Great Opportunities
C O M E R I C A I N C O R P O R AT E D 2 0 0 7 A N N U A L R E P O R T
COMERICA INCORPORATED 2007 ANNUAL REPORT
Great Opportunities don’t happen
by accident. They do happen when a
strategy for success is combined with
a strong focus on customer service
and a clear vision to help people and
businesses be successful. That’s the
Comerica difference.
Table of Contents
Financial Highlights ............................................................................ 1
At A Glance ........................................................................................ 2
Letter to Shareholders ....................................................................... 4
Great Opportunities ........................................................................... 8
Comerica Locations ......................................................................... 14
Leadership ....................................................................................... 16
Comerica Incorporated (NYSE: CMA) is a financial services
company headquartered in Dallas, Texas, and strategically
aligned into three business segments: the Business Bank, the
Retail Bank and Wealth & Institutional Management. Comerica
focuses on relationships and helping businesses and people
to be successful. Comerica Bank locations can be found in
Michigan, California, Texas, Arizona and Florida, with select
businesses operating in several other states, and Canada,
Mexico and China. To receive e-mail alerts of breaking Comerica
news, go to www.comerica.com/newsalerts.
Corporate Profile
About the Cover: The state coins represent Comerica’s primary markets. The green color highlights Comerica’s focus on social and environmental sustainability in the communities where it operates.
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COMERICA INCORPORATED 2007 ANNUAL REPORT
Financial Highlights
dollar amounts in millions,
except per share data years ended December 31
Income Statement
Net interest income
Provision for loan losses
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
Ratios
Return on average assets
2007
$ 2,003
212
682
686
4.47
4.49
4.40
4.43
2.56
34.12
43.53
153
155
2006
$ 1,983
37
782
893
4.88
5.57
4.81
5.49
2.36
32.70
58.68
160
162
Change
Amount
$ 20
175
(100)
(207)
Percent
1%
N/M
(13)
(23)
(0.41)
(1.08)
(8)
(19)
(0.41)
(1.06)
0.20
1.42
(9)
(19)
8
4
(15.15)
(26)
(7)
(7)
(5)
(5)
1.17%
1.58%
Return on average assets from continuing operations*
Return on average common shareholders’ equity
Return on average common shareholders’ equity
from continuing operations*
Average common shareholders’ equity as a percentage of average assets
Tier 1 common capital as a percentage of risk-weighted assets
Tier 1 capital as a percentage of risk-weighted assets
Total capital as a percentage of risk-weighted assets
1.16
13.52
13.44
8.66
6.85
7.51
11.20
1.38
17.24
15.11
9.15
7.54
8.03
11.64
Balance Sheet (at December 31)
Total assets
Total earning assets
Total loans
Total deposits
Total common shareholders’ equity
$62,331
57,448
50,743
44,278
5,117
$ 58,001
$ 4,330
7%
54,052
3,396
47,431
3,312
44,927
5,153
(649)
(36)
6
7
(1)
(1)
N/M – not meaningful
* Income from continuing operations excludes the results of Munder Capital Management, a subsidiary sold in 2006 (after-tax gain of $108 million) and reported
as a discontinued operation in all periods presented.
Net Income
in millions of dollars
757
748
661
658
Diluted Net Income Per Common Share
in dollars
861
816
893
782
686
682
4.36
4.31
3.75 3.73
5.11
5.49
4.84
4.81
4.43 4.40
03
04
05
06
07
03
04
05
06
07
Net income
Net income from continuing operations
Diluted earnings per share
Diluted earnings per share from continuing operations
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COMERICA INCORPORATED 2007 ANNUAL REPORT
COMERICA INCORPORATED 2007 ANNUAL REPORT
At A Glance
The Business Bank
Comerica’s
three business
segments provide
Great Opportunities
for customers
Comerica’s
Business
Bank provides
companies with an
array of credit and
non-credit financial
products and
services.
Average Deposits
7%
45%
Total Revenue
15%
48%
29%
56%
Average Loans
8%
12%
80%
The Business Bank
The Retail Bank
Wealth & Institutional Management
2007 Achievements
· Average Middle Market loans grew 5 percent in 2007 to
$16.2 billion, led by growth of 7 percent in the Texas market
and 11 percent in the Western market
· Average Specialty Business loans grew 17 percent in 2007 to
$4.8 billion (excludes Financial Services Division loans), with
Energy Lending and Technology and Life Sciences contributing
to much of the growth
· Obtained the MasterCard Performance Excellence Award for
Comerica’s success in the commercial card — public sector
· Introduced a suite of trade cycle financing products for commercial
customers engaged in cross-border business
· Named by the U.S. Department of the Treasury as financial agent for
a debit card services program aimed at Social Security recipients
Competitive Advantages
· Expertise in forming strong relationships with corporate clients
· Solid partnership with Retail Bank and Wealth & Institutional
Management
· Experienced and seasoned staff
· Rigorous credit training program
· Recognized as a clear cash management leader, as demonstrated
by 16 A+ grades (the most of any banks measured) and six A
grades in the Phoenix-Hecht 2007 Middle Market Monitor, and the
Nilson Report’s ranking of Comerica as the largest issuer of prepaid
commercial cards
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COMERICA INCORPORATED 2007 ANNUAL REPORT
COMERICA INCORPORATED 2007 ANNUAL REPORT
At A Glance
The Retail Bank
Wealth & Institutional Management
The Retail
Bank delivers
personalized
financial products
and services
to consumers,
entrepreneurs and
small businesses.
Comerica’s Wealth
& Institutional
Management division
serves the needs
of affluent clients,
foundations and
corporations.
2007 Achievements
· Opened 30 new banking centers, 28 of which are
in Comerica’s high-growth markets of Texas, California
and Arizona
· Relocated three banking centers and completed
refurbishments to 27 banking centers: 22 in Michigan,
three in Texas and two in California
· Streamlined and enhanced Comerica’s personal
checking account product line
· Introduced enhanced Web Bill Pay features making it
easier for individuals and small businesses to manage
their online bill payments
· Introduced key consumer loan product offerings into
Comerica’s growth markets
· Launched strategic major marketing campaigns
to attract new business
Competitive Advantages
· Skilled and knowledgeable teams
· Solid partnership with Business Bank and Wealth &
Institutional Management
· Recognized by Greenwich Associates for excellence in
serving small businesses
· Comerica customer contact center ranked second by
O’Connor & Associates in a report measuring the sales
and service effectiveness of in-bound sales agents at banks
· Highly ranked by J.D. Power and Associates in its 2007
Retail Banking Satisfaction StudySM
2007 Achievements
· 14 percent net income growth versus 2006
· Launched Wealth Station – open architecture
management on fiduciary platform fully integrated
with financial planning
· Rolled out insurance, 401(k) and financial planning
in Texas, Florida and California
· Successfully converted to state-of-the art capital
markets platform and introduced new online trading
and compensation programs
· Reorganized Michigan and Texas territory and
private fiduciary businesses for greater efficiency
and productivity
· Introduced institutional investment consulting
and fiduciary back-office outsourcing services
· Created alliance with insurance companies to expand
distribution and product offerings
· Initiated active fixed income separate account management
Competitive Advantages
· Superior relationship management with holistic
financial services offered in local markets
· Solid partnership with Business Bank and Retail Bank
· Competitive products and services
· Sales-and-service culture focused on satisfying
institutional and high net worth clients’ financial needs
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COMERICA INCORPORATED 2007 ANNUAL REPORT
Letter to Shareholders
COMERICA INCORPORATED 2007 ANNUAL REPORT
Comerica continued to execute its
Growth Strategy in 2007 despite a challenging
economic environment.
Dear Shareholders,
Comerica continued to execute its growth
strategy in 2007 despite a challenging
economic environment.
It was a year that saw the entire financial
services sector grapple with rocky market
conditions. Fortunately, the issues that
have caused the greatest volatility in the
marketplace fall largely outside the parameters
of Comerica’s business. As a result, we
weren’t distracted by them and were able
to build positive momentum, as evidenced
by our strong loan growth, particularly in
our high-growth markets; the continuation
of our successful banking center expansion
program; and the relocation of our corporate
headquarters to Dallas, Texas.
We also were able to control expenses in
2007, and at the end of the year entered into
a multi-year procurement services contract
with an outsource provider to reduce our
operating expense base, enhance our current
procurement capabilities and further enable
efficient growth.
Our capital position remained solid,
providing us with ample cushion to weather
the continued challenging economic
RALPH W. BABB JR.
Chairman and Chief Executive Officer
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COMERICA INCORPORATED 2007 ANNUAL REPORT
COMERICA INCORPORATED 2007 ANNUAL REPORT
Letter to Shareholders
environment, while also providing us with the
on managing and mitigating risk. In fact, we
flexibility to continue to invest in our growth
have not created any structured investment
markets. We increased our annual dividend for
vehicles, off-balance-sheet conduits or other
the 39th consecutive year in 2007.
forms of high-risk, sophisticated financing
We were able to move forward in the year,
vehicles that drew headlines in 2007.
even as a challenged residential real estate
To the contrary, in recent years we have
market, particularly in Michigan and California,
invested significant resources into enhancing
affected our overall financial performance.
our credit and risk processes. We view our
For the full year 2007, Comerica reported
income from continuing operations of $682
million, or $4.40 per diluted share, compared
to $782 million, or $4.81 per diluted share, for
2006. The provision for loan losses was $212
credit quality and focus on risk management
as a key differentiator for our company and
take a view that this philosophy must remain a
constant regardless of where we are in a credit
or economic cycle.
million for 2007, compared to $37 million for
These enhanced credit processes are helping
2006. Return on average common shareholders’
us navigate the swift currents and manage
equity from continuing operations was 13.44
through cycles like the one we saw in 2007 and
percent for 2007 and 15.11 percent for 2006.
expect in 2008.
While Comerica doesn’t have subprime
In addition to risk management, there are
mortgage programs, the widely reported
many other important differentiators that
subprime meltdown clearly had an impact
contribute to our success. Perhaps most
on our residential real estate development
significant is our focus on relationships.
exposure in 2007. We believe we have taken the
appropriate actions to manage these risks and
provide appropriate reserves.
Comerica offers all the products of a large
nationwide bank, but we do it with the
customer service, care and market knowledge of
Our pursuit of long-term value for
a community bank (see customer profiles on the
shareholders is embodied by our sharp focus
following pages). Our banking professionals are
Return on Average Common
Shareholders’ Equity From
Continuing Operations
in percent
16.02
15.11
14.85
13.07
13.44
Cash Dividends Declared
Per Common Share
in U.S. dollars
2.56
2.36
2.20
2.00
2.08
03
04
05
06
07
03
04
05
06
07
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COMERICA INCORPORATED 2007 ANNUAL REPORT
Letter to Shareholders
COMERICA INCORPORATED 2007 ANNUAL REPORT
local experts who are known for their ingenuity,
flexibility, responsiveness and attention to
detail. We are committed to delivering the
highest quality financial services.
During the year, Comerica continued its
strategic expansion into the nation’s highest
growth markets. While we celebrate our
Michigan-based roots, Comerica has extended
its footprint to include the attractive high-
growth markets of Texas, California, Florida and
Arizona, which are expected to account for more
than half of the country’s entire population
growth between 2000 and 2030.
We firmly believe that our expansion, which
also diversifies our revenue mix, is the right
strategy at the right time for our company.
Comerica is aligned into three business
segments: the Business Bank, the Retail Bank,
and Wealth & Institutional Management.
We view our Business Bank focus as a natural
entry point to cross-sell products and services
of our Retail Bank and Wealth & Institutional
Management. We are not a mass-market retail
bank. We have a refined strategy that maximizes
the opportunity for our banking centers to
support all of our lines of business.
We opened 30 new banking centers during the
year, 28 of them in our high-growth markets of
Texas, California and Arizona. We have generated
nearly $1.8 billion in new deposits in the banking
centers that have opened since late 2004.
We firmly believe
that our expansion,
which also
diversifies our
revenue mix, is the
Right Strategy at
the Right Time for
our company.
Comerica also was among more than a dozen
banks in 2007 that competed for the opportunity
to serve as financial agent to the U.S. Department
of the Treasury for a program that will provide
debit card services to Social Security recipients.
Comerica was selected, in part, because of our
experience as a pre-paid card issuer for a number
of state government programs. This should
provide us with significant deposit growth and
fee income over time.
In the Retail Bank, we completed
refurbishments to 27 banking centers in 2007:
22 in Michigan, three in Texas and two in
California. We also streamlined and enhanced
Comerica’s personal checking account product
line into five packages designed to fulfill
specific consumer needs. And, we introduced
enhanced Web Bill Pay features, which made it
Our three major business segments were
easier for individuals and small businesses to
important contributors to our growth in 2007.
manage their online bill payments.
In the Business Bank, our efforts to provide
In Wealth & Institutional Management, we
outstanding cash management services were
launched Wealth Station – an open architecture
recognized in the Phoenix-Hecht 2007 Middle
investment platform fully integrated with
Market survey, in which we received 16 A+
financial planning. We also rolled out
grades, more than any other bank measured.
insurance, 401(k) and financial planning in
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COMERICA INCORPORATED 2007 ANNUAL REPORT
COMERICA INCORPORATED 2007 ANNUAL REPORT
Letter to Shareholders
Texas, Florida and California. In addition, we
DiversityInc also ranked us third for our
successfully converted to a state-of-the art
commitment to supplier diversity.
capital markets platform.
Looking ahead to 2008, we expect the banking
You can read more about our business
industry to continue to be challenged, but we
segment achievements and competitive
plan to navigate our way through these swift
advantages on pages 2 and 3 of this report.
currents as we have in the past. We will continue
During the year, we relocated our corporate
headquarters from Detroit, Michigan, to
Dallas, Texas. The relocation of our corporate
headquarters positions our company in a more
central location with greater accessibility to
to execute our growth strategy in 2008. We
expect our banking center expansion program
to keep pace with our 2007 openings, and once
again be focused on our growth markets of Texas,
California, Arizona and Florida.
all of our markets. It advances our strategy to
As part of our corporate strategy, we also are
diversify our customer base and extend our
making a commitment to conduct our business
reach into high-growth markets.
and operations in a way that enhances the
Comerica has maintained a presence in Texas
for 20 years, and we are now the largest banking
company headquartered in the state – an
important differentiator as we work to enhance
customer relationships and build new ones.
Michigan and the city of Detroit are still key
markets for us, and our customers there know
they can continue to rely on the same Comerica
people who provide exceptional customer
service and who they’ve come to know and trust.
Comerica’s commitment to the communities
it serves also was enhanced in 2007. We
provided more than $16 million to not-for-
profit organizations nationwide, including more
than $8 million from the Comerica Charitable
Foundation, which we fund. Our employees also
raised more than $2.3 million for the United
Way and Black United Fund.
Our commitment to diversity was recognized
in 2007 by, among others, the national business
magazines DiversityInc and Hispanic Business,
which ranked Comerica 37th among the “Top
50 Companies for Diversity” and sixth on
the “Diversity Elite 60 List,” respectively.
well being of people and the communities in
which they live, and protects and preserves
the environment for future generations. More
information about our sustainability efforts can
be found online at www.comerica.com.
You can be assured that we will continue
to be guided by our vision to help people be
successful by delivering the highest quality
financial services, providing outstanding value
and building enduring customer relationships.
We are committed to providing attractive
long-term returns for you, our shareholders.
RALPH W. BABB JR.
Chairman and Chief Executive Officer
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COMERICA INCORPORATED 2007 ANNUAL REPORT
Great Opportunities
COMERICA INCORPORATED 2007 ANNUAL REPORT
Reaching Out in Texas
Omega Environmental Technologies, a Dallas, Texas-based distributor
and light manufacturer of after-market automotive air conditioning
products, has achieved double-digit growth in sales in recent years,
despite major restructuring in the automotive industry.
Founded in 1989, Omega is one of the top privately owned
companies in the Dallas/Fort Worth area. In 2007, it was the winner
of the prestigious Small Business Exporter of the Year Award by the
Export-Import Bank of the United States (Ex-Im Bank).
“We service 87 countries,” said Omega founder and chief executive
officer Grace Davis. “We’re always looking for niche markets whether
through geographical expansion or new lines.”
Comerica provides Omega a large spectrum of products and services —
from its lines of credit, including Comerica Trade Finance department
involvement in an Ex-Im Bank facility — to the company’s 401(k) plan.
“Comerica was our first bank and has been a very important
part of our success.”
FLORIDA
GRACe DAvIS
Founder and Chief
Executive Officer of Omega
Environmental Technologies
In August 2007, Comerica announced the
site of its new corporate headquarters
in Texas, with the signing of a multi-year
lease at the 60-story office tower located
at 1717 Main Street in downtown Dallas.
Four “Comerica” signs were placed
atop Comerica Bank Tower in
November 2007.
The Comerica Bank New Year’s Parade
through downtown Dallas kicked off in
front of the new corporate headquarters,
and on January 2, 2008, the first floor
banking center opened for business for
the first time.
Comerica Bank Tower serves as a hub
for the underground pedestrian walkway
system that connects shops, restaurants
and other area buildings.
COMeRICA BAnk TOWeR
Dallas, Texas
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COMERICA INCORPORATED 2007 ANNUAL REPORT
COMERICA INCORPORATED 2007 ANNUAL REPORT
Great Opportunities
Comerica believes the Lone Star State
provides Great Opportunities to grow and
succeed, both here in the U.S. and abroad.
Safety Vision is a Houston, Texas-based company, founded in 1993,
that soon ranked number 298 among the Inc. 500 fastest-growing private
companies in the United States. Its mobile camera systems help reduce
risk, prevent accidents and save lives in mobile fleet industries as
diverse as police, mass transit, mining and student transportation.
Safety Vision owner and chief executive officer Bruce Smith
attributes the company’s annual double-digit growth to the increased
need for safety and security, and a surging international presence.
Safety Vision now sells products in 25 countries.
Safety Vision began a banking relationship with Comerica in 2006.
“We chose Comerica because they provided compelling options, so
it made economic sense to make the move,” Smith said. “You cannot
fund the type of growth we’re experiencing without having a great
banking relationship.”
BRuCe SMITH
Owner and Chief
Executive Officer
of Safety Vision
Comerica’s Treasury
Management Services Offer
Great Opportunities for
Business Customers
Although Comerica boasts nearly
60 treasury products, its Treasury
Management team, led by Dan
McCarty, is moving toward a more
holistic approach when presenting
business customers with solutions.
“It doesn’t make sense for us to
focus on being the low-cost
commodity provider – our strengths
are in our creativity, flexibility and
ability to recognize efficiencies and
other opportunities for customers,”
said McCarty.
One such example is Comerica
Business Deposit CaptureSM, which
allows customers to scan checks and
transmit the images to Comerica
for processing and depositing into
their account. Customers with many
locations benefit from this service
because they can consolidate all their
deposits and never have to leave
their office.
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COMERICA INCORPORATED 2007 ANNUAL REPORT
Great Opportunities
COMERICA INCORPORATED 2007 ANNUAL REPORT
Leveraging Leadership in Michigan
One of Detroit’s hidden gems can be found on Conner Street in a
developing neighborhood on the city’s east side. It is the home of
Samaritan Center, the country’s largest one-stop employment and
training center.
In 2007, Samaritan Center received a new addition with the
opening of Samaritan Manor, which became the first skilled nursing
rehabilitation facility to open in Detroit in more than 20 years.
Comerica has supported Samaritan Center and Samaritan Manor
through its Middle Market banking team, and the Comerica Charitable
Foundation, which Comerica funds, has supported it
with contributions.
“The Comerica Charitable Foundation has contributed to the
revitalization efforts on Detroit’s east side by supporting Samaritan
Center,” said Brother Francis Boylan, Samaritan Center president.
“We appreciate the foundation’s support, which will impact our
community for many years to come.”
FLORIDA
Great Opportunities in the Sunshine
State are Plentiful for Comerica
Dreams, Inc. provides sports fans and collectors with more
than 60,000 officially licensed products from all major sports.
In business for 28 years, the vertically integrated sports
memorabilia and licensed sports products firm sought
a credit and non-credit relationship with a bank that
understood its business and could help it continue to grow.
That bank was Comerica.
CAROLIne CHAMBeRS
President, Comerica
Charitable Foundation
BROTHeR FRAnCIS BOyLAn
President of Samaritan Center
ROSS TAnnenBAuM
President and Chief Executive
Officer of Dreams, Inc.
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COMERICA INCORPORATED 2007 ANNUAL REPORT
COMERICA INCORPORATED 2007 ANNUAL REPORT
Great Opportunities
The Great Lake State provides
Great Opportunities, and is where Comerica
has been helping people and businesses be
successful for nearly 160 years.
McNaughton-McKay was founded in 1910 in Detroit, Michigan, by two
entrepreneurs, John McNaughton and Arch McKay who, through their
successors, fostered a family owned and operated business for over 95 years.
“We have since grown to become one of the world’s largest and most
diverse electrical distributors,” said Donald D. Slominski, Jr., president and
chief executive officer of McNaughton-McKay. “Comerica helped us grow
and has been an important contributor to our overall success.”
Comerica Bank has been McNaughton-McKay’s bank of choice for more than
75 years. The bank helped McNaughton-McKay with a number of acquisitions,
and in 2006 assisted the company in becoming 100 percent employee-owned.
“Comerica provided us with the necessary advice and capital resources
to allow the family owners to achieve their desired objective of providing
liquidity for their holdings while transitioning the operation and control of
the business over to their loyal employees,” noted Slominski.
Today, McNaughton-McKay has 22 U.S. locations in Michigan, Ohio,
Georgia, and North & South Carolina. It also has expanded into the European
market with facilities in Stuttgart and Wegberg, Germany.
DOnALD D.
SLOMInSkI, JR.
President and
Chief Executive Officer
McNaughton-McKay
“Our overall objective is to establish a market-leading,
totally licensed, sports and entertainment products,
enterprise and true multi-channel retailer,” said Ross
Tannenbaum, Dreams, Inc. president and chief
executive officer.
“In order to execute our business plans, it became
apparent that we needed to secure an appropriate
long-term commercial banking relationship. During
our due-diligence process, it was clear that Comerica’s
Middle Market group in Florida was the ideal choice for us.”
Comerica supports Dreams, Inc. with a comprehensive
suite of treasury management solutions to fulfill all of
the company’s depository and disbursement needs.
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COMERICA INCORPORATED 2007 ANNUAL REPORT
Great Opportunities
COMERICA INCORPORATED 2007 ANNUAL REPORT
Building Momentum in the West
For Wente Vineyards, the key to making great wine stems from
successfully running a family owned and operated business for more
than 125 years. Now managed by the fourth and fifth generations of the
Wente family, the winery farms nearly 3,000 acres of estate vineyards in
the Livermore Valley, San Francisco Bay and Monterey County.
Wente Vineyards is California’s oldest continuously family owned
and operated winery. Carolyn Wente, vice chairman and former
president of Wente Vineyards, says Comerica played an important role
in her company’s growth and its addition of a lifestyle business that
complements and enhances the core business of growing grapes and
making wine.
“Comerica understands the supply and demand cycles of the wine
industry, and they’ve been very supportive of our restaurant, the concert
series and other additions to our business,” said Wente.
CAROLyn WenTe
Vice Chairman and
Former President of
Wente Vineyards
BOB WORSLey
Chairman and Chief
Executive Officer of
Renegy Holdings, Inc.
FLORIDA
Finding Great Opportunities
in the Grand Canyon State
Renegy Holdings, Inc. is a green energy company focused
on operating a growing portfolio of biomass-to-electricity
power generation facilities to address a growing demand for
renewable and economical power.
“In 2002, more than 450,000 acres of Arizona forests were
ravaged by the largest fire in the Southwest. After witnessing
the devastation firsthand, it occurred to me that all this wood
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Photographer, David Wallace, Used with permission. Permission does not imply endorsement. COMERICA INCORPORATED 2007 ANNUAL REPORT
COMERICA INCORPORATED 2007 ANNUAL REPORT
Great Opportunities
Comerica finds Great Opportunities in the
Golden State and in the Valley of the Sun, where
entrepreneurship is alive and well, and where
good ideas help people and the environment.
At age five, Allyson Ames started developing her culinary skills by
making breakfast for her mother. At age 17, she earned the title of
Best Young Chef in America. Her dream was to own a bakery. That
dream became a reality after Allyson teamed with her mother, Sondra,
in establishing Wonderland Bakery. In its first year of operation, the
bakery had revenues surpassing $1 million.
The bakery’s success has given Allyson and Sondra the chance to
give back. They founded the Thanks a Million Cookies Foundation,
where a percentage of Wonderland Bakery’s profits are distributed to
philanthropic causes.
The mother-daughter team is working with Comerica to set up
funding for a nationwide product launch.
“We have developed great relationships with our Wealth &
Institutional Management banking team in Costa Mesa,” said Sondra.
“Comerica is a partner in our success as we grow our business.”
SOnDRA AMeS
Chief Visionary of
Wonderland Bakery
waste could be transformed into useful energy,” said
Bob Worsley, chairman and chief executive officer of
Renegy. “Comerica helped turn this vision into reality
by securing the financing necessary to build our first
biomass-to-electricity facility near Snowflake, Arizona.
“Comerica’s support also enabled us to establish the
fuel procurement infrastructure necessary to collect the
fire-salvaged wood and build a three-year inventory of
wood waste fuel prior to commercial operations. We are
now pursuing a broader growth strategy and expansion
into the renewable energy marketplace with the goal of
becoming the leading biomass-to-electricity independent
power producer in North America.”
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COMERICA INCORPORATED 2007 ANNUAL REPORT
Locations
COMERICA INCORPORATED 2007 ANNUAL REPORT
Mapping Great Opportunities
Reach and Scope: Comerica’s primary markets are in Michigan, California, Texas, Arizona and Florida. Select businesses can be found in
several other cities and states (see list opposite page). Comerica’s service areas also extend into Canada (Toronto and Windsor, Ontario),
Mexico (Monterrey) and China (Shanghai).
Texas Market
Dallas/Fort Worth
Houston
Austin
Headquarters: Dallas
Markets: Dallas/Fort Worth Metroplex,
Austin, Houston
Banking Centers: 79
Information: 214.589.1400
Michigan Market
Headquarters: Detroit
Markets: Metropolitan Detroit and greater Ann
Arbor, Battle Creek, Grand Rapids, Jackson,
Kalamazoo, Lansing, Midland, Muskegon
Banking Centers: 237
Information: 313.222.4000
or 248.371.5000
Western Market
Headquarters: San Jose
Markets: San Francisco & the East Bay,
San Jose, Los Angeles, Orange County,
San Diego, Fresno, Sacramento and Santa
Cruz/Monterey, as well as
Phoenix/Scottsdale, Arizona
Banking Centers: 91
(83 in California; 8 in Arizona)
Information: 408.556.5000
Florida Market
Headquarters: Boca Raton
Markets: Boca Raton, Fort Lauderdale,
Naples, Palm Beach Gardens, Riviera Beach,
Sarasota, Stuart, Wellington, Weston
Northern California
Southern California
Phoenix/Scottsdale
Banking Centers: 9
Information: 800.777.7198
Legend
Market Headquarters
Banking Centers
Canada Headquarters: Toronto, Ontario
Mexico Representative Office: Monterrey
Information: Toronto 416.367.3113, Windsor 519.250.0460
Information: 52.818.368.0316
China Representative Office: Shanghai
Information: 86.21.5882.6980
PAGE 14
PAGE 15
COMERICA INCORPORATED 2007 ANNUAL REPORT
Locations
COMERICA INCORPORATED 2007 ANNUAL REPORT
Locations
Comerica Bank Tower
1717 Main Street
Dallas, Texas 75201
Directory Services:
Product Information:
Media Contact:
Investor Contact:
E-mail address:
Website:
800.521.1190
800.292.1300
214.462.4463
313.222.2840
info@comerica.com
www.comerica.com
Other Comerica Locations
City
Business
Barrington, IL
Bellevue, WA
Boston, MA
Chicago, IL
Cincinnati, OH
Cleveland, OH
Denver, CO
Las Vegas, NV
Memphis, TN
Minneapolis, MN
New York, NY
Princeton, NJ
Reston, VA
Rocky Mount, NC
Seattle, WA
Wilmington, DE
SBA Lending
Technology & Life Sciences
Fiduciary Services, Technology
& Life Sciences
Fiduciary Services, International
Finance, National Dealer Services
Middle Market Banking
Middle Market Banking
National Dealer Services,
Fiduciary Services
U.S. Banking
Fiduciary Services
Fiduciary Services
Fiduciary Services
Fiduciary Services
Technology & Life Sciences
Fiduciary Services
Fiduciary Services
Fiduciary Services
Other Comerica units
Comerica Bank & Trust, National Association
Provides a national platform for the delivery of trust, investment
management and other banking 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 services 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 charitable institutions throughout
the United States.
World Asset Management, Inc.
Manages indexed portfolios for institutional 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.
Bank Without Borders
Provides Great Opportunities
for Comerica Employees
Having a talent management system
that places a premium on attracting,
retaining and developing colleagues
with excellent customer service skills
is important to Comerica, particularly
as it continues to grow.
That is why Comerica developed
a program called “Bank Without
Borders.” Colleagues are encouraged
to pursue open positions available
to them around the country, and are
provided with enhanced relocation
assistance.
“The program increases efficiency
and productivity for Comerica
by filling open positions with
experienced colleagues whenever
possible,” said Jacquelyn Wolf, chief
human resources officer.
The results of the program are
evident. Hiring managers are filling
key positions faster. Experienced
colleagues are staffing positions
in markets throughout Comerica’s
footprint. Bank
Without Borders
is contributing
to Comerica’s
growth and
success.
PAGE 14
PAGE 15
COMERICA INCORPORATED 2007 ANNUAL REPORT
COMERICA INCORPORATED 2007 ANNUAL REPORT
Leadership
Leadership
Board of Directors
Ralph W. Babb Jr.
Chairman and
Chief Executive Officer
Comerica Incorporated and
Comerica Bank
Lillian Bauder, Ph.D. (1)(3*)(4)
Retired Vice President
Masco Corporation
(manufacturer of diversified
household and consumer
products and services)
Joseph J. Buttigieg III (5)
Vice Chairman
Comerica Incorporated and
Comerica Bank
James F. Cordes (1)(4)(5*)
Retired Executive Vice President
The Coastal Corporation
(diversified energy company)
Roger A. Cregg (1)(4)(5)
Executive Vice President and
Chief Financial Officer
Pulte Homes, Inc.
(national home builder)
Peter D. Cummings (2)(3)
Chairman
Ram Realty Services
(private real estate management
and development company)
T. Kevin DeNicola (1)(4)(5)
Former Senior Vice President and
Chief Financial Officer
Lyondell Chemical Company
(global manufacturer of
basic chemicals)
Anthony F. Earley Jr. (2)(3)
Chairman and
Chief Executive Officer
DTE Energy Company
(diversified energy company)
Alfred A. Piergallini (2)
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 (5)
Chairman, President and
Chief Executive Officer
Taubman Centers, Inc. and
The Taubman Company
(shopping center management
company engaged in leasing,
management and construction
supervision)
Reginald M. Turner Jr. (1)(4)
Member
Clark Hill PLC
(full-service law firm)
William P. Vititoe (1*)(4*)(5)
Retired Chairman, President
and Chief Executive Officer
Washington Energy Company
(diversified energy company,
now Puget Sound Energy, Inc.)
Kenneth L. Way (2*)(3)
Retired Chairman and
Chief Executive Officer
Lear Corporation
(manufacturer of automotive
components)
PAGE 16
Senior Leadership Team
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
Linda D. Forte
Senior Vice President
Business Affairs
J. Michael Fulton
President
Comerica Bank –
Western Market
Dale E. Greene
Executive Vice President
and Chief Credit Officer
Charles L. Gummer
President
Comerica Bank –
Texas Market
Edward T. Gwilt
Senior Vice President
Asset Quality Review
Michael H. Michalak
Executive Vice President
Corporate Planning,
Development & Risk
Management
Dennis J. Mooradian
Executive Vice President
Wealth & Institutional
Management
Thomas D. Ogden
President
Comerica Bank –
Michigan Market
Jacquelyn H. Wolf, Ph.D.
Executive Vice President
Chief Human Resources
Officer
Board Committees
(1) Audit
(2) Compensation
(4) Qualified Legal
Compliance
(3) Corporate Governance
and Nominating
(5) Enterprise Risk
* Committee Chairperson
FINANCIAL REVIEW AND REPORTS
Comerica Incorporated and Subsidiaries
Performance Graph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Results and Key Corporate Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overview/Earnings Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strategic Lines of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Sheet and Capital Funds Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Accounting Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Financial Statements:
18
20
21
33
37
44
62
67
68
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70
Consolidated Statements of Changes in Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72
Report of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Historical Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
17
PERFORMANCE GRAPH
Comparison of Five Year Cumulative Total Return
Among Comerica Incorporated, Keefe 50-Bank Index, and S&P 500 Index
(Assumes $100 Invested on 12/31/02 and Reinvestment of Dividends)
$250
$200
$150
$100
$50
$0
Comerica Incorporated
Keefe 50-Bank Index
S&P 500 Index
Comerica Incorporated
Keefe 50-Bank Index
S&P 500 Index
2002
$100
$100
$100
2003
$135
$134
$129
2004
$153
$147
$143
2005
$148
$149
$150
2006
$159
$178
$173
2007
$124
$137
$183
The performance shown on the graph above is not necessarily indicative of future performance.
18
TABLE 1: SELECTED FINANCIAL DATA
2007
Years Ended December 31
2005
(dollar amounts in millions, except per share data)
2004
2006
2003
EARNINGS SUMMARY
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,003 $ 1,983 $ 1,956 $ 1,811 $ 1,928
377
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . .
850
Noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,452
Noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
291
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . .
658
Income from continuing operations . . . . . . . . . . . . . . . . .
3
Income from discontinued operations, net of tax . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
661
PER SHARE OF COMMON STOCK
Diluted earnings per common share:
(47)
819
1,613
393
816
45
861
212
888
1,691
306
682
4
686
64
808
1,458
349
748
9
757
37
855
1,674
345
782
111
893
5.49
2.36
32.70
58.68
5.11
2.20
31.11
56.76
4.36
2.08
29.94
61.02
4.43
2.56
34.12
43.53
Income from continuing operations . . . . . . . . . . . . . . . $ 4.40 $ 4.81 $ 4.84 $ 4.31 $ 3.73
3.75
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.00
Cash dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . .
29.20
Common shareholders’ equity . . . . . . . . . . . . . . . . . . . . .
Market value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
56.06
YEAR-END BALANCES
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $62,331 $58,001 $53,013 $51,766 $52,592
48,804
Total earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40,302
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,463
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,801
Total medium- and long-term debt. . . . . . . . . . . . . . . . . .
5,110
Total common shareholders’ equity . . . . . . . . . . . . . . . . .
AVERAGE BALANCES
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $58,574 $56,579 $52,506 $50,948 $52,980
48,841
Total earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42,370
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,519
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,074
Total medium- and long-term debt. . . . . . . . . . . . . . . . . .
Total common shareholders’ equity . . . . . . . . . . . . . . . . .
5,033
CREDIT QUALITY
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . $
Allowance for credit losses on lending- related
54,688
49,821
41,934
8,197
5,070
57,448
50,743
44,278
8,821
5,117
46,975
40,733
40,145
4,540
5,041
48,232
43,816
40,640
4,186
5,097
52,291
47,750
42,074
5,407
5,176
48,016
40,843
40,936
4,286
5,105
48,646
43,247
42,431
3,961
5,068
54,052
47,431
44,927
5,949
5,153
557 $
493 $
516 $
673 $
803
commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total allowance for credit losses . . . . . . . . . . . . . . . . . . . .
Total nonperforming assets . . . . . . . . . . . . . . . . . . . . . . . .
Net loan charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net credit-related charge-offs . . . . . . . . . . . . . . . . . . . . . .
Net loan charge-offs as a percentage of average total
loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net credit-related charge-offs as a percentage of average
total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for loan losses as a percentage of total period-
end loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for loan losses as a percentage of total
nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . . .
RATIOS
Net interest margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on average assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on average common shareholders’ equity . . . . . . .
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend payout ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total payout to shareholders. . . . . . . . . . . . . . . . . . . . . . .
Average common shareholders’ equity as a percentage of
average assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier 1 common capital as a percentage of risk-weighted
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier 1 capital as a percentage of risk-weighted assets . . . .
19
21
578
423
149
153
26
519
232
60
72
33
549
162
110
116
21
694
339
194
194
33
836
538
365
365
0.30% 0.13% 0.25% 0.48% 0.86%
0.31
1.10
138
0.15
1.04
231
0.26
1.19
373
0.48
1.65
215
0.86
1.99
158
3.66% 3.79% 4.06% 3.86% 3.95%
1.64
1.17
16.90
13.52
58.01
58.58
43.05
57.79
104.11
142.44
1.49
15.03
55.60
47.71
96.56
1.25
13.12
53.19
53.33
57.60
1.58
17.24
58.92
42.99
85.79
8.66
6.85
7.51
9.15
7.54
8.03
9.71
7.78
8.38
9.90
8.13
8.77
9.50
8.04
8.72
2007 FINANCIAL RESULTS AND KEY CORPORATE INITIATIVES
Financial Results
(cid:129) Reported income from continuing operations of $682 million, or $4.40 per diluted share for 2007,
compared to $782 million, or $4.81 per diluted share, for 2006. The most significant item contributing to
the $100 million decrease in income from continuing operations in 2007, when compared to 2006, was an
increase in the provision for loan losses of $175 million. Net income was $686 million, or $4.43 per
diluted share for 2007, compared to $893 million, or $5.49 per diluted share for 2006. Included in net
income in 2006 was a $108 million after-tax gain on the sale of the Corporation’s Munder subsidiary
(cid:129) Returned 13.52 percent on average common shareholders’ equity and 1.17 percent on average assets
(cid:129) Generated growth from December 31, 2006 to December 31, 2007 of $3.3 billion in loans and $1.3 billion
in unused commitments to extend credit
(cid:129) Generated geographic market growth in average loans (excluding Financial Services Division) of seven
percent from 2006 to 2007, including Texas (16 percent), Western (13 percent) and Florida (11 percent),
with the Midwest market down one percent
(cid:129) Increased total revenue two percent, including four percent growth in noninterest income. Excluding a
$47 million Financial Services Division-related lawsuit settlement and a $12 million loss on the sale of the
Mexican bank charter in 2006, total revenue growth was three percent and noninterest income growth was
eight percent
(cid:129) Contained the increase in noninterest expenses to $17 million, or one percent, from 2006. 2007 included
incremental expenses related to new banking centers ($23 million), a charge related to the Corporation’s
membership in Visa, Inc. (Visa) ($13 million) and costs associated with the previously announced
headquarters move to Dallas, Texas ($6 million). 2006 noninterest expense included interest on tax
liabilities of $38 million. Interest on tax liabilities was not classified in noninterest expenses in 2007, and
instead classified in the “provision for income taxes”. Full-time equivalent employees increased less than
one percent from 2006 to 2007, even with the addition of 30 new banking centers during the period
(cid:129) Incurred net credit-related charge-offs of 31 basis points as a percent of average total loans in 2007,
compared to 15 basis points in 2006; nonperforming assets increased to $423 million, reflecting chal-
lenges in the residential real estate development industry in Michigan and California
(cid:129) Raised the quarterly cash dividend 8.5 percent, to $0.64 per share, an annual rate of $2.56 per share, for an
annual dividend payout ratio of 58 percent
(cid:129) Repurchased 10 million shares of outstanding common stock in the open market for $580 million, which
combined with dividends, returned 142 percent of earnings to shareholders
Key Corporate Initiatives
(cid:129) Relocated corporate headquarters to Dallas, Texas, where Comerica already had a major presence, to
position the Corporation in a more central location with greater accessibility to all markets. Comerica is
now the largest bank headquartered in Texas
(cid:129) Continued organic growth focused in high growth markets, including opening 30 new banking centers in
2007; in 2008, Comerica expects to open 32 new banking centers. Since the banking center expansion
program began in late 2004, new banking centers have resulted in nearly $1.8 billion in new deposits
(cid:129) Continued to refine and develop the enterprise-wide risk management and compliance programs,
including improvement of analytics, systems and reporting
(cid:129) Managed full-time equivalent staff growth to less than one percent, even with approximately 140 full-time
equivalent employees added to support new banking center openings
(cid:129) Reduced automotive production exposure from loans, unused commitments and standby letters of credit
and financial guarantees from $4.2 billion at December 31, 2006 to $3.7 billion at December 31, 2007
20
OVERVIEW/EARNINGS PERFORMANCE
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 & Institutional
Management. The core businesses are tailored to each of the Corporation’s four primary geographic markets:
Midwest, Western, Texas and Florida.
The accounting and reporting policies of the Corporation and its subsidiaries conform to U.S. generally accepted
accounting principles and prevailing practices within the banking industry. The Corporation’s consolidated financial
statements are prepared based on the application of accounting policies, the most significant of which are described on
page 72 in Note 1 to the consolidated financial statements. The most critical of these significant accounting policies are
discussed in the “Critical Accounting Policies” section on page 62 of this financial review.
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 derived principally
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 and which generate noninterest income, the Corporation’s secondary source of revenue. Growth in
loans, deposits and noninterest income is affected by many factors, including the economic growth in the markets
the Corporation serves, the financial requirements and health of customers and successfully adding new
customers and/or increasing 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 Corporation sold its stake in Munder Capital Management (Munder) in 2006. This financial review and
the consolidated financial statements reflect Munder as a discontinued operation in all periods presented. For
detailed information concerning the sale of Munder and the components of discontinued operations, refer to
Note 26 to the consolidated financial statements on page 127.
The remaining discussion and analysis of the Corporation’s results of operations is based on results from
continuing operations.
The Corporation generated growth of $3.3 billion in loans and $1.3 billion in unused commitments to
extend credit from December 31, 2006 to December 31, 2007. Excluding Financial Services Division, nearly all
business lines showed average loan growth in 2007, compared to 2006, including Specialty Businesses, which
includes Entertainment, Energy, Leasing, and Technology and Life Sciences (17 percent), Global Corporate
Banking (12 percent), Private Banking (11 percent), National Dealer Services (5 percent), Commercial Real Estate
(5 percent), Small Business (5 percent) and Middle Market (5 percent). Excluding Financial Services Division,
average loans grew in the Texas (16 percent), Western (13 percent) and Florida (11 percent) geographic markets in
2007, compared to 2006, and declined one percent in the Midwest market. Average loans decreased 44 percent in
2007 in the Financial Services Division, where customers deposit large balances (primarily noninterest-bearing)
and the Corporation pays certain customer services expenses (included in noninterest expenses on the consol-
idated statements of income) and/or makes low-rate loans (included in net interest income on the consolidated
statements of income) to such customers. Average deposits excluding Financial Services Division increased
$1.9 billion, or five percent from 2006. The increase in average deposits excluding Financial Services Division
when compared to 2006, resulted primarily from an increase in customer and institutional certificates of deposit.
Average Financial Services Division deposits decreased $2.0 billion, or 34 percent, in 2007, compared to 2006. The
decrease in average Financial Services Division deposits in 2007, when compared to 2006, resulted from a
$1.5 billion decrease in average noninterest-bearing deposits and a $508 million decrease in average interest-
bearing deposits. Noninterest-bearing deposits in the Corporation’s Financial Services Division include title and
escrow deposits, which benefit from home mortgage financing and refinancing activity. Financial Services
Division deposit levels may change with the direction of mortgage activity changes, the desirability of such
deposits and competition for deposits. Net interest income increased one percent in 2007, compared to 2006,
primarily due to loan growth.
