OREANDA-NEWS. Comerica Incorporated (NYSE: CMA) today reported full-year 2015 net income of $535 million, or $2.92 per diluted share, compared to $593 million, or $3.16 per diluted share for full-year 2014. Fourth quarter 2015 net income was $130 million, compared to $136 million for the third quarter 2015 and $149 million for the fourth quarter 2014. Earnings per diluted share were 71 cents for fourth quarter 2015 compared to 74 cents for third quarter 2015 and 80 cents for fourth quarter 2014.

"In 2015 we had good balance sheet growth as average loans topped $48 billion and average deposits grew to a record $58 billion," said Ralph W. Babb, Jr., chairman and chief executive officer. "All the while, we are navigating our way through a modestly growing U.S. economy, as well as increased regulatory and technology demands. Credit quality continued to be solid, and while net charge-offs and the provision increased, they remain below normal historical levels. Through buybacks and dividends we returned $389 million or 73 percent of 2015 net income to shareholders. Both our book value and tangible book value per share increased 4 percent over the past year, as we continue to focus on creating long-term shareholder value.

"With respect to the fourth quarter, revenue increased more than 2 percent. This was a result of growth in net interest income, which benefited from higher nonaccrual interest and the rise in rates late in the quarter, as well as an increase in fee generation, particularly commercial lending and card fees. Technology and regulatory costs drove noninterest expenses higher, as anticipated. Negative credit migration in our energy exposure continued as expected, while overall our customers have been acting prudently as evidenced by declining loan balances. The remainder of the loan book continues to perform well. We increased our share buyback to $65 million from the $59 million that was repurchased in each of the past six quarters.

"As we look forward to the year ahead, we remain keenly focused on growing loans and deposits along with managing expenses as we make necessary investments. With the Federal Reserve increasing its benchmark rate 25 basis points in December, our revenue picture looks better, as our balance sheet remains well positioned to benefit from rising rates. With oil prices at a cyclical low, we have been closely monitoring our energy customers. In each quarter of 2015, we increased our reserves for energy and related loans(a). Well into the cycle, we continue to feel comfortable with our energy portfolio. In summary, we are committed to providing high quality financial services and building lasting customer relationships, which combined with our diverse geographic footprint, will continue to assist us in building long-term shareholder value."

(a) Loans related to energy at December 31, 2015 included approximately $3.1 billion of outstanding loans in our Energy business line as well as approximately $625 million of loans in other lines of business to companies that have a sizable portion of their revenue related to energy or could be otherwise disproportionately negatively impacted by prolonged low oil and gas prices.

Full-Year 2015 and Fourth Quarter Overview

Full-Year 2015 Compared to Full-Year 2014

Average total loans increased $2.0 billion, or 4 percent, to $48.6 billion in 2015, reflecting increases in almost all lines of business, with the largest increases in Technology and Life Sciences, Mortgage Banker Finance, National Dealer Services and Commercial Real Estate, partially offset by a decrease in Corporate Banking. Period-end loans increased $516 million, or 1 percent, to $49.1 billion, primarily reflecting increases in Mortgage Banker Finance, Technology and Life Sciences, Commercial Real Estate and National Dealer Services, partially offset by decreases in general Middle Market, Corporate Banking and Energy.

Average total deposits increased $3.5 billion, or 6 percent, to $58.3 billion in 2015, reflecting increases of $3.1 billion, or 12 percent, in noninterest-bearing deposits and $474 million, or 2 percent, in interest-bearing deposits. Period-end deposits increased $2.4 billion, or 4 percent, to $59.9 billion, reflecting an increase of $3.6 billion, or 13 percent, in noninterest-bearing deposits, partially offset by a decrease of $1.2 billion, or 4 percent, in interest-bearing deposits.

Net interest income of $1.7 billion for 2015 increased by $34 million, or 2 percent, primarily as a result of higher earning asset volume, partially offset by lower loan yields, in part due to a decrease in accretion of the purchase discount on the acquired loan portfolio and continued pressure on yields from the low-rate environment and loan portfolio dynamics.

The allowance for loan losses increased $40 million compared to 2014, primarily due to increases in reserves related to energy and Technology and Life Sciences, partially offset by improvements in credit quality in the remainder of the portfolio. Net charge-offs were $75 million, or 0.15 percent of average loans, for 2015, compared to $25 million, or 0.05 percent of average loans, for 2014. The provision for credit losses increased $95 million to $122 million in 2015, compared to 2014.

