Capital One 2014 Annual Report Download - page 119

(4) The denominator used in calculating the nonperforming asset ratios consists of total loans held for investment and other nonperforming assets.
(5) Includes foreclosed properties related to Acquired Loans of $101 million and $68 million as of December 31, 2014 and 2013, respectively.
(6) Includes the net realizable value of auto loans that have been charged-off as a result of a bankruptcy and repossessed assets obtained in
satisfaction of auto loans.
Net Charge-Offs
Net charge-offs consist of the unpaid principal balance of loans held for investment that we determine are
uncollectible, net of recovered amounts. We exclude accrued and unpaid finance charges and fees and fraud losses
from charge-offs. Net charge-offs are recorded as a reduction to the allowance for loan and lease losses and
subsequent recoveries of previously charged-off amounts are credited to the allowance for loan and lease losses.
Costs incurred to recover charged-off loans are recorded as collection expenses and included in our consolidated
statements of income as a component of other non-interest expense. Our charge-off policy for loans varies based on
the loan type. See “Note 1—Summary of Significant Accounting Policies” for information on our charge-off policy
for each of our loan categories.
Table 25 presents our net charge-off amounts and rates, by portfolio segment, in 2014, 2013 and 2012.
Table 25: Net Charge-Offs
Year Ended December 31,
2014 2013 2012
(Dollars in millions) Amount Rate(1) Amount Rate(1) Amount Rate(1)
Credit Card:
Domestic credit card . . . . . . . . . . . . . . . . . . . . . . $ 2,445 3.43% $ 2,904 4.08% $ 2,532 3.53%
International credit card . . . . . . . . . . . . . . . . . . . 283 3.69 381 4.78 412 4.98
Total credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,728 3.46 3,285 4.15 2,944 3.68
Consumer Banking:
Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 619 1.78 546 1.85 414 1.66
Home loan(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 0.05 16 0.04 52 0.12
Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 1.07 54 1.46 65 1.57
Total consumer banking(2) . . . . . . . . . . . . . . . . . . . . 675 0.95 616 0.85 531 0.74
Commercial Banking:
Commercial and multifamily real estate . . . . . . . (5) (0.02) (8) (0.04) 5 0.03
Commercial and industrial . . . . . . . . . . . . . . . . . 10 0.04 15 0.07 8 0.04
Total commercial lending . . . . . . . . . . . . . . . . 5 0.01 7 0.02 13 0.04
Small-ticket commercial real estate . . . . . . . . . . 5 0.52 7 0.62 29 2.19
Total commercial banking . . . . . . . . . . . . . . . . . . . 10 0.02 14 0.03 42 0.12
Other:
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0.36 19 11.34 38 24.14
Total net charge-offs(2) . . . . . . . . . . . . . . . . . . . . . . . $ 3,414 1.72 $ 3,934 2.04 $ 3,555 1.89
Average loans held for investment . . . . . . . . . . . . . $197,925 $192,614 $187,915
Average loans held for investment
(excluding Acquired Loans) . . . . . . . . . . . . . . . . 172,109 160,459 151,668
(1) Calculated for each loan category by dividing net charge-offs for the period by average loans held for investment during the period.
(2) Excluding the impact of Acquired Loans, the net charge-off rates for our home loan portfolio are 0.24%, 0.21%, and 0.68%, for the years
ended December 31, 2014, 2013, and 2012, respectively; the net charge-off rates for total consumer banking are 1.49%, 1.51%, and 1.45%,
for the years ended December 31, 2014, 2013, and 2012, respectively; and the net charge-off rates for total loans held for investment are
1.98%, 2.45%, and 2.34%, for the years ended December 31, 2014, 2013, and 2012, respectively.
For information regarding management’s expectations of net charge-offs, see “MD&A—Business Segment
Expectations.” 97 Capital One Financial Corporation (COF)