Comerica Incorporated (NYSE:CMA) Q2 2024 Earnings Conference Call July 19, 2024 8:00 AM ET
Company Participants
Kelly Gage - Director, Investor Relations
Curt Farmer - President, Chairman & Chief Executive Officer
Jim Herzog - Chief Financial Officer
Peter Sefzik - Chief Banking Officer
Melinda Chausse - Chief Credit Officer
Conference Call Participants
Ken Usdin - Jefferies
Chris McGratty - KBW
Bernard Von Gizycki - Deutsche Bank
Mike Mayo - Wells Fargo
Manan Gosalia - Morgan Stanley
Samuel Varga - UBS
Operator
Hello, and welcome to the Comerica Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.
It's now my pleasure to turn the call over to Kelly Gage, Director of Investor Relations. Please go ahead, Kelly.
Kelly Gage
Thanks, Kevin. Good morning, and welcome to Comerica's second quarter 2024 earnings conference call.
Participating on this call will be our President, Chairman and CEO, Curt Farmer; Chief Financial Officer, Jim Herzog; Chief Credit Officer, Melinda Chausse; and Chief Banking Officer, Peter Sefzik.
During this presentation, we will be referring to slides, which provide additional details. The presentation slides and our press release are available on the SEC's website as well as on the Investor Relations section of our website, comerica.com.
The presentation and this conference call contain forward-looking statements. In that regard, you should be mindful of the risks and uncertainties that can cause actual results to vary materially from expectations. Forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update any forward-looking statements. Please refer to the Safe Harbor statement in today's earnings presentation on Slide 2.
Also, the presentation and this conference call will reference non-GAAP measures. In that regard, I direct you to the reconciliation of these measures in the earnings materials that are available on our website, comerica.com.
Now, I'll turn the call over to Curt, who will begin on Slide 3.
Curt Farmer
Good morning, everyone, and thank you for joining our call.
Today, we reported second quarter earnings of $206 million, or $1.49 per share, outperforming the first quarter on both the reported and on an adjusted basis. Although average loans declined, our targeted focus on responsible growth drove an inflection in balances throughout the quarter.
In an uncertain economic and political environment, customer sentiment appeared slightly less optimistic than last quarter. However, a number of our businesses saw positive momentum and we believe our pipeline supports our growth outlook.
As expected, net interest margin started to rebound and both noninterest income and noninterest expenses improved. Credit quality remained strong, reflecting our proven underwriting discipline.
Being a responsible company is deeply embedded in our culture. And in June, we published our 16th Annual Corporate Responsibility Report detailing our commitments to this important topic. We remain proud of our efforts to prioritize our employees and communities. Once again, U.S. News recognized us as one of the best companies to work for, and we were named one of the 50 most community-minded organizations. We feel responsible business is good business and we take pride in the unique role we play in supporting our markets.
Second quarter financial highlights are on Slide 4. Average loans were impacted by muted first quarter demand, but balances increased consistently throughout the quarter. Our deliberate first quarter reduction in brokered time deposits drove a majority of the decline in average deposits. However, we also continue to see pressure on noninterest-bearing balances as we near what we believe maybe the peak of the rate cycle.
The decline in net interest income reflected both lower Fed deposits and average loans. Charge-offs remain below historical averages at 9 basis points and our loan loss reserves declined modestly. Even excluding the net benefit from lower notable items, both noninterest income and noninterest expenses saw favorable trends.
Taxes increased due to higher income and less of a benefit from discrete items, and our estimated CET1 of 11.55% remained above our 10% strategic target. While we remain in an elevated rate environment, we think the favorable customer-related trends, coupled with the expected structural benefit to net interest income in coming quarters, positions us well.
Now, I'll turn the call over to Jim to review our second quarter financial results in more detail. Jim?
Jim Herzog
Thanks, Curt, and good morning, everyone.
Turning to Slide 5, trailing effects of rationalization efforts coupled with soft demand at the start of the year impacted average loan balances in the second quarter. Low utilization trends persisted in equity fund services although balances rebounded in June and elevated rates continued to impact wealth management loans. Commercial real estate utilization trended higher, however, period-end balances remained flat to the first quarter. We have been purposefully managing commitments and originations in this space for several quarters and we expect to begin to see growth subside in this business.
