Capital One Reports Third Quarter 2011 Net Income of $813 million, or $1.77 per share

Printer Friendly Version of the Press Release (pdf format)

 

Printer Friendly Version of the Financial Supplement (pdf format)

Printer Friendly Version of the Presentation (pdf format)

 

MCLEAN, Va., Oct 20, 2011 /PRNewswire via COMTEX/ --

  • Estimated Tier 1 Common Equity Ratio of approximately 10.0 percent at September 30, 2011, up 60 basis points from 9.4 percent at June 30, 2011
  • End of period loan balances up $1.0 billion to $130.0 billion
  • Net Interest Margin expanded 19 basis points to 7.4 percent compared to second quarter 2011
  • Revenue Margin 9.4 percent, up 18 basis points compared to second quarter 2011
  • Charge-off Rate of 2.52 percent, down 39 basis points compared to second quarter 2011

Capital One Financial Corporation (NYSE: COF) today announced net income for the third quarter of 2011 of $813 million, or $1.77 per diluted common share, compared with net income of $911 million, or $1.97 per diluted common share, for the second quarter of 2011, and net income of $803 million, or $1.76 per diluted common share, for the third quarter of 2010.

"Our strong third quarter results demonstrate that we remain well-positioned to win in the marketplace and deliver shareholder value, " said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "We expect that the acquisitions of ING Direct and the HSBC US Card Business will deliver attractive financial results in the near-term, and put us in an even stronger position to enhance and sustain the value we can deliver to our customers, our communities and our shareholders."

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

Loan and Deposit Balances

Period-end loan balances increased $987 million to $130.0 billion driven by growth in Auto Finance and Commercial Banking. Excluding the expected decline in loan balances in the company's run-off portfolios, loan balances increased $2.0 billion.

Period-end total deposits increased $2.2 billion to $128.3 billion, driven by growth in branch and direct deposits.

Revenues

Total revenue in the third quarter of 2011 was $4.2 billion, up $161 million, or 4.0 percent. Net interest income drove the majority of the increase in revenue, increasing $147 million to $3.3 billion. Approximately half of this growth resulted from a decline in the level of revenue suppression in the Credit Card segment. This lower level of suppression was driven by an increase in the estimated collectability of billed finance charges and fees on existing credit card balances.

In addition, there were two largely offsetting revenue items related to the company's balance sheet repositioning ahead of the pending acquisition of ING Direct. The company recognized $239 million of gains from the sale of $6.4 billion of securities, which were predominately agency mortgage backed securities. Additionally, at the end of the quarter, the company recognized a $266 million mark-to-market loss on the previously announced pay-fixed swap executed in early August 2011.

Margins

Net interest margin expanded 19 basis points in the quarter to 7.39 percent as average asset yield rose 13 basis points combined with a decline of six basis points in the cost of funds. The decline was a result of a decline in deposit rates and a reduction in wholesale funding.

Revenue margin for the third quarter was 9.35 percent, up 18 basis points. The expansion of revenue margin resulted from the same factors that drove the increase in revenues in the quarter.

Non-Interest Expense

Operating expense for the third quarter increased $59 million primarily due to higher staffing costs as well as accruals against an earn-out agreement related to a previous acquisition. Marketing expense decreased $17 million, mostly driven by the timing of several large marketing programs which impacted expenses in the second quarter. In line with usual historical patterns, the company expects marketing expense to rise in the fourth quarter.

Pre-Provision Income (before tax)

An increase in revenue in the quarter was partially offset by a modest increase in non-interest expenses.

Provision Expense

As overall credit trends are stabilizing after almost two years of rapidly declining charge-offs, quarterly credit metrics are increasingly driven by seasonal patterns. Charge-offs continued to fall in the quarter, but a significantly smaller allowance release associated with stabilizing credit trends caused provision expense to increase to $622 million. The charge-off rate improved 39 basis points to 2.52 percent, while the coverage ratio of allowance to loans came down by only 19 basis points to 3.29 percent.

Representation & Warranty

The company's reserve for representation and warranty claims was $892 million as of September 30, 2011, up from $869 million as of June 30, 2011. The company added $72 million in additional reserves and paid $49 million in claims. As a result of some generally increased activity by investors in the non-GSE and non-insured securitization category, the company now believes that the upper end of the reasonably possible future losses from representation and warranty claims beyond current accrual levels could be as high as $1.5 billion. This estimate continues to be subject to the significant uncertainty and numerous factors described in the company's quarterly reports filed with the Securities and Exchange Commission.

Net Income

Net income decreased $98 million as higher pre-provision earnings were more than offset by higher provision expense.

