CAPITAL ONE FINANCIAL CORPORATION 
By MCLEAN, Va., Jan. 17, 2013 /PRNewswire/ -- 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.
"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.
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.
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 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.
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.
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").
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
(3) the impact of these acquired loans.
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 2012 2011
Q4 Q3 Q4
--- --- ---
Earnings
--------
Net interest income $4,528 $4,646 $3,182
Non-interest income(4) (5) 1,096 1,136 868
----- ----- ---
Total net revenue(6) 5,624 5,782 4,050
Provision for credit losses 1,151 1,014 861
Marketing expenses 393 316 420
Operating expenses(7) 2,862 2,729 2,198
----- ----- -----
Income from continuing operations before income taxes 1,218 1,723 571
Income tax provision 370 535 160
--- --- ---
Income from continuing operations, net of tax 848 1,188 411
Loss from discontinued operations, net of tax(4) (5) (10) (4)
--- --- ---
Net income 843 1,178 407
Dividends and undistributed earnings allocated to participating securities (8) (3) (5) (26)
Preferred stock dividends (15) - -
--- --- ---
Net income available to common stockholders $825 $1,173 $381
==== ====== ====
Common Share Statistics
-----------------------
Basic EPS:(8)
Income from continuing operations, net of tax $1.43 $2.05 $0.89
Loss from discontinued operations, net of tax (0.01) (0.02) (0.01)
----- ----- -----
Net income per common share $1.42 $2.03 $0.88
===== ===== =====
Diluted EPS:(8)
Income from continuing operations, net of tax $1.42 $2.03 $0.89
Loss from discontinued operations, net of tax (0.01) (0.02) (0.01)
----- ----- -----
Net income per common share $1.41 $2.01 $0.88
===== ===== =====
Weighted average common shares outstanding (in millions):
Basic EPS 579.2 578.3 456.2
Diluted EPS 585.6 584.1 458.5
Common shares outstanding (period end, in millions) 582.2 581.3 459.9
Dividends per common share $0.05 $0.05 $0.05
Tangible book value per common share (period end)(9) (26) 40.23 38.70 34.26
Balance Sheet (Period End)
-------------------------
Loans held for investment(10) $205,889 $203,132 $135,892
Interest-earning assets 280,096 270,661 179,878
Total assets 312,918 301,989 206,019
Interest-bearing deposits 190,018 192,488 109,945
Total deposits 212,485 213,255 128,226
Borrowings 49,910 38,377 39,561
Stockholders' equity 40,499 39,672 29,666
Balance Sheet (Quarterly Average Balances)
-----------------------------------------
Average loans held for investment(10) $202,944 $202,856 $131,581
Average interest-earning assets 277,886 266,803 176,271
Average total assets 308,096 297,154 200,106
Average interest-bearing deposits 192,122 193,700 109,914
Average total deposits 213,494 213,323 128,450
Average borrowings 44,189 36,451 34,811
Average stockholders' equity 40,212 38,535 29,698
Performance Metrics
-------------------
Net interest income growth (quarter over quarter) (3)% 16% (3)%
Non-interest income growth(quarter over quarter) (4) 8 -
Total net revenue growth(quarter over quarter) (3) 14 (3)
Total net revenue margin(11) 8.10 8.67 9.19
Net interest margin(12) 6.52 6.97 7.22
Return on average assets(13) 1.10 1.60 0.82
Return on average total stockholders' equity(14) 8.44 12.33 5.54
Return on average tangible common equity(15) (26) 14.74 21.93 10.43
Non-interest expense as a % of average loans held for investment(16) 6.42 6.00 7.96
Efficiency ratio(17) 57.88 52.66 64.64
Effective income tax rate 30.4 31.1 28.0
Full-time equivalent employees (in thousands), period end 39.6 37.6 30.5
Credit Quality Metrics(10) (18)
------------------------------
Allowance for loan and lease losses $5,156 $5,154 $4,250
Allowance as a % of loans held for investment 2.50% 2.54% 3.13%
Allowance as a % of loans held for investment (excluding acquired loans) 3.02 3.11 3.22
Net charge-offs $1,150 $887 $884
Net charge-off rate(19) 2.26% 1.75% 2.69%
Net charge-off rate (excluding acquired loans)(19) 2.78 2.18 2.79
30+ day performing delinquency rate 2.70 2.54 3.35
30+ day performing delinquency rate (excluding acquired loans) 3.29 3.15 3.47
30+ day delinquency rate(20) ** 2.92 3.95
30+ day delinquency rate (excluding acquired loans)(20) ** 3.62 4.09
Capital Ratios (21)
------------------
Tier 1 common ratio(22) 11.0% 10.7% 9.7%
Tier 1 risk-based capital ratio(23) 11.4 12.7 12.0
Total risk-based capital ratio(24) 13.6 15.0 14.9
Tangible common equity ("TCE") ratio(25) (26) 7.9 7.9 8.2
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):
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
CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 3: Consolidated Balance Sheets
December 31, September 30, December 31,
(Dollars in millions)(unaudited) 2012 2012 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
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.