Noninterest income, excluding net securities gains, net gain (loss) on sales of businesses and income from
lawsuit settlement, increased seven percent in 2007, compared to 2006, resulting primarily from increases in
fiduciary income ($19 million), commercial lending fees ($10 million), income from principal investing and
warrants ($9 million) and card fees ($8 million).
21
The Corporation’s credit staff closely monitors the financial health of lending customers in order to assess ability
to repay and to adequately provide for expected losses. Loan quality was impacted by challenges in the residential real
estate development industry in Michigan and California and a leveling off of overall credit quality improvement trends
in the Texas market and remaining businesses in the Western market. Credit quality trends resulted in an increase in net
credit-related charge-offs and nonperforming assets in 2007, compared to 2006. The tools developed in the past several
years for evaluating the adequacy of the allowance for loan losses, and the resulting information gained from these
processes, continue to help the Corporation monitor and manage credit risk.
Noninterest expenses increased one percent in 2007, compared to 2006, primarily due to increases in net
occupancy and equipment expense ($18 million), regular salaries ($16 million) and a charge related to the
Corporation’s membership in Visa ($13 million), partially offset by a decrease resulting from the prospective
change in the classification of interest on tax liabilities to “provision for income taxes” on the consolidated
statements of income effective January 1, 2007. Noninterest expenses included $38 million of interest on tax
liabilities in 2006. The $18 million increase in net occupancy and equipment expense in 2007 included $9 million
from the addition of 30 new banking centers. Full-time equivalent employees increased by less than one percent
(approximately 80 employees) from year-end 2006 to year-end 2007, even with approximately 140 full-time
equivalent employees added to support new banking center openings.
A majority of the Corporation’s revenues are generated by the Business Bank business segment, making the
Corporation highly sensitive to changes in the business environment in its primary geographic markets. To
facilitate better balance among business segments and geographic markets, the Corporation opened 30 new
banking centers in 2007 in markets with favorable demographics and plans to continue banking center expansion
in these markets. This is expected to provide opportunity for growth across all business segments, especially in the
Retail Bank and Wealth & Institutional Management segments, as the Corporation penetrates existing relation-
ships through cross-selling and develops new relationships.
For 2008, management expects the following, compared to 2007 from continuing operations (assumes the
economy experiences slow growth in 2007 rather than a recession):
(cid:129) Mid to high single-digit average loan growth, excluding Financial Services Division loans, with flat growth
in the Midwest market, high single-digit growth in the Western market and low double-digit growth in the
Texas market
(cid:129) Average earning asset growth in excess of average loan growth
(cid:129) Average Financial Services Division noninterest-bearing deposits of $1.2 to $1.4 billion. Financial Services
Division loans will fluctuate in tandem with the level of noninterest-bearing deposits
(cid:129) Based on the federal funds rate declining to 2.00 percent by mid-year 2008, average full year net interest
margin between 3.10 and 3.15 percent, including the effects of higher levels of securities, lower value of
noninterest-bearing deposits, average loan growth exceeding average deposit growth and the 2008 FAS 91
impact discussed below
(cid:129) Average net credit-related charge-offs between 45 and 50 basis points of average loans, with charge-offs in
the first half higher than in the second half of 2008. The provision for credit losses is expected to exceed net
charge-offs
(cid:129) Low single-digit growth in noninterest income
(cid:129) Low single-digit decline in noninterest expenses, excluding the provision for credit losses on lending-
related commitments and including the 2008 FAS 91 impact discussed below
(cid:129) Effective tax rate of about 32 percent
(cid:129) Maintain a Tier one common capital ratio comparable to year-end 2007
(cid:129) Statement of Financial Accounting Standards No. 91 (FAS 91) - Accounting for Loan Origination Fees and
Costs. Beginning in 2008, a change in the application of FAS 91 will result in deferral and amortization (over
the loan life) to net interest income of more fees and costs. Based on assumptions for loan growth, loan fees
and average loan life, the estimated impact on 2008, compared to 2007, will be to lower the net interest
margin by about 3-4 basis points (approximately $20 million), lower noninterest expenses by about 3-
4 percent (approximately $60 million) and increase earnings per share by about four cents per quarter
22
Average
Rate
5.62%
7.23
6.23
5.74
5.89
3.81
5.98
—
5.84
3.76
3.29
7.22
5.65
TABLE 2: ANALYSIS OF NET INTEREST INCOME-Fully Taxable Equivalent (FTE)
Average
Balance
Commercial loans(1)(2)(3) . . . . . . . . . . $28,132
4,552
Real estate construction loans . . . . . . . .
9,771
Commercial mortgage loans . . . . . . . . .
1,814
Residential mortgage loans . . . . . . . . . .
2,367
Consumer loans . . . . . . . . . . . . . . . . .
1,302
Lease financing . . . . . . . . . . . . . . . . . .
1,883
International loans . . . . . . . . . . . . . . . .
—
Business loan swap expense(4) . . . . . . .
49,821
Total loans(2)(3)(5) . . . . . . . . . . . . .
2007
Interest
$2,038
374
709
111
166
40
133
(67)
3,504
Years Ended December 31
2006
Average
Rate
Average
Balance
Average
Average
Balance
Rate
Interest
(dollar amounts in millions)
$1,877
336
675
95
181
52
127
(124)
3,219
7.25% $27,341
3,905
8.21
9,278
7.26
1,570
6.13
2,533
7.00
1,314
3.04
1,809
7.06
—
—
47,750
7.03
6.87% $24,575
3,194
8.61
8,566
7.27
1,388
6.02
2,696
7.13
1,283
4.00
2,114
7.01
—
—
43,816
6.74
2005
Interest
$1,381
231
534
80
159
49
126
(2)
2,558
Investment securities available-for-
sale(6) . . . . . . . . . . . . . . . . . . . . . .
4,447
206
Federal funds sold and securities
purchased under agreements to resell. .
Other short-term investments . . . . . . . .
Total earning assets . . . . . . . . . . . . . .
Cash and due from banks . . . . . . . . . . .
Allowance for loan losses . . . . . . . . . . .
Accrued income and other assets . . . . . .
164
256
54,688
1,352
(520)
3,054
Total assets . . . . . . . . . . . . . . . . . . . $58,574
Money market and NOW deposits(1) . . . $14,937
1,389
Savings deposits. . . . . . . . . . . . . . . . . .
Customer certificates of deposit . . . . . . .
7,687
Institutional certificates of
deposit(4)(7) . . . . . . . . . . . . . . . . . .
Foreign office time deposits(8). . . . . . . .
Total interest-bearing deposits. . . . . . .
Short-term borrowings . . . . . . . . . . . . .
Medium- and long-term debt(4)(7) . . . .
Total interest-bearing sources . . . . . . .
Noninterest-bearing deposits(1) . . . . . . .
Accrued expenses and other liabilities . . .
Shareholders’ equity . . . . . . . . . . . . . . .
5,563
1,071
30,647
2,080
8,197
40,924
11,287
1,293
5,070
Total liabilities and shareholders’
equity . . . . . . . . . . . . . . . . . . . . . $58,574
Net interest income/rate spread (FTE) . . .
FTE adjustment(9) . . . . . . . . . . . . . . . .
Impact of net noninterest-bearing sources
of funds . . . . . . . . . . . . . . . . . . . . .
Net interest margin (as a percentage of
average earning assets) (FTE)(2)(3) . . .
(1) FSD balances included above:
Loans (primarily low-rate) . . . . . . $ 1,318
1,202
Interest-bearing deposits . . . . . . .
2,836
Noninterest-bearing deposits . . . .
(2) Impact of FSD loans (primarily low-
rate) on the following:
Commercial loans . . . . . . . . . . .
Total loans . . . . . . . . . . . . . . . .
Net interest margin (FTE)
(assuming loans were funded by
noninterest-bearing deposits) . .
(3) Impact of 2005 warrant accounting
change on the following:
9
14
3,733
460
13
342
300
52
1,167
105
455
1,727
3,861
148
12
12
2,730
4.22
5.15
6.69
6.53
2.88
0.79
4.01
5.23
4.82
3.47
4.89
5.63
3.89
4.56
5.28
5.65
6.82
3.08
0.93
4.45
5.39
4.85
3.81
5.06
5.55
4.22
3,992
174
14
18
3,425
443
11
261
235
55
1,005
130
304
1,439
283
266
52,291
1,557
(499)
3,230
$56,579
$15,373
1,441
6,505
4,489
1,131
28,939
2,654
5,407
37,000
13,135
1,268
5,176
$56,579
390
165
48,232
1,721
(623)
3,176
$52,506
$17,282
1,545
5,418
511
877
25,633
1,451
4,186
31,270
15,007
1,132
5,097
$52,506
337
7
148
19
37
548
52
170
770
1.95
0.49
2.73
3.72
4.18
2.14
3.59
4.05
2.46
$2,006
$
3
2.60
$1,986
$
3
2.64
$1,960
$
4
3.19
1.06
3.66%
1.15
3.79%
0.87
4.06%
$
9
47
0.69% $ 2,363
1,710
3.91
4,374
$
13
66
0.57% $ 1,893
2,600
3.86
5,851
$
8
76
0.45%
2.91
(0.32)%
(0.18)
(0.08)
(0.59)%
(0.32)
(0.16)
(0.43)%
(0.24)
(0.15)
Commercial loans . . . . . . . . . . .
Total loans . . . . . . . . . . . . . . . .
Net interest margin (FTE) . . . . . .
0.08%
0.05
0.04
(4) The gain or loss attributable to the effective portion of cash flow hedges of loans is shown in “Business loan swap expense”. The gain or loss
attributable to the effective portion of fair value hedges of institutional certificates of deposits and medium- and long-term debt, which
totaled a net gain of $12 million in 2007, is included in the related interest expense line items.
20
20
20
$
(5) Nonaccrual loans are included in average balances reported and are used to calculate rates.
(6) Average rate based on average historical cost.
(7) Institutional certificates of deposit and medium- and long-term debt average balances have been adjusted to reflect the gain or loss
attributable to the risk hedged by risk management swaps that qualify as a fair value hedge.
(8) Includes substantially all deposits by foreign domiciled depositors; deposits are primarily in excess of $100,000.
(9) The FTE adjustment is computed using a federal income tax rate of 35%.
23
TABLE 3: RATE-VOLUME ANALYSIS-Fully Taxable Equivalent (FTE)
Increase
(Decrease)
Due to Rate
2007/2006
Increase
(Decrease)
Due to Volume*
Net
Increase
(Decrease)
Increase
(Decrease)
Due to Rate
(in millions)
2006/2005
Increase
(Decrease)
Due to Volume*
Net
Increase
(Decrease)
Interest income (FTE):
Loans:
Commercial loans . . . . . . . . . .
Real estate construction loans . .
Commercial mortgage loans . . .
Residential mortgage loans . . . .
Consumer loans . . . . . . . . . . . .
Lease financing . . . . . . . . . . . . .
International loans . . . . . . . . . .
Business loan swap expense . . .
$104
(16)
(1)
1
(3)
(12)
1
57
Total loans . . . . . . . . . . . . . .
131
Investment securities available-
$ 57
54
35
15
(12)
—
5
—
154
$161
38
34
16
(15)
(12)
6
57
285
for-sale . . . . . . . . . . . . . . . . . . .
11
21
32
Federal funds and securities
purchased under agreements to
resell . . . . . . . . . . . . . . . . . . . . .
Other short-term investments. . . .
1
(3)
Total interest income (FTE) . .
140
Interest expense:
Interest-bearing deposits:
Money market and NOW
accounts . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . .
Certificates of deposit . . . . . . . .
Institutional certificates of
deposit . . . . . . . . . . . . . . . . .
Foreign office time deposits . . .
Total interest-bearing
deposits . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . .
Medium- and long-term debt . . . .
Total interest expense . . . . . .
30
2
29
7
—
68
5
(4)
69
(6)
(1)
168
(13)
—
52
58
(3)
94
(30)
155
219
(5)
(4)
308
17
2
81
65
(3)
162
(25)
151
288
$ 306
44
89
4
34
2
22
(122)
379
20
8
1
408
161
5
69
8
6
249
19
66
334
$190
61
52
11
(12)
1
(21)
—
282
6
(6)
5
287
(55)
(1)
44
208
12
208
59
68
335
$ 496
105
141
15
22
3
1
(122)
661
26
2
6
695
106
4
113
216
18
457
78
134
669
Net interest income (FTE) . . .
$ 71
$ (51)
$ 20
$ 74
$ (48)
$ 26
* Rate/volume variances are allocated to variances due to volume.
Net Interest Income
Net interest income is the difference between interest and yield-related fees earned on assets and interest paid
on liabilities. 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. Gains and losses related to the effective portion of risk management
interest rate swaps that qualify as hedges are included with the interest income or expense of the hedged item
when classified in net interest income. Net interest income on a fully taxable equivalent (FTE) basis comprised
69 percent of total revenues in 2007, compared to 70 percent in 2006 and 71 percent in 2005. Table 2 on page 23 of
24
this financial review provides an analysis of net interest income for the years ended December 31, 2007, 2006 and
2005. The rate-volume analysis in Table 3 above details the components of the change in net interest income on a
FTE basis for 2007 compared to 2006 and 2006 compared to 2005.
Net interest income (FTE) was $2.0 billion in 2007, an increase of $20 million, or one percent, from 2006.
The net interest margin (FTE), which is net interest income (FTE) expressed as a percentage of average earning
assets, decreased to 3.66 percent in 2007, from 3.79 percent in 2006. The increase in net interest income in 2007
was due to loan growth, which was partially offset by a decline in noninterest-bearing deposits (primarily in the
Financial Services Division) and competitive environments for both loan and deposit pricing. The decrease in net
interest margin (FTE) was due to loan growth, a competitive loan and deposit pricing environment and changes in
the funding mix, including a continued shift in funding sources toward higher-cost funds. Partially offsetting these
decreases were maturities of interest rate swaps that carried negative spreads, which provided a 10 basis point
improvement to the net interest margin in 2007, compared to 2006. Average earning assets increased $2.4 billion,
or five percent, to $54.7 billion in 2007, compared to 2006, primarily as a result of a $2.1 billion increase in
average loans and a $455 million increase in average investment securities available-for-sale. Average Financial
Services Division loans (primarily low-rate) decreased $1.0 billion, and average Financial Services Division
noninterest-bearing deposits decreased $1.5 billion in 2007, compared to 2006.
The Corporation expects, on average, net interest margin in 2008 to be between 3.10 and 3.15 percent for the
full year, based on the federal funds rate declining to 2.00 percent by mid-year 2008 and including the effects of
higher levels of securities, lower value of noninterest-bearing deposits, average loan growth exceeding average
deposit growth and the 2008 FAS 91 impact discussed in the 2008 guidance provided on page 22 of this financial
review.
Net interest income and net interest margin are impacted by the operations of the Corporation’s Financial
Services Division. Financial Services Division customers deposit large balances (primarily noninterest-bearing) and
the Corporation pays certain customer services expenses (included in “noninterest expenses” on the consolidated
statements of income) and/or makes low-rate loans (included in “net interest income” on the consolidated
statements of income) to such customers. Footnote (1) to Table 2 on page 23 of this financial review displays average
Financial Services Division loans and deposits, with related interest income/expense and average rates. As shown in
Footnote (2) to Table 2 on page 23 of this financial review, the impact of Financial Services Division loans (primarily
low-rate) on net interest margin (assuming the loans were funded by Financial Services Division noninterest-bearing
deposits) was a decrease of 8 basis points in 2007, compared to a decrease of 16 basis points in 2006.
The Corporation implements various asset and liability management tactics to manage net interest income
exposure to interest rate risk. Refer to the “Interest Rate Risk” section on page 54 of this financial review for
additional information regarding the Corporation’s asset and liability management policies.
In 2006, net interest income (FTE) was $2.0 billion, an increase of $26 million, or one percent, from 2005.
The net interest margin (FTE) decreased to 3.79 percent in 2006, from 4.06 percent in 2005. The increase in net
interest income in 2006 was due to strong loan growth, which was nearly offset by a decline in noninterest-bearing
deposits (primarily in the Financial Services Division), competitive environments for both loan and deposit
pricing and the impact of warrant accounting change discussed in Note 1 to the consolidated financial statements
on page 72, which resulted in a $20 million increase in net interest income in 2005. A greater contribution from
noninterest-bearing deposits in a higher rate environment also benefited net interest income in 2006. The
decrease in net interest margin (FTE) was due to the 2005 warrant accounting change, which increased the
2005 net interest margin by four basis points, the changes in average Financial Services Division loans and
noninterest-bearing deposits discussed below, competitive loan and deposit pricing, a change in the interest-
bearing deposit mix toward higher-cost deposits and the margin impact of loan growth funded with non-core
deposits and purchased funds. Average earning assets increased $4.1 billion, or eight percent, to $52.3 billion in
2006, compared to 2005, primarily as a result of a $3.9 billion increase in average loans and a $131 million
increase in average investment securities available-for-sale. Average Financial Services Division loans (primarily
low-rate) increased $470 million, and average Financial Services Division noninterest-bearing deposits decreased
$1.5 billion in 2006, compared to 2005.
25
Provision for Credit Losses
The provision for credit losses includes both the provision for loan losses and the provision for credit losses
on lending-related commitments. The provision for loan losses reflects management’s evaluation of the adequacy
of the allowance for loan losses. The allowance for loan losses represents management’s assessment of probable
losses inherent in the Corporation’s loan portfolio. The provision for credit losses on lending-related commit-
ments, a component of “noninterest expenses” on the consolidated statements of income, reflects management’s
assessment of the adequacy of the allowance for credit losses on lending-related commitments. The allowance for
credit losses on lending-related commitments, which is included in “accrued expenses and other liabilities” on the
consolidated balance sheets, covers probable credit-related losses inherent in credit-related commitments,
including letters of credit and financial guarantees. The Corporation performs an in-depth quarterly credit
quality review to determine the adequacy of both allowances. For a further discussion of both the allowance for
loan losses and the allowance for credit losses on lending-related commitments, refer to the “Credit Risk” section
of this financial review on page 44, and the “Critical Accounting Policies” section on page 62 of this financial
review.
The provision for loan losses was $212 million in 2007, compared to $37 million in 2006 and a negative
provision of $47 million in 2005. The $175 million increase in the provision for loan losses in 2007, compared to
2006, resulted primarily from challenges in the residential real estate development industry in Michigan and
California and a leveling off of overall credit quality improvement trends in the Texas market and the remaining
businesses of the Western market. These credit trends reflect economic conditions in the Corporation’s three
largest geographic markets. While the economic conditions in Michigan deteriorated over the last year, the
economic conditions in Texas continued to experience growth at a rate somewhat faster than the national
economy, while those in California, other than real estate, grew at a rate equal to the nation as a whole. The average
2007 Michigan Business Activity index compiled by the Corporation was slightly lower than the average for 2006.
However, intense restructuring efforts in the Michigan-based automotive sector created a significant drag on the
state economy that spilled over to other sectors, with the residential real estate development industry one of the
most affected. Forward-looking indicators suggest that current economic conditions in Michigan will deteriorate
at about the same pace as in 2007 and that growth in California and Texas will be slower than it was last year. The
increase in the provision for loan losses in 2006, when compared to 2005, was primarily the result of loan growth,
challenges in the automotive industry and the Michigan residential real estate development industry, and a
leveling off of credit quality improvement trends.
The provision for credit losses on lending-related commitments was a negative provision of $1 million in
2007, compared to charges of $5 million and $18 million in 2006 and 2005, respectively. The $6 million decrease
in the provision for credit losses on lending-related commitments in 2007 was primarily the result of a decrease in
specific reserves related to unused commitments extended to two large customers in the automotive industry.
These reserves declined due to sales of commitments and improved market values for the remaining commit-
ments. The decrease in 2006 was primarily due to reduced reserve needs resulting from improved market values
for unfunded commitments to certain customers in the automotive industry. An analysis of the changes in the
allowance for credit losses on lending-related commitments is presented on page 45 of this financial review.
Net loan charge-offs in 2007 were $149 million, or 0.30 percent of average total loans, compared to
$60 million, or 0.13 percent, in 2006 and $110 million, or 0.25 percent, in 2005. The $89 million increase from
2006 resulted primarily from increases in Midwest residential real estate development ($43 million), Midwest
middle market lending ($34 million) and Western residential real estate development ($16 million). Total net
credit-related charge-offs, which includes net charge-offs on both loans and lending-related commitments, were
$153 million, or 0.31 percent of average total loans, in 2007, compared to $72 million, or 0.15 percent, in 2006
and $116 million, or 0.26 percent, in 2005. Of the $81 million increase in net credit-related charge-offs in 2007,
compared to 2006, net credit-related charge-offs in the Business Bank business segment increased $80 million. By
geographic market, net credit-related charge-offs in the Midwest and Western markets increased $62 million and
$27 million in 2007 compared to 2006. Net credit-related charge-offs in 2006 were impacted by a decision to sell a
$74 million portfolio of loans related to manufactured housing. These loans were transferred to held-for-sale in
the fourth quarter 2006, which required a charge-off of $9 million to adjust the loans to estimated fair value. An
analysis of the changes in the allowance for loan losses, including charge-offs and recoveries by loan category, is
presented in Table 8 on page 45 of this financial review. An analysis of the changes in the allowance for credit
losses on lending-related commitments is presented on page 45 of this financial review.
26
Management expects full-year 2008 average net credit-related charge-offs between 45 and 50 basis points of
average loans, with charge-offs in the first half higher than in the second half of 2008. The provision for credit
losses is expected to exceed net charge-offs.
Noninterest Income
Service charges on deposit accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $221
199
Fiduciary income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75
Commercial lending fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63
Letter of credit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40
Foreign exchange income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43
Brokerage fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
54
Card fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36
Bank-owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
Net income from principal investing and warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Net securities gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Net gain (loss) on sales of businesses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from lawsuit settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
128
Other noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years Ended December 31
2006
2007
2005
(in millions)
$218
180
65
64
38
40
46
40
10
—
(12)
47
119
$218
174
63
70
37
36
39
38
17
—
1
—
126
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $888
$855
$819
Noninterest income increased $33 million, or four percent, to $888 million in 2007, compared to
$855 million in 2006, and increased $36 million, or five percent, in 2006, compared to $819 million in
2005. Excluding net securities gains, net gain (loss) on sales of businesses and income from lawsuit settlement,
noninterest income increased seven percent in 2007 and less than one percent in 2006. An analysis of increases
and decreases by individual line item is presented below.
Service charges on deposit accounts increased $3 million, or one percent, to $221 million in 2007, compared
to $218 million in both 2006 and 2005.
Fiduciary income increased $19 million, or 11 percent, in 2007 and increased $6 million, or four percent, in
2006. Personal and institutional trust fees are the two major components of fiduciary income. These fees are based
on services provided and assets managed. Fluctuations in the market values of the underlying assets managed,
which include both equity and fixed income securities, impact fiduciary income. The increase in 2007 and 2006
was due to net new business and market appreciation.
Commercial lending fees increased $10 million, or 16 percent, in 2007, compared to an increase of
$2 million, or two percent, in 2006. The increases in 2007 and 2006 were primarily due to higher commercial
loan commitment and participation fees.
Letter of credit fees decreased $1 million, or two percent, in 2007, compared to a decrease of $6 million, or
eight percent, in 2006. The 2007 decrease in letter of credit fees was principally due to competitive pricing
pressures and lower demand resulting from the recent challenges in the residential real estate market. Of the 2006
decline, $3 million reflected the impact, in 2005, of an adjustment of deferred fee amortization to more closely
align the amortization periods with actual terms of the letters of credit.
Foreign exchange income increased $2 million, or five percent, to $40 million in 2007, compared to
$38 million and $37 million in 2006 and 2005, respectively. The increase in 2007 was primarily due to the impact
of exchange rate changes on the Canadian dollar denominated net assets held at the Corporation’s Canadian
branch.
Brokerage fees of $43 million increased $3 million, or nine percent, in 2007, compared to $40 million and
$36 million in 2006 and 2005, respectively. Brokerage fees include commissions from retail broker transactions
27
and mutual fund sales and are subject to changes in the level of market activity. The increase in 2007 was primarily
due to increased customer investments in money market mutual funds. The increase in 2006 was primarily due to
increased transaction volumes as a result of improved market conditions.
Card fees, which consist primarily of interchange fees earned on debit and commercial cards, increased
$8 million, or 16 percent, to $54 million, compared to $46 million in 2006, and increased $7 million, or
17 percent, compared to $39 million in 2005. Growth in both 2007 and 2006 resulted primarily from an increase
in transaction volume caused by the continued shift to electronic banking, new customer accounts and new
products.
Bank-owned life insurance income decreased $4 million, to $36 million in 2007, compared to an increase of
$2 million, to $40 million in 2006. The decrease in 2007 resulted primarily from a decrease in death benefits
received and decreased earnings, as a result of interest rate changes.
Net income from principal investing and warrants increased $9 million to $19 million in 2007, compared to
$10 million in 2006 and $17 million in 2005. The $9 million increase in 2007 included a $5 million increase in
warrant income and $4 million of additional income generated from the Corporation’s indirect private equity
investments.
Net securities gains were $7 million in 2007, none of which were individually significant, and were minimal
in both 2006 and 2005.
The net gain (loss) on sales of businesses in 2007 included a net gain of $1 million on the sale of an insurance
subsidiary and a $2 million adjustment to reduce the loss on the 2006 sale of the Corporation’s Mexican bank
charter, while 2006 included a net loss of $12 million on the sale of the Mexican bank charter.
The income from lawsuit settlement of $47 million in 2006 resulted from a payment received to settle a
Financial Services Division-related lawsuit in the fourth quarter 2006.
Other noninterest income increased $9 million, or eight percent, in 2007, compared to a decrease of
$7 million, or five percent, in 2006. The following table illustrates fluctuations in certain categories included in
“other noninterest income” on the consolidated statements of income.
Years Ended December 31
2006
2007
2005
(in millions)
Other noninterest income
Risk management hedge gains (losses) from interest rate and foreign exchange
contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3
(33)
14
7
Amortization of low income housing investments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of SBA loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation asset returns* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (1) $ 3
(25)
16
—
(29)
12
3
* Compensation deferred by the Corporation’s officers is invested in stocks and bonds to reflect the investment
selections of the officers. Income earned on these assets is reported in noninterest income and the offsetting
increase in the liability is reported in salaries expense.
Management expects low single-digit growth in noninterest income in 2008 from 2007 levels.
28
Noninterest Expenses
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 844
193
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007
2005
Years Ended December 31
2006
(in millions)
$ 823
184
$ 786
178
Total salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net occupancy expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside processing fee expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Litigation and operational losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses on lending-related commitments . . . . . . . . . . . . . . . .
Other noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,037
138
60
91
63
43
18
(1)
242
1,007
125
55
85
56
47
11
5
283
964
118
53
77
49
69
14
18
251
Total noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,691
$1,674
$1,613
Noninterest expenses increased $17 million, or one percent, to $1,691 million in 2007, compared to
$1,674 million in 2006, and increased $61 million, or four percent, in 2006, from $1,613 million in 2005.
Increases in regular salaries ($16 million), net occupancy and equipment expenses ($18 million), employee
benefits ($9 million), and a $13 million charge in 2007 related to the Corporation’s membership in Visa, were
substantially offset by a decrease due to the prospective change in classification of interest on tax liabilities to
“provision for income taxes” in 2007 ($38 million). For further discussion of interest on tax liabilities, refer to
Note 1 to the consolidated financial statements on page 72 and to the section in this financial review entitled
“Income Taxes and Tax-Related Items.” In addition, noninterest expenses included approximately $6 million of
costs related to the 2007 relocation of the Corporation’s headquarters to Dallas, Texas, reflected in salaries and
other noninterest expenses. An analysis of increases and decreases by individual line item is presented below.
The following table summarizes the various components of salaries and employee benefits expense.
Years Ended December 31
2007
2006
2005
(in millions)
Salaries
Regular salaries (including contract labor) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 635
4
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138
Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
Deferred compensation plan costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 619
8
134
5
57
$582
6
155
—
43
Total salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
844
823
786
Employee benefits
Pension expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36
157
193
39
145
184
31
147
178
Total salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,037
$1,007
$964
Salaries expense increased $21 million, or three percent, in 2007, compared to an increase of $37 million, or
five percent, in 2006. The increase in 2007 was primarily due to increases in regular salaries of $16 million and
incentive compensation of $4 million. The increase in regular salaries in 2007 was primarily the result of annual
merit increases of approximately $18 million, partially offset by a decline in contract labor costs associated with
technology-related projects. In addition, staff size increased approximately 80 full-time equivalent employees
29
from year-end 2006 to year-end 2007, including approximately 140 full-time equivalent employees added in new
banking centers. The increase in incentive compensation was primarily due to increased incentives tied to peer-
based comparisons of corporate results. Severance included $2 million in 2007 related to the relocation of the
Corporation’s headquarters to Dallas, Texas. The increase in 2006 was primarily due to increases in regular salaries
of $37 million and shared-based compensation of $14 million. The increase in regular salaries in 2006 was
primarily the result of annual merit increases of approximately $17 million and increased contract labor costs
associated with technology-related projects. In addition, staff size from continuing operations increased approx-
imately 65 full-time equivalent employees from year-end 2005 to year-end 2006. Shared-based compensation
expense increased in 2006 primarily as a result of adopting the requisite service period provisions of SFAS 123
(revised 2004) (SFAS 123(R)), “Shared-Based Payment,” effective January 1, 2006, as discussed in Notes 1 and 15
to the consolidated financial statements on pages 72 and 95, respectively. These increases were partially offset by a
$16 million decline in incentives.
Employee benefits expense increased $9 million, or five percent, in 2007, compared to an increase of
$6 million, or three percent, in 2006. The increase in 2007 resulted primarily from an increase in defined
contribution plan expense, mostly from a change in the Corporation’s core matching contribution rate effective
January 1, 2007. The increase in 2006 resulted primarily from an increase in pension expense. For a further
discussion of pension and defined contribution plan expense, refer to the “Critical Accounting Policies” on
page 62 of this financial review and Note 16 to the consolidated financial statements on page 97.
Net occupancy and equipment expense increased $18 million, or ten percent, to $198 million in 2007,
compared to an increase of $9 million, or six percent, in 2006. Net occupancy and equipment expense increased
$9 million and $7 million in 2007 and 2006, respectively, due to the addition of 30 new banking centers in 2007,
25 in 2006 and 18 in 2005.
Outside processing fee expense increased $6 million, or seven percent, to $91 million in 2007, from
$85 million in 2006, compared to an increase of $8 million, or 10 percent, in 2006. The 2007 increase is from
higher volume in activity-based processing charges, in part related to outsourcing. The 2006 increase in outside
processing fees resulted primarily from the outsourcing of certain trust and retirement services processing and a
new electronic bill payment service marketed to corporate customers in 2006.
Software expense increased $7 million, or 12 percent, in 2007, compared to an increase of $7 million, or
15 percent in 2006. The increases in both 2007 and 2006 were primarily due to increased investments in
technology and the implementation of several systems, including tools for a sales tracking system in the banking
centers, anti-money laundering initiatives and a corporate banking portal, increasing both amortization and
maintenance costs.
Customer services expense decreased $4 million, or seven percent, to $43 million in 2007, from $47 million
in 2006, and decreased $22 million, or 33 percent, in 2006, from $69 million in 2005. Customer services expense
represents compensation provided to customers, and is one method to attract and retain title and escrow deposits
in the Financial Services Division. The amount of customer services expense varies from period to period as a
result of changes in the level of noninterest-bearing deposits and low-rate loans in the Financial Services Division
and the earnings credit allowances provided on these deposits, as well as a competitive environment.
Litigation and operational losses increased $7 million, or 55 percent, to $18 million in 2007, from
$11 million in 2006, and decreased $3 million, or 17 percent, in 2006, compared to $14 million in 2005.
Litigation and operational losses include traditionally defined operating losses, such as fraud or processing
problems, as well as uninsured losses and litigation losses. These expenses are subject to fluctuation due to timing
of authorized and actual litigation settlements as well as insurance settlements. The increase in 2007 reflected
$13 million to record an estimated liability related to membership in Visa, partially offset by a litigation-related
insurance settlement of $8 million received in the second quarter 2007. Members of the Visa card association
participate in a loss sharing arrangement to allocate financial responsibilities arising from any potential adverse
resolution of certain antitrust lawsuits challenging the practices of the association. The Corporation believes that
its share of the proceeds from an expected initial public offering of Visa, anticipated in early 2008, will exceed its
share of recorded losses.
The provision for credit losses on lending-related commitments was a negative provision of $1 million in
2007, compared to provisions of $5 million and $18 million in 2006 and 2005, respectively. For additional
30
information on the provision for credit losses on lending-related commitments, refer to Notes 1 and 20 to the
consolidated financial statements on pages 72 and 107, respectively, and the “Provision for Credit Losses” section
on page 26 of this financial review.
Other noninterest expenses decreased $41 million, or 14 percent, in 2007, compared to an increase of
$32 million, or 13 percent, in 2006. The decrease in 2007 was primarily the result of the prospective change in
classification of interest on tax liabilities to “provision for income taxes” in 2007. The following table illustrates
the fluctuations in certain categories included in “other noninterest expenses” on the consolidated statements of
income. For a further discussion of interest on tax liabilities, refer to “Income Taxes and Tax-Related Items” below.
Years Ended December 31
2007
2005
2006
(in millions)
Other noninterest expenses
Interest on tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $N/A
2
Charitable Foundation Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Other real estate expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$38
10
4
$11
10
12
N/A- Not Applicable
Management expects a low single-digit decline in noninterest expenses in 2008 compared to 2007 levels,
excluding the provision for credit losses on lending-related commitments and including the impact of a 2008
change in the application of FAS 91 discussed in the 2008 guidance provided on page 22 of this financial review.
The Corporation’s efficiency ratio (total noninterest expenses as a percentage of total revenue (FTE) excluding
net securities gains) decreased to 58.58 percent in 2007, compared to 58.92 percent in 2006 and 58.01 percent in
2005. The efficiency ratio declined in 2007 primarily due to increased income levels and increased in 2006
primarily due to higher expense levels.
Income Taxes And Tax-Related Items
The provision for income taxes was $306 million in 2007, compared to $345 million in 2006 and
$393 million in 2005. The provision for income tax in 2007 included a $9 million reduction ($6 million
after-tax) of interest resulting from a settlement with the Internal Revenue Service (IRS) on a refund claim. The
provision for income taxes in 2006 was impacted by the completion of an IRS audit of federal tax returns for years
1996 through 2000, the settlement of various refund claims and an adjustment to tax reserves. In the first quarter
2006, tax reserves, which include the provision for income taxes and interest expense on tax liabilities (included in
“other noninterest expenses” in 2006 and 2005) were adjusted to reflect the resolution of those tax years and to
reflect an updated assessment of reserves on certain types of structured lease transactions and a series of loans to
foreign borrowers. Interest on tax liabilities was also reduced by $6 million in the second quarter 2006, upon
settlement of various refund claims with the IRS. As previously disclosed in quarterly and annual SEC filings under
the heading “Tax Contingency,” the IRS disallowed the benefits related to a series of loans to foreign borrowers.
The Corporation has had ongoing discussions with the IRS related to the disallowance. In the fourth quarter 2006,
based on settlements discussed, the Corporation recorded a charge to its tax reserves for the disallowed loan
benefits. The following table summarizes the impact of the items described above on the Corporation’s con-
solidated statement of income for the year ended December 31, 2006.
Completion of IRS audit of the Corporation’s federal income tax returns for
1996-2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement of various refund claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment to tax reserves on a series of loans to foreign borrowers . . . . . . .
Pre-tax
$24
(6)
14
Total tax-related items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$32
31
Year Ended December 31, 2006
Interest on Tax
Liabilities
Provision for
Income Taxes
After-tax
(in millions)
$15
(4)
9
$20
$(16)
(2)
22
$ 4
The effective tax rate, computed by dividing the provision for income taxes by income from continuing
operations before income taxes, was 31.0 percent in 2007, 30.6 percent in 2006 and 32.5 percent in 2005. Changes
in the effective tax rate in 2007 from 2006, and 2006 from 2005, are disclosed in Note 17 to the consolidated
financial statements on page 103. The Corporation had a net deferred tax liability of $146 million at December 31,
2007. Included in net deferred taxes at December 31, 2007 were deferred tax assets of $514 million, net of a
$2 million valuation allowance established for certain state deferred tax assets. A valuation allowance is provided
when it is “more-likely-than-not” that some portion of the deferred tax asset will not be realized. Deferred tax
assets are evaluated for realization based on available evidence and assumptions made regarding future events. In
the event that the future taxable income does not occur in the manner anticipated, other initiatives could be
undertaken to preclude the need to recognize a valuation allowance against the deferred tax asset.
On January 1, 2007, the Corporation adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109,” (FIN 48). As a result, the
Corporation recognized an increase in the liability for unrecognized tax benefits of approximately $18 million
at January 1, 2007, accounted for as a change in accounting principle via a decrease to the opening balance of
retained earnings ($13 million net of tax). Prior disclosures on the change in unrecognized tax benefits resulting
from the adoption of FIN 48 were adjusted to address an uncertain tax position that was incorrectly assessed at the
time of adoption. The facts and circumstances surrounding this uncertain tax position were unchanged since
January 1, 2007. For further discussion of FIN 48 refer to Note 17 to the consolidated financial statements on
page 103.
In July, 2007, the State of Michigan replaced its current Single Business Tax (SBT) with a new Michigan
Business Tax (MBT). Financial institutions are subject to an industry-specific tax which is based on net capital,
effective January 1, 2008. Management believes the MBT will have an immaterial effect on the Corporation’s
financial condition and results of operations when compared to the SBT. Both the SBT and MBT, when effective,
are recorded in “Other noninterest expenses” on the consolidated statements of income.
Management expects an effective tax rate for the full-year 2008 of about 32 percent.
Income From Discontinued Operations, Net Of Tax
Income from discontinued operations, net of tax, was $4 million in 2007, compared to $111 million in 2006
and $45 million in 2005. Income from discontinued operations in 2007 reflected an adjustment to the initial gain
recorded on the sale of the Corporation’s Munder subsidiary in 2006. Included in 2006 was a $108 million after-
tax gain on the sale of Munder in the fourth quarter 2006. The Munder sale agreement included an interest-
bearing contingent note with an initial principal amount of $70 million, which will be realized if the
Corporation’s client-related revenues earned by Munder remain consistent with 2006 levels of approximately
$17 million per year for the five years following the closing of the transaction (2007-2011). Future gains related to
the contingent note are expected to be recognized periodically as targets for the Corporation’s client-related
revenues earned by Munder are achieved. The potential future gains are expected to be recorded between 2008 and
the fourth quarter of 2011, unless fully earned prior to that time. Included in 2005 was a $32 million after-tax gain
in the fourth quarter 2005 that resulted from Munder’s sale of its minority interest in Framlington Group Limited
(Framlington) (a London, England based investment manager). For further information on discontinued
operations, refer to Note 26 to the consolidated financial statements on page 127.
32
STRATEGIC LINES OF BUSINESS
Business Segments
The Corporation’s operations are strategically aligned into three major business segments: the Business Bank, the
Retail Bank and Wealth & Institutional Management. These business segments are differentiated based upon the
products and services provided. In addition to the three major business segments, the Finance Division is also reported
as a segment. The Other category includes discontinued operations and items not directly associated with these
business segments or the Finance Division. Note 24 to the consolidated financial statements on page 119 describes the
business activities of each business segment and the methodologies which form the basis for these results, and presents
financial results of these business segments for the years ended December 31, 2007, 2006 and 2005.
The following table presents net income (loss) by business segment.
Business Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $503
99
Retail Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70
Wealth & Institutional Management . . . . . . . . . . . . . . . . . . . . . .
2007
2005
Years Ended December 31
2006
(dollar amounts in millions)
75% $589
144
15
61
10
74% $658
174
18
63
8
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
672
4
10
100% 794
(18)
117
100% 895
(71)
37
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $686
$893
$861
74%
19
7
100%
* Includes discontinued operations and items not directly associated with the three major business segments or
the Finance Division.
The Business Bank’s net income decreased $86 million, or 15 percent, to $503 million in 2007, compared to a
decrease of $69 million, or 11 percent, to $589 million in 2006. Net interest income (FTE) was $1.3 billion in
2007, an increase of $11 million, or one percent, compared to 2006. The increase in net interest income (FTE) was
primarily due to a $2.7 billion increase in average loan balances (excluding Financial Services Division) and a
$524 million increase in average deposit balances (excluding Financial Services Division), partially offset by a
decline in loan and deposit spreads. The provision for loan losses increased $164 million in 2007, from
$14 million in 2006, primarily due to an increase in reserves in 2007 for the residential real estate development
business, a reserve related to a single customer in the Technology and Life Sciences business line and credit
improvements recognized in 2006, partially offset by a decrease in reserves related to the automotive industry in
2007. Excluding a $47 million Financial Services Division-related lawsuit settlement recorded in 2006 and a
$12 million loss on the sale of the Mexican bank charter in 2006, noninterest income increased $21 million from
2006. The increase was primarily due to net securities gains of $7 million in 2007 and increases in commercial
lending fees ($7 million) and card fees ($4 million) in 2007, when compared to 2006. Noninterest expenses of
$708 million for 2007 decreased $33 million from 2006, primarily due to a $16 million decrease in allocated net
corporate overhead expense, an $8 million decrease in provision for credit losses on lending-related commit-
ments, and $8 million in legal fees recorded in 2006 related to the Financial Services Division-related lawsuit
settlement noted previously. The corporate overhead allocation rates used were six percent and seven percent in
2007 and 2006, respectively. The one percentage point decrease in rate in 2007, when compared to 2006, resulted
mostly from income tax related items.
The Retail Bank’s net income decreased $45 million, or 31 percent, to $99 million in 2007, compared to a decrease
of $30 million, or 18 percent, to $144 million in 2006. Net interest income (FTE) of $627 million decreased
$10 million, or two percent, in 2007, primarily due to decreases in loan and deposit spreads, partially offset by the
benefit of a $349 million increase in average deposit balances. The provision for loan losses increased $18 million in
2007 primarily due to increases in credit-related reserves for Small Business Administration (SBA) loans and Small
Business lending. Noninterest income of $220 million increased $10 million from 2006, primarily due to a $3 million
increase in card fees and a $2 million increase in income from the sale of SBA loans. Noninterest expenses of
33
$655 million for 2007 increased $47 million from 2006, partially due to increases in salaries and employee benefits
expense ($17 million), net occupancy expenses ($9 million) primarily related to the addition of new banking centers,
outside processing fees ($5 million) and a charge related to the Corporation’s membership in Visa ($13 million).
Partially offsetting these increases was an $8 million decrease in allocated net corporate overhead expenses. Refer to the
Business Bank discussion above for an explanation of the decrease in allocated net corporate overhead expenses. The
Corporation opened 30 new banking centers in 2007 and 25 new banking centers in 2006, contributing $56 million to
noninterest expenses in 2007, an increase of $23 million compared to 2006.
Wealth & Institutional Management’s net income increased $9 million, or 14 percent, to $70 million in 2007,
compared to a decrease of $2 million, or three percent, to $61 million in 2006. Net interest income (FTE) of
$145 million decreased $2 million, or two percent, in 2007, compared to 2006, as decreases in loan spreads and
average deposit balances were partially offset by an increase in average loan balances of $403 million from 2006.
