Stonier 1 Bank Performance Intersession_MJC

Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
Stonier Graduate School of Banking
Bank Performance Analysis Extension
Project
Martin J. Cole II
Examiner II
Federal Reserve Bank of Cleveland

Martin Cole
Introduction
While I am a bank examiner in the Community Banking Organization (“CBO”) business
line of the Federal Reserve Bank of Cleveland, I decided to choose a Large Banking
Organization (“LBO”). I decided to perform a financial analysis on Comerica Bank. I have
examined this company but only from a Risk-Weighted Assets (“RWA”) perspective associated
with the Comprehensive Capital and Analysis Review (“CCAR”). All financial indicators cited
in this assessment are from the December 31, 2013 Uniform Bank Performance Report
(“UBPR”), Comerica’s 2013 Annual Report and peer comparisons; this peer group is the average
of all commercial banks throughout the country with assets greater than $3 billion (199
banks).The year-end financial date was chosen as it provides a simple “cut-off” to gain a clear
picture for 2013.
Comerica Incorporated (NYSE: CMA) is a financial services company headquartered in
Dallas, Texas, and strategically aligned by three business segments: The Business Bank, The
Retail Bank, and Wealth Management. Comerica focuses on relationships, and helping people
and businesses achieve success. In addition to Texas, Comerica Bank locations can be found in
Arizona, California, Florida and Michigan, with select businesses operating in several other
states, as well as in Canada and Mexico. Comerica reported total assets of $65.7 billion at March
31, 2014.

Martin Cole
Uniform Bank Performance Analysis Questions
1. Describe the behavior of your bank’s ROA over the last 4 quarters. (The ROA is on page 1 in
the line item “Net Income.”)
a. How does the performance of ROA relate to that of your peer group over this period?
b. What are the main factors that account for the behavior of your ROA over this period?
c. What has been the impact, if any, of your profit performance on your bank’s Tier 1 Leverage
Capital Ratio (also on Page 1) over this horizon? Has your bank raised capital externally or
altered its dividend over this period?
Comerica Bank’s net income of $581 million equates the Return on Average-Assets
(“ROAA”) to 0.91% as of December 31, 2013; this compares unfavorably to the peer average of
1.01% and ranks in the 41st percentile. During the prior three quarter time period, the annualized
ROAA remained relatively stable at 0.96%, 0.94% and 0.91% during quarters ended, September,
June and March, respectively. All quarter-ended figures remained below the peer averages of
1.03% (45th percentile), 1.02% (43rd percentile) and 0.99%(44th percentile), respectively. The
main factors that contribute to CMA’s ROAA, in general, are:
 Net interest income, which is the difference between;
o Interest income
o Interest expense
 Non-interest income
 Non-interest expense
 Provision for loan & lease losses
 Realized gains & losses on security sale transactions

Martin Cole
The main factors contributing to earnings performance will be discussed further in the
following questions detailed below. The earnings performance of CMA has had a positive, albeit
minimal, impact on capital and the tier one leverage. As of December 31, 2013, the tier one
leverage capital ratio of 10.7% exceeds peer of 9.9% and is in the 67th percentile; the tier one
leverage capital ratio increased minimally from 10.5% year-over-year. While net income of
$581 million would provide a substantial boost to tier one capital, dividends of $480 million
inhibits retained earnings growth and equates to a cash dividend to net income rate of 82.6%; this
nearly doubles peer of 43.1% and ranks in the 80th percentile. Cash dividends appear to be
relatively inconsistent as dividends paid for 2013 are $10.1 million less from a year ago despite a
higher 2013 net income. With CMAs current capital levels being ahead of peer, there have not
been any external capital raises from the secondary market.

