UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

January 19, 2012

Date of Report (Date of earliest event reported)

Commission File No. 1-13300

 

 

CAPITAL ONE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		54-1719854
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
1680 Capital One Drive McLean, Virginia		22102
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (703) 720-1000

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

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Item 2.02.

Results of Operations and Financial Condition.

On January 19, 2012, Capital One Financial Corporation (the “Company”) issued a press release announcing its financial results for the fourth quarter ended December 31, 2011. Copies of the Company’s press release and financial supplement are attached and filed herewith as Exhibits 99.1 and 99.2 to this Form 8-K and are incorporated herein by reference.

 

Item 7.01.

Regulation FD Disclosure.

The Company hereby furnishes the information in Exhibit 99.3 hereto, Earnings Release Slides – Fourth Quarter 2011.

Note: Information in Exhibit 99.3 furnished pursuant to Item 7.01 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section. This report will not be deemed an admission as to the materiality of any information in the report that is required to be disclosed solely by Regulation FD. Furthermore, the information provided in Exhibit 99.3 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933.

 

Item 8.01.

Other Events.

See attached press release and financial supplement at Exhibits 99.1 and 99.2, which are incorporated herein by reference.

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Item 9.01.

Financial Statements and Exhibits.

(d)  Exhibits.

 

Exhibit   No.		Description of Exhibit
99.1		Press Release, dated January 19, 2012 – Fourth Quarter 2011
99.2		Financial Supplement – Fourth Quarter 2011
99.3		Earnings Release Slides – Fourth Quarter 2011

Earnings Conference Call Webcast Information.

The Company will hold an earnings conference call on January 19, 2012 at 5:00 PM Eastern Standard time. The conference call will be accessible through live webcast. Interested investors and other individuals can access the webcast via the Company’s home page (http://www.capitalone.com). Choose “Investors” to access the Investor Center and view and/or download the earnings press release, the financial supplement, including a reconciliation to GAAP financial measures, and the earnings release presentation. The replay of the webcast will be archived on the Company’s website through February 2, 2012 at 5:00 PM.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned, hereunto duly authorized.

 

				CAPITAL ONE FINANCIAL CORPORATION
Dated: January 19, 2012				By:		/s/ Gary L. Perlin
						Gary L. Perlin
						Chief Financial Officer

Exhibit 99.1

 

		Contacts:
		Investor Relations				Media Relations
		Jeff Norris		Danielle Dietz		Julie Rakes		Tatiana Stead
		703.720.2455		703.720.2455		804.284.5800		703.720.2352

FOR IMMEDIATE RELEASE: January 19, 2012

Capital One Reports Fourth Quarter 2011 Net Income of $407 million, or $0.88 per share

Earnings for full year 2011 were $3.1 billion, or $6.80 per share

Compared to full year 2010, earnings were up $404 million, or 15 percent

 

•

Fourth quarter loan balances up 4.6 percent from third quarter and up 7.9 percent from prior year’s fourth quarter

 

•

Revenue down modestly in fourth quarter due to absence of Q3 finance charge and fee reserve release and Q4 impact of UK reserve, revenue up modestly excluding these items

 

•

Non-interest expense up, driven by increased marketing and operating expenses

 

•

Continued balance sheet strength; Tier 1 Common Equity Ratio near 10 percent

McLean, Va. (Jan 19, 2012) – Capital One Financial Corporation (NYSE: COF) today announced net income for the fourth quarter of 2011 of $407 million, or $0.88 per diluted common share, compared with net income of $813 million, or $1.77 per diluted common share, for the third quarter of 2011, and net income of $697 million, or $1.52 per diluted common share, for the fourth quarter of 2010. For full year 2011, net income was $3.1 billion, or $6.80 per diluted common share, compared with net income of $2.7 billion, or $6.01 per diluted common share, for 2010.

“In 2011, we made significant investments to restart growth across our lending businesses after a long period of cyclical declines in loan volumes, and we’re seeing these investments gain traction,” said Richard D. Fairbank, Capital One’s Chairman and Chief Executive Officer. “The strong underlying performance of our businesses and the compelling financial and strategic value of our planned acquisitions put us in a position to deliver and sustain shareholder value through growth potential, strong returns, and strong capital generation.”

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Capital One Fourth Quarter 2011 Earnings

Page 2

 

The company expects to close the acquisition of ING Direct in the first quarter and the acquisition of the HSBC US Card business in the second quarter, and expects that the acquisitions will have significant impact on reported results, especially in 2012, from the purchase accounting effects, integration expenses and partial year impacts of these acquisitions.

All comparisons in the following paragraphs are for fourth quarter 2011 compared to third quarter 2011 unless otherwise noted.

Total Company Results

Loan and Deposit Balances

Period-end loan balances increased $5.9 billion to $135.9 billion driven by growth in Domestic Card, Commercial Banking, and Auto Finance. Average loans were up by $2.5 billion, with much of the quarterly balance growth concentrated in the last few weeks of the year.

Period-end total deposits remained flat in the fourth quarter at $128.2 billion. The company expects to close the ING Direct acquisition in the first quarter of 2012 and add approximately $80 billion in deposits. The deposit volume trends in the fourth quarter of 2011 reflect the evolution in the company’s deposit strategy in anticipation of the ING Direct acquisition.

Revenues

Total revenue in the fourth quarter of 2011 was $4.1 billion, down $104 million, or 2.5 percent. Revenue in the quarter was negatively impacted by the absence of the third quarter 2011 finance charge and fee reserve (FCFR) release and higher expected expense related to prior sales of payment protection insurance in the UK. In addition, non-interest income was negatively impacted by a representation and warranty expense of $38 million. Excluding the impact of these items, revenue increased about 2.5 percent in the fourth quarter, in line with average loan growth.

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Capital One Fourth Quarter 2011 Earnings

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Margins

Net interest margin declined 17 basis points in the quarter to 7.22 percent. The margin benefited from a shift from cash to loans and a reduction in funding costs attributed to lower deposit rates. These benefits were more than offset by a decline in loan yields driven largely by one-time effects such as the absence of the FCFR release which benefited third quarter 2011 interest income.

Non-Interest Expense

Non-interest expense for the fourth quarter increased $321 million primarily due to a seasonal ramp in marketing expenses and an increase in operating expenses. The increase in operating expenses includes approximately $90 million in litigation expenses and approximately $40 million in asset write downs and other costs as the company rationalized some facilities and equipment, principally related to acquired bank businesses. Additionally, the company accelerated its build-out of ‘top bank’ infrastructure, especially in the second half of 2011, to ensure our readiness to execute on attractive acquisition opportunities.

Pre-Provision Income (before tax)

Pre-provision earnings decreased in the quarter as a result of the increase in non-interest expense and the reported decline in revenue.

Provision Expense

Provision expense increased $239 million in the quarter as continued improvement in the outlook for credit performance was more than offset by growth in loan balances and seasonal effects. The charge-off rate increased 17 basis points to 2.69 percent, while the coverage ratio of allowance to loans fell by 16 basis points to 3.13 percent.

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Capital One Fourth Quarter 2011 Earnings

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Net Income

Net income in the quarter decreased $406 million reflecting the impact of increases in non-interest and provision expense.

Capital Ratios

The company’s estimated Tier 1 common equity ratio decreased 30 basis points from September 30, 2011, to 9.7 percent as of December 31, 2011, driven by strong loan growth at the end of the fourth quarter. The Tier 1 common equity ratio increased 90 basis points from last year’s rate of 8.8 percent at December 31, 2010. Using known Basel III definitions, our Tier 1 common equity ratio would have been approximately 10 basis points higher at December 31, 2011, or 9.8 percent.

“Significant credit improvement in 2011 led to a sizeable increase in profitability from continuing operations for 2011,” said Gary L. Perlin, Capital One’s Chief Financial Officer. “Over the course of the year, we generated substantial amounts of capital and expect to generate healthy amounts of capital going forward.”

Tier 1 common equity ratio, as used throughout this release, is a non-GAAP financial measure. For additional information, see Table 12 in the Financial Supplement.

Business Segment Results

Credit Card Highlights

Domestic Card reported net income in the fourth quarter of 2011 of $395 million. Total revenue grew 4.7 percent in the fourth quarter of 2011 from the fourth quarter of 2010, driven by growth in loans, strong purchase volumes, and stable margins. The business posted $2.3 billion in net income in 2011, driven by significant credit improvement, the return of modest loan growth, and stable margins.

Domestic Card net charge-off rate increased 15 basis points in the quarter to 4.07 percent, consistent with expected seasonal patterns. Compared with the fourth quarter of 2010, the charge-off rate improved by 321 basis points, resulting from the significant credit improvements experienced in 2011.

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Capital One Fourth Quarter 2011 Earnings

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Domestic Card loan balances grew $2.8 billion, or 5 percent, in the fourth quarter driven by seasonal spending and balance building on a growing account base. Growth for the year resulted largely from the addition of the Kohl’s private label partnership, as well as a return to growth in the company’s general purpose card business in the second half of the year. Excluding the expected installment loan run-off, Domestic Card loans grew by $4.7 billion, or 9 percent for the full year.

Purchase volume increased 9.3 percent in the quarter, reflecting continued strong growth in purchase volume across the company’s Domestic Card business. Purchase volume grew 17.8 percent from the fourth quarter of 2010, excluding the impact of the Kohl’s portfolio.

Commercial Banking Highlights

The Commercial Banking business delivered another quarter of solid profitability and steady loan growth, as deposits and commercial customer relationships continued to grow in the quarter, as well.

The combination of improving credit and growth in loan and deposit volumes drove 2011 net income of $532 million in the Commercial Banking business.

Ending loans were up 5.9 percent from the prior quarter and up 14.3 percent from the fourth quarter of 2010. Growth in loan commitments, an early indicator of future loan growth, was even stronger.

Commercial Banking credit metrics have stabilized and improved over the last six quarters. The charge-off rate for Commercial Banking was 0.63 percent, down 80 basis points from the same quarter last year. Excluding the run-off Small Ticket CRE portfolio, the charge-off rate in the company’s core Commercial Lending businesses was 0.47 percent in the quarter, an improvement of 53 basis points from the prior year. Commercial Lending charge-offs were up 19 basis points from the third quarter, driven by a small number of impaired CRE loans related to a single troubled relationship, which the company had reserved for in prior quarters. The slower flow rate into NPL and stable property values are driving lower charge-offs.

Consumer Banking Highlights

The Consumer Banking business delivered net income of $117 million in the fourth quarter of 2011 and $809 million for full year, driven by the strong performance of the Auto Finance business and growth in deposits with improving interest expense rates.

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Capital One Fourth Quarter 2011 Earnings

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Loan balances were up modestly as strong growth in auto loans was partially offset by expected runoff of the Home Loan portfolio. Auto Finance originations were $3.6 billion, up 5.2 percent from the third quarter and 61.8 percent from the fourth quarter of 2010.

In the Auto Finance business, net charge-off and delinquency rates increased in the quarter, consistent with expected seasonal patterns. However, charge-offs and delinquencies for the year improved 58 basis points and 70 basis points, respectively.

In the Home Loan business, the charge-off rate increased 37 basis points in the quarter but was relatively unchanged compared with the same quarter in 2010, while the delinquency rate increased modestly.

Consumer Banking deposits remained flat in the quarter but grew 6.7 percent in 2011 as the Consumer Banking segment continued to grow retail banking customer relationships.

For more lending information and statistics on the segment results, please refer to the Financial Supplement.

Forward-looking statements

The company cautions that its current expectations in this release dated January 19, 2012 and the company’s plans, objectives, expectations and intentions, are forward-looking statements which speak only as of the date hereof. The company does not undertake any obligation to update or revise any of the information contained herein whether as a result of new information, future events or otherwise.

Certain statements in this release are forward-looking statements, including those that discuss, among other things, strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, expenses, capital measures, accruals for claims in litigation and for other claims against the company, earnings per share or other financial measures for the company; future financial and operating results; the company’s plans, objectives, expectations and intentions; the projected impact and benefits of the pending transactions involving the company, HSBC and ING Direct (the “transactions”); and the assumptions that underlie these matters. To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking information provided by the Private Securities Litigation Reform Act of 1995. Numerous factors could cause the company’s actual results to differ materially from those described in such forward-looking statements, including, among other things: general economic and business conditions in the U.S., the U.K., Canada or the company’s local markets, including conditions affecting employment levels, interest rates, consumer income and confidence, spending and savings that may affect consumer bankruptcies, defaults, charge-offs and deposit activity; an increase or decrease in credit losses (including increases due to a worsening of general economic conditions in the credit environment); the possibility that regulatory and other approvals and conditions to either of the transactions are not

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Capital One Fourth Quarter 2011 Earnings

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obtained or satisfied on a timely basis or at all; the possibility that modifications to the terms of either of the transactions may be required in order to obtain or satisfy such approvals or conditions; the possibility that the company will not receive third-party consents necessary to fully realize the anticipated benefits of the transactions; the possibility that the company may not fully realize the projected cost savings and other projected benefits of the transactions; changes in the anticipated timing for closing either of the transactions; difficulties and delays in integrating the assets and businesses acquired in the transactions; business disruption during the pendency of or following the transactions; the inability to sustain revenue and earnings growth; diversion of management time on issues related to the transactions; reputational risks and the reaction of customers and counterparties to the transactions; disruptions relating to the transactions negatively impacting the company’s ability to maintain relationships with customers, employees and suppliers; changes in asset quality and credit risk as a result of the transactions; financial, legal, regulatory, tax or accounting changes or actions, including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder; developments, changes or actions relating to any litigation matter involving the company; increases or decreases in interest rates; the company’s ability to access the capital markets at attractive rates and terms to capitalize and fund its operations and future growth; the success of the company’s marketing efforts in attracting and retaining customers; increases or decreases in the company’s aggregate loan balances or the number of customers and the growth rate and composition thereof, including increases or decreases resulting from factors such as shifting product mix, amount of actual marketing expenses the company incurs and attrition of loan balances; the level of future repurchase or indemnification requests the company may receive, the actual future performance of mortgage loans relating to such requests, the success rates of claimants against the company, any developments in litigation and the actual recoveries the company may make on any collateral relating to claims against the company; the amount and rate of deposit growth; changes in the reputation of or expectations regarding the financial services industry or the company with respect to practices, products or financial condition; any significant disruption in the company’s operations or technology platform; the company’s ability to maintain a compliance infrastructure suitable for its size and complexity; the company’s ability to control costs; the amount of, and rate of growth in, the company’s expenses as its business develops or changes or as it expands into new market areas; the company’s ability to execute on its strategic and operational plans; any significant disruption of, or loss of public confidence in, the United States Mail service affecting the company’s response rates and consumer payments; the company’s ability to recruit and retain experienced personnel to assist in the management and operations of new products and services; changes in the labor and employment markets; fraud or misconduct by the company’s customers, employees or business partners; competition from providers of products and services that compete with the company’s businesses; and other risk factors set forth from time to time in reports that the company files with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2010, and Exhibit 99.5 to the Current Report on Form 8-K filed on July 13, 2011.

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Capital One Fourth Quarter 2011 Earnings

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About Capital One

Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A. and Capital One Bank (USA), N. A., had $128.2 billion in deposits and $206.0 billion in total assets outstanding as of December 31, 2011. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One, N.A. has approximately 1,000 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol “COF” and is included in the S&P 100 index.

Exhibit 99.2

Capital One Financial Corporation

Financial Supplement

Fourth Quarter 2011⁽¹⁾

Table of Contents

 

				Page
Capital One Financial Consolidated
Table   1:		Financial & Statistical Summary—Consolidated			1
Table   2:		Notes to Consolidated Financial & Statistical Summary (Table 1)			2
Table   3:		Consolidated Statements of Income			3
Table   4:		Consolidated Balance Sheets			4
Table   5:		Average Balances, Net Interest Income and Net Interest Margin			5
Table   6:		Loan Information and Performance Statistics			6
Business Segment Detail
Table   7:		Financial & Statistical Summary—Credit Card Business			7
Table   8:		Financial & Statistical Summary—Consumer Banking Business			8
Table   9:		Financial & Statistical Summary—Commercial Banking Business			9
Table 10:		Financial & Statistical Summary—Other and Total			10
Table 11:		Notes to Loan and Business Segment Disclosures (Tables 6 — 10)			11
Other
Table 12:		Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures			12

 

(1)	The information contained in this Financial Supplement is preliminary and based on data available at the time of the earnings presentation, and investors should refer to our 2011 Annual Report on Form 10-K once it is filed with the Securities and Exchange Commission.

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 1: Financial & Statistical Summary—Consolidated ⁽¹⁾

 

(Dollars in millions, except per share data and as noted) (unaudited)		2011 Q4				2011 Q3				2011 Q2				2011 Q1				2010 Q4
Earnings
Net interest income		$	3,182			$	3,283			$	3,136			$	3,140			$	3,023
Non-interest income (2) (3)			868				871				857				942				939
Total revenue (4)		$	4,050			$	4,154			$	3,993			$	4,082			$	3,962
Provision for loan and lease losses			861				622				343				534				839
Marketing expenses			420				312				329				276				308
Operating expenses (5)			2,198				1,985				1,926				1,886				1,783
Income from continuing operations before income taxes		$	571			$	1,235			$	1,395			$	1,386			$	1,032
Income tax provision			160				370				450				354				331
Income from continuing operations, net of tax			411				865				945				1,032				701
Loss from discontinued operations, net of tax (3)			(4	)			(52	)			(34	)			(16	)			(4	)
Net income		$	407			$	813			$	911			$	1,016			$	697
Common Share Statistics
Basic EPS:
Income from continuing operations, net of tax		$	0.89			$	1.89			$	2.07			$	2.27			$	1.55
Loss from discontinued operations, net of tax			(0.01	)			(0.11	)			(0.07	)			(0.03	)			(0.01	)
Net income per common share		$	0.88			$	1.78			$	2.00			$	2.24			$	1.54
Diluted EPS:
Income from continuing operations, net of tax		$	0.89			$	1.88			$	2.04			$	2.24			$	1.53
Loss from discontinued operations, net of tax			(0.01	)			(0.11	)			(0.07	)			(0.03	)			(0.01	)
Net income per common share		$	0.88			$	1.77			$	1.97			$	2.21			$	1.52
Weighted average common shares outstanding (in millions):
Basic EPS			456.2				456.0				455.6				454.1				452.7
Diluted EPS			458.5				460.4				462.2				460.3				457.2
Common shares outstanding (period end)			456.4				456.1				455.8				455.2				452.8
Dividends per common share		$	0.05			$	0.05			$	0.05			$	0.05			$	0.05
Tangible book value per common share (period end) (6)			34.26				33.82				32.20				29.70				27.73
Stock price per common share (period end)			42.29				39.63				51.67				51.96				42.56
Total market capitalization (period end)			19,301				18,075				23,551				23,652				19,271
Balance Sheet (Period End)
Loans held for investment (7)		$	135,892			$	129,952			$	128,965			$	124,092			$	125,947
Interest-earning assets			179,817				174,308				174,302				172,849				172,024
Total assets			206,019				200,148				199,753				199,300				197,503
Tangible assets (8)			191,806				185,891				185,715				184,928				183,158
Interest-bearing deposits			109,945				110,777				109,278				109,097				107,162
Total deposits			128,226				128,318				126,117				125,446				122,210
Borrowings			39,561				34,315				37,735				39,797				41,796
Stockholders’ equity			29,666				29,378				28,681				27,550				26,541
Tangible common equity (TCE) (9)			15,758				15,425				14,675				13,520				12,558
Balance Sheet (Quarterly Average Balances)
Average loans held for investment (7)		$	131,581			$	129,043			$	127,916			$	125,077			$	125,441
Average interest-earning assets			176,267				177,710				174,143				173,540				173,992
Average total assets			200,106				201,611				199,229				198,075				197,704
Average interest-bearing deposits			109,914				110,750				109,251				108,633				106,597
Average total deposits			128,450				128,268				125,834				124,158				121,736
Average borrowings			34,812				37,366				39,451				40,538				42,428
Average stockholders’ equity			29,698				29,316				28,255				27,009				26,255
Performance Metrics
Net interest income growth (quarter over quarter)			(3	)%			5	%			—	%			4	%			(3	)%
Non-interest income growth (quarter over quarter)			—				2				(9	)			—				4
Revenue growth (quarter over quarter)			(3	)			4				(2	)			3				(1	)
Revenue margin (10)			9.19				9.35				9.17				9.41				9.11
Net interest margin (11)			7.22				7.39				7.20				7.24				6.95
Return on average assets (12)			0.82				1.72				1.90				2.08				1.42
Return on average equity (13)			5.54				11.80				13.38				15.28				10.68
Return on average tangible common equity (14)			10.43				22.58				26.57				31.73				22.90
Non-interest expense as a % of average loans held for investment (15)			7.96				7.12				7.05				6.91				6.67
Efficiency ratio (16)			64.64				55.30				56.47				52.96				52.78
Effective income tax rate			28.0				30.0				32.3				25.5				32.1
Full-time equivalent employees (in thousands)			30.5				29.5				28.2				27.9				25.7
Credit Quality Metrics (17)
Allowance for loan and lease losses		$	4,250			$	4,280			$	4,488			$	5,067			$	5,628
Allowance as a % of loans held for investment			3.13	%			3.29	%			3.48	%			4.08	%			4.47	%
Net charge-offs		$	884			$	812			$	931			$	1,145			$	1,394
Net charge-off rate (18) (19)			2.69	%			2.52	%			2.91	%			3.66	%			4.45	%
30+ day performing delinquency rate			3.35				3.13				2.90				3.07				3.52
30+ day total delinquency rate (20)			—				3.81				3.57				3.79				4.23
Capital Ratios
Tier 1 risk-based capital ratio (21)			12.0	%			12.4	%			11.8	%			10.9	%			11.6	%
Tier 1 common equity ratio (22)			9.7				10.0				9.4				8.4				8.8
Total risk-based capital ratio (23)			14.9				15.4				15.0				14.2				16.8
Tangible common equity (TCE) ratio (24)			8.2				8.3				7.9				7.3				6.9

 

Page 1

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Notes to Consolidated Financial & Statistical Summary (Table 1)

 

(1)	Certain prior period amounts have been reclassified to conform to the current period presentation.

 

(2)	Includes the impact from the change in fair value of retained interests, including interest-only strips, which totaled $11 million in Q4 2011, $12 million in Q3 2011, $16 million in Q2 2011, $7 million in Q1 2011 and $8 million in Q4 2010.

 

(3)

The mortgage representation and warranty reserve increased to $943 million as of December 31, 2011, from $892 million as of September 30, 2011. We recorded a provision for repurchase losses of $59 million in Q4 2011, $72 million in Q3 2011, $37 million in Q2 2011, $44 million in Q1 2011 and $(7) million in Q4 2010. The majority of the provision for repurchase losses is generally included in discontinued operations, with the remaining portion included in non-interest income.

 

(4)

The estimated uncollectible amount of billed finance charges and fees excluded from revenue totaled $130 million in Q4 2011, $24 million in Q3 2011, $112 million in Q2 2011, $105 million in Q1 2011 and $144 million in Q4 2010. As further discussed in our September 30, 2011 Form 10-Q, in the third quarter of 2011 we revised the manner in which we estimate expected recoveries of finance charge and fee amounts previously considered to be uncollectible. The result of this revision was a reduction of the uncollectible finance charge and fee reserves by approximately $83 million as of September 30, 2011, which resulted in a corresponding increase in revenues of $83 million in Q3 2011.

 

(5)

Includes core deposit intangible amortization expense of $40 million in Q4 2011, $42 million in Q3 2011, $44 million in Q2 2011, $45 million in Q1 2011 and $47 million in Q4 2010. Also includes integration costs of $17 million in Q4 2011, $1 million in Q3 2011, $0 million in Q2 2011, $2 million in Q1 2011 and $15 million in Q4 2010.

 

(6)	Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See “Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for the calculation of tangible common equity.

 

(7)	Results subsequent to Q1 2011 reflect the impact of the April 1, 2011 acquisition of the existing private-label credit card loan portfolio of Kohl’s Department Stores (“Kohl’s”), which had an outstanding principal and interest balance of approximately $3.7 billion at acquisition.

 

(8)	Tangible assets is a non-GAAP measure consisting of total assets less assets from discontinued operations and intangible assets. See “Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for the calculation of this measure.

 

(9)	Tangible common equity is a non-GAAP measure consisting of total stockholders’ equity less intangible assets. See “Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for the calculation of this measure.

 

(10)	Calculated based on annualized total revenue for the period divided by average interest-earning assets for the period.

 

(11)	Calculated based on annualized net interest income for the period divided by average interest-earning assets for the period.

 

(12)	Calculated based on annualized income from continuing operations, net of tax, for the period divided by average total assets for the period.

 

(13)	Calculated based on annualized income from continuing operations, net of tax, for the period divided by average stockholders’ equity for the period.

 

(14)	Calculated based on annualized income from continuing operations, net of tax, for the period divided by average tangible common equity for the period.

 

(15)	Calculated based on annualized non-interest expense for the period divided by average loans held for investment for the period.

 

(16)	Calculated based on non-interest expense for the period divided by total revenue for the period.

 

(17)

Purchased credit impaired (“PCI”) loans acquired as part of the Chevy Chase Bank (“CCB”) acquisition are included in the denominator used in calculating the credit quality metrics presented in Table 1. These metrics excluding the impact of loans acquired from CCB from the denominator are presented below:

 

(Dollars in millions) (unaudited)		2011 Q4				2011 Q3				2011 Q2				2011 Q1				2010 Q4
CCB period-end acquired loan portfolio		$	4,689			$	4,873			$	5,181			$	5,351			$	5,532
CCB average acquired loan portfolio			4,781				4,998				5,112				5,305				5,633
Allowance as a % of loans held for investment, excluding CCB loans			3.22	%			3.40	%			3.62	%			4.23	%			4.65	%
Net charge-off rate, excluding CCB loans			2.79				2.62				3.03				3.82				4.65
30+ day performing delinquency rate, excluding CCB loans			3.47				3.25				3.02				3.18				3.68

 

(18)	In accordance with our loss-sharing agreement with Kohl’s, charge-offs for the portfolio are reported net of any reimbursement of credit losses from Kohl’s, which has the impact of lowering the overall charge-off rate.

 

(19)	Calculated based on annualized net charge-offs for the period divided by average loans held for investment for the period.

 

(20)	The 30+ day total delinquency rate as of the end of Q4 2011 will be provided in the 2011 Annual Report on Form 10-K.

 

(21)	Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets. See “Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for the calculation of this ratio.

 

(22)	Tier 1 common equity ratio is a non-GAAP measure calculated based on Tier 1 common equity divided by risk-weighted assets. See “Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for the calculation of this ratio and non-GAAP reconciliation.

 

(23)	Total risk-based capital ratio is a regulatory capital measure calculated based on total risk-based capital divided by risk-weighted assets. See “Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for the calculation of this ratio.

 

(24)	Tangible common equity ratio (“TCE ratio”) is a non-GAAP measure calculated based on tangible common equity divided by tangible assets. See “Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for the calculation of this ratio and non-GAAP reconciliation.

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income

 

														Year Ended December 31,
(Dollars in millions, except per share data) (unaudited)		2011 Q4				2011 Q3				2010 Q4				2011				2010
Interest income:
Loans held for investment, including past-due fees		$	3,440			$	3,550			$	3,352			$	13,774			$	13,934
Investment securities			244				264				305				1,137				1,342
Cash equivalents and other			17				21				17				76				77
Total interest income			3,701				3,835				3,674				14,987				15,353
Interest expense:
Deposits			264				294				340				1,187				1,465
Securitized debt obligations			80				89				165				422				809
Senior and subordinated notes			89				84				65				300				276
Other borrowings			86				85				81				337				346
Total interest expense			519				552				651				2,246				2,896
Net interest income			3,182				3,283				3,023				12,741				12,457
Provision for loan and lease losses			861				622				839				2,360				3,907
Net interest income after provision for loan and lease losses			2,321				2,661				2,184				10,381				8,550
Non-interest income:
Servicing and securitizations			9				12				10				44				7
Service charges and other customer-related fees			452				542				496				1,979				2,073
Interchange fees, net			346				321				349				1,318				1,340
Net other-than-temporary impairment losses recognized in earnings			(6)				(6)				(3)				(21)				(65)
Other			67				2				87				218				359
Total non-interest income			868				871				939				3,538				3,714
Non-interest expense:
Salaries and associate benefits			817				750				657				3,023				2,594
Marketing			420				312				308				1,337				958
Communications and data processing			177				178				181				681				693
Supplies and equipment			137				143				139				539				520
Occupancy			131				122				115				490				486
Other			936				792				691				3,262				2,683
Total non-interest expense			2,618				2,297				2,091				9,332				7,934
Income from continuing operations before income taxes			571				1,235				1,032				4,587				4,330
Income tax provision			160				370				331				1,334				1,280
Income from continuing operations, net of tax			411				865				701				3,253				3,050
Loss from discontinued operations, net of tax			(4)				(52)				(4)				(106)				(307)
Net income		$	407			$	813			$	697			$	3,147			$	2,743
Basic earnings per common share:
Income from continuing operations		$	0.89			$	1.89			$	1.55			$	7.08			$	6.74
Loss from discontinued operations			(0.01)				(0.11)				(0.01)				(0.23)				(0.67)
Net income per basic common share		$	0.88			$	1.78			$	1.54			$	6.85			$	6.07
Diluted earnings per common share:
Income from continuing operations		$	0.89			$	1.88			$	1.53			$	7.03			$	6.68
Loss from discontinued operations			(0.01)				(0.11)				(0.01)				(0.23)				(0.67)
Net income per diluted common share		$	0.88			$	1.77			$	1.52			$	6.80			$	6.01
Weighted average common shares outstanding (in millions):
Basic EPS			456.2				456.0				452.7				455.5				452.1
Diluted EPS			458.5				460.4				457.2				459.1				456.4
Dividends paid per common share		$	0.05			$	0.05			$	0.05			$	0.20			$	0.20

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Consolidated Balance Sheets

 

(Dollars in millions)(unaudited)		December 31, 2011				September 30, 2011				December 31, 2010
Assets:
Cash and due from banks		$	2,097			$	1,794			$	2,067
Interest-bearing deposits with banks			3,399				3,238				2,776
Federal funds sold and securities purchased under agreements to resell			342				1,326				406
Cash and cash equivalents			5,838				6,358				5,249
Restricted cash for securitization investors			791				984				1,602
Securities available for sale, at fair value			38,759				38,400				41,537
Loans held for investment:
Unsecuritized loans held for investment, at amortized cost			88,242				83,010				71,921
Restricted loans for securitization investors			47,650				46,942				54,026
Total loans held for investment			135,892				129,952				125,947
Less: Allowance for loan and lease losses			(4,250)				(4,280)				(5,628)
Net loans held for investment			131,642				125,672				120,319
Loans held for sale, at lower-of-cost-or-fair-value			201				312				228
Accounts receivable from securitizations			94				101				118
Premises and equipment, net			2,748				2,785				2,749
Interest receivable			1,029				958				1,070
Goodwill			13,592				13,593				13,591
Other			11,325				10,985				11,040
Total assets		$	206,019			$	200,148			$	197,503
Liabilities:
Interest payable		$	466			$	401			$	488
Customer deposits:
Non-interest bearing deposits			18,281				17,541				15,048
Interest-bearing deposits			109,945				110,777				107,162
Total customer deposits			128,226				128,318				122,210
Securitized debt obligations			16,527				17,120				26,915
Other debt:
Federal funds purchased and securities loaned or sold under agreements to repurchase			1,464				1,441				1,517
Senior and subordinated notes			11,034				11,051				8,650
Other borrowings			10,536				4,703				4,714
Total other debt			23,034				17,195				14,881
Other liabilities			8,100				7,736				6,468
Total liabilities			176,353				170,770				170,962
Stockholders’ equity:
Common stock			5				5				5
Paid-in capital, net			19,274				19,234				19,084
Retained earnings and accumulated other comprehensive income			13,631				13,382				10,654
Less: Treasury stock, at cost			(3,244)				(3,243)				(3,202)
Total stockholders’ equity			29,666				29,378				26,541
Total liabilities and stockholders’ equity		$	206,019			$	200,148			$	197,503

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 5: Average Balances, Net Interest Income and Net Interest Margin

 

		2011 Q4												2011 Q3												2010 Q4
		Average				Interest Income/				Yield/				Average				Interest Income/				Yield/				Average				Interest Income/				Yield/
(Dollars in millions)(unaudited)		Balance				Expense				Rate				Balance				Expense				Rate				Balance				Expense				Rate
Interest-earning assets:
Loans held for investment		$	131,581			$	3,440				10.46	%		$	129,043			$	3,550				11.00	%		$	125,441			$	3,352				10.69	%
Investment securities			39,005				244				2.50				37,189				264				2.84				41,004				305				2.98
Cash equivalents and other			5,681				17				1.20				11,478				21				0.73				7,547				17				0.90
Total interest-earning assets		$	176,267			$	3,701				8.40	%		$	177,710			$	3,835				8.63	%		$	173,992			$	3,674				8.45	%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts		$	13,700			$	12				0.35	%		$	12,602			$	9				0.29	%		$	12,918			$	8				0.25	%
Money market deposit accounts			47,167				87				0.74				47,483				100				0.84				43,822				110				1.00
Savings accounts			31,422				47				0.60				30,944				56				0.72				25,121				54				0.86
Other consumer time deposits			12,264				77				2.51				13,530				84				2.48				16,941				112				2.64
Public fund CD’s of $100,000 or more			84				1				4.76				92				1				4.35				204				1				1.96
CD’s of $100,000 or more			4,748				39				3.29				5,407				43				3.18				6,696				54				3.23
Foreign time deposits			529				1				0.76				692				1				0.58				895				1				0.45
Total interest-bearing deposits		$	109,914			$	264				0.96	%		$	110,750			$	294				1.06	%		$	106,597			$	340				1.28	%
Securitized debt obligations			16,780				80				1.91				18,478				89				1.93				27,708				165				2.38
Senior and subordinated notes			10,237				89				3.48				10,519				84				3.19				8,096				65				3.21
Other borrowings			7,794				86				4.41				8,369				85				4.06				6,624				81				4.89
Total interest-bearing liabilities		$	144,725			$	519				1.43	%		$	148,116			$	552				1.49	%		$	149,025			$	651				1.75	%
Net interest income/spread						$	3,182				6.97	%						$	3,283				7.14	%						$	3,023				6.70	%
Impact of non-interest bearing funding											0.25	%											0.25	%											0.25	%
Net interest margin											7.22	%											7.39	%											6.95	%

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 6: Loan Information and Performance Statistics⁽¹⁾

 