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 $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
(4) in Q4 2012 totaling $20 million.
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
(5) consideration transferred.
Total net revenue was reduced by $318 million in Q4 2012, $185 million in Q3 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 and $133 million
(6) in Q3 2012.
Includes merger-related expenses, including transaction costs, attributable to
acquisitions of $69 million in Q4 2012, $48 million in Q3 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 and $127 million in Q3 2012. Other asset and intangible amortization
expense related to the ING Direct and HSBC U.S. Card acquisitions totaled $48
(7) million in Q4 2012 and $42 million in Q3 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.
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
(18) 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.
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%
==== ====
CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 6: Loan Information and Performance Statistics(1)(2)(3)
2012 2012 2011
(Dollars in millions)(unaudited) Q4 Q3 Q4
------------------------------- --- --- ---
Period-end Loans Held For Investment
------------------------------------
Credit card:
Domestic credit card $83,141 $80,621 $56,609
International credit card 8,614 8,412 8,466
Total credit card 91,755 89,033 65,075
------ ------ ------
Consumer banking:
Automobile 27,123 26,434 21,779
Home loan 44,100 46,275 10,433
Retail banking 3,904 4,029 4,103
Total consumer banking 75,127 76,738 36,315
------ ------ ------
Commercial banking:(4)
Commercial and multifamily real estate 17,732 16,963 15,736
Commercial and industrial 19,892 18,965 17,088
Total commercial lending 37,624 35,928 32,824
Small-ticket commercial real estate 1,196 1,281 1,503
----- ----- -----
Total commercial banking 38,820 37,209 34,327
------ ------ ------
Other loans 187 152 175
Total $205,889 $203,132 $135,892
======== ======== ========
Average Loans Held For Investment
---------------------------------
Credit card:
Domestic credit card $80,718 $80,502 $54,403
International credit card 8,372 8,154 8,361
Total credit card 89,090 88,656 62,764
------ ------ ------
Consumer banking:
Automobile 26,881 25,923 21,101
Home loan 45,250 47,262 10,683
Retail banking 3,967 4,086 4,007
Total consumer banking 76,098 77,271 35,791
------ ------ ------
Commercial banking:(4)
Commercial and multifamily real estate 17,005 16,654 14,920
Commercial and industrial 19,344 18,817 16,376
Total commercial lending 36,349 35,471 31,296
Small-ticket commercial real estate 1,249 1,296 1,547
----- ----- -----
Total commercial banking 37,598 36,767 32,843
------ ------ ------
Other loans 158 162 183
--- --- ---
Total $202,944 $202,856 $131,581
======== ======== ========
Net Charge-off Rates(5)
----------------------
Credit card:
Domestic credit card 4.35% 3.04% 4.07%
International credit card(8) 3.99 4.95 5.77
Total credit card 4.32 3.22 4.30
---- ---- ----
Consumer Banking:
Automobile 2.24 1.79 2.07
Home loan (0.06) 0.28 0.90
Retail banking 2.45 1.20 1.44
Total consumer banking 0.88 0.83 1.65
---- ---- ----
Commercial banking:(4)
Commercial and multifamily real estate (0.08) (0.05) 0.75
Commercial and industrial 0.13 - 0.21
---- --- ----
Total commercial lending 0.03 (0.03) 0.47
Small-ticket commercial real estate 2.02 0.79 3.73
---- ---- ----
Total commercial banking 0.10 - 0.62
---- --- ----
Other loans 24.23 30.11 24.08
----- ----- -----
Total 2.26% 1.75% 2.69%
==== ==== ====
30+ Day Performing Delinquency Rates(5)
--------------------------------------
Credit card:(7)
Domestic credit card 3.61% 3.52% 3.66%
International credit card 3.58 4.92 5.18
Total credit card 3.61% 3.65% 3.86%
