments processing capabilities. In 2015, we also consolidated our various Wealth Management systems into a single, integrated platform; upgraded our Comerica Web Banking® and Comerica Mobile Banking® platforms; delivered several improvements to our commercial cash management platform and Comerica TM Connect®; and made critical investments to improve the resiliency and security of our systems.

We will continue to make further needed technology investments in 2016 that will sustain the long-term growth of our company, including banking center delivery upgrades, modernized payments capabilities such as same-day ACH and improved mobile delivery capabilities for our commercial cash management systems, as well as enhanced reporting and risk management systems. We also expect to make investments in various other technologies that will improve the automation, effectiveness and efficiency of our various back-office processing capabilities.

Our Strong Commitment to Community, Diversity and Sustainability

"Involvement" is a core value at Comerica, and the bank's steadfast commitment to the communities it serves was underscored in many ways throughout 2015. Our involvement is not only the right thing to do but assists us in our business development efforts as we forge new relationships and grow existing ones.

Comerica contributed nearly $9 million to not-for-profit organizations in the markets we serve in 2015, and our employees raised more than $2.1 million for the United Way and Black United Fund. Comerica employees also donated their personal time and talents, nearly 74,000 hours, to make a positive difference in our local communities.

Our community "Shred Day" events continue to serve as an effective and highly visible signature community service, public education and branding campaign throughout our markets. Notable highlights include 2015 Shred Day DFW, in North Texas, which earned Comerica its third Guinness World Records® achievement with nearly 230 tons of documents securely destroyed and recycled in a single day, and which raised food and funds for the North Texas Food Bank. Between our Shred Day events in Dallas, Houston and Phoenix, we have shredded nearly 1.9 million pounds of sensitive paper documents, keeping that paper out of local landfills and away from identity thieves, while providing nearly 400,000 meals for local food banks since 2011.

This was the fourth year of our sponsorship of the Comerica Hatch Detroit Contest, which offers a $50,000 prize for the winning idea for a new retail business in Detroit. We also sponsored business pitch contests in Dallas and San Francisco. These contests offer us a signature opportunity to advance the aspirations of entrepreneurs in our local markets.

Another core value at Comerica is "Diversity." In 2015, we earned a second consecutive perfect rating of 100 percent on the Human Rights Campaign Foundation's 2016 Corporate Equality Index, a national benchmarking survey and report on corporate policies and practices related to LGBT workplace equality.

Black Enterprise magazine placed Comerica on its 2015 "40 Best Companies for Diversity" list. Comerica also ranked No. 2 on the DiversityInc 2015 Top 10 Regional Companies for Diversity. In addition, Comerica was named to LATINO Magazine's 2015 "LATINO 100" list, the third annual listing of the top 100 companies providing the most opportunities for Latinos in such areas as education, hiring, workforce diversity, minority business development, governance and philanthropy.

Sustainability remains a priority for Comerica, and in 2015 we continued our progress on being a more sustainable organization. We continue to reduce our environmental footprint with our 2020 Environmental Sustainability Goals that will help us to further reduce waste, water use, paper consumption, and energy and emissions. Comerica continues to report on its progress using the Global Reporting Initiative (GRI) framework, and in 2015 we published our first GRI-G4 report. The report provides a comprehensive look at 27 economic, environmental, social and governance "impact topics" developed after extensive consultation with a broad group of internal and external stakeholders.

Comerica Team Stands Strong

As we move forward, we believe we are well positioned. We are committed to providing high quality financial services and building lasting client relationships. We are confident that our relationship banking strategy can drive superior growth of loans, deposits and fee income. Our balance sheet structure benefits from rising interest rates, and our diverse geographic footprint is well situated to drive sustainable growth. As we, along with the industry, continue to face challenges, we are tightly managing expenses while we make necessary investments. Together with our board, we regularly examine, refine and adapt our business model, and we believe our strategic plan will assist us in driving continued profitable growth. As always, we remain focused on delivering long-term value for you, our shareholders.

Ralph Bapp
Ralph W. Babb Jr.
Chairman and Chief Executive Officer

Board of Directors

Ralph W. Babb Jr.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Comerica Incorporated and Comerica Bank
Roger A. Cregg (1)(2)(3)
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AV Homes, Inc.
(Developer and Homebuilder in Florida and Arizona)
T. Kevin DeNicola (1*)(3*)(4)
FORMER CHIEF FINANCIAL OFFICER
KIOR, Inc.
(Biofuels Company)
Jacqueline P. Kane (2)
RETIRED EXECUTIVE VICE PRESIDENT, HUMAN RESOURCES AND CORPORATE AFFAIRS
The Clorox Company
(Manufacturer and Marketer of Consumer Products)
Richard G. Lindner (2*)(4)
RETIRED SENIOR EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
AT&T, Inc.
(Global Telecommunications Company)
Alfred A. Piergallini (2)
CONSULTANT
Desert Trail Consulting
(Marketing Consulting Organization)
Robert S. Taubman (4)
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Taubman Centers, Inc.
(REIT that Owns, Develops and Operates Regional Shopping Centers Nationally) and The Taubman Company (Shopping Center Management Company Engaged in Leasing, Management and Construction Supervision)
Reginald M. Turner Jr. (1)(3)(4*)
ATTORNEY
Clark Hill PLC
(Law Firm)
Nina G. Vaca (1)(3)(4)
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Pinnacle Technical Resources, Inc.
(Staffing, Vendor Management and Information Technology Services Firm) and Vaca Industries Inc. (Management Company)

(1) Audit Committee

(2) Governance, Compensation and Nominating Committee

(3) Qualified Legal Compliance Committee

(4) Enterprise Risk Committee

* Committee Chairperson

Senior Leadership Team

Ralph W. Babb Jr.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Curtis C. Farmer
PRESIDENT
Comerica Incorporated and Comerica Bank
Karen L. Parkhill
VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER
Jon W. Bilstrom
EXECUTIVE VICE PRESIDENT
Legal Affairs
John D. Buchanan
EXECUTIVE VICE PRESIDENT
Governance, Regulatory Relations and Legal Affairs
Megan D. Burkhart
EXECUTIVE VICE PRESIDENT AND CHIEF HUMAN RESOURCES OFFICER
David E. Duprey
EXECUTIVE VICE PRESIDENT AND GENERAL AUDITOR
J. Patrick Faubion
EXECUTIVE VICE PRESIDENT
The Business Bank
Linda D. Forte
SENIOR VICE PRESIDENT
Business Affairs
Peter W. Guilfoile
EXECUTIVE VICE PRESIDENT AND CHIEF CREDIT OFFICER
Judith S. Love
PRESIDENT
Comerica Bank – California Market
Michael H. Michalak
EXECUTIVE VICE PRESIDENT AND CHIEF RISK OFFICER
Paul R. Obermeyer
EXECUTIVE VICE PRESIDENT AND CHIEF INFORMATION OFFICER
Michael T. Ritchie
PRESIDENT
Comerica Bank – Michigan Market
Peter L. Sefzik
PRESIDENT
Comerica Bank – Texas Market
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended
December 31, 2015
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)
 
(IRS Employer Identification Number)
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)
Securities registered pursuant to Section 12(b) of
the Exchange Act:
Common Stock, $5 par value
    Warrants to Purchase Common Stock (expiring November 14, 2018)
These securities are registered on the New York Stock Exchange.
Securities registered pursuant to Section 12(g) of the
Exchange Act:
    Warrants to Purchase Common Stock (expiring December 12, 2018)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o
Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated
filer ý
 
Accelerated
filer o
 
Non-accelerated filer o
(Do not check if a smaller
reporting company)
 
Smaller reporting
company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
At June 30, 2015 (the last business day of the registrant's most recently completed second fiscal quarter), the registrant's common stock, $5 par value, held by non-affiliates had an aggregate market value of approximately $9.0 billion based on the closing price on the New York Stock Exchange on that date of $51.32 per share. For purposes of this Form 10-K only, it has been assumed that all common shares Comerica's Trust Department holds for Comerica's employee plans, and all common shares the registrant's directors and executive officers hold, are shares held by affiliates.
At February 19, 2016, the registrant had outstanding 174,878,064 shares of its common stock, $5 par value.
Documents Incorporated by Reference:
Part III:
Items 10-14—Proxy Statement for the Annual Meeting of Shareholders to be held April 26, 2016.


Table of Contents

TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-1
S-1
E-1




Table of Contents

PART I
Item 1. Business.
GENERAL
Comerica Incorporated ("Comerica") is a financial services company, incorporated under the laws of the State of Delaware, and headquartered in Dallas, Texas. Based on total assets as reported in the most recently filed Consolidated Financial Statements for Bank Holding Companies (FR Y-9C), it was among the 25 largest commercial United States ("U.S.") financial holding companies. Comerica was formed in 1973 to acquire the outstanding common stock of Comerica Bank, which at such time was a Michigan banking corporation and one of Michigan's oldest banks (formerly Comerica Bank-Detroit). On October 31, 2007, Comerica Bank, a Michigan banking corporation, was merged with and into Comerica Bank, a Texas banking association ("Comerica Bank"). As of December 31, 2015, Comerica owned directly or indirectly all the outstanding common stock of 2 active banking and 36 non-banking subsidiaries. At December 31, 2015, Comerica had total assets of approximately $71.9 billion, total deposits of approximately $59.9 billion, total loans (net of unearned income) of approximately $49.1 billion and shareholders' equity of approximately $7.6 billion.
Business Segments
Comerica has strategically aligned its operations into three major business segments: the Business Bank, the Retail Bank, and Wealth Management. In addition to the three major business segments, Finance is also reported as a segment. We provide information about our business segments and the principal products and services provided by these segments in Note 22 on pages F-103 through F-107 of the Notes to Consolidated Financial Statements located in the Financial Section of this report.
Comerica operates in three primary geographic markets - Texas, California, and Michigan, as well as in Arizona and Florida, with select businesses operating in several other states, and in Canada and Mexico. We provide information about our market segments in Note 22 on pages F-103 through F-107 of the Notes to Consolidated Financial Statements located in the Financial Section of this report.
Activities with customers domiciled outside the U.S., in total or with any individual country, are not significant. We provide information on risks attendant to foreign operations: (1) under the caption "Concentration of Credit Risk" on page F-30 of the Financial Section of this report; and (2) under the caption "International Exposure" on page F-33 of the Financial Section of this report.
We provide information about the net interest income and noninterest income we received from our various classes of products and services: (1) under the caption, "Analysis of Net Interest Income-Fully Taxable Equivalent (FTE)" on page F-6 of the Financial Section of this report; (2) under the caption "Net Interest Income" on pages F-7 through F-8 of the Financial Section of this report; and (3) under the caption "Noninterest Income" on pages F-8 through F-9 of the Financial Section of this report.
Acquisition of Sterling Bancshares, Inc.
On July 28, 2011, Comerica acquired all the outstanding common stock of Sterling Bancshares, Inc. ("Sterling"), a bank holding company headquartered in Houston, Texas, in a stock-for-stock transaction. Sterling common shareholders and holders of outstanding Sterling phantom stock units received 0.2365 shares of Comerica's common stock in exchange for each share of Sterling common stock or phantom stock unit. As a result, Comerica issued approximately 24 million common shares with an acquisition date fair value of $793 million, based on Comerica's closing stock price of $32.67 on July 27, 2011. Based on the merger agreement, outstanding and unexercised options to purchase Sterling common stock were converted into fully vested options to purchase common stock of Comerica. In addition, outstanding warrants to purchase Sterling common stock were converted into warrants to purchase common stock of Comerica. Including an insignificant amount of cash paid in lieu of fractional shares, the fair value of total consideration paid was $803 million. The acquisition of Sterling significantly expanded Comerica's presence in Texas, particularly in the Houston and San Antonio areas.
COMPETITION
The financial services business is highly competitive. Comerica and its subsidiaries mainly compete in their three primary geographic markets of Texas, California and Michigan, as well as in the states of Arizona and Florida. They also compete in broader, national geographic markets, as well as markets in Mexico and Canada. They are subject to competition with respect to various products and services, including, without limitation, loans and lines of credit, deposits, cash management, capital market products, international trade finance, letters of credit, foreign exchange management services, loan syndication services, consumer lending, consumer deposit gathering, mortgage loan origination, consumer products, fiduciary services, private banking, retirement services, investment management and advisory services, investment banking services, brokerage services, the sale of annuity products, and the sale of life, disability and long-term care insurance products.
Comerica competes in terms of products and pricing with large national and regional financial institutions and with smaller financial institutions. Some of Comerica's larger competitors, including certain nationwide banks that have a significant

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presence in Comerica's market area, may make available to their customers a broader array of product, pricing and structure alternatives and, due to their asset size, may more easily absorb credit losses in a larger overall portfolio. Some of Comerica's competitors (larger or smaller) may have more liberal lending policies and processes. Further, Comerica's banking competitors may be subject to a significantly different or reduced degree of regulation due to their asset size or types of products offered. They may also have the ability to more efficiently utilize resources to comply with regulations or may be able to more effectively absorb the costs of regulations into their existing cost structure. Comerica believes that the level of competition in all geographic markets will continue to increase in the future.
In addition to banks, Comerica's banking subsidiaries also face competition from other financial intermediaries, including savings and loan associations, consumer finance companies, leasing companies, venture capital funds, credit unions, investment banks, insurance companies and securities firms. Competition among providers of financial products and services continues to increase, with consumers having the opportunity to select from a growing variety of traditional and nontraditional alternatives. The ability of non-banking financial institutions to provide services previously limited to commercial banks has intensified competition. Because non-banking financial institutions are not subject to many of the same regulatory restrictions as banks and bank holding companies, they can often operate with greater flexibility and lower cost structures.
In addition, the industry continues to consolidate, which affects competition by eliminating some regional and local institutions, while strengthening the franchises of acquirers.
SUPERVISION AND REGULATION
Banks, bank holding companies, and financial institutions are highly regulated at both the state and federal level. Comerica is subject to supervision and regulation at the federal level by the Board of Governors of the Federal Reserve System ("FRB") under the Bank Holding Company Act of 1956, as amended. The Gramm-Leach-Bliley Act expanded the activities in which a bank holding company registered as a financial holding company can engage. The conditions to be a financial holding company include, among others, the requirement that each depository institution subsidiary of the holding company be well capitalized and well managed. Effective July 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") also requires the well capitalized and well managed standards to be met at the financial holding company level. Comerica became a financial holding company in 2000. As a financial holding company, Comerica may affiliate with securities firms and insurance companies, and engage in activities that are financial in nature. Activities that are "financial in nature" include, but are not limited to: securities underwriting; securities dealing and market making; sponsoring mutual funds and investment companies (subject to regulatory requirements, including restrictions set forth in the Volcker Rule, described under the heading "The Dodd-Frank Wall Street Reform and Consumer Protection Act and Other Recent Legislative and Regulatory Developments" below); insurance underwriting and agency; merchant banking; and activities that the FRB has determined to be financial in nature or incidental or complementary to a financial activity, provided that it does not pose a substantial risk to the safety or soundness of the depository institution or the financial system generally. A bank holding company that is not also a financial holding company is limited to engaging in banking and other activities previously determined by the FRB to be closely related to banking.
Comerica Bank is chartered by the State of Texas and at the state level is supervised and regulated by the Texas Department of Banking under the Texas Finance Code. Comerica Bank has elected to be a member of the Federal Reserve System under the Federal Reserve Act and, consequently, is supervised and regulated by the Federal Reserve Bank of Dallas. Comerica Bank & Trust, National Association is chartered under federal law and is subject to supervision and regulation by the Office of the Comptroller of the Currency ("OCC") under the National Bank Act. Comerica Bank & Trust, National Association, by virtue of being a national bank, is also a member of the Federal Reserve System. The deposits of Comerica Bank and Comerica Bank & Trust, National Association are insured by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC") to the extent provided by law. Certain transactions executed by Comerica Bank are also subject to regulation by the U.S. Commodity Futures Trading Commission. In Canada, Comerica Bank is supervised by the Office of the Superintendent of Financial Institutions and in Mexico, by the Banco de México.
The FRB supervises non-banking activities conducted by companies directly and indirectly owned by Comerica. In addition, Comerica's non-banking subsidiaries are subject to supervision and regulation by various state, federal and self-regulatory agencies, including, but not limited to, the Financial Industry Regulatory Authority (in the case of Comerica Securities, Inc.), the Office of Financial and Insurance Regulation of the State of Michigan (in the case of Comerica Securities, Inc. and Comerica Insurance Services, Inc.), and the Securities and Exchange Commission ("SEC") (in the case of Comerica Securities, Inc. and World Asset Management, Inc.).
Described below are material elements of selected laws and regulations applicable to Comerica and its subsidiaries. The descriptions are not intended to be complete and are qualified in their entirety by reference to the full text of the statutes and regulations described. Changes in applicable law or regulation, and in their application by regulatory agencies, cannot be predicted, but they may have a material effect on the business of Comerica and its subsidiaries.