Martin Cole
2. Describe the behavior of your bank’s efficiency ratio over the last 4 quarters. (The efficiency
ratio is on Page 3 of your UBPR.)
a. How is the efficiency ratio calculated?
b. How does your performance relate to that of the peer group banks?
c. What factors have affected your efficiency ratio over this time horizon? In particular, were
changes in non-interest expense or changes in total net revenue the more dominant factor? Were
the impacts favorable or unfavorable?
Specific information regarding non-interest income and expense may be found on page 4
of the UBPR, Noninterest Income, Expenses and Yields. Total overhead expense, also known as
the efficiency ratio, is a culmination of Salaries and employee benefits, expenses of premises and
fixed assets and other noninterest expense divided by average assets. CMA has managed to
become slightly more efficient compared to peer in 2013 as they decreased noninterest expense
by $28.7 million. Total overhead expenses as a percent of average assets equates to 2.67%,
compares favorably to peer average of 2.72% and ranks in the 43rdpercentile; this is a slight
improvement from the year-over-year figure of 2.76%. Per CMA’s 10-k, the improvement was
primarily due to decreases of $35 million in merger and restructuring charges, $15 million in
salaries expense and smaller decreases in other categories of noninterest expense. To gain a
clearer perspective of what the main contributors were to the overall reduction in overhead
expenses, we must examine each component. It should be noted that all factors of total overhead
expense (personnel, occupancy and other operating expenses) decreased year-over-year as a
percent of average assets.
Personnel expense decreased $8.6 million year-over-year from $976.4 million to $967.8
million. While this equates to a decrease from 1.56% to 1.52% year-over-year, personnel
expenses remain noticeably above the peer average of 1.32% and rank in the 65th percentile. Per

Martin Cole
CMA’s 10-k, the decrease in salaries expense primarily reflected reduced staffing levels and
lower executive incentive compensation, partially offset by an increase in deferred compensation
expense and annual merit increases.
Occupancy expenses decreased $4.5 million to $205.6 million from $210.1 million year-
over-year. As a percent of average assets, the ratio decreased slightly from 0.34% to 0.32%, is
comparable to the peer average of 0.33%, and ranks in the 45th percentile. The decrease was
primarily due to savings associated with leased properties exited in 2012 and lower utility
expense resulting primarily from a combination of favorable price renegotiations and
conservation efforts. Also, a reduction in equipment depreciation expense, in part reflecting
delayed replacement of fully depreciated assets had a positive impact partially offset by an
increase in maintenance expense and an increase in property tax expense as a result of refunds
received in 2012 related to settlements of tax appeals.
Other operation expenses, which includes intangibles such as goodwill, decreased by
$9.9 million from $532 million to $521.1 million year-over-year. This equates to 0.82% of
average assets which is down from 0.87% and compares favorably to the peer average of 1.02%

Martin Cole
3. Describe the behavior of your bank’s net interest margin over the last 4 quarters and discuss
how the behavior of NIM relates to that of your peer group. (Your institution’s NIM is on Page 1
of the UBPR. It is the bottom line in the “Margin Analysis” section.)
a. How is net interest margin calculated?
b. What are the primary factors that account for NIM performance over this period? Were the
impacts favorable or unfavorable?
c. What is the outlook for your NIM over the next 12 months and what are the primary
assumptions behind this forecast?
The Net Interest Margin (“NIM”) is calculated by taking interest income minus interest
expense and dividing that figure by average earning assets. The NIM measures net interest
income relative to the amount of earning assets on an institution’s balance sheet. A high ratio
indicates stronger core earnings and is ideal when reviewing the UBPR. Given the current and
stable low rate environment that has been exhibited since The Great Recession, NIM has steadily
contracted throughout the banking industry and CMA is no exception to the trend within the
industry. As of yearend 2013, the NIM of 2.83% of average assets significantly lags the peer
average of 3.50% and ranks in the 16th percentile; the NIM contracted 17 basis points year-over-
year from 2012. While at first glance core earnings appear strained, the mitigating factor is the
CMA is primarily a commercial lending bank (commercial loans make up approximately +90%
of the entire loan portfolio) which is traditionally driven by higher dollar volume and lower
interest rates. The low interest income, and resulting NIM, may also be indicative of a
conservative credit culture when considering the minimal losses and past dues currently on
CMAs balance sheet. When looking at the NIM, one must review the components of interest
income and interest expense to gain an understanding of the major drivers associated with the
margin.

