Company: CMA
Filing Date: 2025-02-24
Form Type: 10-K
Source: 0000028412-25-000108
Chunk: 609

Company: COMERICA INC
Filing Date: 2025-02-24
Form: 10-K
Item: Item 16
Chunk 609
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 credit lossesDescription of the MatterThe Corporation’s loan portfolio and the associated allowance for credit losses (ACL) were $50.5 billion and $725 million as of December 31, 2024, respectively. The allowance for credit losses represents management’s estimate of expected credit losses over the contractual life of the loan portfolio at the balance sheet date. The allowance for credit losses includes credit loss estimates for loans evaluated on an individual basis, such as for certain nonaccrual loans and collective loss estimates for pools of loans with similar risk characteristics. The Corporation determines the allowance for pools of loans with similar risk characteristics by applying loss factors to amortized cost balances over the remaining contractual life. Loss factors are based on estimated probability of default, set to a default horizon based on contractual life, and loss given default. Through the use of various models, historical estimates are calibrated to economic forecasts over the reasonable and supportable forecast period based on economic variables that statistically correlate with each of the probability of default and loss given default pools. Qualitative adjustments are then made to bring the allowance to the level management believes is appropriate based on factors that have not otherwise been fully accounted for in the quantitative analysis. Examples of these adjustments include 1) foresight risk, 2) input imprecision, and 3) model imprecision.Auditing management’s estimate of the allowance for credit losses involved a high degree of subjectivity due to the highly judgmental nature of the expected loss models and the qualitative adjustments included in the ACL. Management applies significant judgment in developing assumptions used to determine the allowance estimate and the inputs used in those models as well as in applying qualitative adjustments and model overlays. These determinations could have a significant effect on the ACL.

F-103

How We Addressed the Matter in Our AuditWe obtained an understanding of the Corporation’s process for establishing the ACL, including selection of the models, inputs used in the models, monitoring of the models, and the qualitative adjustments made to the ACL. We evaluated the design and tested the operating effectiveness of the controls over 1) determining the appropriateness of the models used to estimate quantitative components of the ACL, 2) validating the models used to estimate quantitative components of the ACL, 3) selecting the appropriate inputs and assumptions within the models, 4) monitoring of the models including the assessment of the output, 5) determining the appropriateness of the qualitative reserve methodology, including the identification and the assessment for the need for qualitative adjustments and model overlays, 6) validating the relevance and reliability