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Requirements for Approval of Acquisitions and Activities
In most cases, no FRB approval is required for Comerica to acquire a company engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the FRB. However, Federal and state laws impose notice and approval requirements for mergers and acquisitions of other depository institutions or bank holding companies. Prior approval is required before Comerica may acquire the beneficial ownership or control of more than 5% of the voting shares or substantially all of the assets of a bank holding company (including a financial holding company) or a bank.
The Community Reinvestment Act of 1977 ("CRA") requires U.S. banks to help serve the credit needs of their communities. Comerica Bank's current rating under the "CRA" is "satisfactory". If any subsidiary bank of Comerica were to receive a rating under the CRA of less than "satisfactory," Comerica would be prohibited from engaging in certain activities.
In addition, Comerica, Comerica Bank and Comerica Bank & Trust, National Association, are each "well capitalized" and "well managed" under FRB standards. If any subsidiary bank of Comerica were to cease being "well capitalized" or "well managed" under applicable regulatory standards, the FRB could place limitations on Comerica's ability to conduct the broader financial activities permissible for financial holding companies or impose limitations or conditions on the conduct or activities of Comerica or its affiliates. If the deficiencies persisted, the FRB could order Comerica to divest any subsidiary bank or to cease engaging in any activities permissible for financial holding companies that are not permissible for bank holding companies, or Comerica could elect to conform its non-banking activities to those permissible for a bank holding company that is not also a financial holding company.
Further, the effectiveness of Comerica and its subsidiaries in complying with anti-money laundering regulations (discussed below) is also taken into account by the FRB when considering applications for approval of acquisitions.
Transactions with Affiliates
Various governmental requirements, including Sections 23A and 23B of the Federal Reserve Act and the FRB's Regulation W, limit borrowings by Comerica and its nonbank subsidiaries from its affiliate insured depository institutions, and also limit various other transactions between Comerica and its nonbank subsidiaries, on the one hand, and Comerica's affiliate insured depository institutions, on the other. For example, Section 23A of the Federal Reserve Act limits the aggregate outstanding amount of any insured depository institution's loans and other "covered transactions" with any particular nonbank affiliate to no more than 10% of the institution's total capital and limits the aggregate outstanding amount of any insured depository institution's covered transactions with all of its nonbank affiliates to no more than 20% of its total capital. "Covered transactions" are defined by statute to include a loan or extension of credit, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the FRB) from the affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. Section 23A of the Federal Reserve Act also generally requires that an insured depository institution's loans to its nonbank affiliates be, at a minimum, 100% secured, and Section 23B of the Federal Reserve Act generally requires that an insured depository institution's transactions with its nonbank affiliates be on terms and under circumstances that are substantially the same or at least as favorable as those prevailing for comparable transactions with nonaffiliates. The Dodd-Frank Act significantly expanded the coverage and scope of the limitations on affiliate transactions within a banking organization. For example, commencing in July 2012, the Dodd-Frank Act applies the 10% of capital limit on covered transactions to financial subsidiaries and amends the definition of "covered transaction" to include (i) securities borrowing or lending transactions with an affiliate, and (ii) all derivatives transactions with an affiliate, to the extent that either causes a bank or its affiliate to have credit exposure to the securities borrowing/lending or derivative counterparty.
Privacy
The privacy provisions of the Gramm-Leach-Bliley Act generally prohibit financial institutions, including Comerica, from disclosing nonpublic personal financial information of consumer customers to third parties for certain purposes (primarily marketing) unless customers have the opportunity to "opt out" of the disclosure. The Fair Credit Reporting Act restricts information sharing among affiliates for marketing purposes.
Anti-Money Laundering Regulations
The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act ("USA PATRIOT Act") of 2001 and its implementing regulations substantially broadened the scope of U.S. anti-money laundering laws and regulations by requiring insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing. The USA PATRIOT Act and its regulations also provide for information sharing, subject to conditions, between federal law enforcement agencies and financial institutions, as well as among financial institutions, for counter-terrorism purposes. Federal banking regulators are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering activities of the applicants. To comply with these obligations, Comerica and its various operating units have implemented appropriate internal practices, procedures, and controls.

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Interstate Banking and Branching
The Interstate Banking and Branching Efficiency Act (the "Interstate Act"), as amended by the Dodd-Frank Act, permits a bank holding company, with FRB approval, to acquire banking institutions located in states other than the bank holding company's home state without regard to whether the transaction is prohibited under state law, but subject to any state requirement that the bank has been organized and operating for a minimum period of time, not to exceed five years, and the requirement that the bank holding company, prior to and following the proposed acquisition, control no more than 10% of the total amount of deposits of insured depository institutions in the U.S. and no more than 30% of such deposits in that state (or such amount as established by state law if such amount is lower than 30%). The Interstate Act, as amended, also authorizes banks to operate branch offices outside their home states by merging with out-of-state banks, purchasing branches in other states and by establishing de novo branches in other states, subject to various conditions. In the case of purchasing branches in a state in which it does not already have banking operations, the "host" state must have "opted-in" to the Interstate Act by enacting a law permitting such branch purchases. The Dodd-Frank Act expanded the de novo interstate branching authority of banks beyond what had been permitted under the Interstate Act by eliminating the requirement that a state expressly "opt-in" to de novo branching, in favor of a rule that de novo interstate branching is permissible if under the law of the state in which the branch is to be located, a state bank chartered by that state would be permitted to establish the branch. Effective July 21, 2011, the Dodd-Frank Act also required that a bank holding company or bank be well capitalized and well managed (rather than simply adequately capitalized and adequately managed) in order to take advantage of these interstate banking and branching provisions.
Comerica has consolidated the majority of its banking business into one bank, Comerica Bank, with branches in Texas, Arizona, California, Florida and Michigan.
Dividends
Comerica is a legal entity separate and distinct from its banking and other subsidiaries. Most of Comerica's revenues result from dividends its bank subsidiaries pay it. There are statutory and regulatory requirements applicable to the payment of dividends by subsidiary banks to Comerica, as well as by Comerica to its shareholders. Certain, but not all, of these requirements are discussed below.
Comerica Bank and Comerica Bank & Trust, National Association are required by federal law to obtain the prior approval of the FRB and/or the OCC, as the case may be, for the declaration and payment of dividends, if the total of all dividends declared by the board of directors of such bank in any calendar year will exceed the total of (i) such bank's retained net income (as defined and interpreted by regulation) for that year plus (ii) the retained net income (as defined and interpreted by regulation) for the preceding two years, less any required transfers to surplus or to fund the retirement of preferred stock. At January 1, 2016, Comerica's subsidiary banks could declare aggregate dividends of approximately $398 million from retained net profits of the preceding two years. Comerica's subsidiary banks declared dividends of $437 million in 2015, $380 million in 2014 and $480 million in 2013.
Further, federal regulatory agencies can prohibit a banking institution or bank holding company from engaging in unsafe and unsound banking practices and could prohibit the payment of dividends under circumstances in which such payment could be deemed an unsafe and unsound banking practice. Under the Federal Deposit Insurance Corporation Improvement Act ("FDICIA"), "prompt corrective action" regime discussed below, which applies to each of Comerica Bank and Comerica Bank & Trust, National Association, a subject bank is specifically prohibited from paying dividends to its parent company if payment would result in the bank becoming "undercapitalized." In addition, Comerica Bank is also subject to limitations under Texas state law regarding the amount of earnings that may be paid out as dividends to its parent company, and requiring prior approval for payments of dividends that exceed certain levels.
Additionally, the payment of dividends by Comerica to its shareholders is subject to the non-objection of the FRB pursuant to the Comprehensive Capital Analysis and Review (CCAR) program. For more information, please see "The Dodd-Frank Wall Street Reform and Consumer Protection Act and Other Recent Legislative and Regulatory Developments" in this section.
Source of Strength and Cross-Guarantee Requirements
Federal law and FRB regulations require that bank holding companies serve as a source of strength to each subsidiary bank and commit resources to support each subsidiary bank. This support may be required at times when a bank holding company may not be able to provide such support without adversely affecting its ability to meet other obligations. Similarly, under the cross-guarantee provisions of the Federal Deposit Insurance Act, in the event of a loss suffered or anticipated by the FDIC (either as a result of the failure of a banking subsidiary or related to FDIC assistance provided to such a subsidiary in danger of failure), the other banking subsidiaries may be assessed for the FDIC's loss, subject to certain exceptions.
Federal Deposit Insurance Corporation Improvement Act
FDICIA requires, among other things, the federal banking agencies to take "prompt corrective action" in respect of depository institutions that do not meet minimum capital requirements. FDICIA establishes five capital tiers: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized." A depository

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institution's capital tier will depend upon where its capital levels are in relation to various relevant capital measures, which, among others, include a Tier 1 and total risk-based capital measure and a leverage ratio capital measure.
Regulations establishing the specific capital tiers provide that, for a depository institution to be well capitalized, it must have a total risk-based capital ratio of at least 10% and a Tier 1 risk-based capital ratio of at least 8%, a common equity Tier 1 risk-based capital measure of at least 6.5%, a Tier 1 leverage ratio of at least 5% and not be subject to any specific capital order or directive. For an institution to be adequately capitalized, it must have a total risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio of at least 6%, a common equity Tier 1 risk-based capital measure of at least 4.5% and a Tier 1 leverage ratio of at least 4%. Under certain circumstances, the appropriate banking agency may treat a well capitalized, adequately capitalized or undercapitalized institution as if the institution were in the next lower capital category.
As of December 31, 2015, Comerica and its banking subsidiaries exceeded the ratios required for an institution to be considered "well capitalized" under these regulations.
FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. Undercapitalized depository institutions are subject to limitations on growth and certain activities and are required to submit an acceptable capital restoration plan. The federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. In addition, for a capital restoration plan to be acceptable, the institution's parent holding company must guarantee for a specific time period that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company under the guaranty is limited to the lesser of (i) an amount equal to 5% of the depository institution's total assets at the time it became undercapitalized, or (ii) the amount that is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a depository institution fails to submit or implement an acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions are subject to a number of requirements and restrictions. Specifically, such a depository institution may be required to do one or more of the following, among other things: sell sufficient voting stock to become adequately capitalized, reduce the interest rates it pays on deposits, reduce its rate of asset growth, dismiss certain senior executive officers or directors, or stop accepting deposits from correspondent banks. Critically undercapitalized institutions are subject to the appointment of a receiver or conservator or such other action as the FDIC and the applicable federal banking agency shall determine appropriate.
As an additional means to identify problems in the financial management of depository institutions, FDICIA requires federal bank regulatory agencies to establish certain non-capital safety and soundness standards for institutions any such agency supervises. The standards relate generally to, among others, earnings, liquidity, operations and management, asset quality, various risk and management exposures (e.g., credit, operational, market, interest rate, etc.) and executive compensation. The agencies are authorized to take action against institutions that fail to meet such standards.
FDICIA also contains a variety of other provisions that may affect the operations of depository institutions including reporting requirements, regulatory standards for real estate lending, "truth in savings" provisions, the requirement that a depository institution give 90 days prior notice to customers and regulatory authorities before closing any branch, and a prohibition on the acceptance or renewal of brokered deposits by depository institutions that are not well capitalized or are adequately capitalized and have not received a waiver from the FDIC.
Capital Requirements
Comerica and its bank subsidiaries are subject to risk-based capital requirements and guidelines imposed by the FRB and/or the OCC.
For this purpose, a depository institution's or holding company's assets and certain specified off-balance sheet commitments are assigned to various risk categories defined by the FRB, each weighted differently based on the level of credit risk that is ascribed to such assets or commitments, based on counterparty type and asset class. A depository institution's or holding company's capital, in turn, is divided into three tiers: Common Equity Tier 1 ("CET1"), additional Tier 1, and Tier 2. CET1 capital predominantly includes common shareholders' equity, less certain deductions for goodwill, intangible assets and deferred tax assets that arise from net operating losses and tax credit carry-forwards, if any. Additionally, Comerica has made the election to permanently exclude accumulated other comprehensive income related to debt securities, cash flow hedges, and defined benefit postretirement plans from CET1 capital. Additional Tier 1 capital primarily includes noncumulative perpetual preferred stock and related surplus. Tier 2 capital primarily includes qualifying subordinated debt and qualifying allowance for credit losses. Certain deductions and adjustments to CET1 capital, Tier 1 capital and Tier 2 capital are subject to phase-in through December 31, 2017. Entities that engage in trading activities, whose trading activities exceed specified levels, also are required to maintain capital for market risk. Market risk includes changes in the market value of trading account, foreign exchange, and commodity positions, whether resulting from broad market movements (such as changes in the general level of interest rates, equity prices, foreign

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exchange rates, or commodity prices) or from position specific factors. From time to time, Comerica's trading activities may exceed specified regulatory levels, in which case Comerica maintains additional capital for market risk as required.
Comerica, like other bank holding companies, currently is required to maintain CET1, Tier 1 (the sum of CET1 and additional Tier 1 capital) and "total capital" (the sum of Tier 1 and Tier 2 capital) equal to at least 4.5%, 6% and 8% of its total risk-weighted assets (including certain off-balance-sheet items, such as standby letters of credit), respectively. At December 31, 2015, Comerica met all requirements, with CET1, Tier 1 and total capital equal to 10.54%, 10.54% and 12.69% of its total risk-weighted assets, respectively.
Comerica is also required to maintain a minimum "leverage ratio" (Tier 1 capital to non-risk-adjusted total assets) of 4%. Comerica's leverage ratio of 10.22% at December 31, 2015 reflects the nature of Comerica's balance sheet and demonstrates a commitment to capital adequacy. At December 31, 2015, Comerica Bank had CET1, Tier 1 and total capital equal to 10.20%, 10.20% and 12.05% of its total risk-weighted assets, respectively, and a leverage ratio of 9.89%.
Additional information on the calculation of Comerica and its bank subsidiaries' CET1, Tier 1 capital, total capital and risk-weighted assets is set forth in Note 20 of the Notes to Consolidated Financial Statements located on pages F-99 through F-100 of the Financial Section of this report. Additional information on the timing and nature of the Basel III capital requirements is set forth below, under "Basel III: Regulatory Capital and Liquidity Regime."
FDIC Insurance Assessments
The FDIC Deposit Insurance Fund ("DIF") provides insurance coverage for certain deposits. Comerica's subsidiary banks are subject to FDIC deposit insurance assessments to maintain the DIF. The FDIC imposes a risk-based deposit premium assessment system, which was amended pursuant to the Federal Deposit Insurance Reform Act of 2005 and further amended by the Dodd-Frank Act. The Dodd-Frank Act also increased the DIF's minimum reserve ratio and permanently increased general deposit insurance coverage from $100,000 to $250,000. The final rule implementing revisions to the assessment system became effective April 1, 2011. Under the risk-based deposit premium assessment system, the assessment rates for an insured depository institution are determined by an assessment rate calculator, which is based on a number of elements to measure the risk each institution poses to the DIF. The assessment rate is applied to total average assets less tangible equity. Under the current system, premiums are assessed quarterly and could increase if, for example, criticized loans and/or other higher risk assets increase or balance sheet liquidity decreases. For 2015, Comerica's FDIC insurance expense totaled $37 million.
In November 2015, the FDIC issued a Notice of Proposed Rulemaking on Assessments in order to implement section 334 of the Dodd-Frank Act (§334), which requires the FDIC to (1) raise the minimum reserve ratio for the DIF to 1.35 percent, from 1.15 percent, (2) assess premiums on banks to reach the 1.35 percent goal by September 30, 2020, and (3) offset the effect of the increase in the minimum reserve ratio on insured depository institutions with assets of less than $10 billion. The FDIC proposed a surcharge on large banks, to be assessed over a period of eight quarters, to begin the quarter after the DIF reserve ratio first reaches or exceeds 1.15 percent, as a means to implement §334. As proposed, Comerica would be subject to the surcharge assessment. Management currently estimates that, based on the proposal, total FDIC expense would increase by approximately $10 million annually during the surcharge period, which could begin in either the first or second quarter 2016.
Enforcement Powers of Federal and State Banking Agencies
The FRB and other federal and state banking agencies have broad enforcement powers, including, without limitation, and as prescribed to each agency by applicable law, the power to terminate deposit insurance, impose substantial fines and other civil penalties and appoint a conservator or receiver. Failure to comply with applicable laws or regulations could subject Comerica or its banking subsidiaries, as well as officers and directors of these organizations, to administrative sanctions and potentially substantial civil and criminal penalties.
The Dodd-Frank Wall Street Reform and Consumer Protection Act and Other Recent Legislative and Regulatory Developments
The recent financial crisis has led to significant changes in the legislative and regulatory landscape of the financial services industry, including the overhaul of that landscape with the passage of the Dodd-Frank Act, which was signed into law on July 21, 2010. Provided below is an overview of key elements of the Dodd-Frank Act relevant to Comerica, as well as other recent legislative and regulatory developments. The estimates of the impact on Comerica discussed below are based on information currently available and, if applicable, are subject to change until final rulemaking is complete.
Incentive-Based Compensation. In June 2010, the FRB, OCC and FDIC issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers senior executives as well as other employees who, either individually or as part of a group, have the ability to expose the banking organization to material amounts of risk, is based upon the key principles that a banking organization's incentive compensation arrangements (i) should provide employees incentives that appropriately balance risk and financial results in a manner that does not encourage employees to expose their organizations to imprudent risk; (ii) should be compatible with effective controls and risk-management;

