Comerica 2009 Annual Report Download - page 80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
A loan is impaired when it is probable that interest or principal payments will not be made in accordance
with the contractual terms of the original loan agreement. Consistent with this definition, all nonaccrual and
reduced-rate loans are impaired. Loans restructured in troubled debt restructurings bearing market rates of
interest at the time of restructuring and performing in compliance with their modified terms (performing
restructured loans) for a period of six months are considered impaired only in the calendar year of the
restructuring.
Residential real estate loans, which consist of traditional residential mortgages and home equity loans and
lines of credit, are generally placed on nonaccrual status and charged off to current appraised values, less costs to
sell, during the foreclosure process, normally no later than 180 days past due. Other consumer loans are
generally not placed on nonaccrual status and are charged off at no later than 120 days past due, earlier if
deemed uncollectible. Business loans and debt securities are generally placed on nonaccrual status when
management determines full collection of principal or interest is unlikely or when principal or interest payments
are 90 days past due, unless the loan is fully collateralized and in the process of collection. At the time a loan or
debt security is placed on nonaccrual status, interest previously accrued but not collected is charged against
current income. Income on such loans and debt securities is then recognized only to the extent that cash is
received and where future collection of principal is probable. Generally, a loan or debt security may be returned
to accrual status when all delinquent principal and interest have been received and the Corporation expects
repayment of the remaining contractual principal and interest, or when the loan or debt security is both well
secured and in the process of collection.
Real estate acquired through foreclosure (foreclosed property) is carried at the lower of cost or fair value,
less estimated costs to sell. Independent appraisals are obtained to substantiate the fair value of real estate
transferred to foreclosed property at the time of foreclosure and updated at least annually or upon evidence of
deterioration in the property’s value. At the time of foreclosure, any excess of the related loan balance over fair
value (less estimated costs to sell) of the property acquired is charged to the allowance for loan losses.
Subsequent write-downs, operating expenses and losses upon sale, if any, are charged to noninterest expenses.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation,
computed on the straight-line method, is charged to operations over the estimated useful lives of the assets. The
estimated useful lives are generally 10 years to 33 years for premises that the Corporation owns and three years to
eight years for furniture and equipment. Leasehold improvements are amortized over the terms of their
respective leases or 10 years, whichever is shorter.
Software
Capitalized software is stated at cost, less accumulated amortization. Capitalized software includes
purchased software and capitalizable application development costs associated with internally-developed
software. Amortization, computed on the straight-line method, is charged to operations over the estimated
useful life of the software, which is generally five years. Capitalized software is included in ‘‘accrued income and
other assets’’ on the consolidated balance sheets.
Goodwill
Goodwill is subject to impairment testing, which the Corporation conducts annually as of July 1 each year
and on an interim basis if events or changes in circumstances between annual tests indicate the assets might be
impaired. Under applicable accounting guidance, the goodwill impairment test is a two-step test. The first step
of the goodwill impairment test compares the fair value of identified reporting units, which are a subset of the
Corporation’s operating segments, with their carrying amount, including goodwill. If the fair value of a reporting
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