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Press release from PR Newswire

Capital One Reports Fourth Quarter 2011 Net Income of $407 million, or $0.88 per share

Thursday, January 19, 2012

Capital One Reports Fourth Quarter 2011 Net Income of $407 million, or $0.88 per share16:05 EST Thursday, January 19, 2012Earnings for full year 2011 were $3.1 billion, or $6.80 per share Compared to full year 2010, earnings were up $404 million, or 15 percentMCLEAN, Va., Jan. 19, 2012 /PRNewswire/ -- Fourth quarter loan balances up 4.6 percent from third quarter and up 7.9 percent from prior year?s fourth quarterRevenue down modestly in fourth quarter due to absence of Q3 finance charge and fee reserve release and Q4 impact of UK reserve, revenue up modestly excluding these items Non-interest expense up, driven by increased marketing and operating expensesContinued balance sheet strength; Tier 1 Common Equity Ratio near 10 percentCapital One Financial Corporation (NYSE: COF) today announced net income for the fourth quarter of 2011 of $407 million, or $0.88 per diluted common share, compared with net income of $813 million, or $1.77 per diluted common share, for the third quarter of 2011, and net income of              $697 million, or $1.52 per diluted common share, for the fourth quarter of 2010.  For full year 2011, net income was $3.1 billion, or $6.80 per diluted common share, compared with net income of $2.7 billion, or $6.01 per diluted common share, for 2010."In 2011, we made significant investments to restart growth across our lending businesses after a long period of cyclical declines in loan volumes, and we're seeing these investments gain traction," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "The strong underlying performance of our businesses and the compelling financial and strategic value of our planned acquisitions put us in a position to deliver and sustain shareholder value through growth potential, strong returns, and strong capital generation."The company expects to close the acquisition of ING Direct in the first quarter and the acquisition of the HSBC US Card business in the second quarter, and expects that the acquisitions will have significant impact on reported results, especially in 2012, from the purchase accounting effects, integration expenses and partial year impacts of these acquisitions.All comparisons in the following paragraphs are for fourth quarter 2011 compared to third quarter 2011 unless otherwise noted.    Total Company ResultsLoan and Deposit BalancesPeriod-end loan balances increased $5.9 billion to $135.9 billion driven by growth in Domestic Card, Commercial Banking, and Auto Finance.  Average loans were up by $2.5 billion, with much of the quarterly balance growth concentrated in the last few weeks of the year.  Period-end total deposits remained flat in the fourth quarter at $128.2 billion. The company expects to close the ING Direct acquisition in the first quarter of 2012 and add approximately $80 billion in deposits. The deposit volume trends in the fourth quarter of 2011 reflect the evolution in the company's deposit strategy in anticipation of the ING Direct acquisition.RevenuesTotal revenue in the fourth quarter of 2011 was $4.1 billion, down $104 million, or 2.5 percent. Revenue in the quarter was negatively impacted by the absence of the third quarter 2011 finance charge and fee reserve (FCFR) release and higher expected expense related to prior sales of payment protection insurance in the UK.  In addition, non-interest income was negatively impacted by a representation and warranty expense of $38 million. Excluding the impact of these items, revenue increased about 2.5 percent in the fourth quarter, in line with average loan growth.MarginsNet interest margin declined 17 basis points in the quarter to 7.22 percent. The margin benefited from a shift from cash to loans and a reduction in funding costs attributed to lower deposit rates.  These benefits were more than offset by a decline in loan yields driven largely by one-time effects such as the absence of the FCFR release which benefited third quarter 2011 interest income. Non-Interest ExpenseNon-interest expense for the fourth quarter increased $321 million primarily due to a seasonal ramp in marketing expenses and an increase in operating expenses. The increase in operating expenses includes approximately $90 million in litigation expenses and approximately $40 million in asset write downs and other costs as the company rationalized some facilities and equipment, principally related to acquired bank businesses. Additionally, the company accelerated its build-out of 'top bank' infrastructure, especially in the second half of 2011, to ensure our readiness to execute on attractive acquisition opportunities.  Pre-Provision Income (before tax)Pre-provision earnings decreased in the quarter as a result of the increase in non-interest expense and the reported decline in revenue. Provision ExpenseProvision expense increased $239 million in the quarter as continued improvement in the outlook for credit performance was more than offset by growth in loan balances and seasonal effects. The charge-off rate increased 17 basis points to 2.69 percent, while the coverage ratio of allowance to loans fell by 16 basis points to 3.13 percent.Net IncomeNet income in the quarter decreased $406 million reflecting the impact of increases in non-interest and provision expense.Capital RatiosThe company's estimated Tier 1 common equity ratio decreased 30 basis points from September 30, 2011, to 9.7 percent as of December 31, 2011, driven by strong loan growth at the end of the fourth quarter.  The Tier 1 common equity ratio increased 90 basis points from last year's rate of 8.8 percent at December 31, 2010. Using known Basel III definitions, our Tier 1 common equity ratio would have been approximately 10 basis points higher at December 31, 2011, or 9.8 percent."Significant credit improvement in 2011 led to a sizeable increase in profitability from continuing operations for 2011," said Gary L. Perlin, Capital One's Chief Financial Officer.  "Over the course of the year, we generated substantial amounts of capital and expect to generate healthy amounts of capital going forward."Tier 1 common equity ratio, as used throughout this release, is a non-GAAP financial measure. For additional information, see Table 12 in the Financial Supplement.Business Segment ResultsCredit Card HighlightsDomestic Card reported net income in the fourth quarter of 2011 of $395 million. Total revenue grew      4.7 percent in the fourth quarter of 2011 from the fourth quarter of 2010, driven by growth in loans, strong purchase volumes, and stable margins.  