Capital One 2006 Annual Report Download - page 117

99
Corporation was being held in the Other category while all other 2005 acquisitions were allocated to Auto Finance and
Global Financial Services segments at December 31, 2005.
In December 2005, based on a change in strategic direction related to the Companys insurance brokerage business held in
the Global Financial Services segment, the Company recognized a $25.5 million goodwill impairment loss. The impairment
charge was recorded in other non-interest expense in the consolidated income statement.
In connection with the acquisitions of Hibernia and North Fork, the Company recorded intangible assets that consisted of
core deposit intangibles, trust intangibles, lease intangibles, and other intangibles, which are subject to amortization. The core
deposit and trust intangibles reflect the value of deposit and trust relationships. The lease intangibles reflect the difference
between the contractual obligation under current lease contracts and the fair market value of the lease contracts at the
acquisition date. The other intangible items relate to customer lists, brokerage relationships and insurance contracts. The
following table summarizes the Companys purchase accounting intangible assets subject to amortization.
December 31, 2006
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Amortization
Period
Core deposit intangibles $ 1,306,806 $ (80,364) $ 1,226,442 11.1 years
Trust intangibles 10,500 (1,270) 9,230 17.0 years
Lease intangibles 15,911 (1,647) 14,264 9.0 years
Other intangibles 11,474 (2,154) 9,320 9.3 years
Total $ 1,344,691 $ (85,435) $ 1,259,256
December 31, 2005
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Amortization
Period
Core deposit intangibles $ 380,000 $ (9,421) $ 370,579 10.0 years
Trust intangibles 10,500 (145) 10,355 18.0 years
Lease intangibles 5,209 (148) 5,061 9.6 years
Other intangibles 8,351 (168) 8,183 11.5 years
Total $ 404,060 $ (9,882) 394,178
Intangibles are amortized on an accelerated basis over their respective estimated useful lives. Intangible assets are recorded in
Other assets on the balance sheet. Amortization expense related to purchase accounting intangibles totaled $88.8 million for
the year ended December 31, 2006. Amortization expense for intangibles is recorded to non-interest expense. The weighted
average amortization period for all purchase accounting intangibles is 11.0 years. Estimated future amortization is as
follows: 2007$217.6 million, 2008$196.2 million, 2009$174.5, 2010$152.9 million, 2011$132.3 million.
Note 18
Mortgage Servicing Rights
Mortgage Servicing Rights (MSRs), are recognized when mortgage loans are sold in the secondary market and the right to
service these loans are retained for a fee. MSRs are carried at the lower of the initial carrying value, adjusted for amortization
or fair value. MSRs are amortized in proportion to, and over the period of, estimated net servicing income. The amortization
of MSRs is periodically analyzed and adjusted to reflect changes in prepayment speeds. MSRs are periodically evaluated for
impairment based on the difference between the carrying amount and current fair value. To evaluate and measure
impairment, the underlying loans are stratified based on certain risk characteristics, including loan type, note rate and investor
servicing requirements. If it is determined that temporary impairment exists, a valuation allowance is established by risk
stratification through a charge to earnings for any excess of amortized cost over the current fair value. If determined in future
periods that all or a portion of the temporary impairment no longer exists for a particular risk stratification, the valuation
allowance is reduced by increasing earnings. The following table sets forth the changes in the carrying value and fair value of
mortgage servicing rights at December 31: