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Press release from PR Newswire

Capital One Reports Second Quarter 2012 Net Income of $92 million, or $0.16 per share

Wednesday, July 18, 2012

Capital One Reports Second Quarter 2012 Net Income of $92 million, or $0.16 per share16:23 EDT Wednesday, July 18, 2012Both first and second quarter 2012 results were significantly impacted by acquisition accounting impacts and other itemsMCLEAN, Va., July 18, 2012 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the second quarter of 2012 of $92 million, or $0.16 per diluted common share, compared with net income of $1.4 billion, or $2.72 per diluted common share, for the first quarter of 2012, and net income of $911 million, or $1.97 per diluted common share, for the second quarter of 2011.  "While second quarter results reflect significant purchase accounting impacts and other items, the strong underlying performance of our businesses continues to demonstrate that we're well positioned to deliver sustained shareholder value," said Richard Fairbank, Chairman and Chief Executive Officer. "We're focused on delivering that value, including distributing capital to shareholders through a meaningful dividend and opportunistic share buybacks, consistent with our long-standing commitment to maintaining a strong and resilient capital base."Total Company ResultsAll comparisons in the following paragraphs are for second quarter 2012 compared to first quarter 2012 unless otherwise noted.    Loan and Deposit VolumesPeriod-end loans held for investment increased $28.9 billion, or 17 percent, driven largely by the $27.6 billion addition of HSBC U.S. Card portfolio to the Domestic Card business. Period-end loans in the Domestic Card business increased by $27.6 billion. Period-end loans in Commercial Banking increased $1.1 billion, or 3 percent, to $36.1 billion, and period-end loans in Auto Finance grew $1.7 billion, or 7 percent, to $25.3 billion.  Average loans in the quarter grew by $39.7 billion, or 26 percent, to $192.6 billion, primarily as a result of the addition of the HSBC U.S. Card portfolio and the full quarter impact of the ING Direct acquisition.Period-end total deposits decreased $2.6 billion to $213.9 billion, driven by a reduction in deposits in legacy banking segments. Deposit interest expense decreased 6 basis points in the quarter to 0.76 percent. OtherAs previously released, the company announced regulatory settlements related to cross-sell activities in its domestic card business.  As a result, the company recorded $60 million in civil money penalties in non-interest expense.  The company also announced that, pursuant to its agreement with the OCC, it is setting aside $150 million in cash to fund expected customer refunds.  The total income statement impact of these expected refunds is approximately $116 million, including a $75 million reserve accrued in the first quarter to reverse previously recognized revenues and an additional $41 million additional reserve this quarter to reflect the final agreements with the company's regulators. Additionally, the company is no longer recognizing revenue for any amounts billed for these products. This includes approximately $24 million of billed amounts in the second quarter. Until they receive their refunds later in the year, the company continues to bill affected customers for products sold to ensure continuity of coverage. Revenues Total net revenue in the second quarter of 2012 was $5.1 billion, an increase of $120 million, or 2 percent. Net interest income increased by $587 million, or 17 percent, in the quarter to $4.0 billion, primarily due to a 20 percent increase in average interest-earning assets resulting from the partial quarter impact of the HSBC U.S. Card acquisition and the full quarter impact of the ING Direct acquisition. Net interest income for the quarter was unfavorably impacted by certain charges related to the HSBC U.S. Card acquisition, including an expense of $174 million to establish a finance charge and fee reserve for estimated uncollectible billed finance charges and fees and loan premium amortization expense of $63 million.  Non-interest income declined $467 million, or 31 percent, in the quarter, driven primarily by the absence of the bargain purchase gain of $594 million related to the purchase of ING Direct recognized in the first quarter of 2012. Total net revenue was reduced by $41 million to reverse previously recognized revenues in connection with remediation activities related to cross-sell in the Domestic Card business. Net Interest MarginNet interest margin declined 16 basis points in the quarter to 6.04 percent, as lower asset yields were partially offset by the favorable changes in our funding mix.  The decrease in asset yields was primarily driven by lower yields in Domestic Card, which largely resulted from the finance charge and fee reserve build related to HSBC acquisition accounting. Cost of funds was lower by 14 basis points, driven by the favorable impact of a full quarter ING Direct's deposits on the company's funding mix.Non-Interest ExpensesOperating expense for the second quarter increased $625 million, or 29 percent, driven by the inclusion of a full quarter of ING Direct and a partial quarter of HSBC operating expenses and expenses related to the HSBC U.S. Card acquisition, including $85 million of PCCR amortization. As previously mentioned, the company recognized expense of $60 million in regulatory fines related to cross-sell activities in the Domestic Card business.  The company also recognized an expense of $98 million for net litigation reserves to cover interchange and other settlements in the quarter.  This reserve contemplates the anticipated short-term reduction in interchange fees going forward as well as additional amounts relating to a variety of other pending claims. Provision for Credit LossesProvision for credit losses of $1.7 billion in the quarter included a $1.2 billion allowance build for the non-impaired loans brought on to the balance sheet as a result of the HSBC U.S. Card acquisition. Strong credit performance in legacy businesses led to a $259 million allowance release in the quarter, driven by continued stability in credit performance including a lower levels of charge-offs. The net charge-off rate was 1.53 percent in the second quarter of 2012, down from 2.04 percent, driven by the absence of charge-offs in the HSBC U.S. Card portfolio which were absorbed by the credit marks that were established through acquisition accounting, as well as continued improvement in credit in the legacy businesses.Net IncomeNet income from continuing operations before income tax of $236 million in the quarter was significantly impacted by acquisition accounting and other items including those outlined above.  Net income declined to $92 million from $1.4 billion in the prior quarter.Discontinued OperationsThe company recognized a $180 million representation and warranty expense, of which $154 million was recorded in discontinued operations and $26 million which was recorded in non-interest income in continuing operations.  The representation and warranty reserve now stands at $1.0 billion.Capital RatiosThe company's estimated Tier 1 common ratio was approximately 9.9 percent as of June 30, 2012, down from 11.9 percent at March 31, 2012. The company's capital position remains strong after the closing of the HSBC U.S card transaction.Detailed segment information will be available in the company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.Earnings Conference Call Webcast Information The company will hold an earnings conference call on July 19, 2012 at 8:30 AM, Eastern Standard Time. The conference call will be accessible through live webcast. Interested investors and other individuals can access the webcast via the company's home page (www.capitalone.com). Choose "Investors" to access the Investor Center and view and/or download the earnings press release, the financial supplement, including a reconciliation to GAAP financial measures, and the earnings release presentation. The replay of the webcast will be archived on the company's website through August 2, 2012 at 8:30 AM. Forward-looking statementsThe company cautions that its current expectations in this release dated July 18, 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 acquisition of ING Direct and HSBC's U.S. Card business (the "Transactions"); and the assumptions that underlie these matters.  To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking information provided by the Private Securities Litigation Reform Act of 1995. Numerous factors could cause the company's actual results to differ materially from those described in such forward-looking statements, including, among other things: general economic and business conditions in the U.S., the U.K., Canada or the company's local markets, including conditions affecting employment levels, interest rates, consumer income and confidence, spending and savings that may affect consumer bankruptcies, defaults, charge-offs and deposit activity; an increase or decrease in credit losses (including increases due to a worsening of general economic conditions in the credit environment); the possibility that the company may not fully realize the projected cost savings and other projected benefits of the Transactions; difficulties and delays in integrating the assets and businesses acquired in the Transactions; business disruption during the pendency of or following the Transactions; diversion of management time on issues related to the Transactions, including integration of the assets and businesses acquired; reputational risks and the reaction of customers and counterparties to the Transactions; disruptions relating to the Transactions negatively impacting the company's ability to maintain relationships with customers, employees and suppliers; changes in asset quality and credit risk as a result of the Transactions; the accuracy of estimates and assumptions the company uses to determine the fair value of assets acquired and liabilities assumed in the Transactions, and the potential for its estimates or assumptions to change as additional information becomes available and the company completes the accounting analysis 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; the inability to sustain revenue and earnings growth; increases or decreases in interest rates; the company's ability to access the capital markets at attractive rates and terms to capitalize and fund its operations and future growth; the success of the company's marketing efforts in attracting and retaining customers; increases or decreases in the company's aggregate loan balances or the number of customers and the growth rate and composition thereof, including increases