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Capital One Reports Fourth Quarter 2011 Net Income of $407 million, or $0.88 per share
Earnings for full year 2011 were $3.1 billion, or $6.80 per share
Compared to full year 2010, earnings were up $404 million, or 15 percent

 

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MCLEAN, Va., Jan. 19, 2012 /PRNewswire/ --

  • Fourth quarter loan balances up 4.6 percent from third quarter and up 7.9 percent from prior year’s fourth quarter
  • Revenue down modestly in fourth quarter due to absence of Q3 finance charge and fee reserve release and Q4 impact of UK reserve, revenue up modestly excluding these items
  • Non-interest expense up, driven by increased marketing and operating expenses
  • Continued balance sheet strength; Tier 1 Common Equity Ratio near 10 percent

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

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

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

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

Total Company Results

Loan and Deposit Balances

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

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

Revenues

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

Margins

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

Non-Interest Expense

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

Pre-Provision Income (before tax)

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

Provision Expense

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

Net Income

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

Capital Ratios

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

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

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

Business Segment Results

Credit Card Highlights

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

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

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

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

Commercial Banking Highlights

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

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

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

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

Consumer Banking Highlights

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

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

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

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

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

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

Forward-looking statements

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

Certain statements in this release are forward-looking statements, including those that discuss, among other things, strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, expenses, capital measures, accruals for claims in litigation and for other claims against the company, earnings per share or other financial measures for the company; future financial and operating results; the company's plans, objectives, expectations and intentions; the projected impact and benefits of the pending transactions involving the company, HSBC and ING Direct (the "transactions"); and the assumptions that underlie these matters.  To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking information provided by the Private Securities Litigation Reform Act of 1995. Numerous factors could cause the company's actual results to differ materially from those described in such forward-looking statements, including, among other things: general economic and business conditions in the U.S., the U.K., Canada or the company's local markets, including conditions affecting employment levels, interest rates, consumer income and confidence, spending and savings that may affect consumer bankruptcies, defaults, charge-offs and deposit activity; an increase or decrease in credit losses (including increases due to a worsening of general economic conditions in the credit environment); the possibility that regulatory and other approvals and conditions to either of the transactions are not obtained or satisfied on a timely basis or at all; the possibility that modifications to the terms of either of the transactions may be required in order to obtain or satisfy such approvals or conditions; the possibility that the company will not receive third-party consents necessary to fully realize the anticipated benefits of the transactions; the possibility that the company may not fully realize the projected cost savings and other projected benefits of the transactions; changes in the anticipated timing for closing either of the transactions; difficulties and delays in integrating the assets and businesses acquired in the transactions; business disruption during the pendency of or following the transactions; the inability to sustain revenue and earnings growth; diversion of management time on issues related to the transactions; reputational risks and the reaction of customers and counterparties to the transactions; disruptions relating to the transactions negatively impacting the company's ability to maintain relationships with customers, employees and suppliers; changes in asset quality and credit risk as a result of the transactions; financial, legal, regulatory, tax or accounting changes or actions, including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder; developments, changes or actions relating to any  litigation matter involving the company; increases or decreases in interest rates; the company's ability to access the capital markets at attractive rates and terms to capitalize and fund its operations and future growth; the success of the company's marketing efforts in attracting and retaining customers; increases or decreases in the company's aggregate loan balances or the number of customers and the growth rate and composition thereof, including increases or decreases resulting from factors such as shifting product mix, amount of actual marketing expenses the company incurs and attrition of loan balances; the level of future repurchase or indemnification requests the company may receive, the actual future performance of mortgage loans relating to such requests, the success rates of claimants against the company, any developments in litigation and the actual recoveries the company may make on any collateral relating to claims against the company; the amount and rate of deposit growth; changes in the reputation of or expectations regarding the financial services industry or the company with respect to practices, products or financial condition; any significant disruption in the company's operations or technology platform; the company's ability to maintain a compliance infrastructure suitable for its size and complexity; the company's ability to control costs; the amount of, and rate of growth in, the company's expenses as its business develops or changes or as it expands into new market areas; the company's ability to execute on its strategic and operational plans; any significant disruption of, or loss of public confidence in, the United States Mail service affecting the company's response rates and consumer payments; the company's ability to recruit and retain experienced personnel to assist in the management and operations of new products and services; changes in the labor and employment markets; fraud or misconduct by the company's customers, employees or business partners; competition from providers of products and services that compete with the company's businesses; and other risk factors set forth from time to time in reports that the company files with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2010, and Exhibit 99.5 to the Current Report on Form 8-K filed on July 13, 2011.

