Comerica Annual Report 2006

Plain-text annual report

2006 Annual Report S TRATEGY FO R SUCCESS Growth Balance Relationships Risk Management Accountability Diversity C O M E R I C A I N C O R P O R A T E D 2 0 0 6 A N N U A L R E P O R T Comerica Incorporated Comerica Tower at Detroit Center 500 Woodward Avenue, MC 3391 Detroit, Michigan 48226 www.comerica.com Financial Highlights CONTENTS 1 2 At-a-Glance 4 8 14 Other Comerica Locations/Units 15 Board of Directors/Management Policy Committee 16 Shareholder Information Letter to Shareholders Strategy for Success CORE VALUES • Customer Service • Diversity • Ownership • Teamwork • Flexibility/Adapting to Change • Trust/Integrity • Learning and Personal Growth CORPORATE PROFILE Comerica Incorporated (NYSE: CMA) is a ﬁnancial services company, strategically aligned into three business segments: The Business Bank, The Retail Bank, and Wealth & Institutional Management. Comerica’s 11,270 colleagues focus on relationships, and helping people and businesses be successful. Comerica Bank locations can be found in Michigan, California, Texas, Arizona and Florida, with select businesses operating in several other states, as well as in Canada, Mexico and China. To receive e-mail alerts of breaking Comerica news, go to www.comerica.com/newsalerts. Major League Baseball World Series Game 1 October 21, 2006, Comerica Park COMERICA INCORPORATED Comerica Tower at Detroit Center 500 Woodward Avenue, MC 3391, Detroit, Michigan 48226 (248) 371-5000 (metro Detroit) (800) 521-1190 (outside metro Detroit area) (800) 292-1300 (product information center) www.comerica.com www.comericajobs.com (career opportunities) VISION Comerica is in business to help people be successful. We are committed to delivering the highest quality ﬁnancial services by: • Providing outstanding value and building enduring customer relationships • Creating a positive environment for our colleagues, built on trust, teamwork and respect • Demonstrating leadership in our communities • Ensuring a consistent, superior return for our owners FINANCIAL HIGHLIGHTS (DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA) Years Ended December 31 INCOME STATEMENT Net interest income Income from continuing operations* Net income Basic earnings per common share: Income from continuing operations* Net income Diluted earnings per common share: Income from continuing operations* Net income Cash dividends declared per common share Book value per common share Market value per common share Average common shares outstanding – basic Average common shares outstanding – diluted 2006 2005 $ 1,983 $ 1,956 816 861 782 893 $ CHANGE AMOUNT PERCENT 1 % (4) 4 27 (34) 32 4.88 5.57 4.81 5.49 2.36 32.70 58.68 160 162 4.90 5.17 (0.02) 0.40 – 8 4.84 5.11 2.20 31.11 56.76 167 169 (0.03) 0.38 0.16 1.59 1.92 (1) 7 7 5 3 (7) (7) (4) (4) RATIOS Return on average assets* Return on average common shareholders’ equity* Average common shareholders’ equity as a percentage of average assets Tier 1 common capital as a percentage of risk-weighted assets Tier 1 risk-based capital as a percentage of risk-weighted assets Total risk-based capital as a percentage of risk-weighted assets 1.58 % 17.24 9.15 1.64 % 16.90 9.71 7.54 8.02 11.63 7.78 8.38 11.65 BALANCE SHEET (at December 31) Total assets Total earning assets Total loans Total deposits Total common shareholders’ equity $ 58,001 $ 53,013 48,646 54,052 43,247 47,431 42,431 44,927 5,068 5,153 $ 4,988 5,406 4,184 2,496 85 9 % 11 10 6 2 * Income from continuing operations excludes the results of Munder Capital Management, a subsidiary sold in 2006 and reported as a discontinued operation in all periods presented. Ratios are based on net income, which includes income from both continuing and discontinued operations. 9 8 7 6 5 Net Income (in Millions) $861 $816 $893 $782 $757 $748 $658 $661 $658 $601 2002 2003 2004 2005 2006 Net income Net income from continuing operations 5 4 3 2 1 Diluted Net Income Per Common Share $4.36 $4.31 $5.11 $4.84 $5.49 $4.81 $3.75 $3.73 $3.72 $3.40 2002 2003 2004 2005 2006 Diluted earnings per share Diluted earnings per share from continuing operations 1 AT-A-GLANCE THE BUSINESS BANK Overview The Business Bank provides companies with a complete spectrum of credit and non-credit ﬁnancial products and services, including cash management, trust and interna- tional trade. Its relationship managers focus on developing, maintaining and growing long-term relationships with cus- tomers across all geographic markets. 2006 Achievements • Average Middle Market loans were up 5 percent from 2005 to $15.4 billion, with the Western and Texas markets contributing 72 percent of the growth • Average Commercial Real Estate loans were $13.2 billion, with growth of 24 percent, 10 percent and 24 percent, re- spectively, in the fast-growing Western, Texas and Florida markets • National Dealer Services loans were at record levels for the second year in a row, ﬁnishing the year at $5.5 billion • Average Technology & Life Sciences loans increased 31 percent to $1.1 billion compared to 2005 • Global Corporate Banking opened a representative ofﬁce in Shanghai, China • In Mexico, Comerica enhanced its focus on dollar-based activities through a representative ofﬁce in Monterrey • Awarded the U.S. government’s Export-Import Bank’s “Small Business Bank of the Year” award • Expanded Private Equity, Financial Institutions and Munici- palities businesses into the Texas and Western markets • Created a new Middle Market lending unit specializing in the waste management industry • Opened a local developer real estate ofﬁce in Orlando, Florida • Launched a series of new Treasury Management prod- ucts and services including Comerica Business Deposit CaptureSM, Comerica Easy PaySM, Comerica Business Con- nectSM and Comerica ACH Positive PaySM Competitive Advantages • Industry-leading credit training program with focus on long-term relationship management and growth • On average, senior managers have 15-20 years of experience, and relationship managers have seven-and- a-half years of experience products over the next 18 months • Optimize leadership role in check imaging and remote capture • Capitalize on North American lending platform to meet evolving needs of business customers • Expand specialty lending businesses into growth markets in response to new opportunities and customer expectations • Partner with Retail Bank and Wealth & Institutional Manage- ment on cross-sell opportunities THE RETAIL BANK Overview The Retail Bank delivers personalized ﬁnancial products and services to consumers, entrepreneurs and small businesses. Services are delivered through traditional and in-store bank- ing centers, Web banking, telephone banking and ATMs. Skilled and knowledgeable teams work together every day to deliver consistently excellent service quality, which results in deep and long-lasting customer relationships. 