Total loan balances grew consistently throughout the quarter with period-end loans up over $1 billion. National Dealer Services contributed to quarter-end growth, with elevated balances due in part to the cyberattack that impacted dealerships nationwide in June, but we also saw increases across most business lines. Our pipeline remains strong and supports our expectation for continued growth.
Moving to Slide 6, average deposit balances declined $2.3 billion, but almost 70% of the decrease was attributed to lower brokered time deposits. Pressure on noninterest-bearing balances increased relative to trends we observed in the latter half of the first quarter as customers utilized funds to support ongoing business activity or reduce borrowings. Tax-related seasonality impacted select businesses, such as municipalities. While we saw some deposit remixing at the customer level, it did not appear to be the biggest driver.
Even with noninterest-bearing balance trends and ongoing success in winning new interest-bearing deposit relationships, we believe our noninterest-bearing mix remain peer-leading, averaging 40% for the quarter. Interest-bearing deposit cost improved 5 basis points, driven by lower broker time deposits and increases in customer deposit pricing continued to flatten. As rates decline, we expect to see an inflection point in deposit balances, mix and costs. In the meantime, we remain encouraged by our success in growing interest-bearing deposits and continued pricing discipline.
Period-end balances in our securities portfolio, on Slide 7, declined, with continued paydowns and maturities as the mark-to-market adjustment remained relatively flat. We expect continued decline in balances through at least the end of the year.
Turning to Slide 8, net interest income decreased $15 million to $533 million, driven by lower Fed deposits and loan balances, partially offset by decline in wholesale funding. Impacts from the BSBY cessation drove $6 million of the decline as we recognized a $3 million non-cash loss in the second quarter compared to a $3 million increase in the first quarter. As a reminder, you can find the expected future BSBY impacts in the appendix to the slides. Normalization of our cash position drove an increase in net interest margin for the quarter.
As shown on Slide 9, successful execution of our interest rate strategy and the composition of our balance sheet positions us favorably for a gradual 100 basis points, or 50 basis points on average, decline in interest rates. By strategically managing our swap and securities portfolios, while considering balance sheet dynamics, we intend to maintain our insulated position over time.
Credit quality remained strong, as highlighted on Slide 10. Net charge-offs of 9 bps declined for the second consecutive quarter and remained well below our normal range. Although customers continue to navigate high borrowing costs and inflation, we saw an improvement in criticized loans concentrated in our core middle market businesses. Non-accrual loans ticked up slightly, but still remain below historical averages. We did not observe any new emerging pressures and metrics within our incrementally monitored portfolios remain relatively consistent. With the reduction in the allowance for credit losses to 1.38% of total loans, we continue to believe ongoing migration will remain manageable.
On Slide 11, second quarter noninterest income of $291 million increased $55 million. Although a majority of the increase was related to the impact of BSBY cessation in the first quarter, we were encouraged to see growth across most customer-related categories. Capital markets income grew in each product, including M&A advisory services, as a result to the new team we put in place last year. Fiduciary income saw seasonal tax-related increases and brokerage income benefited from investments in our new platform for Comerica Financial Advisors. We were pleased to see successful revenue growth associated with our strategic focus on noninterest income and continue to prioritize these key investments.
Expenses, on Slide 12, improved $48 million over the prior quarter. Salaries and benefits declined $25 million, with seasonally lower stock-based compensation as the biggest driver. FDIC expense came down due to the large special assessment in the first quarter. Other expenses decline, including consulting, operational losses and asset impairment costs associated real estate rationalization, partially offset by seasonally higher advertising. Overall, expense management remains a high priority as we continue to seek opportunities to drive positive operating leverage and efficiency.
As shown on Slide 13, higher profitability coupled with conservative capital management drove increases across all of our key capital ratios. Our estimated CET1 grew to 11.55% and adjusting for the AOCI opt-out, our estimated CET1 remained above required regulatory minimums and buffers. Despite volatility throughout the quarter, at quarter-end, AOCI remained relatively flat. As we think about ongoing capital management, we need to continue to monitor AOCI movement, our loan outlook and regulations as they evolve.