Martin Cole
Continued review of page 1 of the UBPR indicates that interest income represents 2.81%
of average assets which compares unfavorably to the peer average of 3.61% and ranks in the 14th
percentile; the ratio decrease from the year-over-year 2012 figure of 2.99% . Interest income is
driven by the interest rate earned on assets multiplied by the volume of assets on the balance
sheet. Page 3 of the UBPR, Noninterest Income, Expenses and Yields, provides the “Yields On”
and “Cost Of” (for interest expense which will be discussed later) to give an idea how the
interest rates within CMAs balance sheet. The average rate earned on Total Loans & Leases is
3.50%, is down from 3.74% year-over-year, and significantly lags the peer average of 4.74%;
this ranks in the 8th percentile. This is obviously the primary driver behind NIM compression as
all loan types, except loans in foreign offices, are below the peer average. One loan type of note,
when including loan balance considerations, is the commercial & industrial portfolio. The
portfolio earns 3.26% compared to peer of 4.55% and ranks in the 11th percentile. The low rate
earned is further exacerbated when considering C&I loans dominate CMAs loan portfolio. Rates
earned on the investment portfolio, whose primary functions serve as an additional source of
liquidity and earnings, is more in line with peer. Total Investment Securities (tax-equivalent)
earn 2.26% compared to the peer average of 2.36% and ranks in the 46th percentile.
Interest expense, at 0.16%, is well below the peer average of 0.36% and ranks in the 17th
percentile; this is only a minor decrease from 0.20% noted year-over-year, 2012. Looking more
closely, that average yield paid for Total Interest Bearing Deposits is 0.12% compared to the
peer average of 0.36% and ranks in the 8th percentile as all deposit products paid by CMA are
lower than peer (i.e. transaction accounts, other savings deposits, time deposits over $100
thousand, all other time deposits and foreign office deposits). The same can be said about fed
funds purchased & repos, other borrowed money, and subordinated notes & debentures.

Martin Cole
Collectively, All Interest-Bearing Funds costs CMA 0.20% compared to the peer average of
0.47% and ranks in the 15th percentile.

Martin Cole
4. What is your bank’s current level of non-performing loans to total loans and how has it
changed over the last 4 quarters. (The relevant information is on Page 1 and Page 8 of your
UBPR.)
a. How does this performance relate to that of your peer banks?
b. Relative to peers, which categories of loans have above-average NPL ratios?
c. What do you see as the main reason(s) accounting for this?
d. What is the outlook for loan quality over the next 12 months?
For purposes of this paper (and to prevent any confusion for another common term, non-
current loans), non-performing loans are defined as loans that are 90+ days past due (“PD”) and
loans on non-accrual status. Loans on non-accrual status are those which are no longer accruing
interest as the collectability of principal and interest according to the originally stated terms is
uncertain; if a loan is on nonaccrual status it is in most cases classified (i.e. substandard, doubtful
or loss), or at the very least criticized (rated special mention), on an organization’s books. Non-
current loans will be addressed when discussing the outlook of loan quality over the next twelve
months (Question 4.d).
Non-performing loans as a percent of total loans currently represent 0.81%.; this is a 33%
decrease from the yearend 2013 figure of 1.21%, compares favorably to the peer average of
1.46% and ranks in the 29th percentile. Diving deeper into non-performing loans, both 90+ PD
and non-accrual figures are noticeably below peer. Loans 90+ PD as of yearend 2013 totals
$20.5 million and is down from $41.7 million year-over-year; this 2013 figure equates to 0.05%
of total loans & leases and compares favorably to the peer average of 0.29% (ranking in the 47th
percentile). Non-accrual loans as of yearend 2013 totals $349.9 million and is down from $517.4
million year-over-year; this 2013 figure equates to 0.77% of total loans & leases and compares
favorably to the peer average of 1.05% (ranking in the 40th percentile).

Martin Cole
In review of pages 8 & 8A of the UBPR, Analysis of Past Due, Nonaccrual &
Restructured, the following categories were above peer as it relates to total non-performing loans
(% of Non-Current Loans and Leases by Loan Type; as of December 31, 2013):
 Loans to Finance Commercial Real Estate
o 2.46% compared to the peer average of 2.09% (ranks in the 83rd
percentile); this is a decrease from 0.71% year-over-year.
 Single & Multi-Family Mortgages
o 0.68% compared to the peer average of 0.24% (ranks in the 67th
 Non-Farm & Non-Residential Mortgages
o 1.63% compared to the peer average of 1.47% (ranks in the 61st
 Loans to Individuals
 Agricultural
percentile); this is a sharp increase from 0.01% year-over-year.
 Other