The business posted $2.3 billion in net income in 2011, driven by significant credit improvement, the return of modest loan growth, and stable margins. Domestic Card net charge-off rate increased 15 basis points in the quarter to 4.07 percent, consistent with expected seasonal patterns.  Compared with the fourth quarter of 2010, the charge-off rate improved by 321 basis points, resulting from the significant credit improvements experienced in 2011.  Domestic Card loan balances grew $2.8 billion, or 5 percent, in the fourth quarter driven by seasonal spending and balance building on a growing account base.  Growth for the year resulted largely from the addition of the Kohl's private label partnership, as well as a return to growth in the company's general purpose card business in the second half of the year.  Excluding the expected installment loan run-off, Domestic Card loans grew by $4.7 billion, or 9 percent for the full year.Purchase volume increased 9.3 percent in the quarter, reflecting continued strong growth in purchase volume across the company's Domestic Card business. Purchase volume grew 17.8 percent from the fourth quarter of 2010, excluding the impact of the Kohl's portfolio.Commercial Banking HighlightsThe Commercial Banking business delivered another quarter of solid profitability and steady loan growth, as deposits and commercial customer relationships continued to grow in the quarter, as well.  The combination of improving credit and growth in loan and deposit volumes drove 2011 net income of $532 million in the Commercial Banking business. Ending loans were up 5.9 percent from the prior quarter and up 14.3 percent from the fourth quarter of 2010.  Growth in loan commitments, an early indicator of future loan growth, was even stronger.  Commercial Banking credit metrics have stabilized and improved over the last six quarters. The charge-off rate for Commercial Banking was 0.63 percent, down 80 basis points from the same quarter last year.  Excluding the run-off Small Ticket CRE portfolio, the charge-off rate in the company's core Commercial Lending businesses was 0.47 percent in the quarter, an improvement of 53 basis points from the prior year.  Commercial Lending charge-offs were up 19 basis points from the third quarter, driven by a small number of impaired CRE loans related to a single troubled relationship, which the company had reserved for in prior quarters. The slower flow rate into NPL and stable property values are driving lower charge-offs.Consumer Banking HighlightsThe Consumer Banking business delivered net income of $117 million in the fourth quarter of 2011 and $809 million for full year, driven by the strong performance of the Auto Finance business and growth in deposits with improving interest expense rates.Loan balances were up modestly as strong growth in auto loans was partially offset by expected runoff of the Home Loan portfolio.  Auto Finance originations were $3.6 billion, up 5.2 percent from the third quarter and 61.8 percent from the fourth quarter of 2010. In the Auto Finance business, net charge-off and delinquency rates increased in the quarter, consistent with expected seasonal patterns.  However, charge-offs and delinquencies for the year improved 58 basis points and  70 basis points, respectively. In the Home Loan business, the charge-off rate increased 37 basis points in the quarter but was relatively unchanged compared with the same quarter in 2010, while the delinquency rate increased modestly. Consumer Banking deposits remained flat in the quarter but grew 6.7 percent in 2011 as the Consumer Banking segment continued to grow retail banking customer relationships.For more lending information and statistics on the segment results, please refer to the Financial Supplement.Forward-looking statementsThe company cautions that its current expectations in this release dated January 19, 2012 and the company's plans, objectives, expectations and intentions, are forward-looking statements which speak only as of the date hereof. The company does not undertake any obligation to update or revise any of the information contained herein whether as a result of new information, future events or otherwise. Certain statements in this release are forward-looking statements, including those that discuss, among other things, strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, expenses, capital measures, accruals for claims in litigation and for other claims against the company, earnings per share or other financial measures for the company; future financial and operating results; the company's plans, objectives, expectations and intentions; the projected impact and benefits of the pending transactions involving the company, HSBC and ING Direct (the "transactions"); and the assumptions that underlie these matters.  To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking information provided by the Private Securities Litigation Reform Act of 1995. Numerous factors could cause the company's actual results to differ materially from those described in such forward-looking statements, including, among other things: general economic and business conditions in the U.S., the U.K., Canada or the company's local markets, including conditions affecting employment levels, interest rates, consumer income and confidence, spending and savings that may affect consumer bankruptcies, defaults, charge-offs and deposit activity; an increase or decrease in credit losses (including increases due to a worsening of general economic conditions in the credit environment); the possibility that regulatory and other approvals and conditions to either of the transactions are not obtained or satisfied on a timely basis or at all; the possibility that modifications to the terms of either of the transactions may be required in order to obtain or satisfy such approvals or conditions; the possibility that the company will not receive third-party consents necessary to fully realize the anticipated benefits of the transactions; the possibility that the company may not fully realize the projected cost savings and other projected benefits of the transactions; changes in the anticipated timing for closing either of the transactions; difficulties and delays in integrating the assets and businesses acquired in the transactions; business disruption during the pendency of or following the transactions; the inability to sustain revenue and earnings growth; diversion of management time on issues related to the transactions; reputational risks and the reaction of customers and counterparties to the