The provision for loan losses decreased $4 million, primarily due to an improvement from one large customer in
the Midwest market. Noninterest income of $283 million increased $24 million, or 10 percent, in 2007, primarily
due to a $19 million increase in fiduciary income and a $3 million increase in brokerage fees. Noninterest
expenses of $322 million increased $9 million from 2006, primarily due to a $7 million increase in salaries and
employee benefits expense and a $3 million increase in outside processing fee expense, partially offset by a
$4 million decrease in allocated net corporate overhead expenses. Refer to the Business Bank discussion above for
an explanation of the decrease in allocated net corporate overhead expenses.
Net income in the Finance Division was $4 million in 2007, compared to a net loss of $18 million in 2006.
Contributing to the increase in net income was a $31 million increase in net interest income (FTE), primarily due
to the rising rate environment in the first three quarters of the year, during which time interest income received
from the lending-related business units increased faster than the longer-term value attributed to deposits
generated by the business units, and the maturity of swaps with negative spreads, partially offset by an increase
in wholesale funding.
Net income in the Other category was $10 million for 2007, compared to $117 million for 2006. Income from
discontinued operations, net of tax, was $4 million in 2007, compared to $111 million for 2006. Discontinued
operations in 2006 included a $108 million after-tax gain on the sale of the Corporation’s Munder subsidiary.
Noninterest income increased $12 million from 2006, primarily due to a $4 million increase in net income from
principal investing and warrants and a $4 million increase in deferred compensation asset returns. The remaining
difference is due to timing differences between when corporate overhead expenses are reflected as a consolidated
expense and when the expenses are allocated to the business segments.
Geographic Market Segments
The Corporation’s management accounting system also produces market segment results for the Corpo-
ration’s four primary geographic markets: Midwest, Western, Texas and Florida. In addition to the four primary
geographic markets, Other Markets and International are also reported as market segments. The Finance & Other
Businesses category includes discontinued operations. Note 24 to the consolidated financial statements on
page 119 presents a description of each of these market segments as well as the financial results for the years ended
December 31, 2007, 2006 and 2005.
34
The following table presents net income (loss) by market segment.
2007
Midwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $277
170
Western . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89
Other Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
672
14
Finance & Other Businesses* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005
Years Ended December 31
2006
(dollar amounts in millions)
42% $319
273
25
82
12
14
1
72
13
34
7
100% 794
99
41% $351
338
34
89
10
15
2
62
9
40
4
100% 895
(34)
39%
38
10
2
7
4
100%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $686
$893
$861
* Includes discontinued operations and items not directly associated with the market segments.
The Midwest market’s net income decreased $42 million, or 14 percent, to $277 million in 2007, compared
to a decrease of $32 million, or nine percent, to $319 million in 2006. Net interest income (FTE) of $863 million
decreased $45 million from 2006, primarily due to a decrease in loan spreads. The provision for loan losses
increased $11 million, primarily due to an increase in residential real estate development reserves in 2007,
compared to 2006, partially offset by a decrease in reserves related to the automotive industry in 2007.
Noninterest income of $471 million increased $19 million from 2006 due to a $10 million increase in fiduciary
income, a $6 million increase in card fees and a $3 million increase in brokerage fees. Noninterest expenses of
$821 million increased $10 million from 2006, primarily due to a $10 million charge related to the Corporation’s
membership in Visa allocated to the Midwest market in 2007, a $5 million increase in salaries and employee
benefits expense and a $4 million increase in litigation and operational losses, partially offset by a $5 million
decrease in allocated net corporate overhead expenses. Refer to the Business Bank discussion above for an
explanation of the decrease in allocated net corporate overhead expenses. The Corporation opened two new
banking centers and consolidated five banking centers in Michigan in 2007. In addition, 22 banking centers in
Michigan were refurbished in 2007.
The Western market’s net income decreased $103 million, or 38 percent, to $170 million in 2007, compared
to a decrease of $65 million, or 19 percent, to $273 million in 2006. Net interest income (FTE) of $706 million
increased $5 million, or one percent, in 2007. The increase in net interest income (FTE) was primarily due to a
$1.7 billion increase in average loan balances (excluding Financial Services Division) and an $823 million
increase in average deposit balances (excluding Financial Services Division), partially offset by a decrease in net
interest income from the Financial Services Division and declining loan and deposit spreads. Average low-rate
Financial Services Division loan balances declined $1.0 billion in 2007 and average Financial Services Division
deposits declined $2.1 billion. The provision for loan losses increased $140 million, primarily due to an increase
in credit risk in the California residential real estate development industry in 2007, compared to overall credit
improvements in 2006. Noninterest income was $131 million in 2007, a decrease of $29 million from 2006,
primarily due to a $47 million Financial Services Division-related lawsuit settlement in 2006, partially offset by a
$5 million increase in customer derivative income and a $2 million increase in income from the sale of SBA loans.
Noninterest expenses of $455 million increased $5 million, primarily due to a $12 million increase in expenses
related to the addition of new banking centers, mostly salaries and employee benefits expense and net occupancy
expense. These increases were partially offset by an $8 million decrease in legal fees related to the Financial
Services Division-related lawsuit settlement and an $8 million decrease in allocated net corporate overhead
expenses. Refer to the Business Bank discussion above for an explanation of the decrease in allocated net corporate
overhead expenses. The Corporation opened 16 new banking centers in the Western market in 2007. In addition,
two banking centers in the Western market were relocated and two were refurbished in 2007.
The Texas market’s net income decreased $3 million, or three percent, to $79 million in 2007, compared to a
decrease of $7 million, to $82 million in 2006. Net interest income (FTE) of $279 million increased $18 million,
or seven percent, in 2007, compared to 2006. The increase in net interest income (FTE) was primarily due to an
increase in average loan and deposit balances, partially offset by a decrease in loan spreads. The provision for loan
losses increased $10 million, primarily due to credit improvements recognized in 2006. Noninterest income of
35
$86 million increased $10 million from 2006, primarily due to a $4 million increase in commercial lending fees
and increases in various other fee categories. Noninterest expenses of $235 million increased $19 million from
2006, partially due to a $9 million increase in salaries and employee benefits expense and a $2 million increase in
net occupancy expense, primarily related to the addition of new banking centers. These increases were partially
offset by a $3 million decrease in allocated net corporate overhead expenses. Refer to the Business Bank discussion
above for an explanation of the decrease in allocated net corporate overhead expenses. The Corporation opened
12 new banking centers in the Texas market in 2007, which resulted in a $7 million increase in noninterest
expenses. In addition, one banking center in the Texas market was relocated and three were refurbished in 2007.
The Florida market’s net income decreased $7 million, or 46 percent, to $7 million in 2007, compared to a
decrease of $1 million, to $14 million in 2006. Net interest income (FTE) of $47 million increased $4 million, or
nine percent, from 2006, primarily due to a $164 million increase in average loan balances. The provision for loan
losses increased $8 million, primarily due to an increase in residential real estate development industry reserves in
2007, compared to 2006. Noninterest income of $14 million was unchanged from 2006. Noninterest expenses of
$39 million increased $5 million from the comparable period in the prior year, partially due to a $2 million
increase in salaries and employee benefit expenses.
The Other Markets’ net income increased $17 million to $89 million in 2007, compared to 2006. Net interest
income (FTE) of $136 million increased $18 million from 2006, primarily due to a $443 million increase in
average loan balances and a $133 million increase in average deposit balances. The provision for loan losses
increased $10 million, primarily due to an increase in residential real estate development industry reserves in
2007. Noninterest income of $54 million increased $2 million in 2007 compared to 2006. Noninterest expenses
of $92 million decreased $9 million from the comparable period in the prior year, primarily due to an $8 million
decrease in the provision for credit losses on lending-related commitments.
The International market’s net income increased $16 million, to $50 million in 2007, compared to 2006. Net
interest income (FTE) of $67 million decreased $1 million from the comparable period in the prior year. The
provision for loan losses was negative in both 2007 and 2006, due to credit improvements. Noninterest income of
$38 million increased $18 million from 2006, primarily due to a $12 million loss on the sale of the Mexican bank
charter in the third quarter 2006 and a $4 million increase in net securities gains in 2007. Noninterest expenses of
$43 million decreased $7 million in 2007 compared to 2006, reflecting a decrease in salaries and employee benefit
expenses and nominal decreases in other expense categories.
Net income for the Finance & Other Business segment was $14 million in 2007, compared to $99 million for
2006. Income from discontinued operations, net of tax, was $4 million in 2007, compared to $111 million for
2006. Discontinued operations in 2006 included a $108 million after-tax gain on the sale of the Corporation’s
Munder subsidiary. Net interest income (FTE) increased $21 million, primarily due to the rising rate environment
in the first three quarters of the year, during which time interest income received from the lending-related business
units increased faster than the longer-term value attributed to deposits generated by the business units, and the
maturity of swaps with negative spreads, partially offset by an increase in wholesale funding. Noninterest income
increased $13 million, primarily due to a $4 million increase in net income from principal investing and warrants
and a $4 million increase in deferred compensation asset returns. The remaining difference is due to timing
differences between when corporate overhead expenses are reflected as a consolidated expense and when the
expenses are allocated to the business segments.
The following table lists the Corporation’s banking centers by geographic market segments.
December 31
2006
2005
2007
Midwest (Michigan) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Western:
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Arizona . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
237
240
250
83
8
91
79
9
1
70
5
75
68
9
1
58
3
61
61
6
5
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
417
393
383
36
BALANCE SHEET AND CAPITAL FUNDS ANALYSIS
Total assets were $62.3 billion at December 31, 2007, an increase of $4.3 billion from $58.0 billion at
December 31, 2006. On an average basis, total assets increased to $58.6 billion in 2007, from $56.6 billion in
2006, an increase of $2.0 billion, resulting primarily from a $2.4 billion increase in earning assets. The
Corporation also recorded a $140 million decrease in average deposits, a $574 million decrease in average
short-term borrowings and a $2.8 billion increase in average medium- and long-term debt in 2007, compared to
2006.
TABLE 4: ANALYSIS OF INVESTMENT SECURITIES AND LOANS
2007
2006
December 31
2005
(in millions)
2004
2003
Investment securities available-for-sale:
U.S. Treasury and other Government agency
securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Government-sponsored enterprise securities . . . . .
State and municipal securities . . . . . . . . . . . . . . . .
Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
36
6,165
3
92
$
46
3,497
4
115
$
124
3,954
4
158
$
192
3,564
7
180
$
188
4,121
11
169
Total investment securities available-for-sale. . . . $ 6,296
$ 3,662
$ 4,240
$ 3,943
$ 4,489
Commercial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,223
Real estate construction loans:
$26,265
$23,545
$22,039
$21,579
Commercial Real Estate business line. . . . . . . . . . .
Other business lines . . . . . . . . . . . . . . . . . . . . . . . .
Total real estate construction loans. . . . . . . . . . .
Commercial mortgage loans:
Commercial Real Estate business line. . . . . . . . . . .
Other business lines . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial mortgage loans . . . . . . . . . . . .
Residential mortgage loans . . . . . . . . . . . . . . . . . . . .
Consumer loans:
Home equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other consumer . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total consumer loans . . . . . . . . . . . . . . . . . . . . .
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International loans:
Government and official institutions . . . . . . . . . . .
Banks and other financial institutions . . . . . . . . . .
Commercial and industrial . . . . . . . . . . . . . . . . . .
Total international loans . . . . . . . . . . . . . . . . . .
4,089
727
4,816
1,377
8,671
10,048
1,915
1,616
848
2,464
1,351
—
27
1,899
1,926
3,449
754
4,203
1,534
8,125
9,659
1,677
1,591
832
2,423
1,353
—
47
1,804
1,851
2,831
651
3,482
1,450
7,417
8,867
1,485
1,775
922
2,697
1,295
3
46
1,827
1,876
2,461
592
3,053
1,556
6,680
8,236
1,294
1,837
914
2,751
1,265
4
11
2,190
2,205
2,754
643
3,397
1,655
6,223
7,878
1,228
1,647
963
2,610
1,301
12
45
2,252
2,309
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50,743
$47,431
$43,247
$40,843
$40,302
37
TABLE 5: LOAN MATURITIES AND INTEREST RATE SENSITIVITY
December 31, 2007
Loans Maturing
Within
One Year*
After One
But Within
Five Years
After
Five Years
Total
(in millions)
Commercial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,608
3,813
Real estate construction loans . . . . . . . . . . . . . . . . . . . . . . . . . .
3,953
Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,777
International loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,561
792
4,482
115
$1,054
211
1,613
34
$28,223
4,816
10,048
1,926
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,151
$10,950
$2,912
$45,013
Sensitivity of Loans to Changes in Interest Rates:
Predetermined (fixed) interest rates . . . . . . . . . . . . . . . . . . . .
Floating interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,347
6,603
$2,330
582
$10,950
$2,912
* Includes demand loans, loans having no stated repayment schedule or maturity and overdrafts.
Earning Assets
Total earning assets increased to $57.4 billion at December 31, 2007, from $54.1 billion at December 31,
2006. The Corporation’s average earning assets balances are reflected in Table 2 on page 23.
The following table details the Corporation’s average loan portfolio by loan type, business line and
geographic market.
Years Ended December 31
2007
2006
Change
(dollar amounts in millions)
Percent
Change
Average Loans By Loan Type:
Commercial loans:
Excluding Financial Services Division . . . . . . . . . . . . . . . . . . . . . $26,814
1,318
Financial Services Division* . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$24,978
2,363
$ 1,836
(1,045)
7%
(44)
Total commercial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,132
27,341
Real estate construction loans:
Commercial real estate business line . . . . . . . . . . . . . . . . . . . . . .
Other business lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total real estate construction loans . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans:
Commercial real estate business line . . . . . . . . . . . . . . . . . . . . . .
Other business lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial mortgage loans. . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer loans:
3,799
753
4,552
1,390
8,381
9,771
1,814
3,184
721
3,905
1,504
7,774
9,278
1,570
791
615
32
647
(114)
607
493
244
Home equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,580
Other consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
787
Total consumer loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,367
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,302
1,883
International loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $49,821
1,705
828
2,533
1,314
1,809
$47,750
(125)
(41)
(166)
(12)
74
$ 2,071
3
19
4
17
(8)
8
5
16
(7)
(5)
(7)
(1)
4
4%
38
Years Ended December 31
2007
2006
Change
(dollar amounts in millions)
Percent
Change
Average Loans By Business Line:
Middle Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,185
6,717
Commercial Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,471
Global Corporate Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
National Dealer Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,187
Specialty Businesses:
Excluding Financial Services Division . . . . . . . . . . . . . . . . . . . . .
Financial Services Division* . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Specialty Businesses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Business Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Small Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Personal Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Retail Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,843
1,318
6,161
39,721
4,023
2,111
6,134
3,937
$15,386
6,397
4,871
4,937
$
799
320
600
250
4,127
2,363
6,490
38,081
3,828
2,256
6,084
3,534
716
(1,045)
(329)
1,640
195
(145)
50
403
3,937
Total Wealth & Institutional Management . . . . . . . . . . . . . .
Finance/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $49,821
3,534
51
$47,750
403
(22)
$ 2,071
5%
5
12
5
17
(44)
(5)
4
5
(6)
1
11
11
(44)
4%
Average Loans By Geographic Market:
Midwest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,598
Western:
Excluding Financial Services Division . . . . . . . . . . . . . . . . . . . . .
Financial Services Division* . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Western . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Florida. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance/Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,212
1,318
16,530
6,827
1,672
4,041
2,124
29
$18,737
$ (139)
(1)%
13,519
2,363
15,882
5,911
1,508
3,598
2,063
51
1,693
(1,045)
648
916
164
443
61
(22)
13
(44)
4
16
11
12
3
(44)
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $49,821
$47,750
$ 2,071
4%
* Financial Services Division includes primarily low-rate loans
Total loans were $50.7 billion at December 31, 2007, an increase of $3.3 billion from $47.4 billion at
December 31, 2006. Total loans, on an average basis, increased $2.0 billion, or four percent, ($3.1 billion, or seven
percent, excluding Financial Services Division loans), to $49.8 billion in 2007, from $47.8 billion in 2006. Within
average loans, most business lines and geographic markets showed growth. The Corporation continues to make
progress toward the goal of achieving more geographic balance, with markets outside of the Midwest comprising
62 percent of average total loans (excluding Financial Services Division loans and loans in the Finance & Other
Businesses category) in 2007, compared to 59 percent in 2006.
Average commercial real estate loans, consisting of real estate construction and commercial mortgage loans,
increased $1.1 billion, or nine percent, to $14.3 billion in 2007, from $13.2 billion in 2006. Commercial
mortgage loans are loans where the primary collateral is a lien on any real property. Real property is generally
considered primary collateral if the value of that collateral represents more than 50 percent of the commitment at
loan approval. Average loans to borrowers in the Commercial Real Estate business line, which include loans to
residential real estate developers, represented $5.2 billion, or 36 percent, of average total commercial real estate
loans in 2007, compared to $4.7 billion, or 36 percent, of average total commercial real estate loans in 2006. The
increase in average commercial real estate loans to borrowers in the Commercial Real Estate business line in 2007
largely included draws on previously approved lines of credit for residential real estate and commercial
39
development projects and new loans for commercial development projects. The remaining $9.1 billion and
$8.5 billion of commercial real estate loans in other business lines in 2007 and 2006, respectively, were primarily
owner-occupied commercial mortgages. In addition to the $14.3 billion of average 2007 commercial real estate
loans discussed above, the Commercial Real Estate business line also had $1.5 billion of average 2007 loans not
classified as commercial real estate on the consolidated balance sheet. Refer to page 52 under Commercial Real
Estate Lending in the Risk Management section for more information.
Average residential mortgage loans increased $244 million, or 16 percent, from 2006, and primarily include
mortgages originated and retained for certain relationship customers.
Average home equity loans decreased $125 million, or seven percent, from 2006, as a result of a decrease in
draws on commitments extended.
Loans classified as Shared National Credit (SNC) loans totaled $10.9 billion (approximately 1,090 bor-
rowers) at December 31, 2007, compared to $8.8 billion (approximately 1,000 borrowers) at December 31, 2006.
SNC loans are facilities greater than $20 million shared by three or more federally supervised financial institutions
which are reviewed by regulatory authorities at the agent bank level. The Corporation generally seeks to obtain
ancillary business at origination of the SNC relationship, or within two years thereafter. These loans, diversified by
both line of business and geography, comprised approximately 21 percent and 19 percent of total loans at
December 31, 2007 and 2006, respectively.
Management currently expects average loan growth for 2008 to be in the mid to high single-digit range,
excluding Financial Services Division loans, with flat growth in the Midwest market, high single-digit growth in
the Western market and low double-digit growth in the Texas market, compared to 2007.
TABLE 6: ANALYSIS OF INVESTMENT SECURITIES PORTFOLIO
(Fully Taxable Equivalent)
December 31, 2007
Maturity*
5 - 10 Years
Within 1 Year
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
After 10 Years
1 - 5 Years
Total
Weighted
Average
Maturity
Yrs./Mos.
Available-for-sale
U.S. Treasury and other
Government agency
securities . . . . . . . . . . .
Government-sponsored
(dollar amounts in millions)
$ 35
4.40% $ —
—% $ —
—% $
1
7.07% $
36
4.51% 0/10
enterprise securities . . .
21
4.08
262
3.73
1,478
4.03
4,404
5.27
6,165
4.90
12/0
State and municipal
securities . . . . . . . . . . .
—
—
2
9.52
1
9.85
—
—
3
9.51
2/9
Other securities
Other bonds, notes
and debentures . . . .
Other investments** . .
Total investment securities
45
—
4.67
—
1
—
6.73
—
—
—
—
—
—
46
—
—
46
46
4.70
—
0/2
—
available-for-sale . . . . . . .
$101
4.47% $265
3.77% $1,479
4.03% $4,451
5.27% $6,296
4.90% 11/10
* Based on final contractual maturity.
** Balances are excluded from the calculation of total yield.
Investment securities available-for-sale increased $2.6 billion to $6.3 billion at December 31, 2007, from
$3.7 billion at December 31, 2006. Average investment securities available-for-sale increased $455 million to
$4.4 billion in 2007, compared to $4.0 billion in 2006, primarily due to a $470 million increase in average
U.S. Treasury, Government agency, and Government-sponsored enterprise securities. Changes in U.S. Treasury,
Government agency, and Government-sponsored enterprise securities resulted from balance sheet management
40
decisions to reduce interest rate sensitivity. Average other securities decreased $15 million to $131 million in 2007,
and consisted largely of money market and other fund investments at December 31, 2007.
Short-term investments include federal funds sold and securities purchased under agreements to resell, and
other short-term investments. Federal funds sold offer supplemental earning opportunities and serve correspon-
dent banks. Average federal funds sold and securities purchased under agreements to resell declined $119 million
to $164 million during 2007, compared to 2006. Other short-term investments include interest-bearing deposits
with banks, trading securities, and loans held-for-sale. Interest-bearing deposits with banks are investments with
banks in developed countries or foreign banks’ international banking facilities located in the United States. Loans
held-for-sale typically represent residential mortgage loans, student loans and Small Business Administration
loans that have been originated and which management has decided to sell. Average other short-term investments
decreased $10 million to $256 million during 2007, compared to 2006. Short-term investments, other than loans
held-for-sale, provide a range of maturities less than one year and are mostly used to manage short-term
investment requirements of the Corporation.
TABLE 7: INTERNATIONAL CROSS-BORDER OUTSTANDINGS
(year-end outstandings exceeding 1% of total assets)
December 31
Government
and Official
Institutions
Banks and
Other Financial
Institutions
Commercial
and Industrial
Total
(in millions)
Mexico
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$—
—
3
Canada
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$—
$ 4
—
—
$653
$911
922
905
$915
922
908
$ 68
$721
Risk management practices minimize risk inherent in international lending arrangements. These practices
include structuring bilateral agreements or participating in bank facilities, which secure repayment from sources
external to the borrower’s country. Accordingly, such international outstandings are excluded from the cross-border
risk of that country. Mexico, with cross-border outstandings of $915 million, or 1.47 percent of total assets at
December 31, 2007, was the only country with outstandings exceeding 1.00 percent of total assets at year-end 2007.
There were no countries with cross-border outstandings between 0.75 and 1.00 percent of total assets at year-end
2007. Additional information on the Corporation’s Mexican cross-border risk is provided in Table 7 above.
41
Deposits And Borrowed Funds
The Corporation’s average deposits and borrowed funds balances are detailed in the following table.
Years Ended December 31
2007
2006
Change
(in millions)
Percent
Change
Money market and NOW deposits:
Excluding Financial Services Division . . . . . . . . . . . . . . . . . . . . . $13,735
1,202
Financial Services Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13,663
1,710
$
72
(508)
1%
(30)
Total money market and NOW deposits . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Institutional certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign office time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,937
1,389
7,687
5,563
1,071
15,373
1,441
6,505
4,489
1,131
Total interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,647
28,939
(436)
(52)
1,182
1,074
(60)
1,708
Noninterest-bearing deposits:
Excluding Financial Services Division . . . . . . . . . . . . . . . . . . . . .
Financial Services Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,451
2,836
8,761
4,374
(310)
(1,538)
Total noninterest-bearing deposits . . . . . . . . . . . . . . . . . . . . . .
11,287
13,135
(1,848)
(3)
(4)
18
24
(5)
6
(4)
(35)
(14)
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $41,934
$42,074
$ (140)
—%
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,080
8,197
Medium- and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,654
5,407
$ (574)
2,790
(22)%
52
Total borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,277
$ 8,061
$ 2,216
27%
Average deposits were $41.9 billion during 2007, a decrease of $140 million, or less than one percent, from
2006. Excluding Financial Services Division, average deposits increased of $1.9 billion, or five percent, from 2006.
The $1.7 billion, or six percent, increase in average interest-bearing deposits in 2007, when compared to 2006,
resulted primarily from an increase in average customer and institutional certificates of deposit. Institutional
certificates of deposit represent certificates of deposit issued to institutional investors in denominations in excess
of $100,000 and are an alternative to other sources of purchased funds. The increases in certificates of deposit were
partially offset by decreases in average money market, NOW and savings deposits reflecting movement toward
higher cost deposits as customers sought higher returns. Average noninterest-bearing deposits decreased $1.8 bil-
lion, or 14 percent, from 2006. Noninterest-bearing deposits include title and escrow deposits in the Corpo-
ration’s Financial Services Division, which benefit from home mortgage financing and refinancing activity.
Financial Services Division deposit levels may change with the direction of mortgage activity changes, and the
desirability of and competition for such deposits. Average Financial Services Division noninterest-bearing
deposits decreased $1.5 billion, to $2.8 billion in 2007.
Average short-term borrowings decreased $574 million, to $2.1 billion in 2007, compared to $2.7 billion in
2006. Short-term borrowings include federal funds purchased, securities sold under agreements to repurchase and
treasury tax and loan notes.
The Corporation uses medium-term debt (both domestic and European) and long-term debt to provide
funding to support earning assets while providing liquidity that mirrors the estimated duration of deposits. Long-
term subordinated notes further help maintain the Corporation’s and subsidiary banks’ total capital ratios at a
level that qualifies for the lowest FDIC risk-based insurance premium. Medium- and long-term debt increased, on
an average basis, by $2.8 billion. Further information on medium- and long-term debt is provided in Note 11 to
the consolidated financial statements on page 89.
42
Capital
Common shareholders’ equity was $5.1 billion at December 31, 2007, compared to $5.2 billion at
December 31, 2006. The following table presents a summary of changes in common shareholders’ equity in 2007:
Balance at December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FSP 13-2 transition adjustment, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FIN 48 transition adjustment, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at January 1, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retention of earnings (net income less cash dividends declared) . . . . . . . . . . . . . . . . . . . . . . .
Change in accumulated other comprehensive income (loss):
(in millions)
$5,153
(46)
(6)
5,101
293
Investment securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $52
50
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45
Defined benefit and other postretirement plans adjustment . . . . . . . . . . . . . . . . . . . . . . . . .
Total change in accumulated other comprehensive income (loss). . . . . . . . . . . . . . . . . . . . .
Repurchase of approximately 10 million common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net issuance of common stock under employee stock plans . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognition of share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
147
(580)
97
59
Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,117
Further information on the change in accumulated other comprehensive income (loss) is provided in
Note 13 to the consolidated financial statements on page 92.
The Corporation declared common dividends totaling $393 million, or $2.56 per share, on net income
applicable to common stock of $686 million. The dividend payout ratio calculated on a per share basis was
58 percent in 2007 and 43 percent in 2006 and 2005.
The Corporation assesses capital adequacy against the risk inherent in the balance sheet, recognizing that
unexpected loss is the common denominator of risk and that common equity has the greatest capacity to absorb
unexpected loss. Appropriate capitalization is therefore defined through the use of a target capital range. The
Corporation targets to maintain a Tier 1 common capital ratio of between 6.5 percent and 7.5 percent and a Tier 1
capital ratio of between 7.25 percent and 8.25 percent. The Tier 1 common capital ratio is the regulatory Tier 1
capital ratio excluding preferred equity. Based on an interim decision issued by the banking regulators issued in
2006, the after-tax charge associated with a recent accounting standard (SFAS 158) on pension and post-
retirement plan accounting was excluded from the calculation of regulatory capital ratios. Therefore, for the
purposes of calculating regulatory capital ratios, shareholders’ equity was increased by $170 million and
$215 million on December 31, 2007 and 2006, respectively. Refer to Note 19 on page 106 for further discussion
of regulatory capital requirements and capital ratio calculations.
When capital exceeds necessary levels, the Corporation’s common stock can be repurchased as a way to return
excess capital to shareholders. Repurchasing common stock offers a flexible way to control capital levels by
adjusting the capital deployed in reaction to core balance sheet growth. In November 2006 and again in
November 2007, the Board of Directors of the Corporation (the Board) authorized the purchase of up to
10 million shares of Comerica Incorporated outstanding common stock in the open market. In addition to limits
that result from the Board authorizations, the share repurchase program is constrained by holding company
liquidity and capital levels relative to internal targets and regulatory minimums. The Corporation repurchased
10.0 million shares in the open market in 2007 for $580 million, compared to 6.6 million shares in 2006 for
$383 million. Comerica Incorporated common stock available for repurchase under Board authority totaled
12.6 million shares at December 31, 2007. Share repurchases combined with dividends returned 142 percent of
earnings to shareholders in 2007. Refer to Note 12 to the consolidated financial statements on page 91 for
additional information on the Corporation’s share repurchase program.
At December 31, 2007, the Corporation and its U.S. banking subsidiaries exceeded the capital ratios required
for an institution to be considered “well capitalized” by the standards developed under the Federal Deposit
Insurance Corporation Improvement Act of 1991.
43
RISK MANAGEMENT
The Corporation assumes various types of risk in the normal course of business. Management classifies the
risk exposures into five areas: (1) credit, (2) market and liquidity, (3) operational, (4) compliance and (5) business
risks and considers credit risk as the most significant risk. The Corporation employs and is continuously
enhancing various risk management processes to identify, measure, monitor and control these risks, as described
below.
The Corporation continues to enhance its risk management capabilities with additional processes, tools and
systems designed to provide management with deeper insight into the Corporation’s various risks, enhance the
Corporation’s ability to control those risks and ensure that appropriate compensation is received for the risks
taken.
Specialized risk managers, along with the risk management committees in credit, market and liquidity, and
operational and compliance are responsible for the day-to-day management of those respective risks. The
Corporation’s Enterprise-Wide Risk Management Committee is responsible for establishing the governance over
the risk management process as well as providing oversight in managing the Corporation’s aggregate risk position.
The Enterprise-Wide Risk Management Committee is principally made up of the various managers from the
different risk areas and business units and has reporting responsibility to the Enterprise Risk Committee of the
Board.
Credit Risk
Credit risk represents the risk of loss due to failure of a customer or counterparty to meet its financial
obligations in accordance with contractual terms. The Corporation manages credit risk through underwriting,
periodically reviewing and approving its credit exposures using Board committee approved credit policies and
guidelines. Additionally, the Corporation manages credit risk through loan sales and loan portfolio diversifica-
tion, limiting exposure to any single industry, customer or guarantor, and selling participations and/or syndi-
cating to third parties credit exposures above those levels it deems prudent.
During 2007, the Corporation continued its focus on the credit components of the previously described
enterprise-wide risk management processes. A two-factor risk rating system was initiated in 2005 and was
extended to all portfolios in 2006. Enhancements to the analytics related to capital modeling, migration, credit
loss forecasting, stress testing analysis and validation and testing continued in 2007. The evaluation of the
Corporation’s loan portfolios with the new tools is anticipated to provide improved measurement of the potential
risks within the loan portfolios.
44
TABLE 8: ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
2007
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 493
Loan charge-offs:
Domestic
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate construction
Commercial Real Estate business line . . . . . . . . . . . . . . . . .
Other business lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total real estate construction. . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage
Commercial Real Estate business line . . . . . . . . . . . . . . . . .
Other business lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial mortgage . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89
37
5
42
15
37
52
—
13
—
—
Total loan charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
196
Recoveries:
Domestic
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27
—
4
—
4
4
8
Years Ended December 31
2006
2004
2005
(dollar amounts in millions)
$ 803
$ 673
$ 516
2003
$ 791
44
—
—
—
4
13
17
—
23
10
4
98
27
—
4
—
3
—
4
91
2
—
2
4
13
17
1
15
37
11
201
302
2
—
2
4
19
23
1
14
13
14
1
1
2
4
18
22
—
11
4
67
174
268
408
55
—
3
—
5
—
1
52
—
3
—
2
1
16
28
—
1
—
3
—
11
47
Total recoveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
149
Net loan charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
212
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 557
38
60
37
—
$ 493
64
110
(47)
—
$ 516
74
194
64
—
$ 673
43
365
377
—
$ 803
Allowance for loan losses as a percentage of total loans at end of
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans charged-off during the year as a percentage of average
1.10% 1.04% 1.19% 1.65% 1.99%
loans outstanding during the year . . . . . . . . . . . . . . . . . . . . . . .
0.30
0.13
0.25
0.48
0.86
The following table provides an analysis of the changes in the allowance for credit losses on lending-related
commitments.
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26
Less: Charge-offs on lending-related commitments * . . . . . . . . . .
4
Add: Provision for credit losses on lending-
2007
Years Ended December 31
2006
2004
2005
(dollar amounts in millions)
$ 33
$ 21
$ 33
—
6
12
2003
$ 35
—
relatedcommitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
5
18
(12)
(2)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21
$ 26
$ 33
$ 21
$ 33
* Charge-offs result from the sale of unfunded lending-related commitments.
45
Allowance for Credit Losses
The allowance for credit losses includes both the allowance for loan losses and the allowance for credit losses on
lending-related commitments. The allowance for loan losses represents management’s assessment of probable
losses inherent in the Corporation’s loan portfolio. The allowance for loan losses provides for probable losses that
have been identified with specific customer relationships and for probable losses believed to be inherent in the loan
portfolio, but that have not been specifically identified. Internal risk ratings are assigned to each business loan at the
time of approval and are subject to subsequent periodic reviews by the Corporation’s senior management. The
Corporation performs a detailed credit quality review quarterly on both large business and certain large personal
purpose consumer and residential mortgage loans that have deteriorated below certain levels of credit risk and may
allocate a specific portion of the allowance to such loans based upon this review. The Corporation defines business
loans as those belonging to the commercial, real estate construction, commercial mortgage, lease financing and
international loan portfolios. A portion of the allowance is allocated to the remaining business loans by applying
estimated loss ratios, based on numerous factors identified below, to the loans within each risk rating. In addition, a
portion of the allowance is allocated to these remaining loans based on industry specific risks inherent in certain
portfolios that have experienced above average losses, including portfolio exposures to technology-related indus-
tries, Michigan and California residential real estate development and Small Business Administration loans.
Furthermore, a portion of the allowance is allocated to these remaining loans based on industry specific risks
inherent in certain portfolios that have not yet manifested themselves in the risk ratings, including portfolio
exposures to the automotive industry and California residential real estate development. The portion of the
allowance allocated to all other consumer and residential mortgage loans is determined by applying estimated loss
ratios to various segments of the loan portfolio. Estimated loss ratios for all portfolios incorporate factors such as
recent charge-off experience, current economic conditions and trends, and trends with respect to past due and
nonaccrual amounts, and are supported by underlying analysis, including information on migration and loss given
default studies from each of the three largest domestic geographic markets (Midwest, Western and Texas), as well as
mapping to bond tables. The allowance for credit losses on lending-related commitments, included in “accrued
expenses and other liabilities” on the consolidated balance sheets, provides for probable credit losses inherent in
lending-related commitments, including unused commitments to extend credit, letters of credit and financial
guarantees. Lending-related commitments for which it is probable that the commitment will be drawn (or sold) are
reserved with the same estimated loss rates as loans, or with specific reserves. In general, the probability of draw for
letters of credit is considered certain once the credit becomes a watch list credit. Non-watch list letters of credits and
all unfunded commitments have a lower probability of draw, to which standard loan loss rates are applied.
The total allowance for loan losses was $557 million at December 31, 2007, compared to $493 million at
December 31, 2006. The increase resulted mostly from an increase in individual and industry reserves for
customers in the real estate industry, primarily Michigan and California residential real estate development. This
increase was partially offset by reductions in the industry reserves for customers in the automotive, air trans-
portation, contractor and entertainment industries. An analysis of the changes in the allowance for loan losses is
presented in Table 8 on page 45 of this financial review. The allowance for credit losses on lending-related
commitments was $21 million at December 31, 2007, compared to $26 million at December 31, 2006, a decrease
of $5 million, resulting primarily from a decrease in specific reserves related to unused commitments extended to
two large customers in the automotive industry that were previously reserved at quoted prices and now are
reserved using standard unfunded commitment methodology. An analysis of the changes in the allowance for
credit losses on lending-related commitments is presented on page 45 of this financial review.
46
TABLE 9: ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
2007
2006
December 31
2005
2004
2003
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
(dollar amounts in millions)
Domestic
Commercial . . . . . . . . . . .
Real estate construction . .
Commercial mortgage . . .
Residential mortgage . . . .
Consumer . . . . . . . . . . . .
Lease financing . . . . . . . .
International . . . . . . . . . . . .
$288
128
92
2
21
15
11
55% $320
29
80
2
22
27
13
9
20
4
5
3
4
55% $336
21
74
1
25
29
30
9
20
4
5
3
4
55% $442
27
88
2
26
45
43
8
21
3
6
3
4
54% $510
35
104
5
28
27
94
8
20
3
7
3
5
54%
8
20
3
6
3
6
Total . . . . . . . . . . . . . . .
$557
100% $493
100% $516
100% $673
100% $803
100%
Amount — allocated allowance
% — loans outstanding as a percentage of total loans
Actual loss ratios experienced in the future may vary from those projected. The uncertainty occurs because
factors may exist which affect the determination of probable losses inherent in the loan portfolio that are not
necessarily captured by the application of estimated loss ratios or identified industry-specific risks. A portion of
the allowance is maintained to capture these probable losses and reflects management’s view that the allowance
should recognize the margin for error inherent in the process of estimating expected loan losses. Factors that were
considered in the evaluation of the adequacy of the Corporation’s allowance include the inherent imprecision in
the risk rating system and the risk associated with new customer relationships. The allowance associated with the
margin for inherent imprecision covers probable loan losses as a result of an inaccuracy in assigning risk ratings or
stale ratings which may not have been updated for recent negative trends in particular credits. The allowance due
to new business migration risk is based on an evaluation of the risk of rating downgrades associated with loans
that do not have a full year of payment history.
The total allowance is available to absorb losses from any segment within the portfolio. Unanticipated
economic events, including political, economic and regulatory instability in countries where the Corporation has
loans, could cause changes in the credit characteristics of the portfolio and result in an unanticipated increase in
the allowance. Inclusion of other industry specific portfolio exposures in the allowance, as well as significant
increases in the current portfolio exposures, could also increase the amount of the allowance. Any of these events,
or some combination thereof, may result in the need for additional provision for loan losses in order to maintain
an allowance that complies with credit risk and accounting policies.
The allowance as a percentage of total loans, nonperforming loans and as a multiple of annual net loan
charge-offs is provided in the following table.
Years Ended December 31
2006
2007
2005
Allowance for loan losses as a percentage of total loans at end of year . . . . . . . . . . 1.10% 1.04% 1.19%
Allowance for loan losses as a percentage of total nonperforming loans at end of
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for loan losses as a multiple of total net loan charge-offs for the year. . .
138
3.7
231
8.2
373
4.7
The allowance for loan losses as a percentage of total period-end loans increased to 1.10 percent at
December 31, 2007, from 1.04 percent at December 31, 2006. The allowance for loan losses as a percentage
of nonperforming loans decreased to 138 percent at December 31, 2007, from 231 percent at December 31, 2006.
The allowance for loan losses as a multiple of net loan charge-offs decreased to 3.7 times for the year ended
December 31, 2007, compared to 8.2 times for the prior year, as a result of higher levels of net loan
47
charge-offs in 2007. While certain ratios declined, the ratios do not reflect a change in the methodology of
developing the allowance based on the underlying loan portfolios.
TABLE 10: SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS
2007
December 31
2005
2004
(dollar amounts in millions)
2006
2003
NONPERFORMING ASSETS
Nonaccrual loans:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75
Real estate construction:
$ 97
$ 65
$ 161
$ 295
Commercial Real Estate business line . . . . . . . . . . . . . . . . .
Other business lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total real estate construction. . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage:
Commercial Real Estate business line . . . . . . . . . . . . . . . . .
Other business lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial mortgage . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reduced-rate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . .
Foreclosed property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonaccrual debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
161
6
167
66
75
141
1
3
—
4
391
13
404
19
—
18
2
20
18
54
72
1
4
8
12
214
—
214
18
—
3
—
3
6
29
35
2
2
13
18
138
—
138
24
—
31
3
34
6
58
64
1
1
15
36
312
—
312
27
—
21
3
24
3
84
87
2
7
24
68
507
—
507
30
1
Total nonperforming assets. . . . . . . . . . . . . . . . . . . . . . . . . $ 423
$ 232
$ 162
$ 339
$ 538
Nonperforming loans as a percentage of total loans . . . . . . . . . . .
Nonperforming assets as a percentage of total loans, foreclosed
property and nonaccrual debt securities. . . . . . . . . . . . . . . . . . .
Allowance for loan losses as a percentage of total nonperforming
loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138
Loans past due 90 days or more and still accruing . . . . . . . . . . . . $ 54
0.80% 0.45% 0.32% 0.76% 1.26%
0.83
0.49
0.37
0.83
1.33
231
$ 14
373
$ 16
215
$ 15
158
$ 32
Nonperforming Assets
Nonperforming assets include loans and loans held-for-sale on nonaccrual status, loans which have been
renegotiated to less than market rates due to a serious weakening of the borrower’s financial condition, real estate
which has been acquired through foreclosure and is awaiting disposition and debt securities on nonaccrual status.
Consumer loans, except for certain large personal purpose consumer and residential mortgage loans, are
charged-off no later than 180 days past due, and earlier, if deemed uncollectible. Loans, other than consumer
loans, and debt securities are generally placed on nonaccrual status when management determines that principal
or interest may not be fully collectible, but no later than 90 days past due on principal or interest, unless the loan
or debt security is fully collateralized and in the process of collection. Loan amounts in excess of probable future
cash collections are charged-off to an amount that management ultimately expects to collect. Interest previously
accrued but not collected on nonaccrual loans is charged against current income at the time the loan is placed on
nonaccrual. Income on such loans is then recognized only to the extent that cash is received and where the future
collection of principal is probable. Loans that have been restructured to yield a rate that was equal to or greater
48
than the rate charged for new loans with comparable risk and have met the requirements for a return to accrual
status are not included in nonperforming assets. However, such loans may be required to be evaluated for
impairment. Refer to Note 4 of the consolidated financial statements on page 83 for a further discussion of
impaired loans.
Nonperforming assets increased $191 million, or 82 percent, to $423 million at December 31, 2007, from
$232 million at December 31, 2006. Table 10 above shows changes in individual categories. The $177 million
increase in nonaccrual loans at December 31, 2007 from year-end 2006 levels resulted primarily from a
$147 million increase in nonaccrual real estate construction loans and a $69 million increase in nonaccrual
commercial mortgage loans, partially offset by a $22 million decrease in nonaccrual commercial loans, an
$8 million decrease in nonaccrual international loans and an $8 million decrease in nonaccrual lease financing
loans. An analysis of nonaccrual loans at December 31, 2007, based primarily on the Standard Industrial
Classification (SIC) code, is presented on page 51 of this financial review. Loans past due 90 days or more and still
on accrual status increased $40 million, to $54 million at December 31, 2007, from $14 million at December 31,
2006. Nonperforming assets as a percentage of total loans, foreclosed property and nonaccrual debt securities was
0.83 percent and 0.49 percent at December 31, 2007 and 2006, respectively.
The following table presents a summary of changes in nonaccrual loans.
2007
(in millions)
2006
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 214
455
Loans transferred to nonaccrual(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(183)
Nonaccrual business loan gross charge-offs(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(13)
Loans transferred to accrual status(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(15)
Nonaccrual business loans sold(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(67)
Payments/Other(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$138
176
(72)
—
(9)
(19)
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 391
$214
(1) Based on an analysis of nonaccrual loans with book balances greater than $2 million.
(2) Analysis of gross loan charge-offs:
Nonaccrual business loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 183
—
Performing watch list loans (as defined below) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Consumer and residential mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 72
3
23
Total gross loan charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 196
$ 98
(3) Analysis of loans sold:
Nonaccrual business loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15
13
Performing watch list loans (as defined below) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9
77
Total loans sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28
$ 86
(4) Includes net changes related to nonaccrual loans with balances less than $2 million, other than business loan
gross charge-offs and nonaccrual loans sold, and payments on nonaccrual loans with book balances greater
than $2 million.
49
The following table presents the number of nonaccrual loan relationships greater than $2 million and
balance by size of relationship at December 31, 2007.