Capital Ratios

The company's estimated Tier 1 common equity ratio rose to 10.0 percent as of September 30, 2011, up 60 basis points from June 30, 2011. The increase was driven by strong business performance as well as the expected continued decline of deferred tax assets disallowed in the regulatory capital calculation. "We continue to be comfortable with our strong capital levels and our underlying trajectory," said Gary L. Perlin, Capital One's Chief Financial Officer. "Using known Basel III definitions, our Tier 1 common equity ratio would have been approximately 10 basis points higher in the quarter, or 10.1 percent."

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.

Credit Card Highlights

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

The Domestic Card business delivered another quarter of strong returns. The net charge-off rate improved 82 basis points in the quarter with approximately half of the improvement resulting from expected seasonal patterns and the remaining improvement driven by underlying credit performance. The company continues to see declining loss severity and strong credit performance in its newer vintages and portfolio seasoning as older vintages mature.

Domestic Card loan balances declined modestly in the quarter, but excluding the Installment Loan run-off, revolving credit card loans grew $276 million in the quarter, up approximately 0.5 percent sequentially, and up about 4.4 percent compared to the third quarter of 2010.

Purchase volume increased in the quarter to $34.9 billion, reflecting third quarter seasonality and continued strong growth in purchase volume across the company's Domestic Card business. Purchase volume grew 17 percent from the third quarter of 2010, excluding the impact of the Kohl's portfolio.

Commercial Banking Highlights

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

The Commercial Banking segment delivered its third consecutive quarter of strong profitability and continued loan growth. Commercial deposits and commercial customer relationships continued to grow in the quarter.

Ending loans were up 2.9 percent from the prior quarter and up 8.7 percent from the third quarter of 2010. Growth in loan commitments, an early indicator of future loan growth, was even stronger. Commercial & Industrial and Commercial Real Estate businesses experienced the strongest growth in both loans and loan commitments.

Commercial Banking credit metrics have stabilized and improved modestly over the last five quarters. At a rate of 0.37 percent, net charge-offs for Commercial Banking are at their lowest levels since the third quarter of 2008.

Consumer Banking Highlights

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

In Consumer Banking, 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 $3.4 billion, up 17 percent from the second quarter and 40 percent from the third quarter of 2010.

In the Auto Finance business, charge-off and delinquency rates increased in the quarter, consistent with expected seasonal patterns. Year-over-year, charge-offs and delinquencies improved 102 basis points and 108 basis points, respectively.

Auto Finance credit performance remains strong, with originations continuing to perform better than originations from 2007 and 2008. In fact, Auto Finance credit metrics are near their all-time lows, driven by the actions the company took to retrench and reposition the business, tight underwriting and loss mitigation actions through the recession, and continued strength in used car auction prices.

The charge-off rate improved in the Home Loan portfolio, while the delinquency rate increased modestly.

Consumer Banking deposits were up $1.3 billion in the third quarter as the Consumer Banking segment continued to grow retail banking customer relationships.

Forward-looking statements

The company cautions that its current expectations in this release dated October 20, 2011, 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, 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 received 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 (the "SEC"), 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 $128.3 billion in deposits and $200.1 billion in total assets outstanding as of September 30, 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

Third 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 Quarterly Report on Form 10-Q once it is filed with the Securities and Exchange Commission.

CAPITAL ONE FINANCIAL CORPORATION (COF)








Table 1: Financial & Statistical Summary--Consolidated


















2011


2011


2011


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


Q3


Q2


Q1


Earnings








Net interest income


$ 3,283


$ 3,136


$ 3,140


Non-interest income (1)(2)


871


857


942


Total revenue (3)


$ 4,154


$ 3,993


$ 4,082


Provision for loan and lease losses


622


343


534


Marketing expenses


312


329


276


Operating expenses (4)


1,985


1,926


1,886


Income from continuing operations before income taxes


$ 1,235


$ 1,395


$ 1,386


Income tax provision


370


450


354


Income from continuing operations, net of tax


865


945


1,032


Loss from discontinued operations, net of tax (2)


(52)


(34)


(16)


Net income


$ 813


$ 911


$ 1,016










Common Share Statistics








Basic EPS:








Income from continuing operations, net of tax


$ 1.90


$ 2.07


$ 2.27


Loss from discontinued operations, net of tax


(0.12)


(0.07)


(0.03)


Net income per common share


$ 1.78


$ 2.00


$ 2.24


Diluted EPS:








Income from continuing operations, net of tax


$ 1.88


$ 2.04


$ 2.24


Loss from discontinued operations, net of tax


(0.11)


(0.07)


(0.03)


Net income per common share


$ 1.77


$ 1.97


$ 2.21


Weighted average common shares outstanding (in millions):