or decreases resulting from factors such as shifting product mix, amount of actual marketing expenses the company incurs and attrition of loan balances; the level of future repurchase or indemnification requests the company may receive, the actual future performance of mortgage loans relating to such requests, the success rates of claimants against the company, any developments in litigation and the actual recoveries the company may make on any collateral relating to claims against the company; the amount and rate of deposit growth; changes in the reputation of or expectations regarding the financial services industry or the company with respect to practices, products or financial condition; any significant disruption in the company's operations or technology platform; the company's ability to maintain a compliance infrastructure suitable for 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, 2011.About Capital OneCapital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A., Capital One Bank (USA), N. A., and ING Bank, fsb, had $213.9 billion in deposits and $296.6 billion in total assets outstanding as of June 30, 2012. Headquartered in McLean, Virginia, Capital One and ING Direct offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. Capital One, N.A. has 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 Supplement       Second Quarter 2012 (1) (2)    Table of Contents Page Capital One Financial Corporation 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 Statistics6Table   7: Loan Information and Performance Statistics (Excluding Acquired Loans) (3)7Business Segment DetailTable   8:Financial & Statistical Summary?Credit Card Business8Table   9:Financial & Statistical Summary?Consumer Banking Business9Table 10:Financial & Statistical Summary?Commercial Banking Business10Table 11:Financial & Statistical Summary?Other and Total 11Table 12:Notes to Loan and Business Segment Disclosures (Tables 6 ? 11)12OtherTable 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures13(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 June 30, 2012 Quarterly Report on Form 10-Q once it is filed with the Securities and Exchange Commission. (2)References to ING Direct refer to the business and assets acquired and liabilities assumed in the February 17, 2012 acquisition. References to HSBC refer to the May 1, 2012 transaction in which we acquired substantially all of HSBC's credit card and private-label credit card business in the United States ("HSBC U.S. card").(3)   We use the term "acquired loans" to refer to a limited portion of the credit card loans acquired in the HSBC transaction and the substantial majority of loans acquired in the ING Direct and Chevy Chase Bank ("CCB") acquisitions, which were recorded at fair value at acquisition and subsequently accounted for based on estimated cash flows expected to be collected over the life of the loans ( formerly "SOP 03-3"). Because SOP 03-3 takes into consideration estimated credit losses expected to be realized over the life of the loans, including these loans in our credit quality metrics may have a material impact. We therefore present our credit quality metrics with and without acquired loans accounted for under SOP 03-3. CAPITAL ONE FINANCIAL CORPORATION (COF)Table 1:  Financial & Statistical Summary?Consolidated (1)201220122011(Dollars in millions, except per share data and as noted) (unaudited)    Q2 (2)(3)    Q1 (3)Q2EarningsNet interest income$      4,001$    3,414$            3,136Non-interest income(4) (5)1,0541,521857Total net revenue(5) (6)5,0554,9353,993Provision for credit losses1,677573343Marketing expenses334321329Operating expenses(7)2,8082,1831,926Income from continuing operations before income taxes 2361,8581,395Income tax provision43353450Income from continuing operations, net of tax1931,505945Loss from discontinued operations, net of tax(4)(100)(102)(34)Net income931,403911Dividends and undistributed earnings allocated to participating securities(1)(7)?Net income available to common stockholders$             92$     1,396$               911Common Share StatisticsBasic EPS:    Income from continuing operations, net of tax$          0.33$        2.94$              2.07   Loss from discontinued operations, net of tax(0.17)(0.20)(0.07)   Net income per common share $          0.16$        2.74$              2.00Diluted EPS:    Income from continuing operations, net of tax$          0.33$        2.92$              2.04   Loss from discontinued operations, net of tax(0.17)(0.20)(0.07)   Net income per common share$          0.16$        2.72$              1.97Weighted average common shares outstanding (in millions):   Basic EPS577.7508.7455.6   Diluted EPS582.8513.1462.2Common shares outstanding (period end, in millions)580.7580.2459.4Dividends per common share$          0.05$        0.05$              0.05Tangible book value per common share (period end)(8)35.6739.3731.94Balance Sheet (Period End)Loans held for investment(9)$    202,749$  173,822$        128,965Interest-earning assets264,331265,398174,323Total assets296,572294,481199,753Interest-bearing deposits193,859197,254109,278Total deposits213,931216,528126,117Borrowings35,87432,88537,735Stockholders' equity37,19236,95028,681Balance Sheet (Quarterly Average Balances)Average loans held for investment(9)$    192,632$  152,900$        127,916Average interest-earning assets265,019220,246174,113Average total assets295,306246,384199,229Average interest-bearing deposits195,597151,625109,251Average total deposits214,914170,259125,834Average borrowings35,41835,99439,451Average stockholders' equity37,53332,98228,255Performance MetricsNet interest income growth (quarter over quarter) 17%7%?%Non-interest income growth (quarter over quarter)(31)75(9)Total net revenue growth (quarter over quarter)222(2)Total net revenue margin(10)7.638.969.17Net interest margin(11)6.046.207.20Return on average assets(12)0.262.441.90Return on average total stockholders' equity(13)2.0618.2513.38Return on average tangible common equity(14)3.5331.6026.57Non-interest expense as a % of average loans held for investment(15)6.526.557.05Efficiency ratio(16)62.1650.7456.47Effective income tax rate18.219.032.3Full-time equivalent employees (in thousands), period end37.434.228.2Credit Quality Metrics(17)Allowance for loan and lease losses $        4,998$      4,060$            4,488Allowance as a % of loans held for investment 2.47%2.34%3.48%Allowance as a % of loans held for investment (excluding acquired loans) 3.083.083.62Net charge-offs $           738$         780$               931Net charge-off rate(18)1.53%2.04%2.91%Net charge-off rate (excluding acquired loans)(18)1.962.403.0330+ day performing delinquency rate2.062.232.9030+ day performing delinquency rate (excluding acquired loans)2.592.963.0230+ day delinquency rate(19) **2.693.5730+ day delinquency rate (excluding acquired loans)(19) **3.573.72Capital Ratios (20)Tier 1 common ratio(21)9.9%11.9%9.4%Tier 1 risk-based capital ratio(22)11.613.911.8Total risk-based capital ratio(23)14.016.515.0Tangible common equity ("TCE") ratio(24)7.48.27.9 CAPITAL ONE FINANCIAL CORPORATION (COF)Table 2:  Notes to Consolidated Financial & Statistical Summary (Table 1)(1)Certain prior period amounts have been reclassified to conform to the current period presentation.(2)Results for Q2 2012 include the impact of the May 1, 2012 closing of the HSBC transaction, which resulted in the addition of approximately $28.2 billion in credit card receivables at closing.(3)Results for Q1 2012 and thereafter include the impact of the February 17, 2012 acquisition of ING Direct, which resulted in the addition of loans with a gross outstanding principal and interest balance of $40.4 billion and deposits of $84.4 billion at acquisition.(4)We recorded a provision for repurchase losses of $180 million in Q2 2012, $169 million in Q1 2012  and $37 million in Q2 2011. The majority of the provision for repurchase losses is generally included net of tax in discontinued operations, with the remaining amount included pre-tax in non-interest income. The mortgage representation and warranty reserve decreased to $1.0 billion as of June 30, 2012, from $1.1 billion as of March 31. The decrease was due to the settlement of claims in Q2 2012 totaling $280 million, which more than offset the provision expense of $180 million recorded for the quarter.(5)Includes a bargain purchase gain of $594 million recognized in earnings in Q1 2012 attributable to the February 17, 2012 acquisition of ING Direct. (6)Total net revenue was reduced by $311 million in Q2 2012, $123 million in Q1 2012 and $112 million in Q2 2011, for the estimated uncollectible amount of billed finance charges and fees.(7)Includes merger-related expenses, including transaction costs, attributable to acquisitions of $133 million in Q2 2012 and $86 million in Q1 2012. Also includes core deposit intangible amortization expense of $51 million in Q2 2012, $46 million in Q1 2012 and $44 million in Q2 2011. (8)Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See "Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for the calculation of tangible common equity.(9)See Table 12 for information on acquired loans accounted for based on cash flows expected to be collected.(10)Calculated based on annualized total net 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, excluding goodwill impairment charges, for the period divided by total net revenue for the period. (17)Loans acquired as part of the HSBC domestic card, ING Direct and Chevy Chase Bank acquisitions classified as held for investment are included in the denominator used in calculating the credit quality metrics.  We also present these metrics adjusted to exclude from the denominator acquired loans accounted for based on estimated expected cash flows to be collected (formerly SOP 03-3).  See "Table 7: Loan Information and Performance Statistics (Excluding Acquired Loans)" for additional information.(18)Calculated based on annualized net charge-offs for the period divided by average loans held for investment for the period. (19)The 30+ day total delinquency rate as of the end of Q2 2012 will be provided in the June 30, 2012 Quarterly Report on Form 10-Q.(20)Regulatory capital ratios as of the end of Q2 2012 are preliminary and therefore subject to change.(21)Tier 1 common ratio is a regulatory capital measure calculated based on Tier 1 common capital divided by risk-weighted assets. See "Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for the calculation of this ratio.(22)Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets. See "Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for the calculation of this ratio.(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 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for the calculation of this ratio.