(Dollars in millions)(unaudited)		2011 Q4				2011 Q3				2011 Q2				2011 Q1				2010 Q4
Period-end Loans Held For Investment
Credit card:
Domestic credit card (2)		$	56,609			$	53,820			$	53,994			$	50,570			$	53,849
International credit card			8,466				8,210				8,711				8,735				7,522
Total credit card			65,075				62,030				62,705				59,305				61,371
Consumer banking:
Automobile			21,779				20,422				19,223				18,342				17,867
Home loan			10,433				10,916				11,323				11,741				12,103
Retail banking			4,103				4,014				4,046				4,223				4,413
Total consumer banking			36,315				35,352				34,592				34,306				34,383
Commercial banking:
Commercial and multifamily real estate			15,410				14,389				14,035				13,543				13,396
Middle market			12,684				11,924				11,404				10,758				10,484
Specialty lending			4,404				4,221				4,122				3,936				4,020
Total commercial lending			32,498				30,534				29,561				28,237				27,900
Small-ticket commercial real estate			1,503				1,571				1,642				1,780				1,842
Total commercial banking			34,001				32,105				31,203				30,017				29,742
Other loans(3)			501				465				465				464				451
Total		$	135,892			$	129,952			$	128,965			$	124,092			$	125,947
Average Loans Held For Investment
Credit card:
Domestic credit card (2)		$	54,403			$	53,668			$	53,868			$	51,889			$	53,189
International credit card			8,361				8,703				8,823				8,697				7,419
Total credit card			62,764				62,371				62,691				60,586				60,608
Consumer banking:
Automobile			21,101				19,757				18,753				18,025				17,763
Home loan			10,683				11,126				11,534				11,960				12,522
Retail banking			4,007				3,979				4,154				4,251				4,466
Total consumer banking			35,791				34,862				34,441				34,236				34,751
Commercial banking:
Commercial and multifamily real estate			14,628				14,021				13,597				13,345				13,323
Middle market			12,068				11,572				10,979				10,666				10,460
Specialty lending			4,308				4,154				4,014				3,964				3,947
Total commercial lending			31,004				29,747				28,590				27,975				27,730
Small-ticket commercial real estate			1,547				1,598				1,726				1,818				1,887
Total commercial banking			32,551				31,345				30,316				29,793				29,617
Other loans (3)			475				465				468				462				465
Total		$	131,581			$	129,043			$	127,916			$	125,077			$	125,441
Net Charge-off Rates
Credit card:
Domestic credit card (4)			4.07	%			3.92	%			4.74	%			6.20	%			7.28	%
International credit card			5.77				6.15				7.02				5.74				6.68
Total credit card			4.30	%			4.23	%			5.06	%			6.13	%			7.21	%
Consumer banking:
Automobile			2.07	%			1.69	%			1.11	%			1.98	%			2.65	%
Home loan (5)			0.90				0.53				0.60				0.71				0.89
Retail banking (5)			1.44				1.67				1.73				2.24				2.40
Total consumer banking (5)			1.65	%			1.32	%			1.01	%			1.57	%			1.98	%
Commercial banking:
Commercial and multifamily real estate (5)			0.76	%			0.12	%			0.39	%			0.56	%			1.15	%
Middle market (5)			0.20				0.41				0.13				0.18				0.94
Specialty lending			0.24				0.44				0.47				0.30				0.63
Total commercial lending (5)			0.47	%			0.28	%			0.30	%			0.38	%			1.00	%
Small-ticket commercial real estate			3.73				2.19				3.77				7.14				7.72
Total commercial banking (5)			0.63	%			0.37	%			0.50	%			0.79	%			1.43	%
Other loans			9.29	%			6.38	%			10.57	%			19.91	%			21.11	%
Total			2.69	%			2.52	%			2.91	%			3.66	%			4.45	%
30+ Day Performing Delinquency Rates
Credit card:
Domestic credit card			3.66	%			3.65	%			3.33	%			3.59	%			4.09	%
International credit card			5.18				5.35				5.30				5.55				5.75
Total credit card			3.86	%			3.87	%			3.60	%			3.88	%			4.29	%
Consumer banking:
Automobile			6.88	%			6.34	%			6.09	%			5.79	%			7.58	%
Home loan (5)			0.89				0.78				0.70				0.61				0.64
Retail banking (5)			0.83				0.89				0.76				0.93				0.93
Total consumer banking (5)			4.47	%			4.01	%			3.70	%			3.42	%			4.28	%
Nonperforming Asset Rates (6) (7)
Consumer banking:
Automobile			0.58	%			0.53	%			0.49	%			0.39	%			0.64	%
Home loan (5)			4.58				4.74				4.40				4.34				4.25
Retail banking (5)			2.50				2.37				2.45				2.44				2.66
Total consumer banking (5)			1.94	%			2.04	%			2.00	%			2.00	%			2.17	%
Commercial banking:
Commercial and multifamily real estate (5)			1.43	%			2.16	%			2.35	%			2.63	%			2.23	%
Middle market (5)			0.82				1.04				1.19				1.14				1.33
Specialty lending			0.75				0.87				0.95				1.19				1.30
Total commercial lending (5)			1.10	%			1.54	%			1.71	%			1.86	%			1.76	%
Small-ticket commercial real estate			2.86				1.58				0.75				3.39				2.38
Total commercial banking (5)			1.17	%			1.55	%			1.66	%			1.95	%			1.80	%

 

Page 6

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 7: Financial & Statistical Summary—Credit Card Business

 

(Dollars in millions) (unaudited)		2011 Q4				2011 Q3				2011 Q2				2011 Q1				2010 Q4
Credit Card
Earnings:
Interest income		$	2,253			$	2,354			$	2,209			$	2,262			$	2,116
Interest expense			304				312				319				321				246
Net interest income			1,949				2,042				1,890				1,941				1,870
Non-interest income			638				678				619				674				672
Total revenue			2,587				2,720				2,509				2,615				2,542
Provision for loan and lease losses			600				511				309				450				589
Non-interest expense			1,431				1,188				1,238				1,178				1,056
Income from continuing operations before taxes			556				1,021				962				987				897
Income tax provision			203				358				344				344				311
Income from continuing operations, net of tax		$	353			$	663			$	618			$	643			$	586
Selected metrics:
Period-end loans held for investment		$	65,075			$	62,030			$	62,705			$	59,305			$	61,371
Average loans held for investment			62,764				62,371				62,691				60,586				60,608
Average yield on loans held for investment			14.12	%			14.84	%			13.83	%			14.68	%			14.28	%
Revenue margin			16.49				17.44				16.01				17.26				16.78
Net charge-off rate			4.30				4.23				5.06				6.13				7.21
30+ day total delinquency rate (8)			3.86				3.87				3.60				3.88				4.29
Purchase volume (9)		$	38,179			$	34,918			$	34,226			$	27,797			$	29,379
Domestic Card
Earnings:
Interest income		$	1,940			$	1,992			$	1,852			$	1,900			$	1,804
Interest expense			234				239				245				249				183
Net interest income			1,706				1,753				1,607				1,651				1,621
Non-interest income			613				588				584				583				594
Total revenue			2,319				2,341				2,191				2,234				2,215
Provision for loan and lease losses			519				381				187				230				505
Non-interest expense			1,183				972				1,008				990				935
Income from continuing operations before taxes			617				988				996				1,014				775
Income tax provision			222				351				354				360				276
Income from continuing operations, net of tax		$	395			$	637			$	642			$	654			$	499
Selected metrics:
Period-end loans held for investment		$	56,609			$	53,820			$	53,994			$	50,570			$	53,849
Average loans held for investment			54,403				53,668				53,868				51,889				53,189
Average yield on loans held for investment			14.05	%			14.62	%			13.52	%			14.42	%			13.96	%
Revenue margin			17.05				17.45				16.27				17.22				16.66
Net charge-off rate (4)			4.07				3.92				4.74				6.20				7.28
30+ day total delinquency rate (8)			3.66				3.65				3.33				3.59				4.09
Purchase volume (9)		$	34,586			$	31,686			$	31,070			$	25,024			$	26,985
International Card
Earnings:
Interest income		$	313			$	362			$	357			$	362			$	312
Interest expense			70				73				74				72				63
Net interest income			243				289				283				290				249
Non-interest income			25				90				35				91				78
Total revenue			268				379				318				381				327
Provision for loan and lease losses			81				130				122				220				84
Non-interest expense			248				216				230				188				121
Income (loss) from continuing operations before taxes			(61	)			33				(34	)			(27	)			122
Income tax provision (benefit)			(19	)			7				(10	)			(16	)			35
Income (loss) from continuing operations, net of tax		$	(42	)		$	26			$	(24	)		$	(11	)		$	87
Selected metrics:
Period-end loans held for investment		$	8,466			$	8,210			$	8,711			$	8,735			$	7,522
Average loans held for investment			8,361				8,703				8,823				8,697				7,419
Average yield on loans held for investment			14.57	%			16.24	%			15.77	%			16.28	%			16.61	%
Revenue margin			12.82				17.42				14.42				17.52				17.63
Net charge-off rate			5.77				6.15				7.02				5.74				6.68
30+ day total delinquency rate (8)			5.18				5.35				5.30				5.55				5.75
Purchase volume (9)		$	3,593			$	3,232			$	3,156			$	2,773			$	2,394

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 8: Financial & Statistical Summary—Consumer Banking Business

 