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and (iii) should be supported by strong corporate governance, including active and effective oversight by the organization's board of directors. Banking organizations are expected to review regularly their incentive compensation arrangements based on these three principles. Where there are deficiencies in the incentive compensation arrangements, they should be promptly addressed. Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization's safety and soundness, particularly if the organization is not taking prompt and effective measures to correct the deficiencies. Comerica is subject to this final guidance and, similar to other large banking organizations, has been subject to a continuing review of incentive compensation policies and practices by representatives of the FRB, the Federal Reserve Bank of Dallas and the Texas Department of Banking since 2011. As part of that review, Comerica has undertaken a thorough analysis of all the incentive compensation programs throughout the organization, the individuals covered by each plan and the risks inherent in each plan's design and implementation. Comerica has determined that risks arising from employee compensation plans are not reasonably likely to have a material adverse effect on Comerica. Further, it is the Company's intent to continue to evolve our processes going forward by monitoring regulations and best practices for sound incentive compensation.
On April 14, 2011, the FRB, OCC and several other federal financial regulators issued a joint proposed rulemaking to implement Section 956 of the Dodd-Frank Act. Section 956 directed regulators to jointly prescribe regulations or guidelines prohibiting incentive-based payment arrangements, or any feature of any such arrangement, at covered financial institutions that encourage inappropriate risks by providing excessive compensation or that could lead to a material financial loss. This proposal supplements the final guidance issued by the banking agencies in June 2010. Consistent with the Dodd-Frank Act, the proposed rule would not apply to institutions with total consolidated assets of less than $1 billion, and would impose heightened standards for institutions with $50 billion or more in total consolidated assets, which includes Comerica. For these larger institutions, the proposed rule would require that at least 50 percent of annual incentive-based payments be deferred over a period of at least three years for designated executives. Moreover, boards of directors of these larger institutions would be required to identify employees who individually have the ability to expose the institution to possible losses that are substantial in relation to the institution's size, capital or overall risk tolerance, and to determine that the incentive compensation for these employees appropriately balances risk and rewards according to enumerated standards. Comerica is monitoring the development of this rule.
Basel III: Regulatory Capital and Liquidity Regime. In December 2010, the Basel Committee on Banking Supervision (the "Basel Committee") issued a framework for strengthening international capital and liquidity regulation ("Basel III"). In July 2013, U.S. banking regulators issued a final rule for the U.S. adoption of the Basel III regulatory capital framework. Basel III includes a more stringent definition of capital and introduces a new common equity Tier 1 ("CET1") capital requirement; sets forth two comprehensive methodologies for calculating risk-weighted assets ("RWA"), a standardized approach and an advanced approach; introduces two new capital buffers, a conservation buffer and a countercyclical buffer (applicable to advanced approach entities); establishes a new supplemental leverage ratio (applicable to advanced approach entities); and sets out minimum capital ratios and overall capital adequacy standards. As a banking organization subject to the standardized approach, the rules were effective for Comerica on January 1, 2015. Certain deductions and adjustments to regulatory capital (primarily related to intangible assets and surplus Tier 2 capital minority interest) phase in starting January 1, 2015 and will be fully implemented on January 1, 2018. The capital conservation buffer phases in at 0.625 percent beginning on January 1, 2016 and ultimately increases to 2.5 percent on January 1, 2019. Comerica is not subject to the countercyclical buffer or the supplemental leverage ratio.
Comerica's December 31, 2015 CET1 and Tier 1 ratios were both 10.54 percent. Comerica's December 31, 2015 CET1 and Tier 1 capital ratios exceed the minimum required by the final rule (4.5 percent and 6 percent, respectively).
On September 3, 2014, U.S. banking regulators adopted the Liquidity Coverage Ratio ("LCR") rule, which set for U.S. banks the minimum liquidity measure established under the Basel III liquidity framework. Under the final rule, Comerica is subject to a modified LCR standard, which requires a financial institution to hold a minimum level of high-quality, liquid assets ("HQLA") to fully cover modified net cash outflows under a 30-day systematic liquidity stress scenario. The rule is effective for Comerica on January 1, 2016. During the transition year, 2016, Comerica will be required to maintain a minimum LCR of 90 percent. Beginning January 1, 2017, and thereafter, the minimum required LCR will be 100 percent. As of December 31, 2015, Comerica's LCR ratio meets the fully phased-in 2017 requirement.
The Basel III liquidity framework includes a second minimum liquidity measure, the Net Stable Funding Ratio ("NSFR"), which requires the amount of available longer-term, stable sources of funding to be at least 100 percent of the required amount of longer-term stable funding over a one-year period. On October 31, 2014, the Basel Committee on Banking Supervision issued its final NSFR rule, which was originally introduced in 2010 and revised in January 2014. U.S. banking regulators have announced that they expect to issue proposed rules to implement the NFSR in advance of its scheduled global implementation in 2018. While uncertainty exists in the final form and timing of the U.S. rule implementing the NSFR and whether or not Comerica will be subject to the full requirements, Comerica is closely monitoring the development of the rule.
Interchange Fees. On July 20, 2011, the FRB published final rules (Regulation II) pursuant to the Dodd-Frank Act establishing the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction as the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction and prohibiting network exclusivity

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arrangements and routing restrictions. Comerica is subject to the final rules. In July 2013, a federal district court invalidated the FRB's interchange fee rules. The FRB's appeal of the court's ruling resulted in the U.S. Circuit Court of Appeals for the District of Columbia overruling the district court, reinstating the final rule as previously issued. On January 20, 2015, the U.S. Supreme Court denied a further appeal. Accordingly, Regulation II remains intact and its limits on interchange fees are now permanent.
Supervision and Regulation Assessment. Section 318 of the Dodd-Frank Act authorizes the federal banking agencies to assess fees against bank holding companies with total consolidated assets in excess of $50 billion equal to the expenses necessary or appropriate in order to carry out their supervision and regulation of those companies. Comerica accrued $1.6 million for 2015, which will be assessed in the first quarter 2016.
The Volcker Rule. The federal banking agencies and the SEC published approved joint final regulations to implement the Volcker Rule on December 10, 2013. The Volcker Rule generally prohibits banking entities from engaging in proprietary trading and from owning and sponsoring "covered funds" (e.g. hedge funds and private equity funds). The final regulations adopt a multi-faceted approach to implementing the Volcker Rule prohibitions that relies on: (i) detailed descriptions of prohibited and permitted activities; (ii) detailed compliance requirements; and (iii) for banking entities with large volumes of trading activity, detailed quantitative analysis and reporting obligations. In addition to rules implementing the core prohibitions and exemptions (e.g. underwriting, market-making related activities, risk-mitigating hedging and trading in certain government obligations) of the Volcker Rule, the regulations also include two appendices devoted to record-keeping and reporting requirements, including numerous quantitative data reporting obligations for banking entities with significant trading activities (Appendix A) and enhanced compliance requirements for banking entities with significant trading or covered fund activities (Appendix B). The final rule was effective April 1, 2014. The Volcker Rule generally required full compliance with the new restrictions by July 21, 2015; however, the FRB has extended the conformance period to July 21, 2017 for covered funds that were in place prior to December 31, 2013. Comerica is currently in compliance with the effective aspect of the Volcker Rule and expects to meet the final requirements adopted by regulators within the applicable regulatory timelines. Additional information on Comerica's portfolio of indirect (through funds) private equity and venture capital investments is set forth in Note 1 of the Notes to Consolidated Financial Statements located on page F-54 of the Financial Section of this report.
Annual Capital Plans and Stress Tests. Comerica is subject to the FRB's annual Comprehensive Capital Analysis and Review (CCAR) process, as well as the Dodd-Frank Act Stress Testing (DFAST) requirements. As part of the CCAR process, the FRB undertakes a supervisory assessment of the capital adequacy of bank holding companies (BHCs), including Comerica, that have $50 billion or more in total consolidated assets. This capital adequacy assessment is based on a review of a comprehensive capital plan submitted by each participating BHC to the FRB that describes the company's planned capital actions during the nine quarter review period, as well as the results of stress tests conducted by both the company and the FRB under different hypothetical macro-economic scenarios, including a supervisory baseline and an adverse and a severely adverse scenario provided by the FRB. After completing its review, the FRB may object or not object to the company's proposed capital actions, such as plans to pay or increase common stock dividends, reinstate or increase common equity repurchase programs, or issue or redeem preferred stock or other regulatory capital instruments. In connection with the 2015 CCAR, Comerica submitted its 2015 capital plan to the FRB on January 5, 2015; on March 5, 2015, Comerica and the FRB released the revenue, loss and capital results from the annual stress testing exercises and on March 11, 2015, Comerica announced that the FRB had completed its CCAR 2015 capital plan review and did not object to the capital plan or capital distributions contemplated in the plan. The 2015 capital plan submission extended over a period of five quarters, second quarter 2015 - second quarter 2016, due to a modification in timing by the FRB. Comerica plans to submit its CCAR 2016 capital plan to the FRB, consistent with new supervisory guidance (SR 15-19), in April 2016 and expects to receive the results of the FRB's review of the plan in June 2016 and to release its company-run stress tests results in June or July 2016.
FRB regulations also required that Comerica and other large bank holding companies conduct a separate mid-year stress test using financial data as of March 31st and three company-derived macro-economic scenarios (base, adverse and severely adverse) and publish a summary of the results under the severely adverse scenario. On July 23, 2015, Comerica released the results of its company-run mid-year stress tests. For 2016, the mid-year stress test will be moved to an October submission (instead of July). Stress test results are available in the Investor Relations section of Comerica's website at investor.comerica.com, on the "Regulatory Disclosures" page under "Financial Reports."
Enhanced Prudential Requirements. The Dodd-Frank Act created the Financial Stability Oversight Council ("FSOC") to coordinate efforts of the primary U.S. financial regulatory agencies in establishing regulations to address financial stability concerns and to make recommendations to the FRB as to enhanced prudential standards that must apply to large, interconnected bank holding companies and nonbank financial companies supervised by the FRB under the Dodd-Frank Act, including capital, leverage, liquidity and risk management requirements.
On February 18, 2014, the FRB issued its final regulations to implement the enhanced prudential and supervisory requirements mandated by the Dodd-Frank Act. The final regulations address enhanced risk-based capital and leverage requirements, enhanced liquidity requirements, enhanced risk management and risk committee requirements, single-counterparty credit limits, semiannual stress tests (as described above under "Annual Capital Plans and Stress Tests"), and a debt-to-equity limit

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for companies determined to pose a grave threat to financial stability. They are intended to allow regulators to more effectively supervise large bank holding companies and nonbank financial firms whose failure could impact the stability of the US financial system, and generally build on existing US and international regulatory guidance. The rule also takes a multi-stage or phased approach to many of the requirements (such as the capital and liquidity requirements). Most of these requirements apply to Comerica because it has consolidated assets of more than $50 billion. Comerica has or will implement all requirements of the new rules within regulatory timelines.
Resolution (Living Will) Plans. Section 165(d) of the Dodd-Frank Act requires bank holding companies with total consolidated assets of $50 billion or more ("covered companies") to prepare and submit to the federal banking agencies (e.g., FRB and FDIC) a plan for their rapid and orderly resolution under the U.S. Bankruptcy Code. Covered companies, such as Comerica, with less than $100 billion in total nonbank assets were required to submit their initial plans by December 31, 2013. In addition, Section 165(d) requires FDIC-insured depository institutions (like Comerica Bank) with assets of $50 billion or more to develop, maintain, and periodically submit plans outlining how the FDIC would resolve it through the FDIC's resolution powers under the Federal Deposit Insurance Act. The federal banking agencies have issued rules to implement these requirements. In addition, those rules require the filing of annual updates to the plans. Both Comerica and Comerica Bank filed their respective initial and updated resolution plans by the required due dates. The 2015 resolution plan updates are currently under review by the FRB and FDIC.
Section 611 and Title VII of the Dodd-Frank Act. Section 611 of the Dodd-Frank Act prohibits a state bank from engaging in derivative transactions unless the lending limit laws of the state in which the bank is chartered take into consideration exposure to derivatives. Section 611 does not provide how state lending limit laws must factor in derivatives. The Texas Finance Commission has adopted an administrative rule meeting the requirements of Section 611. Accordingly, Comerica Bank may engage in derivative transactions, as permitted by applicable law.
Title VII of the Dodd-Frank Act establishes a comprehensive framework for over-the-counter ("OTC") derivatives transactions. The structure for derivatives set forth in the Dodd-Frank Act is intended to promote, among other things, exchange trading and centralized clearing of swaps and security-based swaps, as well as greater transparency in the derivatives markets and enhanced monitoring of the entities that use these markets. In this regard, the CFTC and SEC have issued several regulatory proposals, some of which are now effective or will become effective in 2016.
The SEC and CFTC have jointly adopted rules further defining the terms "swap," "security-based swap," "security-based swap agreement," and have also adopted final joint rules defining the terms "swap dealer," "security-based swap dealer," "major swap participant," and "major security-based swap participant." Comerica has determined that neither it, nor its subsidiaries, are within the definition of "swap dealer" or "major swap participant," but some portions of the Title VII regulations apply nonetheless. One of these regulations centers on limiting certain OTC transactions to "eligible contract participants." This regulation impacts Comerica's small business customers that do not qualify as eligible contract participants by making such customers ineligible for swap derivatives as hedging in their loan agreements.
Consumer Finance Regulations. The Dodd-Frank Act made several changes to consumer finance laws and regulations. It contained provisions that have weakened the federal preemption rules applicable for national banks and give state attorneys general the ability to enforce federal consumer protection laws. Additionally, the Dodd-Frank Act created the Consumer Financial Protection Bureau ("CFPB"), which has a broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit "unfair, deceptive or abusive" acts and practices, and possesses examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. In this regard, the CFPB has commenced issuing several new rules to implement various provisions of the Dodd-Frank Act that were specifically identified as being enforced by the CFPB, as well as those specified for supervisory and enforcement authority for very large depository institutions and non-depository (nonbank) entities. Comerica is subject to CFPB foreign remittance rules and home mortgage lending rules, in addition to certain other CFPB rules.
The foreign remittance rules fall under Section 1073 of the Dodd-Frank Act. The CFPB issued new regulations amending Regulation E, which implements the Electronic Fund Transfer Act, effective October 28, 2013. The regulations were designed to provide protections to consumers who transfer funds to recipients located in countries outside the United States (customer foreign remittance transfers). In general, the regulation requires remittance transfer providers, such as Comerica, to disclose to a consumer the exchange rate, fees, and amount to be received by the recipient when the consumer sends a remittance transfer. Although Comerica had implemented the model disclosures provided in Appendix A to the final rule, on September 18, 2014, the CFPB extended the compliance exception period for the rule's new disclosure requirements to July 21, 2020.
On November 13, 2014, the CFPB issued a proposed regulation establishing new consumer protections and disclosure requirements on prepaid accounts, including (i) the provision of either periodic statements or free online account information access; (ii) new account error and unauthorized transaction rights; (iii) new "Know Before You Owe" prepaid account disclosures; (iv) public disclosure of account agreements for prepaid accounts and (v) credit protection for linked credit accounts. 
Comerica has implemented these new rules and positioned itself to be in compliance with the new requirements.

