The paragraph is an introduction to Comerica's first quarter 2025 earnings conference call. It begins with a greeting from the operator and an introduction by Kelly Gage, Director of Investor Relations. The call involves several key executives, including President and CEO Curt Farmer, discussing Comerica's performance. The presentation will reference forward-looking statements and non-GAAP measures, with relevant materials available on their website. Curt Farmer begins the presentation on Slide 3, highlighting that Comerica had a strong quarter, exceeding expectations and achieving higher profitability compared to the previous quarter.

The paragraph discusses Comerica's positive financial performance despite seasonal deposit outflows and macroeconomic uncertainty. The bank's net interest income surpassed expectations, aided by beneficial rate curves. Comerica prioritized conservative capital management, boosting its CET1 ratio and returning $143 million to shareholders. The bank emphasizes its strong underwriting discipline and diversified business model, with limited consumer exposure and long-term customer relationships. Its capital strength and liquidity provide flexibility. Comerica took steps to limit rate volatility exposure and expects to benefit from any rate declines. The bank remains vigilant in monitoring market developments amidst ongoing uncertainties.

The company expressed confidence in its ability to perform well despite economic conditions. In the first quarter, they reported earnings of $172 million or $1.25 per share, with net interest income remaining stable despite reduced average loan balances due to muted loan demand and declines in National Dealer Services and Commercial Real Estate. Good deposit trends, a benefit from their swap and securities portfolios, and the end of BSBY countered the loan reductions, resulting in a 12 basis point increase in net interest margin. Credit metrics stayed low despite inflation, and net charge-offs were still within a low range. Non-interest income rose slightly, but was offset by certain pressures, while non-interest expenses decreased due to efficiency priorities and reduced business activity. The capital position remained strong with a CET1 ratio of 12.05%, offering flexibility in navigating the economic environment. Overall, the company felt positive about the quarter's performance and its readiness to support customers and deliver results.

In the article paragraph, total commitments decreased mainly due to trends in commercial real estate, although commitment utilization saw a slight increase due in part to dealer floor plan facilities. Average loan yields dropped by 12 basis points, impacted by lower rates and non-accrual interest, despite benefits from the swap portfolio and BSBY cessation. Average deposits outperformed expectations in the first quarter, despite a $1.4 billion decrease from the previous quarter due to lower broker time deposits and seasonal outflows. Non-interest-bearing deposits remained stable at 38% of the total. Period-end deposits fell by $2.3 billion, but this decline would have been $1.2 billion if not for timing impacts from Direct Express disbursements. Deposit pricing declined by 26 basis points after proactive management. Investment in deposit products and strategies has shown positive results, with potential for future success. The securities portfolio slightly increased, benefiting from lower unrealized losses, and future repayments and maturities are expected to continue benefiting AOCI.

The paragraph discusses the financial institution's current strategy and performance. It reports stable net interest income driven by strong non-interest-bearing deposits and effective deposit pricing strategies amidst low loan activity. The institution expects continued growth in net interest income due to strategic management of their swap and securities portfolios, even in the face of potential interest rate reductions. Their credit portfolio performed as anticipated, with a slight increase in net charge-offs but remaining within normal limits. They noted low non-performing loans and a slight decrease in the allowance for credit losses due to stable credit metrics and a benign economic forecast, although they increased qualitative reserves to maintain coverage ratios due to elevated risks.

In the paragraph, the company discusses its strategy to maintain close relationships with customers to help them navigate supply chain challenges. It highlights confidence in its credit management and notes an increase in first-quarter non-interest income by $4 million, primarily due to the absence of a previous securities repositioning loss. Despite declines in some areas, the company remains focused on boosting customer-related fees. Expenses decreased by $3 million from the previous quarter due to reduced litigation expenses and other cost reductions. The company also achieved a gain from selling a leasing asset, although real estate gains were lower than in previous quarters. It emphasizes a conservative capital approach, maintaining a CET1 ratio of 12.05%, and continues returning capital to shareholders while improving its tangible common equity ratio and book value.

The 2025 financial outlook anticipates slower GDP growth compared to 2024, with average loans projected to decrease by 1% to 2% due to customers awaiting market clarity before increasing loan demand. Loan growth is expected to pick up in the second half of the year. Deposits are predicted to fall by 2% to 3%, driven by a decline in brokered CDs, while core deposits remain stable. The non-interest-bearing deposit mix is expected to stay in the upper 30% range. Despite lower average loans and deposits, net interest income is projected to rise by 5% to 7%, aided by factors like the BSBY cessation and a more efficient funding mix. The second quarter is expected to show minimal changes from the first quarter.

