Capital One 2007 Annual Report Download - page 121

Download and view the complete annual report

Please find page 121 of the 2007 Capital One annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 147

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147

99
Additionally, regulatory restrictions exist that limit the ability of COB, CONA, and Superior to transfer funds to the Corporation. As
of December 31, 2007, retained earnings of COB, CONA, and Superior of $539.9 million, zero million, and $5.0 million, respectively,
were available for payment of dividends to the Corporation without prior approval by the regulators.
CONA is required to maintain cash on hand or non-interest bearing balances with the Federal Reserve to meet reserve requirements.
CONAs non-interest bearing balance with the Federal Reserve was $25.8 million as of December 31, 2007.
Note 21
Commitments, Contingencies and Guarantees
Letters of Credit
The Company issues letters of credit (financial standby, performance standby and commercial) to meet the financing needs of its
customers. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer
to a third party in a borrowing arrangement. Commercial letters of credit are short-term commitments issued primarily to facilitate
trade finance activities for customers and are generally collateralized by the goods being shipped to the client. Collateral requirements
are similar to those for funded transactions and are established based on managements credit assessment of the customer.
Management conducts regular reviews of all outstanding letters of credit and customer acceptances, and the results of these reviews
are considered in assessing the adequacy of the Companys allowance for loan and lease losses.
The Company had contractual amounts of standby letters of credit and commercial letters of credit of $1.2 billion at December 31,
2007. As of December 31, 2007, financial guarantees had expiration dates ranging from 2008 to 2015. The fair value of the standby
letters of credit outstanding at December 31, 2007 that have been issued since January 1, 2003, was $2.9 million and was included in
other liabilities.
Loan and Line of Credit Commitments
As of December 31, 2007, the Company had $198.0 billion of unused credit card lines. While this amount represented the total unused
available credit card lines, the Company has not experienced, and does not anticipate, that all of its customers will exercise their entire
available line at any given point in time. The Company generally has the right to increase, reduce, cancel, alter or amend the terms of
these available lines of credit at any time.
As a result of the acquisitions of Hibernia and North Fork, the Company enters into commitments to extend credit that are legally
binding conditional agreements having fixed expirations or termination dates and specified interest rates and purposes. These
commitments generally require customers to maintain certain credit standards. Collateral requirements and loan-to-value ratios are the
same as those for funded transactions and are established based on managements credit assessment of the customer. Commitments
may expire without being drawn upon. Therefore, the total commitment amount does not necessarily represent future requirements.
The Company maintains a reserve for unfunded loan commitments and letters of credit to absorb estimated probable losses related to
these unfunded credit facilities, in other liabilities. The outstanding unfunded commitments to extend credit other than credit card lines
were approximately $10.4 billion as of December 31, 2007.
Lease Commitments
Certain premises and equipment are leased under agreements that expire at various dates through 2035, without taking into
consideration available renewal options. Many of these leases provide for payment by the lessee of property taxes, insurance
premiums, cost of maintenance and other costs. In some cases, rentals are subject to increases in relation to a cost of living index.
Total rent expenses from continuing operations amounted to approximately $136.1 million, $58.7 million and $68.1 million for the
years ended December 31, 2007, 2006 and 2005, respectively.
Future minimum rental commitments as of December 31, 2007, for all non-cancelable operating leases with initial or remaining terms
of one year or more are as follows:
2008 $ 145,153
2009 133,723
2010 117,005
2011 106,062
2012 95,666
Thereafter 567,743
Total $ 1,165,352
Minimum sublease rental income of $26.2 million, due in future years under noncancelable leases, has not been included in the table
above as a reduction to minimum lease payments.