(Dollars in millions) (unaudited)		2011 Q4				2011 Q3				2011 Q2				2011 Q1				2010 Q4
Consumer Banking
Earnings:
Interest income		$	1,521			$	1,546			$	1,517			$	1,504			$	1,504
Interest expense			416				449				466				521				554
Net interest income			1,105				1,097				1,051				983				950
Non-interest income			152				188				194				186				196
Total revenue			1,257				1,285				1,245				1,169				1,146
Provision for loan and lease losses			180				136				41				95				189
Non-interest expense			893				853				758				740				770
Income from continuing operations before taxes			184				296				446				334				187
Income tax provision			67				106				159				119				67
Income from continuing operations, net of tax		$	117			$	190			$	287			$	215			$	120
Selected metrics:
Period-end loans held for investment		$	36,315			$	35,352			$	34,592			$	34,306			$	34,383
Average loans held for investment			35,791				34,862				34,441				34,236				34,751
Average yield on loans held for investment			9.46	%			9.83	%			9.51	%			9.60	%			9.20	%
Auto loan originations		$	3,586			$	3,409			$	2,910			$	2,571			$	2,217
Period-end deposits			88,540				88,589				87,282				86,355				82,959
Average deposits			88,390				88,266				86,926				83,884				81,834
Deposit interest expense rate			0.84	%			0.95	%			1.00	%			1.06	%			1.13	%
Core deposit intangible amortization		$	31			$	32			$	34			$	35			$	34
Net charge-off rate (5)			1.65	%			1.32	%			1.01	%			1.57	%			1.98	%
Nonperforming loans as a percentage of loans held for investment (5) (6)			1.79				1.88				1.83				1.84				1.97
Nonperforming asset rate (5) (6)			1.94				2.04				2.00				2.00				2.17
30+ day performing delinquency rate (5) (6)			4.47				4.01				3.70				3.42				4.28
Period-end loans serviced for others		$	17,998			$	18,624			$	19,226			$	19,956			$	20,689

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 9: Financial & Statistical Summary—Commercial Banking Business

 

(Dollars in millions) (unaudited)		2011 Q4				2011 Q3				2011 Q2				2011 Q1				2010 Q4
Commercial Banking
Earnings:
Interest income		$	547			$	533			$	523			$	522			$	550
Interest expense			177				180				190				201				214
Net interest income			370				353				333				321				336
Non-interest income			75				62				62				71				49
Total revenue			445				415				395				392				385
Provision for loan and lease losses			74				(10	)			(18	)			(15	)			34
Non-interest expense			220				200				192				177				207
Income from continuing operations before taxes			151				225				221				230				144
Income tax provision			54				80				79				82				51
Income from continuing operations, net of tax		$	97			$	145			$	142			$	148			$	93
Selected metrics:
Period-end loans held for investment		$	34,001			$	32,105			$	31,203			$	30,017			$	29,742
Average loans held for investment			32,551				31,345				30,316				29,793				29,617
Average yield on loans held for investment			4.68	%			4.69	%			4.74	%			4.80	%			5.13	%
Period-end deposits		$	26,532			$	25,282			$	24,304			$	24,244			$	22,630
Average deposits			26,034				25,227				24,282				24,138				22,808
Deposit interest expense rate			0.42	%			0.48	%			0.52	%			0.55	%			0.61	%
Core deposit intangible amortization		$	9			$	10			$	10			$	11			$	13
Net charge-off rate (5)			0.63	%			0.37	%			0.50	%			0.79	%			1.43	%
Nonperforming loans as a percentage of loans held for investment (5)			1.09				1.43				1.54				1.84				1.66
Nonperforming asset rate (5)			1.17				1.55				1.66				1.95				1.80
Risk category: (10)
Noncriticized		$	31,306			$	29,374			$	28,459			$	27,008			$	26,663
Criticized performing			1,843				1,781				1,765				1,924				2,025
Criticized nonperforming			371				459				481				553				494
Total non-PCI loans			33,520				31,614				30,705				29,485				29,182
Total PCI loans			481				491				498				532				560
Total		$	34,001			$	32,105			$	31,203			$	30,017			$	29,742
% of period-end held for investment commercial loans:
Noncriticized			92.07	%			91.49	%			91.21	%			89.98	%			89.65	%
Criticized performing			5.42				5.55				5.66				6.41				6.81
Criticized nonperforming			1.09				1.43				1.54				1.84				1.66
Total non-PCI loans			98.59				98.47				98.40				98.23				98.12
Total PCI loans			1.41				1.53				1.60				1.77				1.88
Total			100.00	%			100.00	%			100.00	%			100.00	%			100.00	%

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 10: Financial & Statistical Summary—Other and Total

 

(Dollars in millions) (unaudited)		2011 Q4				2011 Q3				2011 Q2				2011 Q1				2010 Q4
Other
Earnings:
Interest income		$	(620)			$	(598)			$	(550)			$	(536)			$	(581)
Interest expense			(378)				(389)				(412)				(431)				(448)
Net interest expense			(242)				(209)				(138)				(105)				(133)
Non-interest income (expense)			3				(57)				(18)				11				22
Total revenue			(239)				(266)				(156)				(94)				(111)
Provision for loan and lease losses			7				(15)				11				4				27
Non-interest expense			74				56				67				67				58
Loss from continuing operations before taxes			(320)				(307)				(234)				(165)				(196)
Income tax benefit			(164)				(174)				(132)				(191)				(98)
Income (loss) from continuing operations, net of tax		$	(156)			$	(133)			$	(102)			$	26			$	(98)
Selected metrics:
Period-end loans held for investment (4)		$	501			$	465			$	465			$	464			$	451
Average loans held for investment (4)			475				465				468				462				465
Period-end deposits			13,154				14,447				14,531				14,847				16,621
Average deposits			14,026				14,775				14,626				16,136				17,094
Total
Earnings:
Interest income		$	3,701			$	3,835			$	3,699			$	3,752			$	3,674
Interest expense			519				552				563				612				651
Net interest income			3,182				3,283				3,136				3,140				3,023
Non-interest income			868				871				857				942				939
Total revenue			4,050				4,154				3,993				4,082				3,962
Provision for loan and lease losses			861				622				343				534				839
Non-interest expense			2,618				2,297				2,255				2,162				2,091
Income from continuing operations before taxes			571				1,235				1,395				1,386				1,032
Income tax provision			160				370				450				354				331
Income from continuing operations, net of tax		$	411			$	865			$	945			$	1,032			$	701
Selected metrics:
Period-end loans held for investment		$	135,892			$	129,952			$	128,965			$	124,092			$	125,947
Average loans held for investment			131,581				129,043				127,916				125,077				125,441
Period-end deposits			128,226				128,318				126,117				125,446				122,210
Average deposits			128,450				128,268				125,834				124,158				121,736

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 11: Notes to Loan and Business Segment Disclosures (Tables 6 — 10)

 

(1)	Certain prior period amounts have been reclassified to conform to the current period presentation.

 

(2)	Results subsequent to Q1 2011 reflect the impact of the April 1, 2011 acquisition of the existing private-label credit card loan portfolio of Kohl’s, which had an outstanding principal and interest balance of approximately $3.7 billion at acquisition.

 

(3)	Other loans held for investment includes unamortized premiums and discounts on loans acquired as part of the North Fork and Hibernia acquisitions.

 

(4)	In accordance with our loss-sharing agreement with Kohl’s, charge-offs for the portfolio are reported net of any reimbursement of credit losses from Kohl’s, which has the impact of lowering the overall Domestic Card charge-off rate.

