Capital One 2012 Annual Report Download - page 220

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
third party sevicer does not fulfill on its options to exercise the clean-up calls on certain transactions, the
obligation reverts to us and we would assume approximately $420 million of loans receivable upon our execution
of the clean-up call with the requirement to absorb any losses on the loans receivable. There have been no
instances of non-performance to date by the third party.
We monitor the underlying assets for trends in delinquencies and related losses and review the purchaser’s
financial strength as well as servicing performance. These factors are considered in assessing the adequacy of the
liabilities established for these obligations and the valuations of the assets.
Other VIEs
Affordable Housing Entities
As part of our community reinvestment initiatives, we invest in private investment funds that make equity
investments in multi-family affordable housing properties. We receive affordable housing tax credits for these
investments. The activities of these entities are financed with a combination of invested equity capital and debt.
For those investment funds considered to be VIEs, we are not required to consolidate them if we do not have the
power to direct the activities that most significantly impact the economic performance of those entities. We
record our interests in these unconsolidated VIEs in loans held for investment, other assets and other liabilities on
our consolidated balance sheets. As of December 31, 2012 and 2011 our interests consisted of assets of
approximately $2.4 billion and $2.0 billion, respectively. Our maximum exposure to these entities is limited to
our variable interests in the entities and was $2.4 billion as of December 31, 2012. The creditors of the VIEs have
no recourse to our general credit and we do not provide additional financial or other support during the period
that we were not previously contractually required to provide. The total assets of the unconsolidated investment
funds that were VIEs at December 31, 2012 and 2011 were approximately $7.7 billion and $6.8 billion,
respectively.
Entities that Provide Capital to Low-Income and Rural Communities
We hold variable interests in entities (“Investor Entities”) that invest in community development entities
(“CDEs”) that provide debt financing to businesses and non-profit entities in low-income and rural communities.
Variable interests in the CDEs held by the consolidated Investor Entities are also our variable interests. The
activities of the Investor Entities are financed with a combination of invested equity capital and debt. The
activities of the CDEs are financed solely with invested equity capital. We receive federal and state tax credits
for these investments. We consolidate the VIEs in which we have the power to direct the activities that most
significantly impact the VIE’s economic performance and the obligation to absorb losses or right to receive
benefits that could be potentially significant to the VIE. We have also consolidated other investments and CDEs
that we do not consider VIEs. The assets of the VIEs that we consolidated at December 31, 2012 and 2011
totaled approximately $375 million and $320 million, respectively. The assets of the consolidated VIEs are
reflected on our consolidated balance sheets in cash, loans held for investment, interest receivable and other
assets. The liabilities are reflected in other liabilities.
The total assets of the VIEs that we held an interest in but were not required to consolidate at December 31, 2012
and 2011 totaled approximately $6 million. Our interests in these unconsolidated VIEs are reflected on our
consolidated balance sheets in loans held for investment and other assets. Our maximum exposure to these
entities is limited to our variable interest of $6 million as of December 31, 2012. The creditors of the VIEs have
no recourse to our general credit. We have not provided additional financial or other support during the period
that we were not previously contractually required to provide.
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