Before moving to the outlook, as indicated on Slide 14, we recently received preliminary notification from the Fiscal Service that Comerica Bank was not selected to continue serving as the financial agent for the Direct Express prepaid debit card program following the expiration of our contract early next year. This process remains fluid as contract negotiations are not yet final, but at this time, we do not expect that Comerica Bank will retain the business long-term.
As detailed on the slide, we've recognized noninterest income in card fees, but that is generally offset by expenses associated with managing the program. The financial value has been in the noninterest-bearing deposit balances related to monthly benefits funded on the cards, which have grown over time and averaged $3.3 billion in the second quarter.
As we have discussed in the past, there are various potential scenarios with regards to the timing and mechanics of the deposit transition and we expect more detail in the coming quarters as terms become final. However, our experience with this program leads us to believe this transition maybe longer than shorter and we do not currently anticipate an impact to 2024 deposit balances, noninterest income or expenses.
While we have been honored to manage this important program, we see this as an opportunity to refocus and reprioritize resources towards targeted deposit strategies more in line with our core relationship operating model. Several of these key initiatives are listed on Slide 15 and leverage proven expertise coupled with strategic investments with the goal of driving core deposit growth and consistent funding over time.
As an example, we have been leaning into our competitive position as the leading bank for business to expand our focus within small business. Expected growth in this space should enhance the granularity and consistency of our deposit profile and we were encouraged to see our investments drive favorable customer trends for the quarter. Select talent acquisition and business optimization activities and treasury management and payments have been designed to further capitalize on our strong core product set and should allow us to deliver more comprehensive liquidity solutions to our customers.
Through our experience with Direct Express, we have developed competitive card capabilities that we are already leveraging to win new relationships. Online enhancements within retail are intended to further improve the user experience, while expanding our customer reach. Finally, we see opportunities to leverage our existing delivery model, strong product set and industry knowledge to further target deposit-rich customers, which should help drive stable funding opportunities. In short, we're very excited about the deposit initiatives we are executing on and look forward to continuing to prioritize deposit growth as a key strategic focus.
Our outlook for 2024 is on Slide 16. We project full-year average loans to decline 4% or grow 2% point to point from year-end 2023 to 2024. Trailing effects from our strategic optimization efforts and muted demand across the industry dampened our outlook slightly. However, our strong pipeline and momentum still supports broad-based growth expectations in the second half of the year.
Full-year average deposits are projected to be down 3% from 2023 or down 2% point to point. We expect average brokered time deposits to be relatively consistent from full-year 2023 to full-year 2024. Although we anticipate some level of continued cyclical pressure on noninterest-bearing balances and ongoing success in winning new interest-bearing deposits, we expect to maintain a favorable deposit mix in the upper 30%s.
The combination of noninterest-bearing deposit trends and lower average loans impacts our net interest income outlook, as we now project a 14% decline year-over-year. On a quarterly basis, we expect those same deposit and loan pressures and the negative impact from BSBY cessation to drive a 2% to 3% decline in net interest income. Adjusting for BSBY, third quarter net interest income is only expected to decline a modest 1% as we believe we are at the cyclical low point. We also believe deposit costs will continue to increase slightly until rates begin to decline.
Credit quality remains strong and successful recoveries helped drive lower net charge-offs this quarter. With persistent elevated rates and inflationary pressures, we believe modest migration is possible, however, we expect it to remain manageable. Given our strong results to-date, we forecast full-year net charge-offs to approach, but remain below the lower end of our normal 20 basis point to 40 basis point range.
We expect noninterest income to grow approximately 1% to 2% on a reported basis, which will be down 1% year to year when adjusting for BSBY and the impact of the Ameriprise transition as detailed in the appendix. Third quarter noninterest income is expected to decline 3% to 4%, driven largely by lower projected non-customer income. Within the second quarter, we recognized a $6 million gain due to our derivative related to the Visa Class B exchange program and benefited from smaller valuation adjustments accounted for another income. We project lower FHLB dividends consistent with lower wholesale funding and we expect risk management income to decline based on the forward curve and our hedge position. Despite these non-customer trends, we remain very encouraged about our customer-related momentum and investments to grow fee income over time.