Basic EPS


456.0


455.6


454.1


Diluted EPS


460.4


462.2


460.3


Common shares outstanding (period end)


456.1


455.8


455.2


Dividends per common share


$ 0.05


$ 0.05


$ 0.05


Tangible book value per common share (period end) (5)


33.82


32.20


29.70


Stock price per common share (period end)


39.63


51.67


51.96


Total market capitalization (period end)


18,075


23,551


23,652










Balance Sheet (Period End)








Loans held for investment (6)


$ 129,952


$ 128,965


$ 124,092


Interest-earning assets


174,308


174,302


172,849


Total assets


200,148


199,753


199,300


Tangible assets (7)


185,891


185,715


184,928


Interest-bearing deposits


110,777


109,278


109,097


Total deposits


128,318


126,117


125,446


Borrowings


34,315


37,735


39,797


Stockholders' equity


29,378


28,681


27,550


Tangible common equity (TCE) (8)


15,425


14,675


13,520










Balance Sheet (Quarterly Average Balances)








Average loans held for investment (6)


$ 129,043


$ 127,916


$ 125,077


Average interest-earning assets


177,710


174,143


173,540


Average total assets


201,611


199,229


198,075


Average interest-bearing deposits


110,750


109,251


108,633


Average total deposits


128,268


125,834


124,158


Average borrowings


37,366


39,451


40,538


Average stockholders' equity


29,316


28,255


27,009










Performance Metrics








Net interest income growth (quarter over quarter)


5

%

(0)

%

4

%

Non-interest income growth (quarter over quarter)


2


(9)


0


Revenue growth (quarter over quarter)


4


(2)


3


Revenue margin (9)


9.35


9.17


9.41


Net interest margin 10)


7.39


7.20


7.24


Return on average assets (11)


1.72


1.90


2.08


Return on average equity (12)


11.80


13.38


15.28


Return on average tangible common equity (13)


22.58


26.57


31.73


Non-interest expense as a % of average loans held for investment (14)


7.12


7.05


6.91


Efficiency ratio (15)


55.30


56.47


52.96


Effective income tax rate


30.0


32.3


25.5


Full-time equivalent employees (in thousands)


29.5


28.2


27.9










Credit Quality Metrics (16)








Allowance for loan and lease losses


$ 4,280


$ 4,488


$ 5,067


Allowance as a % of loans held for investment


3.29

%

3.48

%

4.08

%

Net charge-offs


$ 812


$ 931


$ 1,145


Net charge-off rate (17)(18)


2.52

%

2.91

%

3.66

%

30+ day performing delinquency rate


3.13


2.90


3.07










Capital Ratios








Tier 1 risk-based capital ratio (19)


12.4

%

11.8

%

10.9

%

Tier 1 common equity ratio (20)


10.0


9.4


8.4


Total risk-based capital ratio (21)


15.4


15.0


14.2


Tangible common equity (TCE) ratio (22)


8.3


7.9


7.3


CAPITAL ONE FINANCIAL CORPORATION (COF)

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


(1)

Includes the impact from the change in fair value of retained interests, including interest-only strips, which totaled $12 million in Q3 2011, $16 million in Q2 2011, and $7 million in Q1 2011.











(2)

The mortgage representation and warranty reserve increased to $892 million as of September 30, 2011, from $869 million as of June 30, 2011. We recorded a provision for repurchase losses of $72 million in Q3 2011, $37 million in Q2 2011, and $44 million in Q1 2011. The majority of the provision for repurchase losses is included in discontinued operations, with the remaining portion included in non-interest income.











(3)

The estimated uncollectible amount of billed finance charges and fees excluded from revenue totaled $24 million in Q3 2011, $112 million in Q2 2011, and $105 million in Q1 2011. In the third quarter of 2011, we made a change to the way we estimate recoveries in determining the uncollectible amount of finance charges and fees, which significantly reduced the uncollectible amount of billed finance charges and fees excluded from revenue in Q3 2011.











(4)

Includes core deposit intangible amortization expense of $42 million in Q3 2011, $44 million in Q2 2011, and $45 million in Q1 2011 and integration costs of $1 million in Q3 2011, $0 million in Q2 2011, and $2 million in Q1 2011.











(5)

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.











(6)

Amounts for Q3 2011 and Q2 2011 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.



(7)

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.











(8)

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.











(9)

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











(10)

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











(11)

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











(12)

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











(13)

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











(14)

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











(15)

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











(16)

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)


Q3


Q2


Q1



CCB period-end acquired loan portfolio


$ 4,873


$ 5,181


$ 5,351



CCB average acquired loan portfolio


4,998


5,112


5,305



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


3.42

%

3.63

%

4.27

%


Net charge-off rate, excluding CCB loans


2.62


3.03


3.82



30+ day performing delinquency rate, excluding CCB loans


3.32


3.08


3.25











(17)

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.