2006 Achievements • Opened 25 new banking centers, 24 of which are in the high-growth markets of Texas, California, Arizona and Florida • Relocated seven banking centers, improving their visibility and accessibility for all customer segments • Completed refurbishments to 19 banking centers – 16 in Michigan, two in Texas and one in California • Increased average small business loans seven percent to $3.8 billion compared to 2005 • Completed a comprehensive upgrade of all marketing and merchandising displays in banking centers nationwide • Launched “We Love Entrepreneurs” campaign • Simpliﬁed and enhanced checking account offerings, including Platinum CircleSM, a package of services that allows customers to combine business and individual account balances to meet balance requirements • Introduced the Comerica-Northwest Airlines WorldPerks Check Card • Added six new small-business loan products • Launched a small-business suite of Cash Management products • Introduced Comerica credit cards for small businesses and consumers. Card features include reward options and overdraft protection for both personal and business checking accounts • Full suite of technologically advanced treasury and global • Began piloting voice-guidance ATMs for the visually trade products and services impaired • Experience, knowledge and insight to successfully main- tain lending relationships through all phases of the eco- nomic cycle • Specialty businesses focus including Energy, Entertain- ment, Title & Escrow, and Technology and Life Sciences • North American commercial banking platform Strategies • Leverage ongoing technology investments in core plat- forms to deliver customer-centric products and services • Continue aggressive investment in Treasury Management products and services by introducing 26 new or enhanced • Installed TRiO, a relationship-focused front line sales man- agement system Competitive Advantages • Rank #9 among SBA lenders nationwide • Among the top 20 banking companies in small business loans • The top-performing bank and the sixth-most desired ﬁnancial services company, according to the Financial Services Demand 2006 study • Loyal and highly satisﬁed customers – evidence that Comerica’s relationship strategy works 2 • Telephone banking center achievement of a top-ﬁve rating among mystery shoppers of the largest ﬁnancial institutions • Skill set and experience of employees • Improved and highly competitive product set • Relationship approach to customer service and sales, which matches the skills and experience of employees and improves the loyalty of the customer base Strategies • Expand and improve customer access points including the acceleration of the banking center expansion pro- gram and the continued optimization of the Michigan banking center network • Energize sales with improved accountability, sales tools, in- centives and processes, focused on exceeding customer needs • Implement national platforms that will improve efﬁciency, reduce risk and deliver consistent results • Leverage Michigan platform and capacity to support the front line in delivery of the best service and sales experi- ence for customers • Partner with Business Bank and Wealth & Institutional Man- agement on cross-sell opportunities WEALTH & INSTITUTIONAL MANAGEMENT Overview Comerica’s Wealth & Institutional Management segment serves the needs of afﬂuent clients, foundations and corpo- rations, and includes Private Banking, Comerica Securities, Comerica Insurance, Personal Trust, Strategic Alliances, Insti- tutional Trust, Retirement Services, Comerica Asset Manage- ment, World Asset Management and Wilson Kemp. 2006 Achievements • Completed the sale of Munder Capital Management, enabling Comerica to continue to drive growth in its investment management businesses through an open architecture platform. This makes available a wide array of individual and institutional investors, including Munder’s products investment alternatives for • Enhanced the delivery of Advisory Services by Comerica Securities, through a new client segmentation method that provided more effective client service and greater efﬁciency • Successfully merged the back-ofﬁce operations and the compliance departments of Comerica Securities and Comerica Insurance to create improved efﬁciencies • Introduced Executive Asset Management Suite, a product package specially designed for owners and ofﬁcers of companies that are Comerica business clients • Broadened the distribution of Comerica Insurance through the hiring of a new national sales manager who has more than 20 years experience. Also added insurance specialists in the Florida and Western markets • Opened new ofﬁces in the Florida market in Wellington, Riviera Beach and Stuart. Renovated ofﬁces in the Western market Competitive Advantages • A strong middle market corporate client base, which knows Comerica as a trusted ﬁnancial institution • Superior relationship management skills. Many families have worked with Wealth & Institutional Management for up to seven generations • Tenured and experienced staff • Focus of Wealth & Institutional relationship managers on referrals and cross-sales • Investment products, resources and performance • Presence in national growth markets in California, Texas, Arizona and Florida Strategies • Develop and expand core services, including the 2007 introduction of a best-in-class non-proprietary investment platform • Hire, develop and retain exceptional employees through a rewarding culture and competitive incentive plans • Generate greater volume of leads through internal refer- ral sources, and improve cross-selling and cross-referring capabilities • Enhance workload efﬁciencies to enable relationship managers to spend more time selling and servicing high-net-worth clients • Leverage Michigan staff expertise and capacity to support expansion in the growth markets • Create additional product distribution with private bank- ers and securities-licensed