transactions; disruptions relating to the transactions negatively impacting the company's ability to maintain relationships with customers, employees and suppliers; changes in asset quality and credit risk as a result of the transactions; financial, legal, regulatory, tax or accounting changes or actions, including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder; developments, changes or actions relating to any  litigation matter involving the company; increases or decreases in interest rates; the company's ability to access the capital markets at attractive rates and terms to capitalize and fund its operations and future growth; the success of the company's marketing efforts in attracting and retaining customers; increases or decreases in the company's aggregate loan balances or the number of customers and the growth rate and composition thereof, including increases or decreases resulting from factors such as shifting product mix, amount of actual marketing expenses the company incurs and attrition of loan balances; the level of future repurchase or indemnification requests the company may receive, the actual future performance of mortgage loans relating to such requests, the success rates of claimants against the company, any developments in litigation and the actual recoveries the company may make on any collateral relating to claims against the company; the amount and rate of deposit growth; changes in the reputation of or expectations regarding the financial services industry or the company with respect to practices, products or financial condition; any significant disruption in the company's operations or technology platform; the company's ability to maintain a compliance infrastructure suitable for its size and complexity; the company's ability to control costs; the amount of, and rate of growth in, the company's expenses as its business develops or changes or as it expands into new market areas; the company's ability to execute on its strategic and operational plans; any significant disruption of, or loss of public confidence in, the United States Mail service affecting the company's response rates and consumer payments; the company's ability to recruit and retain experienced personnel to assist in the management and operations of new products and services; changes in the labor and employment markets; fraud or misconduct by the company's customers, employees or business partners; competition from providers of products and services that compete with the company's businesses; and other risk factors set forth from time to time in reports that the company files with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2010, and Exhibit 99.5 to the Current Report on Form 8-K filed on July 13, 2011. About Capital OneCapital 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 $128.2 billion in deposits and      $206.0 billion in total assets outstanding as of December 31, 2011. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One, N.A. has approximately 1,000 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.Exhibit 99.2Capital One Financial CorporationFinancial SupplementFourth Quarter 2011 (1)Table of Contents Page Capital One Financial ConsolidatedTable   1:   Financial & Statistical Summary - Consolidated1Table   2:Notes to Consolidated Financial & Statistical Summary (Table 1)2Table   3:Consolidated Statements of Income3Table   4:Consolidated Balance Sheets4Table   5:Average Balances, Net Interest Income and Net Interest Margin 5Table   6:Loan Information and Performance Statistics6Business Segment DetailTable   7:Financial & Statistical Summary - Credit Card Business7Table   8:Financial & Statistical Summary - Consumer Banking Business8Table   9:Financial & Statistical Summary - Commercial Banking Business9Table 10:Financial & Statistical Summary - Other and Total 10Table 11:Notes to Loan and Business Segment Disclosures (Tables 6 - 10)11OtherTable 12:Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures12(1)The information contained in this Financial Supplement is preliminary and based on data available at the time of the earnings presentation, and investors should refer to our 2011 Annual Report on Form 10-K once it is filed with the Securities and Exchange Commission. CAPITAL ONE FINANCIAL CORPORATION (COF)Table 1:  Financial & Statistical Summary?Consolidated (1)201120112011(Dollars in millions, except per share data and as noted) (unaudited)Q4Q3Q2EarningsNet interest income$                      3,182$                      3,283$                      3,136Non-interest income (2) (3)868871857Total revenue (4)$                      4,050$                      4,154$                      3,993Provision for loan and lease losses861622343Marketing expenses420312329Operating expenses (5)2,1981,9851,926Income from continuing operations before income taxes $                         571$                      1,235$                      1,395Income tax provision160370450Income from continuing operations, net of tax411865945Loss from discontinued operations, net of tax (3)(4)(52)(34)Net income$                         407$                         813$                         911Common Share StatisticsBasic EPS:   Income from continuing operations, net of tax$                        0.89$                        1.89$                        2.07   Loss from discontinued operations, net of tax(0.01)(0.11)(0.07)   Net income per common share $                        0.88$                        1.78$                        2.00Diluted EPS:   Income from continuing operations, net of tax$                        0.89$                        1.88$                        2.04   Loss from discontinued operations, net of tax(0.01)(0.11)(0.07)   Net income per common share$                        0.88$                        1.77$                        1.97Weighted average common shares outstanding (in millions):   Basic EPS456.2456.0455.6   Diluted EPS458.5460.4462.2Common shares outstanding (period end) 456.4456.1455.8Dividends per common share$                        0.05$                        0.05$                        0.05Tangible book value per common share (period end) (6)34.2633.8232.20Stock price per common share (period end)42.2939.6351.67Total market capitalization (period end)19,30118,07523,551Balance Sheet (Period End)Loans held for investment (7)$                  135,892$                  129,952$                  128,965Interest-earning assets179,817174,308174,302Total assets206,019200,148199,753Tangible assets (8)191,806185,891185,715Interest-bearing deposits109,945110,777109,278Total