Capital One 2013 Annual Report Download - page 176

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
proportional method amortizes the cost of the investment over the period in which the investor receives tax
credits and other tax benefits, and the resulting amortization is recognized as a component of income taxes
attributable to continuing operations. Historically, these costs have been recognized within non-interest expense.
The guidance is effective for annual and interim periods beginning after December 15, 2014, with early adoption
permitted and retrospective application required. We plan to adopt as of January 1, 2014 and do not expect the
adoption to have a material impact to our financial statements.
NOTE 2—DISCONTINUED OPERATIONS
Shutdown of Mortgage Origination Operations of our Wholesale Mortgage Banking Unit
In the third quarter of 2007, we closed the mortgage origination operations of our wholesale mortgage banking
unit, GreenPoint, which we acquired in December 2006 as part of the North Fork acquisition. The results of the
wholesale banking unit have been accounted for as a discontinued operation and are therefore not included in our
results from continuing operations for the years ended December 31, 2013, 2012 and 2011. We have no
significant continuing involvement in these operations.
The following table summarizes the results from discontinued operations related to the closure of the mortgage
origination operations of out wholesale mortgage banking unit:
Table 2.1: Results of Discontinued Operations
Year Ended December 31,
(Dollars in millions) 2013 2012 2011
Non-interest expense, net .................................................. $(371) $(343) $(168)
Loss from discontinued operations before taxes ................................. (371) (343) (168)
Income tax benefit ........................................................ (138) (126) (62)
Loss from discontinued operations ........................................... $(233) $(217) $(106)
The loss from discontinued operations includes an expense of $333 million ($210 million, net of tax), $307
million ($194 million, net of tax) and $169 million ($120 million, net of tax) for 2013, 2012 and 2011,
respectively, attributable to provisions for mortgage loan repurchase losses related to representations and
warranties provided on loans previously sold to third parties by the wholesale mortgage banking unit. See
“Note 20—Commitments, Contingencies, Guarantees, and Others” for further details.
The discontinued mortgage origination operations of our wholesale mortgage banking unit had remaining assets,
which consisted primarily of income tax assets, of $370 million and $309 million as of December 31, 2013 and
2012, respectively. Liabilities, which primarily consisted of reserves for representations and warranties on loans
previously sold to third parties, totaled $960 million and $644 million as of December 31, 2013 and 2012,
respectively.
NOTE 3—INVESTMENT SECURITIES
Our investment portfolio consists primarily of the following: U.S. Treasury debt, U.S. agency debt and corporate
debt securities guaranteed by U.S. government agencies (“Agency”); Agency and non-agency RMBS and
commercial mortgage-backed securities (“CMBS”); other asset-backed securities (“ABS”), and other
investments. The U.S. government agencies include Federal National Mortgage Association (“Fannie Mae”),
Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Government National Mortgage Association
(“Ginnie Mae”).
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