UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

January 17, 2013

Date of Report (Date of earliest event reported)

Commission File No. 1-13300

 

 

CAPITAL ONE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

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

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

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

 

 

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

 

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

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

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

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

 

 

 

 

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Item 2.02.

Results of Operations and Financial Condition.

On January 17, 2013, Capital One Financial Corporation (the “Company”) issued a press release announcing its financial results for the fourth quarter ended December 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 – Fourth 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 January 17, 2013 – Fourth Quarter 2012
99.2		Financial Supplement – Fourth Quarter 2012
99.3		Earnings Release Slides – Fourth Quarter 2012

Earnings Conference Call Webcast Information.

The Company will hold an earnings conference call on January 17, 2013 at 5:00 p.m. 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 Web site through January 31, 2013 at 10:00 p.m. Eastern standard time.

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SIGNATURE

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

 

				CAPITAL ONE FINANCIAL CORPORATION
Dated: January 17, 2013				By:		/s/ Gary L. Perlin
						Gary L. Perlin
						Chief Financial Officer

Exhibit 99.1

FOR IMMEDIATE RELEASE: January 17, 2013

Capital One Reports Fourth Quarter 2012 Net Income of $843 million,

or $1.41 per share

Earnings for full year 2012 were $3.5 billion, or $6.16 per share

McLean, Va. (January 17, 2013) – Capital One Financial Corporation (NYSE: COF) today announced net income for the full year 2012 of $3.5 billion, or $6.16 per diluted common share, compared with net income of $3.1 billion, or $6.80 per diluted common share, for 2011. Results for 2012 reflect the impacts of acquisition-related accounting and an increase in the number of shares outstanding. Net income for the fourth quarter of 2012 was $843 million, or $1.41 per diluted common share, compared with net income of $1.2 billion, or $2.01 per diluted common share, for the third quarter of 2012, and net income of $407 million, or $0.88 per diluted common share, for the fourth quarter of 2011.

“Seasonal expense and margin trends led to a reduction in fourth quarter earnings compared to the previous quarter,” said Gary L. Perlin, Capital One’s Chief Financial Officer. “With a few exceptions largely related to these seasonal patterns, fourth quarter 2012 results give us a good picture of what to expect in terms of pre-provision earnings in 2013, assuming little change in the external environment.”

The company expects average quarterly revenue levels in 2013 to be consistent with the fourth quarter of 2012, as a modest decline in earning assets will be offset by a steady to slightly higher net interest margin. Overall, the company expects non-interest expense to be, on average, just over $3.1 billion per quarter, reflecting a modest decline in quarterly expenses relative to seasonally elevated operating and marketing costs in the fourth quarter of 2012.

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Capital One Fourth Quarter 2012 Earnings

Page 2

 

“Capital One remains well positioned to deliver sustained shareholder value through sure-footed execution, substantial capital generation, and disciplined capital allocation for the benefit of our shareholders,” said Richard D. Fairbank, Chairman and Chief Executive Officer. “As a first step, we expect to return to a meaningful dividend in 2013, following the completion of the current CCAR process.”

Total Company Results

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

Loans and Deposits

Period-end loans held for investment increased $2.8 billion to $205.9 billion. Commercial Banking’s period-end loans increased $1.6 billion, or 4 percent, to $38.8 billion, and period-end loans in Auto Finance grew $689 million, or 3 percent, to $27.1 billion due to strong growth in both businesses. Domestic Card period-end loans increased $2.5 billion as seasonal growth at the end of the fourth quarter was partially offset by expected run-off in acquired credit card loans and the continued run-off of installment loans. Period-end loans in Home Loans decreased $2.2 billion, or 5 percent, to $44.1 billion, driven by the continued run-off of acquired portfolios.

Average loans in the quarter were essentially flat at $202.9 billion. Average loans in Commercial Banking grew $831 million and Auto Finance average loans grew $958 million. Average Domestic Card loan growth of $216 million was modest compared with the growth in period-end loans reflecting the magnitude of the increase in period-end loans driven by our partnerships portfolio. Average Home Loans decreased by $2.0 billion, driven largely by the continued run-off of acquired portfolios.

Period-end total deposits decreased $770 million to $212.5 billion, driven by a reduction in deposits in legacy banking segments. Average deposits in the quarter were essentially flat and deposit interest rates declined 5 basis points to 0.72 percent.

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Capital One Fourth Quarter 2012 Earnings

Page 3

 

Revenues

Total net revenue for the fourth quarter of 2012 was $5.6 billion, a decline of $158 million, or 3 percent, almost entirely driven by higher levels of estimated uncollectible finance charges and fees in the company’s Domestic Card business. This was due to seasonally higher levels of finance charge and fee reversal and a higher portion of the uncollectible finance charges and fees being recognized as a reduction of net revenue instead of being offset against the SOP 03-3 credit mark on acquired delinquent non-revolving credit card loans.

The higher levels of estimated uncollectible finance charges and fees coupled with a substantial increase in the proportion of lower-yielding cash and investment securities in anticipation of the call of high coupon trust securities resulted in a decrease in net interest margin of 45 basis points to 6.52 percent. Cost of funds in the fourth quarter declined 7 basis points to 0.99 percent.

Non-Interest Expense

Operating expenses were $2.9 billion in the fourth quarter, an increase of $133 million, or 5 percent, driven by higher year-end expense patterns and somewhat higher integration expenses. Marketing expense increased $77 million in the quarter to $393 million.

Provision for Credit Losses

Provision for credit losses was $1.2 billion in the quarter, up $137 million from the previous quarter, largely caused by an increasingly lower proportion of charge-offs related to acquired delinquent non-revolving credit card loans being absorbed by the SOP 03-3 credit mark than was absorbed in the third quarter and an expected seasonal increase to the underlying Domestic Card portfolio.

The net charge-off rate was 2.26 percent in the fourth quarter of 2012, an increase of 51 basis points from 1.75 percent in the third quarter, largely because of the diminishing impact of the credit mark discussed above. The net charge-off rate for Domestic Card increased to 4.35 percent from 3.04 percent, also driven by seasonality and the diminishing impact of the credit mark described above. The net charge-off rate for Auto Finance increased 45 basis points, while the rate for Commercial Banking increased 10 basis points.

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Capital One Fourth Quarter 2012 Earnings

Page 4

 

Net Income

Net income decreased 28 percent in the fourth quarter driven by lower revenue and higher non-interest and credit expenses.