professionals in more banking centers • Partner with Business Bank and Retail Bank on cross-sell opportunities Average Deposits The Retail Bank 45% Wealth & Institutional Management 7% The Business Bank 48% Average Loans The Business Bank 80% The Retail Bank 13% Wealth & Institutional Management 7% Total Revenue The Retail Bank 30% The Business Bank 56% Wealth & Institutional Management 14% Data is for 2006 and excludes Finance/Other 3 COMERICA INCORPORATED Letter to Shareholders Ralph W. Babb Jr. Chairman and Chief Executive Oﬃcer C omerica’s solid ﬁnancial performance in 2006 underscores many positive core operating trends. Loan growth in our fastest-growing markets continued at a double-digit pace throughout the year, and credit quality remained solid. We continued to return excess capital to shareholders through our share repurchase and dividend programs. We also increased our annual dividend for the 38th consecutive year. Our strategy for success, ﬁrst outlined three years ago, is focused on six key drivers, or pillars: growth, balance, relationships, risk management, accountability and diversity. I would like to focus on the ﬁrst two – growth and balance – as these are areas of increasing emphasis at Comerica. I also will touch upon relationships – the key to our company’s strength and success. You can learn more about these and the other pillars of our strategy in the section immediately following this letter. 4 Growth We have an established retail distribution system in Michigan and continue to enjoy a leader- ship position in the state as the business bank of choice among companies of all sizes. Our brand recognition in the market continues to be very high, and was greatly enhanced in 2006 when sev- eral post-season baseball games were played at Comerica Park, home of the American League Champion Detroit Tigers. Because of our relationships and strong local knowledge, we believe we can continue to generate good business in Michigan, even in the face of a slow state economy. We are exporting our relationship banking expertise, nurtured for more than 150 years in Michigan, to this country’s most attractive and fastest-growing markets: California, Texas, Arizona and Florida. This is helping us to diversify our earnings mix, so we are far less dependent on any one market or business segment. Our plan is to continue to grow our presence in these high-growth markets. Today, Comerica operates in seven of the eleven largest cities in the United States – Los Angeles, Houston, Phoenix, San Diego, Dallas, San Jose and Detroit. The U.S. Census Bureau projects that three states – California, Texas and Florida – should account for nearly one-half of total U.S. population growth between 2000 and 2030. Each of the three states is expected to gain more than 12 million people between 2000 and 2030. Arizona, in terms of population, is expected to rise from 20th place in 2000 to 10th place in 2030. Such projections help fuel our belief that the best opportunities for future growth of Comerica lie in these fastest-growing markets. Opening new banking centers in these fastest-growing markets is an important part of our growth strategy. Unlike other banks, our intention is not to blanket every market with branches. Rather, we are much more selective. We are opening banking centers in key markets where we can grow business banking, small business, wealth management and retail all at once. Since our initial three-year banking center expansion program began in late 2004, we’ve opened 60 new banking centers, up from our original target of 50. In 2006, we opened 25 new banking centers. We also refurbished 19 banking centers and relocated seven others to more visible and convenient locations. Among the new banking centers opened since 2004, we’re seeing a nicely balanced distribution of loans and deposits from each of our business segments. This is important as we look for sites that provide a balance of middle market, small business and afﬂuent households. By engaging all of our lines of business, we greatly improve the rate of success for the new banking centers. We have obtained almost $800 million in deposits from our new banking centers since beginning the expan- sion program in late 2004. Our goal is to have our new banking centers become proﬁtable within 18 months. Our expan- sion program is meeting that target. As we expand our banking centers, we closely manage our human capital and expenses. We are currently planning to open about 30 banking centers in 2007. Balance In addition to growth, our new banking centers are providing us with geographic balance. By 2010, we expect more than half of our banking centers to be located in growth markets outside of Michigan, up from 38 percent today. As we build momentum, we believe we can increase the rate of expansion. 5 Our national platform has been built on our ability to export relationship banking to new markets. Our size allows us to provide customers with a broad range of services while retaining the look, feel and ﬂexibility of a smaller community-banking organization. We are steadily making progress toward our goal of achieving more geographic balance, with the Texas, Western and Florida markets generating 50 percent of average total loans compared to 46 percent a year ago. To achieve balance, we are leveraging our strength as a business bank by expanding our retail, and wealth and institutional management businesses. You can learn more about our three strategic lines of business in the “At a Glance” section that precedes this letter. Our strength as a business bank of choice for owner-managed and other companies is well known. We are among the top commercial lending institutions in the country. We provide our business customers with a level of service and experience they can’t always ﬁnd elsewhere. We understand their business models and our commercial lenders use that knowledge to tailor our products and services to ﬁt their needs. The retail bank is a key part of our deposit-gathering strategy, and accounts for 45 per- cent of our 2006 average deposits, excluding the deposits in our Finance/Other division. Re-invigorating the retail bank is key to maintaining strong proﬁtability and growth. Our wealth and institutional management business has been producing increasingly bet- ter results for us. We re-engineered that business, and in doing so re-energized it and made it more efﬁcient. Leveraging our