Capital One 2014 Annual Report Download - page 144

Investment grade: Represents Moody’s long-term rating of Baa3 or better; and/or a Standard & Poor’s, Fitch or
DBRS long-term rating of BBB- or better; or if unrated, an equivalent rating using our internal risk ratings.
Instruments that fall below these levels are considered to be non-investment grade.
Investments in Qualified Affordable Housing Projects: Capital One invests in private investment funds that make
equity investments in multifamily affordable housing properties that provide affordable housing tax credits for these
investments. The activities of these entities are financed with a combination of invested equity capital and debt.
Investor Entities: Entities that invest in community development entities (“CDE”) that provide debt financing to
businesses and non-profit entities in low-income and rural communities.
Leverage ratio (Basel I guideline): Tier 1 capital divided by average assets after certain adjustments, as defined
by the regulators.
Liquidity risk: Liquidity risk is the risk that the Company will not be able to meet its future financial obligations
as they come due, or invest in future asset growth because of an inability to obtain funds at a reasonable price within
a reasonable time period.
Loan-to-value (“LTV”) ratio: The relationship expressed as a percentage, between the principal amount of a loan
and the appraised value of the collateral (i.e., residential real estate, autos, etc.) securing the loan.
Managed basis: A non-GAAP presentation of financial results that includes reclassifications to present revenue on
a fully taxable-equivalent basis. Management uses this non-GAAP financial measure at the segment level, because
it believes this provides information to enable investors to understand the underlying operational performance and
trends of the particular business segment and facilitates a comparison of the business segment with the performance
of competitors.
Market risk: Market risk is the risk that an institution’s earnings or the economic value of equity could be adversely
impacted by changes in interest rates, foreign exchange rates, or other market factors.
Master netting agreement: An agreement between two counterparties that have multiple contracts with each other
that provides for the net settlement of all contracts through a single payment in the event of default or termination
of any one contract.
Mortgage-Backed Security (“MBS”): An asset-backed security whose cash flows are backed by the principal and
interest payments of a set of mortgage loans.
Mortgage Servicing Rights (“MSR”): The right to service a mortgage loan when the underlying loan is sold or
securitized. Servicing includes collections for principal, interest and escrow payments from borrowers and accounting
for and remitting principal and interest payments to investors.
Net interest margin: The result of dividing net interest income by average interest-earning assets.
Nonperforming loans and leases: Loans and leases that have been placed on non-accrual status.
North Fork: North Fork Bancorporation, Inc., which was acquired by the Company in 2006.
Operational risk: The risk of loss, capital impairment, adverse customer experience, or reputational impact resulting
from failure to comply with policies and procedures, failed internal processes or systems, or from external events.
Option-ARM loans: The option-ARM real estate loan product is an adjustable-rate mortgage loan that provides
the borrower with the option each month to make a fully amortizing, interest-only or minimum payment.
122 Capital One Financial Corporation (COF)