---- ---- ----
Consumer Banking:
Automobile 7.00% 6.12% 6.88%
Home loan 0.13 0.15 0.89
Retail banking 0.76 0.73 0.83
Total consumer banking 2.65% 2.23% 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% 0.58%
Home loan 1.00 0.98 4.58
Retail banking 1.85 2.25 2.50
Total consumer banking 0.91% 0.89% 1.94%
---- ---- ----
Commercial banking:(4)
Commercial and multifamily real estate 0.82% 1.04% 1.40%
Commercial and industrial 0.72 0.68 0.80
---- ---- ----
Total commercial lending 0.77% 0.85% 1.09%
Small-ticket commercial real estate 0.97 1.49 2.86
---- ---- ----
Total commercial banking 0.77% 0.87% 1.17%
---- ---- ----
CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 7: Loan Information and Performance Statistics (Excluding Acquired Loans)(1)(2)(3)(5)
2012 2012 2011
(Dollars in millions)(unaudited) Q4 Q3 Q4
------------------------------- --- --- ---
Period-end Loans Held For Investment (Excluding Acquired Loans)
--------------------------------------------------------------
Credit card:
Domestic credit card $82,853 $80,250 $56,609
International credit card 8,614 8,412 8,466
Total credit card 91,467 88,662 65,075
------ ------ ------
Consumer banking:
Automobile 27,106 26,411 21,732
Home loan 7,697 7,719 6,321
Retail banking 3,870 3,990 4,058
Total consumer banking 38,673 38,120 32,111
------ ------ ------
Commercial banking:(4)
Commercial and multifamily real estate 17,605 16,800 15,573
Commercial and industrial 19,660 18,729 16,770
Total commercial lending 37,265 35,529 32,343
Small-ticket commercial real estate 1,196 1,281 1,503
----- ----- -----
Total commercial banking 38,461 36,810 33,846
------ ------ ------
Other loans 154 152 175
Total $168,755 $163,744 $131,207
======== ======== ========
Average Loans Held For Investment (Excluding Acquired Loans)
-----------------------------------------------------------
Credit card:
Domestic credit card $80,407 $80,079 $54,403
International credit card 8,372 8,154 8,361
Total credit card 88,779 88,233 62,764
------ ------ ------
Consumer banking:
Automobile 26,861 25,897 21,049
Home loan 8,092 7,996 6,483
Retail banking 3,931 4,046 3,962
Total consumer banking 38,884 37,939 31,494
------ ------ ------
Commercial banking:(4)
Commercial and multifamily real estate 16,871 16,489 14,757
Commercial and industrial 19,115 18,579 16,055
Total commercial lending 35,986 35,068 30,812
Small-ticket commercial real estate 1,249 1,296 1,547
----- ----- -----
Total commercial banking 37,235 36,364 32,359
------ ------ ------
Other loans 147 162 183
--- --- ---
Total $165,045 $162,698 $126,800
======== ======== ========
Net Charge-off Rates (Excluding Acquired Loans)
----------------------------------------------
Credit card:
Domestic credit card 4.37% 3.06% 4.07%
International credit card(8) 3.99 4.95 5.77
Total credit card 4.33 3.23 4.30
---- ---- ----
Consumer Banking:
Automobile 2.24 1.79 2.07
Home loan (0.33) 1.65 1.48
Retail banking 2.48 1.22 1.46
Total consumer banking 1.73 1.70 1.87
---- ---- ----
Commercial banking:(4)
Commercial and multifamily real estate (0.08) (0.05) 0.76
Commercial and industrial 0.13 - 0.22
---- --- ----
Total commercial lending 0.03 (0.03) 0.48
---- ----- ----
Small-ticket commercial real estate 2.02 0.79 3.73
Total commercial banking 0.10 - 0.63
---- --- ----
Other loans 26.05 30.11 24.08
----- ----- -----
Total 2.78% 2.18% 2.79%
==== ==== ====
30+ Day Performing Delinquency Rates (Excluding Acquired Loans)
--------------------------------------------------------------
Credit card:(7)
Domestic credit card 3.62% 3.53% 3.66%
International credit card 3.58 4.92 5.18
Total credit card 3.62% 3.67% 3.86%
---- ---- ----
Consumer Banking:
Automobile 7.01% 6.12% 6.90%
Home loan 0.77 0.89 1.47
Retail banking 0.77 0.74 0.84
Total consumer banking 5.14% 4.50% 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% 0.58%