Full-year noninterest expenses are expected to decline 2% to 3% on a reported basis, to grow 4% after adjusting for special FDIC assessments, expense recalibration, modernization and the accounting impact from the Ameriprise transition. Third quarter noninterest expenses are expected to increase 3% to 4% over the relatively lower second quarter levels as we intend to reinvest savings from our expense calibration efforts and the headcount aligned with our risk management and strategic priorities. We also expect to see elevated occupancy expense associated with transitioning our corporate facilities and seasonally higher taxes, maintenance and repair. With an ongoing focus on expense discipline, we continue to seek opportunities to offset or self-fund emerging pressures.
Even with a strong projected loan growth in the second half of the year, we expect our CET1 ratio to remain well above our 10% strategic target through year-end. We will continue to monitor AOCI and the regulatory environment as we take a conservative approach to share repurchases in 2024. Despite some near-term cyclical pressures, we expect continued momentum in the second half of the year to position us well for 2025.
Now, I'll turn the call back to Curt.
Curt Farmer
Thank you, Jim.
We are proud of our second quarter results and find the more recent loan and fee income growth trends, coupled with our overall earnings trajectory, to be compelling. As highlighted on Slide 17, we feel we have a unique value proposition and it starts with our strong foundation of credit, capital and liquidity. From that foundation, we execute on a diversified strategy across select markets and businesses designed to mitigate risk and deliver enhanced returns over time. Tying our strong foundation together with our differentiated strategy, we feel we are well positioned for future growth.
We expect meaningful structural tailwinds to net interest income due to anticipated maturities and repayments within our swap and securities portfolio. Our strategic investments are designed to drive consistent capital efficient income, and we saw encouraging results from those investments this quarter.
Finally, we believe our balance sheet is well positioned for responsible profitable growth as we leverage our demonstrated strength as a commercial lender and prioritize our targeted deposit initiatives. While the market remains focused on the timing and magnitude of rate cuts, we feel we have positioned our balance sheet to drive long-term value regardless of the rate environment.
We appreciate your time this morning, and we'd be happy to take your questions.
Question-and-Answer Session
Operator
Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Ken Usdin from Jefferies. Your line is now live.
Curt Farmer
Good morning, Ken.
Ken Usdin
Thanks. Good morning, guys. Look, I'd like to follow-up on the Direct Express and just ask you, you mentioned that it could be delayed to some point. So, I'm just wondering if you can walk us through the steps from here. When do you think you'll know when that start point is? And then, I think the most important is, the $3.3 billion of average deposits, what would be the natural trajectory of time for those to kind of go to zero in the scenario you actually keep them all even under the transition at start point? Thanks.
Peter Sefzik
Yeah. Ken, it's Peter. So, at this point, all of this indication from the Fiscal Service is preliminary. So, what the next few months looks like will sort of be to be determined. We hope over the next couple of quarters to get a little more clarity on what the transition does look like. I would tell you, our focus is on working really closely with the Fiscal Service to make sure that this is a very smooth transition for the customer base here. That's really important to us and I know it's important to them as well. And so, we want to be sure that we're able to execute on that for them.
And as far as the timeline of what the deposits look like and when they leave, as we have said for quite a while now, we believe that to be a longer time period rather than a shorter time period. That's about as much clarity as I can give to you on it, because we just don't really know. I would tell you that our experience having managed this program for a very long time now is that this is a significant transition. There's 4.5 million cardholders and that this would take a long period of time. So, that's going to be something that we will learn hopefully in the coming quarters. And as we get more clarity on it, our intention would be to provide that clarity to you as well.
And I would tell you also that we continue to be very focused on running our playbook for our relationship model, as Curt and Jim have said in our comments. We feel like we've got a whole lot of ways to manage this on a go-forward basis for the company and feel like we'll be able to redirect these resources to be more focused on what we really do as a leading bank for business.
Ken Usdin
Okay. Got it. And then, just bigger picture question, in the scenario where you don't keep it and even if there's a long tail, it still could be a decent hit to earnings power. How much does this change just overall, if at all, strategic thinking about where the company is going in terms of adjusting to a different potential earnings power level?
