Capital One 2012 Annual Report Download - page 192

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Changes in Accretable Yield of Acquired Securities
The following table presents changes in the accretable yield related to the acquired credit-impaired investment
debt securities:
(Dollars in millions)
Purchased
Credit-Impaired
Securities
Accretable yield prior to February 17, 2012 .......................................... $0
Additions from new acquisitions(1) .................................................. 1,743
Accretion recognized in earnings .................................................. (202)
Reductions due to disposals, transfers, and other non-credit related changes ................. 0
Net reclassifications (to)/from nonaccretable difference ................................. (29)
Accretable yield as of December 31, 2012 ........................................... $1,512
(1) Includes securities acquired from ING Direct as well as other securities.
NOTE 5—LOANS
Loan Portfolio Composition
Our total loan portfolio consists of loans we own and loans underlying our securitization trusts. Our loan
portfolio consists of credit card, consumer banking and commercial banking loans. Credit card loans consist of
domestic and international credit card loans as well as installment loans. Consumer banking loans consist of auto,
home, and retail banking loans. Commercial banking loans consist of commercial and multifamily real estate,
commercial and industrial, and small-ticket commercial real estate loans.
Loans Acquired in Business Acquisitions
Our portfolio of loans held for investment includes loans acquired in the CCB, ING Direct and 2012 U.S. card
acquisitions. These loans were recorded at fair value as of the date of each acquisition.
Acquired Loans Accounted for Based on Expected Cash Flows
We use the term “acquired loans” to refer to a limited portion of the credit card loans acquired in the 2012 U.S.
card acquisition and the substantial majority of consumer and commercial loans acquired in the ING Direct and
CCB acquisitions, which are accounted for based on expected cash flows to be collected. Acquired loans
accounted for based on expected cash flows to be collected was $37.1 billion as of December 31, 2012, compared
with $4.7 billion as of December 31, 2011. The increase was largely due to the acquired loans from the ING
Direct acquisition.
We regularly update our estimate of the amount of expected principal and interest to be collected from these
loans and evaluate the results on an aggregated pool basis for loans with common risk characteristics. Probable
decreases in expected loan principal cash flows would trigger the recognition of impairment through our
provision for credit losses. Probable and significant increases in expected cash flows would first reverse any
previously recorded allowance for loan and lease losses established subsequent to acquisition, with any
remaining increase in expected cash flows recognized prospectively in interest income over the remaining
estimated life of the underlying loans. We increased the allowance and recorded a provision for credit losses of
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