Capital One 2012 Annual Report Download - page 213

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(4) Represents changes in accretable yields for those pools with reductions that are driven primarily by changes in actual and estimated
prepayments.
Unfunded Lending Commitments
We manage the potential risk in credit commitments by limiting the total amount of arrangements, both by
individual customer and in total, by monitoring the size and maturity structure of these portfolios and by applying
the same credit standards for all of our credit activities. Unused credit card lines available to our customers
totaled $298.9 billion and $206.0 billion as of December 31, 2012 and 2011, respectively. While these amounts
represented the total available unused credit card lines, we have not experienced and do not anticipate that all of
our customers will access their entire available line at any given point in time.
In addition to available unused credit card lines, we enter 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. These commitments may expire without being drawn upon;
therefore, the total commitment amount does not necessarily represent future funding requirements. The
outstanding unfunded commitments to extend credit, other than credit card lines, were approximately
$17.5 billion and $14.8 billion as of December, 2012 and 2011, respectively.
We maintain a reserve for unfunded loan commitments and letters of credit to absorb estimated probable losses
related to these unfunded credit facilities in other liabilities on our consolidated balance sheets. Our reserve for
unfunded loan commitments and letters of credit was $35 million and $66 million as of December 31, 2012 and
2011, respectively. See “Note 6—Allowance for Loan and Lease Losses” below for additional information.
NOTE 6—ALLOWANCE FOR LOAN AND LEASE LOSSES
We maintain an allowance for loan and lease losses that represents management’s best estimate of incurred loan
and lease losses inherent in our held-for-investment portfolio as of each balance sheet date. We do not maintain
an allowance for held-for-sale loans or acquired loans that are performing, in accordance with or better than our
expectations, as of the date of acquisition, as the fair value of these loans already reflect a credit component.
In addition to the allowance for loan and lease losses, we also estimate probable losses related to unfunded lending
commitments, such as letters of credit, financial guarantees, and binding unfunded loan commitments. The provision
for unfunded lending commitments is included in the provision for credit losses on our consolidated statements of
income and the related reserve for unfunded lending commitments is included in other liabilities on our consolidated
balance sheets. See “Note 1—Summary of Significant Accounting Policies” for a description of the methodologies and
policies for determining our allowance for loan and lease losses for each of our loan portfolio segments.
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