existing customer base – both in the retail and the business bank – provides tremendous cross-sell and growth potential. Regarding the sale of Munder Capital Management: We announced the sale in August and completed it by year-end. We realized an initial after-tax gain of $108 million. The transaction was the right move for our clients and shareholders. We now have a highly effective open architecture wealth management platform, which makes available to clients a wide array of investment alternatives for individual and institutional investors, including Munder’s products. Return on Average Common Shareholders’ Equity Cash Dividends Declared Per Common Share 3 17.24% 16.90% 15.03% 13.12% 12.31% $2.36 $2.20 $2.08 $2.00 2 $1.92 2002 2003 2004 2005 2006 Based on net income 1 2002 2003 2004 2005 2006 18 16 14 12 10 6 Relationships The relationships we form with our customers provide us with a distinct competitive advantage in the ﬁnancial services marketplace. Our relationship managers are known for their ingenu- ity, ﬂexibility, responsiveness, and attention to detail. They are seasoned professionals whose experience level is among the ﬁnancial services industry’s highest. By staying close to our custom- ers, we are able to provide them with the solutions, products and quality services that help them be successful. We have included some examples of our outstanding customer relationships in the pages that follow this letter. Comerica’s relationship model has ﬂourished in several niche markets. These include ﬁnancial services, municipalities, heavy equipment dealers, title and escrow companies, and private equity-sponsored companies. We are expanding these specialty areas to all of our markets. We do an excellent job training and rewarding our relationship managers to cross-sell the bank’s products and services. Based on a recent customer survey of our middle-market customers in three of our major markets, overall customer satisfaction is high. This is evident in the fact that on average, Comerica captures 92 percent of its customers’ total treasury management business. That’s very high, given that customers are willing to give a maximum of 97 percent of their trea- sury management business to a single provider. In fact, Comerica received very strong scores for ease of doing business and for the depth of our products and services. Wealth and institutional management provides another example of our ability to increase the depth of customer relationships from cross-selling other bank products and services. Our wealth and institutional management strategy is consistent with Comerica’s core strength: It starts with a relationship-based sales model. To that, we add strong investment performance and customized and ﬂexible solutions for our customers. Comerica’s focus on relationships also extends to the communities where we do business. Through contributions, employee volunteerism and partnerships, we are helping to make a difference in the communities we serve. In 2006, we provided nearly $16 million to not-for-proﬁt organizations nationwide, including nearly $9 million from the Comerica Charitable Foundation. We also raised $2.4 million in employee pledges for United Way and the Black United Fund. In summary, our strategy for success is working and delivering solid results, thanks in large part to our employees, who are committed to our vision of helping people be successful. Our businesses continue to grow. We’re beginning to move the needle on the balance of our earnings mix, and we expect those results to accelerate. We believe a balanced growth strategy will produce more stable and consistent earnings over time. In this competitive environment, relationships matter the most. We expect to continue to see the beneﬁts of this approach as we apply our relationship-based model to our growth products and markets. We believe the result will be a bank with an improving growth rate; a more stable, more diver- siﬁed mix of revenues; and excellent credit management. Combining that with an attractive dividend payout and capital management program provides a formula for solid returns to our shareholders. Ralph W. Babb Jr. Chairman and Chief Executive Ofﬁcer 7 DON SEBASTIANI & SONS T his family-owned ﬁrm specializes in upscale, but mod- erately priced varietal wines. Principals Don Sebastiani and sons, Donny and August, are third- and fourth- generation California vintners and wine merchants. The company, with headquarters in the Sonoma Valley and a winery in the Napa Valley, reached annual case volume of 1.5 million in 2005, making it one of the fastest-growing wineries in California. That same year, Wine Enthusiast magazine named Don Sebastiani & Sons the American Winery of the Year. “It just reafﬁrms that our innovativeness in trying to create exciting new wine brands has struck a chord with the consumer,” says Richard Conley, chief operating ofﬁcer. “Comerica and its San Francisco Regional Ofﬁce has been a great partner in helping us achieve growth by being ﬂexible and responsive.” Don Sebastiani & Sons depends on Comerica to provide it with a revolving line of credit to ﬁnance inventory and accounts receivable, as well as an equipment loan to ﬁnance the purchase of steel tanks and bottling equipment. THE MASTRO COMPANIES W ith headquarters in Scottsdale, Ariz., this highly successful restaurant holding/management company is a customer of Comerica’s Phoenix Regional Ofﬁce. The Mastro Companies has four restaurant brands: Mastro’s Steakhouse, an upscale steakhouse with locations in Scottsdale, Costa Mesa, Beverly Hills and Thousand Oaks; Mastro’s Ocean Club, an upscale seafood restaurant with locations in Scottsdale and Newport Beach; Maloney’s, a college-town bar & grill with locations in San Diego and throughout the Southwest; and Cocomo Joe’s, a Caribbean-themed restaurant in Phoenix. Comerica has not only provided ﬁnancing for ﬁve of Mastro’s 13 locations, but also assisted with real estate transactions and a working capital line of credit. “Comerica has been terriﬁc,” says Jeff Mastro, president. “They helped us tremen– dously with our growth spurt in 2002, and stepped up again this year to help us out in our latest round of growth.” S P I H S N O I T A L E R COMERICA BANK – WESTERN MARKET The Western Market of Comerica Bank includes 75 banking centers in two states, California and Arizona: 70 in the key California markets of San Francisco and the East Bay, San Jose, Los Angeles, Orange County, San Diego, Fresno, Sacramento, and Santa Cruz /Monterey; also, ﬁve banking centers in greater Phoenix, Ariz. 8 GROWTH Comerica is expanding in growing markets in Cali- fornia, Texas, Arizona and Florida, while maintaining its leadership position in Michigan. Opening new banking centers is an important part of Comerica’s growth plans. The banking center expansion pro- gram is not just a retail strategy; it is a strategy that focuses on serving all of Comerica’s lines of business. Comerica seeks out sites that provide a balance of small businesses, middle market companies, afﬂuent households, and where there are wealth manage- ment opportunities. 