(18)

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











(19)

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.











(20)

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.

.










(21)

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.











(22)

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



































Three Months Ended




Nine Months Ended

(Dollars in millions, except per share data)


September 30,


June 30,


September 30,





September 30,


September 30,

(unaudited)


2011


2011


2010





2011


2010

















Interest income:














Loans held for investment, including past-due fees


$ 3,550


$ 3,367


$ 3,447





$ 10,334


$ 10,582

Investment securities


264


313


347





893


1,037

Cash equivalents and other


21


19


21





59


60


Total interest income


3,835


3,699


3,815





11,286


11,679

















Interest expense:














Deposits


294


307


358





923


1,125

Securitized debt obligations


89


113


191





342


644

Senior and subordinated notes


84


63


72





211


211

Other borrowings


85


80


85





251


265


Total interest expense


552


563


706





1,727


2,245

















Net interest income


3,283


3,136


3,109





9,559


9,434

Provision for loan and lease losses


622


343


867





1,499


3,069

Net interest income after provision for loan and lease losses


2,661


2,793


2,242





8,060


6,365

















Non-interest income:














Servicing and securitizations


12


12


13





35


(3)

Service charges and other customer-related fees


542


460


496





1,527


1,577

Interchange


321


331


346





972


991

Net other-than-temporary impairment losses recognized in earnings


(6)


(6)


(5)





(15)


(62)

Other



2


60


57





151


272


Total non-interest income


871


857


907





2,670


2,775

















Non-interest expense:














Salaries and associate benefits


750


715


641





2,206


1,937

Marketing


312


329


250





917


650

Communications and data processing


178


162


178





504


512

Supplies and equipment


143


124


129





402


381

Occupancy


122


118


135





359


371

Other



792


807


663





2,326


1,992


Total non-interest expense


2,297


2,255


1,996





6,714


5,843

Income from continuing operations before income taxes


1,235


1,395


1,153





4,016


3,297

Income tax provision


370


450


335





1,174


948

Income from continuing operations, net of tax


865


945


818





2,842


2,349

Loss from discontinued operations, net of tax


(52)


(34)


(15)





(102)


(303)

Net income


$ 813


$ 911


$ 803





$ 2,740


$ 2,046

















Basic earnings per common share:














Income from continuing operations


$ 1.90


$ 2.07


$ 1.81





$ 6.24


$ 5.19

Loss from discontinued operations


(0.12)


(0.07)


(0.03)





(0.22)


(0.66)

Net income per common share


$ 1.78


$ 2.00


$ 1.78





$ 6.02


$ 4.53

















Diluted earnings per common share:














Income from continuing operations


$ 1.88


$ 2.04


$ 1.79





$ 6.17


$ 5.15

Loss from discontinued operations


(0.11)


(0.07)


(0.03)





(0.22)


(0.66)

Net income per common share


$ 1.77


$ 1.97


$ 1.76





$ 5.95


$ 4.49

















Weighted average common shares outstanding (in millions):














Basic EPS


456.0


455.6


452.5





455.2


451.9

Diluted EPS


460.4


462.2


456.6





461.0


456.0

















Dividends per common share


$ 0.05


$ 0.05


$ 0.05





$ 0.15


$ 0.15

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Consolidated Balance Sheets




















September 30,


December 31,


September 30,

(Dollars in millions)(unaudited)


2011


2010


2010









Assets:







Cash and due from banks


$ 1,794


$ 2,067


$ 2,015

Interest-bearing deposits with banks


3,238


2,776


2,391

Federal funds sold and repurchase agreements


1,326


406


536


Cash and cash equivalents


6,358


5,249


4,942

Restricted cash for securitization investors


984


1,602


2,686

Securities available for sale, at fair value


38,400


41,537


39,926

Loans held for investment:








Unsecuritized loans held for investment, at amortized cost


83,010


71,921


74,719


Restricted loans for securitization investors


46,942


54,026


51,615


Total loans held for investment


129,952


125,947


126,334


Less: Allowance for loan and lease losses


(4,280)


(5,628)


(6,175)


Net loans held for investment


125,672


120,319


120,159

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


312


228


197

Accounts receivable from securitizations


101


118


127

Premises and equipment, net


2,785


2,749


2,722

Interest receivable


958


1,070


1,025

Goodwill


13,593


13,591


13,593

Other


10,985


11,040


11,556


Total assets


$ 200,148


$ 197,503


$ 196,933

















Liabilities:







Interest payable


$ 401


$ 488


$ 464

Customer deposits:








Non-interest bearing deposits


17,541


15,048


14,471


Interest-bearing deposits


110,777


107,162


104,741


Total customer deposits


128,318


122,210


119,212

Securitized debt obligations


17,120


26,915


29,504

Other debt:








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


1,441


1,517


947


Senior and subordinated notes


11,051


8,650


9,083


Other borrowings


4,703


4,714


4,799


Total other debt


17,195


14,881


14,829

Other liabilities


7,736


6,468


6,863


Total liabilities


170,770


170,962


170,872









Stockholders' equity:







Common stock


5


5


5

Paid-in capital, net


19,234


19,084


19,059

Retained earnings and accumulated other comprehensive income


13,382


10,654


10,199

Less: Treasury stock, at cost


(3,243)


(3,202)


(3,202)


Total stockholders' equity


29,378


26,541


26,061


Total liabilities and stockholders' equity


$ 200,148


$ 197,503


$ 196,933

CAPITAL ONE FINANCIAL CORPORATION (COF)

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

















































Quarter Ended 09/30/11


Quarter Ended 06/30/11


Quarter Ended 09/30/10


(Dollars in millions)


Average


Interest Income/


Yield/


Average


Interest
Income/


Yield/


Average


Interest
Income/


Yield/


(unaudited)


Balance


Expense


Rate


Balance


Expense


Rate


Balance


Expense


Rate


Interest-earning assets:





















Loans held for investment


$ 129,043


$ 3,550


11.00

%

$ 127,916


$ 3,367


10.53

%

$ 126,307


$ 3,447


10.92

%


Investment securities


37,189


264


2.84


40,381


313


3.10


39,872


347


3.48



Cash equivalents and other


11,478


21


0.73


5,846


19


1.30


6,294


21


1.33


Total interest-earning assets


$ 177,710


$ 3,835


8.63

%

$ 174,143


$ 3,699


8.50

%

$ 172,473


$ 3,815


8.85

%























Interest-bearing liabilities:





















Interest-bearing deposits






















NOW accounts


$ 12,602


$ 9


0.29

%

$ 13,186


$ 9


0.27

%

$ 11,333


$ 10


0.35

%



Money market deposit accounts


47,483


100


0.84


45,527


99


0.87


43,260


104


0.96




Savings accounts


30,944


56


0.72


29,329


60


0.82


22,572


49


0.87




Other consumer time deposits


13,530


84


2.48


14,330


91


2.54


18,726


133


2.84




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


92


1


4.35


110


1


3.64


220


1


1.82




CD's of $100,000 or more


5,407


43


3.18


5,867


46


3.14


7,256


59


3.25




Foreign time deposits


692


1


0.58


902


1


0.44


819


2


0.98



Total interest-bearing deposits


$ 110,750


$ 294


1.06

%

$ 109,251


$ 307


1.12

%

$ 104,186


$ 358


1.37

%


Securitized debt obligations


18,478


89


1.93


22,191


113


2.04


30,750


191


2.48



Senior and subordinated notes


10,519


84


3.19


8,093


63


3.11


8,677


72


3.32



Other borrowings


8,369


85


4.06


9,167


80


3.49


6,483


85


5.24


Total interest-bearing liabilities


$ 148,116


$ 552


1.49

%

$ 148,702


$ 563


1.51

%

$ 150,096


$ 706


1.88

%























Net interest income/spread




$ 3,283


7.14

%



$ 3,136


6.99

%



$ 3,109


6.96

%























Interest income to average interest-earning assets






8.63

%





8.50

%





8.85

%

Interest expense to average interest-earning assets






1.24






1.30






1.64


Net interest margin






7.39

%





7.20

%





7.21

%

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 6: Loan Information and Performance Statistics(1)



2011


2011


2011


(Dollars in millions)(unaudited)


Q3


Q2


Q1


Period-end loans held for investment








Credit card:








Domestic credit card(2)


$ 53,820


$ 53,994


$ 50,570


International credit card


8,210


8,711


8,735


Total credit card


62,030


62,705


59,305


Consumer banking:








Automobile


20,422


19,223


18,342


Home loan


10,916


11,323


11,741


Retail banking


4,014


4,046


4,223


Total consumer banking


35,352


34,592


34,306


Commercial banking:








Commercial and multifamily real estate


14,389


14,035


13,543


Middle market


11,924


11,404


10,758


Specialty lending


4,221


4,122


3,936


Total commercial lending


30,534


29,561


28,237


Small-ticket commercial real estate


1,571


1,642


1,780


Total commercial banking


32,105


31,203


30,017


Other loans(3)


465


465


464


Total


$ 129,952


$ 128,965


$ 124,092










Average loans held for investment








Credit card:








Domestic credit card(2)


$ 53,668


$ 53,868


$ 51,889


International credit card


8,703


8,823


8,697


Total credit card


62,371


62,691


60,586


Consumer banking:








Automobile


19,757


18,753


18,025


Home loan


11,126


11,534


11,960


Retail banking


3,979


4,154


4,251


Total consumer banking


34,862


34,441


34,236


Commercial banking:








Commercial and multifamily real estate


14,021


13,597


13,345


Middle market


11,572


10,979


10,666


Specialty lending


4,154


4,014


3,964


Total commercial lending


29,747


28,590


27,975


Small-ticket commercial real estate


1,598


1,726


1,818


Total commercial banking


31,345


30,316


29,793


Other loans(3)


465


468


462


Total


$ 129,043


$ 127,916


$ 125,077










Net charge-off rates








Credit card:








Domestic credit card(4)


3.92

%

4.74

%

6.20

%

International credit card


6.15


7.02


5.74


Total credit card


4.23

%

5.06

%

6.13

%

Consumer banking:








Automobile(5)


1.69

%

1.11

%

1.98

%

Home loan(6)


0.53


0.60


0.71


Retail banking(6)


1.67


1.73


2.24


Total consumer banking(6)


1.32

%

1.01

%

1.57

%

Commercial banking:








Commercial and multifamily real estate(6)


0.12

%

0.39

%

0.56

%

Middle market (6)


0.41


0.13


0.18


Specialty lending


0.44


0.47


0.30


Total commercial lending(6)


0.28

%

0.30

%

0.38

%

Small-ticket commercial real estate


2.19


3.77


7.14


Total commercial banking(6)


0.37

%

0.50

%

0.79

%

Other loans


6.39

%

10.57

%

19.91

%

Total


2.52

%

2.91

%

3.66

%









30+ day performing delinquency rates








Credit card:








Domestic credit card


3.65

%

3.33

%

3.59

%

International credit card


5.35


5.30


5.55


Total credit card


3.87

%

3.60

%

3.88

%

Consumer banking:








Automobile


6.34

%

6.09

%

5.79

%

Home loan(6)


0.78


0.70


0.61


Retail banking(6)


0.89


0.76


0.93


Total consumer banking(6)


4.01

%

3.70

%

3.42

%









Nonperforming asset rates(7) (8)








Consumer banking:








Automobile


0.53

%

0.49

%

0.39

%

Home loan(6)


4.74


4.40


4.34


Retail banking(6)


2.37


2.45


2.44


Total consumer banking(6)


2.04

%

2.00

%

2.00

%

Commercial banking:








Commercial and multifamily real estate(6)


2.16

%

2.35

%

2.63

%

Middle market (6)


1.04


1.19


1.14


Specialty lending


0.87


0.95


1.19


Total commercial lending(6)


1.54

%

1.71

%

1.86

%

Small-ticket commercial real estate


1.58


0.75


3.39


Total commercial banking(6)


1.55

%

1.66

%

1.95

%

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 7: Financial & Statistical Summary - Credit Card Business



2011


2011


2011


(Dollars in millions) (unaudited)


Q3


Q2


Q1


Credit Card








Earnings:








Net interest income


$ 2,042


$ 1,890


$ 1,941


Non-interest income


678


619


674


Total revenue


$ 2,720


$ 2,509


$ 2,615


Provision for loan and lease losses


511


309


450


Non-interest expense


1,188


1,238


1,178


Income from continuing operations before taxes


1,021


962


987


Income tax provision


358


344


344


Income from continuing operations, net of tax


$ 663


$ 618


$ 643










Selected metrics:








Period end loans held for investment


$ 62,030


$ 62,705


$ 59,305


Average loans held for investment


62,371


62,691


60,586


Average yield on loans held for investment


14.84

%

13.83

%

14.68

%

Revenue margin


17.44


16.01


17.26


Net charge-off rate


4.23


5.06


6.13


30+ day delinquency rate(9)


3.87


3.60


3.88


Purchase volume(10)


$ 34,918


$ 34,226


$ 27,797










Domestic Card








Earnings:








Net interest income


$ 1,753


$ 1,607


$ 1,651


Non-interest income


588


584


583


Total revenue


$ 2,341


$ 2,191


$ 2,234


Provision for loan and lease losses


381


187


230


Non-interest expense


972


1,008


990


Income from continuing operations before taxes


988


996


1,014


Income tax provision


351


354


360


Income from continuing operations, net of tax


$ 637


$ 642


$ 654










Selected metrics:








Period end loans held for investment


$ 53,820


$ 53,994


$ 50,570


Average loans held for investment


53,668


53,868


51,889


Average yield on loans held for investment


14.62

%

13.52

%

14.42

%

Revenue margin


17.45


16.27


17.22


Net charge-off rate(4)


3.92


4.74


6.20


30+ day delinquency rate(9)


3.65


3.33


3.59


Purchase volume(10)


$ 31,686


$ 31,070


$ 25,024










International Card








Earnings:








Net interest income


$ 289


$ 283


$ 290


Non-interest income


90


35


91


Total revenue


$ 379


$ 318


$ 381


Provision for loan and lease losses


130


122


220


Non-interest expense


216


230


188


Income (loss) from continuing operations before taxes


33


(34)


(27)


Income tax provision (benefit)


7


(10)


(16)


Income (loss) from continuing operations, net of tax


$ 26


$ (24)


$ (11)










Selected metrics:








Period end loans held for investment


$ 8,210


$ 8,711


$ 8,735


Average loans held for investment


8,703


8,823


8,697


Average yield on loans held for investment


16.24

%

15.77

%

16.28

%

Revenue margin


17.42


14.42


17.52


Net charge-off rate


6.15


7.02


5.74


30+ day delinquency rate(9)


5.35


5.30


5.55


Purchase volume(10)


$ 3,232


$ 3,156


$ 2,773


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 8: Financial & Statistical Summary - Consumer Banking Business




2011


2011


2011


(Dollars in millions) (unaudited)


Q3


Q2


Q1


Consumer Banking








Earnings:









Net interest income


$ 1,097


$ 1,051


$ 983



Non-interest income


188


194


186



Total revenue


$ 1,285


$ 1,245


$ 1,169



Provision for loan and lease losses


136


41


95



Non-interest expense


853


758


740



Income from continuing operations before taxes


296


446


334



Income tax provision


106


159


119



Income from continuing operations, net of tax


$ 190


$ 287


$ 215











Selected metrics:









Period end loans held for investment


$ 35,352


$ 34,592


$ 34,306



Average loans held for investment


34,862


34,441


34,236



Average yield on loans held for investment


9.83

%

9.51

%

9.60

%


Auto loan originations


$ 3,409


$ 2,910


$ 2,571



Period end deposits


88,589


87,282


86,355



Average deposits


88,266


86,926


83,884



Deposit interest expense rate


0.95

%

1.00

%

1.06

%


Core deposit intangible amortization


$ 32


$ 34


$ 35



Net charge-off rate(5)(6)


1.32

%

1.01

%

1.57

%


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


1.88


1.83


1.84



Nonperforming asset rate(6)(7)


2.04


2.00


2.00



30+ day performing delinquency rate(6)(7)


4.01


3.70


3.42



Period end loans serviced for others


$ 18,624


$ 19,226


$ 19,956


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 9: Financial & Statistical Summary - Commercial Banking Business












2011


2011


2011


(Dollars in millions) (unaudited)


Q3


Q2


Q1


Commercial Banking








Earnings:









Net interest income


$ 353


$ 333


$ 321



Non-interest income


62


62


71



Total revenue


$ 415


$ 395


$ 392



Provision for loan and lease losses


(10)


(18)


(15)



Non-interest expense


200


192


177



Income from continuing operations before taxes


225


221


230



Income tax provision


80


79


82



Income from continuing operations, net of tax


$ 145


$ 142


$ 148











Selected metrics:









Period end loans held for investment


$ 32,105


$ 31,203


$ 30,017



Average loans held for investment


31,345


30,316


29,793



Average yield on loans held for investment


4.69

%

4.74

%

4.80

%


Period end deposits


$ 25,282


$ 24,304


$ 24,244



Average deposits


25,227


24,282


24,138



Deposit interest expense rate


0.48

%

0.52

%

0.55

%


Core deposit intangible amortization


$ 10


$ 10


$ 11



Net charge-off rate(6)


0.37

%

0.50

%

0.79

%


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


1.43


1.54


1.84



Nonperforming asset rate(6)


1.55


1.66


1.95











Risk category:(11)









Noncriticized


$ 29,374


$ 28,459


$ 27,008



Criticized performing


1,781


1,765


1,924



Criticized nonperforming


459


481


553



Total non-PCI loans


31,614


30,705


29,485



Total PCI loans


491


498


532



Total


$ 32,105


$ 31,203


$ 30,017












% of period end held for investment commercial loans:









Noncriticized


91.49

%

91.21

%

89.98

%


Criticized performing


5.55


5.66


6.41



Criticized nonperforming


1.43


1.54


1.84



Total non-PCI loans


98.47


98.40


98.23



Total PCI loans


1.53


1.60


1.77



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)


Q3


Q2


Q1

Other







Earnings:








Net interest expense


$ (209)


$ (138)


$ (105)


Non-interest income (expense)


(57)


(18)