Nonaccrual Relationship Size
$2 million — $5 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5 million — $10 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10 million — $25 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Greater than $25 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loan relationships greater than $2 million at December 31, 2007 . . . . . . . . . . . . .
Number of
Relationships
Balance
(dollar amounts in
millions)
20
11
7
2
40
$ 66
71
116
54
$307
There were 58 loan relationships with balances greater than $2 million, totaling $455 million that were
transferred to nonaccrual status in 2007, an increase of $279 million, when compared to $176 million in 2006. Of
the transfers to nonaccrual with balances greater than $2 million in 2007, $286 million were from the Midwest
market and $132 million were from the Western market. There were 11 loan relationships greater than $10 million
transferred to nonaccrual in 2007. The 11 loan relationships totaled $236 million and were to companies in the
real estate ($188 million) and retail trade ($48 million) industries.
The Corporation sold $15 million of nonaccrual business loans in 2007. These loans were to customers in the
real estate, automotive production and airline transportation industries. In addition, the Corporation sold
$82 million of unused commitments in 2007, including $60 million with customers in the automotive industry.
The losses associated with the sale of the unused commitments were charged to the “provision for credit losses on
lending-related commitments” on the consolidated statements of income.
Nonaccrual loan payments/other, as shown in the table above, increased $48 million in 2007, when
compared to 2006. The increase was mostly due to an increase in payments received on nonaccrual loans greater
than $2 million in 2007, compared to 2006.
The following table presents a summary of total internally classified watch list loans (generally consistent
with regulatory defined special mention, substandard and doubtful loans) at December 31, 2007. Of the
$3.5 billion of watch list loans, $1.1 billion, or 31 percent were in the Commercial Real Estate business line.
Consistent with the increase in nonaccrual loans from December 31, 2006 to December 31, 2007, total watch list
loans increased both in dollars and as a percentage of the total loan portfolio.
Total watch list loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,464
As a percentage of total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.8%
$2,411
5.1%
December 31
2007
2006
(dollar amounts in
millions)
50
The following table presents a summary of nonaccrual loans at December 31, 2007 and loan relationships
transferred to nonaccrual and net loan charge-offs during the year ended December 31, 2007, based primarily on
the Standard Industrial Classification (SIC) industry categories.
Industry Category
December 31,
2007
Nonaccrual
Loans
Year Ended December 31, 2007
Loans
Transferred to
Nonaccrual(1)
Net Loan
Charge-Offs
(Recoveries)
(dollar amounts in millions)
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $232
47
Retail trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Automotive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
Wholesale trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
Contractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Churches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Entertainment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
Other(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59% $280
61
12
48
10
—
4
13
3
14
3
13
2
6
2
9
2
6
1
—
—
5
2
62% $ 63
38
14
22
10
(2)
—
2
3
4
3
4
3
5
1
3
2
9
1
(6)
—
7
1
42%
26
15
(1)
1
3
2
3
2
6
(4)
5
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $391
100% $455
100% $149
100%
(1) Based on an analysis of nonaccrual loan relationships with book balances greater than $2 million.
(2) Consumer nonaccrual loans and net charge-offs are included in the “Other” category.
SNC nonaccrual loans comprised six percent and less than one percent of total nonaccrual loans at
December 31, 2007 and 2006, respectively. As a percentage of total loans, SNC loans represented approximately
21 percent and 19 percent at December 31, 2007 and 2006, respectively. SNC loan net charge-offs were $2 million
in both 2007 and 2006. For further discussion of the Corporation’s SNC relationships, refer to the “Earning
Assets” section of this financial review on page 38.
The following table indicates the percentage of nonaccrual loan value to contractual value, which exhibits the
degree to which loans reported as nonaccrual have been partially charged-off.
December 31
2007
2006
(dollar amounts
in millions)
Carrying value of nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $391
Contractual value of nonaccrual loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
549
Carrying value as a percentage of contractual value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$214
300
71% 71%
Concentration of Credit
Loans to borrowers in the automotive industry represented the largest significant industry concentration at
December 31, 2007 and 2006. Loans to automotive dealers and to borrowers involved with automotive
production are reported as automotive, since management believes these loans have similar economic charac-
teristics that might cause them to react similarly to changes in economic conditions. This aggregation involves the
exercise of judgment. Included in automotive production are: (a) original equipment manufacturers and Tier 1
and Tier 2 suppliers that produce components used in vehicles and whose primary revenue source is automotive-
related (“primary” defined as greater than 50%) and (b) other manufacturers that produce components used in
vehicles and whose primary revenue source is automotive-related. Loans less than $1 million and loans recorded
in the Small Business division were excluded from the definition. Foreign ownership consists of North American
affiliates of foreign automakers and suppliers.
51
A summary of loans outstanding and total exposure from loans, unused commitments and standby letters of
credit and financial guarantees to companies related to the automotive industry follows:
2007
2006
December 31
Loans
Outstanding
Percent of
Total Loans
Total
Exposure
Loans
Outstanding
Percent of
Total Loans
Total
Exposure
(in millions)
Production:
Domestic . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . .
$1,415
391
$ 2,571
1,133
Total production . . . . . . . .
1,806
3.6%
3,704
Dealer:
Floor plan . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . .
Total dealer . . . . . . . . . . . .
2,817
2,567
5,384
4,228
3,108
7,336
10.6%
$1,737
469
2,206
3,125
2,433
5,558
$ 2,950
1,267
4.7%
4,217
4,312
3,089
7,401
11.7%
Total automotive . . . . . . . .
$7,190
14.2% $11,040
$7,764
16.4% $11,618
At December 31, 2007, dealer loans, as shown in the table above, totaled $5.4 billion, of which approximately
$3.1 billion, or 59 percent, was to foreign franchises, $1.7 billion, or 31 percent, was to domestic franchises and
$561 million, or 10 percent, was to other. Other includes obligations where a primary franchise was indeter-
minable, such as loans to large public dealership consolidators, and rental car, leasing, heavy truck and recreation
vehicle companies.
Nonaccrual loans to automotive borrowers comprised approximately four percent of total nonaccrual loans
at December 31, 2007. The largest automotive loan on nonaccrual status at December 31, 2007 was $5 million.
Total automotive net loan recoveries were $2 million in 2007. The following table presents a summary of
automotive net loan and credit-related charge-offs for the years ended December 31, 2007 and 2006.
Years Ended
December 31
2007
2006
(in millions)
Production:
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4
(5) —
Total production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(2)
Dealer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Total automotive net loan charge-offs (recoveries) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(2)
Total automotive charge-offs from the sale of unused commitments*. . . . . . . . . . . . . . . . . . . . $ 3
$ 4
—
$ 4
$12
* Primarily related to domestic-owned production companies.
All other industry concentrations, as defined by management, individually represented less than 10 percent
of total loans at year-end 2007.
Commercial Real Estate Lending
The Corporation takes measures to limit risk inherent in its commercial real estate lending activities. These
measures include limiting exposure to those borrowers directly involved in the commercial real estate markets and
adherence to policies requiring conservative loan-to-value ratios for such loans. Commercial real estate loans,
consisting of real estate construction and commercial mortgage loans, totaled $14.9 billion at December 31, 2007,
of which $5.5 billion, or 37 percent, were to borrowers in the Commercial Real Estate business line. Increased
52
nonaccrual loans, reserves and net charge-offs in the Commercial Real Estate business line reflected challenges in
the residential real estate development industry in Michigan and California.
The real estate construction loan portfolio contains loans primarily made to long-time customers with
satisfactory completion experience. The portfolio totaled $4.8 billion and included approximately 1,650 loans, of
which 48 percent had balances less than $1 million at December 31, 2007. The largest real estate construction loan
had a balance of approximately $43 million at December 31, 2007. The commercial mortgage loan portfolio
totaled $10.1 billion at December 31, 2007 and included approximately 8,900 loans, of which 74 percent had
balances of less than $1 million. This total included $8.7 billion of primarily owner-occupied commercial
mortgage loans. The largest loan within the commercial mortgage loan portfolio had a balance of approximately
$56 million at December 31, 2007.
The geographic distribution of commercial real estate loan borrowers is an important factor in diversifying
credit risk. The following table indicates, by location of property and by project type, the diversification of the
Corporation’s real estate construction and commercial mortgage loans to borrowers in the Commercial Real
Estate business line.
Project Type:
Western
Michigan
Texas
Florida
(dollar amounts in millions)
Other
Total
% of Total
December 31, 2007
Location of Property
Real estate construction loans:
Commercial Real Estate business line:
Single Family . . . . . . . . . . . . . . . . . . . . $ 940
348
Land Development . . . . . . . . . . . . . . .
168
Retail . . . . . . . . . . . . . . . . . . . . . . . . . .
88
Multi-family . . . . . . . . . . . . . . . . . . . .
127
Multi-use . . . . . . . . . . . . . . . . . . . . . . .
103
Office . . . . . . . . . . . . . . . . . . . . . . . . .
138
Land Carry . . . . . . . . . . . . . . . . . . . . .
83
Commercial . . . . . . . . . . . . . . . . . . . .
—
Other. . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . $1,995
Commercial mortgage loans:
Commercial Real Estate business line:
Land Carry . . . . . . . . . . . . . . . . . . . . . $ 278
42
Office . . . . . . . . . . . . . . . . . . . . . . . . .
9
Retail . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Multi-family . . . . . . . . . . . . . . . . . . . .
34
Commercial . . . . . . . . . . . . . . . . . . . .
11
Multi-use . . . . . . . . . . . . . . . . . . . . . . .
12
Single Family . . . . . . . . . . . . . . . . . . . .
3
Other. . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 396
$107
116
108
24
35
19
—
16
—
$425
$174
57
52
91
34
36
3
3
$450
$148
155
186
164
38
73
—
19
—
$783
$108
24
5
20
3
6
5
—
$171
$268
47
43
63
41
—
—
5
7
$474
$ 92
11
3
32
—
15
11
—
$164
$150
53
50
74
50
16
—
9
10
$1,613
719
555
413
291
211
138
132
17
40%
18
14
10
7
5
3
3
—
$412
$4,089
100%
$ 18
3
46
35
46
27
13
8
$ 670
137
115
185
117
95
44
14
49%
10
8
13
9
7
3
1
$196
$1,377
100%
Of the $4.1 billion of real estate construction loans in the Commercial Real Estate business line, $161 million
were on nonaccrual status at December 31, 2007. Substantially all of the nonaccrual loans were Single Family,
Land Development and Land Carry project types located in California ($84 million), Michigan ($57 million) and
Florida ($18 million).
Commercial mortgage loans in the Commercial Real Estate business line totaled $1.4 billion and included
$66 million of nonaccrual loans at December 31, 2007, primarily Land Development projects located in Michigan
($55 million).
53
Net charge-offs in the Commercial Real Estate business line were $52 million in 2007, and included
$34 million in the Midwest market, $16 million in the Western market and $2 million in the Texas market.
The following table illustrates, by location of lending office, the diversification of the Corporation’s real estate
construction and commercial mortgage loan portfolios.
December 31, 2007
Real Estate
Construction
%
Amount
Commercial
Mortgage
Amount
%
(dollar amounts in millions)
Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,141
1,541
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
777
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
188
Florida. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
169
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44% $ 5,160
2,660
32
924
16
325
4
979
4
52%
26
9
3
10
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,816
100% $10,048
100%
Market Risk
Market risk represents the risk of loss due to adverse movements in market rates or prices, which include
interest rates, foreign exchange rates and equity prices; the failure to meet financial obligations coming due
because of an inability to liquidate assets or obtain adequate funding and the inability to easily unwind or offset
specific exposures without significantly lowering prices because of inadequate market depth or market
disruptions.
The Asset and Liability Policy Committee (ALPC) establishes and monitors compliance with the policies and
risk limits pertaining to market risk management activities. The ALPC meets regularly to discuss and review market
risk management strategies and is comprised of executive and senior management from various areas of the
Corporation, including finance, lending, deposit gathering and risk management.
Interest Rate Risk
Interest rate risk arises primarily through the Corporation’s core business activities of extending loans and
accepting deposits. The Corporation’s balance sheet is predominantly characterized by floating rate commercial
loans funded by a combination of core deposits and wholesale borrowings. This creates a natural imbalance
between the floating rate loan portfolio and the more slowly repricing deposit products. The result is that growth
in our core businesses will lead to a greater sensitivity to interest rate movements, without mitigating actions. An
example of such an action is purchasing investment securities, primarily fixed rate, which provide liquidity to the
balance sheet and act to mitigate the inherent interest sensitivity. The Corporation actively manages its exposure to
interest rate risk, with the principal objective of optimizing net interest income while operating within acceptable
limits established for interest rate risk and maintaining adequate levels of funding and liquidity.
Interest Rate Sensitivity
Interest rate risk arises in the normal course of business due to differences in the repricing and cash flow
characteristics of assets and liabilities. Since no single measurement system satisfies all management objectives, a
combination of techniques is used to manage interest rate risk. These techniques examine earnings at risk and
economic value of equity utilizing multiple simulation analyses.
The Corporation frequently evaluates net interest income under various balance sheet and interest rate
scenarios, using simulation modeling analysis as its principal risk management evaluation technique. The results
of these analyses provide the information needed to assess the balance sheet structure. Changes in economic
activity, different from those management included in its simulation analyses, whether domestically or inter-
nationally, could translate into a materially different interest rate environment than currently expected. Man-
agement evaluates “base” net interest income under an unchanged interest rate environment and what is believed
to be the most likely balance sheet structure. This “base” net interest income is then evaluated against non-parallel
interest rate scenarios that increase and decrease approximately 200 basis points (but no lower than zero percent)
54
from the unchanged interest rate environment. For this analysis, the rise or decline in interest rates occurs in a
linear fashion over twelve months. In addition, adjustments to asset prepayment levels, yield curves, and overall
balance sheet mix and growth assumptions are made to be consistent with each interest rate environment. These
assumptions are inherently uncertain and, as a result, the model cannot precisely predict the impact of higher or
lower interest rates on net interest income. Actual results may differ from simulated results due to timing,
magnitude and frequency of interest rate changes and changes in market conditions and management strategies,
among other factors. However, the model can indicate the likely direction of change. Derivative instruments
entered into for risk management purposes are included in these analyses. The table below as of December 31,
2007 and 2006 displays the estimated impact on net interest income during the next 12 months as it relates the
unchanged interest rate scenario results to those from the 200 basis point non-parallel shock described above.
Sensitivity of Net Interest Income to Changes in Interest Rates
December 31
2007
2006
Amount
%
Amount
%
(in millions)
Change in Interest Rates:
+200 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(cid:2)200 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 38
(36)
2% $ 34
(51)
(2)
2%
(2)
Corporate policy limits adverse change to no more than four percent of management’s most likely net interest
income forecast and the Corporation operated within this policy guideline. The change in interest rate sensitivity
from December 31, 2006 to December 31, 2007 was primarily a result of loan and deposit growth, activities in the
Financial Services Division, competitive deposit pricing, maturity of swaps and additions to the investment
securities portfolio. In addition, a variety of alternative scenarios are performed to assist in the portrayal of the
Corporation’s interest rate risk position, including, but not limited to, flat balance sheet and most likely rates,
200 basis point parallel rate shocks and yield curve twists. Interest rate risk will be actively managed principally
through the use of on-balance sheet financial instruments or interest rate swaps so that the desired risk profile is
achieved.
In addition to the simulation analysis, an economic value of equity analysis is performed for a longer term
view of the interest rate risk position. The economic value of equity analysis begins with an estimate of the mark-
to-market valuation of the Corporation’s balance sheet and then applies the estimated impact of rate movements
upon the market value of assets, liabilities and off-balance sheet instruments. The economic value of equity is then
calculated as the difference between the market value of assets and liabilities net of the impact of off-balance sheet
instruments. The market value change in the economic value of equity is then compared to the corporate policy
guideline limiting such adverse change to 10 percent of the base economic value of equity as a result of a parallel
200 basis point increase or decrease in interest rates. The Corporation operated within this policy parameter. As
with net interest income shocks, a variety of alternative scenarios are performed to measure the impact on
economic value of equity, including changes in the level, slope and shape of the yield curve.
Sensitivity of Economic Value of Equity to Changes in Interest Rates
December 31
2007
2006
Amount
%
Amount
%
(in millions)
Change in Interest Rates:
+200 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(cid:2)200 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 241
(789)
3% $ 155
(351)
(9)
2%
(4)
The change in economic value of equity sensitivity from December 31, 2006 to December 31, 2007 was
primarily due to the issuance of $515 million of 6.576% fixed rate subordinate notes due 2037, which accounted
for the majority of the decline under the 200 basis point parallel decrease in the interest rates scenario in the table
above. Other contributing factors were changes in loan and funding mix, and a runoff in interest rate swaps partly
offset by additions to the investment securities portfolio.
55
The Corporation uses investment securities and derivative instruments, predominantly interest rate swaps, as
asset and liability management tools with the overall objective of managing the volatility of net interest income
from changes in interest rates. Swaps modify the interest rate characteristics of certain assets and of liabilities (e.g.,
from a floating rate to a fixed rate, from a fixed rate to a floating rate or from one floating rate index to another).
These tools assist management in achieving the desired interest rate risk management objectives.
Risk Management Derivative Instruments
Risk Management Notional Activity
Interest
Rate
Contracts
Foreign
Exchange
Contracts
(in millions)
Balance at January 1, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,455
100
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,102)
Maturities/amortizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,453
400
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,452)
Maturities/amortizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
411
5,521
(5,377)
(4)
$
551
4,035
(4,037)
—
Totals
$11,866
5,621
(8,479)
(4)
$ 9,004
4,435
(7,489)
1
Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,402
$
549
$ 5,951
The notional amount of risk management interest rate swaps totaled $5.4 billion at December 31, 2007, and
$8.5 billion at December 31, 2006. The decrease in notional amount of $3.1 billion from December 31, 2006 to
December 31, 2007 reflects maturities and a current preference for on-balance sheet risk management utilizing the
investment securities portfolio. The fair value of risk management interest rate swaps was a net unrealized gain of
$143 million at December 31, 2007, compared to a net unrealized loss of $19 million at December 31, 2006.
For the year ended December 31, 2007, risk management interest rate swaps generated $55 million of net
interest expense, compared to $108 million of net expense for the year ended December 31, 2006. The decrease in
swap expense for 2007, compared to 2006, was primarily due to the maturities of interest rate swaps that carried a
negative spread.
Table 11 on page 57 summarizes the expected maturity distribution of the notional amount of risk
management interest rate swaps and provides the weighted average interest rates associated with amounts to
be received or paid as of December 31, 2007. Swaps have been grouped by asset and liability designation.
In addition to interest rate swaps, the Corporation employs various other types of derivative instruments to
mitigate exposures to interest rate and foreign currency risks associated with specific assets and liabilities (e.g.,
loans or deposits denominated in foreign currencies). Such instruments may include interest rate caps and floors,
purchased put options, foreign exchange forward contracts and foreign exchange swap agreements. The aggregate
notional amounts of these risk management derivative instruments at December 31, 2007 and 2006 were
$549 million and $551 million, respectively.
Further information regarding risk management derivative instruments is provided in Notes 1, 11, and 20 to
the consolidated financial statements on pages 72, 89 and 107, respectively.
56
TABLE 11: REMAINING EXPECTED MATURITY OF RISK MANAGEMENT INTEREST RATE SWAPS
2008
2009
2010
2011
2012
2013-
2026
Dec. 31,
2007
Total
Dec. 31,
2006
Total
(dollar amounts in millions)
Variable rate asset designation:
Generic receive fixed swaps . . . . . . . . $3,200
Weighted average:(1)
Receive rate . . . . . . . . . . . . . . . . . .
Pay rate . . . . . . . . . . . . . . . . . . . . .
7.02%
7.37
Fixed rate asset designation:
Pay fixed swaps
$ — $— $— $— $ — $3,200
$6,200
—% —% —% —%
—
—
—
—
—% 7.02% 6.03%
—
7.37
7.69
Amortizing . . . . . . . . . . . . . . . . . . $
2
$ — $— $— $— $ — $
2
$
3
Weighted average:(2)
Receive rate . . . . . . . . . . . . . . . . . .
Pay rate . . . . . . . . . . . . . . . . . . . . .
4.74%
3.52
Medium- and long-term debt
designation:
Generic receive fixed swaps . . . . . . . . $ 350
Weighted average:(1)
—% —% —% —%
—
—
—
—
—% 4.74% 4.34%
—
3.52
3.52
$ 100
$— $— $— $1,750
$2,200
$2,250
Receive rate . . . . . . . . . . . . . . . . . .
Pay rate . . . . . . . . . . . . . . . . . . . . .
6.17% 6.06% —% —% —% 5.84% 5.90% 5.95%
—
5.25
5.23
5.14
5.11
5.44
—
—
Total notional amount . . . . . . . . . . . . $3,552
$ 100
$— $— $— $1,750
$5,402
$8,453
(1) Variable rates paid on receive fixed swaps are based on prime or LIBOR (with various maturities) rates in effect
at December 31, 2007
(2) Variable rates received are based on one-month Canadian Dollar Offered Rates in effect at December 31, 2007
Customer-Initiated and Other Derivative Instruments
Customer-Initiated and Other Notional Activity
Interest
Rate
Contracts
Energy
Derivative
Contracts
Foreign
Exchange
Contracts
Balance at January 1, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,804
3,275
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,256)
Maturities/amortizations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(256)
Terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 979
463
(177)
(160)
5,474
96,615
(99,196)
—
(in millions)
$
Balance at December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . $ 5,567
4,277
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(810)
Maturities/amortizations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(526)
Terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,105
765
(389)
—
$
2,893
102,903
(103,081)
—
Totals
$ 10,257
100,353
(100,629)
(416)
$
9,565
107,945
(104,280)
(526)
Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . $ 8,508
$1,481
$
2,715
$ 12,704
The Corporation writes and purchases interest rate caps and enters into foreign exchange contracts, interest
rate swaps and energy derivative contracts to accommodate the needs of customers requesting such services.
Customer-initiated and other notional activity represented 68 percent of total interest rate, energy and foreign
exchange contracts at December 31, 2007, compared to 52 percent at December 31, 2006. Refer to Notes 1 and 20
of the consolidated financial statements on pages 72 and 107, respectively, for further information regarding
customer-initiated and other derivative instruments.
57
Warrants
The Corporation holds a portfolio of approximately 840 warrants for generally non-marketable equity
securities. These warrants are primarily from high technology, non-public companies obtained as part of the loan
origination process. As discussed in Note 1 to the consolidated financial statements on page 72, warrants that have
a net exercise provision embedded in the warrant agreement are required to be accounted for as derivatives and
recorded at fair value (approximately 570 warrants at December 31, 2007). The value of all warrants that are
carried at fair value ($23 million at December 31, 2007) is at risk to changes in equity markets, general economic
conditions and other factors. For further information regarding the valuation of warrants accounted for as
derivatives, refer to the “Critical Accounting Policies” section of this financial review on page 62.
Liquidity Risk and Off-Balance Sheet Arrangements
Liquidity is the ability to meet financial obligations through the maturity or sale of existing assets or the
acquisition of additional funds. The Corporation has various financial obligations, including contractual obli-
gations and commercial commitments, which may require future cash payments. The following contractual
obligations table summarizes the Corporation’s noncancelable contractual obligations and future required
minimum payments, and includes unrecognized tax benefits in “other long-term obligations”. Refer to Notes 7,
10, 11 and 17 of the financial statements on pages 86, 88, 89 and 103, respectively, for a further discussion of these
contractual obligations.
Contractual Obligations
Total
Deposits without a stated maturity * . . . . . . . . . . . . . . $28,506
Certificates of deposit and other deposits with a stated
maturity * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings * . . . . . . . . . . . . . . . . . . . . . . .
Medium- and long-term debt * . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to fund low income housing
15,772
2,807
8,685
640
partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term obligations . . . . . . . . . . . . . . . . . . . . .
119
308
December 31, 2007
Minimum Payments Due by Period
Less than
1-3
Years
1 Year
(in millions)
3-5
Years
More than
5 Years
$28,506
$ — $ — $ —
13,125
2,807
2,000
58
76
68
2,521
—
2,775
115
40
49
86
—
1,245
102
2
45
40
—
2,665
365
1
146
Total contractual obligations . . . . . . . . . . . . . . . . . . . $56,837
$46,640
$5,500
$1,480
$3,217
Medium- and long-term debt * (parent company
only) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
965
$
— $ 150
$ — $ 815
* Deposits and borrowings exclude interest.
The Corporation has other commercial commitments that impact liquidity. These commitments include
commitments to purchase and sell earning assets, commitments to fund private equity and venture capital
investments, unused commitments to extend credit, standby letters of credit and financial guarantees, and
commercial letters of credit. The following commercial commitments table summarizes the Corporation’s
commercial commitments and expected expiration dates by period.
58
Commercial Commitments
Commitments to purchase investment securities . . . . $
Commitments to sell investment securities. . . . . . . . .
Commitments to fund private equity and venture
December 31, 2007
Expected Expiration Dates by Period
Less than
1-3
Years
1 Year
(in millions)
3-5
Years
More than
5 Years
Total
604
4
$
604
4
$
— $ — $ —
—
—
—
capital investments . . . . . . . . . . . . . . . . . . . . . . . . .
Unused commitments to extend credit . . . . . . . . . . . .
Standby letters of credit and financial guarantees . . . .
Commercial letters of credit . . . . . . . . . . . . . . . . . . . .
42
33,819
6,900
234
2
12,679
4,344
186
3
10,288
1,525
47
4
8,504
919
1
33
2,348
112
—
Total commercial commitments . . . . . . . . . . . . . . . $41,603
$17,819
$11,863
$9,428
$2,493
Since many of these commitments expire without being drawn upon, the total amount of these commercial
commitments does not necessarily represent the future cash requirements of the Corporation. Refer to the “Other
Market Risks” section below and Note 20 of the consolidated financial statements on page 107 for a further
discussion of these commercial commitments.
Liquidity requirements are satisfied with various funding sources. First, the Corporation accesses the
purchased funds market regularly to meet funding needs. Purchased funds, comprised of customer certificates
of deposit of $100,000 and over that mature in less than one year, institutional certificates of deposit, foreign
office time deposits and short-term borrowings, approximated $13.0 billion at December 31, 2007, compared to
$9.3 billion and $3.5 billion at December 31, 2006 and 2005, respectively. Second, a $15 billion medium-term
senior note program allows the principal banking subsidiary to issue debt with maturities between one and
30 years. At year-end 2007, unissued debt relating to the medium-term note program totaled $9.6 billion. A third
source, if needed, would be liquid assets, including cash and due from banks, federal funds sold and securities
purchased under agreements to resell, other short-term investments and investment securities available-for-sale,
which totaled $8.1 billion at December 31, 2007. Additionally, the Corporation also had available $16 billion
from a collateralized borrowing account with the Federal Reserve Bank at December 31, 2007.
In February 2008, Comerica Bank (the Bank), a subsidiary of the Corporation, became a member of the
Federal Home Loan Bank of Dallas, Texas (FHLB), which provides short- and long-term funding to its members
though advances that are collateralized by mortgage-related assets. The initial required investment by the Bank in
FHLB stock was $25 million. Additional investment in FHLB stock would be required in relation to the level of
outstanding borrowings. The actual borrowing capacity is contingent on the amount of collateral available to be
pledged to FHLB. As of December 31, 2007, the Corporation had no borrowings from FHLB.
The parent company held $1 million of cash and cash equivalents and $224 million of short-term
investments with a subsidiary bank at December 31, 2007. Another source of liquidity for the parent company
is dividends from its subsidiaries. As discussed in Note 19 to the consolidated financial statements on page 106,
banking subsidiaries are subject to regulation and may be limited in their ability to pay dividends or transfer funds
to the holding company. During 2008, the banking subsidiaries can pay dividends up to $234 million plus
2008 net profits without prior regulatory approval. One measure of current parent company liquidity is
investment in subsidiaries as a percentage of shareholders’ equity. An amount over 100 percent represents the
reliance on subsidiary dividends to repay liabilities. As of December 31, 2007, the ratio was 114 percent. The
Contractual Obligations table on page 58 includes information on parent company future minimum payments
on medium- and long-term debt.
The Corporation regularly evaluates its ability to meet funding needs in unanticipated, stress environments.
In conjunction with the quarterly 200 basis point interest rate shock analyses, discussed in the “Interest Rate
Sensitivity” section on page 54 of this financial review, liquidity ratios and potential funding availability are
examined. Each quarter, the Corporation also evaluates its ability to meet liquidity needs under a series of broad
events, distinguished in terms of duration and severity. The evaluation projects that sufficient sources of liquidity
are available in each series of events.
59
The Corporation also holds a significant interest in certain variable interest entities (VIE’s), in which it is not
the primary beneficiary and does not consolidate. These unconsolidated VIE’s are principally private equity and
venture capital funds, or low income housing limited partnerships. The Corporation defines a significant interest
in a VIE as a subordinated interest that exposes it to a significant portion of the VIE’s expected losses or residual
returns. In general, a VIE is an entity that either (1) has an insufficient amount of equity to carry out its principal
activities without additional subordinated financial support, (2) has a group of equity owners that are unable to
make significant decisions about its activities, or (3) has a group of equity owners that do not have the obligation
to absorb losses or the right to receive returns generated by its operations. If any of these characteristics is present,
the entity is subject to a variable interests consolidation model, and consolidation is based on variable interests,
not on ownership of the entity’s outstanding voting stock. Variable interests are defined as contractual, ownership,
or other monetary interests in an entity that change with fluctuations in the entity’s net asset value. A company
must consolidate an entity depending on whether the entity is a voting rights entity or a VIE. Refer to the
“principles of consolidation” section in Note 1 of the consolidated financial statements on page 72 for a
summarization of the Corporation’s consolidation policy. Also refer to Note 22 of the consolidated financial
statements on page 114 for a discussion of the Corporation’s involvement in VIE’s, including those in which it
holds a significant interest but for which it is not the primary beneficiary.
Other Market Risks
The Corporation’s market risk related to trading instruments is not significant, as trading activities are
limited. Certain components of the Corporation’s noninterest income, primarily fiduciary income, are at risk to
fluctuations in the market values of underlying assets, particularly equity securities. Other components of
noninterest income, primarily brokerage fees, are at risk to changes in the level of market activity.
Share-based compensation expense recognized by the Corporation is dependent upon the fair value of stock
options and restricted stock at the date of grant. The fair value of both stock options and restricted stock is
impacted by the market price of the Corporation’s stock on the date of grant and is at risk to changes in equity
markets, general economic conditions and other factors. For further information regarding the valuation of stock
options and restricted stock, refer to the “Critical Accounting Policies” section of this financial review on page 62.
Indirect Private Equity and Venture Capital Investments
At December 31, 2007, the Corporation had a $74 million portfolio of indirect (through funds) private equity
and venture capital investments, and had commitments of $42 million to fund additional investments in future
periods. The value of these investments is at risk to changes in equity markets, general economic conditions and a
variety of other factors. The majority of these investments are not readily marketable, and are reported in other
assets. The investments are individually reviewed for impairment on a quarterly basis, by comparing the carrying
value to the estimated fair value. For further information regarding the valuation of indirect private equity and
venture capital investments, refer to the “Critical Accounting Policies” section of this financial review on page 62.
Approximately $12 million of the underlying equity and debt (primarily equity) in these funds are to companies
in the automotive industry. The automotive-related positions do not represent a majority of any one fund’s
investments, and therefore, the exposure related to these positions is mitigated by the performance of other
investment interests within the fund’s portfolio of companies. Income from unconsolidated indirect private
equity and venture capital investments in 2007 was $27 million, which was partially offset by $11 million of write-
downs recognized on such investments in 2007. No generic assumption is applied to all investments when
evaluating for impairment. The uncertainty in the economy and equity markets may affect the values of the fund
investments. The following table provides information on the Corporation’s indirect private equity and venture
capital investments portfolio.
Number of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Largest single investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments to fund additional investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60
December 31, 2007
(dollar amounts
in millions)
133
$ 74
15
42
Operational Risk
Operational risk represents the risk of loss resulting from inadequate or failed internal processes, people and
systems, or from external events. The definition includes legal risk, which is the risk of loss resulting from failure to
comply with laws and regulations as well as prudent ethical standards and contractual obligations. It also includes
the exposure to litigation from all aspects of an institution’s activities. The definition does not include strategic or
reputational risks. Although operational losses are experienced by all companies and are routinely incurred in
business operations, the Corporation recognizes the need to identify and control operational losses, and seeks to
limit losses to a level deemed appropriate by management after considering the nature of the Corporation’s
business and the environment in which it operates. Operational risk is mitigated through a system of internal
controls that are designed to keep operating risks at appropriate levels. An Operational Risk Management
Committee ensures appropriate risk management techniques and systems are maintained. The Corporation has
developed a framework that includes a centralized operational risk management function and business/support
unit risk coordinators responsible for managing operational risk specific to the respective business lines.
In addition, internal audit and financial staff monitors and assesses the overall effectiveness of the system of
internal controls on an ongoing basis. Internal Audit reports the results of reviews on the controls and systems to
management and the Audit Committee of the Board. The internal audit staff independently supports the Audit
Committee oversight process. The Audit Committee serves as an independent extension of the Board.
Compliance Risk
Compliance risk represents the risk of regulatory sanctions, reputational impact or financial loss resulting
from its failure to comply with regulations and standards of good banking practice. Activities which may expose
the Corporation to compliance risk include, but are not limited to, those dealing with the prevention of money
laundering, privacy and data protection, community reinvestment initiatives, fair lending challenges resulting
from the Corporation’s expansion of its banking center network and employment and tax matters.
The Enterprise-Wide Compliance Committee, comprised of senior business unit managers as well as
managers responsible for compliance, audit and overall risk, oversees compliance risk. This enterprise-wide
approach provides a consistent view of compliance across the organization. The Enterprise-Wide Compliance
Committee also ensures that appropriate actions are implemented in business units to mitigate risk to an
acceptable level.
Business Risk
Business risk represents the risk of loss due to impairment of reputation, failure to fully develop and execute
business plans, failure to assess current and new opportunities in business, markets and products, and any other
event not identified in the defined risk categories of credit, market and liquidity, operational or compliance risks.
Mitigation of the various risk elements that represent business risk is achieved through initiatives to help the
Corporation better understand and report on the various risks. Wherever quantifiable, the Corporation intends to
use situational analysis and other testing techniques to appreciate the scope and extent of these risks.
61
CRITICAL ACCOUNTING POLICIES
The consolidated financial statements are prepared based on the application of accounting policies, the most
significant of which are described on page 72 in Note 1 to the consolidated financial statements. These policies
require numerous estimates and strategic or economic assumptions, which may prove inaccurate or subject to
variations. Changes in underlying factors, assumptions or estimates could have a material impact on the
Corporation’s future financial condition and results of operations. The most critical of these significant account-
ing policies are the policies for allowance for credit losses, pension plan accounting, income taxes and the
valuation of restricted stock and stock options, nonmarketable equity securities and warrants. These policies are
reviewed with the Audit Committee of the Board and are discussed more fully below.
Allowance for Credit Losses
The allowance for credit losses (combined allowance for loan losses and allowance for credit losses on
lending-related commitments) is calculated with the objective of maintaining a reserve sufficient to absorb
estimated probable losses. Management’s determination of the adequacy of the allowance is based on periodic
evaluations of the loan portfolio, lending-related commitments, and other relevant factors. However, this
evaluation is inherently subjective as it requires an estimate of the loss content for each risk rating and for each
impaired loan, an estimate of the amounts and timing of expected future cash flows, an estimate of the value of
collateral, including the market value of thinly traded or nonmarketable equity securities, and an estimate of the
probability of drawing on unused commitments.
Allowance for Loan Losses
Loans for which it is probable that payment of interest and principal will not be made in accordance with the
contractual terms of the loan agreement are considered impaired. Consistent with this definition, all nonaccrual
and reduced-rate loans (with the exception of residential mortgage and consumer loans) are impaired. The fair
value of impaired loans is estimated using one of several methods, including collateral value, market value of
similar debt, enterprise value, liquidation value and discounted cash flows. The valuation is reviewed and updated
on a quarterly basis. While the determination of fair value may involve estimates, each estimate is unique to the
individual loan, and none is individually significant.
The portion of the allowance allocated to the remaining loans is determined by applying estimated loss ratios
to loans in each risk category. Estimated loss ratios incorporate factors such as recent charge-off experience, current
economic conditions and trends, and trends with respect to past due and nonaccrual amounts, and are supported
by underlying analysis, including information on migration and loss given default studies from each of the three
major domestic geographic markets, as well as mapping to bond tables. Since a loss ratio is applied to a large
portfolio of loans, any variation between actual and assumed results could be significant. In addition, a portion of
the allowance is allocated to these remaining loans based on industry specific risks inherent in certain portfolios
that have experienced above average losses, including portfolio exposures to technology-related industries,
Michigan and California residential real estate development and Small Business Administration loans. Further-
more, a portion of the allowance is allocated to these remaining loans based on industry specific risks inherent in
certain portfolios that have not yet manifested themselves in the risk rating, including portfolio exposures to the
automotive industry and California residential real estate development.
A portion of the allowance is also maintained to cover factors affecting the determination of probable losses
inherent in the loan portfolio that are not necessarily captured by the application of estimated loss ratios or
identified industry specific risks. These factors include the imprecision in the risk rating system and the risk
associated with new customer relationships.
The principle assumption used in deriving the allowance for loan losses is the estimate of loss content for
each risk rating. To illustrate, if recent loss experience dictated that the estimated loss ratios would be changed by
five percent (of the estimate) across all risk ratings, the allocated allowance as of December 31, 2007 would change
by approximately $14 million.
62
Allowance for Credit Losses on Lending-Related Commitments
Lending-related commitments for which it is probable that the commitment will be drawn (or sold) are
reserved with the same estimated loss rates as loans, or with specific reserves. In general, the probability of draw for
letters of credit is considered certain once the credit becomes a watch list credit. Non-watch list letters of credits
and all unfunded commitments have a lower probability of draw, to which standard loan loss rates are applied.
Automotive Industry Concentration
A concentration in loans to the automotive industry could result in significant changes to the allowance for
credit losses if assumptions underlying the expected losses differed from actual results. For example, a bankruptcy
by a domestic automotive manufacturer could adversely affect the risk ratings of its suppliers, causing actual losses
to differ from those expected. The allowance for loan losses included a component for automotive suppliers,
which assumed that suppliers who derive a significant portion of their revenue from certain domestic manu-
facturers would be downgraded by one or two risk ratings in the event of bankruptcy of those domestic
manufacturers.
For further discussion of the methodology used in the determination of the allowance for credit losses, refer
to the “Allowance for Credit Losses” section in this financial review on page 46, and Note 1 to the consolidated
financial statements on page 72. To the extent actual outcomes differ from management estimates, additional
provision for credit losses may be required that would adversely impact earnings in future periods. A substantial
majority of the allowance is assigned to business segments. Any earnings impact resulting from actual outcomes
differing from management estimates would primarily affect the Business Bank segment.
Pension Plan Accounting
The Corporation has defined benefit plans in effect for substantially all full-time employees hired before
January 1, 2007. Benefits under the plans are based on years of service, age and compensation. Assumptions are
made concerning future events that will determine the amount and timing of required benefit payments, funding
requirements and pension expense (income). The three major assumptions are the discount rate used in
determining the current benefit obligation, the long-term rate of return expected on plan assets and the rate
of compensation increase. The assumed discount rate is determined by matching the expected cash flows of the
pension plans to a yield curve that is representative of long-term, high-quality fixed income debt instruments as of
the measurement date, December 31. The second assumption, long-term rate of return expected on plan assets, is
set after considering both long-term returns in the general market and long-term returns experienced by the assets
in the plan. The current asset allocation and target asset allocation model for the plans is detailed in Note 16 on
page 97. The expected returns on these various asset categories are blended to derive one long-term return
assumption. The assets are invested in certain collective investment funds and mutual investment funds, equity
securities, U.S. Treasury and other Government agency securities, Government-sponsored enterprise securities
and corporate bonds and notes. The third assumption, rate of compensation increase, is based on reviewing recent
annual pension-eligible compensation increases as well as the expectation of future increases. The Corporation
reviews its pension plan assumptions on an annual basis with its actuarial consultants to determine if the
assumptions are reasonable and adjusts the assumptions to reflect changes in future expectations.
The key actuarial assumptions that will be used to calculate 2008 expense for the defined benefit pension
plans are a discount rate of 6.47 percent, a long-term rate of return on assets of 8.25 percent, and a rate of
compensation increase of 4.00 percent. Pension expense in 2008 is expected to be approximately $21 million, a
decrease of $15 million from the $36 million recorded in 2007, primarily due to changes in the discount rate.
Changing the 2008 key actuarial assumptions discussed above in 25 basis point increments would have the
following impact on pension expense in 2008:
Key Actuarial Assumption
25 Basis Point
Increase
Decrease
(in millions)
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term rate of return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(6.1)
(3.0)
3.0
$ 6.1
3.0
(3.0)
63
If the assumed long-term return on assets differs from the actual return on assets, the asset gains and losses are
incorporated in the market-related value, which is used to determine the expected return on assets, over a five-year
period. The Employee Benefits Committee, which is comprised of executive and senior managers from various
areas of the Corporation, provides broad asset allocation guidelines to the asset manager, who reports results and
investment strategy quarterly to the Committee. Actual asset allocations are compared to target allocations by
asset category and investment returns for each class of investment are compared to expected results based on
broad market indices.
Note 16 on page 97 to the consolidated financial statements contains a table showing the funded status of the
qualified defined benefit plan at year-end which was $200 million at December 31, 2007. Due to the long-term
nature of pension plan assumptions, actual results may differ significantly from the actuarial-based estimates.
Differences between estimates and experience not recovered in the market or by future assumption changes are
required to be recorded in shareholders’ equity as part of accumulated other comprehensive income (loss) and
amortized to pension expense in future years. For further information, refer to Note 1 to the consolidated financial
statements on page 72. The actuarial net loss in the qualified defined benefit plan recognized in accumulated
other comprehensive income (loss) at December 31, 2007 was $48 million, net of tax. In 2007, the actual return
on plan assets was $89 million, compared to an expected return on plan assets of $93 million. In 2006, the actual
return on plan assets was $123 million, compared to an expected return on plan assets of $89 million. The
Corporation may make contributions from time to time to the qualified defined benefit plan to mitigate the
impact of the actuarial losses on future years. No contributions were made to the plan in 2007. For the foreseeable
future, the Corporation has sufficient liquidity to make such payments.
Pension expense is recorded in “employee benefits” expense on the consolidated statements of income, and is
allocated to business segments based on the segment’s share of salaries expense. Given the salaries expense
included in 2007 segment results, pension expense was allocated approximately 38 percent, 34 percent, 23 percent
and 5 percent to the Retail Bank, Business Bank, Wealth & Institutional Management and Finance segments,
respectively, in 2007.
Income Taxes
The calculation of the Corporation’s income tax provision and related tax accruals is complex and requires
the use of estimates and judgments. The provision for income taxes is based on amounts reported in the
consolidated statements of income (after deducting non-taxable items, principally income on bank-owned life
insurance and deducting tax credits related to investments in low income housing partnerships) and includes
deferred income taxes on temporary differences between the tax basis and financial reporting basis of assets and
liabilities. Accrued taxes represent the net estimated amount due or to be received from taxing jurisdictions
currently or in the future and are included in “accrued income and other assets” or “accrued expenses and other
liabilities” on the consolidated balance sheets. The Corporation assesses the relative risks and merits of tax
positions for various transactions after considering statutes, regulations, judicial precedent and other available
information, and maintains tax accruals consistent with these assessments. The Corporation is subject to audit by
taxing authorities that could question and/or challenge the tax positions taken by the Corporation. In the event of
such a challenge, the Corporation would pursue any disallowed taxes through administrative measures, and if
necessary, vigorously defend its position in court in accordance with its view of the law.