Martin Cole
While most of these ratios are higher-than-peer, they have declined year-over-year as a
percentage of non-current loans and leases. In addition, when looking at pages 4, 7 & 7A
(Balance Sheet & Analysis of Credit Allowance and Loan Mix) the aforementioned loan
categories noted, as a percentage of total loans & leases, are nominal in nature and present
minimal risk to the risk profile of the organization. For example, Agricultural Loans (the only
category whose non-current ratio increased year-over-year) at $72.2 million represent 0.13% of
total loans & leases on CMA’s balance sheet. Given the sharp incline in non-current loans, in
conjunction with the large associated charge-off figures (up from 0.02% to 1.19% and ranks in
the 92nd percentile; the peer average is 0.09%) would indicate two things:
1. From a credit risk management perspective, CMA does not focus on portfolios
with minimal dollar amounts which ultimately results in (in the case of the
Agricultural portfolio);
2. One or two large relationships within the portfolio deteriorating and being
charged off.
Considering the improving economic environment, one would expect the figures to
continue their declining trend. In the case of the Agricultural portfolio, it appears as though one
or two large credits materially affected the past due and net loss figures. The expectation is that
the figures fall in line with historical performance once they are written off from CMA’s balance
sheet.
To obtain a picture of loan quality for the next twelve months, it is important to take into
consideration some of the “leading” indicators of credit quality:
 Non-performing loans - 90+ days PD and nonaccrual (already discussed)
 Loans 30-89 Day PD (one aspect of non-current loans)

Martin Cole
 ALLL/Nonaccrual ratio
 Provision expenses
 Other Real Estate Owned (“OREO”) balance
As non-performing loans have already been discussed, a quick look will be given to loans
30-89 days past due. As of yearend 2013, Total Loans 30-89 Days PD represents 0.28% of non-
current Loans & Leases; this is down from 0.35% year and compares favorably to the peer
average 0.59% (and ranks in the 24th percentile). More specifically by loan type, the only loans
that are 30-89 Days PD and compares unfavorably to peer are non-farm/non-residential
mortgages, owner occupied non-farm/non-residential and “other” loans. In aggregate, non-
current loans within the 30-89 day pipeline provides minimal exposure to CMA’s balance sheet.
During the height of the financial crisis, banks experienced significant credit deterioration
and losses. With severe credit concerns experienced by financial institutions, regulators focused
on the bank’s Allowance for Loan and Lease Losses (ALLL) Methodology. With that said, one
of the ratios that came under regulatory scrutiny was the ALLL/Nonaccrual ratio. Coverage of
1:1 was ideal as it states that the bank had complete coverage other its non-accruals. With that
said, if the ALLL only covered 0.5x, the ALLL was at risk of being criticized by regulatory
authorities and require additional provision expenses. As of yearend 2013, CMA’s ALLL
coverage to Nonaccruals is 1.71x and compares favorably to peer average of 1.68x and ranks in
the 59th percentile; the coverage ratio is an increase from 1.22x year-over-year.
Provision expenses of $42 million equates to 0.07% of average assets and compares
favorably to the peer average of 0.14% and ranks in the 35th percentile; this is a year-over-year
improvement from $73 million equating to 0.12% of average assets. A reduction in provision

Martin Cole
expenses indicates improved credit quality and is further mitigated by the minimal amount of
non-current loans (30-89 Days PD) in the “pipeline”.
While considered an asset, the OREO balance is a blemish on an intuition’s balance
sheet. In many cases, there may be additional losses resulting in the sale of OREO properties
from bank’s books. As of yearend 2013, the OREO balance decline nearly 76% to $12.4 million
(0.05% of average assets) from $51.4 million (0.12% of average assets) year-over-year; the
yearend 2013 figure compares favorably to the peer average of 0.28% and ranks in the 27th
percentile. The large decline year-over-year may have contributed to the increases in losses
(especially within the Agricultural portfolio) associated with the disposal of OREO parcels
during 2013.
In conclusion, the outlook for credit quality is favorable given the amount of non-
performing loans, the amount of 30-89 days past due, adequate nonaccrual coverage with the
ALLL and declining provision expenses and OREO balances.

