Capital One Reports Fourth Quarter 2012 Net Income of $843 million, or $1.41 per share
Capital One Reports Fourth Quarter 2012 Net Income of $843 million, or $1.41
per share
Earnings for full year 2012 were $3.5 billion, or $6.16 per share
PR Newswire
MCLEAN, Va., Jan. 17, 2013
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 1
Summary―Consolidated
Table 2: Consolidated Statements of Income 2
Table 3: Consolidated Balance Sheets 3
Notes to Consolidated Financial
Table 4: Statements & Statistical Summary 4
(Tables 1-3)
Table 5: Average Balances, Net Interest 5
Income and Net Interest Margin
Table 6: Loan Information and Performance 6
Statistics
Loan Information and Performance
Table 7: Statistics (Excluding Acquired 7
Loans) ^(3)
Business Segment Detail
Table 8: Financial & Statistical 8
Summary―Credit Card Business
Table 9: Financial & Statistical 9
Summary―Consumer Banking Business
Financial & Statistical
Table 10: Summary―Commercial Banking 10
Business
Table 11: Financial & Statistical 11
Summary―Other and Total
Table 12: Notes to Loan and Business Segment 12
Disclosures (Tables 6 —11)
Other
Reconciliation of Non-GAAP
Table 13: Measures and Calculation of 13
Regulatory Capital Measures
The information contained in this Financial Supplement is preliminary and
^(1) 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.
References to ING Direct refer to the business and assets acquired and
liabilities assumed in the February 17, 2012 acquisition. References to
^(2) 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
^(3) of the loans, there are no charge-offs or an allowance associated with
these loans unless the estimated cash flows expected to be collected
decrease subsequent to acquisition. In addition, these loans are not
classified as delinquent or nonperforming even though the customer may be
contractually past due because we expect that we will fully collect the
carrying value of these loans. The accounting and classification of these
loans may significantly alter some of our reported credit quality
metrics. We therefore supplement certain reported credit quality metrics
with metrics adjusted to exclude the impact of these acquired loans.
CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 1: Financial & Statistical
Summary—Consolidated ^(1)(2)(3)
(Dollars in millions, except 2012 2012 2011
per share data and as noted) Q4
(unaudited) Q4 Q3
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 1,218 1,723 571
operations before income taxes
Income tax provision 370 535 160
Income from continuing 848 1,188 411
operations, net of tax
Loss from discontinued (5) (10) (4)
operations, net of tax^(4)
Net income 843 1,178 407
Dividends and undistributed
earnings allocated to (3) (5) (26)
participating securities ^(8)
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 (0.01) (0.02) (0.01)
operations, net of tax
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 (0.01) (0.02) (0.01)
operations, net of tax
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 582.2 581.3 459.9
(period end, in millions)
Dividends per common share $ $ $
0.05 0.05 0.05
Tangible book value per common 40.23 38.70 34.26
share (period end)^(9) (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 192,122 193,700 109,914
deposits
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 (3) % 16 % (3) %
(quarter over quarter)^
Non-interest income (4) 8 —
growth(quarter over quarter)
Total net revenue (3) 14 (3)
growth(quarter over quarter)
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 8.44 12.33 5.54
stockholders' equity^(14)
Return on average tangible 14.74 21.93 10.43
common equity^(15) (26)
Non-interest expense as a % of
average loans held for 6.42 6.00 7.96
investment^(16)
Efficiency ratio^(17) 57.88 52.66 64.64
Effective income tax rate 30.4 31.1 28.0
Full-time equivalent employees 39.6 37.6 30.5
(in thousands), period end
Credit Quality Metrics^(10)
(18)
Allowance for loan and lease $ $ $
losses 5,156 5,154 4,250
Allowance as a % of loans held 2.50 % 2.54 % 3.13 %
for investment^
Allowance as a % of loans held
for investment (excluding 3.02 3.11 3.22
acquired loans)
Net charge-offs $ $ $
1,150 887 884
Net charge-off rate^(19) 2.26 % 1.75 % 2.69 %
Net charge-off rate (excluding 2.78 2.18 2.79
acquired loans)^(19)
30+ day performing delinquency 2.70 2.54 3.35
rate
30+ day performing delinquency 3.29 3.15 3.47
rate (excluding acquired loans)
30+ day delinquency rate^(20) ** 2.92 3.95
30+ day delinquency rate
(excluding acquired ** 3.62 4.09
loans)^(20)
Capital Ratios ^(21)
Tier 1 common ratio^(22) 11.0 % 10.7 % 9.7 %
Tier 1 risk-based capital 11.4 12.7 12.0
ratio^(23)
Total risk-based capital 13.6 15.0 14.9
ratio^(24)
Tangible common equity ("TCE") 7.9 7.9 8.2
ratio^(25) (26)
CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 2: Consolidated Statements of Income
^(1)(2)(3)
Three Months Ended Year Ended
December September December December 31,
31, 30, 31,
(Dollars in millions,
except per share data) 2012 2012 2011 2012 2011
(unaudited)
Interest income:
$ $ $ $ $
Loans held for investment 4,901
4,726 3,440 17,537 13,774
Investment securities 361 335 244 1,329 1,137
Other 28 18 17 98 76
Total interest 5,115 5,254 3,701 18,964 14,987
income
Interest expense:
Deposits 348 371 264 1,403 1,187
Securitized debt 58 64 80 271 422
obligations
Senior and subordinated 85 85 89 345 300
notes
Other borrowings 96 88 86 356 337
Total interest 587 608 519 2,375 2,246
expense
Net interest income 4,528 4,646 3,182 16,589 12,741
Provision for credit 1,151 1,014 861 4,415 2,360
losses
Net interest income
after provision for 3,377 3,632 2,321 12,174 10,381
credit losses
Non-interest income:
Service charges and other 595 557 452 2,106 1,979
customer-related fees
Interchange fees, net 459 452 346 1,647 1,318
Net other-than-temporary
impairment losses (12) (13) (6) (52) (21)
recognized in earnings
Bargain purchase gain — — — 594 —
^(5)
Other ^(4) 54 140 76 512 262
Total non-interest 1,096 1,136 868 4,807 3,538
income
Non-interest expense:
Salaries and associate 1,039 1,002 817 3,876 3,023
benefits
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 205 198 177 778 681
processing
Amortization of 190 197 51 604 216
intangibles ^(7)
Merger-related expense ^ 69 48 27 336 45
(7)
Other 613 623 492 2,387 1,803
Total non-interest 3,255 3,045 2,618 11,946 9,332
expense
Income from continuing
operations before income 1,218 1,723 571 5,035 4,587
taxes
Income tax provision 370 535 160 1,301 1,334
Income from continuing 848 1,188 411 3,734 3,253
operations, net of tax
Loss from discontinued
operations, net of tax (5) (10) (4) (217) (106)
^(4)
Net income 843 1,178 407 3,517 3,147
Dividends and
undistributed earnings
allocated to (3) (5) (26) (15) (26)
participating securities
^(8)
Preferred stock dividends (15) — — (15) —
Net income $ $ $ $ $
available to common 1,173
stockholders 825 381 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 (0.01) (0.02) (0.01) (0.39) (0.23)
operations
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 (0.01) (0.02) (0.01) (0.38) (0.23)
operations
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 1 254 342
purchased under agreements to resell
Cash and cash equivalents 11,058 5,969 5,838
Restricted cash for securitization 428 760 791
investors
Securities available for sale, at 63,979 61,464 38,759
fair value
Loans held for investment:
Unsecuritized loans held for 163,341 159,219 88,242
investment
Restricted loans for 42,548 43,913 47,650
securitization investors
Total loans held for investment 205,889 203,132 135,892
Less: Allowance for loan and (5,156) (5,154) (4,250)
lease losses
Net loans held for investment 200,733 197,978 131,642
Loans held for sale, at 201 187 201
lower-of-cost-or-fair-value
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 1,248 967 1,464
agreements to repurchase
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 17,592 16,835 13,631
other comprehensive income
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.
Results for Q2 2012 and thereafter include the impact of the May
^(2) 1, 2012 closing of the HSBC transaction, which resulted in the
addition of approximately $28.2 billion in credit card receivables
at closing.
Results for Q1 2012 and thereafter include the impact of the
^(3) 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
^(4) losses is generally included net of tax in discontinued operations,
with the remaining amount included pre-tax in non-interest income.
The mortgage representation and warranty reserve decreased to $899
million as of December 31, 2012, from $919 million as of September
30, 2012, due to the settlement of claims in Q4 2012 totaling $20
million.
Includes a bargain purchase gain of $594 million recognized in
earnings in Q1 2012 attributable to the February 17, 2012
^(5) acquisition of ING Direct. Represents the excess of the fair value
of the net assets acquired in the ING Direct acquisition as of the
acquisition date of February 17, 2012 over the consideration
transferred.
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
^(6) 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 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
^(7) ("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 million in Q4 2012 and $42 million in Q3
2012.
Dividends and undistributed earnings allocated to
^(8) 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.
Tangible book value per common share is a non-GAAP measure calculated
^(9) 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.
See "Table 12: Notes to Loan and Business Segment Disclosures (Tables
^(10) 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.
Calculated based on annualized income from continuing operations, net
^(13) of tax, for the period divided by average total assets for the
period.
Calculated based on annualized income from continuing operations, net
^(14) of tax, for the period divided by average stockholders' equity for
the period.
Calculated based on annualized income from continuing operations, net
of tax, for the period divided by average tangible common equity for
^(15) 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.
Calculated based on non-interest expense, excluding goodwill
^(17) 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.
^(18) We supplement certain reported credit quality metrics with metrics
adjusted to exclude from the denominator acquired loans accounted for
based on estimated expected cash flows to be collected (formerly SOP
03-3). See "Table 7: Loan Information and Performance Statistics
(Excluding Acquired Loans)" for additional information.
^(19) Calculated based on annualized net charge-offs for the period divided
by average loans held for investment for the period.
The 30+ day total delinquency rate as of the end of Q4 2012 will be
^(20) 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.
Tier 1 common ratio is a regulatory capital measure calculated based
^(22) 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.
Tier 1 risk-based capital ratio is a regulatory capital measure
^(23) 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.
Total risk-based capital ratio is a regulatory capital measure
calculated based on total risk-based capital divided by risk-weighted
^(24) assets. See "Table 13: Reconciliation of Non-GAAP Measures and
Calculation of Regulatory Capital Measures" for additional
information.
TCE ratio is a non-GAAP measure calculated based on tangible common
^(25) equity divided by tangible assets. See "Table 13: Reconciliation of
Non-GAAP Measures and Calculation of Regulatory Capital Measures" for
additional information.
The previously reported TCE as of the end of Q3 2012 has been revised
^(26) 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 Yield/ Average Interest Yield/ Average Interest Yield/
Income/ Income/ Income/
(Dollars in Balance Expense Rate Balance Expense Rate Balance Expense Rate
millions)(unaudited)
Interest-earning
assets:
Cash equivalents $ $ 1.04 % $ $ 1.20 % $ $ 1.20 %
and other 10,768 28 6,019 18 5,685 17
Securities
available for 64,174 361 2.25 57,928 335 2.31 39,005 244 2.50
sale
Loans held for 202,944 4,726 9.31 202,856 4,901 9.66 131,581 3,440 10.46
investment
Total $ $ $
interest-earning 277,886 $ 5,115 7.36 % 266,803 $ 5,254 7.88 % 176,271 $ 3,701 8.40 %
assets
Interest-bearing
liabilities:
Interest-bearing $ $ 0.72 % $ $ 0.77 % $ $ 0.96 %
deposits 192,122 348 193,700 371 109,914 264
Securitized debt 12,119 58 1.91 13,331 64 1.92 16,780 80 1.91
obligations
Senior and 11,528 85 2.95 11,035 85 3.08 10,237 89 3.48
subordinated notes
Other borrowings 20,542 96 1.87 12,085 88 2.91 7,794 86 4.41
Total $ $ $ $ $ $
interest-bearing 236,311 587 0.99 % 230,151 608 1.06 % 144,725 519 1.43 %
liabilities
Net interest $ 4,528 6.37 % $ 4,646 6.82 % $ 3,182 6.97 %
income/spread
Impact of
non-interest bearing 0.15 0.15 0.25
funding
Net interest margin 6.52 % 6.97 % 7.22 %
Year Ended December 31,
2012 2011
Average Interest Yield/ Average Interest Yield/
Income/ Income/
(Dollars in Balance Expense Rate Balance Expense Rate
millions)(unaudited)
Interest-earning
assets:
Cash equivalents $ $ 1.01 % $ $ 1.04 %
and other 9,740 98 7,328 76
Investment 57,424 1,329 2.31 39,513 1,137 2.88
securities
Loans held for 187,915 17,537 9.33 128,424 13,774 10.73
investment
Total $ $
interest-earning 255,079 $18,964 7.43 % 175,265 $14,987 8.55 %
assets
Interest-bearing
liabilities:
Interest-bearing $ $ 1,403 0.77 % $ $ 1,187 1.08 %
deposits 183,314 109,644
Securitized debt 14,138 271 1.92 20,715 422 2.04
obligations
Senior and 11,012 345 3.13 9,244 300 3.25
subordinated notes
Other borrowings 12,875 356 2.77 8,063 337 4.18
Total $ $
interest-bearing 221,339 $ 2,375 1.07 % 147,666 $ 2,246 1.52 %
liabilities
Net interest $16,589 6.36 % $12,741 7.03 %
income/spread
Impact of
non-interest bearing 0.14 0.24
funding
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 17,732 16,963 15,736
estate
Commercial and industrial 19,892 18,965 17,088
Total commercial lending 37,624 35,928 32,824
Small-ticket commercial real 1,196 1,281 1,503
estate
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 17,005 16,654 14,920
estate
Commercial and industrial 19,344 18,817 16,376
Total commercial lending 36,349 35,471 31,296
Small-ticket commercial real 1,249 1,296 1,547
estate
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 (0.08) (0.05) 0.75
estate
Commercial and industrial 0.13 - 0.21
Total commercial lending 0.03 (0.03) 0.47
Small-ticket commercial real 2.02 0.79 3.73
estate
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 0.82 % 1.04 % 1.40 %
estate
Commercial and industrial 0.72 0.68 0.80
Total commercial lending 0.77 % 0.85 % 1.09 %
Small-ticket commercial real 0.97 1.49 2.86
estate
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 17,605 16,800 15,573
estate
Commercial and industrial 19,660 18,729 16,770
Total commercial lending 37,265 35,529 32,343
Small-ticket commercial real 1,196 1,281 1,503
estate
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 16,871 16,489 14,757
estate
Commercial and industrial 19,115 18,579 16,055
Total commercial lending 35,986 35,068 30,812
Small-ticket commercial real 1,249 1,296 1,547
estate
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 (0.08) (0.05) 0.76
estate
Commercial and industrial 0.13 - 0.22
Total commercial lending 0.03 (0.03) 0.48
Small-ticket commercial real 2.02 0.79 3.73
estate
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 0.83 % 1.05 % 1.42 %
estate
Commercial and industrial 0.72 0.69 0.81
Total commercial lending 0.77 0.86 1.10
Small-ticket commercial real 0.97 1.49 2.86
estate
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) Q4 Q3^ Q4
(unaudited)
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 799 1,135 556
taxes
Income tax provision 279 394 203
(benefit)
Income (loss) from $ $ $
continuing operations, net of 520 741 353
tax
Selected performance metrics:
Period-end loans held for $ $ $
investment 91,755 89,033 65,075
Average loans held for 89,090 88,656 62,764
investment
Average yield on loans held 14.33 % 15.03 % 14.12 %
for investment
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 3.61 3.65 3.86
rate^(5)
Nonperforming loan 0.11 — —
rate^(5)(7)
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 $ 811 519
911
Non-interest expense 1,727 1,584 1,183
Income (loss) from
continuing operations before 743 1,042 617
taxes
Income tax provision 263 369 222
(benefit)
Income (loss) from $ $ $
continuing operations, net of 480 673 395
tax
Selected performance metrics:
Period-end loans held for $ $ $
investment 83,141 80,621 56,609
Average loans held for 80,718 80,502 54,403
investment
Average yield on loans held 14.20 % 14.88 % 14.05 %
for investment
Total net revenue margin 16.75 17.08 17.05
Net charge-off rate^(5) 4.35 3.04 4.07
30+ day delinquency 3.61 3.52 3.66
rate^(5)
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 56 93 (61)
taxes
Income tax provision 16 25 (19)
(benefit)
Income (loss) from $ $ $
continuing operations, net of 40 68 (42)
tax
Selected performance metrics:
Period-end loans held for $ $ $
investment 8,614 8,412 8,466
Average loans held for 8,372 8,154 8,361
investment
Average yield on loans held 15.59 % 16.47 % 14.57 %
for investment
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) Q4 Q3^ Q4
(unaudited)
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 503 582 184
operations before taxes
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 76,098 77,271 35,791
investment
Average yield on loans held 5.94 % 6.05 % 9.46 %
for investment
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 0.68 % 0.71 % 0.84 %
rate
Core deposit intangible $ $ $
amortization 39 41 31
Net charge-off rate^(5) 0.88 % 0.83 % 1.65 %
30+ day performing 2.65 2.23 4.47
delinquency rate^(5)
30+ day delinquency ** 2.91 5.99
rate^(5)(10)
Nonperforming loan 0.85 0.84 1.79
rate^(5)(10)
Nonperforming asset 0.91 0.89 1.94
rate^(5)(6)
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) Q4 Q3^ Q4
(unaudited)
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 262 353 182
operations before taxes
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 37,598 36,767 32,843
investment
Average yield on loans held 4.15 % 4.14 % 4.70 %
for investment
Period-end deposits $ $ $
29,866 28,670 26,683
Average deposits 29,476 28,063 26,185
Deposit interest expense 0.28 % 0.31 % 0.42 %
rate
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 0.77 0.87 1.17
^(5)(6)
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) Q4 Q3^ Q4
(unaudited)
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 (346) (347) (351)
taxes
Income tax benefit (180) (190) (175)
Income (loss) from $ $ $
continuing operations, net (166) (157) (176)
of tax
Selected performance metrics:
Period-end loans held for $ $ $
investment 187 152 175
Average loans held for 158 162 183
investment
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 1,218 1,723 571
operations before taxes
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 202,944 202,856 131,581
investment
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.
Results for Q2 2012 and thereafter include the impact of the May 1, 2012
^(2) closing of the HSBC transaction, which resulted in the addition of
approximately $28.2 billion in credit card receivables at closing.
Results for Q1 2012 and thereafter include the impact of the February
^(3) 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
^(4) market and specialty lending related products are included in commercial
and industrial loans. All tax-related affordable housing investments,
some of which were previously included in the "Other" segment, are now
included in the commercial and multifamily real estate category of our
Commercial Banking segment. Prior period amounts have been recast to
conform to the current period presentation.
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
^(5) metrics, adjusted to exclude from the denominator acquired loans
accounted for based on estimated cash flows expected to be collected
over the life of the loans (formerly SOP 03-3), are presented in Table
7. The table below presents amounts related to these acquired loans.
2012 2012 2011
(Dollars in
millions) Q4 Q3 Q4
(unaudited)
Acquired loans
accounted for
under SOP 03-3:
Period-end
unpaid $ $ $
principal 38,477 40,749 5,751
balance
Period-end
loans held for 37,134 39,388 4,685
investment
Average loans
held for 37,899 40,158 4,781
investment
Nonperforming assets consist of nonperforming loans, real estate owned
("REO") and other foreclosed assets. The nonperforming asset ratios are
^(6) 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
^(7) of our credit card loans until the loan is charged off, typically when
the account becomes 180 days past due. Effective November 2012, we began
classifying UK loans as nonperforming when the account becomes 120 days
past due.
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
^(8) revised charge-off policy for these loans is consistent with our
charge-off practice for installment loans. As a result of this change,
we recorded a cumulative charge-off adjustment which resulted in
elevated International Card charge-offs for the month. ii. December
2012 included the impact of excess recoveries due to a high-volume of
debt sales.
^(9) Includes credit card purchase transactions net of returns. Excludes cash
advance transactions.
The 30+ day total delinquency rate as of the end of Q4 2012 will be
^(10) provided in our Annual Report on Form 10-K for the year ended December
31, 2012.
Because some of our tax-related commercial investments generate
tax-exempt income or tax credits, we make certain reclassifications
^(11) 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 Q4 Q3 Q4
millions)(unaudited)
Average Equity to Non-GAAP
Average Tangible Common Equity
Average total stockholders' $ $ $
equity 40,212 38,535 29,698
Less: Average intangible (16,340) (16,408) (13,935)
assets^(1)
Noncumulative (853) (456) —
perpetual preferred stock^(2)
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 (853) (853) —
perpetual preferred stock^(2)
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 (309) (309) (305)
operations
Total assets from continuing 312,609 301,680 205,714
operations
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 (712) (752) (289)
recorded in AOCI^(5)
Net (gains)
losses on cash flow 2 (6) 71
hedges recorded in
AOCI^(5)
Disallowed
goodwill and other (14,428) (14,497) (13,855)
intangible assets
Disallowed — (221) (534)
deferred tax assets
Noncumulative
perpetual preferred (853) (853) —
stock^(2)
Other (12) (12) (2)
Tier 1 common capital 24,496 23,331 15,057
Plus: Noncumulative perpetual 853 853 —
preferred stock^(2)
Tier 1 restricted 2 3,636 3,635
core capital items^(6)
Tier 1 capital 25,351 27,820 18,692
Plus: Long-term debt 2,119 2,119 2,438
qualifying as Tier 2 capital
Qualifying
allowance for loan and 2,819 2,767 1,979
lease losses
Other Tier 2 13 17 23
components
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 11.4 12.7 12.0
ratio^(10)
Total risk-based capital 13.6 15.0 14.9
ratio^(11)
___________________
^(1) Includes impact from related deferred
taxes.
Noncumulative perpetual preferred stock qualifies for Tier 1
^(2) capital; however, it is not includable in Tier 1 common
capital.
TCE ratio calculated based on tangible common equity divided by
^(3) 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.
Tier 1 risk-based capital ratio is a regulatory capital measure
^(10) calculated based on Tier 1 capital divided by risk-weighed
assets.
Total risk-based capital ratio is a regulatory capital measure
^(11) calculated based on total risk-based capital divided by risk-weighed
assets.
SOURCE Capital One Financial Corporation
Website: http://www.capitalone.com
Contact: Investor Relations: Jeff Norris, +1-703-720-2455; Danielle Dietz,
+1-703-720-2455; or Media Relations: Julie Rakes, +1-804-284-5800; Tatiana
Stead, +1-703-720-2352
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