Included in net deferred taxes are deferred tax assets. Deferred tax assets are evaluated for realization based on
available evidence and assumptions made regarding future events. In the event that the future taxable income does
not occur in the manner anticipated, other initiatives could be undertaken to preclude the need to recognize a
valuation allowance against the deferred tax asset. A valuation allowance is provided when it is more-likely-than-
not that some portion of the deferred tax asset will not be realized. At December 31, 2007, a valuation allowance of
approximately $2 million was established for certain state deferred tax assets.
Changes in the estimate of accrued taxes occur due to changes in tax law, interpretations of existing tax laws,
new judicial or regulatory guidance, and the status of examinations conducted by taxing authorities that impact
the relative risks and merits of tax positions taken by the Corporation. These changes in the estimate of accrued
taxes could be significant to the operating results of the Corporation. For further information on tax accruals and
related risks, see Note 17 to the consolidated financial statements on page 103.
64
On January 1, 2007, the Corporation adopted the provisions of FASB issued Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109,” (FIN 48). FIN 48
provides guidance on measurement, de-recognition of tax benefits, classification, accounting disclosure and
transition requirements in accounting for uncertain tax positions. For further discussion of FIN 48, refer to Note 17
to the consolidated financial statements on page 103.
Valuation Methodologies
Restricted Stock and Stock Options
The fair value of share-based compensation as of the date of grant is recognized as compensation expense on
a straight-line basis over the vesting period. In 2007, the Corporation recognized total share-based compensation
expense of $59 million. The Corporation used a binomial model to value stock options granted subsequent to
March 31, 2005. Substantially all stock options granted in 2005 and thereafter were valued using a binomial
model. The option valuation model requires several inputs, including the risk-free interest rate, the expected
dividend yield, expected volatility factors of the market price of the Corporation’s common stock and the expected
option life. For further discussion on the valuation model inputs, see Note 15 to the consolidated financial
statements on page 95. Changes in input assumptions can materially affect the fair value estimates. The option
valuation model is sensitive to the market price of the Corporation’s stock at the grant date, which affects the fair
value estimates and, therefore, the amount of expense recorded on future grants. Using the number of stock
options granted in 2007 and the Corporation’s stock price at December 31, 2007, a $5.00 per share increase in
stock price would result in an increase in pretax expense of approximately $3 million, from the assumed base, over
the options’ vesting period. The fair value of restricted stock is based on the market price of the Corporation’s stock
at the grant date. Using the number of restricted stock awards issued in 2007, a $5.00 per share increase in stock
price would result in an increase in pretax expense of approximately $2 million, from the assumed base, over the
awards’ vesting period. Refer to Notes 1 and 15 of the consolidated financial statements on pages 72 and 95,
respectively, for further discussion of share-based compensation expense.
Nonmarketable Equity Securities
At December 31, 2007, the Corporation had a $74 million portfolio of indirect (through funds) private equity
and venture capital investments, and had commitments to fund additional investments of $42 million in future
periods. The majority of these investments are not readily marketable. The investments are individually reviewed
for impairment, on a quarterly basis, by comparing the carrying value to the estimated fair value. The Corporation
bases its estimates of fair value for the majority of its indirect private equity and venture capital investments on the
percentage ownership in the fair value of the entire fund, as reported by the fund management. In general, the
Corporation does not have the benefit of the same information regarding the fund’s underlying investments as
does fund management. Therefore, after indication that fund management adheres to accepted, sound and
recognized valuation techniques, the Corporation generally utilizes the fair values assigned to the underlying
portfolio investments by fund management. The impact on fair values of future capital calls and transfer
restrictions is not considered by fund management, and the Corporation assumes it to be insignificant. For
those funds where fair value is not reported by fund management, the Corporation derives the fair value of the
fund by estimating the fair value of each underlying investment in the fund. In addition to using qualitative
information about each underlying investment, as provided by fund management, the Corporation gives
consideration to information pertinent to the specific nature of the debt or equity investment, such as relevant
market conditions, offering prices, operating results, financial conditions, exit strategy and other qualitative
information, as available. The lack of an independent source to validate fair value estimates, including the impact
of future capital calls and transfer restrictions, is an inherent limitation in the valuation process. The amount by
which the carrying value exceeds the fair value that is determined to be other-than-temporary impairment, is
charged to current earnings and the carrying value of the investment is written down accordingly. While the
determination of fair value involves estimates, no generic assumption is applied to all investments when
evaluating for impairment. As such, each estimate is unique to the individual investment, and none is individually
significant. The inherent uncertainty in the process of valuing equity securities for which a ready market is
unavailable may cause our estimated values of these securities to differ significantly from the values that would
have been derived had a ready market for the securities existed, and those differences could be material. The value
of these investments is at risk to changes in equity markets, general economic conditions and a variety of other
65
factors, which could result in an impairment charge in future periods. The valuation of nonmarketable equity
securities may be impacted by the adoption of SFAS No. 157, “Fair Value Measurement,” (SFAS 157). For further
discussion of SFAS 157, refer to Note 2 to the consolidated financial statements on page 79.
Warrants
The Corporation holds a portfolio of approximately 840 warrants for generally non-marketable equity
securities. These warrants are primarily from high technology, non-public companies obtained as part of the loan
origination process. Warrants which contain a net exercise provision (approximately 570 warrants at December 31,
2007), are required to be accounted for as derivatives and recorded at fair value ($23 million at December 31,
2007) in accordance with the provisions of Implementation Issue 17a of SFAS 133, “Accounting for Derivative
Instruments and Hedging Activities.” The fair value of the derivative warrant portfolio is reviewed quarterly and
adjustments to the fair value are recorded quarterly in current earnings. Fair value is determined using a Black-
Scholes valuation model, which has five inputs: risk-free rate, expected life, volatility, exercise price, and the per
share market value of the underlying company. Key assumptions used in the December 31, 2007 valuation were as
follows. The risk-free rate was estimated using the U.S. treasury rate, as of the valuation date, corresponding with
the expected life of the warrant. The Corporation used an expected term of one half of the remaining contractual
term of each warrant. Volatility was estimated using an index of comparable publicly traded companies, based on
the Standard Industrial Classification codes. Where sufficient financial data exists, a market approach method was
utilized to estimate the current value of the underlying company. When quoted market values were not available,
an index method was utilized. Under the index method, the subject companies’ values were “rolled-forward” from
the inception date through the valuation date based on the change in value of an underlying index of guideline
public companies. The liquidity of each warrant, or the portfolio of warrants, is not considered in Black-Scholes,
and the Corporation historically assumed this nonmarketability to be insignificant.
The fair value of warrants recorded on the Corporation’s consolidated balance sheets represents manage-
ment’s best estimate of the fair value of these instruments within the framework of existing accounting standards.
Changes in the above material assumptions could result in significantly different valuations. For example, the
following table demonstrates the effect of changes in the volatility assumption used, currently 60 percent, on the
value of warrants required to be carried at fair value:
Valuation of Warrants Held at December 31, 2007
Change in Volatility Factor
20% Lower
20% Higher
(dollar amounts in
millions)
Value of all warrants required to be carried at fair value . . . . . . . . . . . . . . . . . . . . . . .
$(1.5)
$1.7
Based on expected average life of 1.7 years
The valuation of warrants is complex and is subject to a certain degree of management judgment. The
inherent uncertainty in the process of valuing warrants for which a ready market is unavailable may cause
estimated values of these warrant assets to differ significantly from the values that would have been derived had a
ready market for the warrant assets existed, and those differences could be material. The use of an alternative
valuation methodology or alternative approaches used to calculate material assumptions could result in signif-
icantly different estimated values for these assets. In addition, the value of all warrants required to be carried at fair
value is at risk to changes in equity markets, general economic conditions and other factors. The valuation of
warrants may be impacted by the adoption of SFAS No. 157, “Fair Value Measurement,” (SFAS 157). For further
discussion of SFAS 157, refer to Note 2 to the consolidated financial statements on page 79.
66
FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.
In addition, the Corporation may make other written and oral communication from time to time that contain such
statements. All statements regarding the Corporation’s expected financial position, strategies and growth prospects and
general economic conditions expected to exist in the future are forward-looking statements. The words, “anticipates,”
“believes,” “feels,” “expects,” “estimates,” “seeks,” “strives,” “plans,” “intends,” “outlook,” “forecast,” “position,”
“target,” “mission,” “assume,” “achievable,” “potential,” “strategy,” “goal,” “aspiration,” “outcome,” “continue,”
“remain,” “maintain,” “trend,” “objective,” and variations of such words and similar expressions, or future or
conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions as they
relate to the Corporation or its management, are intended to identify forward-looking statements.
The Corporation cautions that forward-looking statements are subject to numerous assumptions, risks and
uncertainties, which change over time. Forward-looking statements speak only as of the date the statement is made,
and the Corporation does not undertake to update forward-looking statements to reflect facts, circumstances,
assumptions or events that occur after the date the forward-looking statements are made. Actual results could differ
materially from those anticipated in forward-looking statements and future results could differ materially from
historical performance.
In addition to factors mentioned elsewhere in this report or previously disclosed in the Corporation’s SEC reports
(accessible on the SEC’s website at www.sec.gov or on the Corporation’s website at www.comerica.com), actual results
could differ materially from forward-looking statements and future results could differ materially from historical
performance due to a variety of reasons, including but not limited to, the following factors:
(cid:129) general political, economic or industry conditions, either domestically or internationally, may be less favorable
than expected;
(cid:129) governmental monetary and fiscal policies may adversely affect the financial services industry, and therefore
impact the Corporation’s financial condition and results of operations;
(cid:129) unfavorable developments concerning credit quality could affect the Corporation’s financial results;
(cid:129) recent problems faced by residential real estate developers could materially impact the Corporation;
(cid:129) businesses or industries in which the Corporation has lending concentrations, including, but not limited to,
automotive production industry and the real estate business, could suffer a significant decline which could
adversely affect the Corporation;
(cid:129) the introductions, implementation, withdrawal, success and timing of business initiatives and strategies,
including, but not limited to, the opening of new banking centers and plans to grow personal financial services
and wealth management, may be less successful or may be different than anticipated, which could adversely
affect the Corporation’s business;
(cid:129) utilization of technology to efficiently and effectively develop, market and deliver new products and services;
(cid:129) changes in the financial markets, including fluctuations in interest rates and their impact on deposit pricing,
could adversely affect the Corporation’s net interest income and balance sheet;
(cid:129) competitive product and pricing pressures among financial institutions within the Corporation’s markets may
change;
(cid:129) customer borrowing, repayment, investment and deposit practices generally may be different than anticipated;
(cid:129) management’s ability to maintain and expand customer relationships may differ from expectations;
(cid:129) management’s ability to retain key officers and employees may change;
(cid:129) legal and regulatory proceedings and related matters with respect to the financial services industry, including
those directly involving the Corporation and its subsidiaries, could adversely affect the Corporation or the
financial services industry in general;
(cid:129) changes in regulation or oversight may have a material adverse impact on the Corporation’s operations;
(cid:129) methods of reducing risk exposures might not be effective;
(cid:129) there could be terrorist activities or other hostilities, which may adversely affect the general economy, financial
and capital markets, specific industries, and the Corporation; and
(cid:129) there could be natural disasters, including, but not limited to, hurricanes, tornadoes, earthquakes, fires, floods
and the disruption of private or public utilities, which may adversely affect the general economy, financial and
capital markets, specific industries, and the Corporation.
67
CONSOLIDATED BALANCE SHEETS
Comerica Incorporated and Subsidiaries
December 31
2007
2006
(in millions, except
share data)
ASSETS
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,440
36
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . . . . .
373
Other short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,296
Investment securities available-for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate construction loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customers’ liability on acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,223
4,816
10,048
1,915
2,464
1,351
1,926
50,743
(557)
50,186
650
48
3,302
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $62,331
$ 1,434
2,632
327
3,662
26,265
4,203
9,659
1,677
2,423
1,353
1,851
47,431
(493)
46,938
568
56
2,384
$58,001
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,920
$13,901
Money market and NOW deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Institutional certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign office time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest-bearing deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medium- and long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,261
1,325
8,357
6,147
1,268
32,358
44,278
2,807
48
1,260
8,821
57,214
15,250
1,365
7,223
5,783
1,405
31,026
44,927
635
56
1,281
5,949
52,848
Common stock — $5 par value:
Authorized — 325,000,000 shares
Issued — 178,735,252 shares at 12/31/07 and 12/31/06 . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less cost of common stock in treasury — 28,747,097 shares at 12/31/07 and
894
564
(177)
5,497
894
520
(324)
5,282
(1,661)
21,161,161 shares at 12/31/06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,117
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $62,331
(1,219)
5,153
$58,001
See notes to consolidated financial statements.
68
CONSOLIDATED STATEMENTS OF INCOME
Comerica Incorporated and Subsidiaries
Years Ended December 31
2006
(in millions, except per share data)
2005
2007
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,501
206
Interest on investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
Interest on short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,730
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INTEREST EXPENSE
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on medium- and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income after provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . .
NONINTEREST INCOME
Service charges on deposit accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiduciary income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial lending fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Letter of credit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brokerage fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank-owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income from principal investing and warrants . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net securities gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain (loss) on sales of businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from lawsuit settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,167
105
455
1,727
2,003
212
1,791
221
199
75
63
40
43
54
36
19
7
3
—
128
888
NONINTEREST EXPENSES
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
844
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
193
Total salaries and employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,037
Net occupancy expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138
Equipment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60
Outside processing fee expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
91
Software expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63
Customer services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43
Litigation and operational losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
Provision for credit losses on lending-related commitments . . . . . . . . . . . . . . . . . . . . .
(1)
Other noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
242
Total noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,691
Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . .
988
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
306
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
682
4
Income from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 686
Basic earnings per common share:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.47
4.49
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per common share:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared on common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.40
4.43
393
2.56
See notes to consolidated financial statements.
$3,216
174
32
3,422
1,005
130
304
1,439
1,983
37
1,946
218
180
65
64
38
40
46
40
10
—
(12)
47
119
855
823
184
1,007
125
55
85
56
47
11
5
283
1,674
1,127
345
782
111
$ 893
$ 4.88
5.57
4.81
5.49
380
2.36
$2,554
148
24
2,726
548
52
170
770
1,956
(47)
2,003
218
174
63
70
37
36
39
38
17
—
1
—
126
819
786
178
964
118
53
77
49
69
14
18
251
1,613
1,209
393
816
45
$ 861
$ 4.90
5.17
4.84
5.11
367
2.20
69
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Comerica Incorporated and Subsidiaries
Common Stock
In Shares
Amount
Capital
Surplus
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Treasury
Stock
Total
Shareholders’
Equity
(in millions, except per share data)
BALANCE AT JANUARY 1, 2005 . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss, net of tax . . .
170.5
—
—
$894
—
—
$421
—
—
$ (69)
—
(101)
$4,331
861
—
$ (472)
—
—
$5,105
861
(101)
760
Total comprehensive income . . . . . . . . .
Cash dividends declared on common
stock ($2.20 per share) . . . . . . . . . . .
Purchase of common stock . . . . . . . . . .
Net issuance of common stock under
employee stock plans . . . . . . . . . . . .
Recognition of share-based
compensation expense . . . . . . . . . . . .
BALANCE AT DECEMBER 31, 2005. . . .
Net income . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net of
—
(9.0)
1.4
—
—
—
—
—
162.9
—
$894
—
tax . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Total comprehensive income . . . . . . . . .
Cash dividends declared on common
stock ($2.36 per share) . . . . . . . . . . .
Purchase of common stock . . . . . . . . . .
Net issuance of common stock
under employee stock plans . . . . . . . .
Recognition of share-based
compensation expense . . . . . . . . . . . .
Employee deferred compensation
—
(6.7)
1.7
—
obligations . . . . . . . . . . . . . . . . . . . .
(0.3)
SFAS 158 transition adjustment, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
—
—
(4)
44
$461
—
—
—
—
(15)
57
17
—
BALANCE AT DECEMBER 31, 2006. . . .
FSP 13-2 transition adjustment, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . . .
FIN 48 transition adjustment, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . . .
BALANCE AT JANUARY 1, 2007 . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net of
157.6
$894
$520
—
—
—
—
—
—
—
—
—
—
(367)
—
(29)
—
—
(525)
(367)
(525)
84
—
51
44
$(170)
—
$4,796
893
$ (913)
—
$5,068
893
55
—
—
—
—
—
(209)
$(324)
—
—
—
—
—
(384)
95
—
(17)
(380)
—
(27)
—
—
—
55
948
(380)
(384)
53
57
—
—
(209)
$5,282
$(1,219)
$5,153
(46)
(6)
—
—
(46)
(6)
157.6
—
$894
—
$520
—
$(324)
—
$5,230
686
$(1,219)
—
$5,101
686
tax . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Total comprehensive income . . . . . . . . .
Cash dividends declared on common
stock ($2.56 per share) . . . . . . . . . . .
Purchase of common stock . . . . . . . . . .
Net issuance of common stock under
—
(10.0)
employee stock plans . . . . . . . . . . . .
2.4
Recognition of share-based
compensation expense . . . . . . . . . . . .
Employee deferred compensation
obligations . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
—
—
—
(16)
59
1
147
—
—
—
—
—
—
—
(393)
—
—
(580)
(26)
139
—
—
—
(1)
147
833
(393)
(580)
97
59
—
BALANCE AT DECEMBER 31, 2007 . . . .
150.0
$894
$564
$(177)
$5,497
$(1,661)
$5,117
See notes to consolidated financial statements.
70
CONSOLIDATED STATEMENTS OF CASH FLOWS
Comerica Incorporated and Subsidiaries
Years Ended December 31,
2006
2007
2005
(in millions)
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
686
4
682
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses on lending-related commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and software amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based compensation arrangements . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amortization of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain on sale/settlement of investment securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . .
Net (gain) loss on sales of businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contributions to qualified pension plan fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease (increase) in trading securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease (increase) in loans held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease (increase) in accrued income receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (decrease) increase in accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INVESTING ACTIVITIES
Net decrease (increase) in federal funds sold and other short-term investments . . . . . . . . . . . . . . . . . .
Proceeds from sales of investment securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from maturities of investment securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of investment securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in fixed assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net decrease (increase) in customers’ liability on acceptances outstanding . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
212
(1)
96
59
(9)
(3)
(7)
(3)
—
61
14
1
(17)
(75)
4
332
1,014
2,558
7
882
(3,519)
(3,561)
(189)
8
3
—
(3,811)
FINANCING ACTIVITIES
(1,295)
Net (decrease) increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,172
Net increase in short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8)
Net (decrease) increase in acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,335
Proceeds from issuance of medium- and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,529)
Repayments of medium- and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89
Proceeds from issuance of common stock under employee stock plans. . . . . . . . . . . . . . . . . . . . . . . .
9
Excess tax benefits from share-based compensation arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . .
(580)
Purchase of common stock for treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(390)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Discontinued operations, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,803
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Net increase (decrease) in cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and due from banks at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,434
Cash and due from banks at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,440
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,703
$ 1,385
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
402
Noncash investing and financing activities:
Loans transferred to other real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loans transferred to held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits transferred to held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20
83
—
$
$
299
13
74
—
See notes to consolidated financial statements.
71
$
893
111
782
37
5
84
57
(9)
(2)
—
12
—
(50)
78
(65)
37
(66)
75
193
975
861
45
816
(47)
18
72
43
—
8
—
(1)
(58)
—
(1)
95
(84)
(1)
(14)
30
846
(1,663)
1
1,337
(747)
(4,324)
(163)
3
43
221
(5,292)
2,496
333
(3)
3,326
(1,303)
45
9
(384)
(377)
—
4,142
(175)
1,609
$ 1,434
2,115
—
1,302
(1,647)
(2,618)
(132)
(2)
1
103
(878)
1,524
109
2
283
(576)
51
—
(525)
(366)
—
502
470
1,139
$ 1,609
$
$
$
733
340
33
43
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Note 1 — Summary of Significant Accounting Policies
Organization
Comerica Incorporated (the Corporation) is a registered financial holding company headquartered in Dallas,
Texas. The Corporation’s major business segments are the Business Bank, the Retail Bank and Wealth & Insti-
tutional Management. For further discussion of each business segment, refer to Note 24 on page 119. The core
businesses are tailored to each of the Corporation’s four primary geographic markets: Midwest, Western, Texas and
Florida. The Corporation and its banking subsidiaries are regulated at both the state and federal levels.
The accounting and reporting policies of the Corporation conform to U.S. generally accepted accounting
principles and prevailing practices within the banking industry. The preparation of financial statements in
conformity with U.S. generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from these estimates.
The following summarizes the significant accounting policies of the Corporation applied in the preparation
of the accompanying consolidated financial statements.
Principles of Consolidation
The consolidated financial statements include the accounts of the Corporation and its subsidiaries after
elimination of all significant intercompany accounts and transactions. Certain amounts in the financial state-
ments for prior years have been reclassified to conform to current financial statement presentation.
The Corporation consolidates variable interest entities (VIE’s) in which it is the primary beneficiary. In
general, a VIE is an entity that either (1) has an insufficient amount of equity to carry out its principal activities
without additional subordinated financial support, (2) has a group of equity owners that are unable to make
significant decisions about its activities or (3) has a group of equity owners that do not have the obligation to
absorb losses or the right to receive returns generated by its operations. If any of these characteristics is present, the
entity is subject to a variable interests consolidation model, and consolidation is based on variable interests, not
on ownership of the entity’s outstanding voting stock. Variable interests are defined as contractual, ownership or
other money interests in an entity that change with fluctuations in the entity’s net asset value. The primary
beneficiary consolidates the VIE; the primary beneficiary is defined as the enterprise that absorbs a majority of
expected losses or receives a majority of residual returns (if the losses or returns occur), or both. The Corporation
consolidates entities not determined to be VIE’s when it holds a majority (controlling) interest in the entity’s
outstanding voting stock. The minority interest in less than 100% owned consolidated subsidiaries is not material
and is included in “accrued expenses and other liabilities” on the consolidated balance sheets. The related
minority interest in earnings which is included in “other noninterest expenses” on the consolidated statements of
income was a credit of $1 million for the year ended December 31, 2007, not significant for the year ended
December 31, 2006 and an expense of $4 million for the year ended December 31, 2005.
Equity investments in entities that are not VIE’s where the Corporation owns less than a majority (con-
trolling) interest and equity investments in entities that are VIE’s where the Corporation is not the primary
beneficiary are not consolidated. Rather, such investments are accounted for using either the equity method or
cost method. The equity method is used for investments in a corporate joint venture and investments where the
Corporation has the ability to exercise significant influence over the investee’s operation and financial policies,
which is generally presumed to exist if the Corporation owns more than 20 percent of the voting interest of the
investee. Equity method investments are included in “accrued income and other assets” on the consolidated
balance sheets, with income and losses recorded in “other noninterest income” on the consolidated statements of
income. Unconsolidated equity investments that do not meet the criteria to be accounted for under the equity
method are accounted for under the cost method. Cost method investments in publicly traded companies are
72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
included in “investment securities available-for-sale” on the consolidated balance sheets, with income (net of
write-downs) recorded in “net securities gains (losses)” on the consolidated statements of income. Cost method
investments in non-publicly traded companies are included in “accrued income and other assets” on the
consolidated balance sheets, with income (net of write-downs) recorded in “other noninterest income” on
the consolidated statements of income.
For further information regarding the Corporation’s investments in VIE’s, refer to Note 22 on page 114.
Discontinued Operations
Components of the Corporation that have been or will be disposed of by sale, where the Corporation does
not have a significant continuing involvement in the operations after the disposal, are accounted for as
discontinued operations in all periods presented if significant to the consolidated financial statements. For
further information on discontinued operations, refer to Note 26 on page 127.
Short-term Investments
Short-term investments include interest-bearing deposits with banks,
trading securities and loans
held-for-sale.
Trading securities are carried at market value. Realized and unrealized gains or losses on trading securities are
included in “other noninterest income” on the consolidated statements of income.
Loans held-for-sale, typically residential mortgages, student loans and Small Business Administration loans,
are carried at the lower of cost or market. Market value is determined in the aggregate for each portfolio.
Investment Securities
Investment securities held-to-maturity are those securities which the Corporation has the ability and
management has the positive intent to hold to maturity as of the balance sheet dates. Investment securities
held-to-maturity are stated at cost, adjusted for amortization of premium and accretion of discount.
securities
Investment
that are not considered held-to-maturity are accounted for as
securities
available-for-sale, and stated at fair value, with unrealized gains and losses, net of income taxes, reported as a
separate component of other comprehensive income (loss). Unrealized losses on securities available-for-sale are
recognized in earnings if, as of the balance sheet date, the Corporation does not have the ability or management
does not have the intent to hold the securities until market recovery or if full collection of the amounts due
according to the contractual terms of the debt is not expected.
Gains or losses on the sale of securities are computed based on the adjusted cost of the specific security sold.
Allowance for Loan Losses
The allowance for loan losses represents management’s assessment of probable losses inherent in the
Corporation’s loan portfolio. The allowance provides for probable losses that have been identified with specific
customer relationships and for probable losses believed to be inherent in the loan portfolio, but that have not
been specifically identified. Internal risk ratings are assigned to each business loan at the time of approval and are
subject to subsequent periodic reviews by senior management. The Corporation performs a detailed credit quality
review quarterly on both large business and certain large personal purpose consumer and residential mortgage
loans that have deteriorated below certain levels of credit risk, and may allocate a specific portion of the allowance
to such loans based upon this review. Business loans are those belonging to the commercial, real estate
construction, commercial mortgage, lease financing and international loan portfolios. A portion of the allowance
is allocated to the remaining business loans by applying estimated loss ratios, based on numerous factors
identified below, to the loans within each risk rating. In addition, a portion of the allowance is allocated to these
73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
remaining loans based on industry specific risks inherent in certain portfolios that have experienced above average
losses. Furthermore, a portion of the allowance is allocated to these remaining loans based on industry specific
risks inherent in certain portfolios that have not yet manifested themselves in the risk ratings. The portion of the
allowance allocated to all other consumer and residential mortgage loans is determined by applying estimated
loss ratios to various segments of the loan portfolio. Estimated loss ratios for all portfolios incorporate factors,
such as recent charge-off experience, current economic conditions and trends, and trends with respect to past due
and nonaccrual amounts, and are supported by underlying analysis, including information on migration and loss
given default studies from each of the three largest domestic geographic markets (Midwest, Western and Texas), as
well as mapping to bond tables.
Actual loss ratios experienced in the future may vary from those estimated. The uncertainty occurs because
factors may exist which affect the determination of probable losses inherent in the loan portfolio and are not
necessarily captured by the application of estimated loss ratios or identified industry-specific risks. A portion of
the allowance is maintained to capture these probable losses and reflects management’s view that the allowance
should recognize the margin for error inherent in the process of estimating expected loan losses. Factors that were
considered in the evaluation of the adequacy of the Corporation’s allowance include the inherent imprecision in
the risk rating system and the risk associated with new customer relationships. The allowance associated with the
margin for inherent imprecision covers probable loan losses as a result of an inaccuracy in assigning risk ratings or
stale ratings which may not have been updated for recent negative trends in particular credits. The allowance due
to new business migration risk is based on an evaluation of the risk of rating downgrades associated with loans
that do not have a full year of payment history.
The total allowance for loan losses is available to absorb losses from any segment within the portfolio.
Unanticipated economic events, including political, economic and regulatory instability in countries where the
Corporation has loans, could cause changes in the credit characteristics of the portfolio and result in an
unanticipated increase in the allowance. Inclusion of other industry specific exposures in the allowance, as well
as significant increases in the current portfolio exposures, could also increase the amount of the allowance. Any of
these events, or some combination thereof, may result in the need for additional provision for loan losses in order
to maintain an allowance that complies with credit risk and accounting policies.
Loans deemed uncollectible are charged off and deducted from the allowance. The provision for loan losses
and recoveries on loans previously charged off are added to the allowance.
Allowance for Credit Losses on Lending-Related Commitments
The allowance for credit losses on lending-related commitments covers management’s assessment of
probable credit losses inherent in lending-related commitments, including unused commitments to extend
credit, letters of credit and financial guarantees. Lending-related commitments for which it is probable that the
commitment will be drawn (or sold) are reserved with the same estimated loss rates as loans, or with specific
reserves. In general, the probability of draw for letters of credit is considered certain once the credit becomes a
watch list credit (generally consistent with regulatory defined special mention, substandard and doubtful
accounts). Non-watch list letters of credits and all unfunded commitments have a lower probability of draw,
to which standard loan loss rates are applied. The allowance for credit losses on lending-related commitments is
included in “accrued expenses and other liabilities” on the consolidated balance sheets, with the corresponding
charge reflected in “provision for credit losses on lending-related commitments” in the noninterest expenses
section on the consolidated statements of income.
Nonperforming Assets
Nonperforming assets are comprised of loans and debt securities for which the accrual of interest has been
discontinued, loans for which the terms have been renegotiated to less than market rates due to a serious
74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
weakening of the borrower’s financial condition, and real estate which has been acquired through foreclosure and
is awaiting disposition.
Loans that have been restructured but yield a rate equal to or greater than the rate charged for new loans with
comparable risk and have met the requirements for accrual status are not reported as nonperforming assets. Such
loans continue to be evaluated for impairment for the remainder of the calendar year of the restructuring. These
loans may be excluded from the impairment assessment in the calendar years subsequent to the restructuring, if
not impaired based on the modified terms. See Note 4 on page 83 for additional information on loan
impairment.
Residential mortgage loans are generally placed on nonaccrual status during the foreclosure process,
normally no later than 150 days past due. Other consumer loans are generally not placed on nonaccrual status
and are charged off no later than 180 days past due, and earlier, if deemed uncollectible. Loans, other than
consumer loans, and debt securities are generally placed on nonaccrual status when principal or interest is past
due 90 days or more and/or when, in the opinion of management, full collection of principal or interest is
unlikely. At the time a loan or debt security is placed on nonaccrual status, interest previously accrued but not
collected is charged against current income. Income on such loans and debt securities is then recognized only to
the extent that cash is received and where future collection of principal is probable. Generally, a loan or debt
security may be returned to accrual status when all delinquent principal and interest have been received and the
Corporation expects repayment of the remaining contractual principal and interest, or when the loan or debt
security is both well secured and in the process of collection.
A nonaccrual loan that is restructured will generally remain on nonaccrual after the restructuring for a period
of six months to demonstrate that the borrower can meet the restructured terms. However, sustained payment
performance prior to the restructuring or significant events that coincide with the restructuring are included in
assessing whether the borrower can meet the restructured terms. These factors may result in the loan being
returned to an accrual status at the time of restructuring or upon satisfaction of a shorter performance period. If
management is uncertain whether the borrower has the ability to meet the revised payment schedule, the loan
remains classified as nonaccrual. Other real estate acquired is carried at the lower of cost or fair value, minus
estimated costs to sell. When the property is acquired through foreclosure, any excess of the related loan balance
over fair value is charged to the allowance for loan losses. Subsequent write-downs, operating expenses and losses
upon sale, if any, are charged to noninterest expenses.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation,
computed on the straight-line method, is charged to operations over the estimated useful lives of the assets. The
estimated useful lives are generally 10-33 years for premises that the Corporation owns and three to eight years for
furniture and equipment. Leasehold improvements are amortized over the terms of their respective leases, or
10 years, whichever is shorter.
Software
Capitalized software is stated at cost, less accumulated amortization. Capitalized software includes purchased
software and capitalizable application development costs associated with internally-developed software. Amor-
tization, computed on the straight-line method, is charged to operations over the estimated useful life of the
software, which is generally five years. Capitalized software is included in “accrued income and other assets” on
the consolidated balance sheets.
75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Goodwill and Other Intangible Assets
Goodwill and identified intangible assets that have an indefinite useful life are subject to impairment testing,
which is conducted annually, or on an interim basis if events or changes in circumstances between annual tests
indicate the assets might be impaired. The Corporation performs its annual impairment test for goodwill as of
July 1 of each year. The impairment test involves assigning tangible assets and liabilities, identified intangible
assets and goodwill to reporting units, which are a subset of the Corporation’s operating segments, and comparing
the fair value of each reporting unit to its carrying value. If the fair value is less than the carrying value, a further test
is required to measure the amount of impairment.
The Corporation reviews finite-lived intangible assets and other long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable from
projected undiscounted net operating cash flows. If the projected undiscounted net operating cash flows are less
than the carrying amount, a loss is recognized to reduce the carrying amount to fair value.
Additional information regarding goodwill, other intangible assets and impairment policies can be found in
Note 8 on page 86.
Share-based Compensation
In 2006, the Corporation adopted the provisions of SFAS No. 123 (revised 2004) (SFAS 123(R)), “Share-
Based Payment,” using the modified-prospective transition method. Compensation expense is recognized under
SFAS 123(R) using the straight-line method over the requisite service period. Measurement and attribution of
compensation cost for awards that were granted prior to the date SFAS 123(R) was adopted continue to be based
on the estimate of the grant-date fair value and attribution method used under prior accounting guidance. Prior to
the adoption of SFAS 123(R), the benefit of tax deductions in excess of recognized compensation costs was
reported in net cash provided by operating activities in the consolidated statements of cash flows. SFAS 123(R)
requires such excess tax benefits be reported as a cash inflow from financing activities, rather than a cash flow from
operating activities; therefore, these amounts for the years ended December 31, 2007 and 2006, are reported in net
cash provided by financing activities in the consolidated statements of cash flows.
In 2002, the Corporation adopted the fair value recognition provisions of SFAS 123, “Accounting for Stock-
Based Compensation” (SFAS 123) (as amended by SFAS No. 148, “Accounting for Stock-Based Compensation —
Transition and Disclosure”), which the Corporation applied prospectively to new share-based compensation
awards granted to employees after December 31, 2001. Options granted prior to January 1, 2002 were accounted
for under the intrinsic value method, as outlined in APB Opinion No. 25, “Accounting for Stock Issued to
Employees.” Net income and earnings per share for the years ended December 31, 2007 and 2006 fully reflect the
impact of applying the fair value recognition method to all outstanding and unvested awards. There would have
been no effect on reported net income and earnings per share if the fair value method required by SFAS 123 (as
amended by SFAS 148) had been applied to all outstanding and unvested awards in 2005.
SFAS 123(R) requires that the expense associated with share-based compensation awards be recorded over
the requisite service period. The requisite service period is the period an employee is required to provide service in
order to vest in the award, which cannot extend beyond the retirement eligible date (the date at which the
employee is no longer required to perform any service to receive the share-based compensation). Prior to the
adoption of SFAS 123(R), the Corporation recorded the expense associated with share-based compensation
awards over the explicit service period (vesting period). Upon retirement, any remaining unrecognized costs
related to share-based compensation awards retained after retirement were expensed.
The Corporation elected to adopt the alternative transition method provided in the Financial Accounting
Standards Board (FASB) Staff Position No. FAS 123(R)-3, “Transition Election Related to Accounting for Tax
Effects of Share-Based Payment Awards,” for calculating the tax effects of share-based compensation under
SFAS 123(R). The alternative transition method included simplified methods to establish the beginning balance
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
of the additional paid-in capital pool (APIC pool) related to the tax effects of employee share-based compen-
sation, and to determine the subsequent impact on the APIC pool and consolidated statements of cash flows of
the tax effects of employee share-based compensation awards that were outstanding and fully or partially unvested
upon adoption of SFAS 123(R).
Further information on the Corporation’s share-based compensation plans is included in Note 15 on page 95.
Pension and Other Postretirement Costs
On December 31, 2006, the Corporation adopted the provisions of SFAS No. 158, “Employers’ Accounting
for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106,
and 132(R),” (SFAS 158), and recognized in its consolidated balance sheet the funded status of its defined benefit
pension and postretirement plans, measured as the difference between the fair value of plan assets and the benefit
obligation. For a pension plan, the benefit obligation is the projected benefit obligation; for any other postre-
tirement plan, the benefit obligation is the accumulated benefit obligation. The Corporation also recorded prior
service costs, net actuarial losses and remaining transition obligations as components of accumulated other
comprehensive income (loss), net of tax, at December 31, 2006. Actuarial gains or losses and prior service costs or
credits that arise subsequent to December 31, 2006 are recognized as increases or decreases in other compre-
hensive income (loss).
Pension costs are charged to “employee benefits” expense on the consolidated statements of income and are
funded consistent with the requirements of federal laws and regulations. Inherent in the determination of pension
costs are assumptions concerning future events that will affect the amount and timing of required benefit
payments under the plans. These assumptions include demographic assumptions such as retirement age and
death, a compensation rate increase, a discount rate used to determine the current benefit obligation and a long-
term expected return on plan assets. Net periodic pension expense includes service cost, interest cost based on the
assumed discount rate, an expected return on plan assets based on an actuarially derived market-related value of
assets, amortization of prior service cost and amortization of net actuarial gains or losses. The market-related value
used to determine the expected return on plan assets is based on fair value adjusted for the difference between
expected returns and actual asset performance. The asset gains and losses are incorporated in the market-related
value over a five-year period. Prior service costs include the impact of plan amendments on the liabilities and are
amortized over the future service periods of active employees expected to receive benefits under the plan. Actuarial
gains and losses result from experience different from that assumed and from changes in assumptions (excluding
asset gains and losses not yet reflected in market-related value). Amortization of actuarial gains and losses is
included as a component of net periodic pension cost for a year if the actuarial net gain or loss exceeds 10 percent
of the greater of the projected benefit obligation or the market-related value of plan assets. If amortization is
required, the excess is amortized over the average remaining service period of participating employees expected to
receive benefits under the plan.
Postretirement benefits are recognized in “employee benefits” expense on the consolidated statements of
income during the average remaining service period of participating employees expected to receive benefits under
the plan or the average remaining future lifetime of retired participants currently receiving benefits under the plan.
For further information regarding SFAS 158 and the Corporation’s pension and other postretirement plans
refer to Note 16 on page 97.
Derivative Instruments
Derivative instruments are carried at fair value in either, “accrued income and other assets” or “accrued
expenses and other liabilities” on the consolidated balance sheets. The accounting for changes in the fair value
(i.e., gains or losses) of a derivative instrument is determined by whether it has been designated and qualifies as
part of a hedging relationship and, further, on the type of hedging relationship. For those derivative instruments
77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
that are designated and qualify as hedging instruments, the Corporation designates the hedging instrument, based
upon the exposure being hedged, as either a fair value hedge, cash flow hedge or a hedge of a net investment in a
foreign operation. For derivative instruments designated and qualifying as a fair value hedge (i.e., hedging the
exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a
particular risk), the gain or loss on the derivative instrument, as well as the offsetting loss or gain on the hedged
item attributable to the hedged risk, are recognized in current earnings during the period of the change in fair
values. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure
to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain
or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified
into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining
gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash
flows of the hedged item (i.e., the ineffective portion), if any, is recognized in current earnings during the period of
change. For derivative instruments that are designated and qualify as a hedge of a net foreign currency investment
in a foreign subsidiary, the gain or loss is reported in other comprehensive income as part of the cumulative
translation adjustment to the extent it is effective. For derivative instruments not designated as hedging instru-
ments, the gain or loss is recognized in current earnings during the period of change.
If the Corporation determines that a derivative instrument has not been or will not continue to be highly
effective as a fair value or cash flow hedge, or that the hedge designation is no longer appropriate, hedge
accounting is discontinued. The derivative instrument will continue to be recorded in the consolidated balance
sheets at its fair value, with future changes in fair value recognized in noninterest income.
Foreign exchange futures and forward contracts, foreign currency options, interest rate caps, interest rate swap
agreements and energy derivative contracts executed as a service to customers are not designated as hedging
instruments and both the realized and unrealized gains and losses on these instruments are recognized in
noninterest income.
The Corporation holds a portfolio of warrants for non-marketable equity securities. Most of these warrants
are from high technology, non-public companies obtained as part of the loan origination process. Warrants that
have a net exercise provision embedded in the warrant agreement (primarily those obtained prior to 2006) are
required to be accounted for as derivatives and recorded at fair value. The initial fair value of warrants obtained as
part of the loan origination process is deferred and amortized into “interest and fees on loans” on the
consolidated statements of income over the life of the loan. The fair value of these warrants is subsequently
adjusted on a quarterly basis, with any changes in fair value recorded in “net income from principal investing and
warrants” on the consolidated statements of income. Prior to 2005, the Corporation recognized income related to
these warrants approximately 30 days prior to the warrant issuer’s publicly traded stock becoming free of
restrictions, when a publicly traded company acquired the warrant issuer, or when cash was received. The
cumulative adjustment to record the fair value was not material to 2005 or any other prior reporting period.
Further information on the Corporation’s derivative instruments is included in Note 20 on page 107.
Standby and Commercial Letters of Credit and Financial Guarantees
A liability related to certain guarantee contracts or indemnification agreements that contingently require the
guarantor to make payments to the guaranteed party is recognized and initially measured at fair value by the
guarantor. The initial recognition and measurement provisions were applied by the Corporation on a prospective
basis to guarantees issued or modified subsequent to December 31, 2002. Further information on the Corpo-
ration’s obligations under guarantees is included in Note 20 on page 107.
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Income Taxes
The provision for income taxes is based on amounts reported in the consolidated statements of income (after
deducting non-taxable items, principally income on bank-owned life insurance, and deducting tax credits related
to investments on low income housing partnerships) and includes deferred income taxes on temporary differ-
ences between the tax basis and financial reporting basis of assets and liabilities. Deferred tax assets are evaluated
for realization based on available evidence and assumptions made regarding future events. This evaluation
includes assumptions of future taxable income and other likely initiatives that could be undertaken. A valuation
allowance is provided when it is more-likely-than-not that some portion of the deferred tax asset will not be
realized. The provision for income taxes assigned to discontinued operations is based on statutory rates, adjusted
for permanent differences generated by those operations.
On January 1, 2007, the Corporation adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109,” (FIN 48). FIN 48 permits the
Corporation to elect to change its accounting policy as to where interest and penalties on tax liabilities is classified
in the consolidated statements of income. Effective January 1, 2007, the Corporation prospectively changed its
accounting policy to classify interest and penalties on tax liabilities in the “provision for income taxes” on the
consolidated statements of income. For all prior periods presented, interest and penalties on tax liabilities
remained classified in “other noninterest expenses” on the consolidated statements of income. For a further
discussion of FIN 48 refer to Note 17 to the consolidated financial statements on page 103.
Statements of Cash Flows
Cash and cash equivalents are defined as those amounts included in “cash and due from banks” on the
consolidated balance sheets. Cash flows from discontinued operations are reported as separate line items within
cash flows from operating, investing and financing activities in the consolidated statements of cash flows.
Deferred Distribution Costs
Certain mutual fund distribution costs, principally commissions paid to brokers, are capitalized when paid
and amortized over six years. Fees that contractually recoup the deferred costs, primarily 12b-1 fees, are received
over a 6-8 year period. The net of these fees and amortization is recorded on the consolidated statements of
income. Early redemption fees collected are generally recorded as a reduction to the capitalized costs, unless there
is evidence that, on an ongoing basis, amounts collected will exceed the unamortized deferred fee asset.
Loan Origination Fees and Costs
Business loan origination and commitment fees greater than $10 thousand and all Small Business Admin-
istration loan, residential mortgage and consumer loan origination fees and costs are deferred and recognized
over the life of the related loan or over the commitment period as a yield adjustment. Loan fees on unused
commitments and net origination fees related to loans sold are recognized currently as noninterest income.