Jim Herzog
Good morning, Ken. It's Jim. I would start out by saying that it is absolutely our intention to replace these deposits over time. As I look at it, short term, of course, there'll be no effect. We do think it will be somewhat of an elongated transition. Long term, we do expect to replace these deposits, and we expect to replace them with core customer deposits that, as Peter and Curt said, probably better fit our business model. Medium term, we'll wait and see how the transition goes, but over time, it is our expectation to replace these with core deposits and minimize the impact, potentially no impact over the long term.
Having said that, to the extent, there is a bit of a transition in the medium term. We do start with a great balance sheet, low levels of wholesale funding, loan-to-deposit ratio. We don't think it affects us strategically, and I would just emphasize that it is our intention over time to replace these deposits to remove any impact to long-term profitability.
Ken Usdin
Okay. Thank you.
Curt Farmer
Thanks, Ken.
Operator
Thank you. Next question today is coming from Chris McGratty from KBW. Your line is now live.
Curt Farmer
Good morning, Chris.
Chris McGratty
Hey, good morning. Just following up on the question, thinking about how the balance sheet -- you may react with your balance sheet, you've got a bond portfolio that throws off a lot of cash. Is one -- I'm trying to get a better handle on, is the scenario replace the deposits with interest-bearing over time, which is a hit, or selling perhaps low-yielding bonds, which would perhaps be less of an impact? Any color on that would be great.
Jim Herzog
Good morning, Chris. It's Jim. We do think the bond portfolio will continue to run down through the end of the year and generate cash. The way I think of it is that bond portfolio will essentially fund our loan growth between now and the end of the year, perhaps early next year. I wouldn't necessarily lean on the bond portfolio for anything related to the Direct Express program, which is really again a longer-term issue and we'll certainly be buying securities by the time we have some type of longer transition for Direct Express. So, I view the bond portfolios more of a shorter-term tactic to fund our loan growth at this point.
Chris McGratty
Okay. And maybe I'm not sure how much you can comment, but was it pricing? What was it that you think -- having had this relationship for many years, what do you think it was that drove the decision not to be selected?
Peter Sefzik
Chris, this is Peter. Quite candidly, we really can't comment and don't plan to comment on sort of what the decision process was or wasn't that the Fiscal Service made. What we can tell you is that we did submit what we felt like was a very competitive bid with our full understanding of this program like I said for a long period of time and the complexities that come with it. So, we're very proud of how we've managed this all of these years and we felt very good about what we submitted, as being the right thing for both parties and including the consumers. And at the end of the day, the decision process is sort of left up to the Fiscal Service and not one that we're going to be able to comment on.
Chris McGratty
Okay. Thank you.
Operator
Thank you. [Operator Instructions] Our next question today is coming from Bernard Von Gizycki from Deutsche Bank. Your line is now live.
Curt Farmer
Good morning, Bernard.
Bernard Von Gizycki
Hey, guys. Good morning. Could you just talk to your interest rate sensitivity analysis on Page 9 of the deck? Your liability sensitive and the forward curve assumptions have changed since 1Q. I wanted color on your underlying assumptions, just how we kind of think about it in the forward? And then, just, I know you've kind of outlined about $100 million benefits from less drags and swaps in 2025, and wondering if there are any updates there.
Jim Herzog
Yeah, good morning, Bernard. It's Jim. Yes, we are modestly liability sensitive. That liability sensitivity has increased slightly from the last quarter. I do think of this as largely interest neutral, but the liability sensitivity is growing just a little bit, which I think is a great position to be in at this point of the cycle. Obviously, the rate cuts that occur according to the curve in 2024 will be more back-ended. So, while it is a little bit of a lift for the 2024 projection, it's not a huge lift. It's really going to be more of a 2025 play. We did assume the June 30 curve in the outlook. So, frankly, if we had updated that curve after CPI report came out, it really wouldn't have moved the overall outlook materially, and again that's because so many of these cuts are occurring late in the year.
Regarding the maturing swaps and securities, and we do have a slide in the appendix on Slide 23 that outlines the maturing swaps and securities, I have talked in the past about the fact that we expect to get about $100 million uplift from those maturities in 2025. Now that's a very simple calculation assuming rates were to stay constant. If rates were to move, number one, it depends when rates move. We may take some of that benefit in 2024. So, obviously, that will reduce the lift in '25, but in an absolute sense, you'd still be getting it. And that $100 million also assumes these maturities and rate movements occur in a vacuum. And as we know nothing occurs in a vacuum.