Capital Ratios

The company’s estimated Tier 1 common ratio was approximately 11.0 percent as of December 31, 2012, up from 10.7 percent as of September 30, 2012.

Detailed segment information will be available in the company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on January 17, 2013 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 (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 January 31, 2013 at 10:00 PM.

Forward-looking Statements

The company cautions that its current expectations in this release dated January 17, 2013 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

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Capital One Fourth Quarter 2012 Earnings

Page 5

 

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); 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; 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.

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Capital One Fourth Quarter 2012 Earnings

Page 6

 

About Capital One

Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A., and Capital One Bank (USA), N. A., had $212.5 billion in deposits and $312.9 billion in total assets outstanding as of December 31, 2012. Headquartered in McLean, Virginia, Capital One offers 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 more than 900 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. ING DIRECT, a division of Capital One, N.A., offers direct banking products and services to customers nationwide. 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

Fourth Quarter 2012 ^{(1) (2)}

Table of Contents

 

						Page
Capital One Financial Corporation Consolidated
		Table 1:		Financial & Statistical Summary—Consolidated			1
		Table 2:		Consolidated Statements of Income			2
		Table 3:		Consolidated Balance Sheets			3
		Table 4:		Notes to Consolidated Financial Statements & Statistical Summary (Tables 1 — 3)			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 December 31, 2012 Annual Report on Form 10-K 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 Q4				2012 Q3				2012 Q2				2012 Q1				2011 Q4
Earnings
Net interest income		$	4,528			$	4,646			$	4,001			$	3,414			$	3,182
Non-interest income(4) (5)			1,096				1,136				1,054				1,521				868
Total net revenue(6)			5,624				5,782				5,055				4,935				4,050
Provision for credit losses			1,151				1,014				1,677				573				861
Marketing expenses			393				316				334				321				420
Operating expenses(7)			2,862				2,729				2,808				2,183				2,198
Income from continuing operations before income taxes			1,218				1,723				236				1,858				571
Income tax provision			370				535				43				353				160
Income from continuing operations, net of tax			848				1,188				193				1,505				411
Loss from discontinued operations, net of tax(4)			(5	)			(10	)			(100	)			(102	)			(4	)
Net income			843				1,178				93				1,403				407
Dividends and undistributed earnings allocated to participating securities(8)			(3	)			(5	)			(1	)			(7	)			(26	)
Preferred stock dividends			(15	)			—				—				—				—
Net income available to common stockholders		$	825			$	1,173			$	92			$	1,396			$	381
Common Share Statistics
Basic EPS:(8)
Income from continuing operations, net of tax		$	1.43			$	2.05			$	0.33			$	2.94			$	0.89
Loss from discontinued operations, net of tax			(0.01	)			(0.02	)			(0.17	)			(0.20	)			(0.01	)
Net income per common share		$	1.42			$	2.03			$	0.16			$	2.74			$	0.88
Diluted EPS:(8)
Income from continuing operations, net of tax		$	1.42			$	2.03			$	0.33			$	2.92			$	0.89
Loss from discontinued operations, net of tax			(0.01	)			(0.02	)			(0.17	)			(0.20	)			(0.01	)
Net income per common share		$	1.41			$	2.01			$	0.16			$	2.72			$	0.88
Weighted average common shares outstanding (in millions):
Basic EPS			579.2				578.3				577.7				508.7				456.2
Diluted EPS			585.6				584.1				582.8				513.1				458.5
Common shares outstanding (period end, in millions)			582.2				581.3				580.7				580.2				459.9
Dividends per common share		$	0.05			$	0.05			$	0.05			$	0.05			$	0.05
Tangible book value per common share (period end)(9) (26)			40.23				38.70				35.67				39.37				34.26
Balance Sheet (Period End)
Loans held for investment(10)		$	205,889			$	203,132			$	202,749			$	173,822			$	135,892
Interest-earning assets			280,096				270,661				264,331				265,398				179,878
Total assets			312,918				301,989				296,572				294,481				206,019
Interest-bearing deposits			190,018				192,488				193,859				197,254				109,945
Total deposits			212,485				213,255				213,931				216,528				128,226
Borrowings			49,910				38,377				35,874				32,885				39,561
Stockholders’ equity			40,499				39,672				37,192				36,950				29,666
Balance Sheet (Quarterly Average Balances)
Average loans held for investment(10)		$	202,944			$	202,856			$	192,632			$	152,900			$	131,581
Average interest-earning assets			277,886				266,803				265,019				220,246				176,271
Average total assets			308,096				297,154				295,306				246,384				200,106
Average interest-bearing deposits			192,122				193,700				195,597				151,625				109,914
Average total deposits			213,494				213,323				214,914				170,259				128,450
Average borrowings			44,189				36,451				35,418				35,994				34,811
Average stockholders’ equity			40,212				38,535				37,533				32,982				29,698
Performance Metrics
Net interest income growth (quarter over quarter)			(3	)%			16	%			17	%			7	%			(3	)%
Non-interest income growth (quarter over quarter)			(4	)			8				(31	)			75				—
Total net revenue growth (quarter over quarter)			(3	)			14				2				22				(3	)
Total net revenue margin(11)			8.10				8.67				7.63				8.96				9.19
Net interest margin(12)			6.52				6.97				6.04				6.20				7.22
Return on average assets(13)			1.10				1.60				0.26				2.44				0.82
Return on average total stockholders’ equity(14)			8.44				12.33				2.06				18.25				5.54
Return on average tangible common equity(15) (26)			14.74				21.93				3.53				31.60				10.43
Non-interest expense as a % of average loans held for investment(16)			6.42				6.00				6.52				6.55				7.96
Efficiency ratio(17)			57.88				52.66				62.16				50.74				64.64
Effective income tax rate			30.4				31.1				18.2				19.0				28.0
Full-time equivalent employees (in thousands), period end			39.6				37.6				37.4				34.2				30.5
Credit Quality Metrics(10) (18)
Allowance for loan and lease losses		$	5,156			$	5,154			$	4,998			$	4,060			$	4,250
Allowance as a % of loans held for investment			2.50	%			2.54	%			2.47	%			2.34	%			3.13	%
Allowance as a % of loans held for investment (excluding acquired loans)			3.02				3.11				3.08				3.08				3.22
Net charge-offs		$	1,150			$	887			$	738			$	780			$	884
Net charge-off rate(19)			2.26	%			1.75	%			1.53	%			2.04	%			2.69	%
Net charge-off rate (excluding acquired loans)(19)			2.78				2.18				1.96				2.40				2.79
30+ day performing delinquency rate			2.70				2.54				2.06				2.23				3.35
30+ day performing delinquency rate (excluding acquired loans)			3.29				3.15				2.59				2.96				3.47
30+ day delinquency rate(20)			**				2.92				2.43				2.69				3.95
30+ day delinquency rate (excluding acquired loans)(20)			**				3.62				3.06				3.57				4.09
Capital Ratios (21)
Tier 1 common ratio(22)			11.0	%			10.7	%			9.9	%			11.9	%			9.7	%
Tier 1 risk-based capital ratio(23)			11.4				12.7				11.6				13.9				12.0
Total risk-based capital ratio(24)			13.6				15.0				14.0				16.5				14.9
Tangible common equity (“TCE”) ratio(25) (26)			7.9				7.9				7.4				8.2				8.2

