Comerica 2013 Annual Report Download - page 57

F-24
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
(dollar amounts in millions)
Years Ended December 31 2013 2012 2011 2010 2009
Balance at beginning of year $ 629 $ 726 $ 901 $ 985 $ 770
Loan charge-offs:
Commercial 91 112 192 195 375
Real estate construction:
Commercial Real Estate business line (a) 37 35 175 234
Other business lines (b) —1241
Total real estate construction 38 37 179 235
Commercial mortgage:
Commercial Real Estate business line (a) 10 46 46 53 90
Other business lines (b) 26 43 93 138 81
Total commercial mortgage 36 89 139 191 171
Lease financing —— — 1 36
International —3 7 8 23
Residential mortgage 413 15 14 21
Consumer 19 20 33 39 34
Total loan charge-offs 153 245 423 627 895
Recoveries:
Commercial 42 39 33 25 18
Real estate construction 76 14 11 1
Commercial mortgage 20 18 26 16 3
Lease financing 1— 11 5 1
International —2512
Residential mortgage 42 2 1 —
Consumer 68442
Total recoveries 80 75 95 63 27
Net loan charge-offs 73 170 328 564 868
Provision for loan losses 42 73 153 480 1,082
Foreign currency translation adjustment —— — — 1
Balance at end of year $ 598 $ 629 $ 726 $ 901 $ 985
Net loan charge-offs during the year as a
percentage of average loans outstanding during
the year 0.16% 0.39% 0.82% 1.39% 1.88%
(a) Primarily charge-offs of loans to real estate developers.
(b) Primarily charge-offs of loans secured by owner-occupied real estate.
Allowance for Credit Losses
The allowance for credit losses includes both the allowance for loan losses and the allowance for credit losses on lending-
related commitments. The allowance for loan losses represents management's assessment of probable, estimable losses inherent
in the Corporation's loan portfolio. The allowance for credit losses on lending-related commitments, included in "accrued expenses
and other liabilities" on the consolidated balance sheets, provides for probable losses inherent in lending-related commitments,
including unused commitments to extend credit and standby letters of credit.
The Corporation disaggregates the loan portfolio into segments for purposes of determining the allowance for credit losses.
These segments are based on the level at which the Corporation develops, documents and applies a systematic methodology to
determine the allowance for credit losses. The Corporation's portfolio segments are business loans and retail loans. Business loans
are defined as those belonging to the commercial, real estate construction, commercial mortgage, lease financing and international
loan portfolios. Retail loans consist of traditional residential mortgage, home equity and other consumer loans.
The allowance for loan losses includes specific allowances, based on individual evaluations of certain loans, and allowances
for homogeneous pools of loans with similar risk characteristics. In the first quarter 2013, the Corporation implemented
enhancements to the approach utilized for determining standard reserve factors for business loans not individually evaluated by
changing from a dollar-based migration method for developing probability of default statistics to a count-based method. Under
the dollar-based method, each dollar that moved to default received equal weight in the determination of standard reserve factors
for each internal risk rating. As a result, the movement of larger loans impacted standard reserve factors more than the movement
of smaller loans. By moving to a count-based approach, where each loan that moves to default receives equal weighting, unusually