deposits128,226128,318126,117Borrowings39,56134,31537,735Stockholders' equity29,66629,37828,681Tangible common equity (TCE) (9)15,75815,42514,675Balance Sheet (Quarterly Average Balances)Average loans held for investment (7)$                  131,581$                  129,043$                  127,916Average interest-earning assets176,267177,710174,143Average total assets200,106201,611199,229Average interest-bearing deposits109,914110,750109,251Average total deposits128,450128,268125,834Average borrowings34,81237,36639,451Average stockholders' equity29,69829,31628,255Performance MetricsNet interest income growth (quarter over quarter) (3)%5%- % Non-interest income growth (quarter over quarter)-2(9)Revenue growth (quarter over quarter)(3)4(2)Revenue margin (10)9.199.359.17Net interest margin (11)7.227.397.20Return on average assets (12)0.821.721.90Return on average equity (13)5.5411.8013.38Return on average tangible common equity (14)10.4322.5826.57Non-interest expense as a % of average loans held for investment (15)7.967.127.05Efficiency ratio (16)64.6455.3056.47Effective income tax rate28.030.032.3Full-time equivalent employees (in thousands)30.529.528.2Credit Quality Metrics (17)Allowance for loan and lease losses$                      4,250$                      4,280$                      4,488Allowance as a % of loans held for investment 3.13%3.29%3.48 % Net charge-offs $                         884$                         812$                         931Net charge-off rate (18) (19)2.69%2.52%2.91 %  30+ day performing delinquency rate 3.353.132.9030+ day total delinquency rate (20)-3.813.57Capital RatiosTier 1 risk-based capital ratio (21)12.0%12.4%11.8 %  Tier 1 common equity ratio (22)9.710.09.4Total risk-based capital ratio (23)14.915.415.0Tangible common equity (TCE) ratio (24)8.28.37.9CAPITAL ONE FINANCIAL CORPORATION (COF)Table 2:  Notes to Consolidated Financial & Statistical Summary (Table 1)(1)Certain prior period amounts have been reclassified to conform to the current period presentation.(2)Includes the impact from the change in fair value of retained interests, including interest-only strips, which totaled $11 million in Q4 2011, $12 million in Q3 2011, and $16 million in Q2 2011.(3)The mortgage representation and warranty reserve increased to $943 million as of December 31, 2011, from $892 million as of September 30, 2011. We recorded a provision for repurchase losses of $59 million in Q4 2011, $72 million in Q3 2011, and $37 million in Q2 2011. The majority of the provision for repurchase losses is generally included in discontinued operations, with the remaining portion included in non-interest income.  (4)The estimated uncollectible amount of billed finance charges and fees excluded from revenue totaled $130 million in Q4 2011, $24 million in Q3 2011, and $112 million in Q2 2011. As further discussed in our September 30, 2011 Form 10-Q, in the third quarter of 2011 we revised the manner in which we estimate expected recoveries of finance charge and fee amounts previously considered to be uncollectible. The result of this revision was a reduction of the uncollectible finance charge and fee reserves by approximately $83 million as of September 30, 2011, which resulted in a corresponding increase in revenues of $83 million in Q3 2011.(5)Includes core deposit intangible amortization expense of $40 million in Q4 2011, $42 million in Q3 2011, and $44 million in Q2 2011. Also includes integration costs of $17 million in Q4 2011, $1 million in Q3 2011, and $0 million in Q2 2011.(6)Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See "Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for the calculation of tangible common equity.(7)Results reflect the impact of the April 1, 2011 acquisition of the existing private-label credit card loan portfolio of Kohl's Department Stores ("Kohl's"), which had an outstanding principal and interest balance of approximately $3.7 billion at acquisition.(8)Tangible assets is a non-GAAP measure consisting of total assets less assets from discontinued operations and intangible assets. See "Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for the calculation of this measure.(9)Tangible common equity is a non-GAAP measure consisting of total stockholders' equity less intangible assets. See "Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for the calculation of this measure.(10)Calculated based on annualized total revenue for the period divided by average interest-earning assets for the period.(11)Calculated based on annualized net interest income for the period divided by average interest-earning assets for the period.(12)Calculated based on annualized income from continuing operations, net of tax, for the period divided by average total assets for the period. (13)Calculated based on annualized income from continuing operations, net of tax, for the period divided by average stockholders' equity for the period. (14)Calculated based on annualized income from continuing operations, net of tax, for the period divided by average tangible common equity for the period. (15)Calculated based on annualized non-interest expense for the period divided by average loans held for investment for the period.(16)Calculated based on non-interest expense for the period divided by total revenue for the period. (17)Purchased credit impaired ("PCI") loans acquired as part of the Chevy Chase Bank ("CCB") acquisition are included in the denominator used in calculating the credit quality metrics presented in Table 1.  These metrics excluding the impact of loans acquired from CCB from the denominator are presented below:201120112011(Dollars in millions) (unaudited)Q4Q3Q2CCB period-end acquired loan portfolio$        4,689$        4,873$        5,181CCB average acquired loan portfolio4,7814,9985,112Allowance as a % of loans held for investment, excluding CCB loans3.22%3.40%3.62%Net charge-off rate, excluding CCB loans2.792.623.0330+ day performing delinquency rate, excluding CCB loans3.473.253.02(18)In accordance with our loss-sharing agreement with Kohl's, charge-offs for the portfolio are reported net of any reimbursement of credit losses from Kohl's, which has the impact of lowering the overall charge-off rate. (19)Calculated based on annualized net charge-offs for the period divided by average loans held for investment for the period. (20)The 30+ day total delinquency rate as of the end of Q4 2011 will be provided in the 2011 Annual Report on Form 10-K.(21)Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets. See "Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for the calculation of this ratio.