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

April 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 April 19, 2012, Capital One Financial Corporation (the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2012. 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 – First Quarter 2012.

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 April 19, 2012– First Quarter 2012
99.2		Financial Supplement – First Quarter 2012
99.3		Earnings Release Slides – First Quarter 2012

Earnings Conference Call Webcast Information.

The Company will hold an earnings conference call on April 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 May 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: April 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: April 19, 2012

Capital One Reports First Quarter 2012 Net Income of $1.4 billion, or $2.72 per share

Excluding the impact of a bargain purchase gain related to acquisition of ING Direct, first quarter net

income was $809 million, or $1.56 per share.

McLean, Va. (April 19, 2012) – Capital One Financial Corporation (NYSE: COF) today announced net income for the first quarter of 2012 of $1.4 billion, or $2.72 per diluted common share. Without the impact of a bargain purchase gain related to the ING Direct acquisition, first quarter 2012 net income would have been $809 million, or $1.56 per diluted common share. This compares with net income of $407 million, or $0.88 per diluted common share, for the fourth quarter of 2011, and net income of $1.0 billion, or $2.21 per diluted common share, for the first quarter of 2011.

“We completed the ING Direct acquisition in the quarter, and we’re thrilled to welcome the customers and associates of ING Direct to Capital One. We now look forward to completing the acquisition of the HSBC US card business in the second quarter,” said Richard Fairbank, Chairman and Chief Executive Officer. “The combination of Capital One, ING Direct and the HSBC US card business puts us in an even stronger position to create sustained shareholder value through growth potential, strong returns and strong capital generation. We’re focused on delivering that value, including distributing capital to shareholders through a meaningful dividend and share buybacks, consistent with our long-standing commitment to maintaining a strong and resilient capital base.”

Total Company Results

All comparisons in the following paragraphs are for first quarter 2012 compared to fourth quarter 2011 unless otherwise noted.

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Capital One First Quarter 2012 Earnings

Page 2

 

Loan and Deposit Balances

Average loans increased $21.3 billion in the quarter, driven largely by the February 17, 2012 acquisition of ING Direct. Average loan balances in legacy businesses grew by $2 billion as the modest decline in the Domestic Card business attributable to expected seasonal paydowns were more than offset by growth in the Commercial Lending and Auto Finance businesses. Period-end loan balances increased $37.9 billion to $173.8 billion.

Period-end total deposits grew $88.3 billion, including the addition of $84.4 billion of deposits from the acquisition of ING Direct, to $216.5 billion.

Revenues

Total revenue in the first quarter of 2012 was $4.9 billion, up $885 million, or 22 percent. Higher revenue in our legacy businesses was driven in part by increased average loan balances and favorable margins. In addition, non-interest income includes a bargain purchase gain of $594 million recognized in earnings for the quarter attributable to the February 17, 2012 acquisition of ING Direct. First quarter revenue also reflects a $160 million benefit related to the company’s sale of Visa stock and subsequent reserve adjustments and the absence of approximately $150 million of unique contra-revenue items recorded in the fourth quarter. These benefits were partially offset by a $75 million one-time reserve addition associated with Domestic Card.

Margins

Net interest margin declined 102 basis points to 6.20 percent in the quarter as a result of the on-boarding of ING Direct’s lower yielding assets and temporarily high cash balances.

Non-Interest Expense

Non-interest expense for the first quarter, inclusive of ING Direct related expenses, decreased $114 million primarily due to a decline in marketing expense and a modest decrease in legacy operating expense.

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Capital One First Quarter 2012 Earnings

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Pre-Provision Earnings (before tax)

Pre-provision earnings increased in the quarter as a result of higher revenue due to the impacts of the ING Direct acquisition, higher loan balances in several legacy businesses and the absence of non-recurring items recorded in the fourth quarter of 2011.

Provision Expense

Strong credit performance led to a $288 million decrease in provision expense in the quarter, driven by both lower charge-offs and a larger allowance release. The charge-off rate decreased 65 basis points to 2.04 percent, while the coverage ratio of allowance to loans fell by 79 basis points to 2.34 percent. This drop was significantly impacted by the ING Direct loans.

Net Income

Net income in the quarter increased $996 million inclusive of a bargain purchase gain of $594 million attributable to the acquisition of ING Direct. In addition to the ING Direct bargain purchase gain, the increase in earnings was primarily driven by higher revenue and lower non-interest and provision expenses in our legacy businesses.

Capital Ratios

The company’s estimated Tier 1 common ratio increased 220 basis points from December 31, 2011, to 11.9 percent as of March 31, 2012, driven by strong retained earnings growth and capital actions related to the financing of the company’s two acquisitions.

The company expects to close the acquisition of HSBC’s US card portfolio in the second quarter of 2012, and expects that the acquisition will have a significant impact on reported results, especially in 2012, due to the purchase accounting effects, integration expenses and partial year impacts of the acquisition.

Tier 1 common ratio, as used throughout this release, is a regulatory capital measure. For additional information, see Table 13 in the Financial Supplement.

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Capital One First Quarter 2012 Earnings

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Business Segment Results

Credit Card Highlights

In the first quarter, Domestic Card delivered strong profits, improving credit and solid year-over-year growth in loans and purchase volumes. Net income in the first quarter was $515 million, an increase of 30.4 percent over the previous quarter. Total revenue declined 4.7 percent in the first quarter of 2012 driven by a one-time reserve addition in the first quarter.

Credit performance improved in the quarter. Domestic Card net charge-off rate decreased 15 basis points in the quarter to 3.92 percent, and delinquencies declined 41 basis points to 3.25 percent, consistent with expected seasonal patterns.

Domestic Card loan balances declined seasonally in the quarter by $3.4 billion to $53.2 billion. Compared to the first quarter of last year, loans grew 5.1 percent.

Purchase volume grew 25.6 percent from the first quarter of 2011 and 14.6 percent excluding the Kohl’s portfolio.

Consumer Banking Highlights

Consumer Banking delivered net income of $224 million in the first quarter of 2012, driven by the addition of ING Direct and strong results in Auto Finance. The significant increases in loan and deposit volumes, revenue and non-interest expense were all driven by the addition of ING Direct in the quarter.