 

Page 1

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Consolidated Statements of Income^(1)(2)(3)

 

 

		Three Months Ended												Year Ended
		December 31,				September 30,				December 31,				December 31,
(Dollars in millions, except per share data) (unaudited)		2012				2012				2011				2012				2011
Interest income:
Loans held for investment		$	4,726			$	4,901			$	3,440			$	17,537			$	13,774
Investment securities			361				335				244				1,329				1,137
Other			28				18				17				98				76
Total interest income			5,115				5,254				3,701				18,964				14,987
Interest expense:
Deposits			348				371				264				1,403				1,187
Securitized debt obligations			58				64				80				271				422
Senior and subordinated notes			85				85				89				345				300
Other borrowings			96				88				86				356				337
Total interest expense			587				608				519				2,375				2,246
Net interest income			4,528				4,646				3,182				16,589				12,741
Provision for credit losses			1,151				1,014				861				4,415				2,360
Net interest income after provision for credit losses			3,377				3,632				2,321				12,174				10,381
Non-interest income:
Service charges and other customer-related fees			595				557				452				2,106				1,979
Interchange fees, net			459				452				346				1,647				1,318
Net other-than-temporary impairment losses recognized in earnings			(12	)			(13	)			(6	)			(52	)			(21	)
Bargain purchase gain(5)			—				—				—				594				—
Other(4)			54				140				76				512				262
Total non-interest income			1,096				1,136				868				4,807				3,538
Non-interest expense:
Salaries and associate benefits			1,039				1,002				817				3,876				3,023
Occupancy and equipment			384				354				268				1,331				1,029
Marketing			393				316				420				1,364				1,337
Professional services			362				307				366				1,270				1,198
Communications and data processing			205				198				177				778				681
Amortization of intangibles(7)			190				197				51				604				216
Merger-related expense(7)			69				48				27				336				45
Other			613				623				492				2,387				1,803
Total non-interest expense			3,255				3,045				2,618				11,946				9,332
Income from continuing operations before income taxes			1,218				1,723				571				5,035				4,587
Income tax provision			370				535				160				1,301				1,334
Income from continuing operations, net of tax			848				1,188				411				3,734				3,253
Loss from discontinued operations, net of tax(4)			(5	)			(10	)			(4	)			(217	)			(106	)
Net income			843				1,178				407				3,517				3,147
Dividends and undistributed earnings allocated to participating securities(8)			(3	)			(5	)			(26	)			(15	)			(26	)
Preferred stock dividends			(15	)			—				—				(15	)			—
Net income available to common stockholders		$	825			$	1,173			$	381			$	3,487			$	3,121
Basic earnings per common share:(8)
Income from continuing operations		$	1.43			$	2.05			$	0.89			$	6.60			$	7.08
Loss from discontinued operations			(0.01	)			(0.02	)			(0.01	)			(0.39	)			(0.23	)
Net income per basic common share		$	1.42			$	2.03			$	0.88			$	6.21			$	6.85
Diluted earnings per common share:(8)
Income from continuing operations		$	1.42			$	2.03			$	0.89			$	6.54			$	7.03
Loss from discontinued operations			(0.01	)			(0.02	)			(0.01	)			(0.38	)			(0.23	)
Net income per diluted common share		$	1.41			$	2.01			$	0.88			$	6.16			$	6.80
Weighted average common shares outstanding (in millions):(8)
Basic EPS			579.2				578.3				456.2				561.1				455.5
Diluted EPS			585.6				584.1				458.5				566.5				459.1
Dividends paid per common share		$	0.05			$	0.05			$	0.05			$	0.20			$	0.20

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Balance Sheets

 

 

 

(Dollars in millions) (unaudited)		December 31, 2012				September 30, 2012				December 31, 2011
Assets:
Cash and due from banks		$	3,440			$	1,855			$	2,097
Interest-bearing deposits with banks			7,617				3,860				3,399
Federal funds sold and securities purchased under agreements to resell			1				254				342
Cash and cash equivalents			11,058				5,969				5,838
Restricted cash for securitization investors			428				760				791
Securities available for sale, at fair value			63,979				61,464				38,759
Loans held for investment:
Unsecuritized loans held for investment			163,341				159,219				88,242
Restricted loans for securitization investors			42,548				43,913				47,650
Total loans held for investment			205,889				203,132				135,892
Less: Allowance for loan and lease losses			(5,156	)			(5,154	)			(4,250	)
Net loans held for investment			200,733				197,978				131,642
Loans held for sale, at lower-of-cost-or-fair-value			201				187				201
Premises and equipment, net			3,587				3,519				2,748
Interest receivable			1,694				1,614				1,029
Goodwill			13,904				13,901				13,592
Other			17,334				16,597				11,419
Total assets		$	312,918			$	301,989			$	206,019
Liabilities:
Interest payable		$	450			$	368			$	466
Customer deposits:
Non-interest bearing deposits			22,467				20,767				18,281
Interest-bearing deposits			190,018				192,488				109,945
Total customer deposits			212,485				213,255				128,226
Securitized debt obligations			11,398				12,686				16,527
Other debt:
Federal funds purchased and securities loaned or sold under agreements to repurchase			1,248				967				1,464
Senior and subordinated notes			12,686				11,756				11,034
Other borrowings			24,578				12,968				10,536
Total other debt			38,512				25,691				23,034
Other liabilities			9,574				10,317				8,100
Total liabilities			272,419				262,317				176,353
Stockholders’ equity:
Preferred stock			853				853				—
Common stock			6				6				5
Paid-in capital, net			25,335				25,265				19,274
Retained earnings and accumulated other comprehensive income			17,592				16,835				13,631
Treasury stock, at cost			(3,287	)			(3,287	)			(3,244	)
Total stockholders’ equity			40,499				39,672				29,666
Total liabilities and stockholders’ equity		$	312,918			$	301,989			$	206,019

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Notes to Consolidated Financial Statements & Statistical Summary (Tables 1-3)

 

(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 mortgage representation and warranty losses in Q4 or Q3 2012. We recorded a provision for mortgage representation and warranty losses of $180 million in Q2 2012, $169 million in Q1 2012 and $59 million in Q4 2011. The majority of the provision for representation and warranty 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 $899 million as of December 31, 2012, from $919 million as of September 30, 2012, due to the settlement of claims in Q4 2012 totaling $20 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. 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.

