Capital One 2006 Annual Report Download - page 99

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81
During 2005, the Company recognized a $20.6 million prepayment penalty for the refinancing of the McLean Headquarters
facility. Of this amount, $16.8 million was allocated to the U.S. Card segment, $2.7 million was allocated to the Global
Financial Services segment, $0.6 million was allocated to the Auto Finance segment, and the remainder of the balance was
held in the Other category.
During 2005, the Company recognized a $28.2 million impairment charge related to the write-off of the Companys
insurance brokerage business. The charge was recorded in non-interest expense and fully allocated to the Global Financial
Services segment.
The Gulf Coast Hurricanes Impacts
As a result of the Gulf Coast Hurricanes of 2005, the Company recorded a $28.5 million allowance for loan losses and
recognized a $15.6 million write-down on retained interests related to its loan securitization programs in 2005. Of the
additional allowance build, $10.0 million was allocated to the U.S. Card segment, $2.5 million was allocated to the Global
Financial Services segment, and $16.0 million was allocated to the Auto Finance segment. The $15.6 million write-down of
retained interests was held in the Other category. The impact of the hurricanes on Hibernia was reflected in Hibernias results
prior to the acquisition
During 2006, the Company determined that $25.7 million of allowance for loan losses previously established by Hibernia to
cover expected losses in the portion of the loan portfolio impacted by the hurricanes was no longer needed. This
determination was driven by improvements in credit performance of the impacted portfolios since the time those reserves
were established. As a result, the Banking segment includes the reversal of this allowance.
Bankruptcy Legislation Impacts
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (new bankruptcy legislation) became effective in
October 2005. As a result, the Company experienced a significant increase in bankruptcy related charge-offs during 2005
which is reflected in the provision for loan losses. The majority of the increase was allocated to the U.S. Card segment.
MasterCard IPO
During 2006, MasterCard, Inc. completed an initial public offering of its stock. In connection with this transaction, the
Company received 2,305,140 Class B shares of which 1,360,032 Class B shares were immediately redeemed by MasterCard,
Inc. The Company recognized a $20.5 million gain from the share redemption, which was reported in non-interest expense
and held in the Other category. In addition, the Company sold a combination of previously purchased charged-off loan
portfolios and Company originated charged-off loans resulting in the recognition of $83.8 million of non-interest income held
in the Other category.
Note 4
Securities Available for Sale
Securities available for sale as of December 31, 2006, 2005 and 2004 were as follows:
Expected Maturity Schedule
1 Year
or Less
15
Years
510
Years
Over 10
Years
Market
Value
Totals
Amortized
Cost Totals
December 31, 2006
U.S. Treasury and other U.S.
government agency obligations $ 422,352 $ 1,404,961 $ 239,127 $ 991 $ 2,067,431 $ 2,091,601
Collateralized mortgage
obligations 2,009 2,197,964 96,820 543,189 2,839,982 2,860,302
Mortgage backed securities 4,858 1,207,529 1,470,515 5,914,861 8,597,763 8,692,290
Asset backed securities 284,275 157,770 161,713 603,758 606,558
Other 573,830 204,781 154,542 409,960 1,343,113 1,293,580
Total $ 1,003,049 $ 5,299,510 $ 2,118,774 $ 7,030,714 $ 15,452,047 $ 15,544,331
December 31, 2005
U.S. Treasury and other U.S.
government agency obligations $ 867,737 $ 2,741,771 $ 789,664 $ 4,020 $ 4,403,192 $ 4,480,536
Collateralized mortgage
obligations 84,531 3,840,768 85,777 4,011,076 4,084,633
Mortgage backed securities 4,528 3,601,471 509,398 9,683 4,125,080 4,138,804
Asset backed securities 231,395 1,064,668 92,506 1,388,569 1,391,930
Other 108,748 10,349 20,722 177,282 317,101 281,350
Total $ 1,296,939 $ 11,259,027 $ 1,498,067 $ 190,985 $ 14,245,018 $ 14,377,253