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Truth in Lending Act ("TILA") and Real Estate Settlement Procedures Act ("RESPA"). In November 2013, the CFPB issued a rule implementing new TILA RESPA Integrated Disclosures ("TRID") to replace the initial Truth-in-Lending disclosure and Good Faith Estimate for most closed-end consumer mortgage loans. The effective date was October 3, 2015. Significant changes in TRID include: (1) expansion of the scope of loans that require RESPA early disclosures, including bridge loans, vacant land loans, and construction loans; (2) changes and additions to "waiting period" requirements to close a loan; (3) reduced tolerances for estimated fees and (4) the lender, rather than the closing agent, is responsible for providing final disclosures. Although Comerica outsources most of its consumer mortgage loans, consumer construction financing has been suspended pending further clarification from the CFPB. This regulation has also resulted in a suspension of consumer bridge loan financing. Such financing has not been a significant business for Comerica.
The Truth in Lending Act (TILA) requires credit card issuers to post consumer credit card agreements to their websites and submit them quarterly to the CFPB commencing February 5, 2015. The CFPB implemented the rule on April 17, 2015. The CFPB delayed implementation of submissions of the agreements to the CFPB until the first week of April 2016. Comerica outsources its consumer credit cards, and does not anticipate any negative impact.
Home Mortgage Disclosure Act (HMDA). In July 2015 the CFPB implemented and expanded new HMDA rules. The final rule adopts a dwelling-secured standard for all loans or lines of credit that are for personal, family, or household purposes. Thus, most consumer-purpose transactions, including closed-end home-equity loans, home-equity lines of credit, and reverse mortgages, are subject to the regulation. Most commercial-purpose transactions (i.e., loans or lines of credit not for personal, family, or household purposes) are subject to the regulation only if they are for the purpose of home purchase, home improvement, or refinancing. The final rule excludes from coverage home improvement loans that are not secured by a dwelling (i.e., home improvement loans that are unsecured or that are secured by some other type of collateral) and all agricultural-purpose loans and lines of credit. Comerica is monitoring and implementing changes as required.
FDIC Guidance on Brokered Deposits.  On January 5, 2015, the FDIC issued guidance in the form of "Frequently Asked Questions" to promote consistency by insured depository institutions in identifying, accepting, and reporting brokered deposits.  On November 13, 2015, the FDIC issued proposed updates to the FAQs.  All insured depository institutions (including those that are well capitalized) must report brokered deposits in their Consolidated Reports of Condition and Income (Call Reports).  Comerica is currently evaluating the impact of these FAQs, including the proposed updates, to various business units throughout the organization, and believes they will only have a nominal impact. 
Flood Insurance Reform. The Biggert-Waters Flood Insurance Reform Act of 2012 ("Biggert-Waters Act"), as amended by the Homeowner Flood Insurance Affordability Act of 2014, modified the National Flood Insurance Program by: (i) increasing the maximum civil penalty for Flood Disaster Protection Act violations to $2,000 and eliminating the annual penalty cap; (ii) requiring certain lenders (including Comerica) to escrow premiums and fees for flood insurance on residential improved real estate; (iii) directing lenders to accept private flood insurance and to notify borrowers of its availability; (iv) amending the force placement requirement provisions; and (v) permitting lenders to charge borrowers costs for lapses in or insufficient coverage. These requirements will impact Comerica loans and extensions of credit secured with residential improved real estate. The civil penalty and force placed insurance provisions were effective immediately. 
On July 21, 2015, certain federal agencies issued a joint final rule exempting: (1) detached structures that are not used as a residence from the mandatory flood insurance purchase requirements and (2) HELOCs, business purpose loans, nonperforming loans, loans with terms of less than one year, loans for co-ops and condominiums, and subordinate loans on the same property from the mandatory escrow of flood insurance premium requirements. Additionally, the final rule requires Comerica to escrow flood insurance payments and offer the option to escrow flood insurance premiums on residential improved real estate securing a loan, effective January 1, 2016. The federal agencies will address the private flood insurance provisions of the Biggert-Waters Act in a separate rulemaking. Comerica will continue to monitor the development and implementation of the private flood insurance rules.
Future Legislation and Regulatory Measures
The environment in which financial institutions will operate after the recent financial crisis, including legislative and regulatory changes affecting capital, liquidity, supervision, permissible activities, corporate governance and compensation, and changes in fiscal policy, may have long-term effects on the business model and profitability of financial institutions that cannot be foreseen. Moreover, in light of recent events and current conditions in the U.S. financial markets and economy, Congress and regulators have continued to increase their focus on the regulation of the financial services industry. Comerica cannot accurately predict whether legislative changes will occur or, if they occur, the ultimate effect they would have upon the financial condition or results of operations of Comerica.
UNDERWRITING APPROACH
The loan portfolio is a primary source of profitability and risk, so proper loan underwriting is critical to Comerica's long-term financial success. Comerica extends credit to businesses, individuals and public entities based on sound lending principles

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and consistent with prudent banking practice. During the loan underwriting process, a qualitative and quantitative analysis of potential credit facilities is performed, and the credit risks associated with each relationship are evaluated. Important factors considered as part of the underwriting process for new loans and loan renewals include:
People: Including the competence, integrity and succession planning of customers.
Purpose: The legal, logical and productive purposes of the credit facility.
Payment: Including the source, timing and probability of payment.
Protection: Including obtaining alternative sources of repayment, securing the loan, as appropriate, with collateral and/or third-party guarantees and ensuring appropriate legal documentation is obtained.
Perspective: The risk/reward relationship and pricing elements (cost of funds; servicing costs; time value of money; credit risk).
Comerica prices credit facilities to reflect risk, the related costs and the expected return, while maintaining competitiveness with other financial institutions. Loans with variable and fixed rates are underwritten to achieve expected risk-adjusted returns on the credit facilities and for the full relationship including the borrower's ability to repay the principal and interest based on such rates.
Credit Administration    
Comerica maintains a Credit Administration Department ("Credit Administration") which is responsible for the oversight and monitoring of our loan portfolio. Credit Administration assists with underwriting by providing objective financial analysis, including an assessment of the borrower's business model, balance sheet, cash flow and collateral. Each borrower relationship is assigned an internal risk rating by Credit Administration. Further, Credit Administration updates the assigned internal risk rating for every borrower relationship as new information becomes available, either as a result of periodic reviews of the credit quality or as a result of a change in borrower performance. The goal of the internal risk rating framework is to improve Comerica's risk management capability, including its ability to identify and manage changes in the credit risk profile of its portfolio, predict future losses and price the loans appropriately for risk.
Credit Policy
Comerica maintains a comprehensive set of credit policies. Comerica's credit policies provide individual relationship managers, as well as loan committees, approval authorities based on our internal risk rating system and establish maximum exposure limits based on risk ratings and Comerica's legal lending limit. Credit Administration, in conjunction with the businesses units, monitors compliance with the credit policies and modifies the existing policies as necessary. New or modified policies/guidelines require approval by the Strategic Credit Committee, chaired by Comerica's Chief Credit Officer and comprising senior credit, market and risk management executives.
Commercial Loan Portfolio
Commercial loans are underwritten using a comprehensive analysis of the borrower's operations. The underwriting process includes an analysis of some or all of the factors listed below:
The borrower's business model.
Periodic review of financial statements including financial statements audited by an independent certified public accountant when appropriate.
The pro-forma financial condition including financial projections.
The borrower's sources and uses of funds.
The borrower's debt service capacity.
The guarantor's financial strength.
A comprehensive review of the quality and value of collateral, including independent third-party appraisals of machinery and equipment and commercial real estate, as appropriate, to determine the advance rates.
Physical inspection of collateral and audits of receivables, as appropriate.
For additional information specific to our Energy loan portfolio, please see the caption, "Energy Lending" on pages F-31 through F-33 of the Financial Section of this report.

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Commercial Real Estate (CRE) Loan Portfolio
Comerica's CRE loan portfolio consists of real estate construction and commercial mortgage loans and includes both loans to real estate developers and loans secured by owner-occupied real estate. Comerica's CRE loan underwriting policies are consistent with the approach described above and provide maximum loan-to-value ratios that limit the size of a loan to a maximum percentage of the value of the real estate collateral securing the loan. The loan-to-value percentage varies by the type of collateral and is limited by advance rates established by our regulators. Our loan-to-value limitations are, in certain cases, more restrictive than those required by regulators and are influenced by other risk factors such as the financial strength of the borrower or guarantor, the equity provided to the project and the viability of the project itself. CRE loans generally require cash equity. CRE loans are normally originated with full recourse or limited recourse to all principals and owners. There are limitations to the size of a single project loan and to the aggregate dollar exposure to a single guarantor.
Consumer and Residential Mortgage Loan Portfolios
Comerica's consumer and residential mortgage loans are originated consistent with the underwriting approach described above, but also includes an assessment of each borrower's personal financial condition, including a review of credit reports and related FICO scores (a type of credit score used to assess an applicant's credit risk) and verification of income and assets. Comerica does not originate subprime loan programs. Although a standard industry definition for subprime loans (including subprime mortgage loans) does not exist, Comerica defines subprime loans as specific product offerings for higher risk borrowers, including individuals with one or a combination of high credit risk factors. These credit factors include low FICO scores, poor patterns of payment history, high debt-to-income ratios and elevated loan-to-value. We generally consider subprime FICO scores to be those below 620 on a secured basis (excluding loans with cash or near-cash collateral and adequate income to make payments) and below 660 for unsecured loans. Residential mortgage loans retained in the portfolio are largely relationship based. The remaining loans are typically eligible to be sold on the secondary market. Adjustable rate loans are limited to standard conventional loan programs.
EMPLOYEES
As of December 31, 2015, Comerica and its subsidiaries had 8,533 full-time and 570 part-time employees.
AVAILABLE INFORMATION
Comerica maintains an Internet website at www.comerica.com where the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports are available without charge, as soon as reasonably practicable after those reports are filed with or furnished to the SEC. The Code of Business Conduct and Ethics for Employees, the Code of Business Conduct and Ethics for Members of the Board of Directors and the Senior Financial Officer Code of Ethics adopted by Comerica are also available on the Internet website and are available in print to any shareholder who requests them. Such requests should be made in writing to the Corporate Secretary at Comerica Incorporated, Comerica Bank Tower, 1717 Main Street, MC 6404, Dallas, Texas 75201.
In addition, pursuant to regulations adopted by the FRB, Comerica makes additional regulatory capital-related disclosures. Under these regulations, Comerica satisfies a portion of these requirements through postings on its website, and Comerica has done so and expects to continue to do so without also providing disclosure of this information through filings with the SEC.
Where we have included web addresses in this report, such as our web address and the web address of the SEC, we have included those web addresses as inactive textual references only. Except as specifically incorporated by reference into this report, information on those websites is not part hereof.
Item 1A.  Risk Factors.
This report includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. In addition, Comerica may make other written and oral communications from time to time that contain such statements. All statements regarding Comerica's expected financial position, strategies and growth prospects and general economic conditions Comerica expects to exist in the future are forward-looking statements. The words, "anticipates," "believes," "contemplates," "feels," "expects," "estimates," "seeks," "strives," "plans," "intends," "outlook," "forecast," "position," "target," "mission," "assume," "achievable," "potential," "strategy," "goal," "aspiration," "opportunity," "initiative," "outcome," "continue," "remain," "maintain," "on course," "trend," "objective," "looks forward," "projects," "models" 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 Comerica or its management, are intended to identify forward-looking statements.
Comerica cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date the statement is made, and Comerica does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

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In addition to factors mentioned elsewhere in this report or previously disclosed in Comerica's SEC reports (accessible on the SEC's website at www.sec.gov or on Comerica's website at www.comerica.com), the factors contained below, among others, could cause actual results to differ materially from forward-looking statements, and future results could differ materially from historical performance.
General political, economic or industry conditions, either domestically or internationally, may be less favorable than expected.
Local, domestic, and international events including economic, financial market, political and industry specific conditions affect the financial services industry, directly and indirectly. Conditions such as or related to inflation, recession, unemployment, volatile interest rates, international conflicts and other factors, such as real estate values, energy prices, state and local municipal budget deficits, government spending and the U.S. national debt, outside of our control may, directly and indirectly, adversely affect Comerica. As was the case with the Great Recession of 2008 and 2009, economic downturns could result in the delinquency of outstanding loans, which could have a material adverse impact on Comerica's earnings.
Governmental monetary and fiscal policies may adversely affect the financial services industry, and therefore impact Comerica's financial condition and results of operations.
Monetary and fiscal policies of various governmental and regulatory agencies, in particular the FRB, affect the financial services industry, directly and indirectly. The FRB regulates the supply of money and credit in the U.S. and its monetary and fiscal policies determine in a large part Comerica's cost of funds for lending and investing and the return that can be earned on such loans and investments. Changes in such policies, including changes in interest rates, will influence the origination of loans, the value of investments, the generation of deposits and the rates received on loans and investment securities and paid on deposits. Changes in monetary and fiscal policies are beyond Comerica's control and difficult to predict. Comerica's financial condition and results of operations could be materially adversely impacted by changes in governmental monetary and fiscal policies.
Changes in regulation or oversight may have a material adverse impact on Comerica's operations.
Comerica is subject to extensive regulation, supervision and examination by the U.S. Treasury, the Texas Department of Banking, the FDIC, the FRB, the SEC, FINRA and other regulatory bodies. Such regulation and supervision governs the activities in which Comerica may engage. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on Comerica's operations, investigations and limitations related to Comerica's securities, the classification of Comerica's assets and determination of the level of Comerica's allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material adverse impact on Comerica's business, financial condition or results of operations.
In particular, Congress and other regulators have significantly increased their focus on the regulation of the financial services industry. Their actions include, but are not limited to, the passage of the Dodd-Frank Act, many parts of which are now in effect, and the adoption of the Basel III framework in the U.S. For additional information on these actions, please see "The Dodd-Frank Wall Street Reform and Consumer Protection Act and Other Recent Legislative and Regulatory Developments" section of the "Supervisory and Regulation" section of this report. Many provisions in the Dodd-Frank Act and the Basel III framework remain subject to regulatory rule-making and/or implementation, the effects of which are not yet known.
Additionally, Comerica may be subject to other regulatory actions that are currently under consideration, or may be under consideration in the future. For example, should U.S. banking regulators establish any additional capital buffers (for example, for banking organizations deemed systemically important to the U.S. financial system), Comerica may be subject to those additional requirements. Further, the current administration proposed in January 2010 a fee on those financial institutions that benefited from recent actions taken by the U.S. government to stabilize the financial system. Calls for that fee were renewed during the 2013 federal budget discussions. Most recently, the administration's 2015 budget proposal would impose a 7 basis point tax on U.S. financial firms with assets over $50 billion, with the goal of such proposal to penalize financial institutions for being overly leveraged. If such fee or another similar fee were implemented, Comerica would likely be subject to its terms.
The effects of such legislation and regulatory actions on Comerica cannot reliably be fully determined at this time. We can neither predict when or whether future regulatory or legislative reforms will be enacted nor what their contents will be. The impact of any future legislation or regulatory actions on Comerica's businesses or operations cannot be reliably determined at this time, and such impact may adversely affect Comerica.

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Comerica must maintain adequate sources of funding and liquidity to meet regulatory expectations, support its operations and fund outstanding liabilities.
Comerica's liquidity and ability to fund and run its business could be materially adversely affected by a variety of conditions and factors, including financial and credit market disruptions and volatility or a lack of market or customer confidence in financial markets in general, which may result in a loss of customer deposits or outflows of cash or collateral and/or ability to access capital markets on favorable terms.
Other conditions and factors that could materially adversely affect Comerica's liquidity and funding include a lack of market or customer confidence in, or negative news about, Comerica or the financial services industry generally which also may result in a loss of deposits and/or negatively affect the ability to access the capital markets; the loss of customer deposits to alternative investments; counterparty availability; interest rate fluctuations; general economic conditions; and the legal, regulatory, accounting and tax environments governing our funding transactions. Many of the above conditions and factors may be caused by events over which Comerica has little or no control. There can be no assurance that significant disruption and volatility in the financial markets will not occur in the future. Further, Comerica's customers may be adversely impacted by such conditions, which could have a negative impact on Comerica's business, financial condition and results of operations.
In September 2014, U.S. banking regulators issued a final rule implementing a quantitative liquidity requirement in the U.S. generally consistent with the Liquidity Coverage Ratio ("LCR") minimum liquidity measure established under the Basel III liquidity framework. Under the final rule, Comerica is subject to a modified LCR standard, which requires a financial institution to hold a minimum level of high-quality, liquid assets ("HQLA") to fully cover modified net cash outflows under a 30-day systematic liquidity stress scenario. The rule is effective for Comerica on January 1, 2016. During the transition year, 2016, Comerica will be required to maintain a minimum LCR of 90 percent. Beginning January 1, 2017, and thereafter, the minimum required LCR will be 100 percent. For more information regarding the LCR, please see the "Supervision and Regulation" section of this report. The inability to access capital markets funding sources as needed could adversely impact our level of regulatory-qualifying capital and ability to continue to comply with the LCR framework.
Further, if Comerica is unable to continue to fund assets through customer bank deposits or access funding sources on favorable terms, or if Comerica suffers an increase in borrowing costs or otherwise fails to manage liquidity effectively, Comerica's liquidity, operating margins, financial condition and results of operations may be materially adversely affected.
Compliance with more stringent capital and liquidity requirements may adversely affect Comerica.
While new capital and liquidity requirements in connection with Basel III and the requirements of the Dodd-Frank Act have been largely implemented, continued compliance by Comerica and its subsidiary banks with these restrictions will have an effect on Comerica. Additional information on the regulatory capital and liquidity requirements currently applicable to Comerica is set forth in the "Supervision and Regulation" section of this report. In light of these or other new legal and regulatory requirements, Comerica and our subsidiary banks are, and will be in the future, required to satisfy additional, more stringent capital and liquidity standards, including annual and mid-year stress testing and quantitative standards for liquidity management. These requirements, and any other new laws or regulations related to capital and liquidity, could adversely affect Comerica's ability to pay dividends or make equity repurchases, or could require Comerica to reduce business levels or to raise capital, including in ways that may adversely affect its results of operations or financial condition and/or existing shareholders.
Further, our regulators may also require us to satisfy additional, more stringent capital adequacy and liquidity standards than those specified as part of the Dodd-Frank Act and the FRB's proposed and final rules implementing Basel III.
Maintaining higher levels of capital and liquidity may reduce Comerica's profitability and otherwise adversely affect its business, financial condition, or results of operations.
Declines in the businesses or industries of Comerica's customers - in particular, the energy industry - could cause increased credit losses or decreased loan balances, which could adversely affect Comerica.
Comerica's business customer base consists, in part, of customers in volatile businesses and industries such as the energy industry, the automotive production industry and the real estate business. These industries are sensitive to global economic conditions, supply chain factors and/or commodities prices. Any decline in one of those customers' businesses or industries could cause increased credit losses, which in turn could adversely affect Comerica. Further, any decline in these businesses or industries could cause decreased borrowings, either due to reduced demand or reductions in the borrowing base available for each customer loan.
In particular, oil and gas prices have fallen sharply since mid-2014. Loans in the Middle Market - Energy business line were $3.1 billion, or approximately 6 percent of total loans, at December 31, 2015. At December 31, 2015, the reserve

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allocation for energy and energy-related loans was over 4 percent of total energy and energy-related loans. Subsequent to December 31, 2015, oil and gas prices dropped significantly, and Comerica saw additional negative migration into criticized loans. If oil and gas prices continue to remain depressed for a prolonged period of time, Comerica's energy portfolio could experience increased credit losses, which could adversely affect Comerica's financial results. Furthermore, a prolonged period of low oil prices could also have a negative impact on the Texas economy, which could have a material adverse effect on Comerica's business, financial condition and results of operations. For more information regarding Comerica's energy portfolio, please see "Energy Lending" beginning on page F-31 of the Financial Section of this report.
Unfavorable developments concerning credit quality could adversely affect Comerica's financial results.
Although Comerica regularly reviews credit exposure related to its customers and various industry sectors in which it has business relationships, default risk may arise from events or circumstances that are difficult to detect or foresee. Under such circumstances, Comerica could experience an increase in the level of provision for credit losses, nonperforming assets, net charge-offs and reserve for credit losses, which could adversely affect Comerica's financial results.
Operational difficulties, failure of technology infrastructure or information security incidents could adversely affect Comerica's business and operations.
Comerica is exposed to many types of operational risk, including legal risk, the risk of fraud or theft by employees or outsiders, failure of Comerica's controls and procedures and unauthorized transactions by employees or operational errors, including clerical or recordkeeping errors or those resulting from computer or telecommunications systems malfunctions. Given the high volume of transactions at Comerica, certain errors may be repeated or compounded before they are identified and resolved. The occurrence of such operational risks can lead to other types of risks including reputational and compliance risks that may amplify the adverse impact to Comerica.
In particular, Comerica's operations rely on the secure processing, storage and transmission of confidential and other information on its technology systems and networks. Any failure, interruption or breach in security of these systems could result in failures or disruptions in Comerica's customer relationship management, general ledger, deposit, loan and other systems.
Comerica may also be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control, which may include, for example, computer viruses, cyber attacks (including cyber attacks resulting in the destruction or exfiltration of data and systems), spikes in transaction volume and/or customer activity, electrical or telecommunications outages, or natural disasters. Although Comerica has programs in place related to business continuity, disaster recovery and information security to maintain the confidentiality, integrity, and availability of its systems, business applications and customer information, such disruptions may give rise to interruptions in service to customers and loss or liability to Comerica. While Comerica's website, www.comerica.com, has been subject to denial of service attacks in the last few years, these events did not result in a breach of Comerica's client data, and account information remained secure. However, future cyber attacks could be more disruptive and damaging, and Comerica may not be able to anticipate or prevent all such attacks.
The occurrence of any failure or interruption in Comerica's operations or information systems, or any security breach, could cause reputational damage, jeopardize the confidentiality of customer information, result in a loss of customer business, subject Comerica to regulatory intervention or expose it to civil litigation and financial loss or liability, any of which could have a material adverse effect on Comerica.
Comerica relies on other companies to provide certain key components of its business infrastructure, and certain failures could materially adversely affect operations.
Comerica faces the risk of operational disruption, failure or capacity constraints due to its dependency on third party vendors for components of its business infrastructure. Third party vendors provide certain key components of Comerica's business infrastructure, such as data processing and storage, payment processing services, recording and monitoring transactions, internet connections and network access, clearing agency and card processing services. While Comerica conducts due diligence prior to engaging with third party vendors, it does not control their operations. Further, while Comerica has enhanced its vendor management policies and practices to facilitate Comerica's compliance with recently updated vendor regulations, these policies and practices cannot eliminate this risk. In this context, any vendor failure to properly deliver these services could adversely affect Comerica's business operations, and result in financial loss, reputational harm, and/or regulatory action.

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Noninterest expenses are important to our profitability, but are subject to a number of factors, some of which are not in our control.
Many factors can influence the amount of noninterest expenses, including changing regulations, pension and health care costs, technology and cybersecurity investments, outside processing expenses and litigation. The importance of managing expenses has been amplified in the current slow growth, low net interest margin business environment. Comerica's noninterest expenses may increase more than anticipated, which could result in an adverse impact on net income.
Changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing, could adversely affect Comerica's net interest income and balance sheet.
The operations of financial institutions such as Comerica are dependent to a large degree on net interest income, which is the difference between interest income from loans and investments and interest expense on deposits and borrowings. Prevailing economic conditions, the trade, fiscal and monetary policies of the federal government and the policies of various regulatory agencies all affect market rates of interest and the availability and cost of credit, which in turn significantly affect financial institutions' net interest income. Interest rates over the past several years have remained at low levels, even following the Federal Open Market Committee's 25 basis point rate rise in December. A continued low interest rate environment may continue to adversely affect the interest income Comerica earns on loans and investments. For a discussion of Comerica's interest rate sensitivity, please see, "Market and Liquidity Risk" beginning on page F-33 of the Financial Section of this report.
Volatility in interest rates can also result in disintermediation, which is the flow of funds away from financial institutions into direct investments, such as federal government and corporate securities and other investment vehicles, which, because of the absence of federal insurance premiums and reserve requirements, generally pay higher rates of return than financial institutions. Comerica's financial results could be materially adversely impacted by changes in financial market conditions.
Reduction in our credit ratings could adversely affect Comerica and/or the holders of its securities.
Rating agencies regularly evaluate Comerica, and their ratings are based on a number of factors, including Comerica's financial strength as well as factors not entirely within its control, including conditions affecting the financial services industry generally. There can be no assurance that Comerica will maintain its current ratings. In February 2016, Standard & Poor's downgraded Comerica's long-term senior credit ratings one notch to BBB+ and Comerica Bank's long and short-term credit ratings one notch to A- and A-2, respectively, and maintained its "Negative" outlook. In March 2015, Moody's Investors Service put global bank ratings on review following the publication of revised bank rating methodology and in May 2015, it downgraded Comerica Bank's long-term senior credit ratings one notch to A3. In February 2016, Moody's revised its outlook to "Negative." While recent credit rating actions have had little to no detrimental impact on Comerica's profitability, borrowing costs, or ability to access the capital markets, future downgrades to Comerica's or its subsidiaries' credit ratings could adversely affect Comerica's profitability, borrowing costs, or ability to access the capital markets or otherwise have a negative effect on Comerica's results of operations or financial condition. If such a reduction placed Comerica's or its subsidiaries' credit ratings below investment grade, it could also create obligations or liabilities under the terms of existing arrangements that could increase Comerica's costs under such arrangements. Additionally, a downgrade of the credit rating of any particular security issued by Comerica or its subsidiaries could negatively affect the ability of the holders of that security to sell the securities and the prices at which any such securities may be sold.
The soundness of other financial institutions could adversely affect Comerica.
Comerica's ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. Comerica has exposure to many different industries and counterparties, and it routinely executes transactions with counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led, and may further lead, to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions could expose Comerica to credit risk in the event of default of its counterparty or client. In addition, Comerica's credit risk may be impacted when the collateral held by it cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure due to Comerica. There is no assurance that any such losses would not adversely affect, possible materially in nature, Comerica.
The introduction, implementation, withdrawal, success and timing of business initiatives and strategies may be less successful or may be different than anticipated, which could adversely affect Comerica's business.
Comerica makes certain projections and develops plans and strategies for its banking and financial products. If Comerica does not accurately determine demand for its banking and financial product needs, it could result in Comerica incurring

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significant expenses without the anticipated increases in revenue, which could result in a material adverse effect on its business.
Damage to Comerica's reputation could damage its businesses.
With consumers increasingly interested in doing business with companies they admire and trust, reputational risk is an increasing concern for business. Such risks include compliance issues, operational challenges, or a strategic, high profile event. Comerica's business is based on the trust of its customers, communities, and entire value chain, which makes managing reputational risk extremely important.  News or other publicity that impairs Comerica's reputation, or the reputation of the financial services industry generally, can therefore cause significant harm to Comerica's business and prospects. Further, adverse publicity or negative information posted on social media websites regarding Comerica, whether or not true, may result in harm to Comerica's prospects.
Comerica may not be able to utilize technology to efficiently and effectively develop, market, and deliver new products and services to its customers.
The financial services industry experiences rapid technological change with regular introductions of new technology-driven products and services. The efficient and effective utilization of technology enables financial institutions to better serve customers and to reduce costs. Comerica's future success depends, in part, upon its ability to address the needs of its customers by using technology to market and deliver products and services that will satisfy customer demands, meet regulatory requirements, and create additional efficiencies in Comerica's operations. Comerica may not be able to effectively develop new technology-driven products and services or be successful in marketing or supporting these products and services to its customers, which could have a material adverse impact on Comerica's financial condition and results of operations.
Competitive product and pricing pressures among financial institutions within Comerica's markets may change.
Comerica operates in a very competitive environment, which is characterized by competition from a number of other financial institutions in each market in which it operates. Comerica competes in terms of products and pricing with large national and regional financial institutions and with smaller financial institutions. Some of Comerica's larger competitors, including certain nationwide banks that have a significant presence in Comerica's market area, may make available to their customers a broader array of product, pricing and structure alternatives and, due to their asset size, may more easily absorb credit losses in a larger overall portfolio. Some of Comerica's competitors (larger or smaller) may have more liberal lending policies and processes.
Additionally, the financial services industry has recently been subject to increasing regulation. For more information, see the "Supervision and Regulation" section of this report. Such regulations may require significant additional investments in technology, personnel or other resources or place limitations on the ability of financial institutions, including Comerica, to engage in certain activities. Comerica's competitors may be subject to a significantly different or reduced degree of regulation due to their asset size or types of products offered. They may also have the ability to more efficiently utilize resources to comply with regulations or may be able to more effectively absorb the costs of regulations into their existing cost structure.
If Comerica is unable to compete effectively in products and pricing in its markets, business could decline, which could have a material adverse effect on Comerica's business, financial condition or results of operations.
Changes in customer behavior may adversely impact Comerica's business, financial condition and results of operations.
Comerica uses a variety of financial tools, models and other methods to anticipate customer behavior as a part of its strategic planning and to meet certain regulatory requirements. Individual, economic, political, industry-specific conditions and other factors outside of Comerica's control, such as fuel prices, energy costs, real estate values or other factors that affect customer income levels, could alter predicted customer borrowing, repayment, investment and deposit practices. Such a change in these practices could materially adversely affect Comerica's ability to anticipate business needs and meet regulatory requirements.
Further, difficult economic conditions may negatively affect consumer confidence levels. A decrease in consumer confidence levels would likely aggravate the adverse effects of these difficult market conditions on Comerica, Comerica's customers and others in the financial institutions industry.
Any future strategic acquisitions or divestitures may present certain risks to Comerica's business and operations.
Difficulties in capitalizing on the opportunities presented by a future acquisition may prevent Comerica from fully achieving the expected benefits from the acquisition, or may cause the achievement of such expectations to take longer to realize than expected.

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Further, the assimilation of the acquired entity's customers and markets could result in higher than expected deposit attrition, loss of key employees, disruption of Comerica's businesses or the businesses of the acquired entity or otherwise adversely affect Comerica's ability to maintain relationships with customers and employees or achieve the anticipated benefits of the acquisition. These matters could have an adverse effect on Comerica for an undetermined period. Comerica will be subject to similar risks and difficulties in connection with any future decisions to downsize, sell or close units or otherwise change the business mix of Comerica.
Management's ability to maintain and expand customer relationships may differ from expectations.
The financial services industry is very competitive. Comerica not only vies for business opportunities with new customers, but also competes to maintain and expand the relationships it has with its existing customers. While management believes that it can continue to grow many of these relationships, Comerica will continue to experience pressures to maintain these relationships as its competitors attempt to capture its customers. Failure to create new customer relationships and to maintain and expand existing customer relationships to the extent anticipated may adversely impact Comerica's earnings.
Management's ability to retain key officers and employees may change.
Comerica's future operating results depend substantially upon the continued service of its executive officers and key personnel. Comerica's future operating results also depend in significant part upon its ability to attract and retain qualified management, financial, technical, marketing, sales and support personnel. Competition for qualified personnel is intense, and Comerica cannot ensure success in attracting or retaining qualified personnel. There may be only a limited number of persons with the requisite skills to serve in these positions, and it may be increasingly difficult for Comerica to hire personnel over time.
Further, Comerica's ability to retain key officers and employees may be impacted by legislation and regulation affecting the financial services industry. On April 14, 2011, FRB, OCC and several other federal financial regulators issued a joint proposed rulemaking to implement Section 956 of the Dodd-Frank Act. Section 956 requires the regulators to issue regulations that prohibit incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions and are deemed to be excessive, or that may lead to material losses. Consistent with the Dodd-Frank Act, the proposed rule would not apply to institutions with total consolidated assets of less than $1 billion, and would impose heightened standards for institutions with $50 billion or more in total consolidated assets, which includes Comerica. For these larger institutions, the proposed rule would require that at least 50 percent of incentive-based payments be deferred over a minimum period of three years for designated executives. Moreover, boards of directors of these larger institutions would be required to identify employees who have the ability to expose the institution to possible losses that are substantial in relation to the institution's size, capital or overall risk tolerance, and to determine that the incentive compensation for these employees appropriately balances risk and rewards according to enumerated standards. Accordingly, Comerica may be at a disadvantage to offer competitive compensation compared to other financial institutions (as referenced above) or companies in other industries, which may not be subject to the same requirements.
Comerica's business, financial condition or results of operations could be materially adversely affected by the loss of any of its key employees, or Comerica's inability to attract and retain skilled employees.
Legal and regulatory proceedings and related matters with respect to the financial services industry, including those directly involving Comerica and its subsidiaries, could adversely affect Comerica or the financial services industry in general.
Comerica has been, and may in the future be, subject to various legal and regulatory proceedings. It is inherently difficult to assess the outcome of these matters, and there can be no assurance that Comerica will prevail in any proceeding or litigation. Any such matter could result in substantial cost and diversion of Comerica's efforts, which by itself could have a material adverse effect on Comerica's financial condition and operating results. Further, adverse determinations in such matters could result in actions by Comerica's regulators that could materially adversely affect Comerica's business, financial condition or results of operations.
Comerica establishes reserves for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. Comerica may still incur legal costs for a matter even if it has not established a reserve. In addition, due to the inherent subjectivity of the assessments and unpredictability of the outcome of legal proceedings, the actual cost of resolving a legal claim may be substantially higher than any amounts reserved for that matter. The ultimate resolution of a pending legal proceeding, depending on the remedy sought and granted, could adversely affect Comerica's results of operations and financial condition.
Methods of reducing risk exposures might not be effective.
Instruments, systems and strategies used to hedge or otherwise manage exposure to various types of credit, market, liquidity, operational, compliance, financial reporting and strategic risks could be less effective than anticipated. As a

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result, Comerica may not be able to effectively mitigate its risk exposures in particular market environments or against particular types of risk, which could have a material adverse impact on Comerica's business, financial condition or results of operations.
Terrorist activities or other hostilities may adversely affect the general economy, financial and capital markets, specific industries, and Comerica.
Terrorist attacks or other hostilities may disrupt Comerica's operations or those of its customers. In addition, these events have had and may continue to have an adverse impact on the U.S. and world economy in general and consumer confidence and spending in particular, which could harm Comerica's operations. Any of these events could increase volatility in the U.S. and world financial markets, which could harm Comerica's stock price and may limit the capital resources available to Comerica and its customers. This could have a material adverse impact on Comerica's operating results, revenues and costs and may result in increased volatility in the market price of Comerica's common stock.
Catastrophic events, including, but not limited to, hurricanes, tornadoes, earthquakes, fires, droughts and floods, may adversely affect the general economy, financial and capital markets, specific industries, and Comerica.
Comerica has significant operations and a significant customer base in California, Texas, Florida and other regions where natural and other disasters may occur. These regions are known for being vulnerable to natural disasters and other risks, such as tornadoes, hurricanes, earthquakes, fires, droughts and floods. These types of natural catastrophic events at times have disrupted the local economy, Comerica's business and customers and have posed physical risks to Comerica's property. In addition, catastrophic events occurring in other regions of the world may have an impact on Comerica's customers and in turn, on Comerica. A significant catastrophic event could materially adversely affect Comerica's operating results.
Changes in accounting standards could materially impact Comerica's financial statements.
From time to time accounting standards setters change the financial accounting and reporting standards that govern the preparation of Comerica's financial statements. These changes can be difficult to predict and can materially impact how Comerica records and reports its financial condition and results of operations. In some cases, Comerica could be required to apply a new or revised standard retroactively, resulting in changes to previously reported financial results, or a cumulative charge to retained earnings.
Comerica's accounting policies and processes are critical to the reporting of financial condition and results of operations. They require management to make estimates about matters that are uncertain.
Accounting policies and processes are fundamental to how Comerica records and reports the financial condition and results of operations. Management must exercise judgment in selecting and applying many of these accounting policies and processes so they comply with U.S. GAAP. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet may result in the Company reporting materially different results than would have been reported under a different alternative.
Management has identified certain accounting policies as being critical because they require management's judgment to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. Comerica has established detailed policies and control procedures that are intended to ensure these critical accounting estimates and judgments are well controlled and applied consistently. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. Because of the uncertainty surrounding management's judgments and the estimates pertaining to these matters, Comerica cannot guarantee that it will not be required to adjust accounting policies or restate prior period financial statements. See "Critical Accounting Policies" on pages F-40 through F-43 of the Financial Section of this report and Note 1 of the Notes to Consolidated Financial Statements located on pages F-51 through F-63 of the Financial Section of this report.
Item 1B.  Unresolved Staff Comments.
None.

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Item 2.  Properties.
The executive offices of Comerica are located in the Comerica Bank Tower, 1717 Main Street, Dallas, Texas 75201. Comerica Bank occupies six floors of the building, plus additional space on the building's lower level. Comerica does not own the Comerica Bank Tower space, but has naming rights to the building and leases the space from an unaffiliated third party. The lease for such space used by Comerica and its subsidiaries extends through September 2023. Comerica's Michigan headquarters are located in a 10-story building in the central business district of Detroit, Michigan at 411 W. Lafayette, Detroit, Michigan 48226. Such building is owned by Comerica Bank. As of December 31, 2015, Comerica, through its banking affiliates, operated at a total of 604 locations. This includes banking centers, trust services locations, and/or loan production or other financial services offices, primarily in the States of Texas, Michigan, California, Florida and Arizona. Of the 604 locations, 236 were owned and 368 were leased. As of December 31, 2015, affiliates also operated from leased spaces in Denver, Colorado; Wilmington, Delaware; Oakbrook Terrace, Illinois; Boston, Massachusetts; Minneapolis, Minnesota; Morristown, New Jersey; New York, New York; Rocky Mount and Cary, North Carolina; Memphis, Tennessee; McLean, Virginia; Bellevue and Seattle, Washington; Monterrey, Mexico; Toronto, Ontario, Canada and Windsor, Ontario, Canada. Comerica and its subsidiaries own, among other properties, a check processing center in Livonia, Michigan, and three buildings in Auburn Hills, Michigan, used mainly for lending functions and operations.
Item 3.  Legal Proceedings.
Please see Note 21 of the Notes to Consolidated Financial Statements located on pages F-102 through F-103 of the Financial Section of this report.

Item 4.   Mine Safety Disclosures.
Not applicable.
PART II

Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information and Holders of Common Stock
The common stock of Comerica Incorporated is traded on the New York Stock Exchange (NYSE Trading Symbol: CMA). At February 17, 2016, there were approximately 10,070 record holders of Comerica's common stock.
Sales Prices and Dividends
Quarterly cash dividends were declared during 2015 and 2014 totaling $0.83 and $0.79 per common share per year, respectively. The following table sets forth, for the periods indicated, the high and low sale prices per share of Comerica's common stock as reported on the NYSE Composite Transactions Tape for all quarters of 2015 and 2014, as well as dividend information.
Quarter    
 
High
 
Low
 
Dividends Per Share
 
Dividend Yield*    
2015
 
 
 
 
 
 
 
 
Fourth
 
$
47.44

 
$
39.52

 
$
0.21

 
1.9
%
Third
 
52.93

 
40.01

 
0.21

 
1.8

Second
 
53.45

 
44.38

 
0.21

 
1.7

First
 
47.94

 
40.09

 
0.20

 
1.8

2014
 
 
 
 
 
 
 
 
Fourth
 
$
50.14

 
$
42.73

 
$
0.20

 
1.7
%
Third
 
52.72

 
48.33

 
0.20

 
1.6

Second
 
52.60

 
45.34

 
0.20

 
1.6

First
 
53.50

 
43.96

 
0.19

 
1.6

* Dividend yield is calculated by annualizing the quarterly dividend per share and dividing by an average of the high and low price in the quarter.
A discussion of dividend restrictions is set forth in Note 20 of the Notes to Consolidated Financial Statements located on pages F-101 through F-102 of the Financial Section of this report, in the "Capital" section on pages F-21 through F-23 of the Financial Section of this report and in the "Supervision and Regulation" section of this report.
Performance Graph
Our performance graph is available under the caption "Performance Graph" on page F-2 of the Financial Section of this report.

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On April 28, 2015, the Board of Directors of Comerica authorized the repurchase of up to an additional 10.0 million shares of Comerica Incorporated outstanding common stock, in addition to the 2.1 million shares remaining at March 31, 2015 under the Board's prior authorizations for the equity repurchase program initially approved in November 2010. Including the April 28, 2015 authorization, a total of 40.3 million shares has been authorized for repurchase under the equity repurchase program since its inception in 2010. In November 2010, the Board authorized the purchase of up to all 11.5 million of Comerica's original outstanding warrants and on April 28, 2015, the Board also authorized the repurchase of up to an additional 2.6 million warrants. There is no expiration date for Comerica's equity repurchase program.
The following table summarizes Comerica's equity repurchase activity for the year ended December 31, 2015.
(shares in thousands)
Total Number of Shares 
and Warrants Purchased 
as Part of Publicly
Announced Repurchase
Plans or Programs
 
Remaining
Repurchase
Authorization 
(a)
 
Total Number
of Shares
Purchased (b)
 
Average 
Price
Paid Per 
Share
 
Average 
Price Paid Per 
Warrant (c)
Total first quarter 2015
1,354

 
12,728

 
1,517

 
$
43.38

 
$

Total second quarter 2015
1,513

 
19,608

(d)
1,523

 
48.00

 
20.70

Total third quarter 2015
1,234

 
18,374

 
1,260

 
47.75

 

October 2015
649

 
17,725

 
652

 
42.52

 

November 2015
629

 
17,096

 
632

 
45.73

 

December 2015
192

 
16,904

 
192

 
44.74

 

Total fourth quarter 2015
1,470

 
16,904

 
1,476

 
44.19

 

Total 2015
5,571

 
16,904

 
5,776

 
45.54

 
20.70

(a)
Maximum number of shares and warrants that may yet be purchased under the publicly announced plans or programs.
(b)
Includes approximately 205,000 shares (including 6,000 shares in the quarter ended December 31, 2015) purchased pursuant to deferred compensation plans and shares purchased from employees to pay for required minimum tax withholding related to restricted stock vesting under the terms of an employee share-based compensation plan during the year ended December 31, 2015. These transactions are not considered part of Comerica's repurchase program.
(c)
Comerica repurchased 500,000 warrants under the repurchase program during the year ended December 31, 2015. Upon exercise of a warrant, the number of shares with a value equal to the aggregate exercise price is withheld from an exercising warrant holder as payment (known as a "net exercise provision"). During the year ended December 31, 2015, Comerica withheld the equivalent of approximately 1,291,000 shares to cover an aggregate of $65.7 million in exercise price and issued approximately 934,000 shares to the exercising warrant holders. Shares withheld in connection with the net exercise provision are not included in the total number of shares or warrants purchased in the above table.
(d)
Includes April 28, 2015 equity repurchase authorization for up to an additional 10.6 million shares and share-equivalents.

Item 6.  Selected Financial Data.
Reference is made to the caption "Selected Financial Data" on page F-3 of the Financial Section of this report.
Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations.
Reference is made to the sections entitled "2015 Overview and 2016 Outlook," "Results of Operations," "Strategic Lines of Business," "Balance Sheet and Capital Funds Analysis," "Risk Management," "Critical Accounting Policies," "Supplemental Financial Data" and "Forward-Looking Statements" on pages F-4 through F-45 of the Financial Section of this report.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.
Reference is made to the subheadings entitled "Market and Liquidity Risk," "Operational Risk," "Compliance Risk" and "Strategic Risk" on pages F-33 through F-39 of the Financial Section of this report.
Item 8.  Financial Statements and Supplementary Data.
Reference is made to the sections entitled "Consolidated Balance Sheets," "Consolidated Statements of Income," "Consolidated Statements of Comprehensive Income," "Consolidated Statements of Changes in Shareholders' Equity," "Consolidated Statements of Cash Flows," "Notes to Consolidated Financial Statements," "Report of Management," "Reports of Independent Registered Public Accounting Firm," and "Historical Review" on pages F-46 through F-116 of the Financial Section of this report.
Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.

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Item 9A.  Controls and Procedures.
Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Exchange Act, management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by this Annual Report on Form 10-K, of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Comerica's disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K.
Internal Control over Financial Reporting
Management's annual report on internal control over financial reporting and the related attestation report of Comerica's registered public accounting firm are included on pages F-111 and F-112 in the Financial Section of this report.
As required by Rule 13a-15(d) of the Exchange Act, management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the period covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, Comerica's internal control over financial reporting. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that there has been no such change during the last quarter of the fiscal year covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, Comerica's internal control over financial reporting.
Item 9B.  Other Information.
None.
PART III
Item 10.  Directors, Executive Officers and Corporate Governance.
Comerica has a Senior Financial Officer Code of Ethics that applies to the Chief Executive Officer, the Chief Financial Officer, the Chief Accounting Officer and the Treasurer. The Senior Financial Officer Code of Ethics is available on Comerica's website at www.comerica.com. If any substantive amendments are made to the Senior Financial Officer Code of Ethics or if Comerica grants any waiver, including any implicit waiver, from a provision of the Senior Financial Officer Code of Ethics to the Chief Executive Officer, the Chief Financial Officer, the Chief Accounting Officer or the Treasurer, we will disclose the nature of such amendment or waiver on our website.
The remainder of the response to this item will be included under the sections captioned "Information About Nominees," "Committees and Meetings of Directors," "Committee Assignments," "Executive Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance" of Comerica's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 26, 2016, which sections are hereby incorporated by reference.
Item 11.  Executive Compensation.
The response to this item will be included under the sections captioned "Compensation Committee Interlocks and Insider Participation," "Compensation Discussion and Analysis," "Compensation of Directors," "Governance, Compensation and Nominating Committee Report," "2015 Summary Compensation Table," "2015 Grants of Plan-Based Awards," "Outstanding Equity Awards at Fiscal Year-End 2015," "2015 Option Exercises and Stock Vested," "Pension Benefits at Fiscal Year-End 2015," "2015 Nonqualified Deferred Compensation," and "Potential Payments upon Termination or Change of Control at Fiscal Year-End 2015" of Comerica's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 26, 2016, which sections are hereby incorporated by reference.
Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The response to this item will be included under the sections captioned "Security Ownership of Certain Beneficial Owners," "Security Ownership of Management" and "Securities Authorized for Issuance Under Equity Compensation Plans" of Comerica's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 26, 2016, which sections are hereby incorporated by reference.
Item 13.  Certain Relationships and Related Transactions, and Director Independence.
The response to this item will be included under the sections captioned "Director Independence and Transactions of Directors with Comerica," "Transactions of Related Parties with Comerica," and "Information about Nominees" of Comerica's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 26, 2016, which sections are hereby incorporated by reference.