(24)TCE ratio is a non-GAAP measure calculated based on tangible common equity divided by tangible assets. See "Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for the calculation of this ratio and non-GAAP reconciliation. CAPITAL ONE FINANCIAL CORPORATION (COF)Table 3:  Consolidated Statements of IncomeThree Months EndedSix Months Ended(Dollars in millions, except per share data) (unaudited)June 30,2012March 31,2012June 30,2011June 30,2012June 30,2011Interest income:Loans held for investment, including past-due fees$            4,255$             3,655$            3,367$             7,910$            6,784Investment securities335298313633629Other2626195238Total interest income4,6163,9793,6998,5957,451Interest expense:Deposits373311307684629Securitized debt obligations6980113149253Senior and subordinated notes878863175127Other borrowings868680172166Total interest expense6155655631,1801,175Net interest income4,0013,4143,1367,4156,276Provision for credit losses1,6775733432,250877Net interest income after provision for credit losses2,3242,8412,7935,1655,399Non-interest income:Service charges and other customer-related fees539415460954985Interchange fees, net408328331736651Net other-than-temporary impairment losses recognized in earnings(13)(14)(6)(27)(9)Bargain purchase gain (1)?594?594?Other12019872318172Total non-interest income1,0541,5218572,5751,799Non-interest expense:Salaries and associate benefits9718647151,8351,456Marketing334321329655605Communications and data processing203172162375326Supplies and equipment178147124325259Occupancy145123118268237Merger-related expenses13386?219?Other1,1787918071,9691,534Total non-interest expense3,1422,5042,2555,6464,417Income from continuing operations before income taxes2361,8581,3952,0942,781Income tax provision43353450396804Income from continuing operations, net of tax1931,5059451,6981,977Loss from discontinued operations, net of tax(100)(102)(34)(202)(50)Net income931,4039111,4961,927Dividends and undistributed earnings allocated to participating securities(1)(7)?(8)?Net income available to common stockholders$                  92$             1,396$                911$             1,488$             1,927Basic earnings per common share:Income from continuing operations$               0.33$               2.94$               2.07$               3.11$               4.35Loss from discontinued operations(0.17)(0.20)(0.07)(0.37)(0.11)Net income per basic common share$               0.16$               2.74$               2.00$               2.74$               4.24Diluted earnings per common share:Income from continuing operations$               0.33$               2.92$               2.04$               3.09$               4.29Loss from discontinued operations(0.17)(0.20)(0.07)(0.37)(0.11)Net income per basic common share$               0.16$               2.72$               1.97$               2.72$               4.18Weighted average common shares outstanding (in millions):Basic EPS577.7508.7455.6543.3454.9Diluted EPS582.8513.1462.2548.0461.3Dividends paid per common share$               0.05$               0.05$               0.05$               0.10$               0.10(1)Represents the excess of the fair value of the net assets acquired in the ING Direct acquisition as of the acquisition date of February 17, 2012 over the consideration transferred. CAPITAL ONE FINANCIAL CORPORATION (COF)Table 4:  Consolidated Balance SheetsJune 30,December 31,June 30,(Dollars in millions)(unaudited)201220112011Assets:Cash and due from banks$             2,297$             2,097$             1,954Interest-bearing deposits with banks3,3523,3994,037Federal funds sold and securities purchased under agreements to resell330342652Cash and cash equivalents5,9795,8386,643Restricted cash for securitization investors3707911,328Securities available for sale, at fair value55,28938,75939,474Loans held for investment:Unsecuritized loans held for investment158,68088,24281,585Restricted loans for securitization investors44,06947,65047,380Total loans held for investment202,749135,892128,965    Less: Allowance for loan and lease losses(4,998)(4,250)(4,488)Net loans held for investment197,751131,642124,477Loans held for sale, at lower-of-cost-or-fair-value1,04720180Accounts receivable from securitizations9694106Premises and equipment, net3,5562,7482,754Interest receivable1,6231,0291,027Goodwill13,86413,59213,596Other16,99711,32510,268Total assets$         296,572$         206,019$         199,753Liabilities:Interest payable$                462$                466$                469Customer deposits:Non-interest bearing deposits20,07218,28116,839Interest-bearing deposits193,859109,945109,278Total customer deposits213,931128,226126,117Securitized debt obligations13,60816,52719,860Other debt:Federal funds purchased and securities loaned or sold under agreements to repurchase1,1011,4642,575Senior and subordinated notes12,07911,0348,664Other borrowings9,08610,5366,636Total other debt22,26623,03417,875Other liabilities9,1138,1006,751Total liabilities259,380176,353171,072Stockholders' equity:Common stock655Paid-in capital, net25,21719,27419,188Retained earnings and accumulated other comprehensive income15,25513,63112,729Less:  Treasury stock, at cost(3,286)(3,244)(3,241)Total stockholders' equity37,19229,66628,681Total liabilities and stockholders' equity$         296,572$         206,019$         199,753 CAPITAL ONE FINANCIAL CORPORATION (COF)Table 5:  Average Balances, Net Interest Income and Net Interest Margin2012 Q22012 Q12011 Q2(Dollars in millions)(unaudited)AverageBalanceInterest Income/ExpenseYield/ RateAverageBalanceInterest Income/ExpenseYield/ RateAverageBalanceInterest Income/ExpenseYield/ RateInterest-earning assets:Loans held for investment$  192,632$  4,2558.84%$  152,900$  3,6559.56%$  127,916$  3,36710.53%Investment securities 56,9723352.3550,5432982.3640,3813133.10Cash equivalents and other15,415260.6716,803260.625,846191.30Total interest-earning assets $  265,019$  4,6166.97%$  220,246$  3,9797.23%$  174,143$  3,6998.50%Interest-bearing liabilities:Interest-bearing depositsNOW accounts$    35,783$       560.63%$    24,912$       340.55%$    13,186$         90.27%Money market deposit accounts108,4011900.7076,3621310.6945,527990.87Savings accounts31,379250.3231,743340.4329,329600.82Other consumer time deposits13,658651.9012,763742.3214,330912.54Public fund CD's of $100,000 or more7515.3384??11013.64CD's of $100,000 or more5,030352.784,787373.095,867463.14Foreign time deposits1,27110.3197410.4190210.44Total interest-bearing deposits195,5973730.76151,6253110.82109,2513071.12Securitized debt obligations14,948691.8516,185801.9822,1911132.04Senior and subordinated notes11,213873.1010,268883.438,093633.11Other borrowings9,257863.729,541863.619,167803.49Total interest-bearing liabilities$  231,015$     6151.06%$  187,619$     5651.20%$  148,702$     5631.51%Net interest income/spread$  4,0015.90%$  3,4146.03%$  3,1366.99%Impact of non-interest bearing funding0.140.170.21Net interest margin6.04%6.20%7.20% CAPITAL ONE FINANCIAL CORPORATION (COF)Table 6: Loan Information and Performance Statistics(1)201220122011(Dollars in millions)(unaudited)Q2 (2)(3)Q1 (3)Q2Period-end Loans Held For InvestmentCredit card:   Domestic credit card $           80,798$           53,173$           53,994   International credit card8,1168,3038,711      Total credit card88,91461,47662,705Consumer banking:   Automobile25,25123,56819,223   Home loan48,22449,55011,323   Retail banking4,1404,1824,046      Total consumer banking77,61577,30034,592Commercial banking:(4)   Commercial and multifamily real estate16,25415,70214,304   Commercial and industrial18,46717,76115,526      Total commercial lending34,72133,46329,830   Small-ticket commercial real estate1,3351,4431,641      Total commercial banking36,05634,90631,471Other loans164140197     Total $         202,749$         173,822$         128,965Average Loans Held For InvestmentCredit card:   Domestic credit card $           71,468$           54,131$           53,868   International credit card8,1948,3018,823      Total credit card79,66262,43262,691Consumer banking:   Automobile24,48722,58218,753   Home loan 48,96629,50211,534   Retail banking4,1534,1794,154      Total consumer banking77,60656,26334,441Commercial banking:(4)   Commercial and multifamily real estate15,83815,51413,859   Commercial and industrial18,00117,03814,993      Total commercial lending33,83932,55228,852   Small-ticket commercial real estate1,3881,4801,726      Total commercial banking35,22734,03230,578Other loans137173206      Total$         192,632$         152,900$         127,916Net Charge-off RatesCredit card:   Domestic credit card2.86%3.92%4.74%   International credit card5.495.527.02      Total credit card3.134.145.06Consumer Banking:   Automobile1.111.411.11   Home loan0.090.200.60   Retail banking1.271.391.73      Total consumer banking0.480.771.01Commercial banking:(4)   Commercial and multifamily real estate0.180.090.38   Commercial and industrial0.10(0.08)0.22      Total commercial lending0.14?0.30   Small-ticket commercial real estate1.464.243.77      Total commercial banking0.190.190.50Other loans18.0423.3023.96      Total1.53%2.04%2.91%30+ Day Performing Delinquency RatesCredit card:   Domestic credit card2.79%3.25%3.33%   International credit card4.845.145.30      Total credit card2.97%3.51%3.60%Consumer Banking:   Automobile5.20%4.87%6.09%   Home loan0.150.150.70   Retail banking0.690.800.76      Total consumer banking1.82%1.63%3.70%Nonperforming Asset Rates(5)(6)Consumer banking:   Automobile0.41%0.32%0.49%   Home loan0.940.944.40   Retail banking2.212.252.45      Total consumer banking0.83%0.82%2.00%Commercial banking:(4)   Commercial and multifamily real estate1.28%1.55%2.31%   Commercial and industrial0.810.691.13      Total commercial lending1.03%1.09%1.69%   Small-ticket commercial real estate1.254.350.75      Total commercial banking1.04%1.23%1.64% CAPITAL ONE FINANCIAL CORPORATION (COF)Table 7: Loan Information and Performance Statistics (Excluding Acquired Loans)(1)(7)201220122011(Dollars in millions)(unaudited)Q2 (2)(3)Q1 (3)Q2Period-end Loans Held For Investment (Excluding Acquired Loans)Credit card:   Domestic credit card $           80,269$           53,173$           53,994   International credit card8,1168,3038,711      Total credit card88,38561,47662,705Consumer banking:   Automobile25,22123,53019,152   Home loan7,5826,9676,738   Retail banking4,0994,1423,997      Total consumer banking36,90234,63929,887Commercial banking:(4)   Commercial and multifamily real estate16,06415,49014,089   Commercial and industrial18,22617,50315,265      Total commercial lending34,29032,99329,354   Small-ticket commercial real estate1,3351,4431,641      Total commercial banking35,62534,43630,995Other