Home loan 5.69 5.85 7.55
Retail banking 1.86 2.27 2.52
Total consumer banking 1.76% 1.78% 2.20%
---- ---- ----
Commercial banking:(4)
Commercial and multifamily real estate 0.83% 1.05% 1.42%
Commercial and industrial 0.72 0.69 0.81
---- ---- ----
Total commercial lending 0.77 0.86 1.10
Small-ticket commercial real estate 0.97 1.49 2.86
---- ---- ----
Total commercial banking 0.78% 0.88% 1.18%
---- ---- ----
CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 8: Financial & Statistical Summary-Credit Card Business(2)
2012 2012 2011
(Dollars
in
millions)
(unaudited) Q4 Q3 Q4
----------- --- --- ---
Credit
Card
------
Earnings:
Net
interest
income $2,849 $2,991 $1,949
Non-
interest
income 883 826 638
--- --- ---
Total
net
revenue 3,732 3,817 2,587
Provision
for
credit
losses 1,000 892 600
Non-
interest
expense 1,933 1,790 1,431
----- ----- -----
Income
(loss)
from
continuing
operations
before
taxes 799 1,135 556
Income
tax
provision
(benefit) 279 394 203
--- --- ---
Income
(loss)
from
continuing
operations,
net
of
tax $520 $741 $353
==== ==== ====
Selected
performance
metrics:
Period-
end
loans
held
for
investment $91,755 $89,033 $65,075
Average
loans
held
for
investment 89,090 88,656 62,764
Average
yield
on
loans
held
for
investment 14.33% 15.03% 14.12%
Total
net
revenue
margin 16.76 17.22 16.49
Net
charge-
off
rate(5)(8) 4.32 3.22 4.30
30+
day
delinquency
rate(5) 3.61 3.65 3.86
Nonperforming
loan
rate(5)(7) 0.11 - -
Purchase
volume(9) $52,853 $48,020 $38,179
Domestic
Card
--------
Earnings:
Net
interest
income $2,583 $2,715 $1,706
Non-
interest
income 798 722 613
--- --- ---
Total
net
revenue 3,381 3,437 2,319
Provision
for
credit
losses $911 811 519
Non-
interest
expense 1,727 1,584 1,183
----- ----- -----
Income
(loss)
from
continuing
operations
before
taxes 743 1,042 617
Income
tax
provision
(benefit) 263 369 222
--- --- ---
Income
(loss)
from
continuing
operations,
net
of
tax $480 $673 $395
==== ==== ====
Selected
performance
metrics:
Period-
end
loans
held
for
investment $83,141 $80,621 $56,609
Average
loans
held
for
investment 80,718 80,502 54,403
Average
yield
on
loans
held
for
investment 14.20% 14.88% 14.05%
Total
net
revenue
margin 16.75 17.08 17.05
Net
charge-
off
rate(5) 4.35 3.04 4.07
30+
day
delinquency
rate(5) 3.61 3.52 3.66
Purchase
volume(9) $48,918 $44,552 $34,586
International
Card
-------------
Earnings:
Net
interest
income $266 $276 $243
Non-
interest
income 85 104 25
--- --- ---
Total
net
revenue 351 380 268
Provision
for
credit
losses 89 81 81
Non-
interest
expense 206 206 248
--- --- ---
Income
(loss)
from
continuing
operations
before
taxes 56 93 (61)
Income
tax
provision
(benefit) 16 25 (19)
--- --- ---
Income
(loss)
from
continuing
operations,
net
of
tax $40 $68 $(42)
=== === ====
Selected
performance
metrics:
Period-
end
loans
held
for
investment $8,614 $8,412 $8,466
Average
loans
held
for
investment 8,372 8,154 8,361
Average
yield
on
loans
held
for
investment 15.59% 16.47% 14.57%
Total
net
revenue
margin 16.77 18.64 12.82
Net
charge-
off
rate(8) 3.99 4.95 5.77
30+
day
delinquency
rate 3.58 4.92 5.18
Nonperforming
loan
rate(7) 1.16 - -
Purchase
volume(9) $3,935 $3,468 $3,593
CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 9: Financial & Statistical Summary-Consumer Banking Business(3)
2012 2012 2011
(Dollars in millions) (unaudited) Q4 Q3 Q4
-------------------------------- --- --- ---
Consumer Banking
----------------
Earnings:
Net interest income $1,503 $1,501 $1,105
Non-interest income 161 260 152
Total net revenue 1,664 1,761 1,257
Provision for credit losses 169 202 180
Non-interest expense 992 977 893
Income from continuing operations before taxes 503 582 184
Income tax provision 178 206 67
Income from continuing operations, net of tax $325 $376 $117