The paragraph forecasts financial growth and expense management for 2025. The company anticipates increased net interest income and a 2% rise in non-interest income, despite early challenges. Non-interest expenses are projected to grow by 2% to 3%, with a focus on balancing investments and efficiency. The company aims for low net charge-offs, leveraging strong credit practices. Capital management remains a priority, maintaining a CET1 ratio above 10%, with potential share repurchases depending on market conditions. Overall, the company plans to maintain strong customer relationships, promote responsible loan growth, enhance deposit efforts, and prudently manage capital and expenses amid market fluctuations.

Curt Farmer discusses Comerica's focus on stability and consistent access to capital for customers during uncertain times. He highlights the company's long-standing track record of conservative capital, credit, and liquidity management, which has contributed to its resilience. Farmer emphasizes the strength of Comerica's geographically diverse model, experienced leadership, conservative underwriting approach, and blue-chip customer base, positioning the company to perform well through economic cycles. He mentions a successful quarter and plans for responsible long-term growth. The floor then opens for questions, with Jon Arfstrom from RBC Capital Markets asking about loan growth outlook and borrower-lender conversations. Farmer acknowledges the proxy role in commercial lending and expresses confidence in building pipelines and a positive growth outlook as the year progresses.

Peter Sefzik discusses the current business landscape, noting that while customers aren't fully halting their activities, they are slowing down their pace. He observes varying levels of caution across the country, with Michigan exhibiting more concern than Texas, particularly in the middle market. Different sectors are reacting differently, with equity fund services experiencing more pullback compared to the robust environmental services sector. The general outlook for the second quarter suggests a cautious approach, with an increasing pipeline but not immediate increases in loan demand. Despite this, there's optimism for economic growth throughout the year, and no recession is anticipated. The company feels positive about benefiting from this growth due to their strategic positioning in the right markets and business lines. Jon Arfstrom then prompts further discussion on the commercial real estate market.

In the paragraph, Peter Sefzik discusses the outlook for commercial real estate, indicating cautious optimism about its stabilization. He notes that while it's still a headwind, it's not as formidable as it was 60 to 90 days ago, with deal flow improving. The bank resumed real estate deals in the second quarter of the previous year, which has been beneficial, leading to more opportunities and commitments. Looking ahead, Sefzik anticipates further leveling off next year, contingent on interest rate developments. Following this, Scott Siefers from Piper Sandler asks Jim Herzog about fee and expense guidance progression, noting the need for higher average quarterly fees and asks for insights into potential expense reductions in the latter half of the year.

The paragraph discusses financial challenges and strategies related to non-interest income and expenses for a company. In the first quarter, non-customer trends exerted a negative impact of $6 to $7 million on their projections. While some of this pressure might persist, the pace is expected to slow down. The company anticipates non-interest income from customer categories to align with their initial expectations, despite a weaker performance in the first quarter. Control over expenses will be crucial, and decisions will need to be made based on how revenue evolves throughout the year. External factors, such as loan demand and economic stability, are difficult to predict but will significantly influence expense management strategies.

The paragraph is part of a conversation involving Scott Siefers, Curt Farmer, and Jim Herzog, where they discuss the company’s approach to managing deposit costs. Jim Herzog explains that the company has successfully reduced deposit costs and has outperformed initial expectations, achieving a better deposit beta than anticipated after the Federal Reserve began cutting rates. He notes the deposit beta was about 71% in the first quarter, higher than their long-term target of 60%. Herzog also mentions that while they might need to slightly adjust rates for some customers due to their proactive strategies, they plan to maintain a 40% to 50% beta as rates continue to decline.

The paragraph discusses the company's strategy regarding brokered and non-brokered deposits. They expect to phase out approximately $1 billion of brokered deposits, which carry interest rates in the low to mid-5% range, by the end of the year, benefiting from this runoff. They are also aiming for favorable rates on non-brokered core deposits as interest rates decrease. The company plans to proactively gather more interest-bearing deposits, even if it requires offering higher rates, as they still prefer this funding over other sources. Although pleased with their deposit strategy so far, they remain vigilant about market trends. Ken Usdin asks about the impact of Direct Express, to which Peter Sefzik responds that there is no change in their outlook, and they don't foresee any deposit balance impacts until after 2025.

The paragraph discusses the company's focus on expanding its deposit base across various business sectors, including small business and corporate operations. There is no specific update on the transition plan for Direct Express, but the company consistently reviews opportunities to grow deposits. Manan Gosalia from Morgan Stanley queries about the trajectory of net interest income (NII) for 2026. Jim Herzog responds, indicating steady growth in NII is expected, excluding the BSBY impact. The growth will be driven by increasing deposits through 2025, with non-interest bearing deposits potentially providing small increases later in the year.