Martin Cole
5. How does your bank measure its interest rate risk exposure?
a. What do the most recent measures show about the size of this exposure? Is your balance sheet
asset sensitive or liability sensitive?
b. How do these exposures compare to the current ALCO limits on your exposure?
*Question # 5 requires information additional to that contained in the UBPR, but page 9 of the
UBPR does contain some potentially relevant information. Information on interest rate risk is
available in a bank’s Annual Report (10K), provided the bank is a publicly-traded company.
Interest rate risk arises in the normal course of business due to differences in the repricing
and cash flow characteristics of assets and liabilities. Per CMAs 2013 Annual Report, they
utilize various asset and liability management strategies to manage net interest income exposure
to interest rate risk. A combination of techniques is used to manage interest rate risk. These
techniques examine the impact of interest rate risk on net interest income and the economic value
of equity under a variety of alternative scenarios, including changes in the level, slope and shape
of the yield curve and utilizing multiple simulation analyses. In addition, each interest rate
scenario includes assumptions regarding loan growth, investment security prepayment levels,
depositor behavior, yield curves, and overall balance sheet mix and growth.
Per the 2013 Annual Report, the analysis of the impact of changes in interest rates on net
interest income under various interest rate scenarios is management's principal risk management
technique. Management evaluates a base case net interest income under an unchanged interest
rate environment and what is believed to be the most likely balance sheet structure. Existing
derivative instruments entered into for risk management purposes are included in the analysis,
but no additional hedging is forecasted. These derivative instruments currently comprise interest
rate swaps that convert fixed-rate long term debt to variable rates. This base case net interest
income is then compared against interest rate scenarios in which rates rise or decline in a linear,

Martin Cole
non-parallel fashion from the base case over 12 months. In the scenarios presented, short-term
interest rates increase 200 basis points, resulting in an average increase in short-term interest
rates of 100 basis points over the period. Due to the current low level of interest rates, the
analysis reflects a declining interest rate scenario of a 25 basis point drop in short-term interest
rates, to zero percent.
(in millions) 2013 2012
December 31 Amount % Amount %
Change in Interest Rates:
+200 basis points $ 210 13% $ 178 11%
-25 basis points (to zero percent) (30) (2) (23) (1)
Corporate policy limits adverse change to no more than four percent of management's
base case net interest income forecast, and CMA was within this policy guideline at December
31, 2013. Sensitivity increased from December 31, 2012 to December 31, 2013 primarily due to
higher actual and forecasted non-maturity deposits, which generate higher forecasted excess
reserves and, therefore, increased sensitivity. The risk to declining interest rates is limited as a
result of the inability of the current low level of rates to fall significantly.
In addition to the simulation analysis, an economic value of equity analysis provides an
alternative view of the interest rate risk position. The economic value of equity is the difference
between the estimate of the economic value of the CMAs financial assets, liabilities and off-
balance sheet instruments, derived through discounting cash flows based on actual rates at the
end of the period and the estimated economic value after applying the estimated impact of rate
movements. The economic value of equity analysis is based on an immediate parallel 200 basis
point increase and 25 basis point decrease in interest rates.

Martin Cole
2013 2012
(in millions) Amount % Amount %
Change in Interest Rates:
+200 basis points $ 670 6% $ 1,031 10%
-25 basis points (to zero percent) (164) (1) (192) (2)
Per the 2013 Annual Report, Corporate policy limits adverse change in the estimated
market value change in the economic value of equity to 15 percent of the base economic value of
equity. CMA was within this policy parameter at December 31, 2013. The change in the
sensitivity of the economic value of equity to a 200 basis point parallel increase in rates between
December 31, 2012 and December 31, 2013 was primarily driven by changes in market interest
rates at the middle to long end of the curve, which most significantly impacts the value of
deposits without a stated maturity. Additionally, a decrease in CMA's mortgage-backed
securities portfolio reduced the level of fixed-rate securities that would decline in value when
interest rates move higher.
At a high-level, to determine whether the bank’s balance sheet is either asset or liability
sensitive, one must determine which side of the balance sheet reprices faster (assets versus
liabilities). If a bank is considered asset-sensitive, more of their assets reprice compared to the
liabilities on its balance sheet. In an upward rate environment these assets, theoretically, reprice
at a higher rate expands net interest income and increases net income (assuming all other factors
are held constant). Conversely, the opposite is true if the bank is liability-sensitive (where a
majority of the liabilities reprice faster than assets. In an upward rate environment, liabilities
would reprice at a higher rate which would contract the net interest income and decrease net
income. The chart below depicts how sensitivity reacts to changing market conditions:
Proportion to In an Increasing In a Decreasing Rate

