Company: CMA
Filing Date: 2025-04-30
Form Type: 10-Q
Source: 0000028412-25-000154
Chunk: 22

Company: COMERICA INC
Filing Date: 2025-04-30
Form: 10-Q
Item: Part I, Item 2
Chunk 22
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 loans increased by 2 percent and 20 basis points, respectively, while nonperforming assets decreased by 1 basis point as a percentage of total loans over that period. Net charge-offs for first quarter 2025 totaled 21 basis points as a percentage of average loans, an increase from net charge-offs for fourth quarter 2024 totaling 13 basis points as a percentage of average loans, but remained near the bottom of the range of historical levels. These trends evidenced a resiliency in the Corporation's portfolio, even as elevated interest rates and persistent inflation continued to pressure customer profitability.

Economic forecasts as of March 31, 2025 were relatively unchanged compared to the December 31, 2024 vintages, reflecting benign economic data at quarter-end and improving conditions over the forecast period. A favorable one-quarter forward shift across the forecast timeframe resulted in relatively improved Gross Domestic Product (GDP) growth, unemployment trends and bond spreads across the reasonable and supportable period as of March 31, 2025 compared to December 31, 2024.

The allowance for credit losses incorporates risks not captured in the underlying model, primarily forecast risk. In management's view, forecast risk at March 31, 2025 was higher than at December 31, 2024, as evidenced by a higher level of stress in the downward economic scenarios. Uncertainties considered by management have broad implications for the overall economy and include the impacts of potential tariffs, persistent inflation and the fiscal deficit, amongst other risks.

The economic forecasts informing the current expected credit loss (CECL) model reflected increased uncertainty amid rapid changes in domestic and foreign economic policies. The impact of potential tariffs and changes to federal government operations were still unclear, creating challenges to economic forecasting. The FRB was assumed to gradually lower interest rates as they remain vigilant toward inflation. Consumer spending growth was seen moderating amid slower, albeit continued, growth of the real economy. Inflation was anticipated to gradually moderate as a modest margin of slack capacity opens in the labor market. Energy prices were projected to level off despite continued crosswinds from the Russia-Ukraine and Middle East wars, with U.S. crude production holding near a record high. Residential real estate property prices were expected to rise at more moderate rates, while commercial real estate prices faced headwinds, both of which reflected the long and variable lags through which the FRB's tighter monetary policy prior to the beginning of rate cuts in the third quarter of 2024 affected the real economy.

Downside risks