The paragraph discusses various factors contributing to the increase in net interest income, including deposit interest and expected loan growth in the second half of the year. It also mentions anticipated financial benefits from maturing swaps and securities. Although these elements provide consistent quarterly growth, the credit environment remains stable with only slight increases in criticized balances, particularly in commercial real estate. This increase is attributed to slower payoff rates due to elevated interest rates and extended leasing times for construction projects. Despite some migration to non-pass credit in commercial real estate, the overall levels are manageable, with regular resolution of non-pass credits each quarter.

The paragraph discusses the stability of the commercial and industrial (C&I) charge-offs in the current quarter, with two charge-offs in commercial real estate contributing to a slight increase in basis points from the previous quarter. Despite the significant uncertainty and risks in the economy, particularly concerning supply chain disruptions, the speaker is confident in their firm’s strong portfolio management and historical resilience during economic cycles. Additionally, there is a discussion on share repurchases, where it is mentioned that $50 million worth of shares were repurchased in the first quarter, with a potential to increase this to $100 million, similar to the fourth quarter. However, these decisions will depend on market conditions and economic developments.

The paragraph discusses several financial considerations and strategies. The company is monitoring long-term interest rates and the curve's impact on Accumulated Other Comprehensive Income (AOCI). Credit performance is stable, but vigilance is advised, and potential increases in loan demand are anticipated if uncertainty decreases. The firm has a healthy Common Equity Tier 1 (CET1) ratio of 12.05%, suggesting likely activity in share repurchases, although specific commitments are not yet made. On net interest income, securities income increased by $9 million quarter-to-quarter, with over half due to securities repositioning. This benefit is largely reflected in the current run rate, with more maturities expected throughout the year.

John Pancari from Evercore ISI asks about expense flexibility amid uncertain revenue and the potential for positive operating leverage in 2025. Jim Herzog responds, noting a projected expense growth range of 2% to 3% for 2025 and emphasizing flexibility to adjust expenses if revenue falls short. He highlights a commitment to ongoing investments in products and risk management but acknowledges the need to calibrate expenses based on revenue trends. Pancari also inquires about the potential for mergers and acquisitions (M&A) in light of increasing scale needs and improving regulatory conditions in the regional bank sector.

Curt Farmer discusses Comerica's approach to mergers and acquisitions (M&A), emphasizing their commitment to remaining independent and focusing on organic growth. He mentions that while they are open to opportunities aligned with their strategic direction, the current M&A environment is uncertain, and the potential targets that fit their criteria are limited. Comerica plans to continue expanding in existing and new markets, like the Southeast, as they operate in major U.S. metropolitan areas. Farmer suggests that while industry M&A tends to fluctuate, he doesn't anticipate significant M&A activity in the next 12 to 18 months.

In the paragraph, several financial professionals discuss the company's strategic focus on maintaining a balanced and resilient financial model. John Pancari appreciates the speaker's insights, and Chris McGratty inquires about future strategies regarding the securities portfolio. Jim Herzog responds, indicating that the current securities portfolio size is slightly above their historical norm. He mentions they monitor liquidity metrics and aim to adjust the portfolio to better align with the balance sheet's overall composition, targeting a range in the upper teens rather than the very high teens it is currently in.

The paragraph discusses a company's financial strategy, emphasizing a preference for share repurchases over securities repositioning in order to improve tangible book value (TBV). They aim to reduce reliance on mortgage-backed securities (MBS) slightly before reinvesting, likely in the fourth quarter. While securities repositioning isn't favored, they might perform minimal adjustments purely as a form of financial maintenance. Additionally, attention is given to higher-risk portfolios, particularly in the automotive sector, where they maintain diligent oversight. The conversation concludes with assurances of robust monitoring by experienced teams.

The paragraph features a conversation involving several individuals, discussing business forecasts and market trends. Chris McGratty and Melinda Chausse engage briefly, and then Anthony Elian from JPMorgan asks about the outlook for fee income, particularly in capital markets. Peter Sefzik responds that they expect an increase in capital markets income, citing growth in syndications, risk products, and a developing M&A business. He also mentions positive outcomes from bond and securities offerings in the first quarter and is optimistic about growth in 2025. Anthony Elian also inquires about supply chain impacts and tariffs affecting the National Dealer portfolio. Peter Sefzik acknowledges the uncertainty in that area, indicating outcomes are still to be determined.