loans164140197     Total $         161,076$         130,691$         123,784Average Loans Held For Investment (Excluding Acquired Loans)Credit card:   Domestic credit card $           71,080$           54,131$           53,868   International credit card8,1948,3018,823      Total credit card79,27462,43262,691Consumer banking:   Automobile24,45422,54018,679   Home loan 7,6866,9947,002   Retail banking4,1104,1364,083      Total consumer banking36,25033,67029,764Commercial banking:(4)   Commercial and multifamily real estate15,64615,32813,640   Commercial and industrial17,75516,75014,777      Total commercial lending33,40132,07828,417   Small-ticket commercial real estate1,3881,4801,726      Total commercial banking34,78933,55830,143Other loans137173206      Total$         150,450$         129,833$         122,804Net Charge-off Rates (Excluding Acquired Loans)Credit card:   Domestic credit card2.87%3.92%4.74%   International credit card5.495.527.02      Total credit card3.144.145.06Consumer Banking:   Automobile1.111.411.12   Home loan0.600.820.98   Retail banking1.291.401.76      Total consumer banking1.021.291.17Commercial banking:(4)   Commercial and multifamily real estate0.180.090.39   Commercial and industrial0.10(0.08)0.23      Total commercial lending0.140.010.30   Small-ticket commercial real estate1.464.243.77      Total commercial banking0.190.190.50Other loans18.0423.3023.96      Total1.96%2.40%3.03%30+ Day Performing Delinquency Rates (Excluding Acquired Loans)Credit card:   Domestic credit card2.81%3.25%3.33%   International credit card4.845.145.30      Total credit card2.99%3.51%3.60%Consumer Banking:   Automobile5.20%4.88%6.11%   Home loan0.931.101.18   Retail banking0.700.810.77      Total consumer banking3.82%3.63%4.29%Nonperforming Asset Rates (Excluding Acquired Loans)(5)(6)Consumer banking:   Automobile0.41%0.32%0.49%   Home loan5.966.667.38   Retail banking2.242.282.48      Total consumer banking1.75%1.83%2.32%Commercial banking(4):   Commercial and multifamily real estate1.29%1.57%2.35%   Commercial and industrial0.820.701.14      Total commercial lending1.041.111.72   Small-ticket commercial real estate1.254.350.75      Total commercial banking1.05%1.25%1.67% CAPITAL ONE FINANCIAL CORPORATION (COF)Table 8:  Financial & Statistical Summary?Credit Card Business201220122011(Dollars in millions) (unaudited)Q2 (2)Q1Q2Credit CardEarnings:  Net interest income$            2,350$            1,992$            1,890  Non-interest income771598619  Total net revenue3,1212,5902,509  Provision for credit losses1,711458309  Non-interest expense1,8631,2681,238  Income (loss) from continuing operations before taxes(453)864962  Income tax provision (benefit)(156)298344  Income (loss) from continuing operations, net of tax$              (297)$               566$               618Selected performance metrics:  Period-end loans held for investment$           88,914$           61,476$           62,705  Average loans held for investment79,66262,43262,691  Average yield on loans held for investment13.42%14.41%13.83%  Total net revenue margin15.6716.5916.01  Net charge-off rate3.134.145.06  30+ day delinquency rate2.973.513.60  Purchase volume(8)$           45,228$           34,498$           34,226Domestic CardEarnings:  Net interest income$            2,118$            1,713$            1,607  Non-interest income708497584  Total net revenue2,8262,2102,191  Provision for credit losses1,600361187  Non-interest expense1,6341,0521,008  Income from continuing operations before taxes(408)797996  Income tax provision(144)282354  Income from continuing operations, net of tax$              (264)$               515$               642Selected performance metrics:  Period-end loans held for investment$          80,798$           53,173$           53,994  Average loans held for investment71,46854,13153,868  Average yield on loans held for investment13.33%14.11%13.52%  Total net revenue margin15.8216.3316.27  Net charge-off rate(7)2.863.924.74  30+ day delinquency rate(7)2.793.253.33  Purchase volume(8)$           41,807$           31,417$           31,070International CardEarnings:  Net interest income$               232$               279$               283  Non-interest income6310135  Total net revenue295380318  Provision for credit losses11197122  Non-interest expense229216230  Income (loss) from continuing operations before taxes(45)67(34)  Income tax provision (benefit)(12)16(10)  Income (loss) from continuing operations, net of tax$                (33)$                 51$                (24)Selected performance metrics:  Period-end loans held for investment$            8,116$            8,303$            8,711  Average loans held for investment8,1948,3018,823  Average yield on loans held for investment14.18%16.38%15.77%  Total net revenue margin14.4018.3114.42  Net charge-off rate5.495.527.02  30+ day delinquency rate 4.845.145.30  Purchase volume(8)$            3,421$            3,081$            3,156 CAPITAL ONE FINANCIAL CORPORATION (COF)Table 9:  Financial & Statistical Summary?Consumer Banking Business201220122011(Dollars in millions) (unaudited)Q2 (3)Q1 (3)Q2Consumer BankingEarnings:Net interest income$            1,496$            1,288$            1,051Non-interest income185176194Total net revenue1,6811,4641,245Provision for credit losses4417441Non-interest expense959943758Income from continuing operations before taxes678347446Income