Company: CMA
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000028412-25-000108
Chunk: 96

Company: COMERICA INC
Filing Date: 2025-02-24
Form: 10-K
Item: Item 1
Chunk 96
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 resulted in the allowance for credit losses remaining relatively stable at $725 million at December 31, 2024, compared to $728 million as of December 31, 2023.

Key credit metrics remained below historical levels at December 31, 2024, with some normalization in trends in 2024 leading to higher criticized loans and nonperforming assets than in 2023. Criticized loan balances increased 5% at December 31, 2024 from December 31, 2023, while nonperforming assets increased to $308 million from $178 million over the same period. Net charge-offs as a percentage of average loans remained low for 2024 at 10 basis points. These portfolio trends were impacted by persistent inflation and elevated interest rates that continued to pressure customer profitability and debt service ratios. 

In isolation, slight improvements in economic forecasts contributed to a partial reduction to the allowance for credit losses to total loans ratio as of December 31, 2024, compared to December 31, 2023. At December 31, 2024, forecasts reflected a more stabilized economic outlook compared to the December 31, 2023 forecasts, with less volatility over the reasonable and supportable period and a return to normalized levels for key economic variables. Specifically, the two-year forecast at December 31, 2024 reflected improved Gross Domestic Product (GDP) growth, relatively flat unemployment trends, more normalized oil prices and bond spreads indicative of lower credit risk in the market. 

The allowance for credit losses incorporates risks not captured in the underlying model, primarily forecast risk. In management’s view, forecast risk at December 31, 2024 was lower than at December 31, 2023 due to a tightening of the economic scenarios, signaling an overall decrease in uncertainty. Uncertainties considered by management at December 31, 2024 focused on portfolios with incremental monitoring, such as leveraged, senior housing and automotive production loans.

The economic forecasts informing the current expected credit loss (CECL) model continue to reflect the cumulative lagged effects of the FRB's tight monetary policy between 2022 and 2024 that are weighing on the real economy, as well as several years of elevated inflation that largely depleted the excess savings that households accumulated during the pandemic. Energy prices are projected to level off amid crosswinds from the Russia-Ukraine and Middle East conflicts, rising U.S. crude production and weak demand from China and other major foreign economies. Residential real estate prices are generally