Other Comprehensive Income (Loss)
The Corporation has elected to present information on comprehensive income in the consolidated state-
ments of changes in shareholders’ equity on page 70 and in Note 13 on page 92.
Note 2 — Pending Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” (SFAS 157), which defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. SFAS 157 applies whenever other standards require (or permit) assets
or liabilities to be measured at fair value, and therefore, does not expand the use of fair value in any new
79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
circumstances. Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants in the market in which the Corporation transacts. SFAS 157
clarifies that fair value should be based on the assumptions market participants would use when pricing an asset or
liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions.
The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to
unobservable data, for example, the Corporation’s own data. SFAS 157 requires fair value measurements to be
separately disclosed by level within the fair value hierarchy. While not expanding the use of fair value, SFAS 157
may change the measurement of fair value. Any change in the measurement of fair value would be considered a
change in estimate and included in the results of operations in the period of adoption. SFAS 157 is effective for
fiscal years beginning after November 15, 2007. Accordingly, the Corporation will adopt the provisions of
SFAS 157 in the first quarter of 2008. The Corporation does not expect the adoption of the provisions of SFAS 157
to have a material effect on the Corporation’s financial condition and results of operations.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities — Including an amendment of FASB Statement No. 115,” (SFAS 159). SFAS 159 provides entities with
the irrevocable option to account for selected financial assets and liabilities at fair value on a contract-by-contract
basis. The Corporation can elect to apply the standard prospectively and measure certain financial instruments at
fair value beginning January 1, 2008. At adoption, the difference between the carrying amount and the fair value
of existing eligible assets and liabilities selected (if any) would be recognized via a cumulative adjustment to
beginning retained earnings on January 1, 2008. After adoption, all changes in fair value would be included in the
results of operations. The Corporation has evaluated the guidance contained in SFAS 159, and has decided not to
elect the fair value option for any financial assets or liabilities at this time.
In December 2007, the FASB issued SFAS No. 141(revised 2007), “Business Combinations,” (SFAS 141(R)),
which replaces SFAS 141. SFAS 141(R) establishes principles and requirements for recognition and measurement
of assets, liabilities and any noncontrolling interest acquired due to a business combination. SFAS 141(R) expands
the definitions of a business and a business combination, resulting in an increased number of transactions or
other events that will qualify as business combinations. Under SFAS 141(R) the entity that acquires the business
(the “acquirer”) will record 100% of all assets and liabilities of the acquired business, including goodwill,
generally at their fair values. SFAS 141(R) requires the acquirer to recognize goodwill as of the acquisition date,
measured as a residual. In most business combinations, goodwill will be recognized to the extent that the
consideration transferred plus the fair value of any noncontrolling interests in the acquiree at the acquisition date
exceeds the fair values of the identifiable net assets acquired. Under SFAS 141(R) acquisition-related transaction
and restructuring costs will be expensed as incurred rather than treated as part of the cost of the acquisition and
included in the amount recorded for assets acquired. SFAS 141(R) is effective for fiscal years beginning after
December 15, 2008. Accordingly, for acquisitions completed after December 31, 2008, the Corporation will apply
the provisions of SFAS 141(R).
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB 51,” (SFAS 160), which defines noncontrolling interest as the portion of equity
in a subsidiary not attributable, direct or indirectly, to the parent. SFAS 160 requires the ownership interests in
subsidiaries held by parties other than the parent (previously referred to as minority interest) to be clearly
presented in the consolidated statement of financial position within equity, but separate from the parent’s equity.
The amount of consolidated net income attributable to the parent and to any noncontrolling interest must be
clearly presented on the face of the consolidated statement of income. Changes in the parent’s ownership interest
while the parent retains its controlling financial interest (greater than 50 percent ownership) are to be accounted
for as equity transactions. Upon a loss of control, any gain or loss on the interest sold will be recognized in
earnings. Additionally, any ownership interest retained will be remeasured at fair value on the date control is lost,
with any gain or loss recognized in earnings. SFAS 160 is effective for fiscal years beginning after December 15,
2008. Accordingly, the Corporation will adopt the provisions of SFAS 160 in the first quarter 2009. The
80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Corporation does not expect the adoption of the provisions of SFAS 160 to have a material effect on the
Corporation’s financial condition and results of operations.
Note 3 — Investment Securities
A summary of the Corporation’s investment securities available-for-sale follows:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(in millions)
Fair Value
December 31, 2007
U.S. Treasury and other Government agency securities . . . . .
Government-sponsored enterprise securities . . . . . . . . . . . . .
State and municipal securities . . . . . . . . . . . . . . . . . . . . . . . .
Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
36
6,178
3
92
Total securities available-for-sale . . . . . . . . . . . . . . . . . . . .
$6,309
December 31, 2006
U.S. Treasury and other Government agency securities . . . . .
Government-sponsored enterprise securities . . . . . . . . . . . . .
State and municipal securities . . . . . . . . . . . . . . . . . . . . . . . .
Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
47
3,590
3
115
Total securities available-for-sale . . . . . . . . . . . . . . . . . . . .
$3,755
$ —
34
—
—
$34
$ —
1
—
—
$ 1
$—
47
—
—
$47
$—
94
—
—
$94
$
36
6,165
3
92
$6,296
$
47
3,497
3
115
$3,662
A summary of the Corporation’s temporarily impaired investment securities available-for-sale follows:
Impaired
Less than 12 months
Over 12 months
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(in millions)
December 31, 2007
U.S. Treasury and other Government agency
securities. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5
$—*
$
1
$ —*
$
6
$ —*
Government-sponsored enterprise
securities. . . . . . . . . . . . . . . . . . . . . . . . . . .
State and municipal securities . . . . . . . . . . . .
Other securities . . . . . . . . . . . . . . . . . . . . . . .
212
—
—
1
—
—
2,126
—
—
46
—
—
2,338
—
—
47
—
—
Total temporarily impaired securities . . . . . $217
$ 1
$2,127
$46
$2,344
$47
December 31, 2006
U.S. Treasury and other Government agency
securities. . . . . . . . . . . . . . . . . . . . . . . . . . . $ —
$—
$
18
$ —*
$
18
$ —*
Government-sponsored enterprise
securities. . . . . . . . . . . . . . . . . . . . . . . . . . .
State and municipal securities . . . . . . . . . . . .
Other securities . . . . . . . . . . . . . . . . . . . . . . .
404
—
—
1
—
—
2,814
—
—
93
—
—
3,218
—
—
94
—
—
Total temporarily impaired securities . . . . . $404
$ 1
$2,832
$93
$3,236
$94
* Unrealized losses less than $0.5 million.
81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
At December 31, 2007, the Corporation had 122 securities in an unrealized loss position, including 120
Government-sponsored enterprise securities (i.e., FMNA, FHLMC). The unrealized losses resulted from changes in
market interest rates, not credit quality. The Corporation has the ability and intent to hold these available-for-sale
investment securities until maturity or market price recovery, and full collection of the amounts due according to
the contractual terms of the debt is expected; therefore, the Corporation does not consider these investments to be
other-than-temporarily impaired at December 31, 2007.
The table below summarizes the amortized cost and fair values of debt securities, by contractual maturity
(securities with multiple maturity dates are classified in the period of final maturity). Expected maturities will
differ from contractual maturities because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
December 31, 2007
Fair
Value
Amortized
Cost
(in millions)
Contractual maturity
Within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
After one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
After five years through ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
After ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
79
3
—
—
$
79
3
—
—
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity and other nondebt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
6,181
46
82
6,168
46
Total securities available-for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,309
$6,296
Sales, calls and write-downs of investment securities available-for-sale resulted in realized gains and losses as follows:
Securities gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9
(2)
Securities losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007
Years Ended
December 31
2006
(in millions)
$ 2
(2)
2005
$ 1
(1)
Total net securities gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7
$— $—
At December 31, 2007, investment securities having a carrying value of $1.8 billion were pledged where
permitted or required by law to secure $1.7 billion of liabilities, including public and other deposits, and
derivative instruments. This included securities of $917 million pledged with the Federal Reserve Bank to secure
actual treasury tax and loan borrowings of $850 million at December 31, 2007. The remaining pledged securities
of $891 million are primarily with state and local government agencies to secure $836 million of deposits and
other liabilities, including deposits of the State of Michigan of $187 million at December 31, 2007.
82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Note 4 — Nonperforming Assets
The following table summarizes nonperforming assets and loans, which generally are contractually past due
90 days or more as to interest or principal payments. Nonperforming assets consist of nonaccrual loans, reduced-
rate loans and real estate acquired through foreclosure. Nonaccrual loans are those on which interest is not being
recognized. Reduced-rate loans are those on which interest has been renegotiated to lower than market rates
because of the weakened financial condition of the borrower.
Nonaccrual and reduced-rate loans are included in loans on the consolidated balance sheets and real estate
acquired through foreclosure is included in “accrued income and other assets” on the consolidated balance sheets.
December 31
2007
(in millions)
2006
Nonaccrual loans:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75
Real estate construction:
$ 97
Commercial Real Estate business line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other business lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total real estate construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage:
Commercial Real Estate business line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other business lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total commercial mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reduced-rate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreclosed property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
161
6
167
66
75
141
1
3
—
4
391
13
404
19
18
2
20
18
54
72
1
4
8
12
214
—
214
18
Total nonperforming assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $423
$232
Loans past due 90 days and still accruing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53
$ 14
Gross interest income that would have been recorded had the nonaccrual and reduced-rate
loans performed in accordance with original terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56
$ 27
Interest income recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20
$ 9
A loan is impaired when it is probable that payment of interest and principal will not be made in accordance
with the contractual terms of the loan agreement. Consistent with this definition, all nonaccrual and reduced-rate
loans (with the exception of residential mortgage and consumer loans) are impaired.
83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Impaired loans at December 31, 2007 were $404 million. Restructured loans which are performing in
accordance with their modified terms must be disclosed as impaired for the remainder of the calendar year of the
restructuring, in accordance with impaired loan disclosure requirements. Loans restructured during the year
which met the requirements to be on accrual status at December 31, 2007, totaled $4 million.
Average impaired loans for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $264
2007
December 31
2006
(in millions)
$149
Total year-end nonaccrual business loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $387
13
Total year-end reduced-rate business loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Loans restructured during the year on accrual status at year-end . . . . . . . . . . . . . . . . .
$209
—
—
2005
$221
$134
—
15
Total year-end impaired loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $404
$209
$149
Year-end impaired loans requiring an allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $356
$195
$129
Allowance allocated to impaired loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 85
$ 34
$ 42
Those impaired loans not requiring an allowance represent loans for which the fair value of expected
repayments or collateral exceeded the recorded investments in such loans. At December 31, 2007, substantially all
of the total impaired loans were evaluated based on fair value of related collateral. Remaining loan impairment is
based on the present value of expected future cash flows discounted at the loan’s effective interest rate or
observable market value.
Note 5 — Allowance for Loan Losses
An analysis of changes in the allowance for loan losses follows:
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 493
(196)
Loan charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47
Recoveries on loans previously charged-off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007
2005
2006
(dollar amounts in millions)
$ 673
$ 516
(174)
(98)
64
38
Net loan charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(149)
212
1
(60)
37
—
(110)
(47)
—
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 557
$ 493
$ 516
As a percentage of total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.10% 1.04% 1.19%
Note 6 — Significant Group Concentrations of Credit Risk
Concentrations of both on-balance sheet and off-balance sheet credit risk are controlled and monitored as
part of credit policies. The Corporation is a regional financial services holding company with a geographic
concentration of its on-balance sheet and off-balance sheet activities in Michigan, California and Texas.
The Corporation has an industry concentration with the automotive industry. Loans to automotive dealers
and to borrowers involved with automotive production are reported as automotive, since management believes
these loans have similar economic characteristics that might cause them to react similarly to changes in economic
conditions. This aggregation involves the exercise of judgment. Included in automotive production are: (a) orig-
inal equipment manufacturers and Tier 1 and Tier 2 suppliers that produce components used in vehicles and
84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
whose primary revenue source is automotive-related (“primary” defined as greater than 50%) and (b) other
manufacturers that produce components used in vehicles and whose primary revenue source is automotive-
related. Loans less than $1 million and loans recorded in the Small Business division were excluded from the
definition. Outstanding loans and total exposure from loans, unused commitments and standby letters of credit
and financial guarantees to companies related to the automotive industry were as follows:
December 31
2007
2006
(in millions)
Automotive loans:
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,806
5,384
Dealer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,206
5,558
Total automotive loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,190
$ 7,764
Total automotive exposure:
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,704
7,336
Dealer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,217
7,401
Total automotive exposure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,040
$11,618
Further, the Corporation’s portfolio of commercial real estate loans, which includes real estate construction
and commercial mortgage loans, was as shown in the following table. Unused commitments on commercial real
estate loans were $5.2 billion and $4.1 billion at December 31, 2007 and 2006, respectively.
December 31
2007
2006
(in millions)
Real estate construction loans:
Commercial Real Estate business line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,089
727
Other business lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,449
754
Total real estate construction loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,816
4,203
Commercial mortgage loans:
Commercial Real Estate business line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other business lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,377
8,671
Total commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,048
1,534
8,125
9,659
Total commercial real estate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,864
$13,862
85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Note 7 — Premises and Equipment
A summary of premises and equipment by major category follows:
December 31
2007
2006
(in millions)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
95
707
465
$
91
631
427
Total cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,267
(617)
1,149
(581)
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 650
$ 568
The Corporation conducts a portion of its business from leased facilities and leases certain equipment. Rental
expense of continuing operations for leased properties and equipment amounted to $65 million, $58 million and
$56 million in 2007, 2006 and 2005, respectively. As of December 31, 2007, future minimum payments under
operating leases and other long-term obligations were as follows:
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years Ending
December 31
(in millions)
$ 82
80
65
63
53
512
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$855
Note 8 — Goodwill and Other Intangible Assets
Goodwill and identified intangible assets that have an indefinite useful life are subject to impairment testing,
which the Corporation conducts annually, or on an interim basis if events or changes in circumstances between
annual tests indicate the assets might be impaired. The annual test of goodwill and intangible assets that have an
indefinite life, performed as of July 1, 2007 and 2006, did not indicate that an impairment charge was required.
In the fourth quarter 2006, the Corporation sold its ownership interest in Munder, a consolidated subsidiary
that was part of the Corporation’s asset management reporting unit. Goodwill of $63 million was allocated to the
sale in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). Following the sale of
Munder, the remaining components of the asset management reporting unit, which were not significant, were
combined with another reporting unit and tested for impairment. The test did not indicate an impairment charge
was required. The Corporation has accounted for Munder as a discontinued operation in all periods presented,
which is included in the “Other” category for business segment reporting purposes. For additional information
regarding discontinued operations, refer to Note 26 on page 127.
86
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
The changes in the carrying amount of goodwill for the years ended December 31, 2007 and 2006 are shown
in the following table. Amounts in all periods are based on business segments in effect at December 31, 2007.
Balance at December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill allocated to the sale of Munder Capital
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . .
Note 9 — Deposits
Business
Bank
Retail
Bank
$90
$47
Wealth &
Institutional
Management
(in millions)
$13
—
—
$90
—
$90
—
—
$47
—
$47
—
—
$13
—
$13
Other
Total
$ 63
213
(63)
—
(63)
—
$ — $150
—
—
$ — $150
At December 31, 2007, the scheduled maturities of certificates of deposit and other deposits with a stated
maturity were as follows:
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years Ending
December 31
(in millions)
$13,125
2,257
264
52
34
40
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,772
A maturity distribution of domestic customer and institutional certificates of deposit of $100,000 and over
follows:
December 31
2007
2006
(in millions)
Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,509
2,846
Over three months to six months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,577
Over six months to twelve months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,275
Over twelve months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,576
1,022
3,654
2,428
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,207
$9,680
All foreign office time deposits of $1.3 billion and $1.4 billion at December 31, 2007 and 2006, respectively,
were in denominations of $100,000 or more.
87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Note 10 — Short-Term Borrowings
Federal funds purchased and securities sold under agreements to repurchase generally mature within one to
four days from the transaction date. Other short-term borrowings, consisting of commercial paper, borrowed
securities, term federal funds purchased, short-term notes and treasury tax and loan deposits, generally mature
within one to 120 days from the transaction date. The following table provides a summary of short-term
borrowings.
December 31, 2007
Amount outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate at year-end . . . . . . . . . . . . . . . . . . . . . . .
Maximum month-end balance during the year . . . . . . . . . . . . . . . . . . .
Average balance outstanding during the year . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate during the year. . . . . . . . . . . . . . . . . . . .
December 31, 2006
Amount outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate at year-end . . . . . . . . . . . . . . . . . . . . . . .
Maximum month-end balance during the year . . . . . . . . . . . . . . . . . . .
Average balance outstanding during the year . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate during the year. . . . . . . . . . . . . . . . . . . .
Federal Funds Purchased
and Securities Sold Under
Agreements to Repurchase
Other
Short-term
Borrowings
(dollar amounts in millions)
$1,749
1.84%
$1,985
1,854
5.04%
$ 561
5.04%
$ 595
2,130
4.92%
$1,058
3.87%
$1,191
226
5.21%
$
74
4.92%
$1,306
524
4.77%
At December 31, 2007, Comerica Bank, a subsidiary of the Corporation had pledged loans totaling
$20 billion to secure a $16 billion collateralized borrowing account with the Federal Reserve Bank.
88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Note 11 — Medium- and Long-Term Debt
Medium- and long-term debt are summarized as follows:
December 31
2007
2006
(in millions)
Parent company
Subordinated notes:
7.25% subordinated note due 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 151
294
4.80% subordinated note due 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
6.576% subordinated notes due 2037 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
361
7.60% subordinated note due 2050 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
308
510
—
Total subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medium-term note:
818
806
Floating rate based on LIBOR indices due 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total parent company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subsidiaries
Subordinated notes:
7.25% subordinated note due 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.98% subordinated note due 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.00% subordinated note due 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.875% subordinated note due 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.50% subordinated note due 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.125% subordinated note due 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.70% subordinated note due 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.75% subordinated notes due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.20% subordinated notes due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.375% subordinated note due 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.875% subordinated note due 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150
968
—
—
253
100
102
156
261
667
513
185
198
—
806
201
58
253
102
101
157
251
397
489
182
192
Total subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medium-term notes:
2,435
2,383
Floating rate based on LIBOR indices due 2007 to 2012 . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate based on PRIME indices due 2007 to 2008 . . . . . . . . . . . . . . . . . . . . . . . . .
2.85% fixed rate note due 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate based on Federal Funds indices due 2009 . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable rate note payable due 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,318
1,000
—
100
—
Total subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,853
2,299
350
100
—
11
5,143
Total medium- and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,821
$5,949
89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
The carrying value of medium- and long-term debt has been adjusted to reflect the gain or loss attributable to
the risk hedged. Concurrent with or subsequent to the issuance of certain of the medium- and long-term debt
presented above, the Corporation entered into interest rate swap agreements to convert the stated rate of the debt
to a rate based on the indices identified in the following table.
Principal Amount
of Debt
Converted
Base Rate
Base
Rate at
12/31/07
(dollar amounts in millions)
Parent company
4.80% subordinated note due 2015 . . . . . . . . . . . . . . . . . . .
$300
6-month LIBOR
4.72%
Subsidiaries
Subordinated notes:
6.00% subordinated note due 2008 . . . . . . . . . . . . . . . . . . .
6.875% subordinated note due 2008 . . . . . . . . . . . . . . . . . .
8.50% subordinated note due 2009 . . . . . . . . . . . . . . . . . . .
7.125% subordinated note due 2013 . . . . . . . . . . . . . . . . . .
5.70% subordinated note due 2014. . . . . . . . . . . . . . . . . . . .
5.75% subordinated note due 2016 . . . . . . . . . . . . . . . . . . .
5.20% subordinated note due 2017 . . . . . . . . . . . . . . . . . . .
8.375% subordinated note due 2024 . . . . . . . . . . . . . . . . . .
7.875% subordinated note due 2026 . . . . . . . . . . . . . . . . . .
250
100
100
150
250
250
500
150
150
6-month LIBOR
6-month LIBOR
3-month LIBOR
6-month LIBOR
6-month LIBOR
6-month LIBOR
6-month LIBOR
6-month LIBOR
6-month LIBOR
4.72
4.72
4.83
4.72
4.72
4.72
4.72
4.72
4.72
In July 2007, the Corporation issued $150 million of floating rate medium-term senior notes due July 27,
2010. The notes pay interest quarterly, beginning October 27, 2007. The notes bear interest at a variable rate reset
each interest period based on three-month LIBOR plus 0.17%. The Corporation used the proceeds to repay the
$150 million 7.25% subordinated note due 2007. These medium-term notes do not qualify as Tier 2 capital and
are not insured by the FDIC.
In June 2007, the Corporation exercised its option to redeem a $55 million, 9.98% subordinated note, which
had an original maturity date of 2026.
In March 2007, Comerica Bank (the Bank), a subsidiary of the Corporation, issued an additional $250 mil-
lion of 5.75% subordinated notes under a series initiated in November 2006. The notes pay interest semiannually,
beginning May 21, 2007, and mature November 21, 2016. The Bank used the net proceeds for general corporate
purposes.
In February 2007, the Corporation issued $515 million of 6.576% subordinated notes that relate to trust
preferred securities issued by an unconsolidated subsidiary. The notes pay interest semiannually, beginning
August 20, 2007 through February 20, 2032. Beginning February 20, 2032, the notes will bear interest at an annual
rate based on LIBOR, payable monthly until the scheduled maturity date of February 20, 2037. The Corporation
used the proceeds for the redemption of a $350 million, 7.60% subordinated note due 2050 and to repurchase
additional shares. The 6.576% subordinated notes qualify as Tier 1 capital. All other subordinated notes with
maturities greater than one year qualify as Tier 2 capital.
In November 2006, the Bank issued $400 million of 5.75% subordinated notes. The notes pay interest
semiannually, beginning May 21, 2007, and mature November 21, 2016. The Bank used the net proceeds for
general corporate purposes.
In February 2006, the Bank issued an additional $250 million of 5.20% subordinated notes under a series
initiated in August 2005. The notes pay interest semiannually, beginning August 22, 2006, and mature August 22,
2017. The Bank used the net proceeds for general corporate purposes.
90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
The Corporation currently has a $15 billion medium-term senior note program. This program allows the
principal banking subsidiary to issue fixed or floating rate notes with maturities between one and 30 years. The
Bank issued a total of $3.4 billion and $2.7 billion of floating rate bank notes during the years ended December 31,
2007 and 2006, respectively, under the senior note program, using the proceeds for general corporate purposes.
The interest rate on the floating rate medium-term notes based on LIBOR at December 31, 2007 ranged from one-
month LIBOR less 0.01% to three-month LIBOR plus 0.19%. The interest rate on the floating rate medium-term
notes based on PRIME at December 31, 2007 ranged from PRIME less 2.91% to PRIME less 2.38%. The interest rate
on the floating rate medium-term note based on the Federal Funds rate at December 31, 2007 was Federal Funds
plus 0.21%. The medium-term notes outstanding at December 31, 2007 are due from 2008 to 2012. The medium-
term notes do not qualify as Tier 2 capital and are not insured by the FDIC.
In February 2008, the Bank became a member of the Federal Home Loan Bank of Dallas, Texas (FHLB), which
provides short- and long-term funding to its members though advances that are collateralized by mortgage-related
assets. The initial required investment by the bank in FHLB stock was $25 million. Additional investment in FHLB
stock would be required in relation to the level of outstanding borrowings. The actual borrowing capacity is
contingent on the amount of collateral available to be pledged to FHLB.
At December 31, 2007, the principal maturities of medium- and long-term debt were as follows:
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years Ending
December 31
(in millions)
$2,000
1,675
1,100
875
370
2,665
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$8,685
Note 12 — Shareholders’ Equity
The Board of Directors of the Corporation authorized the purchase up to 10 million shares of Comerica
Incorporated outstanding common stock on November 13, 2007, in addition to the remaining unfilled portion of
November 14, 2006 authorization. There is no expiration date for the Corporation’s share repurchase program.
Substantially all shares purchased as part of the Corporation’s publicly announced repurchase program were
transacted in the open market and were within the scope of Rule 10b-18, which provides a safe harbor for
purchases in a given day if an issuer of equity securities satisfies the manner, timing, price and volume conditions
of the rule when purchasing its own common shares in the open market. Open market repurchases totaled
10.0 million shares, 6.6 million shares and 9.0 million shares in the years ended December 31, 2007, 2006 and
91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
2005, respectively. The following table summarizes the Corporation’s share repurchase activity for the year ended
December 31, 2007.
Total Number
of Shares
Purchased(1)
Average Price
Paid Per Share
Total Number of Shares
Purchased as Part of Publicly
Announced Repurchase
Plans or Programs
Remaining Share
Repurchase
Authorization(2)
$60.29
(shares in thousands)
3,441
Total first quarter 2007 . . . . . . . . . .
Total second quarter 2007 . . . . . . .
Total third quarter 2007 . . . . . . . . .
October 2007 . . . . . . . . . . . . . . . . .
November 2007(3) . . . . . . . . . . . . .
December 2007 . . . . . . . . . . . . . . .
3,491
3,496
2,020
642
395
—
Total fourth quarter 2007 . . . . . . . .
1,037
62.15
53.88
46.42
43.64
—
45.36
Total 2007. . . . . . . . . . . . . . . . . .
10,044
$58.11
3,488
2,016
638
395
—
1,033
9,978
9,113
5,625
3,609
2,971
12,576
12,576
12,576
12,576
(1) Includes shares purchased as part of publicly announced repurchase plans or programs, shares purchased
pursuant to deferred compensation plans and shares purchased from employees to pay for grant prices and/or
taxes related to stock option exercises and restricted stock vesting under the terms of an employee share-based
compensation plan.
(2) Maximum number of shares that may yet be purchased under the publicly announced plans or programs.
(3) Remaining share repurchase authorization includes the November 13, 2007 Board of Directors resolution for
the repurchase of an additional 10 million shares.
At December 31, 2007, the Corporation had 30.1 million shares of common stock reserved for issuance and
1.3 million shares of restricted stock outstanding to employees and directors under share-based compensation
plans.
Note 13 — Accumulated Other Comprehensive Income (Loss)
Other comprehensive income (loss) includes the change in net unrealized gains and losses on investment
securities available-for-sale, the change in accumulated net gains and losses on cash flow hedges, the change in the
accumulated foreign currency translation adjustment and the change in the accumulated defined benefit and
other postretirement plans adjustment. The consolidated statements of changes in shareholders’ equity on page 70
include only combined other comprehensive income (loss), net of tax. The following table presents reconcil-
iations of the components of accumulated other comprehensive income (loss) for the years ended December 31,
2007, 2006 and 2005. Total comprehensive income totaled $833 million, $948 million and $760 million for the
years ended December 31, 2007, 2006 and 2005, respectively. The $115 million decrease in total comprehensive
income in the year ended December 31, 2007, when compared to 2006, resulted principally from a decrease in net
income ($207 million), partially offset by a decrease in net unrealized losses on investment securities available-
for-sale ($44 million) due to changes in the interest rate environment, an increase in net gains on cash flow hedges
($7 million) and the change in the defined benefit and other postretirement benefit plans adjustment ($45 mil-
lion). Accumulated other comprehensive income at December 31, 2006 was impacted by a $209 million after-tax
transition adjustment to apply the provisions of SFAS 158.
92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
For a further discussion of the effect of derivative instruments and the effects of SFAS 158 on other
comprehensive income (loss) refer to Notes 1, 16 and 20 on pages 72, 97 and 107, respectively.
Accumulated net unrealized gains (losses) on investment securities available-for-sale:
Years Ended December 31
2006
2007
2005
(in millions)
Balance at beginning of period, net of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (61) $ (69) $ (34)
(53)
—
Net unrealized holding gains (losses) arising during the period . . . . . . . . . . . . . . . . . . . .
Less: Reclassification adjustment for gains (losses) included in net income . . . . . . . . . . . .
87
7
12
—
Change in net unrealized gains (losses) before income taxes . . . . . . . . . . . . . . . . . . . . . .
Less: Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in net unrealized gains (losses) on investment securities available-for-sale,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80
28
52
12
4
8
(53)
(18)
(35)
Balance at end of period, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9) $ (61) $ (69)
Accumulated net gains (losses) on cash flow hedges:
Balance at beginning of period, net of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (48) $ (91) $ (16)
(117)
(2)
Net cash flow hedges gains (losses) arising during the period . . . . . . . . . . . . . . . . . . . .
Less: Reclassification adjustment for gains (losses) included in net income . . . . . . . . . .
(58)
(124)
9
(67)
Change in cash flow hedges before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in cash flow hedges, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of period, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accumulated foreign currency translation adjustment:
76
26
50
2
66
23
43
(115)
(40)
(75)
$ (48) $ (91)
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ (7) $ (6)
(1)
Net translation gains (losses) arising during the period . . . . . . . . . . . . . . . . . . . . . . . .
Less: Reclassification adjustment for gains (losses) included in net income,
—
—
due to sale of foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
(7)
7
—
(1)
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ (7)
Accumulated defined benefit pension and other postretirement plans adjustment:
Balance at beginning of period, net of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(215) $ (3) $ (13)
15
5
Minimum pension liability adjustment arising during the period before income taxes . .
Less: Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
N/A
N/A
(5)
(2)
Change in minimum pension liability, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SFAS 158 transition adjustment before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SFAS 158 transition adjustment, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
N/A
N/A
N/A
N/A
(3)
(327)
(118)
(209)
10
N/A
N/A
N/A
Net defined benefit pension and other postretirement adjustment arising
during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
N/A
N/A
Less: Adjustment for amounts recognized as components of net periodic
benefit cost during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(30)
N/A
N/A
Change in defined benefit and other postretirement plans adjustment
before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in defined benefit and other postretirement plans adjustment, net of tax. . . . . .
71
26
45
N/A
N/A
N/A
N/A
N/A
N/A
Balance at end of period, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(170) $(215) $ (3)
Total accumulated other comprehensive loss at end of period, net of tax . . . . . . . . . . . . . . . $(177) $(324) $(170)
N/A — Not Applicable
93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Note 14 — Net Income Per Common Share
Basic income from continuing operations and net income per common share are computed by dividing
income from continuing operations and net income applicable to common stock, respectively, by the weighted-
average number of shares of common stock outstanding during the period. Diluted income from continuing
operations and net income per common share are computed by dividing income from continuing operations and
net income applicable to common stock, respectively, by the weighted-average number of shares, nonvested
restricted stock and dilutive common stock equivalents outstanding during the period. Common stock equiv-
alents consist of common stock issuable under the assumed exercise of stock options granted under the
Corporation’s stock plans, using the treasury stock method. A computation of basic and diluted income from
continuing operations and net income per common share are presented in the following table.
Years Ended December 31
2007
2005
2006
(in millions, except per
share data)
Basic
Income from continuing operations applicable to common stock . . . . . . . . . . . . . $ 682
686
Net income applicable to common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 782
893
$ 816
861
Average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
153
160
167
Basic income from continuing operations per common share . . . . . . . . . . . . . . . . $4.47
4.49
Basic net income per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4.88
5.57
$4.90
5.17
Diluted
Income from continuing operations applicable to common stock . . . . . . . . . . . . . $ 682
686
Net income applicable to common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 782
893
$ 816
861
Average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonvested stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock equivalents:
153
1
Net effect of the assumed exercise of stock options . . . . . . . . . . . . . . . . . . . . . .
1
Diluted average common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
155
160
1
1
162
167
1
1
169
Diluted income from continuing operations per common share . . . . . . . . . . . . . . $4.40
4.43
Diluted net income per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4.81
5.49
$4.84
5.11
The following average outstanding options to purchase shares of common stock were not included in the
computation of diluted net income per common share because the options’ exercise prices were greater than the
average market price of common shares for the year.
Average outstanding options . . . . . . . . . . . . . . . .
Range of exercise prices . . . . . . . . . . . . . . . . . . . . $56.00 — $71.58
10.3
2007
2006
(options in millions)
6.0
$56.80 — $71.58
2005
6.1
$57.99 — $71.58
94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Note 15 — Share-Based Compensation
Share-based compensation expense is charged to “salaries” expense, except for the Corporation’s Munder
subsidiary, which was sold in 2006, whose share-based compensation expense was charged to “income from
discontinued operations, net of tax,” on the consolidated statements of income. The components of share-based
compensation expense for all share-based compensation plans and related tax benefits are as follows:
Share-based compensation expense:
Comerica Incorporated share-based plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59
Munder share-based plans* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59
Related tax benefits recognized in net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21
$57
7
$64
$23
$43
2
$45
$16
2007
2006
(in millions)
2005
* Excludes $9 million and $7 million of long-term incentive plan expense triggered by the 2006 sale of Munder
and the 2005 sale of Framlington, respectively
The following table summarizes unrecognized compensation expense for all share-based plans:
Total unrecognized share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2007
(dollar amounts
in millions)
$ 61
Weighted-average expected recognition period (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.4
The Corporation has share-based compensation plans under which it awards both shares of restricted stock
to key executive officers and key personnel, and stock options to executive officers, directors and key personnel of
the Corporation and its subsidiaries. Restricted stock vests over periods ranging from three to five years. Stock
options vest over periods ranging from one to four years. The maturity of each option is determined at the date of
grant; however, no options may be exercised later than ten years and one month from the date of grant. The
options may have restrictions regarding exercisability. The plans originally provided for a grant of up to
13.2 million common shares, plus shares under certain plans that are forfeited, expire or are cancelled. At
December 31, 2007, 10.9 million shares were available for grant.
The Corporation used a binomial model to value substantially all stock options granted in the periods
presented. Previously, a Black-Scholes option-pricing model was used. Option valuation models require several
inputs, including the expected stock price volatility, and changes in input assumptions can materially affect the
fair value estimates. The model used may not necessarily provide a reliable single measure of the fair value of
employee and director stock options. The risk-free interest rate assumption used in the binomial option-pricing
model as outlined in the table below was based on the federal ten-year treasury interest rate. The expected
dividend yield was based on the historical and projected dividend yield patterns of the Corporation’s common
shares. Expected volatility assumptions during 2007 and 2006 considered both the historical volatility of the
Corporation’s common stock over a ten-year period and implied volatility based on actively traded options on the
Corporation’s common stock with pricing terms and trade dates similar to the stock options granted. In 2005,
only historical volatility was considered under the binomial model. The expected life of employee and director
stock options, which is an output of the binomial model, considered the percentage of vested shares estimated to
be cancelled over the life of the grant and was based on the historical exercise behavior of the option holders.
95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
The fair value of options granted subsequent to March 31, 2005 was estimated using the binomial option-
pricing model with the following weighted-average assumptions:
Year Ended
December 31,
2007
Year Ended
December 31,
2006
Period from
April 1, 2005
to December 31,
2005
Risk-free interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility factors of the market price of Comerica
common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected option life (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.88%
3.85
23
6.4
4.69%
3.85
24
6.5
4.44%
3.85
29
6.5
The weighted-average grant-date fair values per option share granted, based on the assumptions above, were
$12.47, $12.25, and $13.56 in 2007, 2006 and 2005, respectively.
A summary of the Corporation’s stock option activity and related information for the year ended
December 31, 2007 follows:
Outstanding — January 1, 2007 . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . .
Exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Options
(in thousands)
19,191
2,413
(419)
(2,013)
Outstanding — December 31, 2007 . . . . . . . . . . . . .
19,172
Outstanding, net of expected forfeitures —
December 31, 2007. . . . . . . . . . . . . . . . . . . . . . . .
18,851
Exercisable — December 31, 2007 . . . . . . . . . . . . . .
13,160
Weighted-Average
Exercise Price
per Share
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic Value
(in millions)
$55.06
58.93
57.48
44.56
$56.56
$56.55
$56.48
5.2
5.2
3.9
$7
$7
$7
The aggregate intrinsic value of outstanding options shown in the table above represents the total pretax
intrinsic value at December 31, 2007, based on the Corporation’s closing stock price of $43.53 as of December 31,
2007. The total intrinsic value of stock options exercised was $33 million, $26 million and $31 million for the
years ended December 31, 2007, 2006 and 2005, respectively.
Cash received from the exercise of stock options during 2007, 2006 and 2005 totaled $89 million,
$45 million and $42 million, respectively. The net excess income tax benefit realized for the tax deductions
from the exercise of these options during the years ended December 31, 2007, 2006 and 2005 totaled $8 million,
$8 million and $9 million, respectively.
96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
A summary of the Corporation’s restricted stock activity and related information for 2007 follows:
Outstanding-January 1, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Shares
(in thousands)
1,114
438
(54)
(172)
Outstanding-December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,326
Weighted-Average
Grant-Date
Fair Value per Share
$54.38
58.97
56.07
56.04
$55.62
The total fair value of restricted stock awards that fully vested during the years ended December 31, 2007,
2006 and 2005 was $10 million, $8 million and $1 million, respectively.
The Corporation expects to satisfy the exercise of stock options and future grants of restricted stock by issuing
shares of common stock out of treasury. At December 31, 2007, the Corporation held 28.7 million shares in
treasury.
For further information on the Corporation’s share-based compensation plans, refer to Note 1 on page 72.
Note 16 — Employee Benefit Plans
The Corporation has a qualified and a non-qualified defined benefit pension plan, which together, provide
benefits for substantially all full-time employees hired before January 1, 2007. Employee benefits expense
included pension expense of $36 million, $39 million and $31 million in the years ended December 31, 2007,
2006 and 2005, respectively, for the plans. Benefits under the defined benefit plans are based primarily on years of
service, age and compensation during the five highest paid consecutive calendar years occurring during the last ten
years before retirement. The defined benefit plans’ assets primarily consist of units of certain collective investment
funds and mutual investment funds administered by Munder Capital Management, equity securities, U.S. Treasury
and other Government agency securities, Government-sponsored enterprise securities, and corporate bonds and
notes. The majority of these assets have publicly quoted prices, which is the basis for determining fair value of plan
assets.
On January 1, 2007, the Corporation added a defined contribution feature to its principal defined contri-
bution plan for the benefit of substantially all full-time employees hired on or after January 1, 2007. Under the
defined contribution feature, the Corporation will make an annual contribution to the individual account of each
eligible employee ranging from three to eight percent of annual compensation, determined based on combined
age and years of service. The contributions will be invested based on employee investment elections. The
employee fully vests in the defined contribution account after three years of service. The plan feature, effective
January 1, 2007, requires one year of service before an employee is eligible to participate. As a result, no pension
expense was incurred for this plan feature for the year ended December 31, 2007.
The Corporation’s postretirement benefit plan continues to provide postretirement health care and life
insurance benefits for retirees as of December 31, 1992. The plan also provides certain postretirement health care
and life insurance benefits for a limited number of retirees who retired prior to January 1, 2000. For all other
employees hired prior to January 1, 2000, a nominal benefit is provided. Employees hired on or after January 1,
2000 are not eligible to participate in the plan. The Corporation has funded the plan with bank-owned life
insurance.
97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
The following table sets forth reconciliations of the projected benefit obligation and plan assets of the
Corporation’s qualified defined benefit pension plan, non-qualified defined benefit pension plan and postre-
tirement benefit plan. The Corporation used a measurement date of December 31, 2007 for these plans.
Qualified
Defined Benefit
Pension Plan
Non-Qualified
Defined Benefit
Pension Plan
2007
2006
2007
2006
Postretire-
ment
Benefit Plan
2007
2006
(in millions)
Change in projected benefit obligation:
Projected benefit obligation at January 1 . . . . . . . . . . . . $1,044
30
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(63)
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(36)
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Plan change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,066
31
57
(78)
(32)
—
$ 114
4
8
18
(4)
—
$ 104
4
6
3
(3)
—
$82
—
5
1
(8)
1
$79
—
5
(3)
(8)
9
Projected benefit obligation at December 31 . . . . . . . . . . $1,037
$1,044
$ 140
$ 114
$81
$82
Change in plan assets:
Fair value of plan assets at January 1. . . . . . . . . . . . . . . . $1,184
89
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . .
—
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . .
(36)
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,093
123
—
(32)
$ — $ — $85
5
3
(8)
—
4
(4)
—
3
(3)
Fair value of plan assets at December 31 . . . . . . . . . . . . . $1,237
$1,184
$ — $ — $85
Accumulated benefit obligation. . . . . . . . . . . . . . . . . . . . $ 909
$ 909
$ 108
$ 88
$81
Funded status at December 31*. . . . . . . . . . . . . . . . . . . . $ 200
$ 140
$(140) $(114) $ 4
$83
6
4
(8)
$85
$83
$ 2
* Based on projected benefit obligation for pension plans and accumulated benefit obligation for postretirement
benefit plan.
The 2006 postretirement benefit plan change of $9 million reflects an adjustment to include certain
participant groups not previously included in plan valuations. The non-qualified defined benefit pension plan
was the only pension plan with an accumulated benefit obligation in excess of plan assets at December 31, 2007
and 2006.
98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
The following table details the amounts recognized in accumulated other comprehensive income (loss) at
December 31, 2007 and 2006 for the qualified defined benefit pension plan, non-qualified defined benefit
pension plan and postretirement benefit plan and the changes for 2007.
Qualified
Defined Benefit
Pension Plan
Non-Qualified
Defined Benefit
Pension Plan
Net Loss
Prior Service
(Cost) Credit
Net Transition
Obligation
Net Loss
Total
(in millions)
Prior Service
(Cost) Credit
Net Transition
Obligation
Total
$(138)
59
$(24)
—
$ —
—
$(162) $ (31)
(18)
59
$ 8
—
$ —
—
$ (23)
(18)
(15)
(6)
74
26
48
6
2
4
—
—
—
—
(21)
(6)
2
80
28
52
(12)
(4)
(8)
(2)
(1)
(1)
—
—
—
—
(4)
(14)
(5)
(9)
Balance at December 31, 2006, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment arising during the year . . .
Less: Adjustment for amounts
recognized as components of net
periodic benefit cost during the
year . . . . . . . . . . . . . . . . . . . . . .
Change in amounts recognized in other
comprehensive income before income
taxes . . . . . . . . . . . . . . . . . . . . . . .
Less: Provision for income taxes . . . . .
Change in amounts recognized in other
comprehensive income, net of tax . . .
Balance at December 31, 2007, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . .
$ (90)
$(20)
$ —
$(110) $ (39)
$ 7
$ —
$ (32)
Postretirement Benefit Plan
Prior Service
(Cost) Credit
Net Transition
Obligation
Net Loss
Total
Prior Service
(Cost) Credit
Net Transition
Obligation
Total
Net Loss
Total
(in millions)
$ (8)
$ (6)
$(16)
$ (30) $(177)
$(22)
$(16)
$(215)
Balance at December 31, 2006, net of
tax . . . . . . . . . . . . . . . . . . . . . . .
Adjustment arising during the
year . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
41
—
—
41
Less: Adjustment for amounts
recognized as components of net
periodic benefit cost during the
year . . . . . . . . . . . . . . . . . . . . .
Change in amounts recognized in
other comprehensive income
before income taxes . . . . . . . . . . .
Less: Provision for income taxes. . .
Change in amounts recognized in
other comprehensive income, net
of tax . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2007, net of
tax . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
(1)
(4)
(5)
(21)
(5)
(4)
(30)
1
1
—
4
2
2
5
3
2
62
22
40
5
2
3
4
2
2
71
26
45
$ (8)
$ (6)
$(14)
$ (28) $(137)
$(19)
$(14)
$(170)
99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Components of net periodic benefit cost are as follows:
Years Ended December 31
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30
62
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(93)
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Amortization of prior service cost (credit) . . . . . . . . . . . . . . . . .