About Capital One

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






Exhibit 99.2

Capital One Financial Corporation

Financial Supplement

Fourth Quarter 2011 (1)

Table of Contents










Page

Capital One Financial Consolidated



Table   1:  


Financial & Statistical Summary - Consolidated

1


Table   2:


Notes to Consolidated Financial & Statistical Summary (Table 1)

2


Table   3:


Consolidated Statements of Income

3


Table   4:


Consolidated Balance Sheets

4


Table   5:


Average Balances, Net Interest Income and Net Interest Margin

5


Table   6:


Loan Information and Performance Statistics

6

Business Segment Detail



Table   7:


Financial & Statistical Summary - Credit Card Business

7


Table   8:


Financial & Statistical Summary - Consumer Banking Business

8


Table   9:


Financial & Statistical Summary - Commercial Banking Business

9


Table 10:


Financial & Statistical Summary - Other and Total

10


Table 11:


Notes to Loan and Business Segment Disclosures (Tables 6 - 10)

11

Other





Table 12:


Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures

12
















(1)

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





CAPITAL ONE FINANCIAL CORPORATION (COF)








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


















2011


2011


2011


(Dollars in millions, except per share data and as noted) (unaudited)


Q4


Q3


Q2


Earnings








Net interest income


$                      3,182


$                      3,283


$                      3,136


Non-interest income (2) (3)


868


871


857


Total revenue (4)


$                      4,050


$                      4,154


$                      3,993


Provision for loan and lease losses


861


622


343


Marketing expenses


420


312


329


Operating expenses (5)


2,198


1,985


1,926


Income from continuing operations before income taxes


$                         571


$                      1,235


$                      1,395


Income tax provision


160


370


450


Income from continuing operations, net of tax


411


865


945


Loss from discontinued operations, net of tax (3)


(4)


(52)


(34)


Net income


$                         407


$                         813


$                         911










Common Share Statistics








Basic EPS:








  Income from continuing operations, net of tax


$                        0.89


$                        1.89


$                        2.07


  Loss from discontinued operations, net of tax


(0.01)


(0.11)


(0.07)


  Net income per common share


$                        0.88


$                        1.78


$                        2.00


Diluted EPS:








  Income from continuing operations, net of tax


$                        0.89


$                        1.88


$                        2.04


  Loss from discontinued operations, net of tax


(0.01)


(0.11)


(0.07)


  Net income per common share


$                        0.88


$                        1.77


$                        1.97


Weighted average common shares outstanding (in millions):








  Basic EPS


456.2


456.0


455.6


  Diluted EPS


458.5


460.4


462.2


Common shares outstanding (period end)


456.4


456.1


455.8


Dividends per common share


$                        0.05


$                        0.05


$                        0.05


Tangible book value per common share (period end) (6)


34.26


33.82


32.20


Stock price per common share (period end)


42.29


39.63


51.67


Total market capitalization (period end)


19,301


18,075


23,551










Balance Sheet (Period End)








Loans held for investment (7)


$                  135,892


$                  129,952


$                  128,965


Interest-earning assets


179,817


174,308


174,302


Total assets


206,019


200,148


199,753


Tangible assets (8)


191,806


185,891


185,715


Interest-bearing deposits


109,945


110,777


109,278


Total deposits


128,226


128,318


126,117


Borrowings


39,561


34,315


37,735


Stockholders' equity


29,666


29,378


28,681


Tangible common equity (TCE) (9)


15,758


15,425


14,675










Balance Sheet (Quarterly Average Balances)








Average loans held for investment (7)


$                  131,581


$                  129,043


$                  127,916


Average interest-earning assets


176,267


177,710


174,143


Average total assets


200,106


201,611


199,229


Average interest-bearing deposits


109,914


110,750


109,251


Average total deposits


128,450


128,268


125,834


Average borrowings


34,812


37,366


39,451


Average stockholders' equity


29,698


29,316


28,255










Performance Metrics








Net interest income growth (quarter over quarter)


(3)

%

5

%

-

%

Non-interest income growth (quarter over quarter)