If rates do move down, other parts of the balance sheet are going to be impacted, including all the swaps that are currently on the books that are not maturing, they would certainly benefit. So, you have this $100 million of maturing swaps and securities in a vacuum, but all these other factors get rolled into what amounts to our modest liability sensitivity. And I would just say that if the balance sheet and rates perform as expected, we would probably get a little less than $100 million for those maturing swaps and securities, but you would likely make that up with our modest liability sensitivity.
So, you really get it one way or the other assuming the balance sheet response as we model it. But of course, we'll wait and see how things actually play out. But I think big picture we feel pretty good about that number.
Bernard Von Gizycki
Okay, great. And then just maybe following up on the noninterest-bearing deposit, I think it was mentioned obviously this continued cyclical pressure, but the narrative changed maybe a bit recently. And just wanted to get your sense on would you expect like outflows to continue, would it be migration, would it potentially be slowing once three, four cuts kind of occur? Because obviously, the rate differential is high and even if we get three, four cuts, it still remain relatively higher than it has been over the past several years. So, just wanted to get some thoughts on how you think that could migrate.
Jim Herzog
Sure, Bernard. We have been saying that as long as rates stay higher for longer, we do expect to see some modest pressure on noninterest-bearing deposits. I think that's natural with rates being at this level. I'll reinforce that we are at the apex of the cycle at this point, so this is probably where we're seeing this maximum pressure and it's a little uncomfortable but we do expect it to turn as rates move downwards in the latter part of the year.
In terms of the overall outlook, you see that our average deposits in Q2 were about $25.5 billion. We do think Q3 is likely to be slightly more than $1 billion lower than that. So that's just slightly below where we ended up on June 30th. And we think that's the low point. We do see noninterest-bearing deposits for both seasonal reasons as well as rates moving down. We actually see a slight increase then in Q4 and we would expect to see those continue to increase as we move through 2025. So, we absolutely seem to be at the apex of the cycle with maximum pressure on noninterest-bearing deposits, but we do see that turning later this year.
Bernard Von Gizycki
Okay, great. Thanks for taking my question.
Curt Farmer
Thanks, Bernard.
Jim Herzog
Thank you.
Operator
Thank you. Next question today is coming from Mike Mayo from Wells Fargo. Your line is now live.
Curt Farmer
Good morning, Mike.
Mike Mayo
Hi. So, you said you have industry-leading noninterest-bearing deposits to total of 40%. I think that's about double peer average, but that might be going lower. Just remind us why is that so far ahead of peer and what's been range? What's been the low point of that over the last few decades? And what's been the high point? And where do you think that settles out?
Jim Herzog
Good morning, Mike. It's Jim. Yeah, we are very proud of that ratio. I would point to the fact that we have been very focused really for the last decade plus on payments and treasury management services and we believe that is a huge driver and something that really differentiates us. I would put that as the largest factor.
Certainly, our commercial orientation helps a little bit because we have noninterest-bearing deposits, but of course, you do offer a bit of an ECA or ECR on that which is somewhat of a pseudo interest rate. But it's really part of our business model. We absolutely emphasize noninterest-bearing deposits when we extend credit. We expect to get the deposit, we expect to get the treasury management services, and those noninterest-bearing deposits tend to accompany those services.
Now, where we've been in the past, we've been much lower than that in the past before some of the treasury management initiatives had ramped up. I would also say that in the past we had a very high loan-to-deposit ratio if you go back to pre-financial crisis as many banks did throughout the industry. And so, as a result, we were offering much higher interest rates which created a little bit more migration. We don't think we're going to lean on broker deposits anywhere close to that as we did in the past. We expect our loan-to-deposit ratio to stay maintained. But I would say in essence it's our business model and it's what we emphasize as we go out and solicit new business.
Mike Mayo
And just a follow-up, the competitive environment seems as tough as it's ever been for regional banks with a lot more bank expanding nationally. How do you see that competitive environment as it relates to the deposits and your deposit guide and your loan guide? Is this cyclical? And how much of this might be structural? And at what point would you consider buying another bank or combining with other bank given the change in the strategic environment? Thank you.