15
Amortization of net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 31
57
(89)
6
21
Qualified Defined Benefit
Pension Plan
2006
2007
Non-Qualified
Defined Benefit
Pension Plan
2006
2005
2007
2005
(in millions)
$ 4
$ 29
55
8
(91) —
(2)
6
6
20
$ 4
6
—
(2)
5
$ 4
5
—
(2)
5
Net periodic benefit cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20
$ 26
$ 19
$16
$13
$12
Additional information:
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 89
$123
$ 66
$ — $ — $ —
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5
(4)
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Amortization of transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
2007
2005
Years Ended December 31
Postretirement Benefit
Plan
2006
(in millions)
$ 5
(4)
4
—
1
$ 4
(4)
4
—
1
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6
$ 6
$ 5
Additional information:
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5
$ 6
$ 3
The estimated portion of balances remaining in accumulated other comprehensive income (loss) that are
expected to be recognized as a component of net periodic benefit cost in the year ended December 31, 2008 are as
follows.
Qualified
Defined Benefit
Pension Plan
Non-Qualified
Defined Benefit
Pension Plan
Postretirement
Benefit Plan
Total
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost (credit) . . . . . . . . . . . . . . . . . . . . . . .
$ 3
—
6
(in millions)
$ 5
—
(2)
$—
4
1
$8
4
5
Actuarial assumptions are reflected below. The discount rate and rate of compensation increase used to
determine the benefit obligation for each year shown is as of the end of the year. The discount rate, expected return
on plan assets and rate of compensation increase used to determine net cost for each year shown is as of the
beginning of the year.
100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Weighted-average assumptions used to determine year end benefit obligation:
December 31
Qualified and Non-Qualified
Defined Benefit Pension Plans
2007
2005
2006
Postretirement Benefit Plan
2007
2005
2006
Discount rate used in determining benefit obligation . . . 6.47% 5.89% 5.50% 6.15% 5.89% 5.50%
Rate of compensation increase
4.00
4.00
4.00
Weighted-average assumptions used to determine net cost:
Years Ended December 31
Qualified and Non-Qualified
Defined Benefit Pension Plans
2007
2005
2006
Postretirement Benefit Plan
2007
2005
2006
Discount rate used in determining net cost . . . . . . . . . . . 5.89% 5.50% 5.75% 5.89% 5.50% 5.75%
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . 8.25
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . 4.00
8.25
4.00
8.75
4.00
5.00
5.00
5.00
The long-term rate of return expected on plan assets is set after considering both long-term returns in the
general market and long-term returns experienced by the assets in the plan. The returns on the various asset
categories are blended to derive one long-term rate of return. The Corporation reviews its pension plan
assumptions on an annual basis with its actuarial consultants to determine if assumptions are reasonable
and adjusts the assumptions to reflect changes in future expectations.
Assumed healthcare and prescription drug cost trend rates:
December 31
Healthcare
Prescription
Drug
2007
2006
2007
2006
6.50% 6.50% 8.00% 8.00%
Cost trend rate assumed for next year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate that the cost trend rate gradually declines to . . . . . . . . . . . . . . . . . . . . . .
5.00
Year that the rate reaches the rate at which it is assumed to remain . . . . . . . . 2013
5.00
2012
5.00
2012
5.00
2013
Assumed healthcare and prescription drug cost trend rates have a significant effect on the amounts reported
for the healthcare plans. A one-percentage point change in 2006 assumed healthcare and prescription drug cost
trend rates would have the following effects:
Effect on postretirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect on total service and interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5
—
$(5)
—
One-Percentage-
Point
Increase
Decrease
(in millions)
101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Plan Assets
The Corporation’s qualified defined benefit pension plan asset allocations at December 31, 2007 and 2006
and target allocation for 2008 are shown in the table below. There were no assets in the non-qualified defined
benefit pension plan. The postretirement benefit plan is fully invested in bank-owned life insurance policies.
Asset Category
Target
Allocation
2008
Equity securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 — 65%
Fixed income, including cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 — 40
Alternative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0 — 5
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage of
Plan Assets at
December 31
2007
2006
61% 63%
39
—
37
—
100% 100%
Qualified Defined Benefit
Pension Plan
The investment goal for the qualified defined benefit pension plan is to achieve a real rate of return (nominal
rate minus consumer price index change) consistent with that received on investment grade corporate bonds. The
Corporation’s 2008 target allocation percentages by asset category are noted in the table above. Given the mix of
equity securities and fixed income (including cash), management believes that by targeting the benchmark return
to an “investment grade” quality return, an appropriate degree of risk is maintained. Within the asset classes, the
degree of non-U.S. based assets is limited to 15 percent of the total, to be allocated within both equity securities
and fixed income. The investment manager has discretion to make investment decisions within the target
allocation parameters. The Corporation’s Employee Benefits Committee must approve exceptions to this policy.
Securities issued by the Corporation and its subsidiaries are not eligible for use within this plan.
Cash Flows
Estimated Future Employer Contributions
claims.
Estimated Future Benefit Payments
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$—
* Estimated employer contributions in the postretirement benefit plan do not include settlements on death
Qualified
Defined Benefit
Pension Plan
Year Ended December 31
Non-Qualified
Defined Benefit
Pension Plan
(in millions)
$5
Postretirement
Benefit Plan*
$7
Qualified
Defined Benefit
Pension Plan
Postretirement
Benefit Plan*
Years Ended December 31
Non-Qualified
Defined Benefit
Pension Plan
(in millions)
$ 5
6
7
8
8
52
$ 7
7
7
7
7
34
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 — 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 38
41
44
47
51
321
* Estimated benefit payments in the postretirement benefit plan are net of estimated Medicare subsidies.
102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
The Corporation also maintains other defined contribution plans (including 401(k) plans) for various
groups of its employees. Substantially all of the Corporation’s employees are eligible to participate in one or more
of the plans. Under the Corporation’s principal defined contribution plan, the Corporation makes matching cash
contributions. Effective January 1, 2007, the Corporation prospectively changed its core matching contribution to
100 percent of the first four percent of qualified earnings contributed (up to the current IRS compensation limit),
invested based on employee investment elections. Previously, the Corporation’s matches were based on a
declining percentage of employee contributions as well as a performance-based matching contribution. Under
the prior plan, the matching contributions were made in the stock of the Corporation and were restricted until the
end of the calendar year. Employee benefits expense included expense for the plans of $20 million, $13 million
and $15 million in the years ended December 31, 2007, 2006 and 2005, respectively.
Note 17 — Income Taxes and Tax-Related Items
The provision for federal income taxes is computed by applying the statutory federal income tax rate to
income before income taxes as reported in the consolidated financial statements after deducting non-taxable
items, principally income on bank-owned life insurance, and deducting tax credits related to investments in low
income housing partnerships. State and foreign taxes are then added to the federal tax provision. In addition,
beginning January 1, 2007, interest and penalties on tax liabilities are classified in the provision for income taxes.
The Corporation adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes- an interpretation of FASB Statement No. 109,” (FIN 48) on January 1, 2007. As a result, the
Corporation recognized an increase in the liability for unrecognized tax benefits of approximately $18 million at
January 1, 2007, accounted for as a change in accounting principle via a decrease to the opening balance of
retained earnings ($13 million, net of tax). At January 1, 2007, the Corporation had unrecognized tax benefits of
approximately $85 million. After consideration of the effect of the federal tax benefit available on unrecognized
state tax benefits, the total amount of unrecognized tax benefits that, if recognized, would affect the Corporation’s
effective tax rate was approximately $75 million at January 1, 2007, and $77 million at December 31, 2007.
A reconciliation of the beginning and ending amount of unrecognized tax benefit follows:
Balance at January 1, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases as a result of tax positions taken during a prior period . . . . . . . . . . . . . . . . . . . . . . .
Increases as a result of tax positions taken during a current period . . . . . . . . . . . . . . . . . . . . . .
Decreases as a result of tax positions taken during a current period . . . . . . . . . . . . . . . . . . . . .
Decreases related to settlements with tax authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases as a result of a lapse of the applicable statute of limitations . . . . . . . . . . . . . . . . . . .
Unrecognized
Tax Benefits
(in millions)
$85
3
4
—
(4)
—
Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$88
The Corporation recognized approximately $5 million in interest and penalties on tax liabilities included in
the “provision for income taxes” on the consolidated statements of income for the year ended December 31, 2007,
compared to $38 million for the year ended December 31, 2006 and $11 million for the year ended December 31,
2005, included in “other noninterest expenses” on the consolidated statements of income. The 2007 interest and
penalties on tax liabilities are net of a $9 million reduction of interest resulting from a settlement with the Internal
Revenue Service (IRS) on a refund claim. The Corporation had approximately $76 million and $71 million
accrued for the payment of interest and penalties at December 31, 2007 and January 1, 2007, respectively. Upon
adoption of FIN 48, the Corporation recorded a $7 million (net of tax) decrease to interest and penalties on tax
liabilities as an increase to the opening balance of retained earnings.
103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
In the ordinary course of business, the Corporation enters into certain transactions that have tax conse-
quences. From time to time, the IRS questions and/or challenges the tax position taken by the Corporation with
respect to those transactions. The Corporation engaged in certain types of structured leasing transactions that the
IRS disallowed in its examination of the Corporation’s federal tax returns for the years 1996 through 2000. The
Corporation continues to exchange information with the IRS Appeals Office related to the structured leasing
transactions. The IRS also disallowed foreign tax credits associated with the interest on a series of loans to foreign
borrowers. The Corporation has had ongoing discussions with the IRS Appeals Office related to the disallowance
of the foreign tax credits associated with the loans and adjusted tax and related interest and penalties reserves
based on settlements discussed. Also, the Corporation has had discussions with various state tax authorities
regarding prior year tax filings. The Corporation anticipates that it is reasonably possible that the foreign tax
credits and state tax return issues will be settled within the next 12 months resulting in additional payments in the
range of $35 to $45 million in 2008.
Based on current knowledge and probability assessment of various potential outcomes, the Corporation
believes that current tax reserves, determined in accordance with FIN 48, are adequate to cover the matters
outlined above, and the amount of any incremental liability arising from these matters is not expected to have a
material adverse effect on the Corporation’s consolidated financial condition or results of operations. Proba-
bilities and outcomes are reviewed as events unfold, and adjustments to the reserves are made when necessary.
The Corporation believes that its tax returns were filed based upon applicable statutes, regulations and case
law in effect at the time of the transactions. The Corporation intends to vigorously defend its positions taken in
those returns in accordance with its view of the law controlling these activities. However, as noted above, the IRS,
an administrative authority or a court, if presented with the transactions, could disagree with the Corporation’s
interpretation of the tax law. After evaluating the risks and opportunities, the best outcome may result in a
settlement. The ultimate outcome for each position is not known.
The following tax years for significant jurisdictions remain subject to examination as of December 31, 2007:
Jurisdiction
Tax Years
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2001-2006
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2002-2006
On January 1, 2007, the Corporation adopted the provisions of FASB Staff Position No. FAS 13-2, “Account-
ing for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a
Leveraged Lease Transaction,” (FSP 13-2). FSP 13-2 requires a recalculation of the lease income from the inception
of a leveraged lease if, during the lease term, the expected timing of the income tax cash flows generated from a
leveraged lease is revised. The Corporation recorded a one-time non-cash after-tax charge to beginning retained
earnings of $46 million to reflect changes in expected timing of the income tax cash flows generated from affected
leveraged leases, which is expected to be recognized as income over periods ranging from 4 years to 20 years.
104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
The current and deferred components of the provision for income taxes for continuing operations are as
follows:
Current
2007
December 31
2006
(in millions)
2005
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $322
11
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$309
12
12
$321
16
32
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
359
333
369
Deferred
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(51)
(2)
(53)
8
4
12
31
(7)
24
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $306
$345
$393
Income from discontinued operations, net of tax, included a provision for income taxes on discontinued
operations of $2 million, $73 million and $25 million for the years ended December 31, 2007, 2006 and 2005,
respectively. There was an income tax provision on securities transactions in 2007 of $2 million, compared to
nominal tax provisions in both 2006 and 2005.
The principal components of deferred tax assets and liabilities are as follows:
December 31
2007
(in millions)
2006
Deferred tax assets:
Allowance for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $203
35
Deferred loan origination fees and costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36
Foreign tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27
Tax interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53
Other temporary differences, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets before valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
516
(2)
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
514
Deferred tax liabilities:
Lease financing transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
646
14
660
$181
38
180
35
36
30
58
558
—
558
663
6
669
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $146
$111
105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
At December 31, 2007, the Corporation had undistributed earnings of approximately $146 million related to
a foreign subsidiary. The Corporation intends to reinvest theses earnings indefinitely and has not recorded any
related federal or state income tax expense. If these earnings were repatriated to the United States, the Corporation
would record additional income tax expense of approximately $53 million.
A reconciliation of expected income tax expense at the federal statutory rate of 35 percent to the Corporation’s
provision for income taxes for continuing operations and effective tax rate follows:
2007
Years Ended December 31
2006
2005
Amount
Rate
Amount
Rate
Amount
Rate
(dollar amounts in millions)
Tax based on federal statutory rate . . . . . . . . . . . . . . . . . .
State income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Affordable housing and historic credits . . . . . . . . . . . . . .
Bank-owned life insurance . . . . . . . . . . . . . . . . . . . . . . . .
Disallowance of foreign tax credit . . . . . . . . . . . . . . . . . .
Settlement of 1996-2000 IRS audit . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$346
16
(36)
(14)
—
—
(6)
35.0% $395
10
(31)
(15)
22
(16)
(20)
1.6
(3.6)
(1.4)
—
—
(0.6)
35.0% $423
16
(24)
(15)
—
—
(7)
0.9
(2.8)
(1.4)
2.0
(1.4)
(1.7)
35.0%
1.4
(2.0)
(1.2)
—
—
(0.7)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . .
$306
31.0% $345
30.6% $393
32.5%
Note 18 — Transactions with Related Parties
The Corporation’s banking subsidiaries have had, and expect to have in the future, transactions with the
Corporation’s directors and executive officers, and companies with which these individuals are associated. Such
transactions were made in the ordinary course of business and included extensions of credit, leases and
professional services. With respect to extensions of credit, all were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the same time for comparable transactions with other
customers and did not, in management’s opinion, involve more than normal risk of collectibility or present other
unfavorable features. The aggregate amount of loans attributable to persons who were related parties at
December 31, 2007, totaled $210 million at the beginning and $294 million at the end of 2007. During
2007, new loans to related parties aggregated $620 million and repayments totaled $536 million.
Note 19 — Regulatory Capital and Reserve Requirements
Cash and due from banks includes reserves required to be maintained and/or deposited with the Federal
Reserve Bank. These reserve balances vary, depending on the level of customer deposits in the Corporation’s
banking subsidiaries. The average required reserve balances were $267 million and $298 million for the years
ended December 31, 2007 and 2006, respectively.
Banking regulations limit the transfer of assets in the form of dividends, loans or advances from the bank
subsidiaries to the parent company. Under the most restrictive of these regulations, the aggregate amount of
dividends which can be paid to the parent company without obtaining prior approval from bank regulatory
agencies approximated $234 million at January 1, 2008, plus 2008 net profits. Substantially all the assets of the
Corporation’s banking subsidiaries are restricted from transfer to the parent company of the Corporation in the
form of loans or advances.
Dividends declared to the parent company of the Corporation by its banking subsidiaries amounted to
$614 million, $746 million and $793 million in 2007, 2006 and 2005, respectively.
106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
The Corporation and its U.S. banking subsidiaries are subject to various regulatory capital requirements
administered by federal and state banking agencies. Quantitative measures established by regulation to ensure
capital adequacy require the maintenance of minimum amounts and ratios of Tier 1 and total capital (as defined
in the regulations) to average and risk-weighted assets. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Corporation’s financial statements. At December 31, 2007 and 2006, the Corporation
and its U.S. banking subsidiaries exceeded the ratios required for an institution to be considered “well capitalized”
(total risk-based capital, Tier 1 risk-based capital and leverage ratios greater than 10 percent, six percent and five
percent, respectively). The following is a summary of the capital position of the Corporation and Comerica Bank,
its significant banking subsidiary.
December 31, 2007
Tier 1 common capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier 1 capital (minimum-$3.0 billion (Consolidated)) . . . . . . . . . . . . . . . .
Total capital (minimum-$6.0 billion (Consolidated)). . . . . . . . . . . . . . . . .
Risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average assets (fourth quarter) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier 1 common capital to risk-weighted assets . . . . . . . . . . . . . . . . . . . . . .
Tier 1 capital to risk-weighted assets (minimum-4.0%). . . . . . . . . . . . . . . .
Total capital to risk-weighted assets (minimum-8.0%) . . . . . . . . . . . . . . . .
Tier 1 capital to average assets (minimum-3.0%) . . . . . . . . . . . . . . . . . . . .
December 31, 2006
Tier 1 common capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier 1 capital (minimum-$2.8 billion (Consolidated)) . . . . . . . . . . . . . . . .
Total capital (minimum-$5.6 billion (Consolidated)). . . . . . . . . . . . . . . . .
Risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average assets (fourth quarter) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier 1 common capital to risk-weighted assets . . . . . . . . . . . . . . . . . . . . . .
Tier 1 capital to risk-weighted assets (minimum-4.0%). . . . . . . . . . . . . . . .
Total capital to risk-weighted assets (minimum-8.0%) . . . . . . . . . . . . . . . .
Tier 1 capital to average assets (minimum-3.0%) . . . . . . . . . . . . . . . . . . . .
Comerica Incorporated
(Consolidated)
(dollar amounts in millions)
Comerica
Bank
$ 5,145
5,640
8,410
75,102
60,878
6.85%
7.51
11.20
9.26
$ 5,318
5,657
8,202
70,486
57,884
7.54%
8.03
11.64
9.77
$ 5,408
5,728
8,185
74,919
60,660
7.22%
7.65
10.92
9.44
$ 5,373
5,693
7,930
70,343
57,663
7.64%
8.09
11.27
9.87
Note 20 — Derivative and Credit-Related Financial Instruments
In the normal course of business, the Corporation enters into various transactions involving derivative and
credit-related financial instruments to manage exposure to fluctuations in interest rate, foreign currency and other
market risks and to meet the financing needs of customers. These financial instruments involve, to varying
degrees, elements of credit and market risk.
Credit risk is the possible loss that may occur in the event of nonperformance by the counterparty to a
financial instrument. The Corporation attempts to minimize credit risk arising from financial instruments by
evaluating the creditworthiness of each counterparty, adhering to the same credit approval process used for
traditional lending activities. Counterparty risk limits and monitoring procedures have also been established to
facilitate the management of credit risk. Collateral is obtained, if deemed necessary, based on the results of
107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
management’s credit evaluation. Collateral varies, but may include cash, investment securities, accounts receiv-
able, equipment or real estate.
Derivative instruments are traded over an organized exchange or negotiated over-the-counter. Credit risk
associated with exchange-traded contracts is typically assumed by the organized exchange. Over-the-counter
contracts are tailored to meet the needs of the counterparties involved and, therefore, contain a greater degree of
credit risk and liquidity risk than exchange-traded contracts, which have standardized terms and readily available
price information. The Corporation reduces exposure to credit and liquidity risks from over-the-counter derivative
instruments entered into for risk management purposes, and transactions entered into to mitigate the market risk
associated with customer-initiated transactions, by conducting such transactions with investment grade domestic
and foreign financial institutions and subjecting counterparties to credit approvals, limits and monitoring
procedures similar to those used in making other extensions of credit.
Market risk is the potential loss that may result from movements in interest or foreign currency rates and
energy prices, which cause an unfavorable change in the value of a financial instrument. The Corporation
manages this risk by establishing monetary exposure limits and monitoring compliance with those limits. Market
risk arising from derivative instruments entered into on behalf of customers is reflected in the consolidated
financial statements and may be mitigated by entering into offsetting transactions. Market risk inherent in
derivative instruments held or issued for risk management purposes is generally offset by changes in the value of
rate sensitive assets or liabilities.
Derivative Instruments
The Corporation, as an end-user, employs a variety of financial instruments for risk management purposes.
Activity related to these instruments is centered predominantly in the interest rate markets and mainly involves
interest rate swaps. Various other types of instruments also may be used to manage exposures to market risks,
including interest rate caps and floors, total return swaps, foreign exchange forward contracts and foreign
exchange swap agreements.
For hedge relationships accounted for under SFAS 133 at inception of the hedge, the Corporation uses either
the short-cut method if it qualifies, or applies dollar offset or statistical regression analysis to assess effectiveness.
The short-cut method is used for fair value hedges of medium- and long-term debt. This method allows for the
assumption of zero hedge ineffectiveness and eliminates the requirement to further assess hedge effectiveness on
these transactions. For SFAS 133 hedge relationships to which the Corporation does not apply the short-cut
method either the dollar offset or statistical regression analysis is used at inception and for each reporting period
thereafter to assess whether the derivative used has been and is expected to be highly effective in offsetting changes
in the fair value or cash flows of the hedged item. All components of each derivative instrument’s gain or loss are
included in the assessment of hedge effectiveness. Net hedge ineffectiveness is recorded in “other noninterest
income” on the consolidated statements of income.
The following table presents net hedge ineffectiveness gains (losses) by risk management hedge type:
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3
Fair value hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Foreign currency hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Years Ended December 31
2006
2007
2005
(in millions)
$ 1
—
—
$ 1
—
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3
$ 1
$ 1
As part of a fair value hedging strategy, the Corporation has entered into interest rate swap agreements for
interest rate risk management purposes. These interest rate swap agreements effectively modify the Corporation’s
108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
exposure to interest rate risk by converting fixed rate deposits and debt to a floating rate. These agreements involve
the receipt of fixed rate interest amounts in exchange for floating rate interest payments over the life of the
agreement, without an exchange of the underlying principal amount.
As part of a cash flow hedging strategy, the Corporation entered into predominantly three-year interest rate
swap agreements (weighted average original maturity of 3.0 years) that effectively convert a portion of its existing
and forecasted floating rate loans to a fixed rate basis, thus reducing the impact of interest rate changes on future
interest income over the next 10 months. Approximately six percent ($3.2 billion) of the Corporation’s
outstanding loans were designated as hedged items to interest rate swap agreements at December 31, 2007.
For the year ended December 31, 2007, interest rate swap agreements designated as cash flow hedges decreased
interest and fees on loans by $67 million, compared with a decrease of $124 million for the year ended
December 31, 2006. If interest rates, interest yield curves and notional amounts remain at their current levels, the
Corporation expects to reclassify $2 million of net gains, net of tax, on derivative instruments that are designated
as cash flow hedges from accumulated other comprehensive income (loss) to earnings during the next 12 months
due to receipt of variable interest associated with the existing and forecasted floating rate loans.
Foreign exchange rate risk arises from changes in the value of certain assets and liabilities denominated in
foreign currencies. The Corporation employs cash instruments, such as investment securities, as well as derivative
instruments, to manage exposure to these and other risks. In addition, the Corporation uses foreign exchange
forward and option contracts to protect the value of its foreign currency investment in foreign subsidiaries.
Realized and unrealized gains and losses from foreign exchange forward and option contracts used to protect the
value of investments in foreign subsidiaries are not included in the statement of income, but are shown in the
accumulated foreign currency translation adjustment account included in other comprehensive income (loss),
with the related amounts due to or from counterparties included in other liabilities or other assets. During the year
ended December 31, 2006, the Corporation recognized net gains of less than $0.5 million in accumulated foreign
currency translation adjustment, related to the foreign exchange forward and option contracts. The Corporation
did not hold any forward foreign exchange contracts recognized in accumulated foreign currency translation
adjustment during the year ended December 31, 2007.
Management believes these hedging strategies achieve the desired relationship between the rate maturities of
assets and funding sources which, in turn, reduce the overall exposure of net interest income to interest rate risk,
although, there can be no assurance that such strategies will be successful. The Corporation also may use various
other types of financial instruments to mitigate interest rate and foreign currency risks associated with specific
assets or liabilities. Such instruments include interest rate caps and floors, foreign exchange forward contracts,
investment securities, foreign exchange option contracts and foreign exchange cross-currency swaps.
109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
The following table presents the composition of derivative instruments held or issued for risk management
purposes, excluding commitments, at December 31, 2007 and 2006. The fair values of all derivative instruments
are reflected in the consolidated balance sheets.
Notional/
Contract
Amount
Unrealized
Gains
Unrealized
Losses
Fair
Value
(in millions)
December 31, 2007
Risk management
Interest rate contracts:
Swaps — cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swaps — fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts:
Spot and forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Total risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2006
Risk management
Interest rate contracts:
Swaps — cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swaps — fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts:
Spot and forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Total risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,200
2,202
5,402
528
21
549
$5,951
$6,200
2,253
8,453
518
33
551
$9,004
$ 3
142
145
4
1
5
$150
$ —
75
75
6
—
6
$ 81
$ 2
—
2
2
—
2
$ 4
$87
7
94
2
—
2
$96
$ 1
142
143
2
1
3
$146
$ (87)
68
(19)
4
—
4
$ (15)
Notional amounts, which represent the extent of involvement in the derivatives market, are generally used to
determine the contractual cash flows required in accordance with the terms of the agreement. These amounts are
typically not exchanged, significantly exceed amounts subject to credit or market risk, and are not reflected in the
consolidated balance sheets.
Credit risk, which excludes the effects of any collateral or netting arrangements, is measured as the cost to
replace, at current market rates, contracts in a profitable position. The amount of this exposure is represented by
the gross unrealized gains on derivative instruments.
Bilateral collateral agreements with counterparties covered 63 percent and 76 percent of the notional amount of
interest rate derivative contracts at December 31, 2007 and 2006, respectively. These agreements reduce credit risk by
providing for the exchange of marketable investment securities to secure amounts due on contracts in an unrealized
gain position. In addition, at December 31, 2007, master netting arrangements had been established with all interest
rate swap counterparties and certain foreign exchange counterparties. These arrangements effectively reduce credit
risk by permitting settlement, on a net basis, of contracts entered into with the same counterparty. The Corporation
has not experienced any material credit losses associated with derivative instruments.
Fee income is earned from entering into various transactions, principally foreign exchange contracts, interest
rate contracts, and energy derivative contracts at the request of customers. The Corporation mitigates market risk
inherent in customer-initiated interest rate and energy contracts by taking offsetting positions, except in those
circumstances when the amount, tenor and/or contracted rate level results in negligible economic risk, whereby
110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
the cost of purchasing an offsetting contract is not economically justifiable. For customer-initiated foreign
exchange contracts, the Corporation mitigates most of the inherent market risk by taking offsetting positions and
manages the remainder through individual foreign currency position limits and aggregate value-at-risk limits.
These limits are established annually and reviewed quarterly.
For those customer-initiated derivative contracts which were not offset or where the Corporation holds a
speculative position within the limits described above, the Corporation recognized $1 million of net gains in
2007, 2006 and 2005, which were included in “other noninterest income” in the consolidated statements of
income. The fair value of derivative instruments held or issued in connection with customer-initiated activities,
including those customer-initiated derivative contracts where the Corporation does not enter into an offsetting
derivative contract position, is included in the following table.
The following table presents the composition of derivative instruments held or issued in connection with
customer-initiated and other activities.
Notional/
Contract
Amount
Unrealized
Gains
Unrealized
Losses
Fair
Value
(in millions)
December 31, 2007
Customer-initiated and other
Interest rate contracts:
Caps and floors written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Caps and floors purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
851
851
6,806
8,508
Energy derivative contracts:
Caps and floors written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Caps and floors purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total energy derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
410
410
661
1,481
Foreign exchange contracts:
2,707
Spot, forwards, futures and options . . . . . . . . . . . . . . . . . . . . . . .
8
Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,715
Total foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Total customer-initiated and other . . . . . . . . . . . . . . . . . . . . . . . . $12,704
December 31, 2006
Customer-initiated and other
Interest rate contracts:
Caps and floors written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Caps and floors purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
551
536
4,480
5,567
Energy derivative contracts:
Caps and floors written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Caps and floors purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total energy derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
310
310
485
1,105
Foreign exchange contracts:
2,889
Spot, forwards, futures and options . . . . . . . . . . . . . . . . . . . . . . .
4
Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,893
Total foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Total customer-initiated and other . . . . . . . . . . . . . . . . . . . . . . . . $ 9,565
$ —
5
110
115
—
43
61
104
34
—
34
$253
$ —
3
37
40
—
23
22
45
24
—
24
$109
$ 5
—
89
94
43
—
61
104
29
—
29
$227
$ 3
—
26
29
23
—
21
44
21
—
21
$ 94
$ (5)
5
21
21
(43)
43
—
—
5
—
5
$ 26
$ (3)
3
11
11
(23)
23
1
1
3
—
3
$ 15
111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Fair values for customer-initiated and other derivative instruments represent the net unrealized gains or
losses on such contracts and are recorded in the consolidated balance sheets. Changes in fair value are recognized
in the consolidated income statements. The following table provides the average unrealized gains and unrealized
losses and noninterest income generated on customer-initiated and other interest rate contracts, energy derivative
contracts and foreign exchange contracts.
Years Ended
December 31
2007
(in millions)
2006
Average unrealized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $137
120
Average unrealized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50
Noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$103
92
42
Detailed discussions of each class of derivative instruments held or issued by the Corporation for both risk
management and customer-initiated and other activities are as follows.
Interest Rate Swaps
Interest rate swaps are agreements in which two parties periodically exchange fixed cash payments for
variable payments based on a designated market rate or index (or variable payments based on two different rates
or indices for basis swaps), applied to a specified notional amount until a stated maturity. The Corporation’s swap
agreements are structured such that variable payments are primarily based on prime, one-month LIBOR or three-
month LIBOR. These instruments are principally negotiated over-the-counter and are subject to credit risk, market
risk and liquidity risk.
Interest Rate Options, Including Caps and Floors
Option contracts grant the option holder the right to buy or sell an underlying financial instrument for a
predetermined price before the contract expires. Interest rate caps and floors are option-based contracts which
entitle the buyer to receive cash payments based on the difference between a designated reference rate and the
strike price, applied to a notional amount. Written options, primarily caps, expose the Corporation to market risk
but not credit risk. A fee is received at inception for assuming the risk of unfavorable changes in interest rates.
Purchased options contain both credit and market risk. All interest rate caps and floors entered into by the
Corporation are over-the-counter agreements.
Foreign Exchange Contracts
Foreign exchange contracts such as futures, forwards and options are primarily entered into as a service to
customers and to offset market risk arising from such positions. Futures and forward contracts require the delivery
or receipt of foreign currency at a specified date and exchange rate. Foreign currency options allow the owner to
purchase or sell a foreign currency at a specified date and price. Foreign exchange futures are exchange-traded,
while forwards, swaps and most options are negotiated over-the-counter. Foreign exchange contracts expose the
Corporation to both market risk and credit risk. The Corporation also uses foreign exchange rate swaps and cross-
currency swaps for risk management purposes.
Energy Derivative Contracts
The Corporation offers energy derivative contracts, including over-the-counter and NYMEX based natural gas
and crude oil fixed rate swaps and options as a service to customers seeking to hedge market risk in the underlying
products. Contract tenors are typically limited to three years to accommodate hedge requirements and are further
limited to products that are liquid and available on demand. Energy derivative swaps are over-the-counter
agreements in which the Corporation and the counterparty periodically exchange fixed cash payments for variable
112
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
payments based upon a designated market price or index. Energy derivative option contracts grant the option
owner the right to buy or sell the underlying commodity for a predetermined price at settlement date. Energy caps,
floors and collars are option-based contracts that result in the buyer and seller of the contract receiving or making
cash payments based on the difference between a designated reference price and the contracted strike price,
applied to a notional amount. An option fee or premium is received by the Corporation at inception for assuming
the risk of unfavorable changes in energy commodity prices. Purchased options contain both credit and market
risk. Commodity options entered into by the Corporation are over-the-counter agreements.
Warrants
The Corporation holds a portfolio of approximately 840 warrants for generally non-marketable equity
securities. These warrants are primarily from high technology, non-public companies obtained as part of the loan
origination process. As discussed in Note 1 on page 72, warrants that have a net exercise provision embedded in
the warrant agreement are required to be recorded at fair value. Fair value for these warrants (approximately 570
warrants at December 31, 2007 and 680 warrants at December 31, 2006) was approximately $23 million at
December 31, 2007 and $26 million at December 31, 2006, as estimated using a Black-Scholes valuation model.
Commitments
The Corporation also enters into commitments to purchase or sell earning assets for risk management and
trading purposes. These transactions are similar in nature to forward contracts. The Corporation had commit-
ments to purchase investment securities for its trading account and available-for-sale portfolios totaling $604 mil-
lion at December 31, 2007, and commitments to purchase investment securities for its trading account totaling
$20 million at December 31, 2006. Commitments to sell investment securities related to the trading account
totaled $4 million at December 31, 2007 and $16 million at December 31, 2006. Outstanding commitments
expose the Corporation to both credit and market risk.
Credit-Related Financial Instruments
The Corporation issues off-balance sheet financial instruments in connection with commercial and con-
sumer lending activities. The Corporation’s credit risk associated with these instruments is represented by the
contractual amounts indicated in the following table.
December 31
2007
2006
(in millions)
Unused commitments to extend credit:
Commercial and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,603
2,216
Bankcard, revolving check credit and equity access loan commitments . . . . . . . . . . . .
$30,410
2,147
Total unused commitments to extend credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33,819
$32,557
Standby letters of credit and financial guarantees:
Maturing within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,344
2,556
Maturing after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,385
2,199
Total standby letters of credit and financial guarantees . . . . . . . . . . . . . . . . . . . . . . . . $ 6,900
$ 6,584
Commercial letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
234
$
249
The Corporation maintains an allowance to cover probable credit losses inherent in lending-related com-
mitments, including unused commitments to extend credit, letters of credit and financial guarantees. At
December 31, 2007 and 2006, the allowance for credit losses on lending-related commitments, which is recorded
113
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
in “accrued expenses and other liabilities” on the consolidated balance sheets, was $21 million and $26 million,
respectively.
Unused Commitments to Extend Credit
Commitments to extend credit are legally binding agreements to lend to a customer, provided there is no
violation of any condition established in the contract. These commitments generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since many commitments expire without being
drawn upon, the total contractual amount of commitments does not necessarily represent future cash require-
ments of the Corporation. Commercial and other unused commitments are primarily variable rate commitments.
Standby and Commercial Letters of Credit and Financial Guarantees
Standby and commercial letters of credit and financial guarantees represent conditional obligations of the
Corporation, which guarantee the performance of a customer to a third party. Standby letters of credit and
financial guarantees are primarily issued to support public and private borrowing arrangements, including
commercial paper, bond financing and similar transactions. Long-term standby letters of credit and financial
guarantees are defined as those maturing beyond one year and expire in decreasing amounts through the year
2016.
Commercial letters of credit are issued to finance foreign or domestic trade transactions and are short-term in
nature. The Corporation may enter into participation arrangements with third parties, which effectively reduce the
maximum amount of future payments, which may be required under standby letters of credit. These risk
participations covered $664 million of the $6.9 billion standby letters of credit outstanding at December 31, 2007.
At December 31, 2007, the carrying value of the Corporation’s standby and commercial letters of credit and
financial guarantees, which is included in “accrued expenses and other liabilities” on the consolidated balance
sheet, totaled $100 million.
Note 21 — Contingent Liabilities
Legal Proceedings
The Corporation and certain of its subsidiaries are subject to various pending and threatened legal
proceedings arising out of the normal course of business or operations. In view of the inherent difficulty of
predicting the outcome of such matters, the Corporation cannot state what the eventual outcome of these matters
will be. However, based on current knowledge and after consultation with legal counsel, management believes
that current reserves, determined in accordance with SFAS 5, “Accounting for Contingencies,” (SFAS 5), are
adequate and the amount of any incremental liability arising from these matters is not expected to have a material
adverse effect on the Corporation’s consolidated financial condition or results of operations. For information
regarding income tax contingencies, refer to Note 17 on page 103.
Note 22 — Variable Interest Entities (VIE’s)
The Corporation evaluates its interest in certain entities to determine if these entities meet the definition of a
VIE, and whether the Corporation was the primary beneficiary and should consolidate the entity based on the
variable interests it held. The following provides a summary of the VIE’s in which the Corporation has a significant
interest.
The Corporation owns 100% of the common stock of an entity formed in 2007 to issue trust preferred
securities. This entity meets the definition of a VIE, but the Corporation is not the primary beneficiary. The trust
preferred securities held by this entity ($500 million at December 31, 2007) are classified as subordinated debt
and qualify as Tier 1 capital. The Corporation is not exposed to loss related to this VIE.
114
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
The Corporation has a significant limited partnership interest in The Peninsula Fund Limited Partnership
(PFLP), a venture capital fund, which was acquired in 1995. The PFLP’s general partner (an employee of the
Corporation) is considered a related party to the Corporation. This entity meets the definition of a VIE, and the
Corporation is the primary beneficiary of the entity. As such, the Corporation consolidates PFLP. Creditors of the
partnership do not have recourse against the Corporation, and exposure to loss as a result of involvement with
PFLP was limited to the book basis in the entity, which was insignificant at December 31, 2007, and approximately
$2 million of commitments for future investments.
The Corporation has limited partnership interests in three other venture capital funds, which were acquired
in 1998, 1999 and 2001, where the general partner (an employee of the Corporation) in these three partnerships is
considered a related party to the Corporation. These three entities meet the definition of a VIE, however, the
Corporation is not the primary beneficiary of the entities. As such, the Corporation accounts for its interest in
these partnerships on the cost method. These three entities had approximately $157 million in assets at
December 31, 2007. Exposure to loss as a result of involvement with these three entities at December 31,
2007 was limited to approximately $5 million of book basis of the Corporation’s investments and approximately
$2 million of commitments for future investments.
The Corporation, as a limited partner, also holds an insignificant ownership percentage interest in 129 other
venture capital and private equity investment partnerships where the Corporation is not related to the general
partner. While these entities may meet the definition of a VIE, the Corporation is not the primary beneficiary of
any of these entities as a result of its insignificant ownership percentage interest. The Corporation accounts for its
interests in these partnerships on the cost method, and exposure to loss as a result of involvement with these
entities at December 31, 2007 was limited to approximately $69 million of book basis of the Corporation’s
investments and approximately $38 million of commitments for future investments.
Two limited liability subsidiaries of the Corporation are the general partners in two investment fund
partnerships, formed in 1999 and 2003. These subsidiaries manage the investments held by these funds. These
two investment partnerships meet the definition of a VIE. In the investment fund partnership formed in 1999, the
Corporation is not the primary beneficiary of the entity. As such, the Corporation accounts for its indirect interests
in this partnership on the cost method. This investment partnership had approximately $157 million in assets at
December 31, 2007 and was structured so that the Corporation’s exposure to loss as a result of its interest should
be limited to the book basis of the Corporation’s investment in the limited liability subsidiary, which was
insignificant at December 31, 2007. In the investment fund partnership formed in 2003, the Corporation is the
primary beneficiary and consolidates the entity. This investment partnership had assets of approximately
$10 million at December 31, 2007 and was structured so that the Corporation’s exposure to loss as a result of
its interest should be limited to the book basis of the Corporation’s investment in the limited liability subsidiary,
which was insignificant at December 31, 2007.
The Corporation has a significant limited partner interest in 20 low income housing tax credit/historic
rehabilitation tax credit partnerships, acquired at various times from 1992 to 2007. These entities meet the
definition of a VIE. However, the Corporation is not the primary beneficiary of the entities and, as such, accounts
for its interest in these partnerships on the cost or equity method. These entities had approximately $137 million
in assets at December 31, 2007. Exposure to loss as a result of its involvement with these entities at December 31,
2007 was limited to approximately $16 million of book basis of the Corporation’s investment, which includes
unused commitments for future investments.
The Corporation, as a limited partner, also holds an insignificant ownership percentage interest in 106 other
low income housing tax credit/historic rehabilitation tax credit partnerships. While these entities may meet the
definition of a VIE, the Corporation is not the primary beneficiary of any of these entities as a result of its
insignificant ownership percentage interest. As such, the Corporation accounts for its interest in these partner-
ships on the cost or equity method. Exposure to loss as a result of its involvement with these entities at
115
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
December 31, 2007 was limited to approximately $328 million of book basis of the Corporation’s investment,
which includes unused commitments for future investments.
For further information on the company’s consolidation policy, see Note 1 on page 72.
Note 23 — Estimated Fair Value of Financial Instruments
Disclosure of the estimated fair values of financial instruments, which differ from carrying values, often
requires the use of estimates. In cases where quoted market values are not available, the Corporation uses present
value techniques and other valuation methods to estimate the fair values of its financial instruments. These
valuation methods require considerable judgment, and the resulting estimates of fair value can be significantly
affected by the assumptions made and methods used. Accordingly, the estimates provided herein do not
necessarily indicate amounts which could be realized in a current exchange. Furthermore, as the Corporation
typically holds the majority of its financial instruments until maturity, it does not expect to realize many of the
estimated amounts disclosed. The disclosures also do not include estimated fair value amounts for items which
are not defined as financial instruments, but which have significant value. These include such items as core deposit
intangibles, the future earnings potential of significant customer relationships and the value of trust operations
and other fee generating businesses. The Corporation believes the imprecision of an estimate could be significant.
The Corporation used the following methods and assumptions in estimating fair value disclosures for
financial instruments:
Cash and due from banks, federal funds sold and securities purchased under agreements to resell, and interest-bearing
deposits with banks: The carrying amount approximates the estimated fair value of these instruments.
Trading securities: These securities are carried at quoted market value or the market value for comparable
securities, which represents estimated fair value.
Loans held-for-sale: The market value of these loans represents estimated fair value or estimated net selling
price. The market value is determined on the basis of existing forward commitments or the current market values
of similar loans.
Investment securities:
Investment securities are carried at quoted market value, if available. The market value
for comparable securities is used to estimate fair value if quoted market values are not available.
Domestic business loans: These consist of commercial, real estate construction, commercial mortgage and
equipment lease financing loans. The estimated fair value of the Corporation’s variable rate commercial loans is
represented by their carrying value, adjusted by an amount which estimates the change in fair value caused by
changes in the credit quality of borrowers since the loans were originated. The estimated fair value of fixed rate
commercial loans is calculated using a discounted cash flow model. The resulting amounts are adjusted to
estimate the effect of changes in the credit quality of borrowers since the loans were originated.
International loans: These consist primarily of short-term trade-related loans, variable rate loans or loans
which have no cross-border risk due to the existence of domestic guarantors or liquid collateral. The estimated fair
value of the Corporation’s international loan portfolio is represented by their carrying value, adjusted by an
amount which estimates the effect on fair value of changes in the credit quality of borrowers or guarantors.
Retail loans: This category consists of residential mortgage, home equity and other consumer loans. The
estimated fair value of residential mortgage loans is based on discounted contractual cash flows adjusted for
expected prepayments. For home equity and other consumer loans, the estimated fair values are calculated using a
discounted cash flow model. The resulting amounts are adjusted to estimate the effect of changes in the credit
quality of borrowers since the loans were originated.
Customers’ liability on acceptances outstanding and acceptances outstanding: The carrying amount approximates
the estimated fair value.
116
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Loan servicing rights: The estimated fair value is representative of a discounted cash flow analysis, using
interest rates and prepayment speed assumptions currently quoted for comparable instruments.
Deposit liabilities: The estimated fair value of demand deposits, consisting of checking, savings and certain
money market deposit accounts, is represented by the amounts payable on demand. The carrying amount of
deposits in foreign offices approximates their estimated fair value, while the estimated fair value of term deposits is
calculated by discounting the scheduled cash flows using the year-end rates offered on these instruments.