Selected performance metrics:
Period-end loans held for investment $75,127 $76,738 $36,315
Average loans held for investment 76,098 77,271 35,791
Average yield on loans held for investment 5.94% 6.05% 9.46%
Auto loan originations $3,479 $3,905 $3,586
Period-end deposits 172,396 173,100 88,540
Average deposits 172,654 173,334 88,390
Deposit interest expense rate 0.68% 0.71% 0.84%
Core deposit intangible amortization $39 $41 $31
Net charge-off rate(5) 0.88% 0.83% 1.65%
30+ day performing delinquency rate(5) 2.65 2.23 4.47
30+ day delinquency rate(5)(10) ** 2.91 5.99
Nonperforming loan rate(5)(10) 0.85 0.84 1.79
Nonperforming asset rate(5)(6) 0.91 0.89 1.94
Period-end loans serviced for others $15,333 $15,659 $17,998
CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 10: Financial & Statistical Summary-Commercial Banking Business(3)(4)
2012 2012 2011
(Dollars in millions)
(unaudited) Q4 Q3 Q4
--- --- ---
Commercial Banking
------------------
Earnings:
Net interest income $450 $432 $425
Non-interest income 86 87 87
Total net revenue(11) 536 519 512
Provision for credit losses (20) (87) 76
Non-interest expense 294 253 254
Income from continuing operations
before taxes 262 353 182
Income tax provision 93 125 65
Income from continuing operations,
net of tax $169 $228 $117
Selected performance metrics:
Period-end loans held for investment $38,820 $37,209 $34,327
Average loans held for investment 37,598 36,767 32,843
Average yield on loans held for
investment 4.15% 4.14% 4.70%
Period-end deposits $29,866 $28,670 $26,683
Average deposits 29,476 28,063 26,185
Deposit interest expense rate 0.28% 0.31% 0.42%
Core deposit intangible amortization $8 $8 $9
Net charge-off rate(5) 0.10% - % 0.62%
Nonperforming loan rate(5) 0.73 0.82 1.08
Nonperforming asset rate (5)(6) 0.77 0.87 1.17
Risk category:(12)
Noncriticized $36,839 $35,112 $31,617
Criticized performing 1,340 1,394 1,857
Criticized nonperforming 282 305 372
Total risk-rated loans 38,461 36,811 33,846
Acquired commercial loans 359 398 481
Total commercial loans $38,820 $37,209 $34,327
% of period-end held for investment
commercial loans:
Noncriticized 94.9% 94.4% 92.1%
Criticized performing 3.5 3.7 5.4
Criticized nonperforming 0.7 0.8 1.1
Total risk-rated loans 99.1 98.9 98.6
Acquired commercial loans 0.9 1.1 1.4
Total commercial loans 100.0% 100.0% 100.0%
CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 11: Financial & Statistical Summary-Other and Total(2)(3)
2012 2012 2011
(Dollars in millions)
(unaudited) Q4 Q3 Q4
--- --- ---
Other (4)
--------
Earnings:
Net interest expense $(274) $(278) $(297)
Non-interest income (34) (37) (9)
Total net revenue (308) (315) (306)
Provision for credit losses 2 7 5
Non-interest expense 36 25 40
Income (loss) from continuing
operations before taxes (346) (347) (351)
Income tax benefit (180) (190) (175)
Income (loss) from continuing
operations, net of tax $(166) $(157) $(176)
Selected performance
metrics:
Period-end loans held for
investment $187 $152 $175
Average loans held for
investment 158 162 183
Period-end deposits 10,223 11,485 13,003
Average deposits 11,364 11,926 13,875
Total
-----
Earnings:
Net interest income $4,528 $4,646 $3,182
Non-interest income 1,096 1,136 868
Total net revenue 5,624 5,782 4,050
Provision for credit losses 1,151 1,014 861
Non-interest expense 3,255 3,045 2,618
Income from continuing
operations before taxes 1,218 1,723 571
Income tax provision 370 535 160
Income from continuing
operations, net of tax $848 $1,188 $411
Selected performance
metrics:
Period-end loans held for
investment $205,889 $203,132 $135,892
Average loans held for
investment 202,944 202,856 131,581
Period-end deposits 212,485 213,255 128,226
Average deposits 213,494 213,323 128,450
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.