Peter Sefzik
Mike, this is Peter, and I'll comment first and I'll let Curt maybe comment on the strategic part of it. But I think from a competitive standpoint, we actually feel that's where the diversity of our model is just terribly compelling. A number of regional banks are expanding nationally. We've been national for a long time. We been in California for a long time, in Texas, Michigan, we're expanding in the Southeast. But I think our national presence has been very helpful when it comes to competitiveness on deposits.
So, what you're trying to raise deposit wise in Michigan versus California versus Texas, it gives us lots of options. We also have a number of businesses that really are national businesses, like our TLS business, our Financial Services division, where we're able to attract customers and deposits in different ways that don't necessarily tie us to, let's say, CD rates in a small part of Texas, for example, we've got a lot of handles that we're able to pull.
So, I totally agree with you, it's about as competitive as we've seen it in a long time, not just on deposits, really on loans and pricing and structure across the country right now has picked up a lot in the last quarter. But I think that again the diversity of our model as we've tried to continue to communicate is just terribly compelling and gives us a lot of advantages in competing with regional banks, community banks and the larger banks.
And so, Curt, I might flip to you.
Curt Farmer
Yeah, Mike, thank you for the question. And on the strategic side, we have been a very patient acquirer, really have done one acquisition in the last 20 years, have continued to lean into our organic growth model. And the last couple of years we've seen nice growth on the asset side from the lending perspective and just expansion of our customer base. And we think we continue to have really good opportunities to grow in all the markets that we operate in as well as the markets that we've expanded into more recently.
We'll have to wait and see how the environment unfolds. Thus far, it's been an environment with not a lot of M&A occurring because a lot of uncertainty around regulation, economy, et cetera. But certainly if something made strategic cultural sense for us and was a good fit, we would take a look at it in one of our primary geographies, but again that would not be our primary focus. Our primary focus continues to be on organic growth and we think we have really good opportunities there.
Mike Mayo
All right. Thank you.
Curt Farmer
Thanks, Mike.
Peter Sefzik
Thank you, Mike.
Operator
Thank you. Next question today is coming from Manan Gosalia from Morgan Stanley. Your line is now live.
Curt Farmer
Manan, good morning.
Manan Gosalia
Hi, good morning. Apologies if I missed this in your prior remarks, but can you comment on your conversations with customers on when loan demand can really start to come back, right? I think pipelines are pretty robust, but across the industry, loan demand has been weak. Is it lower rates that are going to bring back that demand? Is it some of the uncertainty with the elections, et cetera, going away? Can you just talk about what your conversations with customers have been?
Peter Sefzik
Hey, Manan, it's Peter. I guess, the answer to your question is probably a little bit of all the above. I think in our surveys with customers, we get the sense that the number one driver of loan demand impact right now is interest rates and we believe that to the extent that we start to see some reduction in rates that that would impact loan demand or lead to hopefully some more loan demand.
And then, I would acknowledge and I believe that when you talk to customers, there's just sort of a -- I'd call it, a wait and see a little bit as to what -- how the year is going to unfold when it comes to, as Curt said, the regulatory environment, get through the elections. And I just -- I feel like historically that's a theme I've heard during presidential election years for a long time that most of your owner managed businesses kind of want to wait and see what things are going to look like after November and then they start to make decisions.
So, to your point, and I know a number of banks have been talking about this, we feel like we've got a good outlook for the second half of the year. We're still showing positive point to point loan growth for 2024 overall, but I think probably real demand doesn't pick up until you start to see interest rates come down and we get through the election.
Manan Gosalia
Got it. And maybe on the credit side, I know nothing notable to call out this quarter, criticized assets moved lower, but the investor conversation has pivoted to some concerns around credit on the C&I side as opposed to CRE. Anything specific you're seeing there? Anything you're hearing from borrowers? And I think as growth starts to slow in the economy, how do you think that impacts the credit of the portfolio overall?
Melinda Chausse
Manan, this is Melinda. Yeah, obviously, we posted a pretty nice quarter. And honestly, in the C&I book was really where we saw the improvement. It was pretty broad based across a number of different industries that are sort of embedded in core middle market. So, at this point, I'm not seeing, we're not seeing any trends in any one particular segment.