Martin Cole
Market Rate Rate Environment Environment
Asset-Sensitive Directly NII Increases NII Decreases
Liability-Sensitive Inversely NII Decreases NII Increases
In review of page 9 of the UBPR, Interest Rate Risk Analysis as a Percent of Assets,
CMA is more closely matched compared to peer in the current flat-to-increasing interest rate
environment. From a contractual/repricing perspective, loans & securities over 3 years is
currently at 18.5% compared to peer of 42.2% and ranks in the 5th percentile; this is an increase
from the year-over year figures of 16.0% and peer average of 37.5%, respectively. Conversely,
liabilities over 3 years are at 0.4% compared to peer of 2.1% and ranks in the 15th percentile.
While the bank has remained stable at 0.4% year-over-year, the peer group has declined from
2.2%.The net over 3 year position of 18.1% is up from 15.5% noted year-over-year, compares to
the peer average of 39.9%, and ranks in the 6th percentile.
Loans & securities over 1 year is currently at 21.5% compared to peer of 54.7% and
ranks in the 3rd percentile; this is a decrease from the year-over year figure of 23.2% while the
peer figure increased from 44.7%. Conversely, liabilities over 1 year are at 1.4% compared to
peer of 6.5% and ranks in the 14th percentile. While the peer has remained stable at 6.5% year-
over-year, the bank has declined from 1.7%. The net over 1 year position of 20.1% is down from
21.4% noted year-over-year, compares to the peer average of 47.7%, and ranks in the 7th
percentile.
Another aspect of CMAs sensitivity to market risk is the consideration associated with
assets containing optionality. CMA has very few variable-rate mortgage loans and pass-throughs
given their current balance sheet make up; as of year-end, 2013 they represent 8.6% of assets

Martin Cole
compared to peer average of 17.2% and ranks in the 19th percentile. Both figures have decreased
year-over-year from 10.6% and 17.6%, respectively. Loans & securities over 15 years is
currently at 0.3% compared to peer of 4.6% and ranks in the 7th percentile; this is an decrease
from the year-over year figures of 0.4% (CMA) and 4.9% (peer), respectively.
While CMA is closely matched with minimal assets extending past 15 years, the main
overall risk indicator that present substantial risk to the organization are off balance sheet items
(“OBSI”). OBSIs represent 53.7% of assets compared to peer average of 25.3%; this represents
a year-over-year increase for both figures of 51.1% and 24.8%, respectively. OBSIs are difficult
to assess sensitivity as there is no defined amortization and lines may be drawn at any moment
(therefore becoming “on” balance sheet). From a modeling perspective, this makes assessing
OBSIs difficult, much like attempting to model non-maturity deposits (“NMDs”). With that
said, it may be beneficial for CMA to use historical runoff and consumer activity to assess the
potential impact of OBSIs from a sensitivity perspective.
In referencing page 10 of the UPBR, Liquidity & Funding, provides a strong case
supporting CMAs asset-sensitivity position. Short-term assets to short-term liabilities currently
represent 338.4% compared to peer of 152.3% and ranks in the 86th percentile; both figures have
decreased noticeably from 492.1% and 167.4%, respectively. More uniquely, short-term
investments to short-term noncore funding represent 131.5% versus peer of 81.7% and ranks in
the 86th percentile. Collectively, these ratios indicate and reconcile with CMAs 10-k that they
are, in fact, asset-sensitive which is advantageous in the current flat and expected increasing
interest rate environment.
2014 Outlook & Conclusion

Martin Cole
Per CMAs 2013 Annual Report, the following are the Management expectations for
2014, compared to 2013. Please note that these considerations assume a continuation of a slowly
growing economy and low rate environment:
 Average loan growth consistent with 2013, reflecting stabilization in Mortgage Banker
Finance near average fourth quarter 2013 levels, improving trends in Commercial Real
Estate and continued focus on pricing.
 Net interest income modestly lower, reflecting a decline in purchase accounting
accretion, to $10 million to $20 million, and the effect of a continued low rate
environment, partially offset by loan growth.
 Provision for credit losses stable as a result of stable net charge-offs and continued strong
credit quality offset by loan growth.
 Noninterest income stable, reflecting continued growth in customer-driven fee income.
 Noninterest expenses lower, excluding litigation-related expenses, reflecting a more than
50 percent decrease in pension expense. Increases in merit, healthcare and regulatory
costs mostly offset by continued expense discipline.
 Income tax expense to approximate 28 percent of pre-tax income.
In conclusion, CMA has a favorable outlook in 2014. CMA is in satisfactory condition with
a well-managed credit portfolio and operating and interest expenses. There are opportunities
available to expand the NIM through pricing loans at a higher-rate; however, the current low rate
environment coupled with CMAs apparent conservative lending culture jeopardizes the
opportunity. Lastly, given their asset-sensitivity, CMAs has positioned well now and into the
future once interest rates begin to rise.

Stonier 1 Bank Performance Intersession_MJC

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