 

(6)

Total net revenue was reduced by $318 million in Q4 2012, $185 million in Q3 2012, $311 million in Q2 2012, $123 million in Q1 2012 and $130 million in Q4 2011, for the estimated uncollectible amount of billed finance charges and fees. Premium amortization related to the ING Direct and HSBC U.S. card acquisitions reduced revenue by $124 million in Q4 2012, $133 million in 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 $69 million in Q4 2012, $48 million in Q3 2012, $133 million in Q2 2012, $86 million in Q1 2012 and $27 million in Q4 2011. Also includes intangible amortization expense related to purchased credit card relationships (“PCCR”) from the HSBC U.S. card acquisition of $122 million in Q4 2012, $127 million in Q3 2012 and $85 million in Q2 2012. Other asset and intangible amortization expense related to the ING Direct and HSBC U.S. Card acquisitions totaled $48 million in Q4 2012, $42 million in Q3 2012, $41 million in Q2 2012, and $16 million in Q1 2012.

 

(8)	Dividends and undistributed earnings allocated to participating securities and EPS are computed independently for each period. Accordingly, the sum of each quarter may not agree to the year-to-date total.

 

(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 additional information.

 

(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. See “Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for additional information.

 

(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 CCB, ING Direct and HSBC U.S. card 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 Q4 2012 will be provided in the Annual Report on Form 10-K for the year ended December 31, 2012.

 

(21)	Regulatory capital ratios as of the end of Q4 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 additional information.

 

(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 additional information.

 

(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 additional information.

 

(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 additional information.

 

(26)	The previously reported TCE as of the end of Q3 2012 has been revised to exclude noncumulative perpetual preferred stock. See “Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures” for additional information.

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

 

		2012 Q4												2012 Q3												2011 Q4
		Average				Interest Income/				Yield/				Average				Interest Income/				Yield/				Average				Interest Income/				Yield/
(Dollars in millions)(unaudited)		Balance				Expense				Rate				Balance				Expense				Rate				Balance				Expense				Rate
Interest-earning assets:
Cash equivalents and other		$	10,768			$	28				1.04	%		$	6,019			$	18				1.20	%		$	5,685			$	17				1.20	%
Securities available for sale			64,174				361				2.25				57,928				335				2.31				39,005				244				2.50
Loans held for investment			202,944				4,726				9.31				202,856				4,901				9.66				131,581				3,440				10.46
Total interest-earning assets		$	277,886			$	5,115				7.36	%		$	266,803			$	5,254				7.88	%		$	176,271			$	3,701				8.40	%
Interest-bearing liabilities:
Interest-bearing deposits		$	192,122			$	348				0.72	%		$	193,700			$	371				0.77	%		$	109,914			$	264				0.96	%
Securitized debt obligations			12,119				58				1.91				13,331				64				1.92				16,780				80				1.91
Senior and subordinated notes			11,528				85				2.95				11,035				85				3.08				10,237				89				3.48
Other borrowings			20,542				96				1.87				12,085				88				2.91				7,794				86				4.41
Total interest-bearing liabilities		$	236,311			$	587				0.99	%		$	230,151			$	608				1.06	%		$	144,725			$	519				1.43	%
Net interest income/spread						$	4,528				6.37	%						$	4,646				6.82	%						$	3,182				6.97	%
Impact of non-interest bearing funding											0.15												0.15												0.25
Net interest margin											6.52	%											6.97	%											7.22	%

 

		Year Ended December 31,
		2012												2011
		Average				Interest Income/				Yield/				Average				Interest Income/				Yield/
(Dollars in millions)(unaudited)		Balance				Expense				Rate				Balance				Expense				Rate
Interest-earning assets:
Cash equivalents and other		$	9,740			$	98				1.01	%		$	7,328			$	76				1.04	%
Investment securities			57,424				1,329				2.31				39,513				1,137				2.88
Loans held for investment			187,915				17,537				9.33				128,424				13,774				10.73
Total interest-earning assets		$	255,079			$	18,964				7.43	%		$	175,265			$	14,987				8.55	%
Interest-bearing liabilities:
Interest-bearing deposits		$	183,314			$	1,403				0.77	%		$	109,644			$	1,187				1.08	%
Securitized debt obligations			14,138				271				1.92				20,715				422				2.04
Senior and subordinated notes			11,012				345				3.13				9,244				300				3.25
Other borrowings			12,875				356				2.77				8,063				337				4.18
Total interest-bearing liabilities		$	221,339			$	2,375				1.07	%		$	147,666			$	2,246				1.52	%
Net interest income/spread						$	16,589				6.36	%						$	12,741				7.03	%
Impact of non-interest bearing funding											0.14												0.24
Net interest margin											6.50	%											7.27	%

 

Page 5

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CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

 