Period-end loan balances were up $41.0 billion, including $40.4 billion of loan balances attributable to the acquisition of ING Direct. Additionally, auto loans grew $1.8 billion. Growth in auto loans resulted from traction in geographic expansion and the company’s strategy to deepen relationships with its most valued auto dealers. Auto Finance originations in the quarter were $4.3 billion, up 19.1 percent from the fourth quarter of 2011.

The company expects that the sizeable run-off of the ING Direct home loan portfolio and the continuing run-off of the legacy Home Loan portfolio will more than offset the growth in auto loans, driving a declining trend in Consumer Banking loan balances for several years.

Provision expense declined, with lower charge-offs in both the Home Loan portfolio and Auto Finance, partially offset by an allowance build driven by the increase in auto loan balances. Charge-off rates improved with the addition of ING Direct home loans which have no charge-offs due the credit mark recognized in purchase accounting and seasonal favorability in Auto Finance.

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Capital One First Quarter 2012 Earnings

Page 5

 

Consumer Banking deposits were $176.0 billion at the end of the quarter, an increase of $87.5 billion which includes $84.4 billion of deposits from the acquisition of ING Direct. Deposit interest expense decreased 11 basis points in the quarter.

Commercial Banking Highlights

Commercial Banking delivered another quarter of solid profitability and steady loan growth, with total revenue of $516 million, up $4 million in the first quarter of 2012 and $69 million year-over-year. Net income increased $93 million to $210 million in the quarter.

Period-end loans increased slightly from the prior quarter and 15.3 percent from the first quarter of 2011. Commercial deposits grew 5.1 percent in the quarter, and 15.2 percent year-over-year, with improvements in deposit interest expense.

The charge-off rate for Commercial Banking was 0.19 percent, down 43 basis points from the prior quarter. Excluding the run-off in the Small Ticket CRE portfolio, the charge-off rate in the core Commercial Lending businesses was zero in the quarter, an improvement of 47 basis points from the prior quarter.

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 April 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 acquisition of ING Direct (the “ING Direct Transaction”) and the pending acquisition

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Capital One First Quarter 2012 Earnings

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of HSBC’s U.S. credit card business (the “HSBC Transaction” and, with the ING Direct Transaction, 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 the company will not receive third-party consents necessary to fully realize the anticipated benefits of the HSBC Transaction; 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 the HSBC Transaction; difficulties and delays in integrating the assets and businesses acquired in the Transactions; business disruption during the pendency of or following the Transactions; diversion of management time on issues related to the Transactions, including integration of the assets and businesses acquired; 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; the accuracy of estimates and assumptions the company uses to determine the fair value of assets acquired and liabilities assumed in the Transactions, and the potential for its estimates or assumptions to change as additional information becomes available and the company completes the accounting analysis 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; the inability to sustain revenue and earnings growth; 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

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Capital One First Quarter 2012 Earnings

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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, 2011.

About Capital One

Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A., Capital One Bank (USA), N. A., and ING Bank, fsb, had $216.5 billion in deposits and $294.5 billion in total assets outstanding as of March 31, 2012. Headquartered in McLean, Virginia, Capital One and ING Direct offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. 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

First Quarter 2012 ⁽¹⁾⁽²⁾

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
Table    7:		Loan Information and Performance Statistics (Excluding Acquired Loans) (3)			7
Business Segment Detail
Table    8:		Financial & Statistical Summary—Credit Card Business			8
Table    9:		Financial & Statistical Summary—Consumer Banking Business			9
Table  10:		Financial & Statistical Summary—Commercial Banking Business			10
Table  11:		Financial & Statistical Summary—Other and Total			11
Table  12:		Notes to Loan and Business Segment Disclosures (Tables 6 — 11)			12
Other
Table 13:		Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures			13

 

(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 March 31, 2012 Quarterly Report on Form 10-Q once it is filed with the Securities and Exchange Commission.

 

(2)	References to ING Direct refer to the business and assets acquired and liabilities assumed in the February 17, 2012 acquisition.

 

(3)

Acquired loans consist of the substantial majority of loans acquired in the Chevy Chase Bank and ING Direct business combinations, which were recorded at fair value at acquisition and accounted for under applicable accounting guidance. This accounting methodology takes into consideration estimated credit losses expected to be realized over the remaining lives of the loans. Accordingly, we present certain credit quality metrics excluding the impact of these loans where applicable.

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

 

		2012				2011				2011				2011				2011
(Dollars in millions, except per share data and as noted) (unaudited)		Q1 (2)				Q4				Q3				Q2				Q1
Earnings
Net interest income		$	3,414			$	3,182			$	3,283			$	3,136			$	3,140
Non-interest income (3) (4)			1,521				868				871				857				942
Total revenue (5)			4,935				4,050				4,154				3,993				4,082
Provision for credit losses			573				861				622				343				534
Marketing expenses			321				420				312				329				276
Operating expenses (6)			2,183				2,198				1,985				1,926				1,886
Income from continuing operations before income taxes			1,858				571				1,235				1,395				1,386
Income tax provision			353				160				370				450				354
Income from continuing operations, net of tax			1,505				411				865				945				1,032
Loss from discontinued operations, net of tax (3)			(102	)			(4	)			(52	)			(34	)			(16	)
Net income			1,403				407				813				911				1,016
Dividends and undistributed earnings allocated to participating securities			(7	)			(26	)			—				—				—
Net income available to common stockholders		$	1,396			$	381			$	813			$	911			$	1,016
Common Share Statistics
Basic EPS:
Income from continuing operations, net of tax		$	2.94			$	0.89			$	1.89			$	2.07			$	2.27
Loss from discontinued operations, net of tax			(0.20	)			(0.01	)			(0.11	)			(0.07	)			(0.03	)
Net income per common share		$	2.74			$	0.88			$	1.78			$	2.00			$	2.24
Diluted EPS:
Income from continuing operations, net of tax		$	2.92			$	0.89			$	1.88			$	2.04			$	2.24
Loss from discontinued operations, net of tax			(0.20	)			(0.01	)			(0.11	)			(0.07	)			(0.03	)
Net income per common share		$	2.72			$	0.88			$	1.77			$	1.97			$	2.21
Weighted average common shares outstanding (in millions):
Basic EPS			508.7				456.2				456.0				455.6				454.1
Diluted EPS			513.1				458.5				460.4				462.2				460.3
Common shares outstanding (period end)			580.2				459.9				459.6				459.4				458.7
Dividends per common share		$	0.05			$	0.05			$	0.05			$	0.05			$	0.05
Tangible book value per common share (period end) (7)			39.37				34.26				33.56				31.94				29.47
Balance Sheet (Period End)
Loans held for investment (8)		$	173,822			$	135,892			$	129,952			$	128,965			$	124,092
Interest-earning assets			265,398				179,878				174,307				174,323				172,870
Total assets			294,481				206,019				200,148				199,753				199,300
Tangible assets (9)			280,067				191,806				185,891				185,715				184,928
Interest-bearing deposits			197,254				109,945				110,777				109,278				109,097
Total deposits			216,528				128,226				128,318				126,117				125,446
Borrowings			32,885				39,561				34,315				37,735				39,797
Stockholders’ equity			36,950				29,666				29,378				28,681				27,550
Balance Sheet (Quarterly Average Balances)
Average loans held for investment (8)		$	152,900			$	131,581			$	129,043			$	127,916			$	125,077
Average interest-earning assets			220,246				176,271				177,531				174,113				173,440
Average total assets			246,384				200,106				201,611				199,229				198,075
Average interest-bearing deposits			151,625				109,914				110,750				109,251				108,633
Average total deposits			170,259				128,450				128,268				125,834				124,158
Average borrowings			35,994				34,812				37,366				39,451				40,538
Average stockholders’ equity			32,982				29,698				29,316				28,255				27,009
Performance Metrics
Net interest income growth (quarter over quarter)			7	%			(3	)%			5	%			—	%			4	%
Non-interest income growth (quarter over quarter)			75				—				2				(9	)			—
Revenue growth (quarter over quarter)			22				(3	)			4				(2	)			3
Revenue margin (10)			8.96				9.19				9.36				9.17				9.41
Net interest margin (11)			6.20				7.22				7.40				7.20				7.24
Return on average assets (12)			2.44				0.82				1.72				1.90				2.08
Return on average equity (13)			18.25				5.54				11.80				13.38				15.28
Return on average tangible common equity (14)			31.60				10.43				22.58				26.57				31.73
Non-interest expense as a % of average loans held for investment (15)			6.55				7.96				7.12				7.05				6.91
Efficiency ratio (16)			50.74				64.64				55.30				56.47				52.96
Effective income tax rate			19.0				28.0				30.0				32.3				25.5
Full-time equivalent employees (in thousands)			34.2				30.5				29.5				28.2				27.9
Credit Quality Metrics
Allowance for loan and lease losses		$	4,060			$	4,250			$	4,280			$	4,488			$	5,067
Allowance as a % of loans held for investment			2.34	%			3.13	%			3.29	%			3.48	%			4.08	%
Allowance as a % of loans held for investment (excluding acquired loans)			3.08				3.22				3.40				3.62				4.23
Net charge-offs		$	780			$	884			$	812			$	931			$	1,145
Net charge-off rate (17) (18)			2.04	%			2.69	%			2.52	%			2.91	%			3.66	%
Net charge-off rate (excluding acquired loans)			2.40				2.79				2.62				3.03				3.82
30+ day performing delinquency rate (19)			2.23				3.35				3.13				2.90				3.07
30+ day performing delinquency rate (excluding acquired loans)			2.96				3.47				3.25				3.02				3.18
30+ day delinquency rate(20)			—				3.95				3.81				3.57				3.79
Capital Ratios
Tier 1 risk-based capital ratio (21)			13.9	%			12.0	%			12.4	%			11.8	%			10.9	%
Tier 1 common ratio (22)			11.9				9.7				10.0				9.4				8.4
Total risk-based capital ratio (23)			16.5				14.9				15.4				15.0				14.2
Tangible common equity (TCE) ratio (24)			8.2				8.2				8.3				7.9				7.3

 

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)	Results for Q1 2012 include the impact of the February 17, 2012 acquisition of ING Direct, which resulted in the addition of loans with an outstanding principal and interest loan balance of $40.4 billion and deposits of $84.4 billion at acquisition.

 

(3)

The mortgage representation and warranty reserve increased to $1.1 billion as of March 31, 2012, from $943 million as of December 31, 2011. We recorded a provision for repurchase losses of $169 million in Q1 2012, $59 million in Q4 2011, $72 million in Q3 2011, $37 million in Q2 2011 and $44 million in Q1 2011. The majority of the provision for repurchase losses is generally included in discontinued operations, with the remaining portion included in non-interest income.

 

(4)	Includes a bargain purchase gain of $594 million recognized in earnings in Q1 2012 attributable to the February 17, 2012 acquisition of ING Direct.

 

(5)	The estimated uncollectible amount of billed finance charges and fees excluded from revenue totaled $123 million in Q1 2012, $130 million in Q4 2011, $24 million in Q3 2011, $112 million in Q2 2011 and $105 million in Q1 2011.

 

(6)

Includes merger-related expenses attributable to acquisitions of $86 million in Q1 2012, $27 million in Q4 2011 and $18 million in Q3 2011. Also, includes core deposit intangible amortization expense of $46 million in Q1 2012, $40 million in Q4 2011, $42 million in Q3 2011, $44 million in Q2 2011 and $45 million in Q1 2011.

 

(7)	Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See “Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for the calculation of tangible common equity.

 

(8)	See Table 7 for additional information on acquired loans and our credit quality metrics excluding acquired loans.

 

(9)	Tangible assets is a non-GAAP measure consisting of total assets less assets from discontinued operations and intangible assets. See “Table 13: 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)	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.

 

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

 

(19)	The 30+ day performing delinquency rate for acquired loans, which is presented below, is calculated based on the contractual past due unpaid principal balance divided by the total outstanding unpaid principal balance of acquired loans as of the end of each period.

 

 

(20)	The 30+ day delinquency rate as of the end of Q1 2012 will be provided in the March 31, 2012 Quarterly Report on Form 10-Q.

 

(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 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for the calculation of this ratio.

 

(22)	Tier 1 common ratio is a regulatory capital measure calculated based on Tier 1 common capital divided by risk-weighted assets. See “Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for the calculation of this ratio.

 

(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 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for the calculation of this ratio.

 

(24)	TCE ratio is a non-GAAP measure calculated based on tangible common equity divided by tangible assets. See “Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for the calculation of this ratio and non-GAAP reconciliation.

 

Page 2

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income

 

 

		Three Months Ended
(Dollars in millions, except per share data) (unaudited)		March 31, 2012				December 31, 2011				March 31, 2011
Interest income:
Loans held for investment, including past-due fees		$	3,655			$	3,440			$	3,417
Investment securities			298				244				316
Other			26				17				19
Total interest income			3,979				3,701				3,752
Interest expense:
Deposits			311				264				322
Securitized debt obligations			80				80				140
Senior and subordinated notes			88				89				64
Other borrowings			86				86				86
Total interest expense			565				519				612
Net interest income			3,414				3,182				3,140
Provision for credit losses			573				861				534
Net interest income after provision for credit losses			2,841				2,321				2,606
Non-interest income:
Service charges and other customer-related fees			415				452				525
Interchange fees, net			328				346				320
Net other-than-temporary impairment losses recognized in earnings			(14	)			(6	)			(3	)
Bargain purchase gain (1)			594				—				—
Other			198				76				100
Total non-interest income			1,521				868				942
Non-interest expense:
Salaries and associate benefits			891				817				741
Marketing			321				420				276
Communications and data processing			173				177				164
Supplies and equipment			150				137				135
Occupancy			123				131				119
Other			846				936				727
Total non-interest expense			2,504				2,618				2,162
Income from continuing operations before income taxes			1,858				571				1,386
Income tax provision			353				160				354
Income from continuing operations, net of tax			1,505				411				1,032
Loss from discontinued operations, net of tax			(102	)			(4	)			(16	)
Net income			1,403				407				1,016
Dividends and undistributed earnings allocated to participating securities			(7	)			(26	)			—
Net income available to common stockholders		$	1,396			$	381			$	1,016
Basic earnings per common share:
Income from continuing operations		$	2.94			$	0.89			$	2.27
Loss from discontinued operations			(0.20	)			(0.01	)			(0.03	)
Net income per basic common share		$	2.74			$	0.88			$	2.24
Diluted earnings per common share:
Income from continuing operations		$	2.92			$	0.89			$	2.24
Loss from discontinued operations			(0.20	)			(0.01	)			(0.03	)
Net income per diluted common share		$	2.72			$	0.88			$	2.21
Weighted average common shares outstanding (in millions):
Basic EPS			508.7				456.2				454.1
Diluted EPS			513.1				458.5				460.3
Dividends paid per common share		$	0.05			$	0.05			$	0.05

 

(1)	Represents the excess of the fair value of the net assets acquired in the ING Direct acquisition as of the acquisition date of February 17, 2012 over the consideration transferred.

 

Page 3

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Consolidated Balance Sheets

 

 

 

		Three Months Ended
(Dollars in millions)(unaudited)		March 31, 2012				December 31, 2011				March 31, 2011
Assets:
Cash and due from banks		$	27,341			$	2,097			$	2,028
Interest-bearing deposits with banks			3,007				3,399				5,397
Federal funds sold and securites purchased under agreements to resell			308				342				546
Cash and cash equivalents			30,656				5,838				7,971
Restricted cash for securitization investors			1,090				791				2,556
Securities available for sale, at fair value			60,810				38,759				41,566
Loans held for investment:
Unsecuritized loans held for investment			128,927				88,242				75,184
Restricted loans for securitization investors			44,895				47,650				48,908
Total loans held for investment			173,822				135,892				124,092
Less: Allowance for loan and lease losses			(4,060	)			(4,250	)			(5,067	)
Net loans held for investment			169,762				131,642				119,025
Loans held for sale, at lower-of-cost-or-fair-value			627				201				117
Accounts receivable from securitizations			96				94				112
Premises and equipment, net			3,062				2,748				2,739
Interest receivable			1,157				1,029				1,025
Goodwill			13,595				13,592				13,597
Other			13,626				11,325				10,592
Total assets		$	294,481			$	206,019			$	199,300
Liabilities:
Interest payable		$	384			$	466			$	411
Customer deposits:
Non-interest bearing deposits			19,274				18,281				16,349
Interest-bearing deposits			197,254				109,945				109,097
Total customer deposits			216,528				128,226				125,446
Securitized debt obligations			15,474				16,527				24,506
Other debt:
Federal funds purchased and securities loaned or sold under agreements to repurchase			770				1,464				1,970
Senior and subordinated notes			11,948				11,034				8,545
Other borrowings			4,693				10,536				4,776
Total other debt			17,411				23,034				15,291
Other liabilities			7,734				8,100				6,096
Total liabilities			257,531				176,353				171,750
Stockholders’ equity:
Common stock			6				5				5
Paid-in capital, net			25,136				19,274				19,141
Retained earnings and accumulated other comprehensive income			15,094				13,631				11,644
Less: Treasury stock, at cost			(3,286	)			(3,244	)			(3,240	)
Total stockholders’ equity			36,950				29,666				27,550
Total liabilities and stockholders’ equity		$	294,481			$	206,019			$	199,300

 

Page 4

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CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

 

		2012 Q1												2011 Q4												2011 Q1
(Dollars in millions) (unaudited)		Average Balance				Interest Income/ Expense				Yield/ Rate				Average Balance				Interest Income/ Expense				Yield/ Rate				Average Balance				Interest Income/ Expense				Yield/ Rate
Interest-earning assets:
Loans held for investment		$	152,900			$	3,655				9.56	%		$	131,581			$	3,440				10.46	%		$	125,077			$	3,417				10.93	%
Investment securities			50,543				298				2.36				39,005				244				2.50				41,532				316				3.04
Cash equivalents and other			16,803				26				0.62				5,685				17				1.20				6,831				19				1.11
Total interest-earning assets		$	220,246			$	3,979				7.23	%		$	176,271			$	3,701				8.40	%		$	173,440			$	3,752				8.65	%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts		$	24,912			$	34				0.55	%		$	13,700			$	12				0.35	%		$	13,648			$	9				0.26	%
Money market deposit accounts			76,362				131				0.69				47,167				87				0.74				45,613				110				0.96
Savings accounts			31,743				34				0.43				31,422				47				0.60				26,801				55				0.82
Other consumer time deposits			12,763				74				2.32				12,264				77				2.51				15,344				99				2.58
Public fund CD’s of $100,000 or more			84				—				—				84				1				4.76				149				1				2.68
CD’s of $100,000 or more			4,787				37				3.09				4,748				39				3.29				6,097				47				3.08
Foreign time deposits			974				1				0.41				529				1				0.76				981				1				0.41
Total interest-bearing deposits		$	151,625			$	311				0.82	%		$	109,914			$	264				0.96	%		$	108,633			$	322				1.19	%
Securitized debt obligations			16,185				80				1.98				16,780				80				1.91				25,515				140				2.19
Senior and subordinated notes			10,268				88				3.43				10,237				89				3.48				8,090				64				3.16
Other borrowings			9,541				86				3.61				7,794				86				4.41				6,933				86				4.96
Total interest-bearing liabilities		$	187,619			$	565				1.20	%		$	144,725			$	519				1.43	%		$	149,171			$	612				1.64	%
Net interest income/spread						$	3,414				6.03	%						$	3,182				6.97	%						$	3,140				7.01	%
Impact of non-interest bearing funding											0.17												0.25												0.23
Net interest margin											6.20	%											7.22	%											7.24	%

 

 

Page 5

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 6: Loan Information and Performance Statistics ⁽¹⁾

 

(Dollars in millions)(unaudited)		2012 Q1(2)				2011 Q4				2011 Q3				2011 Q2				2011 Q1
Period-end Loans Held For Investment
Credit card:
Domestic credit card		$	53,173			$	56,609			$	53,820			$	53,994			$	50,570
International credit card			8,303				8,466				8,210				8,711				8,735
Total credit card			61,476				65,075				62,030				62,705				59,305
Consumer banking:
Automobile			23,568				21,779				20,422				19,223				18,342
Home loan			49,550				10,433				10,916				11,323				11,741
Retail banking			4,182				4,103				4,014				4,046				4,223
Total consumer banking			77,300				36,315				35,352				34,592				34,306
Commercial banking: (3)
Commercial and multifamily real estate			15,702				15,736				14,660				14,304				13,791
Commercial and industrial			17,761				17,088				16,145				15,526				14,694
Total commercial lending			33,463				32,824				30,805				29,830				28,485
Small-ticket commercial real estate			1,443				1,503				1,571				1,641				1,780
Total commercial banking			34,906				34,327				32,376				31,471				30,265
Other loans			140				175				194				197				216
Total		$	173,822			$	135,892			$	129,952			$	128,965			$	124,092
Average Loans Held For Investment
Credit card:
Domestic credit card		$	54,131			$	54,403			$	53,668			$	53,868			$	51,889
International credit card			8,301				8,361				8,703				8,823				8,697
Total credit card			62,432				62,764				62,371				62,691				60,586
Consumer banking:
Automobile			22,582				21,101				19,757				18,753				18,025
Home loan			29,502				10,683				11,126				11,534				11,960
Retail banking			4,179				4,007				3,979				4,154				4,251
Total consumer banking			56,263				35,791				34,862				34,441				34,236
Commercial banking: (3)
Commercial and multifamily real estate			15,514				14,920				14,291				13,859				13,579
Commercial and industrial			17,038				16,376				15,726				14,993				14,630
Total commercial lending			32,552				31,296				30,017				28,852				28,209
Small-ticket commercial real estate			1,480				1,547				1,598				1,726				1,818
Total commercial banking			34,032				32,843				31,615				30,578				30,027
Other loans			173				183				195				206				228
Total		$	152,900			$	131,581			$	129,043			$	127,916			$	125,077
Net Charge-off Rates
Credit card:
Domestic credit card (4)			3.92	%			4.07	%			3.92	%			4.74	%			6.20	%
International credit card			5.52				5.77				6.15				7.02				5.74
Total credit card			4.14	%			4.30	%			4.23	%			5.06	%			6.13	%
Consumer banking:
Automobile (5)			1.41	%			2.07	%			1.69	%			1.11	%			1.98	%
Home loan (5)			0.20				0.90				0.53				0.60				0.71
Retail banking (5)			1.39				1.44				1.67				1.73				2.24
Total consumer banking (5)			0.77	%			1.65	%			1.32	%			1.01	%			1.57	%
Commercial banking: (3)
Commercial and multifamily real estate (5)			0.09	%			0.75	%			0.11	%			0.38	%			0.58	%
Commercial and industrial (5)			(0.08	)			0.21				0.42				0.22				0.21
Total commercial lending (5)			—	%			0.47	%			0.27	%			0.30	%			0.39	%
Small-ticket commercial real estate			4.24				3.73				2.19				3.77				7.14
Total commercial banking (5)			0.19	%			0.62	%			0.37	%			0.50	%			0.80	%
Other loans			23.30	%			24.08	%			15.28	%			23.96	%			38.33	%
Total			2.04	%			2.69	%			2.52	%			2.91	%			3.66	%
30+ Day Performing Delinquency Rates (6)
Credit card:
Domestic credit card			3.25	%			3.66	%			3.65	%			3.33	%			3.59	%
International credit card			5.14				5.18				5.35				5.30				5.55
Total credit card			3.51	%			3.86	%			3.87	%			3.60	%			3.88	%
Consumer banking:
Automobile (5)			4.87	%			6.88	%			6.34	%			6.09	%			5.79	%
Home loan (5)			0.15				0.89				0.78				0.70				0.61
Retail banking (5)			0.80				0.83				0.89				0.76				0.93
Total consumer banking (5)			1.63	%			4.47	%			4.01	%			3.70	%			3.42	%
Nonperforming Asset Rates (7) (8)
Consumer banking:
Automobile (5)			0.32	%			0.58	%			0.53	%			0.49	%			0.39	%
Home loan (5)			0.94				4.58				4.74				4.40				4.34
Retail banking (5)			2.25				2.50				2.37				2.45				2.44
Total consumer banking (5)			0.82	%			1.94	%			2.04	%			2.00	%			2.00	%
Commercial banking: (3)
Commercial and multifamily real estate (5)			1.55	%			1.40	%			2.12	%			2.31	%			2.59	%
Commercial and industrial (5)			0.69				0.80				1.00				1.13				1.15
Total commercial lending (5)			1.09	%			1.09	%			1.53	%			1.69	%			1.85	%
Small-ticket commercial real estate			4.35				2.86				1.58				0.75				3.39
Total commercial banking (5)			1.23	%			1.17	%			1.54	%			1.64	%			1.94	%

 

Page 6

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 7: Loan Information and Performance Statistics (Excluding Acquired Loans)^{(1) (5)} 

 

 

 

(Dollars in millions) (unaudited)		2012 Q1				2011 Q4				2011 Q3				2011 Q2				2011 Q1
Total period-end acquired loan portfolio (9)		$	43,132			$	4,689			$	4,873			$	5,181			$	5,351
Total average acquired loan portfolio (9)			23,067				4,781				4,998				5,112				5,305
Net Charge-off Rates
Consumer banking:
Auto			1.41	%			2.07	%			1.69	%			1.12	%			1.98	%
Home loan			0.82				1.48				0.87				0.98				1.16
Retail banking			1.40				1.46				1.69				1.76				2.32
Total consumer banking			1.29	%			1.87	%			1.51	%			1.17	%			1.82	%
Commercial banking:
Commercial and multifamily real estate			0.09	%			0.76	%			0.11	%			0.39	%			0.59	%
Commercial and industrial			(0.08	)			0.22				0.43				0.23				0.22
Total commercial lending			0.01				0.48				0.28				0.30				0.40
Total commercial banking			0.19	%			0.63	%			0.38	%			0.50	%			0.81	%
30+ Day Performing Delinquency Rates
Consumer banking:
Auto			4.88	%			6.90	%			6.36	%			6.11	%			5.83	%
Home loan			1.10				1.47				1.28				1.18				1.02
Retail banking			0.81				0.84				0.90				0.77				0.93
Total consumer banking			3.63	%			5.06	%			4.57	%			4.29	%			3.98	%
Nonperforming Asset Rates
Consumer banking:
Auto			0.32	%			0.58	%			0.53	%			0.49	%			0.39	%
Home loan			6.66				7.55				7.80				7.38				7.24
Retail banking			2.28				2.52				2.40				2.48				2.44
Total consumer banking			1.83	%			2.20	%			2.33	%			2.32	%			2.32	%
Commercial banking:
Commercial and multifamily real estate			1.57	%			1.42	%			2.14	%			2.35	%			2.64	%
Commercial and industrial			0.70				0.81				1.02				1.14				1.17
Total commercial lending			1.11				1.10				1.56				1.72				1.88
Total commercial banking			1.25	%			1.18	%			1.56	%			1.67	%			1.97	%
Nonperforming Loans as a Percentage of Period-end Loans Held for Investment
Consumer banking			1.71	%			2.03	%			2.15	%			2.12	%			2.14	%
Commercial banking			1.17				1.10				1.44				1.55				1.86

 

Page 7

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 8: Financial & Statistical Summary—Credit Card Business

 

 

 

(Dollars in millions) (unaudited)		2012 Q1 (2)				2011 Q4				2011 Q3				2011 Q2				2011 Q1
Credit Card
Earnings:
Net interest income		$	1,992			$	1,949			$	2,042			$	1,890			$	1,941
Non-interest income			598				638				678				619				674
Total revenue			2,590				2,587				2,720				2,509				2,615
Provision for credit losses			458				600				511				309				450
Non-interest expense			1,268				1,431				1,188				1,238				1,178
Income from continuing operations before taxes			864				556				1,021				962				987
Income tax provision			298				203				358				344				344
Income from continuing operations, net of tax		$	566			$	353			$	663			$	618			$	643
Selected metrics:
Period-end loans held for investment		$	61,476			$	65,075			$	62,030			$	62,705			$	59,305
Average loans held for investment			62,432				62,764				62,371				62,691				60,586
Average yield on loans held for investment			14.41	%			14.12	%			14.84	%			13.83	%			14.68	%
Revenue margin			16.59				16.49				17.44				16.01				17.26
Net charge-off rate			4.14				4.30				4.23				5.06				6.13
30+ day delinquency rate			3.51				3.86				3.87				3.60				3.88
Purchase volume (10)		$	34,296			$	38,179			$	34,918			$	34,226			$	27,797
Domestic Card
Earnings:
Net interest income		$	1,713			$	1,706			$	1,753			$	1,607			$	1,651
Non-interest income			497				613				588				584				583
Total revenue			2,210				2,319				2,341				2,191				2,234
Provision for credit losses			361				519				381				187				230
Non-interest expense			1,052				1,183				972				1,008				990
Income from continuing operations before taxes			797				617				988				996				1,014
Income tax provision			282				222				351				354				360
Income from continuing operations, net of tax		$	515			$	395			$	637			$	642			$	654
Selected metrics:
Period-end loans held for investment		$	53,173			$	56,609			$	53,820			$	53,994			$	50,570
Average loans held for investment			54,131				54,403				53,668				53,868				51,889
Average yield on loans held for investment			14.11	%			14.05	%			14.62	%			13.52	%			14.42	%
Revenue margin			16.33				17.05				17.45				16.27				17.22
Net charge-off rate (4)			3.92				4.07				3.92				4.74				6.20
30+ day delinquency rate			3.25				3.66				3.65				3.33				3.59
Purchase volume (10)		$	31,418			$	34,586			$	31,686			$	31,070			$	25,024
International Card
Earnings:
Net interest income		$	279			$	243			$	289			$	283			$	290
Non-interest income			101				25				90				35				91
Total revenue			380				268				379				318				381
Provision for credit losses			97				81				130				122				220
Non-interest expense			216				248				216				230				188
Income (loss) from continuing operations before taxes			67				(61	)			33				(34	)			(27	)
Income tax provision (benefit)			16				(19	)			7				(10	)			(16	)
Income (loss) from continuing operations, net of tax		$	51			$	(42	)		$	26			$	(24	)		$	(11	)
Selected metrics:
Period-end loans held for investment		$	8,303			$	8,466			$	8,210			$	8,711			$	8,735
Average loans held for investment			8,301				8,361				8,703				8,823				8,697
Average yield on loans held for investment			16.38	%			14.57	%			16.24	%			15.77	%			16.28	%
Revenue margin			18.31				12.82				17.42				14.42				17.52
Net charge-off rate			5.52				5.77				6.15				7.02				5.74
30+ day delinquency rate			5.14				5.18				5.35				5.30				5.55
Purchase volume (10)		$	2,878			$	3,593			$	3,232			$	3,156			$	2,773

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 9: Financial & Statistical Summary—Consumer Banking Business

 

 

 

(Dollars in millions) (unaudited)		2012 Q1 (2)				2011 Q4				2011 Q3				2011 Q2				2011 Q1
Consumer Banking
Earnings:
Net interest income		$	1,288			$	1,105			$	1,097			$	1,051			$	983
Non-interest income			176				152				188				194				186
Total revenue			1,464				1,257				1,285				1,245				1,169
Provision for credit losses			174				180				136				41				95
Non-interest expense			943				893				853				758				740
Income from continuing operations before taxes			347				184				296				446				334
Income tax provision			123				67				106				159				119
Income from continuing operations, net of tax		$	224			$	117			$	190			$	287			$	215
Selected metrics:
Period-end loans held for investment		$	77,300			$	36,315			$	35,352			$	34,592			$	34,306
Average loans held for investment			56,263				35,791				34,862				34,441				34,236
Average yield on loans held for investment			7.20	%			9.46	%			9.83	%			9.51	%			9.60	%
Auto loan originations		$	4,270			$	3,586			$	3,409			$	2,910			$	2,571
Period-end deposits			176,007				88,540				88,589				87,282				86,355
Average deposits			129,915				88,390				88,266				86,926				83,884
Deposit interest expense rate			0.73	%			0.84	%			0.95	%			1.00	%			1.06	%
Core deposit intangible amortization		$	37			$	31			$	32			$	34			$	35
Net charge-off rate (5)			0.77	%			1.65	%			1.32	%			1.01	%			1.57	%
30+ day performing delinquency rate (5) (6)			1.63				4.47				4.01				3.70				3.42
30+ day delinquency rate (5) (6)			—				5.99				5.57				5.26				4.96
Nonperforming loans as a percentage of loans held for investment (5) (7)			0.77				1.79				1.88				1.83				1.84
Nonperforming asset rate (5) (7)			0.82				1.94				2.04				2.00				2.00
Period-end loans serviced for others		$	17,586			$	17,998			$	18,624			$	19,226			$	19,956

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 10: Financial & Statistical Summary—Commercial Banking Business

 

 

		2012				2011				2011				2011				2011
(Dollars in millions) (unaudited)		Q1(2)				Q4				Q3				Q2				Q1
Commercial Banking (3) (12)
Earnings:
Net interest income		$	431			$	425			$	407			$	388			$	376
Non-interest income			85				87				63				62				71
Total revenue			516				512				470				450				447
Provision for credit losses			(69	)			76				(10	)			(19	)			(16	)
Non-interest expense			261				254				237				222				212
Income from continuing operations before taxes			324				182				243				247				251
Income tax provision			114				65				86				88				89
Income from continuing operations, net of tax		$	210			$	117			$	157			$	159			$	162
Selected metrics:
Period-end loans held for investment		$	34,906			$	34,327			$	32,376			$	31,471			$	30,265
Average loans held for investment			34,032				32,843				31,615				30,578				30,027
Average yield on loans held for investment			4.47	%			4.70	%			4.71	%			4.75	%			4.81	%
Period-end deposits		$	28,046			$	26,683			$	25,376			$	24,409			$	24,336
Average deposits			27,569				26,185				25,321				24,371				24,232
Deposit interest expense rate			0.37	%			0.42	%			0.47	%			0.52	%			0.55	%
Core deposit intangible amortization		$	9			$	9			$	10			$	10			$	11
Net charge-off rate (5)			0.19	%			0.62	%			0.37	%			0.50	%			0.80	%
Nonperforming loans as a percentage of loans held for investment (5) (7)			1.15				1.08				1.42				1.53				1.83
Nonperforming asset rate (5) (7)			1.23				1.17				1.54				1.64				1.94
Risk category: (11)
Noncriticized		$	32,339			$	31,617			$	29,636			$	28,723			$	27,254
Criticized performing			1,695				1,857				1,790				1,769				1,925
Criticized nonperforming			402				372				459				481				554
Total risk-rated loans			34,436				33,846				31,885				30,973				29,733
Acquired commercial loans			470				481				491				498				532
Total commercial loans		$	34,906			$	34,327			$	32,376			$	31,471			$	30,265
% of period-end held for investment commercial loans:
Noncriticized			92.64	%			92.11	%			91.54	%			91.27	%			90.05	%
Criticized performing			4.86				5.41				5.53				5.62				6.36
Criticized nonperforming			1.15				1.08				1.42				1.53				1.83
Total risk-rated loans			98.65				98.60				98.48				98.42				98.24
Acquired commercial loans			1.35				1.40				1.52				1.58				1.76
Total commercial loans			100.00	%			100.00	%			100.00	%			100.00	%			100.00	%

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 11: Financial & Statistical Summary—Other and Total

 

 

		2012				2011				2011				2011				2011
(Dollars in millions) (unaudited)		Q1 (2)				Q4				Q3				Q2				Q1
Other (3)
Earnings:
Net interest expense		$	(297	)		$	(297	)		$	(263	)		$	(193	)		$	(160	)
Non-interest income (expense)			662				(9	)			(58	)			(18	)			11
Total revenue			365				(306	)			(321	)			(211	)			(149	)
Provision for credit losses			10				5				(15	)			12				5
Non-interest expense			32				40				19				37				32
Loss from continuing operations before taxes			323				(351	)			(325	)			(260	)			(186	)
Income tax benefit			(182	)			(175	)			(180	)			(141	)			(198	)
Income (loss) from continuing operations, net of tax		$	505			$	(176	)		$	(145	)		$	(119	)		$	12
Selected metrics:
Period-end loans held for investment		$	140			$	175			$	194			$	197			$	216
Average loans held for investment			173				183				195				206				228
Period-end deposits			12,475				13,003				14,353				14,426				14,755
Average deposits			12,775				13,875				14,681				14,537				16,042
Total
Earnings:
Net interest income		$	3,414			$	3,182			$	3,283			$	3,136			$	3,140
Non-interest income			1,521				868				871				857				942
Total revenue			4,935				4,050				4,154				3,993				4,082
Provision credit losses			573				861				622				343				534
Non-interest expense			2,504				2,618				2,297				2,255				2,162
Income from continuing operations before taxes			1,858				571				1,235				1,395				1,386
Income tax provision			353				160				370				450				354
Income from continuing operations, net of tax		$	1,505			$	411			$	865			$	945			$	1,032
Selected metrics:
Period-end loans held for investment		$	173,822			$	135,892			$	129,952			$	128,965			$	124,092
Average loans held for investment			152,900				131,581				129,043				127,916				125,077
Period-end deposits			216,528				128,226				128,318				126,117				125,446
Average deposits			170,259				128,450				128,268				125,834				124,158

 

Page 11

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 12: Notes to Loan and Business Segment Disclosures (Tables 6 — 11)

 

 

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

 

(2)	Results for Q1 2012 include the impact of the February 17, 2012 acquisition of ING Direct, which resulted in the addition of loans with an outstanding principal and interest loan balance of $40.4 billion and deposits of $84.4 billion at acquisition.

 

(3)

In Q1 2012, we re-aligned the products within our Commercial Banking segment to reflect the business operations by product rather than by customer type. As a result of this re-alignment, we now report three product categories: commercial and multifamily real estate, commercial and industrial loans and small-ticket commercial real estate. Middle market and specialty lending related products are included in commercial and industrial loans. All tax-related investments, some of which were previously included in the “Other” segment, are included in the commercial and multifamily real estate category of our Commercial Banking segment.

 

(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)	Loans acquired as part of the ING Direct and Chevy Chase Bank acquisitions are included in the denominator used in calculating the credit quality metrics presented in Table 6. These metrics excluding the impact of these acquired loans from the denominator are presented in Table 7.

 

(6)	The 30+ day performing delinquency rate for acquired loans, which is presented below, is calculated based on the contractual past due unpaid principal balance divided by the total outstanding unpaid principal balance of acquired loans as of the end of each period.

 

			000000				000000				000000				000000				000000
		2012				2011				2011				2011				2011
(Dollars in millions) (unaudited)		Q1				Q4				Q3				Q2				Q1
Total period-end acquired loan portfolio (unpaid principal balance)		$	44,256			$	5,205			$	5,464			$	5,735			$	6,108
30+ day performing delinquency rates (acquired loans):
Consumer banking:
Auto			4.30	%			5.31	%			3.47	%			4.18	%			3.72	%
Home loan			3.08				2.93				2.94				2.60				2.62
Retail banking			5.42				2.20				0.43				6.57				9.35
Total consumer banking			3.08	%			2.94	%			2.92	%			2.65	%			2.69	%

The 30+ day total delinquency rate as of the end of Q1 2012 will be provided in the March 31, 2012 Quarterly Report on Form 10-Q.

 

(7)

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.

 

(8)

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.

 

(9)	Reported based on carrying value of acquired loans. See Table 2, footnote (19) for the outstanding unpaid principal balance as of the end of each period.

 

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

 

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

 

(12)	Because some of our tax-related commercial investments generate tax-exempt income or tax credits, we make certain reclassifications to our Commercial Banking business results to present revenues on a taxable-equivalent basis based on the assumption of approximately 35% effective tax rate.

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 13: 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”) and TCE ratio. The table below provides the details of the calculation of our regulatory capital and non-GAAP capital measures. While our 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.

 

		2012				2011				2011				2011				2011
(Dollars in millions)(unaudited)		Q1				Q4				Q3				Q2				Q1
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders’ equity		$	32,982			$	29,698			$	29,316			$	28,255			$	27,009
Less: Average intangible assets (1)			(13,931	)			(13,935	)			(13,990	)			(14,025	)			(14,001	)
Average tangible common equity		$	19,051			$	15,763			$	15,326			$	14,230			$	13,008
Stockholders’ Equity to Non-GAAP Tangible Common Equity
Total stockholders’ equity		$	36,950			$	29,666			$	29,378			$	28,681			$	27,550
Less: Intangible assets (1)			(14,110	)			(13,908	)			(13,953	)			(14,006	)			(14,030	)
Tangible common equity		$	22,840			$	15,758			$	15,425			$	14,675			$	13,520
Total Assets to Tangible Assets
Total assets		$	294,481			$	206,019			$	200,148			$	199,753			$	199,300
Less: Assets from discontinued operations			(304	)			(305	)			(304	)			(32	)			(342	)
Total assets from continuing operations			294,177				205,714				199,844				199,721				198,958
Less: Intangible assets (1)			(14,110	)			(13,908	)			(13,953	)			(14,006	)			(14,030	)
Tangible assets		$	280,067			$	191,806			$	185,891			$	185,715			$	184,928
Non-GAAP TCE Ratio
Tangible common equity		$	22,840			$	15,758			$	15,425			$	14,675			$	13,520
Tangible assets			280,067				191,806				185,891				185,715				184,928
TCE ratio (2)			8.2	%			8.2	%			8.3	%			7.9	%			7.3	%
Regulatory Capital Ratios (3)
Total stockholders’ equity		$	36,950			$	29,666			$	29,378			$	28,681			$	27,550
Less: Net unrealized (gains) losses on AFS securities recorded in AOCI (4)			(327	)			(289	)			(401	)			(482	)			(314	)
Net (gains) losses on cash flow hedges recorded in AOCI (4)			70				71				55				71				95
Disallowed goodwill and other intangible assets			(14,057	)			(13,855	)			(13,899	)			(13,954	)			(13,993	)
Disallowed deferred tax assets			(902	)			(534	)			(227	)			(647	)			(1,377	)
Other			(2	)			(2	)			(2	)			(2	)			(2	)
Tier 1 common capital		$	21,732			$	15,057			$	14,904			$	13,667			$	11,959
Plus: Tier 1 restricted core capital items (5)			3,636				3,635				3,636				3,636				3,636
Tier 1 capital		$	25,368			$	18,692			$	18,540			$	17,303			$	15,595
Plus: Long-term debt qualifying as Tier 2 capital			2,438				2,438				2,438				2,727				2,827
Qualifying allowance for loan and lease losses			2,315				1,979				1,896				1,864				1,825
Other Tier 2 components			17				23				24				28				20
Tier 2 capital		$	4,770			$	4,440			$	4,358			$	4,619			$	4,672
Total risk-based capital (6)		$	30,138			$	23,132			$	22,898			$	21,922			$	20,267
Risk-weighted assets (7)		$	182,779			$	155,657			$	149,028			$	146,201			$	142,495
Tier 1 common ratio (8)			11.9	%			9.7	%			10.0	%			9.4	%			8.4	%
Tier 1 risk-based capital ratio (9)			13.9				12.0				12.4				11.8				10.9
Total risk-based capital ratio (10)			16.5				14.9				15.4				15.0				14.2

 

(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 Q1 2012 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 ratio is a regulatory measure calculated based on Tier 1 common capital 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-weighed assets.

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

 

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