Capital One 2015 Annual Report Download - page 178

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
159 Capital One Financial Corporation (COF)
NOTE 6—ALLOWANCE FOR LOAN AND LEASE LOSSES
Our allowance for loan and lease losses represents management’s best estimate of incurred loan and lease losses inherent in our
loans 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 in
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
methodology and policy for determining our allowance for loan and lease losses for each of our loan portfolio segments.
Allowance for Loan and Lease Losses Activity
The table below summarizes changes in the allowance for loan and lease losses and unfunded lending commitments, by portfolio
segment, for the years ended December 31, 2015 and 2014.
Table 6.1: Allowance for Loan and Lease Losses and Unfunded Lending Commitments
(Dollars in millions)
Credit
Card
Consumer
Banking
Commercial
Banking Other(1) Total
Allowance for loan and lease losses:
Balance as of December 31, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,214 $ 752 $ 338 $ 11 $ 4,315
Provision (benefit) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,750 703 67 (5) 3,515
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,963) (989) (34) (10) (4,996)
Recoveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,235 314 24 9 1,582
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,728) (675) (10) (1) (3,414)
Other changes(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32) (1) 0 0 (33)
Balance as of December 31, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,204 779 395 5 4,383
Unfunded lending commitments reserve:
Balance as of December 31, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 7 80 0 87
Provision for unfunded lending commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 26 0 26
Balance as of December 31, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 7 106 0 113
Combined allowance and unfunded reserve as of December 31, 2014 . . . . . . . . . . . . . . . . . . $ 3,204 $ 786 $ 501 $ 5 $ 4,496
Allowance for loan and lease losses:
Balance as of December 31, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,204 $ 779 $ 395 $ 5 $ 4,383
Provision (benefit) for credit losses(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,417 819 256 (2) 4,490
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,028) (1,082) (76) (7) (5,193)
Recoveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,110 351 29 8 1,498
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,918) (731) (47) 1 (3,695)
Other changes(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (49) 1 0 0 (48)
Balance as of December 31, 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,654 868 604 4 5,130
Unfunded lending commitments reserve:
Balance as of December 31, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 7 106 0 113
Provision for unfunded lending commitments(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 46 0 46
Other changes(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 9 0 9
Balance as of December 31, 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 7 161 0 168
Combined allowance and unfunded reserve as of December 31, 2015 . . . . . . . . . . . . . . . . . . $ 3,654 $ 875 $ 765 $ 4 $ 5,298
__________
(1) Other primarily consists of our discontinued GreenPoint mortgage operations loan portfolio.
(2) Represents foreign currency translation adjustments and the net impact of loan transfers and sales. At acquisition date we also recognized the fair value of
the unfunded lending commitments reserve of the GE Healthcare acquisition. See “Note 2—Business Developments” for additional information about the
GE Healthcare acquisition.
(3) Includes a provision for credit losses of $49 million to establish an initial allowance and reserve related to the loans acquired in the GE Healthcare acquisition.