		2012				2012				2012				2012				2011
(Dollars in millions)(unaudited)		Q4				Q3				Q2				Q1				Q4
Period-end Loans Held For Investment
Credit card:
Domestic credit card		$	83,141			$	80,621			$	80,798			$	53,173			$	56,609
International credit card			8,614				8,412				8,116				8,303				8,466
Total credit card			91,755				89,033				88,914				61,476				65,075
Consumer banking:
Automobile			27,123				26,434				25,251				23,568				21,779
Home loan			44,100				46,275				48,224				49,550				10,433
Retail banking			3,904				4,029				4,140				4,182				4,103
Total consumer banking			75,127				76,738				77,615				77,300				36,315
Commercial banking:(4)
Commercial and multifamily real estate			17,732				16,963				16,254				15,702				15,736
Commercial and industrial			19,892				18,965				18,467				17,761				17,088
Total commercial lending			37,624				35,928				34,721				33,463				32,824
Small-ticket commercial real estate			1,196				1,281				1,335				1,443				1,503
Total commercial banking			38,820				37,209				36,056				34,906				34,327
Other loans			187				152				164				140				175
Total		$	205,889			$	203,132			$	202,749			$	173,822			$	135,892
Average Loans Held For Investment
Credit card:
Domestic credit card		$	80,718			$	80,502			$	71,468			$	54,131			$	54,403
International credit card			8,372				8,154				8,194				8,301				8,361
Total credit card			89,090				88,656				79,662				62,432				62,764
Consumer banking:
Automobile			26,881				25,923				24,487				22,582				21,101
Home loan			45,250				47,262				48,966				29,502				10,683
Retail banking			3,967				4,086				4,153				4,179				4,007
Total consumer banking			76,098				77,271				77,606				56,263				35,791
Commercial banking:(4)
Commercial and multifamily real estate			17,005				16,654				15,838				15,514				14,920
Commercial and industrial			19,344				18,817				18,001				17,038				16,376
Total commercial lending			36,349				35,471				33,839				32,552				31,296
Small-ticket commercial real estate			1,249				1,296				1,388				1,480				1,547
Total commercial banking			37,598				36,767				35,227				34,032				32,843
Other loans			158				162				137				173				183
Total		$	202,944			$	202,856			$	192,632			$	152,900			$	131,581
Net Charge-off Rates(5)
Credit card:
Domestic credit card			4.35	%			3.04	%			2.86	%			3.92	%			4.07	%
International credit card(8)			3.99				4.95				5.49				5.52				5.77
Total credit card			4.32				3.22				3.13				4.14				4.30
Consumer Banking:
Automobile			2.24				1.79				1.11				1.41				2.07
Home loan			(0.06	)			0.28				0.09				0.20				0.90
Retail banking			2.45				1.20				1.27				1.39				1.44
Total consumer banking			0.88				0.83				0.48				0.77				1.65
Commercial banking:(4)
Commercial and multifamily real estate			(0.08	)			(0.05	)			0.18				0.09				0.75
Commercial and industrial			0.13				—				0.10				(0.08	)			0.21
Total commercial lending			0.03				(0.03	)			0.14				—				0.47
Small-ticket commercial real estate			2.02				0.79				1.46				4.24				3.73
Total commercial banking			0.10				—				0.19				0.19				0.62
Other loans			24.23				30.11				18.04				23.30				24.08
Total			2.26	%			1.75	%			1.53	%			2.04	%			2.69	%
30+ Day Performing Delinquency Rates(5)
Credit card:(7)
Domestic credit card			3.61	%			3.52	%			2.79	%			3.25	%			3.66	%
International credit card			3.58				4.92				4.84				5.14				5.18
Total credit card			3.61	%			3.65	%			2.97	%			3.51	%			3.86	%
Consumer Banking:
Automobile			7.00	%			6.12	%			5.20	%			4.87	%			6.88	%
Home loan			0.13				0.15				0.15				0.15				0.89
Retail banking			0.76				0.73				0.69				0.80				0.83
Total consumer banking			2.65	%			2.23	%			1.82	%			1.63	%			4.47	%
Nonperforming Asset Rates(5)(6)
Credit card:(7)
International credit card			1.16	%			—	%			—	%			—	%			—	%
Total credit card			0.11	%			—	%			—	%			—	%			—	%
Consumer banking:
Automobile			0.63	%			0.52	%			0.41	%			0.32	%			0.58	%
Home loan			1.00				0.98				0.94				0.94				4.58
Retail banking			1.85				2.25				2.21				2.25				2.50
Total consumer banking			0.91	%			0.89	%			0.83	%			0.82	%			1.94	%
Commercial banking:(4)
Commercial and multifamily real estate			0.82	%			1.04	%			1.28	%			1.55	%			1.40	%
Commercial and industrial			0.72				0.68				0.81				0.69				0.80
Total commercial lending			0.77	%			0.85	%			1.03	%			1.09	%			1.09	%
Small-ticket commercial real estate			0.97				1.49				1.25				4.35				2.86
Total commercial banking			0.77	%			0.87	%			1.04	%			1.23	%			1.17	%

 

Page 6

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 7: Loan Information and Performance Statistics (Excluding Acquired Loans) ^(1)(2)(3)(5)

 

 

 

		2012				2012				2012				2012				2011
(Dollars in millions)(unaudited)		Q4				Q3				Q2				Q1				Q4
Period-end Loans Held For Investment (Excluding Acquired Loans)
Credit card:
Domestic credit card		$	82,853			$	80,250			$	80,269			$	53,173			$	56,609
International credit card			8,614				8,412				8,116				8,303				8,466
Total credit card			91,467				88,662				88,385				61,476				65,075
Consumer banking:
Automobile			27,106				26,411				25,221				23,530				21,732
Home loan			7,697				7,719				7,582				6,967				6,321
Retail banking			3,870				3,990				4,099				4,142				4,058
Total consumer banking			38,673				38,120				36,902				34,639				32,111
Commercial banking: (4)
Commercial and multifamily real estate			17,605				16,800				16,064				15,490				15,573
Commercial and industrial			19,660				18,729				18,226				17,503				16,770
Total commercial lending			37,265				35,529				34,290				32,993				32,343
Small-ticket commercial real estate			1,196				1,281				1,335				1,443				1,503
Total commercial banking			38,461				36,810				35,625				34,436				33,846
Other loans			154				152				164				140				175
Total		$	168,755			$	163,744			$	161,076			$	130,691			$	131,207
Average Loans Held For Investment (Excluding Acquired Loans)
Credit card:
Domestic credit card		$	80,407			$	80,079			$	71,080			$	54,131			$	54,403
International credit card			8,372				8,154				8,194				8,301				8,361
Total credit card			88,779				88,233				79,274				62,432				62,764
Consumer banking:
Automobile			26,861				25,897				24,454				22,540				21,049
Home loan			8,092				7,996				7,686				6,994				6,483
Retail banking			3,931				4,046				4,110				4,136				3,962
Total consumer banking			38,884				37,939				36,250				33,670				31,494
Commercial banking: (4)
Commercial and multifamily real estate			16,871				16,489				15,646				15,328				14,757
Commercial and industrial			19,115				18,579				17,755				16,750				16,055
Total commercial lending			35,986				35,068				33,401				32,078				30,812
Small-ticket commercial real estate			1,249				1,296				1,388				1,480				1,547
Total commercial banking			37,235				36,364				34,789				33,558				32,359
Other loans			147				162				137				173				183
Total		$	165,045			$	162,698			$	150,450			$	129,833			$	126,800
Net Charge-off Rates (Excluding Acquired Loans)
Credit card:
Domestic credit card			4.37	%			3.06	%			2.87	%			3.92	%			4.07	%
International credit card (8)			3.99				4.95				5.49				5.52				5.77
Total credit card			4.33				3.23				3.14				4.14				4.30
Consumer Banking:
Automobile			2.24				1.79				1.11				1.41				2.07
Home loan			(0.33	)			1.65				0.60				0.82				1.48
Retail banking			2.48				1.22				1.29				1.40				1.46
Total consumer banking			1.73				1.70				1.02				1.29				1.87
Commercial banking: (4)
Commercial and multifamily real estate			(0.08	)			(0.05	)			0.18				0.09				0.76
Commercial and industrial			0.13				—				0.10				(0.08	)			0.22
Total commercial lending			0.03				(0.03	)			0.14				0.01				0.48
Small-ticket commercial real estate			2.02				0.79				1.46				4.24				3.73
Total commercial banking			0.10				—				0.19				0.19				0.63
Other loans			26.05				30.11				18.04				23.30				24.08
Total			2.78	%			2.18	%			1.96	%			2.40	%			2.79	%
30+ Day Performing Delinquency Rates (Excluding Acquired Loans)
Credit card: (7)
Domestic credit card			3.62	%			3.53	%			2.81	%			3.25	%			3.66	%
International credit card			3.58				4.92				4.84				5.14				5.18
Total credit card			3.62	%			3.67	%			2.99	%			3.51	%			3.86	%
Consumer Banking:
Automobile			7.01	%			6.12	%			5.20	%			4.88	%			6.90	%
Home loan			0.77				0.89				0.93				1.10				1.47
Retail banking			0.77				0.74				0.70				0.81				0.84
Total consumer banking			5.14	%			4.50	%			3.82	%			3.63	%			5.06	%
Nonperforming Asset Rates (Excluding Acquired Loans) (5)(6)
Credit card: (7)
International credit card			1.16	%			—	%			—	%			—	%			—	%
Total credit card			0.11	%			—	%			—	%			—	%			—	%
Consumer banking:
Automobile			0.63	%			0.52	%			0.41	%			0.32	%			0.58	%
Home loan			5.69				5.85				5.96				6.66				7.55
Retail banking			1.86				2.27				2.24				2.28				2.52
Total consumer banking			1.76	%			1.78	%			1.75	%			1.83	%			2.20	%
Commercial banking: (4)
Commercial and multifamily real estate			0.83	%			1.05	%			1.29	%			1.57	%			1.42	%
Commercial and industrial			0.72				0.69				0.82				0.70				0.81
Total commercial lending			0.77				0.86				1.04				1.11				1.10
Small-ticket commercial real estate			0.97				1.49				1.25				4.35				2.86
Total commercial banking			0.78	%			0.88	%			1.05	%			1.25	%			1.18	%

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

 

 

		2012				2012				2012				2012				2011
(Dollars in millions) (unaudited)		Q4				Q3				Q2				Q1				Q4
Credit Card
Earnings:
Net interest income		$	2,849			$	2,991			$	2,350			$	1,992			$	1,949
Non-interest income			883				826				771				598				638
Total net revenue			3,732				3,817				3,121				2,590				2,587
Provision for credit losses			1,000				892				1,711				458				600
Non-interest expense			1,933				1,790				1,863				1,268				1,431
Income (loss) from continuing operations before taxes			799				1,135				(453	)			864				556
Income tax provision (benefit)			279				394				(156	)			298				203
Income (loss) from continuing operations, net of tax		$	520			$	741			$	(297	)		$	566			$	353
Selected performance metrics:
Period-end loans held for investment		$	91,755			$	89,033			$	88,914			$	61,476			$	65,075
Average loans held for investment			89,090				88,656				79,662				62,432				62,764
Average yield on loans held for investment			14.33	%			15.03	%			13.42	%			14.41	%			14.12	%
Total net revenue margin			16.76				17.22				15.67				16.59				16.49
Net charge-off rate (5)(8)			4.32				3.22				3.13				4.14				4.30
30+ day delinquency rate (5)			3.61				3.65				2.97				3.51				3.86
Nonperforming loan rate (5)(7)			0.11				—				—				—				—
Purchase volume (9)		$	52,853			$	48,020			$	45,228			$	34,498			$	38,179
Domestic Card
Earnings:
Net interest income		$	2,583			$	2,715			$	2,118			$	1,713			$	1,706
Non-interest income			798				722				708				497				613
Total net revenue			3,381				3,437				2,826				2,210				2,319
Provision for credit losses		$	911				811				1,600				361				519
Non-interest expense			1,727				1,584				1,634				1,052				1,183
Income (loss) from continuing operations before taxes			743				1,042				(408	)			797				617
Income tax provision (benefit)			263				369				(144	)			282				222
Income (loss) from continuing operations, net of tax		$	480			$	673			$	(264	)		$	515			$	395
Selected performance metrics:
Period-end loans held for investment		$	83,141			$	80,621			$	80,798			$	53,173			$	56,609
Average loans held for investment			80,718				80,502				71,468				54,131				54,403
Average yield on loans held for investment			14.20	%			14.88	%			13.33	%			14.11	%			14.05	%
Total net revenue margin			16.75				17.08				15.82				16.33				17.05
Net charge-off rate (5)			4.35				3.04				2.86				3.92				4.07
30+ day delinquency rate (5)			3.61				3.52				2.79				3.25				3.66
Purchase volume (9)		$	48,918			$	44,552			$	41,807			$	31,417			$	34,586
International Card
Earnings:
Net interest income		$	266			$	276			$	232			$	279			$	243
Non-interest income			85				104				63				101				25
Total net revenue			351				380				295				380				268
Provision for credit losses			89				81				111				97				81
Non-interest expense			206				206				229				216				248
Income (loss) from continuing operations before taxes			56				93				(45	)			67				(61	)
Income tax provision (benefit)			16				25				(12	)			16				(19	)
Income (loss) from continuing operations, net of tax		$	40			$	68			$	(33	)		$	51			$	(42	)
Selected performance metrics:
Period-end loans held for investment		$	8,614			$	8,412			$	8,116			$	8,303			$	8,466
Average loans held for investment			8,372				8,154				8,194				8,301				8,361
Average yield on loans held for investment			15.59	%			16.47	%			14.18	%			16.38	%			14.57	%
Total net revenue margin			16.77				18.64				14.40				18.31				12.82
Net charge-off rate (8)			3.99				4.95				5.49				5.52				5.77
30+ day delinquency rate			3.58				4.92				4.84				5.14				5.18
Nonperforming loan rate (7)			1.16				—				—				—				—
Purchase volume (9)		$	3,935			$	3,468			$	3,421			$	3,081			$	3,593

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

		2012				2012				2012				2012				2011
(Dollars in millions) (unaudited)		Q4				Q3				Q2				Q1				Q4
Consumer Banking
Earnings:
Net interest income		$	1,503			$	1,501			$	1,496			$	1,288			$	1,105
Non-interest income			161				260				185				176				152
Total net revenue			1,664				1,761				1,681				1,464				1,257
Provision for credit losses			169				202				44				174				180
Non-interest expense			992				977				959				943				893
Income from continuing operations before taxes			503				582				678				347				184
Income tax provision			178				206				240				123				67
Income from continuing operations, net of tax		$	325			$	376			$	438			$	224			$	117
Selected performance metrics:
Period-end loans held for investment		$	75,127			$	76,738			$	77,615			$	77,300			$	36,315
Average loans held for investment			76,098				77,271				77,606				56,263				35,791
Average yield on loans held for investment			5.94	%			6.05	%			6.17	%			7.20	%			9.46	%
Auto loan originations		$	3,479			$	3,905			$	4,306			$	4,270			$	3,586
Period-end deposits			172,396				173,100				173,966				176,007				88,540
Average deposits			172,654				173,334				174,416				129,915				88,390
Deposit interest expense rate			0.68	%			0.71	%			0.70	%			0.73	%			0.84	%
Core deposit intangible amortization		$	39			$	41			$	42			$	37			$	31
Net charge-off rate(5)			0.88	%			0.83	%			0.48	%			0.77	%			1.65	%
30+ day performing delinquency rate(5)			2.65				2.23				1.82				1.63				4.47
30+ day delinquency rate(5)(10)			**				2.91				2.47				2.25				5.99
Nonperforming loan rate(5)			0.85				0.84				0.79				0.77				1.79
Nonperforming asset rate(5)(6)			0.91				0.89				0.83				0.82				1.94
Period-end loans serviced for others		$	15,333			$	15,659			$	16,108			$	17,586			$	17,998

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 10: Financial & Statistical Summary—Commercial Banking Business⁽³⁾⁽⁴⁾

 

		2012				2012				2012				2012				2011
(Dollars in millions) (unaudited)		Q4				Q3				Q2				Q1				Q4
Commercial Banking
Earnings:
Net interest income		$	450			$	432			$	427			$	431			$	425
Non-interest income			86				87				82				85				87
Total net revenue(11)			536				519				509				516				512
Provision for credit losses			(20	)			(87	)			(94	)			(69	)			76
Non-interest expense			294				253				251				261				254
Income from continuing operations before taxes			262				353				352				324				182
Income tax provision			93				125				124				114				65
Income from continuing operations, net of tax		$	169			$	228			$	228			$	210			$	117
Selected performance metrics:
Period-end loans held for investment		$	38,820			$	37,209			$	36,056			$	34,906			$	34,327
Average loans held for investment			37,598				36,767				35,227				34,032				32,843
Average yield on loans held for investment			4.15	%			4.14	%			4.27	%			4.47	%			4.70	%
Period-end deposits		$	29,866			$	28,670			$	27,784			$	28,046			$	26,683
Average deposits			29,476				28,063				27,943				27,569				26,185
Deposit interest expense rate			0.28	%			0.31	%			0.33	%			0.37	%			0.42	%
Core deposit intangible amortization		$	8			$	8			$	9			$	9			$	9
Net charge-off rate(5)			0.10	%			—	%			0.19	%			0.19	%			0.62	%
Nonperforming loan rate(5)			0.73				0.82				0.99				1.15				1.08
Nonperforming asset rate (5)(6)			0.77				0.87				1.04				1.23				1.17
Risk category:(12)
Noncriticized		$	36,839			$	35,112			$	33,745			$	32,339			$	31,617
Criticized performing			1,340				1,394				1,524				1,695				1,857
Criticized nonperforming			282				305				356				402				372
Total risk-rated loans			38,461				36,811				35,625				34,436				33,846
Acquired commercial loans			359				398				431				470				481
Total commercial loans		$	38,820			$	37,209			$	36,056			$	34,906			$	34,327
% of period-end held for investment commercial loans:
Noncriticized			94.9	%			94.4	%			93.6	%			92.6	%			92.1	%
Criticized performing			3.5				3.7				4.2				4.9				5.4
Criticized nonperforming			0.7				0.8				1.0				1.2				1.1
Total risk-rated loans			99.1				98.9				98.8				98.7				98.6
Acquired commercial loans			0.9				1.1				1.2				1.3				1.4
Total commercial loans			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%

 

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CAPITAL ONE FINANCIAL CORPORATION (COF)

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

 

		2012				2012				2012				2012				2011
(Dollars in millions) (unaudited)		Q4				Q3				Q2				Q1				Q4
Other (4)
Earnings:
Net interest expense		$	(274	)		$	(278	)		$	(272	)		$	(297	)		$	(297	)
Non-interest income			(34	)			(37	)			16				662				(9	)
Total net revenue			(308	)			(315	)			(256	)			365				(306	)
Provision for credit losses			2				7				16				10				5
Non-interest expense			36				25				69				32				40
Income (loss) from continuing operations before taxes			(346	)			(347	)			(341	)			323				(351	)
Income tax benefit			(180	)			(190	)			(165	)			(182	)			(175	)
Income (loss) from continuing operations, net of tax		$	(166	)		$	(157	)		$	(176	)		$	505			$	(176	)
Selected performance metrics:
Period-end loans held for investment		$	187			$	152			$	164			$	140			$	175
Average loans held for investment			158				162				137				173				183
Period-end deposits			10,223				11,485				12,181				12,475				13,003
Average deposits			11,364				11,926				12,555				12,775				13,875
Total
Earnings:
Net interest income		$	4,528			$	4,646			$	4,001			$	3,414			$	3,182
Non-interest income			1,096				1,136				1,054				1,521				868
Total net revenue			5,624				5,782				5,055				4,935				4,050
Provision for credit losses			1,151				1,014				1,677				573				861
Non-interest expense			3,255				3,045				3,142				2,504				2,618
Income from continuing operations before taxes			1,218				1,723				236				1,858				571
Income tax provision			370				535				43				353				160
Income from continuing operations, net of tax		$	848			$	1,188			$	193			$	1,505			$	411
Selected performance metrics:
Period-end loans held for investment		$	205,889			$	203,132			$	202,749			$	173,822			$	135,892
Average loans held for investment			202,944				202,856				192,632				152,900				131,581
Period-end deposits			212,485				213,255				213,931				216,528				128,226
Average deposits			213,494				213,323				214,914				170,259				128,450

