CMA » Topics » Warrants

These excerpts taken from the CMA 10-K filed Feb 24, 2009.

Warrants

        The Corporation holds a portfolio of approximately 780 warrants for generally non-marketable equity securities. These warrants are primarily from high technology, non-public companies obtained as part of the loan origination process. As discussed in Note 1, warrants that have a net exercise provision embedded in the warrant agreement are considered derivatives and are required to be recorded at fair value. Fair value for these warrants (approximately 400 warrants at December 31, 2008 and 570 warrants at December 31, 2007) was approximately $8 million at December 31, 2008 and $23 million at December 31, 2007, as estimated using a Black-Scholes valuation model.

Warrants



        The Corporation holds a portfolio of approximately 780 warrants for generally non-marketable equity securities. These
warrants are primarily from high technology, non-public companies obtained as part of the loan origination process. As discussed in Note 1, warrants that have a net exercise
provision embedded in the warrant agreement are considered derivatives and are required to be recorded at fair value. Fair value for these warrants (approximately 400 warrants at December 31,
2008 and 570 warrants at December 31, 2007) was approximately $8 million at December 31, 2008 and $23 million at December 31, 2007, as estimated using a
Black-Scholes valuation model.



These excerpts taken from the CMA 10-K filed Feb 26, 2008.
Warrants
 
The Corporation holds a portfolio of approximately 840 warrants for generally non-marketable equity securities. These warrants are primarily from high technology, non-public companies obtained as part of the loan origination process. As discussed in Note 1 on page 72, warrants that have a net exercise provision embedded in the warrant agreement are required to be recorded at fair value. Fair value for these warrants (approximately 570 warrants at December 31, 2007 and 680 warrants at December 31, 2006) was approximately $23 million at December 31, 2007 and $26 million at December 31, 2006, as estimated using a Black-Scholes valuation model.
 
Warrants


 



The Corporation holds a portfolio of approximately 840 warrants
for generally non-marketable equity securities. These warrants
are primarily from high technology, non-public companies
obtained as part of the loan origination process. As discussed
in Note 1 on page 72, warrants that have a net
exercise provision embedded in the warrant agreement are
required to be recorded at fair value. Fair value for these
warrants (approximately 570 warrants at December 31, 2007
and 680 warrants at December 31, 2006) was
approximately $23 million at December 31, 2007 and
$26 million at December 31, 2006, as estimated using a
Black-Scholes valuation model.


 




This excerpt taken from the CMA 10-K filed Feb 27, 2007.
Warrants
 
The Corporation holds a portfolio of approximately 790 warrants for generally non-marketable equity securities. These warrants are primarily from high technology, non-public companies obtained as part of the loan origination process. As discussed in Note 1 on page 70, warrants that have a net exercise provision embedded in the warrant agreement are required to be recorded at fair value. Fair value for these warrants (approximately 680 warrants at December 31, 2006 and 800 warrants at December 31, 2005) was approximately $26 million at December 31, 2006 and $30 million at December 31, 2005, as estimated using a Black-Scholes valuation model.
 
This excerpt taken from the CMA 10-K filed Mar 3, 2006.
     Warrants

      The Corporation holds a portfolio of approximately 800 warrants for non-marketable equity securities. These warrants are primarily from high technology, non-public companies obtained as part of the loan origination process. The Corporation historically recognized income related to these warrants approximately 30 days prior to the warrant issuer’s publicly traded stock becoming free of restrictions, when a publicly traded company acquired the warrant issuer, or when cash was received. In third quarter 2005, the Corporation determined that, due to a net exercise provision embedded in the warrant agreements, the warrant portfolio should have been recorded at fair value in accordance with Implementation Issue 17a of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” (SFAS 133) since 2001. The required cumulative adjustments to record the portfolio at fair value were not material to the current or any prior reporting periods, and were recorded as of September 30, 2005. The adjustments included recording a $24 million warrant asset in “accrued income and other assets” on the consolidated balance sheet. The adjustments also included recording $20 million in “interest and fees on loans,” $4 million in incentive compensation expense in

72


 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Comerica Incorporated and Subsidiaries

“salaries expense” and $5 million in “provision for income taxes” on the consolidated statements of income. Under the Corporation’s new accounting, the fair value of warrants covered by Implementation issue 17a of SFAS 133 that are received as part of the loan origination process is deferred and amortized into interest and fees on loans over the life of the loan, in accordance with SFAS 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases.” In addition, beginning in the fourth quarter 2005, the fair value of these warrants is adjusted on a quarterly basis, with any changes in the fair value recorded in “warrant income” on the consolidated statements of income.

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