Capital One 2011 Annual Report Download - page 128

(1) Calculated for each loan category by dividing net charge-offs for the period by average loans held for investment during
the period.
(2) The reduction in the provision for loan and lease losses attributable to Kohl’s was $257 million for 2011. Loss sharing
amounts attributable to Kohl’s reduced net charge-offs by $118 million in 2011. The expected reimbursement from
Kohl’s netted in our allowance for loan and lease losses was approximately $139 million as of December 31, 2011.
(3) Excludes losses on the purchased credit-impaired loans acquired from Chevy Chase Bank. We separately track and
report these loans. We provide additional information on the loans acquired from Chevy Chase Bank in “Note 5—
Loans.”
(4) The average loans held for investment used in calculating net charge-off rates includes the impact of loans acquired as
part of the Chevy Chase Bank acquisition. Our total net charge-off rate, excluding the impact of acquired Chevy Chase
Bank loans, was 3.06%, 5.44% and 6.09% for 2011, 2010 and 2009, respectively.
(5) During the first quarter of 2009, loans acquired from Chevy Chase Bank were included in the “Other” category.
(6) The average balances of the acquired Chevy Chase Bank loan portfolio, which are included in the total average loans
held for investment used in calculating the net charge-off rates, were $5.0 billion, $6.3 billion and $6.8 billion for 2011,
2010 and 2009, respectively.
Loan Modifications and Restructurings
As part of our customer retention efforts, we may modify loans for certain borrowers who have demonstrated
performance under the previous terms. As part of our loss mitigation efforts, we may make loan modifications to
a borrower experiencing financial difficulty that are intended to minimize our economic loss and avoid the need
for foreclosure or repossession of collateral. We may provide short-term (three to twelve months) or long-term
(greater than twelve months) modifications to improve the long-term collectability of the loan. Our most
common types of modifications include a reduction in the borrower’s initial monthly or quarterly principal and
interest payment through an extension of the loan term, a reduction in the interest rate, or a combination of both.
These modifications may result in our receiving the full amount due, or certain installments due, under the loan
over a period of time that is longer than the period of time originally provided for under the terms of the loan. In
some cases, we may curtail the amount of principal owed by the borrower. Loan modifications in which an
economic concession has been granted to a borrower experiencing financial difficulty are accounted for and
reported as TDRs. We also classify loan modifications that involve a trial period as TDRs.
In the third quarter of 2011, we adopted accounting guidance that provides clarification on determining whether a
debtor is experiencing financial difficulties and whether a concession has been granted to the debtor for purposes
of determining if a loan modification constitutes a TDR. The new guidance applies retrospectively to our loan
restructurings on or after January 1, 2011.
Table 29 presents the loan balances as of December 31, 2011 and 2010 of loan modifications made as part of our
loss mitigation efforts, all of which are considered to be TDRs. Table 29 excludes loan modifications that do not
meet the definition of a TDR and acquired loans from Chevy Chase Bank, which we track and report separately.
We provide additional detail on acquired loans from Chevy Chase Bank below under “Purchased Credit-
Impaired Loans.”
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