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Table of Contents

Item 14.  Principal Accountant Fees and Services.
The response to this item will be included under the section captioned "Independent Registered Public Accounting Firm" of Comerica's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 26, 2016, which section is hereby incorporated by reference.
PART IV

Item 15.  Exhibits and Financial Statement Schedules
The following documents are filed as a part of this report:
 
1.
 
Financial Statements: The financial statements that are filed as part of this report are included in the Financial Section on pages F-46 through F-113.
 
 
 
2.
 
All of the schedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instruction, the required information is contained elsewhere in the Form 10-K, or the schedules are inapplicable and therefore have been omitted.
 
 
 
3.
 
Exhibits: The exhibits listed on the Exhibit Index on pages E-1 through E-5 of this Form 10-K are filed with this report or are incorporated herein by reference.


23

Table of Contents

FINANCIAL REVIEW AND REPORTS
Comerica Incorporated and Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


F-1

Table of Contents

PERFORMANCE GRAPH
The graph shown below compares the total returns (assuming reinvestment of dividends) of Comerica Incorporated common stock, the S&P 500 Index, and the KBW Bank Index. The graph assumes $100 invested in Comerica Incorporated common stock (returns based on stock prices per the NYSE) and each of the indices on December 31, 2010 and the reinvestment of all dividends during the periods presented.
The performance shown on the graph is not necessarily indicative of future performance.


F-2

Table of Contents

SELECTED FINANCIAL DATA
(dollar amounts in millions, except per share data)
 
 
 
 
 
 
 
 
 
Years Ended December 31
2015
 
2014
 
2013
 
2012
 
2011
EARNINGS SUMMARY
 
 
 
 
 
 
 
 
 
Net interest income
$
1,689

 
$
1,655

 
$
1,672

 
$
1,728

 
$
1,653

Provision for credit losses
147

 
27

 
46

 
79

 
144

Noninterest income (a)
1,050

 
868

 
882

 
870

 
843

Noninterest expenses (a)
1,842

 
1,626

 
1,722

 
1,757

 
1,771

Provision for income taxes
229

 
277

 
245

 
241

 
188

Net income
521

 
593

 
541

 
521

 
393

Net income attributable to common shares
515

 
586

 
533

 
515

 
389

PER SHARE OF COMMON STOCK
 
 
 
 
 
 
 
 
 
Diluted earnings per common share
$
2.84

 
$
3.16

 
$
2.85

 
$
2.67

 
$
2.09

Cash dividends declared
0.83

 
0.79

 
0.68

 
0.55

 
0.40

Common shareholders' equity
43.03

 
41.35

 
39.22

 
36.86

 
34.79

Tangible common equity (b)
39.33

 
37.72

 
35.64

 
33.36

 
31.40

Market value
41.83

 
46.84

 
47.54

 
30.34

 
25.80

Average diluted shares (in millions)
181

 
185

 
187

 
192

 
186

YEAR-END BALANCES
 
 
 
 
 
 
 
 
 
Total assets
$
71,877

 
$
69,186

 
$
65,224

 
$
65,066

 
$
61,005

Total earning assets
66,687

 
63,788

 
60,200

 
59,618

 
55,506

Total loans
49,084

 
48,593

 
45,470

 
46,057

 
42,679

Total deposits
59,853

 
57,486

 
53,292

 
52,191

 
47,755

Total medium- and long-term debt
3,058

 
2,675

 
3,543

 
4,720

 
4,944

Total common shareholders' equity
7,560

 
7,402

 
7,150

 
6,939

 
6,865

AVERAGE BALANCES
 
 
 
 
 
 
 
 
 
Total assets
$
70,247

 
$
66,336

 
$
63,933

 
$
62,569

 
$
56,914

Total earning assets
65,129

 
61,560

 
59,091

 
57,483

 
52,121

Total loans
48,628

 
46,588

 
44,412

 
43,306

 
40,075

Total deposits
58,326

 
54,784

 
51,711

 
49,533

 
43,762

Total medium- and long-term debt
2,905

 
2,963

 
3,972

 
4,818

 
5,519

Total common shareholders' equity
7,534

 
7,373

 
6,965

 
7,009

 
6,348

CREDIT QUALITY
 
 
 
 
 
 
 
 
 
Total allowance for credit losses
$
679

 
$
635

 
$
634

 
$
661

 
$
752

Total nonperforming loans
379

 
290

 
374

 
541

 
887

Foreclosed property
12

 
10

 
9

 
54

 
94

Total nonperforming assets
391

 
300

 
383

 
595

 
981

Net credit-related charge-offs
101

 
25

 
73

 
170

 
328

Net credit-related charge-offs as a percentage of average total loans
0.21
%
 
0.05
%
 
0.16
%
 
0.39
%
 
0.82
%
Allowance for loan losses as a percentage of total period-end loans
1.29

 
1.22

 
1.32

 
1.37

 
1.70

Allowance for loan losses as a percentage of total nonperforming loans
167

 
205

 
160

 
116

 
82

RATIOS
 
 
 
 
 
 
 
 
 
Net interest margin (fully taxable equivalent)
2.60
%
 
2.70
%
 
2.84
%
 
3.03
%
 
3.19
%
Return on average assets
0.74

 
0.89

 
0.85

 
0.83

 
0.69

Return on average common shareholders' equity
6.91

 
8.05

 
7.76

 
7.43

 
6.18

Dividend payout ratio
28.33

 
24.09

 
23.29

 
20.52

 
18.96

Average common shareholders' equity as a percentage of average assets
10.73

 
11.11

 
10.90

 
11.21

 
11.16

Common equity tier 1 capital as a percentage of risk-weighted assets (c)
10.54

 
n/a

 
n/a

 
n/a

 
n/a

Tier 1 common capital as a percentage of risk-weighted assets (b)
n/a

 
10.50

 
10.64

 
10.14

 
10.37

Tier 1 capital as a percentage of risk-weighted assets (c)
10.54

 
10.50

 
10.64

 
10.14

 
10.41

Tangible common equity as a percentage of tangible assets (b)
9.70

 
9.85

 
10.07

 
9.76

 
10.27

(a)
Effective January 1, 2015, contractual changes to a card program resulted in a change to the accounting presentation of the related revenues and expenses. The effect of this change was an increase of $181 million to both noninterest income and noninterest expenses in 2015.
(b)
See Supplemental Financial Data section for reconcilements of non-GAAP financial measures.
(c)
Ratios calculated based on the risk-based capital requirements in effect at the time. The U.S. implementation of the Basel III regulatory capital framework became effective on January 1, 2015, with transitional provisions.
n/a - not applicable.

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Table of Contents

2015 OVERVIEW AND 2016 OUTLOOK
Comerica Incorporated (the Corporation) is a financial holding company headquartered in Dallas, Texas. The Corporation's major business segments are the Business Bank, the Retail Bank and Wealth Management. The core businesses are tailored to each of the Corporation's three primary geographic markets: Michigan, California and Texas. Information about the activities of the Corporation's business segments is provided in Note 22 to the consolidated financial statements.
As a financial institution, the Corporation's principal activity is lending to and accepting deposits from businesses and individuals. The primary source of revenue is net interest income, which is principally derived from the difference between interest earned on loans and investment securities and interest paid on deposits and other funding sources. The Corporation also provides other products and services that meet the financial needs of customers which generate noninterest income, the Corporation's secondary source of revenue. Growth in loans, deposits and noninterest income is affected by many factors, including economic conditions in the markets the Corporation serves, the financial requirements and economic health of customers, and the ability to add new customers and/or increase the number of products used by current customers. Success in providing products and services depends on the financial needs of customers and the types of products desired.
The accounting and reporting policies of the Corporation and its subsidiaries conform to generally accepted accounting principles (GAAP) in the United States (U.S.). 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. The most critical of these significant accounting policies are discussed in the "Critical Accounting Policies" section of this financial review.
OVERVIEW
Net income was $521 million in 2015, a decrease of $72 million, or 12 percent, compared to $593 million in 2014. Net income per diluted common share was $2.84 in 2015, compared to $3.16 in 2014. The most significant items contributing to the decrease in net income are described below.
Average loans were $48.6 billion in 2015, an increase of $2.0 billion, or 4 percent, compared to 2014. The increase in average loans primarily reflected an increase of $1.8 billion, or 6 percent, in commercial loans, $174 million, or 8 percent, in consumer loans and $100 million, or 6 percent in residential mortgage loans. The increase in commercial loans primarily reflected increases in Mortgage Banker Finance, Technology and Life Sciences, National Dealer Services and Small Business, partially offset by a decrease in Corporate Banking.
Average deposits increased $3.5 billion, or 6 percent, to $58.3 billion in 2015, compared to 2014. The increase in average deposits reflected increases of $3.1 billion, or 12 percent, in average noninterest-bearing deposits and $1.2 billion, or 5 percent, in money market and interest-bearing checking deposits, partially offset by a decrease of $660 million, or 14 percent, in customer certificates of deposit. The increase in average deposits reflected increases in almost all lines of business and in all geographic markets.
Net interest income was $1.7 billion in 2015, an increase of $34 million, or 2 percent, compared to 2014. The increase in net interest income resulted primarily from an increase in average earning assets of $3.6 billion, partially offset by a $27 million decrease in the accretion of the purchase discount on the acquired loan portfolio, continued pressure on yields from the low-rate environment and loan portfolio dynamics.
The provision for credit losses was $147 million in 2015, an increase of $120 million compared to 2014, primarily reflecting increased provisions for Energy and energy-related loans, Technology and Life Sciences, Corporate Banking and Small Business, partially offset by improved credit quality in the remainder of the portfolio. Net loan charge-offs were $100 million, or 0.21 percent of average loans, for 2015, an increase of $75 million compared to 2014, primarily reflecting increases in Energy, general Middle Market (largely due to an increase in charge-offs on energy-related loans), Small Business, Corporate Banking and Technology and Life Sciences, partially offset by a decrease in Private Banking.
Noninterest income increased $182 million or 21 percent, in 2015, compared to 2014. Excluding a $181 million impact from a change in accounting presentation for a card program, noninterest income increased $1 million. Increases in card fees, service charges on deposit accounts and fiduciary income were largely offset by lower investment banking income, lower fee income on certain categories impacted by regulatory changes and decreases in several non-fee categories.
Noninterest expenses increased $216 million, or 13 percent, in 2015, compared to 2014. Excluding the $181 million impact from a change in accounting presentation for a card program and the benefit to 2015 from the release of $33 million of litigation reserves in the second and third quarters, noninterest expenses increased $68 million, or 4 percent, primarily due to increases in technology and regulatory expenses, outside processing fees and pension expense, partially offset by cost savings realized in 2015 from certain actions taken in the second half of 2014.
The quarterly dividend was increased to 21 cents per share, or 5 percent, in April 2015.
The Corporation repurchased approximately 5.1 million shares and 500,000 warrants in 2015 under the equity repurchase program. Together with dividends of $0.83 per share, $389 million, or 75 percent of 2015 net income, was returned to shareholders.

F-4

Table of Contents

2016 OUTLOOK
Management expectations for 2016, compared to 2015, assuming a continuation of the current economic and low-rate environment, are as follows:
Average loans modestly higher, in line with Gross Domestic Product growth, reflecting a continued decline in Energy more than offset by increases in most other lines of business.
Net interest income higher, reflecting the benefits from the December 2015 short-term rate increase, loan growth and a larger securities portfolio more than offsetting higher funding costs.
Full-year benefit from the December rise in short-term rates expected to be more than $90 million if deposit prices remain at current levels.
Provision for credit losses higher, with an estimated impact of $75 million to $125 million for energy and energy-related exposure, recognized primarily in the first quarter. Continued improvements in the remainder of the portfolio provide a partial offset.
Net charge-offs in line with historical normal levels.
Noninterest income modestly higher, primarily due to growth in card fees from merchant processing services, government card and commercial card. Continued focus on cross-sell opportunities, including wealth management products such as fiduciary and brokerage services.
Noninterest expenses higher, reflecting continued increases in technology costs and regulatory expenses, increased outside processing in line with growing revenue, higher FDIC insurance expense due to recent regulatory proposal, and typical inflationary pressures. Additionally, 2015 benefited from a $33 million legal reserve release, which is offset by lower pension expense in 2016.
Income tax expense to approximate 32 percent of pre-tax income.



F-5

Table of Contents

RESULTS OF OPERATIONS
The following provides a comparative discussion of the Corporation's consolidated results of operations for 2015 compared to 2014. A comparative discussion of results for 2014 compared to 2013 is provided at the end of this section. For a discussion of the Critical Accounting Policies that affect the Consolidated Results of Operations, see the "Critical Accounting Policies" section of this Financial Review.
ANALYSIS OF NET INTEREST INCOME - Fully Taxable Equivalent (FTE)
(dollar amounts in millions)
 
 
 
 
 
 
 
Years Ended December 31
2015
 
2014
 
2013
 
Average
Balance
Interest
Average
Rate
 
Average
Balance
Interest
Average
Rate
 
Average
Balance
Interest
Average
Rate
Commercial loans
$
31,501

$
966

3.07
%
 
$
29,715

$
927

3.12
%
 
$
27,971

$
917

3.28
%
Real estate construction loans
1,884

66

3.48

 
1,909

65

3.41

 
1,486

57

3.85

Commercial mortgage loans
8,697

296

3.41

 
8,706

327

3.75

 
9,060

372

4.11

Lease financing
783

25

3.17

 
834

19

2.33

 
847

27

3.23

International loans
1,441

51

3.58

 
1,376

50

3.65

 
1,275

48

3.74

Residential mortgage loans
1,878

71

3.77

 
1,778

68

3.82

 
1,620

66

4.09

Consumer loans
2,444

80

3.26

 
2,270

73

3.20

 
2,153

71

3.30

Total loans (a) (b)
48,628

1,555

3.20

 
46,588

1,529

3.28

 
44,412

1,558

3.51

 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
9,113

202

2.24

 
8,970

209

2.33

 
9,246

213

2.33

Other investment securities
1,124

14

1.25

 
380

2

0.45

 
391

2

0.48

Total investment securities (c)
10,237

216

2.13

 
9,350

211

2.26

 
9,637

215

2.25

 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits with banks
6,158

16

0.26

 
5,513

14

0.26

 
4,930

13

0.26

Other short-term investments
106

1

0.81

 
109


0.57

 
112

1

1.22

Total earning assets
65,129

1,788

2.75

 
61,560

1,754

2.85

 
59,091

1,787

3.03

 
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
1,059

 
 
 
934

 
 
 
987

 
 
Allowance for loan losses
(621
)
 
 
 
(601
)
 
 
 
(622
)
 
 
Accrued income and other assets
4,680

 
 
 
4,443

 
 
 
4,480

 
 
Total assets
$
70,247

 
 
 
$
66,336

 
 
 
$
63,936

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market and interest-bearing checking deposits
$
24,073

26

0.11

 
$
22,891

24

0.11

 
$
21,704

28

0.13

Savings deposits
1,841


0.02

 
1,744

1

0.03

 
1,657

1

0.03

Customer certificates of deposit
4,209

16

0.37

 
4,869

18

0.36

 
5,471

23

0.42

Foreign office time deposits (d)
116

1

1.02

 
261

2

0.82

 
500

3

0.52

Total interest-bearing deposits
30,239

43

0.14

 
29,765

45

0.15

 
29,332

55

0.19

Short-term borrowings
93


0.05

 
200


0.04

 
211


0.07

Medium- and long-term debt (e)
2,905

52

1.80

 
2,963

50

1.68

 
3,972

57

1.45

Total interest-bearing sources
33,237

95

0.29

 
32,928

95

0.29

 
33,515

112

0.33

 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing deposits
28,087

 
 
 
25,019

 
 
 
22,379

 
 
Accrued expenses and other liabilities
1,389

 
 
 
1,016

 
 
 
1,074

 
 
Total shareholders' equity
7,534

 
 
 
7,373

 
 
 
6,968

 
 
Total liabilities and shareholders' equity
$
70,247

 
 
 
$
66,336

 
 
 
$
63,936

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income/rate spread (FTE)
 
$
1,693

2.46

 
 
$
1,659

2.56

 
 
$
1,675

2.70

 
 
 
 
 
 
 
 
 
 
 
 
FTE adjustment (f)
 
$
4

 
 
 
$
4

 
 
 
$
3

 
 
 
 
 
 
 
 
 
 
 
 
 
Impact of net noninterest-bearing sources of funds
 
 
0.14

 
 
 
0.14

 
 
 
0.14

Net interest margin (as a percentage of average earning assets) (FTE) (a) (c)
 
 
2.60
%
 
 
 
2.70
%
 
 
 
2.84
%
(a)
Accretion of the purchase discount on the acquired loan portfolio of $7 million, $34 million and $49 million increased the net interest margin by 1 basis point, 6 basis points and 8 basis points in 2015, 2014 and 2013, respectively.
(b)
Nonaccrual loans are included in average balances reported and in the calculation of average rates.
(c)
Includes investment securities available-for-sale and investment securities held-to-maturity. Average rate based on average historical cost. Carrying value exceeded average historical cost by $100 million, $12 million and $92 million in 2015, 2014 and 2013, respectively.
(d)
Includes substantially all deposits by foreign depositors; deposits are primarily in excess of $100,000.
(e)
Medium- and long-term debt average balances included $160 million, $192 million and $274 million in 2015, 2014 and 2013, respectively, for the gain attributed to the risk hedged with interest rate swaps. Interest expense on medium-and long-term debt was reduced by $70 million in 2015 and $72 million in both 2014 and 2013, for the net gains on these fair value hedge relationships.
(f)
The FTE adjustment is computed using a federal tax rate of 35%.

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Table of Contents

RATE/VOLUME ANALYSIS - FTE
(in millions)
 
 
 
 
 
 
 
Years Ended December 31
2015/2014
 
2014/2013
 
Increase
(Decrease)
Due to Rate
Increase
(Decrease)
Due to 
Volume (a)
Net
Increase
(Decrease)
 
Increase
(Decrease)
Due to Rate
Increase
(Decrease)
Due to 
Volume (a)
Net
Increase
(Decrease)
Interest Income (FTE):
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial loans
$
(15
)
 
$
54

 
$
39

 
 
$
(45
)
 
$
55

 
$
10

 
Real estate construction loans
2

 
(1
)
 
1

 
 
(6
)
 
14

 
8

 
Commercial mortgage loans
(31
)
 

 
(31
)
 
 
(32
)
 
(13
)
 
(45
)
 
Lease financing
8

 
(2
)
 
6

 
 
(8
)
 

 
(8
)
 
International loans
(1
)
 
2

 
1

 
 
(1
)
 
3

 
2

 
Residential mortgage loans
(1
)
 
4

 
3

 
 
(4
)
 
6

 
2

 
Consumer loans
1

 
6

 
7

 
 
(2
)
 
4

 
2

 
 Total loans
(37
)
(b)
63

 
26

(b)
 
(98
)
(b)
69

 
(29
)
(b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities
(8
)
 
1

 
(7
)
 
 

 
(4
)
 
(4
)
 
Other investment securities
3

 
9

 
12

 
 

 

 

 
 Total investment securities (c)
(5
)
 
10

 
5

 
 

 
(4
)
 
(4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits with banks

 
2

 
2

 
 

 
1

 
1

 
Other short-term investments

 
1

 
1

 
 
(1
)
 

 
(1
)
 
Total interest income (FTE)
(42
)
 
76

 
34

 
 
(99
)
 
66

 
(33
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market and interest-bearing checking deposits

 
2

 
2

 
 
(5
)
 
1

 
(4
)
 
Savings deposits
(1
)
 

 
(1
)
 
 

 

 

 
Customer certificates of deposit
1

 
(3
)
 
(2
)
 
 
(3
)
 
(2
)
 
(5
)
 
Foreign office time deposits
1

 
(2
)
 
(1
)
 
 
1

 
(2
)
 
(1
)
 
Total interest-bearing deposits
1

 
(3
)
 
(2
)
 
 
(7
)
 
(3
)
 
(10
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medium- and long-term debt
3

 
(1
)
 
2

 
 
9

 
(16
)
 
(7
)
 
Total interest expense
4

 
(4
)
 

 
 
2

 
(19
)
 
(17
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income (FTE)
$
(46
)
 
$
80

 
$
34

 
 
$
(101
)
 
$
85

 
$
(16
)
 
(a)
Rate/volume variances are allocated to variances due to volume.
(b)
Reflected decreases of $27 million and $15 million in accretion of the purchase discount on the acquired loan portfolio in 2015 and 2014, respectively.
(c)
Includes investment securities available-for-sale and investment securities held-to-maturity.
NET INTEREST INCOME
Net interest income is the difference between interest earned on assets and interest paid on liabilities. FTE adjustments are made to the yields on tax-exempt assets in order to present tax-exempt income and fully taxable income on a comparable basis. FTE adjustments totaled $4 million in both 2015 and 2014 and $3 million in 2013. Gains and losses related to the effective portion of risk management interest rate swaps that qualify as hedges are included with the interest expense of the hedged item. Net interest income on a FTE basis comprised 62 percent of total revenues in 2015 and 66 percent in both 2014 and 2013. The decrease in 2015 is due to an increase in noninterest income as described under the "Noninterest Income" subheading below. The "Analysis of Net Interest Income-Fully Taxable Equivalent" table of this financial review provides an analysis of net interest income for the years ended December 31, 2015, 2014, and 2013. The rate-volume analysis in the table above details the components of the change in net interest income on a FTE basis for 2015 compared to 2014 and 2014 compared to 2013.
Net interest income was $1.7 billion in 2015, an increase of $34 million compared to 2014. The increase in net interest income resulted primarily from higher earning asset volume, partially offset by lower loan and investment yields, in part due to a $27 million decrease in the accretion of the purchase discount on the acquired loan portfolio and continued pressure on yields from the low-rate environment and changing loan portfolio dynamics. Average earning assets increased $3.6 billion, or 6 percent, primarily reflecting increases of $2.0 billion in average loans, $887 million in average investment securities and $645 million in average interest-bearing deposits with banks. Funding costs remained unchanged with lower interest expense on deposits, primarily due to lower time deposit balances, offset by an increase in interest expense on debt, primarily due to an increase in the portfolio average rate, largely as a result of the impact of maturities and new issues.
The net interest margin (FTE) in 2015 decreased 10 basis points to 2.60 percent, from 2.70 percent in 2014, primarily due to lower loan yields and an increase in average balances deposited with the Federal Reserve Bank (FRB), partially offset by higher average loan balances. The decrease in loan yields primarily reflected unfavorable portfolio dynamics and a decrease in

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accretion on the acquired loan portfolio, shifts in the average loan portfolio mix and the impact of a competitive low-rate environment, partially offset by a benefit from an increase in LIBOR rates. Accretion of the purchase discount on the acquired loan portfolio increased the net interest margin by 1 basis point in 2015, compared to 6 basis points in 2014. Average balances deposited with the FRB were $6.0 billion and $5.4 billion in 2015 and 2014, respectively, and are included in "interest-bearing deposits with banks" on the consolidated balance sheets.
The Corporation utilizes various asset and liability management strategies to manage net interest income exposure to interest rate risk. Refer to the "Market and Liquidity Risk" section of this financial review for additional information regarding the Corporation's asset and liability management policies.
PROVISION FOR CREDIT LOSSES
The provision for credit losses was $147 million in 2015, compared to $27 million in 2014. 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 is recorded to maintain the allowance for loan losses at the level deemed appropriate by the Corporation to cover probable credit losses inherent in the portfolio. The provision for loan losses was $142 million in 2015, an increase of $120 million compared to $22 million in 2014, primarily reflecting increased provisions for Energy and energy-related loans, Technology and Life Sciences, Corporate Banking and Small Business.
Net loan charge-offs in 2015 increased $75 million to $100 million, or 0.21 percent of average total loans, compared to $25 million, or 0.05 percent, in 2014. The increase primarily reflected increases in Energy, general Middle Market (largely due to an increase in charge-offs on energy-related loans), Small Business (primarily due to the charge-off of a single large credit in 2015), Corporate Banking and Technology and Life Sciences, partially offset by an increase in net recoveries in Private Banking.
The provision for credit losses on lending-related commitments is recorded to maintain the allowance for credit losses on lending-related commitments at the level deemed appropriate by the Corporation to cover probable credit losses inherent in lending-related commitments. The provision for credit losses on lending-related commitments was $5 million in both 2015 and 2014. Lending-related commitment charge-offs were $1 million in 2015 and insignificant in 2014.
For further discussion of the allowance for loan losses and the allowance for credit losses on lending-related commitments, including the methodology used in the determination of the allowances and an analysis of the changes in the allowances, refer to Note 1 to the consolidated financial statements and the "Credit Risk" section of this financial review.
NONINTEREST INCOME
(in millions)
 
Years Ended December 31
2015
 
2014
 
2013
Card fees
$
290

 
$
92

 
$
86

Card fees excluding presentation change (a)
109

 
92

 
86

Service charges on deposit accounts
223

 
215

 
214

Fiduciary income
187

 
180

 
171

Commercial lending fees
99

 
98

 
99

Letter of credit fees
53

 
57

 
64

Bank-owned life insurance
40

 
39

 
40

Foreign exchange income
40

 
40

 
36

Brokerage fees
17

 
17

 
17

Net securities losses
(2
)
 

 
(1
)
Other noninterest income (b)
103

 
130

 
156

Total noninterest income
$
1,050

 
$
868

 
$
882

Total noninterest income excluding presentation change (a)
$
869

 
$
868

 
$
882

(a)
Effective January 1, 2015, contractual changes to a card program resulted in a change to the accounting presentation of the related revenues and expenses. The effect of this change was an increase of $181 million to card fees in 2015. The Corporation believes that this information will assist investors, regulators, management and others in comparing results to prior periods.
(b)
The table below provides further details on certain categories included in other noninterest income.
Noninterest income increased $182 million to $1.1 billion in 2015, compared to $868 million in 2014. Excluding the $181 million impact of the change in accounting presentation on card fees as described in footnote (a) to the above table, noninterest income increased $1 million. An analysis of significant year over year changes by individual line item follows.
Card fees consist primarily of interchange and other fees earned on government card programs, commercial cards and debit/ATM cards, as well as, beginning in 2015, fees from providing merchant payment processing services. Card fees increased $198 million to $290 million in 2015, compared to $92 million in 2014. Two significant developments impacted the comparability of card fees between 2014 and 2015. First, as referenced in footnote (a) to the table above, the Corporation entered into a new

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contract for an existing government card program effective January 1, 2015. Changes to the terms of the contract resulted in a change to the presentation of the related revenue and expenses. In 2015, under the current contract, total revenue before related expenses was recorded in card fees, and related expenses were recorded in outside processing fee expense; whereas in 2014, under the terms of the prior contract, revenue was recorded in card fees net of the related expenses. The impact of this presentation change was a $181 million increase to card fees in 2015. Second, the Corporation changed its business model for providing merchant payment processing services. Previously, the Corporation's merchant payment processing revenue was earned through a joint venture, and the revenue was recorded in other noninterest income net of related expenses. The Corporation's participation in the joint venture concluded in the second quarter 2015. The net revenue from the joint venture included in other noninterest income was $3 million in 2015, compared to $14 million in 2014. The Corporation now directly enters into agreements with its merchant customers and records merchant services revenue in card fees ($17 million in 2015, zero in 2014) before the related expenses. A third party processes the transactions, and such processing expenses are recorded in outside processing fee expense ($16 million in 2015, $1 million in 2014, both years include start-up expenses). After adjusting for the $181 million impact of the contractual change to a government card program and the $17 million impact from the change to the Corporation's business model for providing merchant payment processing services, card fees were stable. For further information about the impact of the change to the merchant payment processing business model, refer to the "other noninterest income" discussion below and the "outside processing fee expense" discussion under the "Noninterest Expenses" subheading that follows.
Service charges on deposit accounts increased $8 million, or 4 percent, to $223 million in 2015, compared to $215 million in 2014. The increase in 2015 was primarily due to an increase in commercial service charges.
Fiduciary income increased $7 million, or 4 percent, to $187 million in 2015, compared to $180 million in 2014. Personal trust fees, institutional trust fees and investment advisory fees are the three major components of fiduciary income. These fees are based on services provided, assets under management and assets under administration. Fluctuations in the market values of the underlying assets managed or administered, which include both equity and fixed income securities, and net asset flows within client accounts, impact fiduciary income. The increase in 2015 was primarily due to an increase in investment advisory fees, largely driven by net asset inflows, as brokerage clients continue to transition from transactional services to investment advisory services, and the favorable impact on fees from market value increases.
Letter of credit fees decreased $4 million, or 7 percent, to $53 million in 2015, compared to $57 million in 2014. The decrease in 2015 was primarily due to regulatory-driven decreases in the volume of letters of credit outstanding.
Other noninterest income decreased $27 million, or 21 percent, to $103 million in 2015, compared to $130 million in 2014. The following table illustrates certain categories included in "other noninterest income" on the consolidated statements of income.
(in millions)
 
 
 
 
Years Ended December 31
 
2015
 
2014
 
2013
Customer derivative income
 
$
18

 
$
22

 
$
25

Investment banking fees
 
12

 
18

 
19

Insurance commissions
 
10

 
13

 
14

Securities trading income
 
9

 
9

 
14

Income from principal investing and warrants
 
6

 
10

 
14

Income from unconsolidated subsidiaries
 
2

 
8

 
10

Deferred compensation asset returns (a)
 

 
6

 
13

All other noninterest income
 
46

 
44

 
47

Other noninterest income
 
$
103

 
$
130

 
$
156

(a)
Compensation deferred by the Corporation's officers and directors is invested based on investment selections of the officers and directors. Income earned on these assets is reported in noninterest income and the offsetting change in liability is reported in salaries and benefits expense.
The decrease in other noninterest income primarily reflected decreases in investment banking fees, income from unconsolidated subsidiaries and deferred compensation plan asset returns. The decline in investment banking fees was largely due to decreased activity in the energy markets. Income from unconsolidated subsidiaries reflected the decrease of $11 million in income from the merchant payment processing joint venture that concluded in the second quarter 2015, as described further in the discussion of "card fees" above, partially offset by a decrease in tax credit investment amortization expense. The decrease in deferred compensation asset returns was offset by a decrease in deferred compensation expense in salaries and benefits expense.

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NONINTEREST EXPENSES
(in millions)
 
Years Ended December 31
2015
 
2014
 
2013
Salaries and benefits expense
1,009

 
980

 
1,009

Outside processing fee expense
332

 
122

 
119

Outside processing fee expense excluding presentation change (a)
151

 
122

 
119

Net occupancy expense
159

 
171

 
160

Equipment expense
53

 
57

 
60

Software expense
99

 
95

 
90

FDIC insurance expense
37

 
33

 
33

Advertising expense
24

 
23

 
21

Litigation-related expense
(32
)
 
4

 
52

Gain on debt redemption

 
(32
)
 
(1
)
Other noninterest expenses
161

 
173