-


2


(9)


Revenue growth (quarter over quarter)


(3)


4


(2)


Revenue margin (10)


9.19


9.35


9.17


Net interest margin (11)


7.22


7.39


7.20


Return on average assets (12)


0.82


1.72


1.90


Return on average equity (13)


5.54


11.80


13.38


Return on average tangible common equity (14)


10.43


22.58


26.57


Non-interest expense as a % of average loans held for investment (15)


7.96


7.12


7.05


Efficiency ratio (16)


64.64


55.30


56.47


Effective income tax rate


28.0


30.0


32.3


Full-time equivalent employees (in thousands)


30.5


29.5


28.2










Credit Quality Metrics (17)








Allowance for loan and lease losses


$                      4,250


$                      4,280


$                      4,488


Allowance as a % of loans held for investment


3.13

%

3.29

%

3.48

%

Net charge-offs


$                         884


$                         812


$                         931


Net charge-off rate (18) (19)


2.69

%

2.52

%

2.91

%  

30+ day performing delinquency rate


3.35


3.13


2.90


30+ day total delinquency rate (20)


-


3.81


3.57










Capital Ratios








Tier 1 risk-based capital ratio (21)


12.0

%

12.4

%

11.8

%  

Tier 1 common equity ratio (22)


9.7


10.0


9.4


Total risk-based capital ratio (23)


14.9


15.4


15.0


Tangible common equity (TCE) ratio (24)


8.2


8.3


7.9






CAPITAL ONE FINANCIAL CORPORATION (COF)








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


















(1)

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











(2)

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











(3)

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











(4)

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











(5)

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











(6)

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











(7)

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











(8)

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











(9)

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











(10)

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











(11)

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











(12)

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











(13)

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











(14)

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











(15)

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











(16)

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











(17)

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















2011


2011


2011



(Dollars in millions) (unaudited)


Q4


Q3


Q2



CCB period-end acquired loan portfolio



$        4,689


$        4,873


$        5,181



CCB average acquired loan portfolio


4,781


4,998


5,112



Allowance as a % of loans held for investment, excluding CCB loans


3.22

%

3.40

%

3.62

%


Net charge-off rate, excluding CCB loans


2.79


2.62


3.03



30+ day performing delinquency rate, excluding CCB loans


3.47


3.25


3.02












(18)

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











(19)

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











(20)

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



(21)

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











(22)

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

.










(23)

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











(24)

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





CAPITAL ONE FINANCIAL CORPORATION (COF) 

Table 3:  Consolidated Statements of Income








Year Ended



2011
Q4


2011
Q3


2010
Q4




December 31,
2011


December 31,
2010

(Dollars in millions, except per share data) (unaudited)





















Interest income:













Loans held for investment, including past-due fees


$      3,440


$      3,550


$      3,352




$      13,774


$      13,934

Investment securities


244


264


305




1,137


1,342

Cash equivalents and other


17


21


17




76


77


Total interest income


3,701


3,835


3,674




14,987


15,353














Interest expense:













Deposits 


264


294


340




1,187


1,465

Securitized debt obligations


80


89


165




422


809

Senior and subordinated notes


89


84


65




300


276

Other borrowings


86


85


81




337


346


Total interest expense


519


552


651




2,246


2,896














Net interest income


3,182


3,283


3,023




12,741


12,457

Provision for loan and lease losses


861


622


838




2,360


3,907

Net interest income after provision for loan and lease losses


2,321


2,661


2,185




10,381


8,550














Non-interest income:













Servicing and securitizations


9


12


10




44


7

Service charges and other customer-related fees


452


542


496




1,979


2,073

Interchange fees, net


346


321


349




1,318


1,340

Net other-than-temporary impairment losses recognized in earnings


(6)


(6)


(3)




(21)


(65)

Other 


67


2


87




218


359


Total non-interest income


868


871


939




3,538


3,714














Non-interest expense:













Salaries and associate benefits


817


750


657




3,023


2,594

Marketing 


420


312


308




1,337


958

Communications and data processing


177


178


181




681


693

Supplies and equipment


137


143


139




539


520

Occupancy 


131


122


115




490


486

Other 


936


792


691




3,262


2,683


Total non-interest expense


2,618


2,297


2,091




9,332


7,934

Income from continuing operations before income taxes


571


1,235


1,033




4,587


4,330

Income tax provision


160


370


332




1,334


1,280

Income from continuing operations, net of tax


411


865


701




3,253


3,050

Loss from discontinued operations, net of tax


(4)