Noninterest income increased $182 million to $1.1 billion in 2015. Excluding the $181 million impact of a change to the accounting presentation for a card program, noninterest income was stable. Increases in card fees, service charges on deposit accounts and fiduciary income were largely offset by lower investment banking income, lower fee income on certain categories impacted by regulatory changes and decreases in several non-fee categories.

Noninterest expenses increased $219 million to $1.8 billion in 2015. Excluding the $181 million impact of a change to the accounting presentation for a card program, noninterest expenses increased $38 million, or 2 percent, primarily due to increases in technology and regulatory expenses, outside processing fees and pension expense, partially offset by a $36 million decrease in litigation-related expenses, reflecting the release of $33 million of litigation reserves in the second and third quarters of 2015, and cost savings realized in 2015 from certain actions taken in the second half of 2014.

Comerica repurchased approximately 5.1 million shares of common stock and 500,000 warrants during 2015 under the equity repurchase program. Together with dividends of $0.83 per share, $389 million was returned to shareholders.

Fourth Quarter 2015 Compared to Third Quarter 2015

Average total loans decreased $424 million to $48.5 billion, primarily reflecting decreases in Mortgage Banker Finance, general Middle Market, Energy and Corporate Banking, partially offset by increases in Commercial Real Estate and National Dealer Services. Period-end total loans increased $167 million, to $49.1 billion, largely driven by increases in National Dealer Services, Mortgage Banker Finance and Commercial Real Estate, partially offset by decreases in general Middle Market and Energy.

Average total deposits increased $596 million, or 1 percent, to $59.7 billion, primarily driven by a $1.0 billion increase in noninterest-bearing deposits. The increase in average total deposits was primarily due to increases in Corporate Banking and Private Banking, partially offset by decreases in Technology and Life Sciences and general Middle Market. Average deposits increased in all major geographic markets. Period-end total deposits increased $1.1 billion to $59.9 billion.

Net interest income increased $11 million to $433 million compared to third quarter 2015, primarily reflecting an increase in loan yields, largely due to higher interest recognized on nonaccrual loans and the increase in short-term rates, and a larger securities portfolio, partially offset by a decrease in average loans.

The allowance for loan losses increased $12 million in the fourth quarter 2015, primarily due to an increase in reserves related to energy. Net charge-offs were $26 million, or 0.21 percent of average loans, in the fourth quarter 2015, compared to $23 million, or 0.19 percent, in the third quarter 2015. As a result, the provision for credit losses was $35 million for the fourth quarter 2015.

Noninterest income increased $6 million in the fourth quarter 2015, primarily the result of an increase in commercial lending fees.

Noninterest expenses increased $28 million in the fourth quarter 2015, primarily due to increases in technology and regulatory-related contract labor and consulting expenses, as well as seasonally higher staff insurance expense. Additionally, the third quarter 2015 benefited from a release of $3 million of litigation reserves, low deferred compensation expense and lower share-based compensation expense as a result of forfeitures, which were not repeated in the fourth quarter.

The provision for income taxes decreased $14 million in the fourth quarter 2015. The effective tax rate was 28 percent for the fourth quarter 2015, compared to 32 percent in the third quarter 2015, primarily reflecting a $5 million tax benefit from the early termination of certain leveraged lease transactions.

Capital remained solid at December 31, 2015, as evidenced by an estimated common equity Tier 1 capital ratio of 10.53 percent and a tangible common equity ratio of 9.72 percent.

Comerica repurchased approximately 1.5 million shares of common stock under the equity repurchase program, which, together with dividends, returned $102 million to shareholders.

Net interest income increased $11 million to $433 million in the fourth quarter 2015, compared to the third quarter 2015.

Interest on loans increased $5 million, reflecting higher interest recognized on nonaccrual loans (+$6 million) and higher loan yields (+$3 million), partially offset by the impact of lower average loan balances (-$3 million) and a decrease in accretion of the purchase discount on the acquired loan portfolio (-$1 million).

Interest on investment securities increased $2 million, primarily reflecting the reinvestment of excess Federal Reserve Bank deposits into higher yielding Treasury securities in the fourth quarter 2015.

Interest on short-term investments increased $2 million, primarily reflecting an increase in average Federal Reserve Bank deposit balances.

The net interest margin of 2.58 percent increased 4 basis points compared to the third quarter 2015, primarily due to the impact of higher interest recognized on nonaccrual loans (+3 basis points) and higher loan yields (+2 basis points), partially offset by the impact of an increase in Federal Reserve Bank deposit balances (-1 basis point).