392 U.S. Banking Centers TX 17.3% AZ 1.3% FL 2.3% CA 17.9% MI 61.2% 2006 H T W O R G BALANCE To achieve consistent growth through all phases of a business cycle, Comerica is diversifying its earn- ings mix, particularly by geographic market. The markets outside of the Midwest accounted for 50 percent of average total loans in 2006, compared to 46 percent in 2005. Geographic Loan Growth (By Market Segment) Total: $47.7 Billion Texas 13% Florida 4% E C N 512 U.S. Banking Centers TX 20% Midwest & Other 50% Western 33% AZ 5% FL 4% A 2006 MI 46% CA 25% L 2010 Projected A B Total: $43.8 Billion Texas 12% Florida 3% Midwest & Other 54% Western 31% 2005 Data is for 2005 and 2006 and excludes Finance/Other 9 GULF WINDS INTERNATIONAL Y ou don’t need to tell Steve Stewart about the beneﬁts of an increasingly global economy. Every customer he has either imports or exports something from the Port of Houston. Stewart is president and co-owner of Gulf Winds International, a third-party logistics provider to the shipping industry. Under that logistics umbrella, the company specializes in warehous- ing and related services, as well as distribution services for the international shipping community. Gulf Winds, celebrating its 10th anniversary this year, operates six warehouse facilities in Houston, which total about 1.5 million square feet of storage and handling space. “For the last ﬁve or six years, our growth rate has been 25-30 percent a year. No doubt some of this growth is a result of the ever-increasing trafﬁc seen at The Port of Houston. However, our ability to attract key employees, including reliable and safe drivers, continues to give us the competitive advantage to grow our market share,” explains Stewart. “When we started out as a small business, I wore out my knee pads trying to get a bank to give us a small business loan. Eventually we found a bank that gave us a small line of credit, but we were growing too fast for them. They couldn’t com- prehend our business model. They weren’t familiar with the transportation industry. Comerica, however, has a middle market group and we ﬁt within that framework quite nicely. They came in, took a look at our books, interviewed us, and determined that we were exactly the kind of company that they wanted to work with. So we began our relationship with Comerica in February of 2003. Once we had a reliable and aggressive banking partner, things really started to happen for us. Frankly, our growth wouldn’t have happened with- out Comerica, who gave us the ﬁnancing and ﬁnancial strength to do what we needed to do.” S P I H S N O I T A L E R COMERICA BANK – TEXAS MARKET The Texas Market of Comerica Bank includes 68 banking centers in the key Texas markets of Dallas, Houston and Austin. 10 COMERICA RECOGNIZED FOR DIVERSITY Comerica continued to demonstrate its com- mitment to diversity in a number of ways in 2006, and has received considerable recognition for its efforts. segmentation groups Comerica has market across the organization. Each group includes Comerica colleagues who are responsible for developing strategies and tactics for reaching out to African Americans, Hispanics, women, Arab and Chaldean Americans, Asian Indians, and Asian Paciﬁc Islanders. The market segmentation groups are ably assisted by the Business Affairs Department. Business Affairs was strengthened in 2006 with sever- al key appointments to Senior Vice President Linda Forte’s team. Janice Tessier was named National Manager of Diversity Initiatives and provides assis- tance to the market segmentation groups, to help them achieve their goals and make their teams successful. Amal Berry-Brown was named Arab and Chaldean American Business Affairs Manager. Monica Martinez was named Hispanic Business Affairs Manager. The three appointees are work- ing with colleagues across all markets in growing and strengthening relationships with segmentation group customers and prospects. Comerica also demonstrated its commitment to diversity through sponsorships and volunteerism activities. For example, Comerica was one of the leading corporate fundraisers for the National Conference for Community and Justice, or NCCJ (recently renamed the Michigan Roundtable for Diversity and Inclusion) “Walk As One” in Detroit. More than 400 Comerica colleagues participated in the walk, raising needed funds for a program designed to help young adults recognize the need for tolerance. Comerica’s Service Company introduced a Mas- ters of Diversity Awareness (MDA) Program in 2006, designed to develop understanding and apprecia- tion of diversity throughout the division. The creative Y T I S R E V I D pilot program provides colleagues with learning opportunities covering various aspects of diversity, and provide tools and information to assist them in managing diversity in the workplace. During National Diversity Month, a number of pro- grams were successfully completed to celebrate diversity at Comerica, including a panel discussion on Asian culture with Comerica colleagues in the Western Market. As a result of its strong commitment to diversity, Comerica received a number of honors during 2006, including the following: • Comerica has been ranked #12 (up from #34 in 2005) on the DiversityInc list of the “Top 50 Compa- nies in the United States” based on commitment to diversity. In addition, Comerica ranked #4 for its commitment to supplier diversity and #6 based on the number of women in executive positions. • BLACK ENTERPRISE magazine named Comerica to its list of the “40 Best Companies for Diversity.” • Asian Enterprise Magazine named Comerica as one of the “Top U.S. Companies for Asian-Ameri- cans,” based upon its commitment to the small- business community, as well as its contributions