(52)


(4)




(106)


(307)

Net income 


$      407


$       813


$      697




$        3,147


$        2,743














Basic earnings per common share:













 Income from continuing operations


$      0.89


$      1.89


$     1.55




$          7.08


$          6.74

 Loss from discontinued operations


(0.01)


(0.11)


(0.01)




(0.23)


(0.67)

 Net income per basic common share


$      0.88


$      1.78


$     1.54




$          6.85


$          6.07














Diluted earnings per common share:













 Income from continuing operations


$      0.89


$      1.88


$     1.53




$          7.03


$          6.68

 Loss from discontinued operations


(0.01)


(0.11)


(0.01)




(0.23)


(0.67)

 Net income per diluted common share


$      0.88


$      1.77


$     1.52




$          6.80


$          6.01














Weighted average common shares outstanding (in millions):













  Basic EPS 


456.2


456.0


452.7




455.5


452.1

  Diluted EPS


458.5


460.4


457.2




459.1


456.4














Dividends paid per common share


$      0.05


$      0.05


$      0.05




$                        0.20


$          0.20





CAPITAL ONE FINANCIAL CORPORATION (COF) 







Table 4:  Consolidated Balance Sheets


























December 31,


September  30,


December 31,

(Dollars in millions)(unaudited)


2011


2011


2010









Assets:







Cash and due from banks


$                      2,097


$                      1,794


$                      2,067

Interest-bearing deposits with banks


3,399


3,238


2,776

Federal funds sold and securities purchased under agreements to resell


342


1,326


406


Cash and cash equivalents


5,838


6,358


5,249

Restricted cash for securitization investors


791


984


1,602

Securities available for sale, at fair value


38,759


38,400


41,537

Loans held for investment:








Unsecuritized loans held for investment, at amortized cost


88,242


83,010


71,921


Restricted loans for securitization investors


47,650


46,942


54,026


Total loans held for investment


135,892


129,952


125,947


   Less: Allowance for loan and lease losses


(4,250)


(4,280)


(5,628)


Net loans held for investment


131,642


125,672


120,319

Loans held for sale, at lower-of-cost-or-fair-value


201


312


228

Accounts receivable from securitizations


94


101


118

Premises and equipment, net


2,748


2,785


2,749

Interest receivable


1,029


958


1,070

Goodwill


13,592


13,593


13,591

Other


11,325


10,985


11,040


Total assets


$                  206,019


$                  200,148


$                  197,503

















Liabilities:







Interest payable


$                         466


$                         401


$                         488

Customer deposits:








Non-interest bearing deposits


18,281


17,541


15,048


Interest-bearing deposits


109,945


110,777


107,162


Total customer deposits


128,226


128,318


122,210

Securitized debt obligations


16,527


17,120


26,915

Other debt:








Federal funds purchased and securities loaned or sold under agreements to repurchase


1,464


1,441


1,517


Senior and subordinated notes


11,034


11,051


8,650


Other borrowings


10,536


4,703


4,714


Total other debt


23,034


17,195


14,881

Other liabilities


8,100


7,736


6,468


Total liabilities


176,353


170,770


170,962









Stockholders' equity:







Common stock


5


5


5

Paid-in capital, net


19,274


19,234


19,084

Retained earnings and accumulated other comprehensive income


13,631


13,382


10,654

Less:  Treasury stock, at cost


(3,244)


(3,243)


(3,202)


Total stockholders' equity


29,666


29,378


26,541


Total liabilities and stockholders' equity


$                  206,019


$                  200,148


$                  197,503




CAPITAL ONE FINANCIAL CORPORATION (COF)

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





















































2011 Q4



2011 Q3



2010 Q4






Average


Interest Income/


Yield/



Average


Interest Income/


Yield/



Average


Interest Income/


Yield/


(Dollars in millions)(unaudited)


Balance


Expense


Rate



Balance


Expense


Rate



Balance


Expense


Rate


Interest-earning assets:























Loans held for investment


$  131,581


$  3,440


10.46

%


$  129,043


$  3,550


11.00

%


$  125,441


$  3,352


10.69

%


Investment securities


39,005


244


2.50



37,189


264


2.84



41,004


305


2.98



Cash equivalents and other


5,681


17


1.20



11,478


21


0.73



7,547


17


0.90


Total interest-earning assets


$  176,267


$  3,701


8.40

%


$  177,710


$  3,835


8.63

%


$  173,992


$  3,674


8.45

%

























Interest-bearing liabilities:























Interest-bearing deposits
























NOW accounts


$  13,700


$       12


0.35

%


$    12,602


$         9


0.29

%


$    12,918


$         8


0.25

%



Money market deposit accounts


47,167


87


0.74



47,483


100


0.84



43,822


110


1.00




Savings accounts


31,422


47


0.60



30,944


56


0.72



25,121


54


0.86




Other consumer time deposits


12,264


77


2.51



13,530


84


2.48



16,941


112


2.64




Public fund CD's of $100,000 or more


84


1


4.76



92


1


4.35



204


1


1.96




CD's of $100,000 or more


4,748


39


3.29



5,407


43


3.18



6,696


54


3.23




Foreign time deposits


529


1


0.76



692


1


0.58



895


1


0.45



Total interest-bearing deposits


$  109,914


$     264


0.96

%


$  110,750


$     294


1.06

%


$  106,597


$     340


1.28

%


Securitized debt obligations


16,780


80


1.91



18,478


89


1.93



27,708


165


2.38



Senior and subordinated notes


10,237


89


3.48



10,519


84


3.19



8,096


65


3.21



Other borrowings


7,794


86


4.41



8,369


85


4.06



6,624


81


4.89


Total interest-bearing liabilities


$  144,725


$     519


1.43

%


$  148,116


$     552


1.49

%


$  149,025


$     651


1.75

%

























Net interest income/spread




$  3,182


6.97

%




$  3,283


7.14

%




$  3,023


6.70

%

























Impact of non-interest bearing funding






0.25

%






0.25

%






0.25

%

Net interest margin






7.22

%






7.39

%






6.95

%





CAPITAL ONE FINANCIAL CORPORATION (COF)








Table 6: Loan Information and Performance Statistics (1)










2011


2011


2011


(Dollars in millions)(unaudited)


Q4


Q3


Q2


Period-end loans held for investment








Credit card:








  Domestic credit card (2)


$                    56,609


$                    53,820


$                    53,994


  International credit card


8,466


8,210


8,711


     Total credit card


65,075


62,030


62,705


Consumer banking:








  Automobile


21,779


20,422


19,223


  Home loan


10,433


10,916


11,323


  Retail banking


4,103


4,014


4,046


     Total consumer banking


36,315


35,352


34,592


Commercial banking:








  Commercial and multifamily real estate


15,410


14,389


14,035


  Middle market


12,684


11,924


11,404


  Specialty lending


4,404


4,221


4,122


     Total commercial lending


32,498


30,534


29,561


  Small-ticket commercial real estate


1,503


1,571


1,642


     Total commercial banking


34,001


32,105


31,203


Other loans(3)


501


465


465


    Total


$                  135,892


$                  129,952


$                  128,965










Average loans held for investment








Credit card:








  Domestic credit card (2)


$                    54,403


$                    53,668


$                    53,868


  International credit card


8,361


8,703


8,823


     Total credit card


62,764


62,371


62,691


Consumer banking:








  Automobile


21,101


19,757


18,753


  Home loan


10,683


11,126


11,534


  Retail banking


4,007


3,979


4,154


     Total consumer banking


35,791


34,862


34,441


Commercial banking:








  Commercial and multifamily real estate


14,628


14,021


13,597


  Middle market


12,068


11,572


10,979


  Specialty lending


4,308


4,154


4,014


     Total commercial lending


31,004


29,747


28,590


  Small-ticket commercial real estate


1,547


1,598


1,726


     Total commercial banking


32,551


31,345


30,316


Other loans (3)


475


465


468


     Total


$                  131,581


$                  129,043


$                  127,916










Net charge-off rates








Credit card:








  Domestic credit card (4)


4.07

%

3.92

%

4.74

%

  International credit card


5.77


6.15


7.02


     Total credit card


4.30

%

4.23

%

5.06

%

Consumer banking:








  Automobile


2.07

%

1.69

%

1.11

%

  Home loan (5)


