Capital One 2013 Annual Report Download - page 122

Loan Modifications and Restructurings
As part of our loss mitigation efforts, we may provide short-term (three to twelve months) or long-term (greater
than twelve months) modifications to a borrower experiencing financial difficulty to improve long-term
collectability of the loan and to avoid the need for foreclosure or repossession of collateral.
Table 23 presents the loan balances as of December 31, 2013 and 2012, for which loan modifications were made
as part of our loss mitigation efforts, all of which are considered to be troubled debt restructurings (“TDR”).
Table 23 excludes loan modifications that do not meet the definition of a TDR and Acquired Loans accounted for
based on expected cash flows, which we track and report separately.
Table 23: Loan Modifications and Restructurings
(Dollars in millions)
December 31, 2013 December 31, 2012
Amount
% of
Total
Modifications Amount
% of
Total
Modifications
Modified and restructured loans:
Credit card(1) .......................................... $ 780 46.4% $ 873 48.7%
Auto ................................................. 355 21.1 328 18.3
Home loan ............................................ 244 14.5 145 8.1
Retail banking ......................................... 64 3.8 65 3.6
Commercial banking .................................... 238 14.2 383 21.3
Total ............................................ $1,681 100.0% $1,794 100.0%
Status of modified and restructured loans:
Performing ............................................ $1,250 74.4% $1,419 79.1%
Nonperforming ........................................ 431 25.6 375 20.9
Total ............................................ $1,681 100.0% $1,794 100.0%
(1) Amount reported reflects the total outstanding customer balance, which consists of unpaid principal balance, accrued interest and fees.
The outstanding balance of loan modifications made to assist borrowers experiencing financial difficulties
decreased to $1.7 billion as of December 31, 2013, from $1.8 billion as of December 31, 2012. Of these
modifications, approximately $431 million, or 26%, were classified as nonperforming as of December 31, 2013,
compared with $375 million, or 21%, as of December 31, 2012.
Credit card loan modifications account for the majority of our TDR loan modifications, representing $780
million, or 46%, of the outstanding balance of total TDR loans as of December 31, 2013, and $873 million, or
49%, of the outstanding balance of total TDR loans as of December 31, 2012. The vast majority of our credit
card TDR loan modifications involve a reduction in the interest rate on the account and placing the customer on a
fixed payment plan not exceeding 60 months. We determine the effective interest rate for purposes of measuring
impairment on modified loans that involve a reduction and are considered to be a TDR based on the interest rate
in effect immediately prior to the loan entering the modification program. In some cases, the interest rate on a
credit card account is automatically increased due to non-payment, late payment or similar events. In all cases,
we cancel the customer’s available line of credit on the credit card. If the customer does not comply with the
modified payment terms, then the credit card loan agreement may revert to its original payment terms, with the
amount of any loan outstanding reflected in the appropriate delinquency category. The loan amount may then be
charged-off in accordance with our standard charge-off policy.
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