to the Asian Paciﬁc American market. • Comerica was named by the Michigan Minority Business Development Council as the “2006 Cor- poration of the Year – Finance & Insurance Servic- es sector,” which is the 10th time during the past 11 years that Comerica has received this honor for its commitment to using minority-owned sup- pliers, and helping them grow and prosper. • Chairman Ralph Babb was honored as a “Humanitarian of the Year” at the Michigan Roundtable for Diversity and Inclusion’s annual Humanitarian Tribute Luncheon in Detroit. • Comerica also was named as one of “Metropoli- tan Detroit’s 101 Best and Brightest Companies to Work For” by the Michigan Business and Profes- sional Association and the National Association for Business Resources. Comerica received this honor due to its commitment to work-life bal- ance, robust diversity program and full menu of beneﬁts for full and part-time employees, among other factors. In addition to its continued work with the market segmentation groups, Business Affairs in 2007 will ensure that all employ- ees have ready access to information that will assist them in success- fully achieving their busi- ness goals as they reach out to diverse customers and prospects. 11 THE SAGEMONT SCHOOL T he Sagemont School in Weston, Florida has demonstrated tremendous growth over the past decade. Sagemont is a fully accredited private school that offers a comprehen- sive education for children from pre-kindergarten through 12th grade. The school has become a leader in the nation when it comes to integrating technology into the K-12 curriculum, and has built a wireless laptop community for its middle- and upper-school students. With some 770 students, the school’s mission is to stimulate critical thinking through a rigorous college preparatory program and indi- vidualized instruction. “We strive to build a community of learners, one student at a time,” says Sagemont Headmaster Brent Goldman. “We believe that aca- demics are only one part of the package. That’s why we offer a wide array of extracurricular activities for students of all ages and interests. Our goal is to help foster well-educated, well-rounded individuals who are destined for success in college and in life.” Comerica has been part of the Sagemont team since 2005, when the bank created a reﬁnancing package to help the school man- age a healthier cash ﬂow. The relationship continues with a newly created “Friends and Family of Sagemont School” banking pack- age, to help parents prepare for college tuition and other costs. In addition, Comerica is ﬁnancing the construction of a new athletic facility on the campus that will enable the school to offer summer programming to the entire community. Comerica recently secured the naming rights to the school gymna- sium to help defray the costs of the athletic program. “We’re very proud of The Comerica Bank Dome,” says Goldman. “The partner- ship between Sagemont and Comerica enables us to enhance our sports and other programs in very meaningful ways.” S P I H S N O I T A L E R COMERICA BANK – FLORIDA MARKET The Florida Market of Comerica Bank includes nine banking centers in Boca Raton, Ft. Lauderdale, Palm Beach Gardens, Naples, Riviera Beach, Sarasota, Stuart, Wellington and Weston. 12 BELLE TIRE DISTRIBUTORS I f you live and work in Michigan, then you should be very familiar with this successful family retail business. Belle Tire has built a solid reputation for quality and service ever since it was established in 1922. The company’s relationship with longstanding Comerica has been a key to the ﬁrm’s consistent growth; Belle Tire has been a Comerica customer for 57 years. In 1994, Comerica Bank assisted Belle Tire with the buyout of Tire Man, its largest competitor. The strat- egy nearly doubled the number of Belle Tire’s retail stores. “When we merged the two companies, that’s when things really started to pick up for us, because our larger size enabled us to increase our advertising and promotions,” says Don Barnes, Belle Tire presi- dent. “We also gained a tremendous amount of syn- ergies by eliminating duplication, and that, in turn, allowed us to be more proﬁtable and grow.” Since then, Comerica has helped Belle Tire with oth- er acquisitions. The company now has 81 locations with annual sales of more than $234 million. Current- ly, Comerica is ﬁnancing Belle Tire’s new $8.0 million corporate headquarters in Allen Park, Mich. Belle Tire purchased the former Frito Lay building near its existing warehouse. Renovation of the facility was completed in the fourth quarter of 2006. “Comerica has been a wonderful part- ner,” Barnes says. “Anytime we needed to take some type of new action to grow, Comerica was always there to help us. It’s a great relationship.” COMERICA BANK – MICHIGAN MARKET The Michigan Market of Comerica Bank includes 240 banking centers in metropolitan Detroit, Ann Arbor, Battle Creek, Grand Rapids, Jackson, Kal- amazoo, Lansing, Midland and Muskegon. T N E M E G A N A M K S I R Y T I L I B A T N U O C C A RISK MANAGEMENT Comerica has invested signiﬁcant resources into making its risk management systems and processes best in class. Enhanced risk management tools en- able Comerica to mitigate variability in credit qual- ity. Improvements in credit quality have been a key contributor of Comerica’s strong ﬁnancial perfor- mance. Comerica’s solid credit quality metrics are evident in the charts below. Nonperforming Assets (in Millions) $579 $538 $339 $232 $162 2002 2003 2004 2005 2006 6 5 4 3 2 1 Net Loan Charge-offs (in Millions) $481 $365 $194 $110 $60 2002 2003 2004 2005 2006 6 5 4 3 2 1 ACCOUNTABILITY Execution is one of the most important compo- nents of Comerica’s business model and is key to accountability at the organization. For the Business Bank, executing the plan means continuing to introduce new products and services, increasing cross-sales, and exporting the expertise of several businesses into other parts of Comerica’s footprint. For the Retail Bank, executing the plan means improv- applying technology, expanding and ing access points, developing an energized sale culture, and creating national platforms that will help Comerica do business more productively and efﬁciently. For Wealth & Institutional Management, executing the plan means aggressively investing in training, new people and new technologies to enhance Comerica’s competitive edge; delivering strong investment performance; and offering customized, ﬂexible solutions to clients. 