Company: CMA
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000028412-25-000108
Chunk: 433

Company: COMERICA INC
Filing Date: 2025-02-24
Form: 10-K
Item: Item 8
Chunk 433
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 period. Management selects economic variables it believes to be most relevant based on the composition of the loan portfolio and customer base, including forecasted levels of employment, gross domestic product, corporate bond and treasury spreads, industrial production levels, consumer and commercial real estate price indices as well as housing statistics.

The allowance for credit losses is highly sensitive to the economic forecasts used to develop the estimate. Due to the high level of uncertainty regarding significant assumptions, the Corporation evaluated a range of economic scenarios, including more severe economic forecast scenarios, with varying responses to current economic risks. The following table summarizes select economic variables representative of the forecasts used in a more severe forecast scenario.

F-36

Economic VariableMore Severe ForecastReal GDP Contracts through third quarter 2025, followed by partial recovery, resulting in a cumulative contraction of 0.7 percent over the forecast period.Unemployment rateIncreases to 8.3 percent by first quarter 2026, followed by a decline to 7.5 percent by the end of the forecast period.Corporate BBB bond to 10-year Treasury bond spreadsSpreads widen to a peak of 4.0 percent before gradually narrowing to 2.3 percent by the end of the forecast period.Oil PricesDecline to $48 per barrel by first quarter 2026 before recovering to $57 per barrel by the end of the forecast period.

Selecting a different forecast in the current environment could result in a significantly different estimated allowance for credit losses. To illustrate, absent model overlays and other qualitative adjustments that are part of the quarterly reserving process, if the Corporation selected the more severe scenario to inform its models, the allowance for credit losses as of December 31, 2024 would increase by approximately $328 million. However, factoring in model overlays and qualitative adjustments could result in a materially different estimate under a more severe scenario.

Qualitative Adjustments and Model Overlays 

The Corporation includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative estimate, including foresight risk, model imprecisions and input imprecisions. Qualitative adjustments for foresight risk reflect the inherent imprecision in economic forecasts and may be included based on management’s evaluation of different forecast scenarios, ranging from more benign to more severe, and known recent events impacting the Corporation’s portfolio. Model imprecision adjustments and model overlays may be included to mitigate known limitations in the quantitative models. Input imprecision includes adjustments for portfolios where recent historical losses exceed expected losses or known recent events are expected to alter risk ratings