(22)Tier 1 common equity ratio is a non-GAAP measure calculated based on Tier 1 common equity divided by risk-weighted assets. See "Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for the calculation of this ratio and non-GAAP reconciliation..(23)Total risk-based capital ratio is a regulatory capital measure calculated based on total risk-based capital divided by risk-weighted assets. See "Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for the calculation of this ratio.(24)Tangible common equity ratio ("TCE ratio") is a non-GAAP measure calculated based on tangible common equity divided by tangible assets. See "Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for the calculation of this ratio and non-GAAP reconciliation.CAPITAL ONE FINANCIAL CORPORATION (COF) Table 3:  Consolidated Statements of IncomeYear Ended2011Q42011Q32010Q4December 31,2011December 31,2010(Dollars in millions, except per share data) (unaudited)Interest income:Loans held for investment, including past-due fees$      3,440$      3,550$      3,352$      13,774$      13,934Investment securities2442643051,1371,342Cash equivalents and other1721177677Total interest income3,7013,8353,67414,98715,353Interest expense:Deposits 2642943401,1871,465Securitized debt obligations8089165422809Senior and subordinated notes898465300276Other borrowings868581337346Total interest expense5195526512,2462,896Net interest income3,1823,2833,02312,74112,457Provision for loan and lease losses8616228382,3603,907Net interest income after provision for loan and lease losses2,3212,6612,18510,3818,550Non-interest income:Servicing and securitizations91210447Service charges and other customer-related fees4525424961,9792,073Interchange fees, net3463213491,3181,340Net other-than-temporary impairment losses recognized in earnings(6)(6)(3)(21)(65)Other 67287218359Total non-interest income8688719393,5383,714Non-interest expense:Salaries and associate benefits8177506573,0232,594Marketing 4203123081,337958Communications and data processing177178181681693Supplies and equipment137143139539520Occupancy 131122115490486Other 9367926913,2622,683Total non-interest expense2,6182,2972,0919,3327,934Income from continuing operations before income taxes5711,2351,0334,5874,330Income tax provision1603703321,3341,280Income from continuing operations, net of tax4118657013,2533,050Loss from discontinued operations, net of tax(4)(52)(4)(106)(307)Net income $      407$       813$      697$        3,147$        2,743Basic earnings per common share:  Income from continuing operations$      0.89$      1.89$     1.55$          7.08$          6.74  Loss from discontinued operations(0.01)(0.11)(0.01)(0.23)(0.67)  Net income per basic common share$      0.88$      1.78$     1.54$          6.85$          6.07Diluted earnings per common share:  Income from continuing operations$      0.89$      1.88$     1.53$          7.03$          6.68  Loss from discontinued operations(0.01)(0.11)(0.01)(0.23)(0.67)  Net income per diluted common share$      0.88$      1.77$     1.52$          6.80$          6.01Weighted average common shares outstanding (in millions):   Basic EPS 456.2456.0452.7455.5452.1   Diluted EPS458.5460.4457.2459.1456.4Dividends paid per common share$      0.05$      0.05$      0.05$                        0.20$          0.20CAPITAL ONE FINANCIAL CORPORATION (COF) Table 4:  Consolidated Balance SheetsDecember 31,September  30,December 31,(Dollars in millions)(unaudited)201120112010Assets:Cash and due from banks$                      2,097$                      1,794$                      2,067Interest-bearing deposits with banks3,3993,2382,776Federal funds sold and securities purchased under agreements to resell3421,326406Cash and cash equivalents5,8386,3585,249Restricted cash for securitization investors7919841,602Securities available for sale, at fair value38,75938,40041,537Loans held for investment:Unsecuritized loans held for investment, at amortized cost88,24283,01071,921Restricted loans for securitization investors47,65046,94254,026Total loans held for investment135,892129,952125,947    Less: Allowance for loan and lease losses(4,250)(4,280)(5,628)Net loans held for investment131,642125,672120,319Loans held for sale, at lower-of-cost-or-fair-value201312228Accounts receivable from securitizations94101118Premises and equipment, net2,7482,7852,749Interest receivable1,0299581,070Goodwill13,59213,59313,591Other11,32510,98511,040Total assets$                  206,019$                  200,148$                  197,503Liabilities:Interest payable$                         466$                         401$                         488Customer deposits:Non-interest bearing deposits18,28117,54115,048Interest-bearing deposits109,945110,777107,162Total customer deposits128,226128,318122,210Securitized debt obligations16,52717,12026,915Other debt:Federal funds purchased and securities loaned or sold under agreements to repurchase1,4641,4411,517Senior and subordinated notes11,03411,0518,650Other borrowings10,5364,7034,714Total other debt23,03417,19514,881Other liabilities8,1007,7366,468Total liabilities176,353170,770170,962Stockholders' equity:Common stock555Paid-in capital, net19,27419,23419,084Retained earnings and accumulated other comprehensive income13,63113,38210,654Less:  Treasury stock, at cost(3,244)(3,243)(3,202)Total stockholders' equity29,66629,37826,541Total liabilities and stockholders' equity$                  206,019$                  200,148$                  197,503CAPITAL ONE FINANCIAL CORPORATION (COF) Table 5:  Average Balances, Net Interest Income and Net Interest Margin2011 Q4 2011 Q3 2010 Q4 AverageInterest Income/ Yield/ AverageInterest Income/ Yield/ AverageInterest Income/ Yield/ (Dollars in millions)(unaudited)BalanceExpenseRateBalanceExpenseRateBalanceExpenseRateInterest-earning assets:Loans held for investment$  131,581$  3,44010.46%$  129,043$  3,55011.00%$  125,441$  3,35210.69%Investment securities 39,0052442.5037,1892642.8441,0043052.98Cash equivalents and other5,681171.2011,478210.737,547170.90Total interest-earning assets $  176,267$  3,7018.40%$  177,710$  3,8358.63%$  173,992$  3,6748.45%Interest-bearing liabilities:Interest-bearing depositsNOW accounts$  13,700$       120.35%$    12,602$         90.29%$    12,918$         80.25%Money market deposit accounts47,167870.7447,4831000.8443,8221101.00Savings accounts31,422470.6030,944560.7225,121540.86Other consumer time deposits12,264772.5113,530842.4816,9411122.64Public fund CD's of $100,000 or more8414.769214.3520411.96CD's of $100,000 or more4,748393.295,407433.186,696543.23Foreign time deposits52910.7669210.5889510.45Total interest-bearing deposits$  109,914$     2640.96%$  110,750$     2941.06%$  106,597$     3401.28%Securitized debt obligations16,780801.9118,478891.9327,7081652.38Senior and subordinated notes10,237893.4810,519843.198,096653.21Other borrowings7,794864.418,369854.066,624814.89Total interest-bearing liabilities$  144,725$     5191.43%$  148,116$     5521.49%$  149,025$     6511.75%Net interest income/spread$  3,1826.97%$  3,2837.14%$  3,0236.70%Impact of non-interest bearing funding0.25%0.25%0.25%Net interest margin7.22%7.39%6.95%CAPITAL ONE FINANCIAL CORPORATION (COF)Table 6: Loan Information and Performance Statistics (1)201120112011(Dollars in millions)(unaudited)Q4Q3Q2Period-end loans held for investmentCredit card:   Domestic credit card (2)$                    56,609$                    53,820$                    53,994   International credit card8,4668,2108,711      Total credit card65,07562,03062,705Consumer banking:   Automobile21,77920,42219,223   Home loan10,43310,91611,323   Retail banking4,1034,0144,046      Total consumer banking36,31535,35234,592Commercial banking:   Commercial and multifamily real estate15,41014,38914,035   Middle market12,68411,92411,404   Specialty lending4,4044,2214,122      Total commercial lending32,49830,53429,561   Small-ticket commercial real estate1,5031,5711,642      Total commercial banking34,00132,10531,203Other loans(3)501465465     Total $                  135,892$                  129,952$                  128,965Average loans held for investmentCredit card:   Domestic credit card (2)$                    54,403$                    53,668$                    53,868   International credit card8,3618,7038,823      Total credit card62,76462,37162,691Consumer banking:   Automobile21,10119,75718,753   Home loan10,68311,12611,534   Retail banking4,0073,9794,154      Total consumer banking35,79134,86234,441Commercial banking:   Commercial and multifamily real estate14,62814,02113,597   Middle market12,06811,57210,979   Specialty lending4,3084,1544,014      Total commercial lending31,00429,74728,590   Small-ticket commercial real estate1,5471,5981,726      Total commercial banking32,55131,34530,316Other loans (3)475465468      Total$                  131,581$                  129,043$                  127,916Net charge-off ratesCredit card:   Domestic credit card (4)4.07%3.92%4.74%   International credit card5.776.157.02      Total credit card4.30%4.23%5.06%Consumer banking:   Automobile2.07%1.69%1.11%   Home loan (5)0.900.530.60   Retail banking (5)1.441.671.73      Total consumer banking (5)1.65%1.32%1.01%Commercial banking:   Commercial and multifamily real estate (5)0.76%0.12%0.39%   Middle market (5)0.200.410.13   Specialty lending0.240.440.47      Total commercial lending (5)0.47%0.28%0.30%   Small-ticket commercial real estate3.732.193.77      Total commercial banking (5)0.63%0.37%0.50%Other loans9.29%6.38%10.57%      Total2.69%2.52%2.91%30+ day performing delinquency ratesCredit card:   Domestic credit card3.66%3.65%3.33%   International credit card5.185.355.30      Total credit card3.86%3.87%3.60%Consumer banking:   Automobile6.88%6.34%6.09%   Home loan (5)0.890.780.70   Retail banking (5)0.830.890.76      Total consumer banking (5)4.47%4.01%3.70%Nonperforming asset rates (6) (7)Consumer banking:   Automobile0.58%0.53%0.49%   Home loan (5)4.584.744.40   Retail banking (5)2.502.372.45      Total consumer banking (5)1.94%2.04%2.00%Commercial banking:   Commercial and multifamily real estate (5)1.43%2.16%2.35%   Middle market (5)0.821.041.19   Specialty lending0.750.870.95      Total commercial lending (5)1.10%1.54%1.71%   Small-ticket commercial real estate2.861.580.75      Total commercial banking (5)1.17%1.55%1.66%CAPITAL ONE FINANCIAL CORPORATION (COF)Table 7:  Financial & Statistical Summary -- Credit Card Business201120112011(Dollars in millions) (unaudited)Q4Q3Q2Credit CardEarnings:  Interest income$                       2,253$                      2,354$                      2,209  Interest expense304312319  Net interest income                       1,949                      2,042                      1,890  Non-interest income638678619  Total revenue                       2,587                      2,720                      2,509  Provision for loan and lease losses600511309  Non-interest expense1,4311,1881,238  Income from continuing operations before taxes5561,021962  Income tax provision203358344  Income from continuing operations, net of tax$                          353$                         663$                         618Selected metrics:  Period-end loans held for investment$                     65,075$                    62,030$                    62,705  Average loans held for investment62,76462,37162,691  Average yield on loans held for investment14.12%14.84%13.83%  Revenue margin16.4917.4416.01  Net charge-off rate4.304.235.06  30+ day total delinquency rate (8)3.863.873.60  Purchase volume (9)$                     38,179$                    34,918$                    34,226Domestic CardEarnings:  Interest income$                       1,940$                      1,992$                      1,852  Interest expense234239245  Net interest income                       1,706                      1,753                      1,607  Non-interest income613588584  Total revenue                       2,319                      2,341                      2,191  Provision for loan and lease losses519381187  Non-interest expense1,1839721,008  Income from continuing operations before taxes617988996  Income tax provision222351354  Income from continuing operations, net of tax$                          395$                         637$                         642Selected metrics:  Period-end loans held for investment$                     56,609$                    53,820$                    53,994  Average loans held for investment54,40353,66853,868  Average yield on loans held for investment14.05%14.62%13.52%  Revenue margin17.0517.4516.27  Net charge-off rate (4)4.073.924.74  30+ day total delinquency rate (8)3.663.653.33  Purchase volume (9)$                     34,586$                    31,686$                    31,070International CardEarnings:  Interest income                         $                          313$                          362$                         357  Interest expense707374  Net interest income                          243                        289                        283  Non-interest income259035  Total revenue                          268                        379318  Provision for loan and lease losses81130122  Non-interest expense248216230  Income (loss) from continuing operations before taxes(61)33(34)  Income tax provision (benefit)(19)7(10)  Income (loss) from continuing operations, net of tax$                          (42)$                           26$                         (24)Selected metrics:  Period-end loans held for investment$                       8,466$                      8,210$                      8,711  Average loans held for investment8,3618,7038,823  Average yield on loans held for investment14.57%16.24%15.77%  Revenue margin12.8217.4214.42  Net charge-off rate5.776.157.02  30+ day total delinquency rate (8)5.185.355.30  Purchase volume (9)$                       3,593$                      3,232$                      3,156CAPITAL ONE FINANCIAL CORPORATION (COF)Table 8:  Financial & Statistical Summary -- Consumer Banking Business201120112011(Dollars in millions) (unaudited)Q4Q3Q2Consumer BankingEarnings:Interest income$                      1,521$                      1,546$                      1,517Interest expense416449466Net interest income                      1,105                      1,097                      1,051Non-interest income152188194Total revenue                      1,257                      1,285                     1,245Provision for loan and lease losses18013641Non-interest expense893853758Income from continuing operations before taxes184296446Income tax provision67106159Income from continuing operations, net of tax$                         117$                         190$                         287Selected metrics:Period-end loans held for investment$                    36,315$                    35,352$                    34,592Average loans held for investment35,79134,86234,441Average yield on loans held for investment9.46%9.83%9.51%Auto loan originations$                      3,586$                      3,409$                      2,910Period-end deposits88,54088,58987,282Average deposits88,39088,26686,926Deposit interest expense rate0.84%0.95%1.00%Core deposit intangible amortization$                           31$                           32$                           34Net charge-off rate (5)1.65%1.32%1.01%Nonperforming loans as a percentage of loans held for investment (5) (6)1.791.881.83Nonperforming asset rate (5) (6)1.942.042.0030+ day performing delinquency rate (5) (6)4.474.013.70Period-end loans serviced for others$                    17,998$                    18,624$                    19,226CAPITAL ONE FINANCIAL CORPORATION (COF)Table 9:  Financial & Statistical Summary -- Commercial Banking Business201120112011(Dollars in millions) (unaudited)Q4Q3Q2Commercial BankingEarnings:Interest income$                         547$                         533$                         523Interest expense177180190Net interest income                         370                        353                       333Non-interest income756262Total revenue                         445                         415                      395Provision for loan and lease losses74(10)(18)Non-interest expense220200192Income from continuing operations before taxes151225221Income tax provision 548079Income from continuing operations, net of tax$                           97$                         145$                         142Selected metrics:Period-end loans held for investment$                    34,001$                    32,105$                    31,203Average loans held for investment32,55131,34530,316Average yield on loans held for investment4.68%4.69%4.74%Period-end deposits$                    26,532$                    25,282$                    24,304Average deposits26,03425,22724,282Deposit interest expense rate0.42%0.48%0.52%Core deposit intangible amortization$                             9$                           10$                           10Net charge-off rate (5)0.63%0.37%0.50%Nonperforming loans as a percentage of loans held for investment (5)1.091.431.54Nonperforming asset rate (5)1.171.551.66Risk category: (10)Noncriticized$                    31,306$                    29,374$                    28,459Criticized performing1,8431,7811,765Criticized nonperforming371459481Total non-PCI loans33,52031,61430,705Total PCI loans481491498Total$                    34,001$                    32,105$                    31,203% of period-end held for investment commercial loans:Noncriticized92.07%91.49%91.21%Criticized performing5.425.555.66Criticized nonperforming1.091.431.54Total non-PCI loans98.5998.4798.40Total PCI loans1.411.531.60Total100.00%100.00%100.00%CAPITAL ONE FINANCIAL CORPORATION (COF)Table 10:  Financial & Statistical Summary --  Other and Total 201120112011(Dollars in millions) (unaudited)Q4Q3Q2OtherEarnings:Interest income$                       (620)$                       (598)$                       (550)Interest expense(378)(389)(412)Net interest expense                       (242)                       (209)                       (138)Non-interest income (expense)3(57)(18)Total revenue                       (239)                       (266)                       (156)Provision for loan and lease losses7(15)11Non-interest expense745667Loss from continuing operations before taxes(320)(307)(234)Income tax benefit(164)(174)(132)Income (loss) from continuing operations, net of tax$                       (156)$                       (133)$                       (102)Selected metrics:Period-end loans held for investment (4)$                         501$                         465$                         465Average loans held for investment (4)475465468Period-end deposits13,15414,44714,531Average deposits14,02614,77514,626TotalEarnings:Interest income$                      3,701$                      3,835$                      3,699Interest expense519552563Net interest income                      3,182                    3,283                      3,136Non-interest income868871857Total revenue                      4,050                     4,154                      3,993Provision for loan and lease losses861622343Non-interest expense2,6182,2972,255Income from continuing operations before taxes5711,2351,395Income tax provision160370450Income from continuing operations, net of tax$                         411$                         865$                         945Selected metrics:  Period-end loans held for investment$                  135,892$                  129,952$                  128,965  Average loans held for investment131,581129,043127,916  Period-end deposits128,226128,318126,117  Average deposits128,450128,268125,834CAPITAL ONE FINANCIAL CORPORATION (COF)Table 11:  Notes to Loan and Business Segment Disclosures (Tables 6 ? 10)(1)Certain prior period amounts have been reclassified to conform to the current period presentation.(2)Results reflect the impact of the April 1, 2011 acquisition of the existing private-label credit card loan portfolio of Kohl's, which had an outstanding principal and interest balance of approximately $3.7 billion at acquisition.(3)Other loans held for investment includes unamortized premiums and discounts on loans acquired as part of the North Fork and Hibernia acquisitions.(4)In accordance with our loss-sharing agreement with Kohl's, charge-offs for the portfolio are reported net of any reimbursement of credit losses from Kohl's, which has the impact of lowering the overall Domestic Card charge-off rate. (5)PCI loans acquired as part of the CCB acquisition are included in the denominator used in calculating the credit quality ratios presented in Tables 6-10. These metrics excluding the impact of loans acquired from CCB from the denominator are presented below:201120112011(Dollars in millions) (unaudited)Q4Q3Q2CCB period end acquired loan portfolio$          4,689$          4,873$          5,181CCB average acquired loan portfolio4,7814,9985,112Net charge-off rates:  Consumer banking:     Home loan1.48%0.87%0.98%     Retail banking1.461.691.76         Total consumer banking1.87%1.51%1.17%  Commercial banking:     Commercial and multifamily real estate0.77%0.12%0.40%     Middle market0.210.420.13         Total commercial lending0.480.280.31         Total commercial banking0.64%0.38%0.51%30+ day performing delinquency rates:  Consumer banking:     Home loan1.47%1.28%1.18%     Retail banking0.840.900.77         Total consumer banking5.06%4.57%4.29%Nonperforming asset rates:  Consumer banking:     Home loan7.55%7.80%7.38%     Retail banking2.522.402.48         Total consumer banking2.20%2.33%2.32%  Commercial banking:     Commercial and multifamily real estate1.44%2.18%2.39%     Middle market0.841.071.22         Total commercial lending1.111.571.73         Total commercial banking1.19%1.57%1.68%Nonperforming loans as a percentage of period-end loans held for investment:  Consumer banking2.03%2.15%2.12%  Commercial banking1.111.451.56(6)Nonperforming assets consist of nonperforming loans and real estate owned ("REO") and foreclosed assets. The nonperforming asset ratios are calculated based on nonperforming assets for each category divided by the combined period-end total of loans held for investment, REO and foreclosed assets for each respective category.(7)As permitted by regulatory guidance, our policy is generally to exempt delinquent credit card loans from being classified as nonperforming. We continue to accrue finance charges and fees on credit card loans until the loan is charged off, typically when the account becomes 180 days past due. Billed finance charges and fees considered uncollectible are not recognized in income.(8)In the third quarter of 2011, we revised the manner in which we estimate expected recoveries of finance charge and fee amounts previously considered to be uncollectible. This revision resulted in an increase of 11 basis points in the 30+ day delinquency rate for Domestic Card. For International Card, the change did not have a significant impact on the 30+ day delinquency rate.(9)Includes credit card purchase transactions net of returns. Excludes cash advance transactions.(10)Criticized exposures correspond to the "Special Mention," "Substandard" and "Doubtful" asset categories defined by bank regulatory authorities.CAPITAL ONE FINANCIAL CORPORATION (COF)Table 12: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital MeasuresIn 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. 201120112011(Dollars in millions)(unaudited)Q4Q3Q2Average Equity to Non-GAAP Average Tangible Common EquityAverage total stockholders' equity$          29,698$          29,316$          28,255Less:  Average intangible assets (1)(13,935)(13,990)(14,025)Average tangible common equity$          15,763$          15,326$          14,230Stockholders' Equity to Non-GAAP Tangible Common EquityTotal stockholders' equity$          29,666$          29,378$          28,681Less:  Intangible assets (1)(13,908)(13,953)(14,006)Tangible common equity$          15,758$          15,425$          14,675Total Assets to Tangible AssetsTotal assets$        206,019$        200,148$        199,753Less:  Assets from discontinued operations(305)(304)(32)Total assets from continuing operations205,714199,844199,721Less:  Intangible assets (1)(13,908)(13,953)(14,006)Tangible assets$        191,806$        185,891$        185,715Non-GAAP TCE RatioTangible common equity$          15,758$          15,425$          14,675Tangible assets191,806185,891185,715TCE ratio (2)8.2%8.3%7.9%Non-GAAP Tier 1 Common Equity and Regulatory Capital Ratios (3)Total stockholders' equity$          29,666$          29,378$          28,681Less:  Net unrealized (gains) losses on AFS securities recorded in AOCI (4)(289)(401)(482)     Net (gains) losses on cash flow hedges recorded in AOCI (4)715571     Disallowed goodwill and other intangible assets(13,855)(13,899)(13,954)     Disallowed deferred tax assets(534)(227)(647)     Other (2)(2)(2)Tier 1 common equity$          15,057$          14,904$          13,667Plus:  Tier 1 restricted core capital items (5)3,6353,6363,636Tier 1 capital$          18,692$          18,540$          17,303Plus:  Long-term debt qualifying as Tier 2 capital2,4372,4382,727     Qualifying allowance for loan and lease losses1,9771,8961,864     Other Tier 2 components232428Tier 2 capital$            4,437$            4,358$            4,619Total risk-based capital (6)$          23,129$          22,898$          21,922Risk-weighted assets (7)$        155,472$        149,028$        146,201Tier 1 common equity ratio (8)9.7%10.0%9.4%Tier 1 risk-based capital ratio (9)12.012.411.8Total risk-based capital ratio (10)14.915.415.0(1)  Includes impact from related deferred taxes.   (2)  Calculated based on tangible common equity divided by tangible assets(3)  Capital ratios as of the end of Q4 2011 are preliminary and therefore subject to change once the calculations have been finalized.    (4)  Amounts presented are net of tax.   (5)  Consists primarily of trust preferred securities.   (6)  Total risk-based capital equals the sum of Tier 1 capital and Tier 2 capital (7)  Calculated based on prescribed regulatory guidelines.   (8)  Tier 1 common equity ratio is a non-GAAP measure calculated based on Tier 1 common equity divided by risk-weighted assets.   (9)  Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.   (10)  Total risk-based capital ratio is a regulatory capital measure calculated based on total risk-based capital divided by risk-weighted assets.   SOURCE Capital One Financial Corporation