0.90


0.53


0.60


  Retail banking (5)


1.44


1.67


1.73


     Total consumer banking (5)


1.65

%

1.32

%

1.01

%

Commercial banking:








  Commercial and multifamily real estate (5)


0.76

%

0.12

%

0.39

%

  Middle market (5)


0.20


0.41


0.13


  Specialty lending


0.24


0.44


0.47


     Total commercial lending (5)


0.47

%

0.28

%

0.30

%

  Small-ticket commercial real estate


3.73


2.19


3.77


     Total commercial banking (5)


0.63

%

0.37

%

0.50

%

Other loans


9.29

%

6.38

%

10.57

%

     Total


2.69

%

2.52

%

2.91

%









30+ day performing delinquency rates








Credit card:








  Domestic credit card


3.66

%

3.65

%

3.33

%

  International credit card


5.18


5.35


5.30


     Total credit card


3.86

%

3.87

%

3.60

%

Consumer banking:








  Automobile


6.88

%

6.34

%

6.09

%

  Home loan (5)


0.89


0.78


0.70


  Retail banking (5)


0.83


0.89


0.76


     Total consumer banking (5)


4.47

%

4.01

%

3.70

%









Nonperforming asset rates (6) (7)








Consumer banking:








  Automobile


0.58

%

0.53

%

0.49

%

  Home loan (5)


4.58


4.74


4.40


  Retail banking (5)


2.50


2.37


2.45


     Total consumer banking (5)


1.94

%

2.04

%

2.00

%

Commercial banking:








  Commercial and multifamily real estate (5)


1.43

%

2.16

%

2.35

%

  Middle market (5)


0.82


1.04


1.19


  Specialty lending


0.75


0.87


0.95


     Total commercial lending (5)


1.10

%

1.54

%

1.71

%

  Small-ticket commercial real estate


2.86


1.58


0.75


     Total commercial banking (5)


1.17

%

1.55

%

1.66

%





CAPITAL ONE FINANCIAL CORPORATION (COF)








Table 7:  Financial & Statistical Summary -- Credit Card Business








2011


2011


2011


(Dollars in millions) (unaudited)


Q4


Q3


Q2


Credit Card








Earnings:








 Interest income


$                       2,253


$                      2,354


$                      2,209


 Interest expense


304


312


319


 Net interest income


                      1,949


                     2,042


                     1,890


 Non-interest income


638


678


619


 Total revenue


                      2,587


                     2,720


                     2,509


 Provision for loan and lease losses


600


511


309


 Non-interest expense


1,431


1,188


1,238


 Income from continuing operations before taxes


556


1,021


962


 Income tax provision


203


358


344


 Income from continuing operations, net of tax


$                          353


$                         663


$                         618










Selected metrics:








 Period-end loans held for investment


$                     65,075


$                    62,030


$                    62,705


 Average loans held for investment


62,764


62,371


62,691


 Average yield on loans held for investment


14.12

%

14.84

%

13.83

%

 Revenue margin


16.49


17.44


16.01


 Net charge-off rate


4.30


4.23


5.06


 30+ day total delinquency rate (8)


3.86


3.87


3.60


 Purchase volume (9)


$                     38,179


$                    34,918


$                    34,226










Domestic Card








Earnings:








 Interest income


$                       1,940


$                      1,992


$                      1,852


 Interest expense


234


239


245


 Net interest income


                      1,706


                     1,753


                     1,607


 Non-interest income


613


588


584


 Total revenue


                      2,319


                     2,341


                     2,191


 Provision for loan and lease losses


519


381


187


 Non-interest expense


1,183


972


1,008


 Income from continuing operations before taxes


617


988


996


 Income tax provision


222


351


354


 Income from continuing operations, net of tax


$                          395


$                         637


$                         642










Selected metrics:








 Period-end loans held for investment


$                     56,609


$                    53,820


$                    53,994


 Average loans held for investment


54,403


53,668


53,868


 Average yield on loans held for investment


14.05

%

14.62

%

13.52

%

 Revenue margin


17.05


17.45


16.27


 Net charge-off rate (4)


4.07


3.92


4.74


 30+ day total delinquency rate (8)


3.66


3.65


3.33


 Purchase volume (9)


$                     34,586


$                    31,686


$                    31,070










International Card








Earnings:








 Interest income


                        $                          313


$                          362


$                         357


 Interest expense


70


73


74


 Net interest income


                         243


                       289


                       283


 Non-interest income


25


90


35


 Total revenue


                         268


                       379


318


 Provision for loan and lease losses


81


130


122


 Non-interest expense


248


216


230


 Income (loss) from continuing operations before taxes


(61)


33


(34)


 Income tax provision (benefit)


(19)


7


(10)


 Income (loss) from continuing operations, net of tax


$                          (42)


$                           26


$                         (24)










Selected metrics:








 Period-end loans held for investment


$                       8,466


$                      8,210


$                      8,711


 Average loans held for investment


8,361


8,703


8,823


 Average yield on loans held for investment


14.57

%

16.24

%

15.77

%

 Revenue margin


12.82


17.42


14.42


 Net charge-off rate


5.77


6.15


7.02


 30+ day total delinquency rate (8)


5.18


5.35


5.30


 Purchase volume (9)


$                       3,593


$                      3,232


$                      3,156






CAPITAL ONE FINANCIAL CORPORATION (COF)








Table 8:  Financial & Statistical Summary -- Consumer Banking Business











2011


2011


2011


(Dollars in millions) (unaudited)


Q4


Q3


Q2


Consumer Banking








Earnings:









Interest income


$                      1,521


$                      1,546


$                      1,517



Interest expense


416


449


466



Net interest income


                     1,105


                     1,097


                     1,051



Non-interest income


152


188


194



Total revenue


                     1,257


                     1,285


                    1,245



Provision for loan and lease losses


180


136


41



Non-interest expense


893


853


758



Income from continuing operations before taxes


184


296


446



Income tax provision


67


106


159



Income from continuing operations, net of tax


$                         117


$                         190


$                         287











Selected metrics:









Period-end loans held for investment


$                    36,315


$                    35,352


$                    34,592



Average loans held for investment


35,791


34,862


34,441



Average yield on loans held for investment


9.46

%

9.83

%

9.51

%


Auto loan originations


$                      3,586


$                      3,409


$                      2,910



Period-end deposits


88,540


88,589


87,282



Average deposits


88,390


88,266


86,926



Deposit interest expense rate


0.84

%

0.95

%

1.00

%


Core deposit intangible amortization


$                           31


$                           32


$                           34



Net charge-off rate (5)


1.65

%

1.32

%

1.01

%


Nonperforming loans as a percentage of loans held for investment (5) (6)


1.79


1.88


1.83



Nonperforming asset rate (5) (6)


1.94


2.04


2.00



30+ day performing delinquency rate (5) (6)


4.47


4.01


3.70



Period-end loans serviced for others


$                    17,998


$                    18,624


$                    19,226






CAPITAL ONE FINANCIAL CORPORATION (COF)








Table 9:  Financial & Statistical Summary -- Commercial Banking Business



















2011


2011


2011


(Dollars in millions) (unaudited)


Q4


Q3


Q2


Commercial Banking








Earnings:









Interest income


$                         547


$                         533


$                         523



Interest expense


177


180


190



Net interest income


                        370


                       353


                      333



Non-interest income


75


62


62



Total revenue


                        445


                        415


                     395



Provision for loan and lease losses


74


(10)


(18)



Non-interest expense


220


200


192



Income from continuing operations before taxes


151


225


221



Income tax provision


54


80


79



Income from continuing operations, net of tax


$                           97


$                         145


$                         142











Selected metrics:









Period-end loans held for investment


$                    34,001


$                    32,105


$                    31,203



Average loans held for investment


32,551


31,345


30,316



Average yield on loans held for investment


4.68

%

4.69

%

4.74

%


Period-end deposits


$                    26,532


$                    25,282


$                    24,304



Average deposits


26,034


25,227


24,282



Deposit interest expense rate


0.42

%

0.48

%

0.52

%


Core deposit intangible amortization


$                             9


$                           10


$                           10



Net charge-off rate (5)


0.63

%

0.37

%

0.50

%


Nonperforming loans as a percentage of loans held for investment (5)


1.09


1.43


1.54



Nonperforming asset rate (5)


1.17


1.55


1.66











Risk category: (10)