The paragraph discusses how car dealers performed well during the COVID-19 pandemic and are prepared to handle current challenges. There's an anticipation of over 15 million car sales this year, but uncertainties remain, such as consumer pricing and car manufacturing. Dealers are taking a cautious approach, waiting to see how the situation develops. The conversation then shifts to Brian Foran from Truist, who asks about the uncertainty in mergers and acquisitions (M&A) and loans. Curt Farmer responds, suggesting that a lack of deal activity in the industry over the next 12 to 18 months is due to a combination of factors, including regulatory rules, the economy, interest rates, and market conditions.

The paragraph discusses the potential indicators of loan growth over the next three to four months. Peter Sefzik suggests that interest rates and economic conditions, such as the possibility of a recession, will significantly impact loan growth. He expresses optimism about their outlook if the macro economy continues to improve. He highlights Michigan's middle market, particularly the auto sector, as a key area of focus due to its slowdown compared to other regions like Southeast Texas and California. Sefzik notes that if economic conditions remain stable, their outlook is positive, but economic setbacks such as rising unemployment and interest rates could hinder loan demand moving into 2026.

The paragraph involves a discussion between Curt Farmer, Peter Sefzik, and Ben Gerlinger about the competitive market environment for their business. Ben Gerlinger asks about growth and competition, specifically regarding geographic areas like Michigan versus Texas, and whether competitors are leading with pricing strategies. Curt Farmer and Peter Sefzik acknowledge the competitive nature of the market and emphasize their focus on responsible credit management. They note that pricing in the industry has become more aggressive recently, but express confidence in their ability to compete on pricing and provide value to their customers.

The paragraph details the bank's loan growth and expansion efforts in various regions. It mentions an increase in average loan growth from $8.5 billion to $8.9 billion, with particular emphasis on the Southeast and Mountain West regions. In the Southeast, the bank anticipates loan growth exceeding 50%, thanks to strong relationship-building and an expanding team from Florida to North Carolina. In the Mountain West, new leadership and staff additions are occurring in areas like Phoenix and Denver. Additionally, the bank, though often considered regional, operates nationally with customers across various states and cities.

The discussion centers on improving the efficiency ratio to the high 50s range over time, with the focus on revenue growth as the primary driver. Jim Herzog, responding to Nick Holowko's question, acknowledges that achieving this efficiency ratio will not happen in the near term due to economic uncertainties. He emphasizes that while cost-cutting might provide temporary improvements, long-term progress relies on increasing revenue through ongoing initiatives. He notes that revenue growth has the potential for upward compounding, which is more sustainable than relying solely on expense reductions.

The paragraph discusses the company's focus on revenue initiatives and expense management. They emphasize the importance of revenue growth over the next few years to improve their efficiency ratio. Nick Holowko inquires about the loan growth outlook, particularly the strength in the environmental services sector. Peter Sefzik responds by highlighting two main verticals in this sector: waste management and renewable energy. Both are seen as growth opportunities, with expectations for continued steady growth. The company plans to expand by adding more people and customers in these areas.

In the conversation, Bill Carcache from Wolfe Research asks about potential growth in non-interest-bearing deposits and whether the company would pay more for these deposits through earnings credits. Jim Herzog clarifies that their focus is primarily on growing interest-bearing deposits, although a small increase in non-interest-bearing deposits is expected. Broker deposits are projected to decrease, keeping non-interest-bearing deposits in the upper 30% range. The company is open to paying more for interest-bearing deposits if necessary, but doing so isn't their primary strategy. Curt Farmer adds that the company's approach might change if economic conditions, like a recession, affect deposit growth, which has historically increased in the non-interest-bearing category during such times.

Jim Herzog elaborates on the importance of non-interest bearing deposits to Comerica's business model, highlighting them as a significant factor, especially in the current high-rate environment anticipated for 2025. He notes that while high rates make customers more attentive to their deposit mix, potentially pressuring non-interest bearing deposits, a future decrease in rates could positively influence their growth. Herzog also mentions that inflation may necessitate larger working capital for customers, which could lead to proportional growth in non-interest bearing deposits. Additionally, the company's efforts in developing treasury management services are crucial for attracting these deposits. Despite recent challenges, Herzog is optimistic about future growth driven by economic trends and product development.

The paragraph details the conclusion of a call with Curt Farmer, the President, Chairman, and CEO of Comerica. After taking questions, Curt Farmer expresses gratitude to the participants for their interest and participation. The operator then closes the event, encouraging participants to disconnect or log off and enjoy the rest of their day.

This summary was generated with AI and may contain some inaccuracies.