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

October 18, 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 October 18, 2012, Capital One Financial Corporation (the “Company”) issued a press release announcing its financial results for the third quarter ended September 30, 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 – Third 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 October 18, 2012– Third Quarter 2012
99.2		Financial Supplement – Third Quarter 2012
99.3		Earnings Release Slides – Third Quarter 2012

Earnings Conference Call Webcast Information.

The Company will hold an earnings conference call on October 18, 2012 at 5:00 PM Eastern daylight 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 November 1, 2012 at 10:00 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: October 18, 2012				By:		/s/ Gary L. Perlin
						Gary L. Perlin
						Chief Financial Officer

Exhibit 99.1

 

		Press Release

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

FOR IMMEDIATE RELEASE: October 18, 2012

Capital One Reports Third Quarter 2012 Net Income of $1.2 billion,

or $2.01 per share

Tier 1 common ratio of 10.7% under Basel I; expected to be above 8% on Basel III basis in 2013¹

McLean, Va. (October 18, 2012) – Capital One Financial Corporation (NYSE: COF) today announced net income for the third quarter of 2012 of $1.2 billion, or $2.01 per diluted common share, compared with net income of $93 million, or $0.16 per diluted common share, for the second quarter of 2012, and net income of $813 million, or $1.77 per diluted common share, for the third quarter of 2011.

“Capital One posted solid results across all of our businesses in the third quarter, including strong contributions from ING Direct and the HSBC U.S. credit card business,” said Richard D. Fairbank, Chairman and Chief Executive Officer. “We are well positioned to sustain strong returns and capital generation, even in an environment with low industry growth and prolonged low interest rates.”

Total Company Results

All comparisons in the following paragraphs are for the third quarter of 2012 compared with the second quarter of 2012 unless otherwise noted.

Loans and Deposits

Period-end loans held for investment remained essentially flat at $203.1 billion. Domestic Card period-end loans decreased by $177 million as modest organic growth in revolving credit card loans was more than offset by the expected run-off in the quarter of HSBC credit card loans and the continuing run-off of installment loans. Period-end loans in Home Loans decreased by $1.9 billion, or 4 percent, to $46.3 billion driven by continued run-off of acquired portfolios. Commercial Banking’s period-end loans increased $1.2 billion, or 3 percent, to $37.2 billion, and period-end loans in Auto Finance grew $1.2 billion, or 5 percent, to $26.4 billion due to strong growth in both businesses.

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Capital One Third Quarter 2012 Earnings

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Average loans in the quarter grew by $10.2 billion, or 5 percent, to $202.9 billion, primarily as a result of a $9.0 billion, or 13 percent, increase in Domestic Card average loans due to the full-quarter impact of the HSBC U.S. credit card acquisition. Average Home Loans decreased by $1.7 billion, or 3 percent, to $47.3 billion driven by continued run-off of acquired portfolios. Average Commercial Banking loans increased $1.5 billion, or 4 percent, to $36.8 billion, and average Auto Finance loans grew $1.4 billion, or 6 percent, to $25.9 billion, again due to strong growth in both businesses.

Period-end total deposits decreased $676 million to $213.3 billion, driven by a reduction in deposits in legacy banking segments. Deposit interest rates remained essentially flat in the quarter.

Revenues

Total net revenue for the third quarter of 2012 was $5.8 billion, an increase of $727 million, or 14 percent, largely due to the full-quarter impact of the HSBC credit card loans acquired in the second quarter and a lower non-principal reserve build related to the HSBC acquisition. This resulted in an increase in net interest margin of 93 basis points to 6.97 percent. Cost of funds in the third quarter of 1.06 percent remained flat relative to the second quarter.

Non-interest income increased $82 million, or 8 percent, also due to the full-quarter impact of the HSBC U.S. credit card acquisition.

Non-Interest Expense

Operating expense for the third quarter decreased $79 million, or 3 percent, largely due to a decrease in charges for legal and regulatory matters and unique items as well as lower merger-related expenses, which were partially offset by the full-quarter impact of the HSBC U.S. credit card acquisition. Marketing expense declined $18 million, or 5 percent.

Provision for Credit Losses

Provision for credit losses was $1.0 billion in the quarter, down $663 million from the previous quarter, driven by a significantly lower HSBC-related allowance build.

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Capital One Third Quarter 2012 Earnings

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The net charge-off rate was 1.75 percent in the third quarter of 2012, an increase of 22 basis points from 1.53 percent in the second quarter, largely because a lower proportion of charge-offs on the HSBC U.S. credit card loans was absorbed by the credit mark on such loans than in the second quarter. The net charge-off rate for Domestic Card remained at low levels, driven by merger-related impacts and favorable seasonal patterns. The company expects the Domestic Card charge-off rate to increase significantly in the fourth quarter as the impact of the mark has largely run its course and because the third quarter is the seasonal low point for the underlying Domestic Card charge-off rate. The net charge-off rate for Auto increased 68 basis points primarily due to seasonality, while the rate for Commercial Banking declined 19 basis points.

Net charge-offs include approximately $25 million from the required implementation of newly issued Office of the Comptroller of the Currency (OCC) guidance regarding the treatment of consumer loans where the borrower has gone through Chapter 7 bankruptcy.

Net Income

Income from continuing operations before income taxes of $1.7 billion in the quarter was impacted by lower provision expense and a full-quarter of HSBC results relative to the second quarter. Net income was $1.2 billion in the third quarter, up from $93 million in the prior quarter.

Capital Ratios

The company’s estimated Tier 1 common ratio was approximately 10.7 percent as of September 30, 2012, up from 9.9 percent as of June 30, 2012.

“Given our strong capital trajectory, we expect to exceed an assumed Basel III Tier 1 common ratio target of 8 percent in 2013,” said Gary L. Perlin, Capital One’s Chief Financial Officer. “This includes the estimated impact of implementing the Basel II Advanced Approaches to calculating regulatory capital, which we expect will apply to Capital One in 2016 or later.”

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Capital One Third Quarter 2012 Earnings

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Detailed segment information will be available in the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012.

 

1

Assumed 8 percent Basel III Tier 1 common ratio target assumes a buffer of 50 basis points for a systemically important financial institution (SIFI) under applicable rules and regulations and a further buffer of 50 basis points. Actual target will depend on regulatory expectations and business judgments. Estimated based on the company’s current interpretation, expectations and understanding of the Basel III capital rules and other capital regulations proposed by U.S. regulators and the application of such rules to its businesses as currently conducted. Basel III calculations are necessarily subject to change based on, among other things, the scope and terms of the final rules and regulations, model calibration and other implementation guidance, changes in the company’s businesses and certain actions of management, including those affecting the composition of its balance sheet. The company believes this ratio provides useful information to investors and others by measuring its progress against expected future regulatory capital standards.

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on October 18, 2012 at 5:00 PM, Eastern Daylight 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 (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 November 1, 2012 at 10:00 PM.

Forward-looking statements

The company cautions that its current expectations in this release dated October 18, 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 and HSBC’s U.S. Card business (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

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Capital One Third Quarter 2012 Earnings

Page 5

 

general economic conditions in the credit environment); 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 and regulations governing bank capital and liquidity standards, including Basel-related initiatives; the possibility that the company may not fully realize the projected cost savings and other projected benefits of the Transactions; difficulties and delays in integrating the assets and businesses acquired in the Transactions; business disruption 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; 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 the nature of our business; 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, 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

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Capital One Third Quarter 2012 Earnings

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$213.3 billion in deposits and $302.0 billion in total assets outstanding as of September 30, 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.

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Exhibit 99.2

Capital One Financial Corporation

Financial Supplement

      Third Quarter 2012 ⁽¹⁾⁽²⁾

Table of Contents

 

				Page
Capital One Financial Corporation 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 September 30, 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. References to HSBC refer to the May 1, 2012 transaction in which we acquired substantially all of HSBC’s credit card and private-label credit card business in the United States (“HSBC U.S. card”).

 

(3)

We use the term “acquired loans” to refer to a limited portion of the credit card loans acquired in the HSBC U.S. card acquisition and the substantial majority of loans acquired in the ING Direct and Chevy Chase Bank (“CCB”) acquisitions, which were recorded at fair value at acquisition and subsequently accounted for based on estimated cash flows expected to be collected over the life of the loans (under the accounting standard formerly known as “SOP 03-3”). Because SOP 03-3 takes into consideration future credit losses expected to be incurred over the life of the loans, there are no charge-offs or an allowance associated with these loans unless the estimated cash flows expected to be collected decrease subsequent to acquisition. In addition, these loans are not classified as delinquent or nonperforming even though the customer may be contractually past due because we expect that we will fully collect the carrying value of these loans. The accounting and classification of these loans may significantly alter some of our reported credit quality metrics. We therefore supplement certain reported credit quality metrics with metrics adjusted to exclude the impact of these acquired loans.

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 1: Financial & Statistical Summary—Consolidated ^(1)(2)(3)

 

 

(Dollars in millions, except per share data and as noted) (unaudited)		2012 Q3				2012 Q2				2012 Q1				2011 Q4				2011 Q3
Earnings
Net interest income		$	4,646			$	4,001			$	3,414			$	3,182			$	3,283
Non-interest income (4) (5)			1,136				1,054				1,521				868				871
Total net revenue (6)			5,782				5,055				4,935				4,050				4,154
Provision for credit losses			1,014				1,677				573				861				622
Marketing expenses			316				334				321				420				312
Operating expenses (7)			2,729				2,808				2,183				2,198				1,985
Income from continuing operations before income taxes			1,723				236				1,858				571				1,235
Income tax provision			535				43				353				160				370
Income from continuing operations, net of tax			1,188				193				1,505				411				865
Loss from discontinued operations, net of tax (4)			(10	)			(100	)			(102	)			(4	)			(52	)
Net income			1,178				93				1,403				407				813
Dividends and undistributed earnings allocated to participating securities			(5	)			(1	)			(7	)			(26	)			—
Net income available to common stockholders		$	1,173			$	92			$	1,396			$	381			$	813
Common Share Statistics
Basic EPS (8):
Income from continuing operations, net of tax		$	2.05			$	0.33			$	2.94			$	0.89			$	1.89
Loss from discontinued operations, net of tax			(0.02	)			(0.17	)			(0.20	)			(0.01	)			(0.11	)
Net income per common share		$	2.03			$	0.16			$	2.74			$	0.88			$	1.78
Diluted EPS (8):
Income from continuing operations, net of tax		$	2.03			$	0.33			$	2.92			$	0.89			$	1.88
Loss from discontinued operations, net of tax			(0.02	)			(0.17	)			(0.20	)			(0.01	)			(0.11	)
Net income per common share		$	2.01			$	0.16			$	2.72			$	0.88			$	1.77
Weighted average common shares outstanding (in millions):
Basic EPS			578.3				577.7				508.7				456.2				456.0
Diluted EPS			584.1				582.8				513.1				458.5				460.4
Common shares outstanding (period end, in millions)			581.3				580.7				580.2				459.9				459.6
Dividends per common share		$	0.05			$	0.05			$	0.05			$	0.05			$	0.05
Tangible book value per common share (period end) (9)			40.17				35.67				39.37				34.26				33.56
Balance Sheet (Period End)
Loans held for investment (10)		$	203,132			$	202,749			$	173,822			$	135,892			$	129,952
Interest-earning assets			270,661				264,331				265,398				179,878				174,307
Total assets			301,989				296,572				294,481				206,019				200,148
Interest-bearing deposits			192,488				193,859				197,254				109,945				110,777
Total deposits			213,255				213,931				216,528				128,226				128,318
Borrowings			38,377				35,874				32,885				39,561				34,315
Stockholders’ equity			39,672				37,192				36,950				29,666				29,378
Balance Sheet (Quarterly Average Balances)
Average loans held for investment (10)		$	202,856			$	192,632			$	152,900			$	131,581			$	129,043
Average interest-earning assets			266,803				265,019				220,246				176,271				177,531
Average total assets			297,154				295,306				246,384				200,106				201,611
Average interest-bearing deposits			193,700				195,597				151,625				109,914				110,750
Average total deposits			213,323				214,914				170,259				128,450				128,268
Average borrowings			36,451				35,418				35,994				34,811				37,366
Average stockholders’ equity			38,535				37,533				32,982				29,698				29,316
Performance Metrics
Net interest income growth (quarter over quarter)			16	%			17	%			7	%			(3	)%			5	%
Non-interest income growth (quarter over quarter)			8				(31	)			75				—				2
Total net revenue growth (quarter over quarter)			14				2				22				(3	)			4
Total net revenue margin (11)			8.67				7.63				8.96				9.19				9.36
Net interest margin (12)			6.97				6.04				6.20				7.22				7.40
Return on average assets (13)			1.60				0.26				2.44				0.82				1.72
Return on average total stockholders’ equity (14)			12.33				2.06				18.25				5.54				11.80
Return on average tangible common equity (15)			21.48				3.53				31.60				10.43				22.58
Non-interest expense as a % of average loans held for investment (16)			6.00				6.52				6.55				7.96				7.12
Efficiency ratio (17)			52.66				62.16				50.74				64.64				55.30
Effective income tax rate			31.1				18.2				19.0				28.0				30.0
Full-time equivalent employees (in thousands), period end			37.6				37.4				34.2				30.5				29.5
Credit Quality Metrics (10) (18)
Allowance for loan and lease losses		$	5,154			$	4,998			$	4,060			$	4,250			$	4,280
Allowance as a % of loans held for investment			2.54	%			2.47	%			2.34	%			3.13	%			3.29	%
Allowance as a % of loans held for investment (excluding acquired loans)			3.11				3.08				3.08				3.22				3.40
Net charge-offs		$	887			$	738			$	780			$	884			$	812
Net charge-off rate (19)			1.75	%			1.53	%			2.04	%			2.69	%			2.52	%
Net charge-off rate (excluding acquired loans) (19)			2.18				1.96				2.40				2.79				2.62
30+ day performing delinquency rate			2.54				2.06				2.23				3.35				3.13
30+ day performing delinquency rate (excluding acquired loans)			3.15				2.59				2.96				3.47				3.25
30+ day delinquency rate (20)			**				2.43				2.69				3.95				3.81
30+ day delinquency rate (excluding acquired loans) (20)			**				3.06				3.57				4.09				3.95
Capital Ratios (21)
Tier 1 common ratio (22)			10.7	%			9.9	%			11.9	%			9.7	%			10.0	%
Tier 1 risk-based capital ratio (23)			12.7				11.6				13.9				12.0				12.4
Total risk-based capital ratio (24)			15.0				14.0				16.5				14.9				15.4
Tangible common equity (“TCE”) ratio (25)			8.2				7.4				8.2				8.2				8.3

 

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 Q2 2012 and thereafter include the impact of the May 1, 2012 closing of the HSBC transaction, which resulted in the addition of approximately $28.2 billion in credit card receivables at closing.

 

(3)	Results for Q1 2012 and thereafter include the impact of the February 17, 2012 acquisition of ING Direct, which resulted in the addition of loans of $40.4 billion, other assets of $53.9 billion and deposits of $84.4 billion at acquisition.

 

(4)

We did not record a provision for repurchase losses in Q3 2012. We recorded a provision for repurchase losses of $180 million in Q2 2012, $169 million in Q1 2012, $59 million in Q4 2011 and $72 million in Q3 2011. The majority of the provision for repurchase losses is generally included net of tax in discontinued operations, with the remaining amount included pre-tax in non-interest income. The mortgage representation and warranty reserve decreased to $919 million as of September 30, 2012, from $1.0 billion as of June 30, 2012, due to the settlement of claims in Q3 2012 totaling $83 million.

 

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

 

(6)

Total net revenue was reduced by $185 million in Q3 2012, $311 million in Q2 2012, $123 million in Q1 2012, $130 million in Q4 2011 and $24 million in Q3 2011, for the estimated uncollectible amount of billed finance charges and fees. Premium amortization related to the HSBC U.S. card and ING Direct acquisitions reduced revenue by $133 million for Q3 2012, $104 million in Q2 2012, and $30 million in Q1 2012.

 

(7)

Includes merger-related expenses, including transaction costs, attributable to acquisitions of $48 million in Q3 2012, $133 million in Q2 2012, $86 million in Q1 2012, $27 million in Q4 2011, and $18 million in Q3 2011. Also includes intangible amortization expense related to purchased credit card relationships (“PCCR”) from the HSBC U.S. card acquisition of $127 million in Q3 2012 and $85 million in Q2 2012. Other asset and intangible amortization expense related to the HSBC U.S. Card and ING Direct acquisitions totaled $42 million in Q3 2012, $41 million in Q2 2012, and $16 million in Q1 2012.

 

(8)	Earnings per share is computed independently for each period. Accordingly, the sum of the quarterly earnings per share amounts may not agree to the year-to-date amounts.

 

(9)	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.

 

(10)	See “Table 12: Notes to Loan and Business Segment Disclosures (Tables 6 — 11)” for information on acquired loans accounted for based on estimated cash flows expected to be collected.

 

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

 

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

 

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

 

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

 

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

 

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

 

(17)	Calculated based on non-interest expense, excluding goodwill impairment charges, for the period divided by total net revenue for the period.

 

(18)

Loans acquired as part of the HSBC U.S. card, ING Direct and CCB acquisitions classified as held for investment are included in the denominator used in calculating our reported credit quality metrics. We supplement certain reported credit quality metrics with metrics adjusted to exclude from the denominator acquired loans accounted for based on estimated expected cash flows to be collected (formerly SOP 03-3). See “Table 7: Loan Information and Performance Statistics (Excluding Acquired Loans)” for additional information.

 

(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 Q3 2012 will be provided in the September 30, 2012 Quarterly Report on Form 10-Q.

 

(21)	Regulatory capital ratios as of the end of Q3 2012 are preliminary and therefore subject to change.

 

(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)	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.

 

(24)	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.

 

(25)	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												Nine Months Ended
(Dollars in millions, except per share data) (unaudited)		September 30, 2012				June 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011
Interest income:
Loans held for investment		$	4,901			$	4,255			$	3,550			$	12,811			$	10,334
Investment securities			335				335				264				968				893
Other			18				26				21				70				59
Total interest income			5,254				4,616				3,835				13,849				11,286
Interest expense:
Deposits			371				373				294				1,055				923
Securitized debt obligations			64				69				89				213				342
Senior and subordinated notes			85				87				84				260				211
Other borrowings			88				86				85				260				251
Total interest expense			608				615				552				1,788				1,727
Net interest income			4,646				4,001				3,283				12,061				9,559
Provision for credit losses			1,014				1,677				622				3,264				1,499
Net interest income after provision for credit losses			3,632				2,324				2,661				8,797				8,060
Non-interest income:
Service charges and other customer-related fees			557				539				542				1,511				1,527
Interchange fees, net			452				408				321				1,188				972
Net other-than-temporary impairment losses recognized in earnings			(13	)			(13	)			(6	)			(40	)			(15	)
Bargain purchase gain (1)			—				—				—				594				—
Other			140				120				14				458				186
Total non-interest income			1,136				1,054				871				3,711				2,670
Non-interest expense:
Salaries and associate benefits			1,002				971				750				2,837				2,206
Marketing			316				334				312				971				917
Communications and data processing			198				203				178				573				504
Supplies and equipment			209				178				143				534				402
Occupancy			145				145				122				413				359
Merger-related expenses			48				133				18				267				18
Other			1,127				1,178				774				3,096				2,308
Total non-interest expense			3,045				3,142				2,297				8,691				6,714
Income from continuing operations before income taxes			1,723				236				1,235				3,817				4,016
Income tax provision			535				43				370				931				1,174
Income from continuing operations, net of tax			1,188				193				865				2,886				2,842
Loss from discontinued operations, net of tax			(10	)			(100	)			(52	)			(212	)			(102	)
Net income			1,178				93				813				2,674				2,740
Dividends and undistributed earnings allocated to participating securities			(5	)			(1	)			—				(12	)			—
Net income available to common stockholders		$	1,173			$	92			$	813			$	2,662			$	2,740
Basic earnings per common share:
Income from continuing operations		$	2.05			$	0.33			$	1.89			$	5.18			$	6.24
Loss from discontinued operations			(0.02	)			(0.17	)			(0.11	)			(0.38	)			(0.22	)
Net income per basic common share		$	2.03			$	0.16			$	1.78			$	4.80			$	6.02
Diluted earnings per common share:
Income from continuing operations		$	2.03			$	0.33			$	1.88			$	5.13			$	6.17
Loss from discontinued operations			(0.02	)			(0.17	)			(0.11	)			(0.38	)			(0.22	)
Net income per diluted common share		$	2.01			$	0.16			$	1.77			$	4.75			$	5.95
Weighted average common shares outstanding (in millions):
Basic EPS			578.3				577.7				456.0				555.0				455.2
Diluted EPS			584.1				582.8				460.4				560.1				461.0
Dividends paid per common share		$	0.05			$	0.05			$	0.05			$	0.15			$	0.15

 

(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

 

 

(Dollars in millions)(unaudited)		September 30, 2012				June 30, 2012				December 31, 2011				September 30, 2011
Assets:
Cash and due from banks		$	1,855			$	2,297			$	2,097			$	1,794
Interest-bearing deposits with banks			3,860				3,352				3,399				3,238
Federal funds sold and securities purchased under agreements to resell			254				330				342				1,326
Cash and cash equivalents			5,969				5,979				5,838				6,358
Restricted cash for securitization investors			760				370				791				984
Securities available for sale, at fair value			61,464				55,289				38,759				38,400
Loans held for investment:
Unsecuritized loans held for investment			159,219				158,680				88,242				83,010
Restricted loans for securitization investors			43,913				44,069				47,650				46,942
Total loans held for investment			203,132				202,749				135,892				129,952
Less: Allowance for loan and lease losses			(5,154	)			(4,998	)			(4,250	)			(4,280	)
Net loans held for investment			197,978				197,751				131,642				125,672
Loans held for sale, at lower-of-cost-or-fair-value			187				1,047				201				312
Accounts receivable from securitizations			166				96				94				101
Premises and equipment, net			3,519				3,556				2,748				2,785
Interest receivable			1,614				1,623				1,029				958
Goodwill			13,901				13,864				13,592				13,593
Other			16,431				16,997				11,325				10,985
Total assets		$	301,989			$	296,572			$	206,019			$	200,148
Liabilities:
Interest payable		$	368			$	462			$	466			$	401
Customer deposits:
Non-interest bearing deposits			20,767				20,072				18,281				17,541
Interest-bearing deposits			192,488				193,859				109,945				110,777
Total customer deposits			213,255				213,931				128,226				128,318
Securitized debt obligations			12,686				13,608				16,527				17,120
Other debt:
Federal funds purchased and securities loaned or sold under agreements to repurchase			967				1,101				1,464				1,441
Senior and subordinated notes			11,756				12,079				11,034				11,051
Other borrowings			12,968				9,086				10,536				4,703
Total other debt			25,691				22,266				23,034				17,195
Other liabilities			10,317				9,113				8,100				7,736
Total liabilities			262,317				259,380				176,353				170,770
Stockholders’ equity:
Preferred stock			853				—				—				—
Common stock			6				6				5				5
Paid-in capital, net			25,265				25,217				19,274				19,234
Retained earnings and accumulated other comprehensive income			16,835				15,255				13,631				13,382
Treasury stock, at cost			(3,287	)			(3,286	)			(3,244	)			(3,243	)
Total stockholders’ equity			39,672				37,192				29,666				29,378
Total liabilities and stockholders’ equity		$	301,989			$	296,572			$	206,019			$	200,148

 

Page 4

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CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

 

		2012 Q3												2012 Q2												2011 Q3
(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		$	202,856			$	4,901				9.66	%		$	192,632			$	4,255				8.84	%		$	129,043			$	3,550				11.00	%
Investment securities			57,928				335				2.31				56,972				335				2.35				37,189				264				2.84
Cash equivalents and other			6,019				18				1.20				15,415				26				0.67				11,299				21				0.74
Total interest-earning assets		$	266,803			$	5,254				7.88	%		$	265,019			$	4,616				6.97	%		$	177,531			$	3,835				8.64	%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts		$	36,965			$	61				0.66	%		$	35,783			$	56				0.63	%		$	12,602			$	9				0.29	%
Money market deposit accounts			107,340				189				0.70				108,401				190				0.70				47,483				100				0.84
Savings accounts			29,963				21				0.28				31,379				25				0.32				30,944				56				0.72
CD’s of $100,000 or more			4,838				35				2.89				5,030				35				2.78				5,407				43				3.18
Other consumer time deposits			12,878				63				1.96				13,658				65				1.90				13,530				84				2.48
Public fund CD’s of $100,000 or more			68				1				5.88				75				1				5.33				92				1				4.35
Foreign time deposits			1,648				1				0.24				1,271				1				0.31				692				1				0.58
Total interest-bearing deposits			193,700				371				0.77				195,597				373				0.76				110,750				294				1.06
Securitized debt obligations			13,331				64				1.92				14,948				69				1.85				18,478				89				1.93
Senior and subordinated notes			11,035				85				3.08				11,213				87				3.10				10,519				84				3.19
Other borrowings			12,085				88				2.91				9,257				86				3.72				8,369				85				4.06
Total interest-bearing liabilities		$	230,151			$	608				1.06	%		$	231,015			$	615				1.06	%		$	148,116			$	552				1.49	%
Net interest income/spread						$	4,646				6.82	%						$	4,001				5.91	%						$	3,283				7.15	%
Impact of non-interest bearing funding											0.15												0.13												0.25
Net interest margin											6.97	%											6.04	%											7.40	%

 

Page 5

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 6: Loan Information and Performance Statistics ^(1)(2)(3)

 

 

(Dollars in millions)(unaudited)		2012 Q3				2012 Q2				2012 Q1				2011 Q4				2011 Q3
Period-end Loans Held For Investment
Credit card:
Domestic credit card		$	80,621			$	80,798			$	53,173			$	56,609			$	53,820
International credit card			8,412				8,116				8,303				8,466				8,210
Total credit card			89,033				88,914				61,476				65,075				62,030
Consumer banking:
Automobile			26,434				25,251				23,568				21,779				20,422
Home loan			46,275				48,224				49,550				10,433				10,916
Retail banking			4,029				4,140				4,182				4,103				4,014
Total consumer banking			76,738				77,615				77,300				36,315				35,352
Commercial banking: (4)
Commercial and multifamily real estate			16,963				16,254				15,702				15,736				14,660
Commercial and industrial			18,965				18,467				17,761				17,088				16,145
Total commercial lending			35,928				34,721				33,463				32,824				30,805
Small-ticket commercial real estate			1,281				1,335				1,443				1,503				1,571
Total commercial banking			37,209				36,056				34,906				34,327				32,376
Other loans			152				164				140				175				194
Total		$	203,132			$	202,749			$	173,822			$	135,892			$	129,952
Average Loans Held For Investment
Credit card:
Domestic credit card		$	80,502			$	71,468			$	54,131			$	54,403			$	53,668
International credit card			8,154				8,194				8,301				8,361				8,703
Total credit card			88,656				79,662				62,432				62,764				62,371
Consumer banking:
Automobile			25,923				24,487				22,582				21,101				19,757
Home loan			47,262				48,966				29,502				10,683				11,126
Retail banking			4,086				4,153				4,179				4,007				3,979
Total consumer banking			77,271				77,606				56,263				35,791				34,862
Commercial banking: (4)
Commercial and multifamily real estate			16,654				15,838				15,514				14,920				14,291
Commercial and industrial			18,817				18,001				17,038				16,376				15,726
Total commercial lending			35,471				33,839				32,552				31,296				30,017
Small-ticket commercial real estate			1,296				1,388				1,480				1,547				1,598
Total commercial banking			36,767				35,227				34,032				32,843				31,615
Other loans			162				137				173				183				195
Total		$	202,856			$	192,632			$	152,900			$	131,581			$	129,043
Net Charge-off Rates(7)
Credit card:
Domestic credit card			3.04	%			2.86	%			3.92	%			4.07	%			3.92	%
International credit card			4.95				5.49				5.52				5.77				6.15
Total credit card			3.22				3.13				4.14				4.30				4.23
Consumer Banking:
Automobile			1.79				1.11				1.41				2.07				1.69
Home loan			0.28				0.09				0.20				0.90				0.53
Retail banking			1.20				1.27				1.39				1.44				1.67
Total consumer banking			0.83				0.48				0.77				1.65				1.32
Commercial banking: (4)
Commercial and multifamily real estate			(0.05	)			0.18				0.09				0.75				0.11
Commercial and industrial			—				0.10				(0.08	)			0.21				0.42
Total commercial lending			(0.03	)			0.14				—				0.47				0.27
Small-ticket commercial real estate			0.79				1.46				4.24				3.73				2.19
Total commercial banking			—				0.19				0.19				0.62				0.37
Other loans			30.11				18.04				23.30				24.08				15.28
Total			1.75	%			1.53	%			2.04	%			2.69	%			2.52	%
30+ Day Performing Delinquency Rates(7)
Credit card:
Domestic credit card			3.52	%			2.79	%			3.25	%			3.66	%			3.65	%
International credit card			4.92				4.84				5.14				5.18				5.35
Total credit card			3.65	%			2.97	%			3.51	%			3.86	%			3.87	%
Consumer Banking:
Automobile			6.12	%			5.20	%			4.87	%			6.88	%			6.34	%
Home loan			0.15				0.15				0.15				0.89				0.78
Retail banking			0.73				0.69				0.80				0.83				0.89
Total consumer banking			2.23	%			1.82	%			1.63	%			4.47	%			4.01	%
Nonperforming Asset Rates (5)(6)(7)
Consumer banking:
Automobile			0.52	%			0.41	%			0.32	%			0.58	%			0.53	%
Home loan			0.98				0.94				0.94				4.58				4.74
Retail banking			2.25				2.21				2.25				2.50				2.37
Total consumer banking			0.89	%			0.83	%			0.82	%			1.94	%			2.04	%
Commercial banking: (4)
Commercial and multifamily real estate			1.04	%			1.28	%			1.55	%			1.40	%			2.12	%
Commercial and industrial			0.68				0.81				0.69				0.80				1.00
Total commercial lending			0.85	%			1.03	%			1.09	%			1.09	%			1.53	%
Small-ticket commercial real estate			1.49				1.25				4.35				2.86				1.58
Total commercial banking			0.87	%			1.04	%			1.23	%			1.17	%			1.54	%

 

Page 6

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 7: Loan Information and Performance Statistics (Excluding Acquired Loans) ^(1)(2)(3)(7)

 

 

 

		2012				2012				2012				2011				2011
(Dollars in millions)(unaudited)		Q3				Q2				Q1				Q4				Q3
Period-end Loans Held For Investment (Excluding Acquired Loans)
Credit card:
Domestic credit card		$	80,250			$	80,269			$	53,173			$	56,609			$	53,820
International credit card			8,412				8,116				8,303				8,466				8,210
Total credit card			88,662				88,385				61,476				65,075				62,030
Consumer banking:
Automobile			26,411				25,221				23,530				21,732				20,366
Home loan			7,719				7,582				6,967				6,321				6,634
Retail banking			3,990				4,099				4,142				4,058				3,969
Total consumer banking			38,120				36,902				34,639				32,111				30,969
Commercial banking: (4)
Commercial and multifamily real estate			16,800				16,064				15,490				15,573				14,496
Commercial and industrial			18,729				18,226				17,503				16,770				15,820
Total commercial lending			35,529				34,290				32,993				32,343				30,316
Small-ticket commercial real estate			1,281				1,335				1,443				1,503				1,571
Total commercial banking			36,810				35,625				34,436				33,846				31,887
Other loans			152				164				140				175				194
Total		$	163,744			$	161,076			$	130,691			$	131,207			$	125,080
Average Loans Held For Investment (Excluding Acquired Loans)
Credit card:
Domestic credit card		$	80,079			$	71,080			$	54,131			$	54,403			$	53,668
International credit card			8,154				8,194				8,301				8,361				8,703
Total credit card			88,233				79,274				62,432				62,764				62,371
Consumer banking:
Automobile			25,897				24,454				22,540				21,049				19,692
Home loan			7,996				7,686				6,994				6,483				6,759
Retail banking			4,046				4,110				4,136				3,962				3,933
Total consumer banking			37,939				36,250				33,670				31,494				30,384
Commercial banking: (4)
Commercial and multifamily real estate			16,489				15,646				15,328				14,757				14,101
Commercial and industrial			18,579				17,755				16,750				16,055				15,396
Total commercial lending			35,068				33,401				32,078				30,812				29,497
Small-ticket commercial real estate			1,296				1,388				1,480				1,547				1,598
Total commercial banking			36,364				34,789				33,558				32,359				31,095
Other loans			162				137				173				183				195
Total		$	162,698			$	150,450			$	129,833			$	126,800			$	124,045
Net Charge-off Rates (Excluding Acquired Loans)
Credit card:
Domestic credit card			3.06	%			2.87	%			3.92	%			4.07	%			3.92	%
International credit card			4.95				5.49				5.52				5.77				6.15
Total credit card			3.23				3.14				4.14				4.30				4.23
Consumer Banking:
Automobile			1.79				1.11				1.41				2.07				1.69
Home loan			1.65				0.60				0.82				1.48				0.87
Retail banking			1.22				1.29				1.40				1.46				1.69
Total consumer banking			1.70				1.02				1.29				1.87				1.51
Commercial banking: (4)
Commercial and multifamily real estate			(0.05	)			0.18				0.09				0.76				0.11
Commercial and industrial			—				0.10				(0.08	)			0.22				0.43
Total commercial lending			(0.03	)			0.14				0.01				0.48				0.28
Small-ticket commercial real estate			0.79				1.46				4.24				3.73				2.19
Total commercial banking			—				0.19				0.19				0.63				0.38
Other loans			30.11				18.04				23.30				24.08				15.28
Total			2.18	%			1.96	%			2.40	%			2.79	%			2.62	%
30+ Day Performing Delinquency Rates (Excluding Acquired Loans)
Credit card:
Domestic credit card			3.53	%			2.81	%			3.25	%			3.66	%			3.65	%
International credit card			4.92				4.84				5.14				5.18				5.35
Total credit card			3.67	%			2.99	%			3.51	%			3.86	%			3.87	%
Consumer Banking:
Automobile			6.12	%			5.20	%			4.88	%			6.90	%			6.36	%
Home loan			0.89				0.93				1.10				1.47				1.28
Retail banking			0.74				0.70				0.81				0.84				0.90
Total consumer banking			4.50	%			3.82	%			3.63	%			5.06	%			4.57	%
Nonperforming Asset Rates (Excluding Acquired Loans) (5)(6)
Consumer banking:
Automobile			0.52	%			0.41	%			0.32	%			0.58	%			0.53	%
Home loan			5.85				5.96				6.66				7.55				7.80
Retail banking			2.27				2.24				2.28				2.52				2.40
Total consumer banking			1.78	%			1.75	%			1.83	%			2.20	%			2.33	%
Commercial banking: (4)
Commercial and multifamily real estate			1.05	%			1.29	%			1.57	%			1.42	%			2.14	%
Commercial and industrial			0.69				0.82				0.70				0.81				1.02
Total commercial lending			0.86				1.04				1.11				1.10				1.56
Small-ticket commercial real estate			1.49				1.25				4.35				2.86				1.58
Total commercial banking			0.88	%			1.05	%			1.25	%			1.18	%			1.56	%

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 8: Financial & Statistical Summary—Credit Card Business ⁽²⁾

 

 

 

		2012				2012				2012				2011				2011
(Dollars in millions) (unaudited)		Q3				Q2				Q1				Q4				Q3
Credit Card
Earnings:
Net interest income		$	2,991			$	2,350			$	1,992			$	1,949			$	2,042
Non-interest income			826				771				598				638				678
Total net revenue			3,817				3,121				2,590				2,587				2,720
Provision for credit losses			892				1,711				458				600				511
Non-interest expense			1,790				1,863				1,268				1,431				1,188
Income (loss) from continuing operations before taxes			1,135				(453	)			864				556				1,021
Income tax provision (benefit)			394				(156	)			298				203				358
Income (loss) from continuing operations, net of tax		$	741			$	(297	)		$	566			$	353			$	663
Selected performance metrics:
Period-end loans held for investment		$	89,033			$	88,914			$	61,476			$	65,075			$	62,030
Average loans held for investment			88,656				79,662				62,432				62,764				62,371
Average yield on loans held for investment			15.03	%			13.42	%			14.41	%			14.12	%			14.84	%
Total net revenue margin			17.22				15.67				16.59				16.49				17.44
Net charge-off rate(7)			3.22				3.13				4.14				4.30				4.23
30+ day delinquency rate(7)			3.65				2.97				3.51				3.86				3.87
Purchase volume (8)		$	48,020			$	45,228			$	34,498			$	38,179			$	34,918
Domestic Card
Earnings:
Net interest income		$	2,715			$	2,118			$	1,713			$	1,706			$	1,753
Non-interest income			722				708				497				613				588
Total net revenue			3,437				2,826				2,210				2,319				2,341
Provision for credit losses			811				1,600				361				519				381
Non-interest expense			1,584				1,634				1,052				1,183				972
Income (loss) from continuing operations before taxes			1,042				(408	)			797				617				988
Income tax provision (benefit)			369				(144	)			282				222				351
Income (loss) from continuing operations, net of tax		$	673			$	(264	)		$	515			$	395			$	637
Selected performance metrics:
Period-end loans held for investment		$	80,621			$	80,798			$	53,173			$	56,609			$	53,820
Average loans held for investment			80,502				71,468				54,131				54,403				53,668
Average yield on loans held for investment			14.88	%			13.33	%			14.11	%			14.05	%			14.62	%
Total net revenue margin			17.08				15.82				16.33				17.05				17.45
Net charge-off rate(7)			3.04				2.86				3.92				4.07				3.92
30+ day delinquency rate(7)			3.52				2.79				3.25				3.66				3.65
Purchase volume (8)		$	44,552			$	41,807			$	31,417			$	34,586			$	31,686
International Card
Earnings:
Net interest income		$	276			$	232			$	279			$	243			$	289
Non-interest income			104				63				101				25				90
Total net revenue			380				295				380				268				379
Provision for credit losses			81				111				97				81				130
Non-interest expense			206				229				216				248				216
Income (loss) from continuing operations before taxes			93				(45	)			67				(61	)			33
Income tax provision (benefit)			25				(12	)			16				(19	)			7
Income (loss) from continuing operations, net of tax		$	68			$	(33	)		$	51			$	(42	)		$	26
Selected performance metrics:
Period-end loans held for investment		$	8,412			$	8,116			$	8,303			$	8,466			$	8,210
Average loans held for investment			8,154				8,194				8,301				8,361				8,703
Average yield on loans held for investment			16.47	%			14.18	%			16.38	%			14.57	%			16.24	%
Total net revenue margin			18.64				14.40				18.31				12.82				17.42
Net charge-off rate			4.95				5.49				5.52				5.77				6.15
30+ day delinquency rate			4.92				4.84				5.14				5.18				5.35
Purchase volume (8)		$	3,468			$	3,421			$	3,081			$	3,593			$	3,232

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 9: Financial & Statistical Summary—Consumer Banking Business ⁽³⁾

 

 

(Dollars in millions) (unaudited)		2012 Q3				2012 Q2				2012 Q1				2011 Q4				2011 Q3
Consumer Banking
Earnings:
Net interest income		$	1,501			$	1,496			$	1,288			$	1,105			$	1,097
Non-interest income			260				185				176				152				188
Total net revenue			1,761				1,681				1,464				1,257				1,285
Provision for credit losses			202				44				174				180				136
Non-interest expense			977				959				943				893				853
Income from continuing operations before taxes			582				678				347				184				296
Income tax provision			206				240				123				67				106
Income from continuing operations, net of tax		$	376			$	438			$	224			$	117			$	190
Selected performance metrics:
Period-end loans held for investment		$	76,738			$	77,615			$	77,300			$	36,315			$	35,352
Average loans held for investment			77,271				77,606				56,263				35,791				34,862
Average yield on loans held for investment			6.05	%			6.17	%			7.20	%			9.46	%			9.83	%
Auto loan originations		$	3,905			$	4,306			$	4,270			$	3,586			$	3,409
Period-end deposits			173,100				173,966				176,007				88,540				88,589
Average deposits			173,334				174,416				129,915				88,390				88,266
Deposit interest expense rate			0.71	%			0.70	%			0.73	%			0.84	%			0.95	%
Core deposit intangible amortization		$	41			$	42			$	37			$	31			$	32
Net charge-off rate(7)			0.83	%			0.48	%			0.77	%			1.65	%			1.32	%
30+ day performing delinquency rate(7)			2.23				1.82				1.63				4.47				4.01
30+ day delinquency rate (7)(9)			**				2.47				2.25				5.99				5.57
Nonperforming loan rate (5)(7)			0.84				0.79				0.77				1.79				1.88
Nonperforming asset rate (5)(7)			0.89				0.83				0.82				1.94				2.04
Period-end loans serviced for others		$	15,659			$	16,108			$	17,586			$	17,998			$	18,624

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 10: Financial & Statistical Summary—Commercial Banking Business ⁽³⁾

 

 

		2012				2012				2012				2011				2011
(Dollars in millions) (unaudited)		Q3				Q2				Q1				Q4				Q3
Commercial Banking (4)(11)
Earnings:
Net interest income		$	432			$	427			$	431			$	425			$	407
Non-interest income			87				82				85				87				63
Total net revenue			519				509				516				512				470
Provision for credit losses			(87	)			(94	)			(69	)			76				(10	)
Non-interest expense			253				251				261				254				237
Income from continuing operations before taxes			353				352				324				182				243
Income tax provision			125				124				114				65				86
Income from continuing operations, net of tax		$	228			$	228			$	210			$	117			$	157
Selected performance metrics:
Period-end loans held for investment		$	37,209			$	36,056			$	34,906			$	34,327			$	32,376
Average loans held for investment			36,767				35,227				34,032				32,843				31,615
Average yield on loans held for investment			4.14	%			4.27	%			4.47	%			4.70	%			4.71	%
Period-end deposits		$	28,670			$	27,784			$	28,046			$	26,683			$	25,376
Average deposits			28,063				27,943				27,569				26,185				25,321
Deposit interest expense rate			0.31	%			0.33	%			0.37	%			0.42	%			0.47	%
Core deposit intangible amortization		$	8			$	9			$	9			$	9			$	10
Net charge-off rate(7)			—	%			0.19	%			0.19	%			0.62	%			0.37	%
Nonperforming loan rate (5)(7)			0.82				0.99				1.15				1.08				1.42
Nonperforming asset rate (5)(7)			0.87				1.04				1.23				1.17				1.54
Risk category: (10)
Noncriticized		$	35,112			$	33,745			$	32,339			$	31,617			$	29,636
Criticized performing			1,394				1,524				1,695				1,857				1,790
Criticized nonperforming			305				356				402				372				459
Total risk-rated loans			36,811				35,625				34,436				33,846				31,885
Acquired commercial loans			398				431				470				481				491
Total commercial loans		$	37,209			$	36,056			$	34,906			$	34,327			$	32,376
% of period-end held for investment commercial loans:
Noncriticized			94.4	%			93.6	%			92.6	%			92.1	%			91.6	%
Criticized performing			3.7				4.2				4.9				5.4				5.5
Criticized nonperforming			0.8				1.0				1.2				1.1				1.4
Total risk-rated loans			98.9				98.8				98.7				98.6				98.5
Acquired commercial loans			1.1				1.2				1.3				1.4				1.5
Total commercial loans			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%

 

Page 10

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 11: Financial & Statistical Summary—Other and Total ⁽²⁾⁽³⁾

 

		2012				2012				2012				2011				2011
(Dollars in millions) (unaudited)		Q3				Q2				Q1				Q4				Q3
Other (4)
Earnings:
Net interest expense		$	(278	)		$	(272	)		$	(297	)		$	(297	)		$	(263	)
Non-interest income			(37	)			16				662				(9	)			(58	)
Total net revenue			(315	)			(256	)			365				(306	)			(321	)
Provision for credit losses			7				16				10				5				(15	)
Non-interest expense			25				69				32				40				19
Income (loss) from continuing operations before taxes			(347	)			(341	)			323				(351	)			(325	)
Income tax benefit			(190	)			(165	)			(182	)			(175	)			(180	)
Income (loss) from continuing operations, net of tax		$	(157	)		$	(176	)		$	505			$	(176	)		$	(145	)
Selected performance metrics:
Period-end loans held for investment		$	152			$	164			$	140			$	175			$	194
Average loans held for investment			162				137				173				183				195
Period-end deposits			11,485				12,181				12,475				13,003				14,353
Average deposits			11,926				12,555				12,775				13,875				14,681
Total
Earnings:
Net interest income		$	4,646			$	4,001			$	3,414			$	3,182			$	3,283
Non-interest income			1,136				1,054				1,521				868				871
Total net revenue			5,782				5,055				4,935				4,050				4,154
Provision for credit losses			1,014				1,677				573				861				622
Non-interest expense			3,045				3,142				2,504				2,618				2,297
Income from continuing operations before taxes			1,723				236				1,858				571				1,235
Income tax provision			535				43				353				160				370
Income from continuing operations, net of tax		$	1,188			$	193			$	1,505			$	411			$	865
Selected performance metrics:
Period-end loans held for investment		$	203,132			$	202,749			$	173,822			$	135,892			$	129,952
Average loans held for investment			202,856				192,632				152,900				131,581				129,043
Period-end deposits			213,255				213,931				216,528				128,226				128,318
Average deposits			213,323				214,914				170,259				128,450				128,268

 

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 Q2 2012 and thereafter include the impact of the May 1, 2012 closing of the HSBC transaction, which resulted in the addition of approximately $28.2 billion in credit card receivables at closing.

 

(3)	Results for Q1 2012 and thereafter include the impact of the February 17, 2012 acquisition of ING Direct, which resulted in the addition of loans of $40.4 billion, other assets of $53.9 billion and deposits of $84.4 billion at acquisition.

 

(4)

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 commercial real estate investments, some of which were previously included in the “Other” segment, are now included in the commercial and multifamily real estate category of our Commercial Banking segment. Prior period amounts have been recast to conform to the current period presentation.

 

(5)

Nonperforming assets consist of nonperforming loans, real estate owned (“REO”) and other 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 other foreclosed assets for each respective category.

 

(6)

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. Revenue is reduced each period by the amount of estimated uncollectible billed finance charges and fees.

 

(7)

Loans acquired as part of the HSBC U.S. card, ING Direct and CCB acquisitions are included in the denominator used in calculating the credit quality metrics presented in Tables 6, 8, 9, and 10. These metrics, adjusted to exclude from the denominator acquired loans accounted for based on estimated cash flows expected to be collected over the life of the loans (formerly SOP 03-3), are presented in Table 7. The table below presents amounts related to these acquired loans.

 

(Dollars in millions) (unaudited)		2012 Q3				2012 Q2				2012 Q1				2011 Q4				2011 Q3
Acquired loans accounted for under SOP 03-3:
Period-end unpaid principal balance		$	40,749			$	43,333			$	44,798			$	5,751			$	6,021
Period-end loans held for investment			39,388				41,673				43,131				4,685				4,873
Average loans held for investment			40,158				42,182				23,067				4,781				4,998

 

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

 

(9)	The 30+ day total delinquency rate as of the end of Q3 2012 will be provided in the September 30, 2012 Quarterly Report on Form 10-Q.

 

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

 

(11)

Because some of our tax-related commercial investments generate tax-exempt income or tax credits, we make certain reclassifications within our Commercial Banking business results to present revenues on a taxable-equivalent basis, calculated assuming an effective tax rate approximately equal to our federal statutory tax rate of 35%.

 

Page 12

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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				2012				2012				2011				2011
(Dollars in millions)(unaudited)		Q3				Q2				Q1				Q4				Q3
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders’ equity		$	38,535			$	37,533			$	32,982			$	29,698			$	29,316
Less: Average intangible assets (1)			(16,408	)			(15,689	)			(13,931	)			(13,935	)			(13,990	)
Average tangible common equity		$	22,127			$	21,844			$	19,051			$	15,763			$	15,326
Stockholders’ Equity to Non-GAAP Tangible Common Equity
Total stockholders’ equity		$	39,672			$	37,192			$	36,950			$	29,666			$	29,378
Less: Intangible assets (1)			(16,323	)			(16,477	)			(14,110	)			(13,908	)			(13,953	)
Tangible common equity		$	23,349			$	20,715			$	22,840			$	15,758			$	15,425
Total Assets to Tangible Assets
Total assets		$	301,989			$	296,572			$	294,481			$	206,019			$	200,148
Less: Assets from discontinued operations			(309	)			(310	)			(304	)			(305	)			(304	)
Total assets from continuing operations			301,680				296,262				294,177				205,714				199,844
Less: Intangible assets (1)			(16,323	)			(16,477	)			(14,110	)			(13,908	)			(13,953	)
Tangible assets		$	285,357			$	279,785			$	280,067			$	191,806			$	185,891
Non-GAAP TCE Ratio
Tangible common equity		$	23,349			$	20,715			$	22,840			$	15,758			$	15,425
Tangible assets			285,357				279,785				280,067				191,806				185,891
TCE ratio (2)			8.2	%			7.4	%			8.2	%			8.2	%			8.3	%
Regulatory Capital Ratios (3)
Total stockholders’ equity		$	39,672			$	37,192			$	36,950			$	29,666			$	29,378
Less:  Net unrealized (gains) losses on AFS securities recorded in AOCI (4)			(752	)			(422	)			(327	)			(289	)			(401	)
Net (gains) losses on cash flow hedges recorded in AOCI (4)			(6	)			34				70				71				54
Disallowed goodwill and other intangible assets			(14,497	)			(14,563	)			(14,057	)			(13,855	)			(13,898	)
Disallowed deferred tax assets			(221	)			(758	)			(902	)			(534	)			(227	)
Noncumulative perpetual preferred stock (5)			(853	)			—				—				—				—
Other			(12	)			(12	)			(3	)			(2	)			(2	)
Tier 1 common capital			23,331				21,471				21,731				15,057				14,904
Plus: Noncumulative perpetual preferred stock (5)			853				—				—				—				—
Tier 1 restricted core capital items (6)			3,636				3,636				3,636				3,635				3,636
Tier 1 capital			27,820				25,107				25,367				18,692				18,540
Plus:  Long-term debt qualifying as Tier 2 capital			2,119				2,318				2,438				2,438				2,438
Qualifying allowance for loan and lease losses			2,767				2,740				2,314				1,979				1,896
Other Tier 2 components			17				15				17				23				24
Tier 2 capital			4,903				5,073				4,769				4,440				4,358
Total risk-based capital (7)		$	32,723			$	30,180			$	30,136			$	23,132			$	22,898
Risk-weighted assets (8)		$	218,369			$	216,341			$	182,704			$	155,657			$	149,028
Tier 1 common ratio (9)			10.7	%			9.9	%			11.9	%			9.7	%			10.0	%
Tier 1 risk-based capital ratio (10)			12.7				11.6				13.9				12.0				12.4
Total risk-based capital ratio (11)			15.0				14.0				16.5				14.9				15.4

 

(1)	Includes impact from related deferred taxes.

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

(3)	Regulatory capital ratios as of the end of Q3 2012 are preliminary and therefore subject to change.

(4)	Amounts presented are net of tax.

(5)	Noncumulative perpetual preferred stock qualifies for Tier 1 capital; however, it is not includable in Tier 1 common capital.

(6)	Consists primarily of trust preferred securities.

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

(8)	Calculated based on prescribed regulatory guidelines.

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

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

(11)	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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