Noncriticized


$                    31,306


$                    29,374


$                    28,459



Criticized performing


1,843


1,781


1,765



Criticized nonperforming


371


459


481



Total non-PCI loans


33,520


31,614


30,705



Total PCI loans


481


491


498



Total


$                    34,001


$                    32,105


$                    31,203












% of period-end held for investment commercial loans:









Noncriticized


92.07

%

91.49

%

91.21

%


Criticized performing


5.42


5.55


5.66



Criticized nonperforming


1.09


1.43


1.54



Total non-PCI loans


98.59


98.47


98.40



Total PCI loans


1.41


1.53


1.60



Total


100.00

%

100.00

%

100.00

%





CAPITAL ONE FINANCIAL CORPORATION (COF)







Table 10:  Financial & Statistical Summary --  Other and Total















2011


2011


2011

(Dollars in millions) (unaudited)


Q4


Q3


Q2

Other







Earnings:








Interest income


$                       (620)


$                       (598)


$                       (550)


Interest expense


(378)


(389)


(412)


Net interest expense


                      (242)


                      (209)


                      (138)


Non-interest income (expense)


3


(57)


(18)


Total revenue


                      (239)


                      (266)


                      (156)


Provision for loan and lease losses


7


(15)


11


Non-interest expense


74


56


67


Loss from continuing operations before taxes


(320)


(307)


(234)


Income tax benefit


(164)


(174)


(132)


Income (loss) from continuing operations, net of tax


$                       (156)


$                       (133)


$                       (102)









Selected metrics:








Period-end loans held for investment (4)


$                         501


$                         465


$                         465


Average loans held for investment (4)


475


465


468


Period-end deposits


13,154


14,447


14,531


Average deposits


14,026


14,775


14,626









Total







Earnings:








Interest income


$                      3,701


$                      3,835


$                      3,699


Interest expense


519


552


563


Net interest income


                     3,182


                   3,283


                     3,136


Non-interest income


868


871


857


Total revenue


                     4,050


                    4,154


                     3,993


Provision for loan and lease losses


861


622


343


Non-interest expense


2,618


2,297


2,255


Income from continuing operations before taxes


571


1,235


1,395


Income tax provision


160


370


450


Income from continuing operations, net of tax


$                         411


$                         865


$                         945









Selected metrics:








 Period-end loans held for investment


$                  135,892


$                  129,952


$                  128,965


 Average loans held for investment


131,581


129,043


127,916


 Period-end deposits


128,226


128,318


126,117


 Average deposits


128,450


128,268


125,834





CAPITAL ONE FINANCIAL CORPORATION (COF)








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
















(1)

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











(2)

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











(3)

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











(4)

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











(5)

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















2011


2011


2011



(Dollars in millions) (unaudited)


Q4


Q3


Q2



CCB period end acquired loan portfolio

$          4,689


$          4,873


$          5,181



CCB average acquired loan portfolio

4,781


4,998


5,112













Net charge-off rates:








 Consumer banking:









    Home loan

1.48

%

0.87

%

0.98

%


    Retail banking

1.46


1.69


1.76



        Total consumer banking

1.87

%

1.51

%

1.17

%












 Commercial banking:









    Commercial and multifamily real estate

0.77

%

0.12

%

0.40

%


    Middle market

0.21


0.42


0.13



        Total commercial lending

0.48


0.28


0.31



        Total commercial banking

0.64

%

0.38

%

0.51

%












30+ day performing delinquency rates:








 Consumer banking:









    Home loan

1.47

%

1.28

%

1.18

%


    Retail banking

0.84


0.90


0.77



        Total consumer banking

5.06

%

4.57

%

4.29

%












Nonperforming asset rates:








 Consumer banking:









    Home loan

7.55

%

7.80

%

7.38

%


    Retail banking

2.52


2.40


2.48



        Total consumer banking

2.20

%

2.33

%

2.32

%












 Commercial banking:









    Commercial and multifamily real estate

1.44

%

2.18

%

2.39

%


    Middle market

0.84


1.07


1.22



        Total commercial lending

1.11


1.57


1.73



        Total commercial banking

1.19

%

1.57

%

1.68

%












Nonperforming loans as a percentage of period-end loans held for investment:








 Consumer banking


2.03

%

2.15

%

2.12

%


 Commercial banking

1.11


1.45


1.56












(6)

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











(7)

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











(8)

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











(9)

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











(10)