Short-term borrowings: The carrying amount of federal funds purchased, securities sold under agreements to
repurchase and other short-term borrowings approximates estimated fair value.
Medium- and long-term debt: The estimated fair value of the Corporation’s variable rate medium- and long-
term debt is represented by its carrying value. The estimated fair value of the fixed rate medium- and long-term
debt is based on quoted market values. If quoted market values are not available, the estimated fair value is based
on the market values of debt with similar characteristics.
Derivative instruments: The estimated fair value of interest rate and energy commodity swaps represents the
amount the Corporation would receive or pay to terminate or otherwise settle the contracts at the balance sheet
date, taking into consideration current unrealized gains and losses on open contracts. The estimated fair value of
foreign exchange futures and forward contracts and commitments to purchase or sell financial instruments is
based on quoted market prices. The estimated fair value of interest rate, energy commodity and foreign currency
options (including caps, floors and collars) is determined using option pricing models. The estimated fair value of
warrants that are accounted for as derivatives are valued using a Black-Scholes valuation model. All derivative
instruments are carried at fair value on the balance sheet.
Credit-related financial instruments: The estimated fair value of unused commitments to extend credit and
standby and commercial letters of credit is represented by the estimated cost to terminate or otherwise settle the
obligations with the counterparties. This amount is approximated by the fees currently charged to enter into
similar arrangements, considering the remaining terms of the agreements and any changes in the credit quality of
counterparties since the agreements were entered into. This estimate of fair value does not take into account the
significant value of the customer relationships and the future earnings potential involved in such arrangements as
the Corporation does not believe that it would be practicable to estimate a representational fair value for these
items.
117
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
The estimated fair values of the Corporation’s financial instruments are as follows:
Assets
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,440
$ 1,440
$ 1,434
$ 1,434
December 31
2007
2006
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
(in millions)
Federal funds sold and securities purchased under agreements
to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing deposits with banks . . . . . . . . . . . . . . . . . . . . . .
Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held-for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other short-term investments. . . . . . . . . . . . . . . . . . . . . .
36
38
118
217
373
36
38
118
217
373
Investment securities available-for-sale. . . . . . . . . . . . . . . . . . . . .
6,296
6,296
Commercial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate construction loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,223
4,816
10,048
1,915
2,464
1,351
1,926
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . .
50,743
(557)
2,632
—
179
148
327
3,662
26,265
4,203
9,659
1,677
2,423
1,353
1,851
47,431
(493)
46,938
56
14
13,901
31,026
44,927
635
56
5,949
81
(96)
109
(94)
26
(94)
2,632
—
179
148
327
3,662
26,050
4,192
9,796
1,718
2,477
1,191
1,839
47,263
—
47,263
56
14
13,901
30,998
44,899
635
56
5,642
81
(96)
109
(94)
26
(100)
28,048
4,716
10,308
2,021
2,515
1,144
1,929
50,681
—
50,681
48
12
11,920
32,357
44,277
2,807
48
8,492
50,186
48
12
11,920
32,358
44,278
2,807
48
8,821
150
(4)
253
(227)
23
(110)
150
(4)
253
(227)
23
(117)
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customers’ liability on acceptances outstanding . . . . . . . . . . . . .
Loan servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities
Demand deposits (noninterest-bearing) . . . . . . . . . . . . . . . . . . .
Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acceptances outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medium- and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments
Risk management:
Unrealized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer-initiated and other:
Unrealized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit-related financial instruments . . . . . . . . . . . . . . . . . . . . .
118
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Note 24 — Business Segment Information
The Corporation has strategically aligned its operations into three major business segments: the Business
Bank, the Retail Bank, and Wealth & Institutional Management. These business segments are differentiated based
on the type of customer and the related products and services provided. In addition to the three major business
segments, the Finance Division is also reported as a segment. Business segment results are produced by the
Corporation’s internal management accounting system. This system measures financial results based on the
internal business unit structure of the Corporation. Information presented is not necessarily comparable with
similar information for any other financial institution. The management accounting system assigns balance sheet
and income statement items to each business segment using certain methodologies, which are regularly reviewed
and refined. For comparability purposes, amounts in all periods are based on business segments and method-
ologies in effect at December 31, 2007. These methodologies, which are briefly summarized in the following
paragraph, may be modified as management accounting systems are enhanced and changes occur in the
organizational structure or product lines.
The Corporation’s internal funds transfer pricing system records cost of funds or credit for funds using a
combination of matched maturity funding for certain assets and liabilities and a blended rate based on various
maturities for the remaining assets and liabilities. The allowance for loan losses is allocated to both large business
and certain large personal purpose consumer and residential mortgage loans that have deteriorated below certain
levels of credit risk based on a non-standard, specifically calculated amount. Additional loan loss reserves are
allocated based on industry-specific risk and are maintained to capture probable losses due to the inherent
imprecision in the risk rating system and new business migration risk not captured in the credit scores of
individual loans. For other business loans, the allowance for loan losses is recorded in business units based on the
credit score of each loan outstanding. For other consumer and residential mortgage loans, it is allocated based on
applying estimated loss ratios to various segments of the loan portfolio. The related loan loss provision is assigned
based on the amount necessary to maintain an allowance for loan losses adequate for each product category.
Noninterest income and expenses directly attributable to a line of business are assigned to that business segment.
Direct expenses incurred by areas whose services support the overall Corporation are allocated to the business
segments as follows: product processing expenditures are allocated based on standard unit costs applied to actual
volume measurements; administrative expenses are allocated based on estimated time expended; and corporate
overhead is assigned 50 percent based on the ratio of the business segment’s noninterest expenses to total
noninterest expenses incurred by all business segments and 50 percent based on the ratio of the business
segment’s attributed equity to total attributed equity of all business segments. Equity is attributed based on credit,
operational and interest rate risks. Most of the equity attributed relates to credit risk, which is determined based on
the credit score and expected remaining life of each loan, letter of credit and unused commitment recorded in the
business units. Operational risk is allocated based on deposit balances, non-earning assets, trust assets under
management, and the nature and extent of expenses incurred by business units. Virtually all interest rate risk is
assigned to Finance, as are the Corporation’s hedging activities.
The following discussion provides information about the activities of each business segment. A discussion of
the financial results and the factors impacting 2007 performance can be found in the section entitled “Business
Segments” in the financial review on page 33.
The Business Bank is primarily comprised of the following businesses: middle market, commercial real estate,
national dealer services, international finance, global corporate, leasing, financial services, and technology and
life sciences. This business segment meets the needs of medium-size businesses, multinational corporations and
governmental entities by offering various products and services, including commercial loans and lines of credit,
deposits, cash management, capital market products, international trade finance, letters of credit, foreign
exchange management services and loan syndication services.
The Retail Bank includes small business banking and personal financial services, consisting of consumer
lending, consumer deposit gathering and mortgage loan origination. In addition to a full range of financial
119
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
services provided to small business customers, this business segment offers a variety of consumer products,
including deposit accounts, installment loans, credit cards, student loans, home equity lines of credit and
residential mortgage loans.
Wealth & Institutional Management offers products and services consisting of fiduciary services, private
banking, retirement services, investment management and advisory services, investment banking and discount
securities brokerage services. This business segment also offers the sale of annuity products, as well as life,
disability and long-term care insurance products.
The Finance segment includes the Corporation’s securities portfolio and asset and liability management
activities. This segment is responsible for managing the Corporation’s funding, liquidity and capital needs,
performing interest sensitivity analysis and executing various strategies to manage the Corporation’s exposure to
liquidity, interest rate risk and foreign exchange risk.
The Other category includes discontinued operations, the income and expense impact of equity and cash, tax
benefits not assigned to specific business segments and miscellaneous other expenses of a corporate nature.
Business segment financial results are as follows:
Year Ended December 31, 2007
Business
Bank
Retail
Bank
Wealth &
Institutional
Management
Finance
Other
Total
(dollar amounts in millions)
Earnings summary:
Net interest income (expense) (FTE) . . . . . . . $ 1,326 $
Provision for loan losses . . . . . . . . . . . . . . . .
Noninterest income . . . . . . . . . . . . . . . . . . . .
Noninterest expenses . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes (FTE). . .
Income from discontinued operations,
178
291
708
228
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $
503 $
627
41
220
655
52
—
99
34
117 $
Net credit-related charge-offs . . . . . . . . . . . . . $
Selected average balances:
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,762 $ 6,880
6,134
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,156
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,169
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attributed equity . . . . . . . . . . . . . . . . . . . . . .
850
Statistical data:
Return on average assets(1) . . . . . . . . . . . . . .
Return on average attributed equity . . . . . . . .
Net interest margin(2) . . . . . . . . . . . . . . . . . .
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . .
39,721
16,253
17,091
2,935
11.68
3.65
77.29
17.11
3.33
44.10
1.23% 0.55%
$ 145
(3)
283
322
39
—
70
2
$
$
$4,096
3,937
2,386
2,392
332
$
$
$
(69) $ (23) $ 2,006
212
(4)
888
29
1,691
(4)
309
8
—
65
10
(18)
—
4
4
4 $
10 $
686
— $ — $
153
$ 5,669 $1,167 $58,574
49,821
41,934
53,504
5,070
7
6,174
16,531
628
22
(35)
321
325
1.70%
21.03
3.64
75.29
N/M
N/M
N/M
N/M
N/M
N/M
N/M
N/M
1.17%
13.52
3.66
58.58
120
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Year Ended December 31, 2006
Business
Bank
Retail
Bank
Wealth &
Institutional
Management
Finance
Other
Total
Earnings summary:
Net interest income (expense) (FTE) . . . . . . . $ 1,315 $
Provision for loan losses. . . . . . . . . . . . . . . . .
Noninterest income . . . . . . . . . . . . . . . . . . . .
Noninterest expenses . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes (FTE) . . .
Income from discontinued operations,
14
305
741
276
net of tax. . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . $
—
589 $
637
23
210
608
72
—
144
$ 147
1
259
313
31
—
61
$
35
37 $
Net credit-related charge-offs . . . . . . . . . . . . . $
Selected average balances:
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,263 $ 6,786
6,084
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,807
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,810
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attributed equity . . . . . . . . . . . . . . . . . . . . . . .
831
Statistical data:
Return on average assets(1) . . . . . . . . . . . . . .
Return on average attributed equity . . . . . . . .
Net interest margin(2) . . . . . . . . . . . . . . . . . .
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . .
38,081
17,775
18,677
2,639
22.30
3.45
45.78
17.30
3.79
71.75
1.50% 0.81%
$ (100) $ (13) $ 1,986
37
855
1,674
348
—
64
14
(32)
(1)
17
(2)
1
—
111
$
(18) $ 117 $
$ — $
— $ — $
111
893
72
$3,677
3,534
2,394
2,392
299
$ 5,271 $1,582 $56,579
47,750
42,074
51,403
5,176
18
5,186
13,198
499
33
(88)
326
908
1.67%
20.49
4.15
77.10
N/M
N/M
N/M
N/M
N/M
N/M
N/M
N/M
1.58%
17.24
3.79
58.92
Year Ended December 31, 2005
Business
Bank
Retail
Bank
Wealth &
Institutional
Management
Finance
Other
Total
Earnings summary:
Net interest income (expense) (FTE) . . . . . . . . $ 1,395 $
Provision for loan losses. . . . . . . . . . . . . . . . . .
Noninterest income . . . . . . . . . . . . . . . . . . . . .
Noninterest expenses . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes (FTE) . . . .
Income from discontinued operations,
(42)
284
728
335
net of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . $
—
658 $
612
4
208
546
96
—
174
25
86 $
Net credit-related charge-offs . . . . . . . . . . . . . . $
Selected average balances:
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35,708 $ 6,554
5,882
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,841
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,832
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attributed equity . . . . . . . . . . . . . . . . . . . . . . . .
805
Statistical data:
Return on average assets(1) . . . . . . . . . . . . . . .
Return on average attributed equity . . . . . . . . .
Net interest margin(2) . . . . . . . . . . . . . . . . . . .
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . . .
34,561
20,424
21,160
2,528
21.64
3.63
66.54
26.02
4.02
43.37
1.84% 0.99%
$ 147
(3)
253
304
36
—
63
6
$
$
$3,487
3,338
2,458
2,453
300
$ (183) $ (11) $ 1,960
(47)
819
1,613
397
—
63
10
(59)
(6)
11
25
(11)
—
$ (71) $
45
37 $
$ — $
(1) $
45
861
116
$5,218 $1,539 $52,506
43,816
40,640
47,409
5,097
(15)
896
6,510
510
50
21
454
954
1.81%
21.07
4.39
76.13
N/M
N/M
N/M
N/M
N/M
N/M
N/M
N/M
1.64%
16.90
4.06
58.01
(1) Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(2) Net interest margin is calculated based on the greater of average earning assets or average deposits and purchased funds.
FTE-Fully Taxable Equivalent
N/M-Not Meaningful
121
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
The Corporation’s management accounting system also produces market segment results for the Corpo-
ration’s four primary geographic markets: Midwest, Western, Texas, and Florida. In addition to the four primary
geographic markets, Other Markets and International are also reported as market segments. Market segment
results are provided as supplemental information to the business segment results and may not meet all operating
segment criteria as set forth in SFAS 131, “Disclosures about Segments of an Enterprise and Related Information,”
(SFAS 131). The following discussion provides information about the activities of each market segment. A
discussion of the financial results and the factors impacting 2007 performance can be found in the section entitled
“Geographic Market Segments” in the financial review on page 34.
The Midwest market consists of operations located in the states of Michigan, Ohio and Illinois. Currently,
Michigan operations represent the significant majority of this geographic market.
The Western market consists of the states of California, Arizona, Nevada, Colorado and Washington.
Currently, California operations represent the significant majority of the Western market.
The Texas and Florida markets consist of operations located in the states of Texas and Florida, respectively.
Other Markets include businesses with a national perspective, the Corporation’s investment management
and trust alliance businesses as well as activities in all other markets in which the Corporation has operations,
except for the International market, as described below.
The International market represents the activity of the Corporation’s international finance division, which
provides banking services primarily to foreign-owned, North American-based companies and secondarily to
international operations of North American-based companies.
The Finance & Other Businesses segment includes the Corporation’s securities portfolio, asset and liability
management activities, discontinued operations, the income and expense impact of equity and cash not assigned
to specific business/market segments, tax benefits not assigned to specific business/market segments and
miscellaneous other expenses of a corporate nature. This segment includes responsibility for managing the
Corporation’s funding, liquidity and capital needs, performing interest sensitivity analysis and executing various
strategies to manage the Corporation’s exposure to liquidity, interest rate risk and foreign exchange risk.
The Corporation’s total revenues from customers and long-lived assets (excluding certain intangible assets)
located in foreign countries in which the Corporation holds assets were less than five percent of the Corporation’s
consolidated revenues and long-lived assets (excluding certain intangible assets) in each of the years ended
December 31, 2007, 2006 and 2005.
122
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Market segment financial results are as follows:
Midwest Western
Texas
Year Ended December 31, 2007
Other
Florida
Markets
(dollar amounts in millions)
International
Finance
& Other
Businesses
Total
Earnings summary:
Net interest income (expense) (FTE) . . . . . . . . . $
Provision for loan losses . . . . . . . . . . . . . . . . .
Noninterest income . . . . . . . . . . . . . . . . . . . .
Noninterest expenses . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes (FTE) . . . . .
Income from discontinued operations,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
863 $
88
471
821
148
706 $ 279 $
108
131
455
104
8
86
235
43
47 $ 136
16
11
54
14
92
39
(7)
4
—
—
—
—
—
89
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $
277 $
170 $
79 $
7 $
9 $
2 $
28 $
110 $
Net credit-related charge-offs . . . . . . . . . . . . . . $
Selected average balances:
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,189 $17,069 $7,106 $1,687 $4,435
4,041
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,386
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,503
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attributed equity . . . . . . . . . . . . . . . . . . . . . .
335
Statistical data:
Return on average assets(1) . . . . . . . . . . . . . . .
Return on average attributed equity . . . . . . . . . .
Net interest margin(2) . . . . . . . . . . . . . . . . . .
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . .
1.44% 0.99% 1.12% 0.43% 2.01%
13.40
4.08
64.32
16,530
13,325
13,361
1,212
18,598
15,819
16,484
1,722
6,827
3,884
3,900
596
1,672
286
288
96
26.61
3.36
48.42
13.99
4.26
54.45
7.51
2.80
63.65
16.02
4.62
61.76
10
$
$
$
67
(15)
38
43
27
—
50
(6)
$2,252
2,124
1,095
1,116
156
$
$
$
(92) $ 2,006
212
888
1,691
309
(4)
94
6
(10)
4
14
4
$
686
— $
153
$ 6,836
29
6,139
16,852
953
$58,574
49,821
41,934
53,504
5,070
2.20%
31.86
3.08
43.12
N/M
N/M
N/M
N/M
1.17%
13.52
3.66
58.58
Year Ended December 31, 2006
Midwest Western
Texas
Florida
Other
Markets
International
Finance
& Other
Businesses
Total
Earnings summary:
Net interest income (expense) (FTE) . . . . . . . . . $
Provision for loan losses . . . . . . . . . . . . . . . . .
Noninterest income . . . . . . . . . . . . . . . . . . . .
Noninterest expenses . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes (FTE) . . . . .
Income from discontinued operations,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
908 $
77
452
811
153
701 $ 261 $
(32)
160
450
170
(2)
76
216
41
43 $ 118
6
52
101
(9)
3
14
34
6
—
—
—
—
—
72
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $
319 $
273 $
82 $
14 $
7 $
1 $
2 $
48 $
Net credit-related charge-offs . . . . . . . . . . . . . . $
Selected average balances:
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,407 $16,445 $6,174 $1,528 $3,971
3,598
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,253
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,378
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
278
Attributed equity . . . . . . . . . . . . . . . . . . . . . .
Statistical data:
Return on average assets(1) . . . . . . . . . . . . . . .
Return on average attributed equity . . . . . . . . . .
Net interest margin(2). . . . . . . . . . . . . . . . . . .
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . .
1.64% 1.66% 1.33% 0.88% 1.81%
15.56
4.39
64.14
15,882
14,592
14,658
1,102
18,737
16,061
16,734
1,623
5,911
3,699
3,709
529
1,508
306
308
80
24.79
4.41
52.29
19.67
4.83
59.57
16.81
2.84
60.34
25.81
3.29
59.32
13
123
$
$
$
68
(14)
20
50
18
—
34
1
$2,201
2,063
1,065
1,092
157
$ (113) $ 1,986
37
855
1,674
348
(1)
81
12
(31)
111
99
$
111
893
— $
72
$
$
$ 6,853
51
5,098
13,524
1,407
$56,579
47,750
42,074
51,403
5,176
1.52%
21.37
3.17
57.73
N/M
N/M
N/M
N/M
1.58%
17.24
3.79
58.92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Year Ended December 31, 2005
Midwest Western
Texas
Florida
Other
Markets
International
Finance
& Other
Businesses
Total
Earnings summary:
Net interest income (expense) (FTE) . . . . . . . . . $
Provision for loan losses . . . . . . . . . . . . . . . . .
Noninterest income . . . . . . . . . . . . . . . . . . . .
Noninterest expenses . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes (FTE) . . . . .
Income from discontinued operations,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
923 $
46
460
794
192
784 $ 242 $
(68)
122
434
202
(8)
75
189
47
—
—
—
39 $
1
13
28
8
—
Net income (loss). . . . . . . . . . . . . . . . . . . . . . $
351 $
338 $
89 $
15 $
89
2
40
75
(10)
—
62
6 $
7 $
79 $
14 $
Net credit-related charge-offs . . . . . . . . . . . . . . $
Selected average balances:
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,502 $14,219 $5,176 $1,301 $2,827
2,596
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
996
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,089
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Attributed equity . . . . . . . . . . . . . . . . . . . . . .
206
Statistical data:
Return on average assets(1) . . . . . . . . . . . . . . .
Return on average attributed equity . . . . . . . . . .
Net interest margin(2). . . . . . . . . . . . . . . . . . .
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . .
1.80% 1.89% 1.72% 1.15% 2.18%
18.87
4.82
59.76
18,796
16,781
17,396
1,646
13,638
16,852
16,865
1,046
4,998
3,655
3,651
471
1,288
299
297
66
32.30
4.65
47.92
21.39
4.90
57.40
29.89
3.44
57.72
22.72
3.06
54.77
5
$
$
$
77
(14)
35
58
28
—
40
6
$2,724
2,465
1,140
1,147
198
1.46%
20.11
2.92
51.74
$ 1,960
(47)
819
1,613
397
$ (194)
(6)
74
35
(70)
45
$ (34)
$
(1)
$
$
45
861
116
$6,757
35
917
6,964
1,464
N/M
N/M
N/M
N/M
$52,506
43,816
40,640
47,409
5,097
1.64%
16.90
4.06
58.01
(1) Return on average assets is calculated based on the greater of average assets or average liabilities and attributed equity.
(2) Net interest margin is calculated based on the greater of average earning assets or average deposits and purchased funds.
FTE-Fully Taxable Equivalent
N/M-Not Meaningful
124
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Note 25 — Parent Company Financial Statements
Balance Sheets — Comerica Incorporated
December 31
2007
2006
(in millions, except
share data)
ASSETS
Cash and due from subsidiary bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Short-term investments with subsidiary bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries, principally banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
224
102
5,840
4
166
$
122
246
92
5,586
4
152
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,337
$ 6,202
LIABILITIES AND SHAREHOLDERS’ EQUITY
Medium- and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
968
252
$
806
243
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,220
1,049
Common stock — $5 par value:
Authorized — 325,000,000 shares
Issued — 178,735,252 shares at 12/31/07 and 12/31/06 . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less cost of common stock in treasury — 28,747,097 shares at 12/31/07 and
894
564
(177)
5,497
894
520
(324)
5,282
21,161,161 shares at 12/31/06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,661)
(1,219)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,117
5,153
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,337
$ 6,202
125
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Statements of Income — Comerica Incorporated
Years Ended December 31
2007
2005
2006
(in millions)
INCOME
Income from subsidiaries
Dividends from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $614
Other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
149
Intercompany management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
Other noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$746
13
178
13
$793
6
117
3
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
793
950
919
EXPENSES
Interest on medium- and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net occupancy expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before provision (benefit) for income taxes and equity in undistributed
earnings of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision (benefit) for income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before equity in undistributed earnings of subsidiaries . . . . . . . . . . . . . . . . . .
Equity in undistributed earnings of subsidiaries, principally banks (including
60
108
7
1
51
227
52
113
2
1
46
214
566
(22)
588
736
(6)
742
45
98
6
1
47
197
722
(27)
749
discontinued operations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
98
151
112
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $686
$893
$861
126
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Statements of Cash Flows — Comerica Incorporated
Years Ended December 31
2007
2005
2006
(in millions)
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 686
Adjustments to reconcile net income to net cash provided by operating activities
$ 893
$ 861
Undistributed earnings of subsidiaries, principally banks (including
discontinued operations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and software amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based compensation arrangements . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(98)
1
20
(9)
34
(52)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
634
INVESTING ACTIVITIES
Net decrease in short-term investments with subsidiary bank . . . . . . . . . . . . . . . . .
Net proceeds from private equity and venture capital investments. . . . . . . . . . . . . .
Capital transactions with subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in fixed assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by investing activities . . . . . . . . . . . . . . . . . . . .
FINANCING ACTIVITIES
Proceeds from issuance of medium- and long-term debt . . . . . . . . . . . . . . . . . . . . .
Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of common stock for treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based compensation arrangements . . . . . . . . . . . . . .
22
3
(62)
(1)
(38)
665
(510)
89
(580)
(390)
9
(151)
1
21
(9)
49
(89)
804
18
3
(6)
(1)
14
—
—
45
(384)
(377)
9
(112)
1
15
—
38
(58)
803
25
21
2
(1)
47
—
—
51
(525)
(366)
—
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(717)
(707)
(840)
Net (decrease) increase in cash on deposit at bank subsidiary . . . . . . . . . . . . . . . . .
Cash on deposit at bank subsidiary at beginning of year . . . . . . . . . . . . . . . . . . . . .
(121)
122
111
11
10
1
Cash on deposit at bank subsidiary at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . $
1
$ 122
$ 11
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 57
$ 50
$ 42
Income taxes (recovered) paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (39) $ — $ (30)
Note 26 — Sales of Businesses/Discontinued Operations
In December 2006, the Corporation sold its ownership interest in Munder to an investor group. The sale,
including associated costs and assigned goodwill, resulted in a net after-tax gain of $108 million, or $0.67 per
average annual diluted share, in 2006. The sale agreement included an interest-bearing contingent note with an
initial principal amount of $70 million, which will be realized if the Corporation’s client-related revenues earned
by Munder remain consistent with 2006 levels of approximately $17 million per year for the five years following
127
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
the closing of the transaction (2007-2011). The principal amount of the note may be increased to a maximum of
$80 million or decreased to as low as zero, depending on the level of such revenues earned in the five years
following the closing. Repayment of the principal is scheduled to begin after the sixth anniversary of the closing of
the transaction from Munder’s excess cash flows, as defined in the sale agreement. The note matures in December
2013. Future gains related to the contingent note are expected to be recognized periodically as targets for the
Corporation’s client-related revenues earned by Munder are achieved. Recognition of the potential gains related to
the contingent note will begin when cumulative client-related revenues exceed approximately $26 million,
$18 million of which accumulated in 2007. The potential future gains are expected to be recorded between 2008
and the fourth quarter of 2011, unless fully earned prior to that time.
As a result of the sale transaction, the Corporation reported Munder as a discontinued operation in all
periods presented. The assets and liabilities related to the discontinued operations of Munder are not material and
have not been reclassified on the consolidated balance sheets.
The income from discontinued operations recorded in 2007 reflected adjustments to the initial gain recorded
at the closing of the Munder sale transaction. The components of net income from discontinued operations for
the years ended December 31, 2007, 2006 and 2005, respectively, were as follows:
2007
2005
2006
(in millions, except per share
data)
Income from discontinued operations before income taxes and cumulative
effect of change in accounting principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations before cumulative effect of change in
accounting principle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of change in accounting principle, net of taxes . . . . . . . . . . . . . . .
Net income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6
2
4
—
4
$ 196
77
$ 70
25
119
(8)
45
—
$ 111
$ 45
Basic earnings per common share:
Income from discontinued operations before cumulative effect of change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.03
0.03
Net income from discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$0.74
0.69
$0.27
0.27
Diluted earnings per common share:
Income from discontinued operations before cumulative effect of change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income from discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income from discontinued operations, net of tax . . . . . . . . . .
0.03
0.03
—
0.73
0.68
—
0.27
0.27
1
During the third quarter 2006, the Corporation completed the sale of its Mexican bank charter. Included in
“net gain (loss) on sales of businesses” on the consolidated statements of income is a net loss on the sale of
$12 million, which is reflected in the Corporation’s Business Bank business segment and International geographic
market segment. As part of the sale transaction, the Corporation transferred $24 million of loans and $18 million
of liabilities to the buyer.
In the fourth quarter 2006, the Corporation decided to sell a portfolio of loans related to manufactured
housing, located primarily in Michigan and Ohio. In accordance with SFAS 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets,” approximately $74 million of loans were classified as held-for-sale, which were
included in “other short-term investments” on the consolidated balance sheet at December 31, 2006. The
Corporation recorded a $9 million charge-off to adjust the loans classified as held-for-sale to fair value. During the
128
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
first quarter 2007, the Corporation completed the sale and transferred the $74 million of loans to the buyer for
substantially the fair value recorded at December 31, 2006.
During the fourth quarter 2005, HCM Holdings Limited (formerly Framlington Holdings Limited), which is
a 49 percent owned subsidiary of Munder, sold its 90.8 percent interest in London, England based Framlington
Group Limited. The sale resulted in a net after-tax gain of $32 million, or $0.19 per diluted share, which is
included in “income from discontinued operations, net of tax” on the consolidated statements of income.
Note 27 — Summary of Quarterly Financial Statements (Unaudited)
The following quarterly information is unaudited. However, in the opinion of management, the information
reflects all adjustments, which are necessary for the fair presentation of the results of operations, for the periods
presented.
2007
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
(in millions, except per share data)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 944
455
$ 952
449
$ 933
424
$ 901
399
Net interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net securities gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest income (excluding net securities gains) . . . . . . . . . . . . . . . .
Noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . . . . . . . . . . . . .
489
108
3
227
450
44
117
2
503
45
4
226
423
85
180
1
509
36
—
225
411
91
196
—
502
23
—
203
407
86
189
1
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 119
$ 181
$ 196
$ 190
Basic earnings per common share:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$0.78
0.80
$1.18
1.20
$1.28
1.28
$1.21
1.21
Diluted earnings per common share:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.77
0.79
1.17
1.18
1.25
1.25
1.19
1.19
129
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
2006
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 912
410
$ 893
391
$ 845
345
$ 772
293
Net interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net securities gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest income (excluding net securities gains (losses)) . . . . . . . . .
Noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . .
502
22
1
261
457
100
185
114
502
15
—
195
399
88
195
5
500
27
1
202
389
92
195
5
479
(27)
(2)
197
429
65
207
(13)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 299
$ 200
$ 200
$ 194
Basic earnings per common share:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1.17
1.89
$1.22
1.25
$1.21
1.24
$1.28
1.20
Diluted earnings per common share:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.16
1.87
1.20
1.23
1.19
1.22
1.26
1.18
130
REPORT OF MANAGEMENT
The management of Comerica Incorporated (the Corporation) is responsible for the accompanying con-
solidated financial statements and all other financial information in this Annual Report. The consolidated
financial statements have been prepared in conformity with U.S. generally accepted accounting principles and
include amounts which of necessity are based on management’s best estimates and judgments and give due
consideration to materiality. The other financial information herein is consistent with that in the consolidated
financial statements.
In meeting its responsibility for the reliability of the consolidated financial statements, management
develops and maintains effective internal controls, including those over financial reporting, as defined in the
Securities and Exchange Act of 1934, as amended. The Corporation’s internal control over financial reporting
includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the Corporation; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated
financial statements in conformity with U.S. generally accepted accounting principles, and that receipts and
expenditures of the Corporation are made only in accordance with authorizations of management and directors
of the Corporation; and (3) provide reasonable assurance regarding prevention or timely detection of unau-
thorized acquisition, use or disposition of the Corporation’s assets that could have a material effect on the
consolidated financial statements.
Management assessed, with participation of the Corporation’s Chief Executive Officer and Chief Financial
Officer, internal control over financial reporting as it relates to the Corporation’s consolidated financial state-
ments presented in conformity with U.S. generally accepted accounting principles as of December 31, 2007. The
assessment was based on criteria for effective internal control over financial reporting described in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on this assessment, management determined that internal control over financial
reporting is effective as it relates to the Corporation’s consolidated financial statements presented in conformity
with U.S. generally accepted accounting principles as of December 31, 2007.
Because of inherent limitations, internal control over financial reporting may not prevent or detect mis-
statements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
The consolidated financial statements as of December 31, 2007 were audited by Ernst & Young LLP, an
independent registered public accounting firm. The audit was conducted in accordance with the standards of the
Public Company Accounting Oversight Board (United States), which required the independent public accoun-
tants to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement and whether effective internal control over financial reporting is maintained in all material respects.
The Corporation’s Board of Directors oversees management’s internal control over financial reporting and
financial reporting responsibilities through its Audit Committee as well as various other committees. The Audit
Committee, which consists of directors who are not officers or employees of the Corporation, meets regularly with
management, internal audit and the independent public accountants to assure that the Audit Committee,
management, internal auditors and the independent public accountants are carrying out their responsibilities,
and to review auditing, internal control and financial reporting matters.
Ralph W. Babb Jr.
Chairman, President and Executive Vice President and
Chief Executive Officer
Chief Financial Officer
Elizabeth S. Acton
Marvin J. Elenbaas
Senior Vice President and
Chief Accounting Officer
131
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Comerica Incorporated
We have audited Comerica Incorporated’s internal control over financial reporting as of December 31, 2007,
based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Comerica Incorporated’s management is
responsible for maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Report of Management.
Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on
our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the Corporation; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the Corporation
are being made only in accordance with authorizations of management and directors of the Corporation; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the Corporation’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, Comerica Incorporated maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2007, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the 2007 consolidated financial statements of Comerica Incorporated and subsidiaries and our
report dated February 20, 2008 expressed an unqualified opinion thereon.
Detroit, Michigan
February 20, 2008
132
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Comerica Incorporated
We have audited the accompanying consolidated balance sheets of Comerica Incorporated and subsidiaries
as of December 31, 2007 and 2006, and the related consolidated statements of income, shareholders’ equity, and
cash flows for each of the three years in the period ended December 31, 2007. These financial statements are the
responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Comerica Incorporated and subsidiaries at December 31, 2007 and 2006,
and the consolidated results of its operations and its cash flows for each of the three years in the period ended
December 31, 2007, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 16 to the consolidated financial statements, in 2006 Comerica Incorporated and
subsidiaries changed its method of accounting for pension and other postretirement plans.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the effectiveness of Comerica Incorporated’s internal control over financial reporting as of
December 31, 2007, based on criteria established in “Internal Control-Integrated Framework” issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2008,
expressed an unqualified opinion thereon.
Detroit, Michigan
February 20, 2008
133
HISTORICAL REVIEW — AVERAGE BALANCE SHEETS
Comerica Incorporated and Subsidiaries
CONSOLIDATED FINANCIAL INFORMATION
2007
2006
Years Ended December 31
2005
(in millions)
2004
2003
ASSETS
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . $ 1,352
Federal funds sold and securities purchased under
agreements to resell . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term investments . . . . . . . . . . . . . . . . . .
Investment securities available-for-sale. . . . . . . . . . . .
Commercial loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate construction loans . . . . . . . . . . . . . . . . . .
Commercial mortgage loans . . . . . . . . . . . . . . . . . . .
Residential mortgage loans . . . . . . . . . . . . . . . . . . . .
Consumer loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less allowance for loan losses . . . . . . . . . . . . . . . . . .
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income and other assets . . . . . . . . . . . . . . . .
164
256
4,447
28,132
4,552
9,771
1,814
2,367
1,302
1,883
49,821
(520)
49,301
3,054
$ 1,557
$ 1,721
$ 1,685
$ 1,811
283
266
3,992
27,341
3,905
9,278
1,570
2,533
1,314
1,809
47,750
(499)
47,251
3,230
390
165
3,861
24,575
3,194
8,566
1,388
2,696
1,283
2,114
43,816
(623)
43,193
3,176
1,695
226
4,321
22,139
3,264
7,991
1,237
2,668
1,272
2,162
40,733
(787)
39,946
3,075
1,634
308
4,529
23,764
3,540
7,521
1,192
2,474
1,283
2,596
42,370
(831)
41,539
3,159
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $58,574
$56,579
$52,506
$50,948
$52,980
LIABILITIES AND SHAREHOLDERS’ EQUITY
Noninterest-bearing deposits . . . . . . . . . . . . . . . . . . . $11,287
30,647
Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . .
$13,135
28,939
$15,007
25,633
$14,122
26,023
$13,910
27,609
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . .
Medium- and long-term debt . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . .
41,934
2,080
1,293
8,197
53,504
5,070
42,074
2,654
1,268
5,407
51,403
5,176
40,640
1,451
1,132
4,186
47,409
5,097
40,145
275
947
4,540
45,907
5,041
41,519
550
804
5,074
47,947
5,033
Total liabilities and shareholders’ equity . . . . . . . . $58,574
$56,579
$52,506
$50,948
$52,980
134
HISTORICAL REVIEW — STATEMENTS OF INCOME
Comerica Incorporated and Subsidiaries
CONSOLIDATED FINANCIAL INFORMATION
2007
Years Ended December 31
2006
2004
2005
(in millions, except per share data)
2003
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,501
206
Interest on investment securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
Interest on short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,730
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,216
174
32
3,422
$2,554
148
24
2,726
$2,055
147
36
2,238
$2,213
165
36
2,414
INTEREST EXPENSE
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on medium- and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income after provision for loan losses . . . . . . . . . . . . . . . . . . . . . .
1,167
105
455
1,727
2,003
212
1,791
1,005
130
304
1,439
1,983
37
1,946
548
52
170
770
1,956
(47)
2,003
315
4
108
427
1,811
64
1,747
370
7
109
486
1,928
377
1,551
NONINTEREST INCOME
Service charges on deposit accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiduciary income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial lending fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Letter of credit fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brokerage fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Card fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank-owned life insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) from principal investing and warrants . . . . . . . . . . . . . . . . . . . . .
Net securities gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain (loss) on sales of businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from lawsuit settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
221
199
75
63
40
43
54
36
19
7
3
—
128
888
NONINTEREST EXPENSES
844
Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
193
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,037
138
Net occupancy expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60
Equipment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
91
Outside processing fee expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63
Software expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43
Customer services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
Litigation and operational losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
Provision for credit losses on lending-related commitments . . . . . . . . . . . . . . . . . . .
242
Other noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,691
Total noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
988
Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . .
306
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
682
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Income from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 686
218
180
65
64
38
40
46
40
10
—
(12)
47
119
855
823
184
1,007
125
55
85
56
47
11
5
283
1,674
1,127
345
782
111
$ 893
218
174
63
70
37
36
39
38
17
—
1
—
126
819
786
178
964
118
53
77
49
69
14
18
251
1,613
1,209
393
816
45
$ 861
231
166
55
66
37
36
32
34
21
—
7
—
123
808
238
166
63
65
36
34
27
42
(3)
50
—
—
132
850
736
154
890
122
54
67
43
23
24
(12)
247
1,458
1,097
349
748
9
$ 757
713
156
869
126
56
70
37
25
18
(2)
253
1,452
949
291
658
3
$ 661
Basic earnings per common share:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.47
4.49
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per common share:
$ 4.88
5.57
$ 4.90
5.17
$ 4.36
4.41
$ 3.76
3.78
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared on common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.40
4.43
393
2.56
4.81
5.49
380
2.36
4.84
5.11
367
2.20
4.31
4.36
356
2.08
3.73
3.75
350
2.00
135
HISTORICAL REVIEW-STATISTICAL DATA
Comerica Incorporated and Subsidiaries
CONSOLIDATED FINANCIAL INFORMATION
2007
Years Ended December 31
2005
2006
2004
2003
AVERAGE RATES (FULLY TAXABLE EQUIVALENT BASIS)
Federal funds sold and securities purchased under agreements to
resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities available-for-sale . . . . . . . . . . . . . . . . . . . .
Commercial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate construction loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income as a percentage of earning assets. . . . . . . . . . .
Domestic deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits in foreign offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medium- and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense as a percentage of interest- bearing sources . . .
Interest rate spread . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of net noninterest-bearing sources of funds . . . . . . . . . . .
5.28%
5.65
4.56
5.15%
6.69
4.22
3.29%
7.22
3.76
1.36%
5.83
3.36
1.11%
5.75
3.65
7.25
8.21
7.26
6.13
7.00
3.04
7.06
7.03
6.82
3.77
4.85
3.81
5.06
5.55
4.22
2.60
1.06
6.87
8.61
7.27
6.02
7.13
4.00
7.01
6.74
6.53
3.42
4.82
3.47
4.89
5.63
3.89
2.64
1.15
5.62
7.23
6.23
5.74
5.89
3.81
5.98
5.84
5.65
2.07
4.18
2.14
3.59
4.05
2.46
3.19
0.87
4.22
5.43
5.19
5.68
4.73
4.06
4.69
5.05
4.76
1.17
2.60
1.21
1.25
2.39
1.38
3.38
0.48
4.12
5.04
5.35
6.12
4.94
4.59
4.44
5.23
4.94
1.30
3.15
1.34
1.20
2.14
1.46
3.48
0.47
Net interest margin as a percentage of earning assets . . . . . . . . .
3.66%
3.79%
4.06%
3.86%
3.95%
RATIOS
Return on average common shareholders’ equity from
continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on average common shareholders’ equity . . . . . . . . . . . .
Return on average assets from continuing operations . . . . . . . . .
Return on average assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Efficiency ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier 1 common capital as a percentage of risk- weighted assets . .
Tier 1 capital as a percentage of risk- weighted assets . . . . . . . . .
Total capital as a percentage of risk- weighted assets . . . . . . . . . .
PER SHARE DATA
Book value at year-end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34.12
Market value at year-end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43.53
Market value for the year
13.44% 15.11% 16.02% 14.85% $ 13.07%
16.90
13.52
1.56
1.16
1.64
1.17
58.01
58.58
7.78
6.85
8.38
7.51
11.65
11.20
17.24
1.38
1.58
58.92
7.54
8.03
11.64
15.03
1.47
1.49
55.60
8.13
8.77
12.75
13.12
1.24
1.25
53.19
8.04
8.72
12.71
$ 32.70
58.68
$ 31.11
56.76
$ 29.94
61.02
$ 29.20
56.06
High. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63.89
39.62
60.10
50.12
63.38
53.17
63.80
50.45
56.34
37.10
OTHER DATA (share data in millions)
Average common shares outstanding — basic . . . . . . . . . . . . . . .
Average common shares outstanding — diluted . . . . . . . . . . . . .
Number of banking centers . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of employees (full-time equivalent)
153
155
417
160
162
393
167
169
383
172
174
379
175
176
361
Continuing operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,782
—
10,700
—
10,636
180
10,720
172
11,034
175
136
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,
address or ownership of stock, and lost or stolen stock
certificates should be directed to the transfer agent and registrar:
Debt Ratings – Senior Unsecured Obligations (long-term)
Comerica Inc. Comerica Bank
Standard and Poor’s
Moody’s Investors Service
Fitch Ratings
A
A2
A+
A+
A1
A+
Dominion Bond Rating Service A
A (high)
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 contacting 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 commissions
or service charges. Participating shareholders also may invest
up to $10,000 in additional funds each month for the purchase
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 authorization
form can be requested from the transfer agent shown above.
Dividend Payments
Subject to approval of the board of directors, dividends
customarily are paid on Comerica’s common stock on or about
January 1, April 1, July 1 and October 1.
Form10-K
A copy of Comerica’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2007, as filed with the Securities
and Exchange Commission, may be obtained without charge
upon written request to the Secretary of the Corporation at the
address listed on the back cover.
Officer Certifications
On June 8, 2007, Comerica’s Chief Executive Officer submitted
his annual certification to the New York Stock Exchange stating
that he was not aware of any violation by Comerica 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, 2007.
Design by Eisenberg And Associates, Dallas, Texas
Investor Relations on the Internet
Go to www.comerica.com to find the latest investor relations
information about Comerica, including stock quotes, news
releases and financial data.
Stock Prices, Dividends and Yields
Quarter
High
Low
Dividends
Per Share
Dividend
Yield*
2007
Fourth
Third
Second
First
2006
Fourth
Third
Second
First
$54.88
61.34
63.89
63.39
$59.72
58.95
60.10
58.62
$39.62
50.26
58.18
56.77
$55.82
51.45
50.12
54.23
$0.64
0.64
0.64
0.64
$0.59
0.59
0.59
0.59
5.4%
4.6
4.2
4.3
4.1%
4.3
4.3
4.2
* 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, 2008, there were 13,525 holders of record of
Comerica’s common stock.
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 employees
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 ethics:
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 Directors.
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.
Comerica Corporate Headquarters
Comerica Bank Tower
1717 Main Street
Dallas, Texas 75201
www.comerica.com
This book has been printed on 100# Utopia II Dull Cover and 100# Utopia II Dull
Text, and 37# Opaque Financials which contain 10% post consumer recovered
fiber content.