13 OTHER COMERICA LOCATIONS U.S. City Barrington, IL Bellevue, WA Boston Chicago Cincinnati Cleveland Denver Las Vegas Memphis Minneapolis New York Princeton, NJ Reston, VA Rocky Mount, NC Seattle, WA Wilmington, DE Business SBA Lending Technology & Life Sciences Trust Services, Technology & Life Sciences Trust Services, International Finance, National Dealer Services, Specialized Industries Middle Market Banking Middle Market Banking National Dealer Services, Trust Services U.S. Banking Trust Services Trust Services Trust Services Trust Services Technology & Life Sciences Trust Services Trust Services Trust Services NON-U.S. In Canada Toronto, Windsor Information: Toronto 416.367.3113 Windsor 519.250.0460 In Mexico Monterrey Information: [52] 818.368.0316 In China Shanghai Information: 86.21.5882.6980 OTHER COMERICA UNITS Comerica Bank & Trust, National Association Provides a national platform for the delivery of trust, investment management and other bank- ing services. Comerica Insurance Services, Inc. Offers life, disability, long-term care, group beneﬁts, and property and casualty insurance to businesses and individuals. Comerica Leasing Corporation Provides equipment leasing and ﬁnancing ser- vices for businesses throughout the United States. Comerica Securities, Inc. A full-service broker-dealer that offers stocks, bonds, corporate and public ﬁnance, mutual funds and annuities, along with a full suite of fee-based investment management services. Comerica West Incorporated Originates mid-sized loans to business customers with a speciﬁc emphasis on the Western United States. Wilson, Kemp & Associates, Inc. Provides investment advisory services to private investors, corporations, municipalities and chari- table institutions throughout the United States. World Asset Management, Inc. Manages index portfolios for clients, including municipalities, unions, corporations, endowments and foundations. W.Y. Campbell & Company Provides investment banking and corporate ﬁnance services to Fortune 500 companies and middle-market ﬁrms. COMERICA OPENS SHANGHAI OFFICE Comerica’s new representative oﬃce in Shanghai provides networking services for U.S. customers seeking to expand or explore business opportunities in China. “China is the fastest-growing importer and exporter for the U.S., and Chinese-owned businesses represent an increasingly signiﬁcant part of our Western Market,” said Tom Ogden, executive vice president for Global Corporate Banking. “The Shanghai location is especially advantageous to Comerica because it is a center of manufacturing activity for many U.S.-aﬃliated companies. By having an oﬃce in this key business center, we can provide our customers with introductions to professionals and business partners, cut through red tape and provide education about local business practices.” “Our representative in Shanghai, Helen Huang, is expanding our current networking resources in China with banks, law ﬁrms, accountants and others operating there,” said J. Michael Fulton, president and chief executive oﬃcer of Comerica Bank’s Western Market. “In doing so, she is demonstrating to U.S. businesses that Comerica is one of the few commercial banks that can add value to their present or future needs in China.” Huang, a U.S. citizen who is a native of Shanghai, speaks and writes Mandarin ﬂuently, speaks the Shanghai dialect, and understands Cantonese and several regional dialects. BOARD OF DIRECTORS COMERICA INCORPORATED Alfred A. Piergallini Chairman, President and Chief Executive Ofﬁcer Wisconsin Cheese Group, Inc. (manufacturer and marketer of ethnic and specialty cheeses); Consultant, Desert Trail Consulting (marketing consulting organization) Robert S. Taubman Chairman, President and Chief Executive Ofﬁcer Taubman Centers, Inc. (shopping center management company engaged in leasing, management and construction supervision) Reginald M. Turner Jr. Member Clark Hill PLC (full-service law ﬁrm) c c William P. Vititoe Retired Chairman, President and Chief Executive Ofﬁcer Washington Energy Company (diversiﬁed energy company, now Puget Sound Energy, Inc.) c Kenneth L. Way Retired Chairman Lear Corporation (manufacturer of automotive components) Ralph W. Babb Jr. Chairman and Chief Executive Ofﬁcer Comerica Incorporated and Comerica Bank c Lillian Bauder, Ph.D. Retired Vice President Masco Corporation (manufacturer of diversiﬁed household and consumer products and services) Joseph J. Buttigieg III Vice Chairman Comerica Incorporated and Comerica Bank c James F. Cordes Retired Executive Vice President The Coastal Corporation (diversiﬁed energy company) Roger A. Cregg Executive Vice President and Chief Financial Ofﬁcer Pulte Homes, Inc. (national home builder) Peter D. Cummings Chairman Ram Realty Services (private real estate management and development company) T. Kevin DeNicola Senior Vice President and Chief Financial Ofﬁcer Lyondell Chemical Company (global manufacturer of basic chemicals) Anthony F. Earley Jr. Chairman and Chief Executive Ofﬁcer DTE Energy Company (diversiﬁed energy company) BOARD COMMITTEES Audit Compensation Corporate Governance & Nominating Qualiﬁed Legal Compliance Enterprise Risk c Committee Chairperson MANAGEMENT POLICY COMMITTEE Ralph W. Babb Jr. Chairman and Chief Executive Ofﬁcer Joseph J. Buttigieg III Vice Chairman The Business Bank Elizabeth S. Acton Executive Vice President and Chief Financial Ofﬁcer Connie Beck Executive Vice President The Retail Bank John R. Beran Executive Vice President and Chief Information Ofﬁcer Jon W. Bilstrom Executive Vice President Governance, Regulatory Relations & Legal Affairs David E. Duprey Executive Vice President General Auditor J. Michael Fulton President and Chief Executive Ofﬁcer Comerica Bank – Western Market Dale E. Greene Executive Vice President and Chief Credit Ofﬁcer Charles L. Gummer President and Chief Executive Ofﬁcer Comerica Bank – Texas Market Michael H. Michalak Senior Vice President Corporate Planning, Development & Risk Management Dennis J. Mooradian Executive Vice President Wealth & Institutional Management Jacquelyn H. Wolf Executive Vice President Chief Human Resources Ofﬁcer and Corporate Communications 15 SHAREHOLDER INFORMATION STOCK Comerica’s stock trades on the New York Stock Exchange (NYSE) under the symbol CMA. SHAREHOLDER ASSISTANCE Inquiries related to shareholder records, change