 

(5)	PCI loans acquired as part of the CCB acquisition are included in the denominator used in calculating the credit quality ratios presented in Tables 6-10. These metrics excluding the impact of loans acquired from CCB from the denominator are presented below:

 

(Dollars in millions) (unaudited)		2011 Q4				2011 Q3				2011 Q2				2011 Q1				2010 Q4
CCB period end acquired loan portfolio		$	4,689			$	4,873			$	5,181			$	5,351			$	5,532
CCB average acquired loan portfolio			4,781				4,998				5,112				5,305				5,633
Net charge-off rates:
Consumer banking:
Home loan			1.48	%			0.87	%			0.98	%			1.16	%			1.46	%
Retail banking			1.46				1.69				1.76				2.32				2.49
Total consumer banking			1.87	%			1.51	%			1.17	%			1.82	%			2.32	%
Commercial banking:
Commercial and multifamily real estate			0.77	%			0.12	%			0.40	%			0.57	%			1.17	%
Middle market			0.21				0.42				0.13				0.18				0.97
Total commercial lending			0.48				0.28				0.31				0.38				1.02
Total commercial banking			0.64	%			0.38	%			0.51	%			0.80	%			1.45	%
30+ day performing delinquency rates:
Consumer banking:
Home loan			1.47	%			1.28	%			1.18	%			1.02	%			1.06	%
Retail banking			0.84				0.90				0.77				0.93				0.97
Total consumer banking			5.06	%			4.57	%			4.29	%			3.98	%			5.01	%
Nonperforming asset rates:
Consumer banking:
Home loan			7.55	%			7.80	%			7.38	%			7.24	%			7.05	%
Retail banking			2.52				2.40				2.48				2.44				2.77
Total consumer banking			2.20	%			2.33	%			2.32	%			2.32	%			2.54	%
Commercial banking:
Commercial and multifamily real estate			1.44	%			2.18	%			2.39	%			2.68	%			2.28	%
Middle market			0.84				1.07				1.22				1.17				1.36
Total commercial lending			1.11				1.57				1.73				1.90				1.79
Total commercial banking			1.19	%			1.57	%			1.68	%			1.99	%			1.83	%
Nonperforming loans as a percentage of period-end loans held for investment:
Consumer banking			2.03	%			2.15	%			2.12	%			2.14	%			2.30	%
Commercial banking			1.11				1.45				1.56				1.88				1.69

 

(6)

Nonperforming assets consist of nonperforming loans and real estate owned (“REO”) and foreclosed assets. The nonperforming asset ratios are calculated based on nonperforming assets for each category divided by the combined period-end total of loans held for investment, REO and foreclosed assets for each respective category.

 

(7)

As permitted by regulatory guidance, our policy is generally to exempt delinquent credit card loans from being classified as nonperforming. We continue to accrue finance charges and fees on credit card loans until the loan is charged off, typically when the account becomes 180 days past due. Billed finance charges and fees considered uncollectible are not recognized in income.

 

(8)

In the third quarter of 2011, we revised the manner in which we estimate expected recoveries of finance charge and fee amounts previously considered to be uncollectible. This revision resulted in an increase of 11 basis points in the 30+ day delinquency rate for Domestic Card. For International Card, the change did not have a significant impact on the 30+ day delinquency rate.

 

(9)	Includes credit card purchase transactions net of returns. Excludes cash advance transactions.

 

(10)	Criticized exposures correspond to the “Special Mention,” “Substandard” and “Doubtful” asset categories defined by bank regulatory authorities.

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures

In addition to disclosing required regulatory capital measures, we also report certain non-GAAP capital measures that management uses in assessing its capital adequacy. These non-GAAP measures include average tangible common equity, tangible common equity (“TCE”), TCE ratio, Tier 1 common equity and Tier 1 common equity ratio. The table below provides the details of the calculation of each of these measures. While these non-GAAP capital measures are widely used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies, they may not be comparable to similarly titled measures reported by other companies.

 

(Dollars in millions)(unaudited)		2011 Q4				2011 Q3				2011 Q2				2011 Q1				2010 Q4
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders’ equity		$	29,698			$	29,316			$	28,255			$	27,009			$	26,255
Less: Average intangible assets (1)			(13,935	)			(13,990	)			(14,025	)			(14,001	)			(14,008	)
Average tangible common equity		$	15,763			$	15,326			$	14,230			$	13,008			$	12,247
Stockholders’ Equity to Non-GAAP Tangible Common Equity
Total stockholders’ equity		$	29,666			$	29,378			$	28,681			$	27,550			$	26,541
Less: Intangible assets (1)			(13,908	)			(13,953	)			(14,006	)			(14,030	)			(13,983	)
Tangible common equity		$	15,758			$	15,425			$	14,675			$	13,520			$	12,558
Total Assets to Tangible Assets
Total assets		$	206,019			$	200,148			$	199,753			$	199,300			$	197,503
Less: Assets from discontinued operations			(305	)			(304	)			(32	)			(342	)			(362	)
Total assets from continuing operations			205,714				199,844				199,721				198,958				197,141
Less: Intangible assets (1)			(13,908	)			(13,953	)			(14,006	)			(14,030	)			(13,983	)
Tangible assets		$	191,806			$	185,891			$	185,715			$	184,928			$	183,158
Non-GAAP TCE Ratio
Tangible common equity		$	15,758			$	15,425			$	14,675			$	13,520			$	12,558
Tangible assets			191,806				185,891				185,715				184,928				183,158
TCE ratio (2)			8.2	%			8.3	%			7.9	%			7.3	%			6.9	%
Non-GAAP Tier 1 Common Equity and Regulatory Capital Ratios (3)
Total stockholders’ equity		$	29,666			$	29,378			$	28,681			$	27,550			$	26,541
Less: Net unrealized (gains) losses on AFS securities recorded in AOCI (4)			(289	)			(401	)			(482	)			(314	)			(368	)
Net (gains) losses on cash flow hedges recorded in AOCI (4)			71				55				71				95				86
Disallowed goodwill and other intangible assets			(13,854	)			(13,899	)			(13,954	)			(13,993	)			(13,953	)
Disallowed deferred tax assets			(534	)			(227	)			(647	)			(1,377	)			(1,150	)
Other			(2	)			(2	)			(2	)			(2	)			(2	)
Tier 1 common equity		$	15,058			$	14,904			$	13,667			$	11,959			$	11,154
Plus: Tier 1 restricted core capital items (5)			3,636				3,636				3,636				3,636				3,636
Tier 1 capital		$	18,694			$	18,540			$	17,303			$	15,595			$	14,790
Plus: Long-term debt qualifying as Tier 2 capital			2,438				2,438				2,727				2,827				2,827
Qualifying allowance for loan and lease losses			1,977				1,896				1,864				1,825				3,748
Other Tier 2 components			23				24				28				20				29
Tier 2 capital		$	4,438			$	4,358			$	4,619			$	4,672			$	6,604
Total risk-based capital (6)		$	23,132			$	22,898			$	21,922			$	20,267			$	21,394
Risk-weighted assets (7)		$	155,472			$	149,028			$	146,201			$	142,495			$	127,043
Tier 1 common equity ratio (8)			9.7	%			10.0	%			9.4	%			8.4	%			8.8	%
Tier 1 risk-based capital ratio (9)			12.0				12.4				11.8				10.9				11.6
Total risk-based capital ratio (10)			14.9				15.4				15.0				14.2				16.8

 

(1)	Includes impact from related deferred taxes.

 

(2)	Calculated based on tangible common equity divided by tangible assets.

 

(3)	Capital ratios as of the end of Q4 2011 are preliminary and therefore subject to change once the calculations have been finalized.

 

(4)	Amounts presented are net of tax.

 

(5)	Consists primarily of trust preferred securities.

 

(6)	Total risk-based capital equals the sum of Tier 1 capital and Tier 2 capital.

 

(7)	Calculated based on prescribed regulatory guidelines.

 

(8)	Tier 1 common equity ratio is a non-GAAP measure calculated based on Tier 1 common equity divided by risk-weighted assets.

 

(9)	Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.

 

(10)	Total risk-based capital ratio is a regulatory capital measure calculated based on total risk-based capital divided by risk-weighted assets.

 

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