11


Total revenue


$ (266)


$ (156)


$ (94)


Provision for loan and lease losses


(15)


11


4


Non-interest expense


56


67


67


Loss from continuing operations before taxes


(307)


(234)


(165)


Income tax benefit


(174)


(132)


(191)


Income (loss) from continuing operations, net of tax


$ (133)


$ (102)


$ 26









Selected metrics:








Period end loans held for investment(4)


$ 465


$ 465


$ 464


Average loans held for investment(4)


465


468


462


Period end deposits


14,447


14,531


14,847


Average deposits


14,775


14,626


16,136









Total







Earnings:








Net interest income


$ 3,283


$ 3,136


$ 3,140


Non-interest income


871


857


942


Total revenue


$ 4,154


$ 3,993


$ 4,082


Provision for loan and lease losses


622


343


534


Non-interest expense


2,297


2,255


2,162


Income from continuing operations before taxes


1,235


1,395


1,386


Income tax provision


370


450


354


Income from continuing operations, net of tax


$ 865


$ 945


$ 1,032









Selected metrics:








Period-end loans held for investment


$ 129,952


$ 128,965


$ 124,092


Average loans held for investment


129,043


127,916


125,077


Period end deposits


128,318


126,117


125,446


Average deposits


128,268


125,834


124,158

CAPITAL ONE FINANCIAL CORPORATION (COF)

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











(1)

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











(2)

Amounts for Q3 2011 and Q2 2011 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.



(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)

The third quarter 2011 annualized net charge-off rate for Auto reflects the impact of a true-up of recoveries for certain bankruptcy-related Auto loans that were previously charged-off, which resulted in a decrease in the annualized net charge off rate of 19 basis points in the Q3 2011.











(6)

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)


Q3


Q2


Q1



CCB period end acquired loan portfolio


$ 4,873


$ 5,181


$ 5,351



CCB average acquired loan portfolio


4,998


5,112


5,305













Net charge-off rates









Consumer banking:









Home loan


0.87

%

0.98

%

1.16

%


Retail banking


1.69


1.76


2.32



Total consumer banking


1.51

%

1.17

%

1.82

%












Commercial banking:









Commercial and multifamily real estate


0.12

%

0.40

%

0.57

%


Middle market


0.42


0.13


0.18



Total commercial lending


0.28

%

0.31

%

0.38

%


Total commercial banking


0.38

%

0.51

%

0.80

%












30+ day performing delinquency rates









Consumer banking:









Home loan


1.28

%

1.18

%

1.02

%


Retail banking


0.90


0.77


0.93



Total consumer banking


4.57

%

4.29

%

3.98

%












Nonperforming asset rates









Consumer banking:









Home loan


7.80

%

7.38

%

7.24

%


Retail banking


2.40


2.48


2.44



Total consumer banking


2.33

%

2.32

%

2.32

%












Commercial banking:









Commercial and multifamily real estate


2.18

%

2.39

%

2.68

%


Middle market


1.07


1.22


1.17



Total commercial lending


1.57

%

1.73

%

1.90

%


Total commercial banking


1.57

%

1.68

%

1.99

%












Nonperforming loans as a percentage of loans held for investment









Consumer banking


2.15

%

2.12

%

2.14

%


Commercial banking


1.45


1.56


1.88












(7)

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











(8)

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.











(9)

The September 30, 2011 30+ day delinquency rate for Domestic Card reflects the impact of a change in the way we estimate recoveries in determining the uncollectible amount of finance charges and fees, which resulted in an increase of 11 basis points as of September 30, 2011. For International Card, the change did not have a significant impact on the 30+ day delinquency rate as of September 30, 2011.











(10)

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





















(11)

Criticized exposures correspond to the "Special Mention," "Substandard" and "Doubtful" asset categories defined by banking regulatory authorities.

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 12: 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), TCE ratio, Tier 1 common equity and Tier 1 common equity ratio. The table below provides the details of the calculation of each of these measures. While these 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.















2011



2011



2011


(Dollars in millions)(unaudited)


Q3



Q2



Q1


Average Equity to Non-GAAP Average Tangible Common Equity










Average total stockholders' equity


$ 29,316



$ 28,255



$ 27,009


Less: Average intangible assets (1)


(13,990)



(14,025)



(14,001)


Average tangible common equity


$ 15,326



$ 14,230



$ 13,008













Stockholders' Equity to Non-GAAP Tangible Common Equity










Total stockholders' equity


$ 29,378



$ 28,681



$ 27,550


Less: Intangible assets (1)


(13,953)



(14,006)



(14,030)


Tangible common equity


$ 15,425



$ 14,675



$ 13,520













Total Assets to Tangible Assets










Total assets


$ 200,148