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
(4) segment. Prior period amounts have been recast to conform to the current period presentation.
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
(5) presented in Table 7. The table below presents amounts related to these acquired loans.
2012 2012 2011
(Dollars in millions) (unaudited) Q4 Q3 Q4
-------------------------------- --- --- ---
Acquired loans accounted for under
SOP 03-3:
Period-end unpaid principal balance $38,477 $40,749 $5,751
Period-end loans held for investment 37,134 39,388 4,685
Average loans held for investment 37,899 40,158 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.
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
(7) nonperforming when the account becomes 120 days past due.
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
(8) 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.
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 2011
(Dollars in millions)(unaudited) Q4 Q3 Q4
--- --- ---
Average Equity to Non-GAAP Average Tangible Common Equity
---------------------------------------------------------
Average total stockholders' equity $40,212 $38,535 $29,698
Less: Average intangible assets(1) (16,340) (16,408) (13,935)
Noncumulative perpetual preferred stock(2) (853) (456) -
Average tangible common equity(3) $23,019 $21,671 $15,763
======= ======= =======
Stockholders' Equity to Non-GAAP Tangible Common Equity
-------------------------------------------------------
Total stockholders' equity $40,499 $39,672 $29,666
Less: Intangible assets(1) (16,224) (16,323) (13,908)
Noncumulative perpetual preferred stock(2) (853) (853) -
Tangible common equity(3) $23,422 $22,496 $15,758
======= ======= =======
Total Assets to Tangible Assets
-------------------------------
Total assets $312,918 $301,989 $206,019
Less: Assets from discontinued operations (309) (309) (305)
---- ---- ----
Total assets from continuing operations 312,609 301,680 205,714
Less: Intangible assets(1) (16,224) (16,323) (13,908)
Tangible assets $296,385 $285,357 $191,806
======== ======== ========
Non-GAAP TCE Ratio
------------------
Tangible common equity(3) $23,422 $22,496 $15,758
Tangible assets 296,385 285,357 191,806
TCE ratio(3) 7.9% 7.9% 8.2%
Regulatory Capital Ratios(4)
---------------------------
Total stockholders' equity $40,499 $39,672 $29,666
Less: Net unrealized (gains) losses on AFS securities recorded in AOCI(5) (712) (752) (289)
Net (gains) losses on cash flow hedges recorded in AOCI(5) 2 (6) 71
Disallowed goodwill and other intangible assets (14,428) (14,497) (13,855)
Disallowed deferred tax assets - (221) (534)
Noncumulative perpetual preferred stock(2) (853) (853) -
Other (12) (12) (2)
Tier 1 common capital 24,496 23,331 15,057
Plus: Noncumulative perpetual preferred stock(2) 853 853 -
Tier 1 restricted core capital items(6) 2 3,636 3,635
Tier 1 capital 25,351 27,820 18,692
------ ------ ------
Plus: Long-term debt qualifying as Tier 2 capital 2,119 2,119 2,438
Qualifying allowance for loan and lease losses 2,819 2,767 1,979
Other Tier 2 components 13 17 23
Tier 2 capital 4,951 4,903 4,440
----- ----- -----
Total risk-based capital(7) $30,302 $32,723 $23,132
======= ======= =======
Risk-weighted assets(8) $222,546 $218,390 $155,657
======== ======== ========
Tier 1 common ratio(9) 11.0% 10.7% 9.7%
Tier 1 risk-based capital ratio(10) 11.4 12.7 12.0
Total risk-based capital ratio(11) 13.6 15.0 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.
SOURCE Capital One Financial Corporation