of name, ad- dress or ownership of stock, and lost or stolen stock certiﬁcates should be directed to the transfer agent and registrar: WRITTEN REQUESTS: Wells Fargo Shareowner Services P.O. Box 64854 St. Paul, MN 55164-0854 (877) 536-3551 stocktransfer@wellsfargo.com CERTIFIED/OVERNIGHT MAIL: Wells Fargo Shareowner Services 161 North Concord Exchange South St. Paul, MN 55075-1139 (877) 536-3551 shareowneronline.com ELIMINATION OF DUPLICATE MATERIALS If you receive duplicate mailings at one address, you may have multiple shareholder accounts. You can consolidate your multiple accounts into a single, more convenient account by contacting the transfer agent shown above. In addition, if more than one member of your household is receiving shareholder materials, you can eliminate the duplicate mailings by contact- ing the transfer agent. DIVIDEND REINVESTMENT PLAN Comerica offers a dividend reinvestment plan, which permits participating shareholders of record to reinvest dividends in Comerica common stock without paying brokerage commis- sions or service charges. Participating shareholders also may invest up to $10,000 in additional funds each month for the pur- chase of additional shares. A brochure describing the plan in detail and an authorization form can be requested from the transfer agent shown above. DIVIDEND DIRECT DEPOSIT Common shareholders of Comerica may have their dividends deposited into their savings or checking account at any bank that is a member of the National Automated Clearing House (ACH) system. Information describing this service and an autho- rization form can be requested from the transfer agent shown above. DIVIDEND PAYMENTS Subject to approval of the board of directors, dividends cus- tomarily are paid on Comerica’s common stock on or about January 1, April 1, July 1 and October 1. FORM 10-K A copy of the Corporation’s Annual Report on Form 10-K, as ﬁled with the Securities and Exchange Commission, may be ob- tained without charge upon written request to the Secretary of the Corporation at the address listed on the inside back cover. 16 STOCK PRICES, DIVIDENDS AND YIELDS Quarter High Low Dividends Dividend Per Share Yield* 2006 Fourth Third Second First 2005 Fourth Third Second First $59.72 58.95 60.10 58.62 $60.25 63.38 59.29 61.40 $55.82 51.45 50.12 54.23 $53.60 56.80 53.17 53.70 $0.59 0.59 0.59 0.59 $0.55 0.55 0.55 0.55 4.1% 4.3 4.3 4.2 3.9% 3.7 3.9 3.8 * 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. As of January 31, 2007 there were 14,133 holders of record of the Corporation’s common stock. OFFICER CERTIFICATIONS On June 6, 2006, Comerica’s Chief Executive Ofﬁcer submitted his annual certiﬁcation to the New York Stock Ex- change stating that he was not aware of any violation by the Corporation of the Exchange’s corporate governance listing standards. Comerica ﬁled the certiﬁcations by its Chief Executive Ofﬁcer and Chief Financial Ofﬁcer required by Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits to its Annual Report on Form 10-K for the ﬁscal year ended December 31, 2006. Debt Ratings – Senior Unsecured Obligations Comerica Bank A+ A1 A+ A (high) Standard and Poor’s Moody’s Investors Service Fitch Ratings Dominion Bond Rating Service Comerica Incorporated A A2 A+ A INVESTOR RELATIONS ON THE INTERNET Go to www.comerica.com to ﬁnd the latest investor rela- tions information about Comerica, including stock quotes, news releases and ﬁnancial data. COMMUNITY REINVESTMENT ACT (CRA) PERFORMANCE Comerica is committed to meeting the credit needs of the communities it serves. Comerica’s overall CRA rating is “Outstanding.” EQUAL EMPLOYMENT OPPORTUNITY Comerica is committed to its afﬁrmative action program and practices, which ensure uniform treatment of employ- ees without regard to race, creed, ethnicity, color, age, national origin, religion, handicap, marital status, sexual orientation, veteran status, weight, height or sex. CORPORATE ETHICS The Corporate Governance section of Comerica’s website at www.comerica.com includes the following codes of eth- ics: Senior Financial Ofﬁcer Code of Ethics, Code of Business Conduct and Ethics for Employees, and Code of Business Conduct and Ethics for Members of the Board of Direc- tors. Comerica will also disclose in that website section any amendments or waivers to those codes of ethics, within four business days of such an event. Financial Highlights CONTENTS 1 2 At-a-Glance 4 8 14 Other Comerica Locations/Units 15 Board of Directors/Management Policy Committee 16 Shareholder Information Letter to Shareholders Strategy for Success CORE VALUES • Customer Service • Diversity • Ownership • Teamwork • Flexibility/Adapting to Change • Trust/Integrity • Learning and Personal Growth CORPORATE PROFILE Comerica Incorporated (NYSE: CMA) is a ﬁnancial services company, strategically aligned into three business segments: The Business Bank, The Retail Bank, and Wealth & Institutional Management. Comerica’s 11,270 colleagues focus on relationships, and helping people and businesses be successful. Comerica Bank locations can be found in Michigan, California, Texas, Arizona and Florida, with select businesses operating in several other states, as well as in Canada, Mexico and China. To receive e-mail alerts of breaking Comerica news, go to www.comerica.com/newsalerts. Major League Baseball World Series Game 1 October 21, 2006, Comerica Park COMERICA INCORPORATED Comerica Tower at Detroit Center 500 Woodward Avenue, MC 3391, Detroit, Michigan 48226 (248) 371-5000 (metro Detroit) (800) 521-1190 (outside metro Detroit area) (800) 292-1300 (product information center) www.comerica.com www.comericajobs.com (career opportunities) VISION Comerica is in business to help people be successful. We are committed to delivering the highest quality ﬁnancial services by: • Providing outstanding value and building enduring customer relationships • Creating a positive environment for our colleagues, built on trust, teamwork and respect • Demonstrating leadership in our communities • Ensuring a consistent, superior return for our owners 2006 Annual Report S TRATEGY FO R SUCCESS Growth Balance Relationships Risk Management Accountability Diversity C O M E R I C A I N C O R P O R A T E D 2 0 0 6 A N N U A L R E P O R T Comerica Incorporated Comerica Tower at Detroit Center 500 Woodward Avenue, MC 3391 Detroit, Michigan 48226 www.comerica.com

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