Comerica 2009 Annual Report Download - page 112

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comerica Incorporated and Subsidiaries
Note 11 — Variable Interest Entities (VIEs)
The Corporation evaluates its interest in certain entities to determine if these entities meet the definition of
a VIE and whether the Corporation was the primary beneficiary and should consolidate the entity based on the
variable interests it held. The following provides a summary of the VIEs in which the Corporation has a
significant interest.
The Corporation owns 100 percent of the common stock of an entity formed in 2007 to issue trust preferred
securities. This entity meets the definition of a VIE, but the Corporation is not the primary beneficiary as the
expected losses and residual returns of the trust are absorbed by the trust preferred stock holders. The trust
preferred securities held by this entity ($500 million at December 31, 2009) qualify as Tier 1 capital and are
classified as subordinated debt included in ‘‘medium- and long-term debt’’ on the consolidated balance sheets,
with associated interest expense recorded in ‘‘interest on medium- and long-term debt’’ on the consolidated
statements of income. The Corporation is not exposed to loss related to this VIE.
The Corporation has limited partnership interests in three private equity investment partnerships, which
were acquired in 1998, 1999 and 2001, where the general partner (an employee of the Corporation) in these
three partnerships is considered a related party to the Corporation. These entities meet the definition of a VIE;
however, the Corporation is not the primary beneficiary of the entities, as the majority of variable interests are
expected to accrue to the nonaffiliated limited partners. As such, the Corporation accounts for its interest in
these partnerships on the cost method. Investments are included in ‘‘accrued income and other assets’’ on the
consolidated balance sheets, with income (net of write-downs) recorded in ‘‘other noninterest income’’ on the
consolidated statements of income. These entities had approximately $108 million in assets at December 31,
2009. These funds generally cannot be redeemed. Distributions from these funds are received by the
Corporation as the result of liquidation of underlying investments of the funds and/or as income distributions.
Exposure to loss as a result of involvement with these entities at December 31, 2009 was limited to the book basis
of the Corporation’s investments of approximately $4 million and approximately $1 million of commitments for
future investments.
The Corporation, as a limited partner, also holds an insignificant ownership percentage interest in 130 other
private equity and venture capital investment partnerships where the Corporation is not related to the general
partner. While these entities may meet the definition of a VIE, the Corporation is not the primary beneficiary of
any of these entities as a result of its insignificant ownership interest. The Corporation accounts for its interests in
these partnerships on the cost method. Investments are included in ‘‘accrued income and other assets’’ on the
consolidated balance sheets with income (net of write-downs) recorded in ‘‘other noninterest income’’ on the
consolidated statements of income. These funds generally cannot be redeemed. Distributions from these funds
are received by the Corporation as the result of liquidation of underlying investments of the funds and/or as
income distributions. Exposure to loss as a result of involvement with these entities at December 31, 2009 was
limited to the book basis of the Corporation’s investments of approximately $53 million and approximately
$25 million of commitments for future investments.
A limited liability subsidiary of the Corporation is the general partner in an investment fund partnership
formed in 2003. The subsidiary manages the investments held by the fund and the investment partnership meets
the definition of a VIE. The Corporation is the primary beneficiary and consolidates the entity, as the majority of
the variable interests are expected to accrue to the Corporation. The investment partnership had assets of
approximately $2 million at December 31, 2009 and was structured so that the Corporation’s exposure to loss as
a result of its interest would be limited to the book basis of the Corporation’s investment in the limited liability
subsidiary, which was insignificant at December 31, 2009. Total fee revenue earned by the Corporation as
110