 

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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 affordable housing 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)

Loans acquired as part of the CCB, ING Direct and HSBC U.S. card 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 Q4				2012 Q3				2012 Q2				2012 Q1				2011 Q4
Acquired loans accounted for under SOP 03-3:
Period-end unpaid principal balance		$	38,477			$	40,749			$	43,333			$	44,798			$	5,751
Period-end loans held for investment			37,134				39,388				41,673				43,131				4,685
Average loans held for investment			37,899				40,158				42,182				23,067				4,781

 

(6)

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.

 

(7)

As permitted by regulatory guidance, our policy is generally to exempt delinquent credit card loans from being classified as nonperforming. We continue to accrue finance charges and fees on the substantial majority of our credit card loans until the loan is charged off, typically when the account becomes 180 days past due. Effective November 2012, we began classifying UK loans as nonperforming when the account becomes 120 days past due.

 

(8)

The charge-off rate for UK card was impacted by two events in the quarter: i. In November 2012 we began charging off delinquent UK loans for which revolving privileges have been revoked as part of a loan workout when the account becomes 120 past due. We previously charged off such loans in the period the account became 180 days past due. Our revised charge-off policy for these loans is consistent with our charge-off practice for installment loans. As a result of this change, we recorded a cumulative charge-off adjustment which resulted in elevated International Card charge-offs for the month. ii. December 2012 included the impact of excess recoveries due to a high-volume of debt sales.

 

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

 

(10)	The 30+ day total delinquency rate as of the end of Q4 2012 will be provided in our Annual Report on Form 10-K for the year ended December 31, 2012.

 

(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%.

 

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

 

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				2012				2011
(Dollars in millions)(unaudited)		Q4				Q3				Q2				Q1				Q4
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders’ equity		$	40,212			$	38,535			$	37,533			$	32,982			$	29,698
Less: Average intangible assets(1)			(16,340	)			(16,408	)			(15,689	)			(13,931	)			(13,935	)
Noncumulative perpetual preferred stock(2)			(853	)			(456	)			—				—				—
Average tangible common equity(3)		$	23,019			$	21,671			$	21,844			$	19,051			$	15,763
Stockholders’ Equity to Non-GAAP Tangible Common Equity
Total stockholders’ equity		$	40,499			$	39,672			$	37,192			$	36,950			$	29,666
Less: Intangible assets(1)			(16,224	)			(16,323	)			(16,477	)			(14,110	)			(13,908	)
Noncumulative perpetual preferred stock(2)			(853	)			(853	)			—				—				—
Tangible common equity(3)		$	23,422			$	22,496			$	20,715			$	22,840			$	15,758
Total Assets to Tangible Assets
Total assets		$	312,918			$	301,989			$	296,572			$	294,481			$	206,019
Less: Assets from discontinued operations			(309	)			(309	)			(310	)			(304	)			(305	)
Total assets from continuing operations			312,609				301,680				296,262				294,177				205,714
Less: Intangible assets(1)			(16,224	)			(16,323	)			(16,477	)			(14,110	)			(13,908	)
Tangible assets		$	296,385			$	285,357			$	279,785			$	280,067			$	191,806
Non-GAAP TCE Ratio
Tangible common equity(3)		$	23,422			$	22,496			$	20,715			$	22,840			$	15,758
Tangible assets			296,385				285,357				279,785				280,067				191,806
TCE ratio(3)			7.9	%			7.9	%			7.4	%			8.2	%			8.2	%
Regulatory Capital Ratios(4)
Total stockholders’ equity		$	40,499			$	39,672			$	37,192			$	36,950			$	29,666
Less:  Net unrealized (gains) losses on AFS securities recorded in AOCI(5)			(712	)			(752	)			(422	)			(327	)			(289	)
Net (gains) losses on cash flow hedges recorded in AOCI(5)			2				(6	)			34				70				71
Disallowed goodwill and other intangible assets			(14,428	)			(14,497	)			(14,563	)			(14,057	)			(13,855	)
Disallowed deferred tax assets			—				(221	)			(758	)			(902	)			(534	)
Noncumulative perpetual preferred stock(2)			(853	)			(853	)			—				—				—
Other			(12	)			(12	)			(12	)			(3	)			(2	)
Tier 1 common capital			24,496				23,331				21,471				21,731				15,057
Plus:  Noncumulative perpetual preferred stock(2)			853				853				—				—				—
Tier 1 restricted core capital items(6)			2				3,636				3,636				3,636				3,635
Tier 1 capital			25,351				27,820				25,107				25,367				18,692
Plus:  Long-term debt qualifying as Tier 2 capital			2,119				2,119				2,318				2,438				2,438
Qualifying allowance for loan and lease losses			2,819				2,767				2,740				2,314				1,979
Other Tier 2 components			13				17				15				17				23
Tier 2 capital			4,951				4,903				5,073				4,769				4,440
Total risk-based capital(7)		$	30,302			$	32,723			$	30,180			$	30,136			$	23,132
Risk-weighted assets(8)		$	222,546			$	218,390			$	216,341			$	182,704			$	155,657
Tier 1 common ratio(9)			11.0	%			10.7	%			9.9	%			11.9	%			9.7	%
Tier 1 risk-based capital ratio(10)			11.4				12.7				11.6				13.9				12.0
Total risk-based capital ratio(11)			13.6				15.0				14.0				16.5				14.9

 

(1)	Includes impact from related deferred taxes.

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

(3)	TCE ratio calculated based on tangible common equity divided by tangible assets. The previously reported TCE as of the end of Q3 2012 has been revised to exclude noncumulative perpetual preferred stock.

(4)	Regulatory capital ratios as of the end of Q4 2012 are preliminary and therefore subject to change.

(5)	Amounts presented are net of tax.

(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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