Now having said that, customers that are exposed to the consumer, so B2C-type companies, service-type companies, are a little bit more challenged and probably going to be a little bit slower to show some improvement if they're in that [non-cash] (ph) category, but we feel really good about C&I. And quite frankly, they have navigated this high rate environment by, quite frankly, managing cash flow really tightly. Honestly, utilization is low. That's probably where some of the deposits have gone, quite frankly, because they want to utilize cash in the most efficient way, and that is to pay down high cost debt.
So, I feel pretty good about the C&I portfolio. That does not mean that we're not going to continue to see some manageable level of migration, and there could be some idiosyncratic event that impacts a particular customer.
Commercial real estate, obviously, in a lot of focus, but our portfolio continues to perform quite well. It was very stable this quarter. We continue to experience no delinquencies and no losses in our senior housing portfolio, which was stressed because of rates, but also just the environment for housing coming out of COVID, is very elevated from a non-cash credit perspective, but is very stable at this point.
So, not seeing any major cracks. As long as the economy continues to sort of chug along at that soft landing strategy, I think we'll be okay, and we're well reserved if there is any issues that arise.
Manan Gosalia
Great. Thank you.
Curt Farmer
Thank you, Manan.
Operator
Thank you. Our next question today is coming from Samuel Varga from UBS. Your line is now live.
Curt Farmer
Good morning, Sam.
Samuel Varga
Good morning. I just wanted to go back to the loan demand and loan growth commentary a little bit. So, I'm trying to square what you said about how November is sort of the key catalyst here, and at the same time, obviously, guide sort of assumes that second half, there is a ramp up in loan demand. So, could you just help us understand, I guess, how much of the expected sort of demand pull through is 4Q, or is there something in the pipeline that you already see that makes you comfortable that we could see something happen in the third quarter as well?
Peter Sefzik
Yeah, Sam, I think I would still say though that probably the number one factor is interest rates. And I think that November would be the secondary factor to that. And I guess I would just say that as we see our pipelines as we sit right now, that's kind of where we're coming up with this 2% point to point loan growth. We had a great quarter of $1 billion in point to point loan growth. And so, what we see for the rest of the year is that that should be able to continue and we're encouraged by what we see. And I would tell you it's pretty broad based across our businesses.
That growth, last year, we had a number of businesses that we were sort of rationalizing if you will, getting through getting through everything that occurred in 2023 and much of that is now picking back up. And I think that as we get into the second half of the year, the realization of that pipeline growth will start to be there. But I don't think it's going to really, really pick up, as I said, until we do start to see some interest rates come down.
So, as we sit right now, our managers forecast we feel really good about how the second half of the year looks on the outlook that we're showing.
Samuel Varga
Got it. Thanks for that color. And just my follow-up is around the noninterest-bearing deposits and maybe a bit more looking into 2025. I just wanted to get a better sense for, what would need to happen in your mind to actually see meaningful dollar balances move into the bank? I'm trying to get a better sense for it. Is it just simply rate cuts? Or are there some increased leverage components that we would need to see before the dollars go back into these accounts?
Jim Herzog
Good morning, Sam. It's Jim. Of course, we're not offering any specific 2025 guidance at this time, but I would say it's really a function of three things. One, the rate environment. We typically do see noninterest-bearing deposits grow all things equal as rates start to come down. So that's certainly a factor. Business activity, again, going back to answering Mike Mayo's question, noninterest-bearing deposits are certainly a point of emphasis for us. And then, just overall economic growth as GDP grows nominally and it does look like we're going to have some decent nominal growth in 2025. You typically expect money supply, working capital levels within middle market businesses to grow proportionately with that.
So, we do think number of factors are pointing the right direction for noninterest-bearing deposits to start growing again, inflect later this year then start growing in 2025. So, we feel like, again, we're going -- right now, we're somewhat in the apex of that cycle, but we see some real strong tailwinds for us and any really commercial bank as we move through 2025.
Samuel Varga
Understood. Thanks for taking my questions. Appreciate it.
Curt Farmer
Thank you, Sam.
Operator
Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Curt for any further or closing comments.
Curt Farmer
Well, as always, thank you for your interest in Comerica and we hope that you have a good day. Thank you.
Operator
Thank you. That does conclude today's teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.