Capital One 2013 Annual Report Download - page 207

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 $276.7 billion and $298.9 billion as of December 31, 2013 and 2012, 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 (“LTV”) 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
$20.9 billion and $17.5 billion as of December 31, 2013 and 2012, respectively.
Finance Charge and Fee Reserves
We continue to accrue finance charges and fees on credit card loans until the account is charged-off. Our
methodology for estimating the uncollectible portion of billed finance charges and fees is consistent with the
methodology we use to estimate the allowance for incurred principal losses on our credit card loan receivables.
Revenue was reduced by $796 million, $937 million and $371 million in 2013, 2012 and 2011, respectively, for
the estimated uncollectible portion of billed finance charges and fees. The finance charge and fee reserve totaled
$190 million as of December 31, 2013, compared with $307 million as of December 31, 2012.
Loans Held for Sale
We also originated $2.1 billion, $1.6 billion and $954 million of conforming residential mortgage loans and
commercial multifamily real estate loans in 2013, 2012 and 2011, respectively. We retained servicing on 92% of
these loans sold in both 2013 and 2012 , and we retained servicing on 91% of these loans sold in 2011.
NOTE 5—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. 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 further discussion on the methodologies and
policies for determining our allowance for loan and lease losses for each of our loan portfolio segments.
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