tax provision240123159Income from continuing operations, net of tax$               438$               224$               287Selected performance metrics:Period-end loans held for investment $           77,615$           77,300$           34,592Average loans held for investment 77,60656,26334,441Average yield on loans held for investment6.17%7.20%9.51%Auto loan originations$            4,306$            4,270$            2,910Period-end deposits173,966176,00787,282Average deposits 174,416129,91586,926Deposit interest expense rate0.70%0.73%1.00%Core deposit intangible amortization$                 42$                 37$                 34Net charge-off rate(7)0.48%0.77%1.01%30+ day performing delinquency rate(7)1.821.633.7030+ day delinquency rate(7)(9) ** 2.255.26Nonperforming loan rate(5)(7) 0.790.771.83Nonperforming asset rate(5)(7)0.830.822.00Period-end loans serviced for others$           16,108$           17,586$           19,226 CAPITAL ONE FINANCIAL CORPORATION (COF)Table 10:  Financial & Statistical Summary?Commercial Banking Business201220122011(Dollars in millions) (unaudited)Q2 (3)Q1 (3)Q2Commercial Banking(4)(11)Earnings:Net interest income$               427$               431$               388Non-interest income828562Total net revenue509516450Provision for credit losses(94)(69)(19)Non-interest expense251261222Income from continuing operations before taxes352324247Income tax provision 12411488Income from continuing operations, net of tax$               228$               210$               159Selected performance metrics:Period-end loans held for investment $           36,056$           34,906$           31,471Average loans held for investment 35,22734,03230,578Average yield on loans held for investment4.27%4.47%4.75%Period-end deposits $           27,784$           28,046$           24,409Average deposits 27,94327,56924,371Deposit interest expense rate0.33%0.37%0.52%Core deposit intangible amortization$                   9$                   9$                 10Net charge-off rate(5)0.19%0.19%0.50%Nonperforming loan rate(5)(7)0.991.151.53Nonperforming asset rate (5)(7) 1.041.231.64Risk category:(10)Noncriticized$           33,746$           32,339$           28,723Criticized performing1,5241,6951,769Criticized nonperforming356402481    Total risk-rated loans35,62634,43630,973Acquired commercial loans430470498    Total commercial loans$           36,056$           34,906$           31,471% of period-end held for investment commercial loans:Noncriticized93.6%92.6%91.2%Criticized performing4.24.95.7Criticized nonperforming1.01.21.5    Total risk-rated loans98.898.798.4Acquired commercial loans1.21.31.6    Total commercial loans100.0%100.0%100.0% CAPITAL ONE FINANCIAL CORPORATION (COF)Table 11:  Financial & Statistical Summary?Other and Total 201220122011(Dollars in millions) (unaudited)Q2 (2)(3)Q1 (3)Q2Other (4)Earnings:Net interest expense$             (272)$                 (297)$                (193)Non-interest income (loss)16662(18)Total net revenue(256)365(211)Provision for credit losses161012Non-interest expense693237Income (loss) from continuing operations before taxes(341)323(260)Income tax benefit(165)(182)(141)Income (loss) from continuing operations, net of tax$              (176)$                  505$                (119)Selected performance metrics:Period-end loans held for investment$               164$                  140$                 197Average loans held for investment137173206Period-end deposits12,18112,47514,426Average deposits12,55512,77514,537TotalEarnings:Net interest income$            4,001$               3,414$              3,136Non-interest income1,0541,521857Total net revenue5,0554,9353,993Provision credit losses1,677573343Non-interest expense3,1422,5042,255Income from continuing operations before taxes2361,8581,395Income tax provision43353450Income from continuing operations, net of tax$               193$               1,505$                 945Selected performance metrics:  Period-end loans held for investment $        202,749$           173,822$           128,965  Average loans held for investment192,632152,900127,916  Period-end deposits213,931216,528126,117  Average deposits214,914170,259125,834 CAPITAL ONE FINANCIAL CORPORATION (COF)Table 12:  Notes to Loan and Business Segment Disclosures (Tables 6 -- 11)(1)Certain prior period amounts have been reclassified to conform to the current period presentation.(2)Results for Q2 2012 include the impact of the May 1, 2012 closing of the HSBC transaction, which resulted in the addition of approximately $28.2 billion in credit card receivables at closing.(3)Results for Q1 2012 and thereafter include the impact of the February 17, 2012 acquisition of ING Direct, which resulted in the addition of loans with a gross outstanding principal and interest balance of $40.4 billion and deposits of $84.4 billion at acquisition.(4)In Q1 2012, we re-aligned the products within our Commercial Banking segment to reflect the business operations by product rather than by customer type. As a result of this re-alignment, we now report three product categories: commercial and multifamily real estate, commercial and industrial loans and small-ticket commercial real estate. Middle market and specialty lending related products are included in commercial and industrial loans. All tax-related investments, some of which were previously included in the "Other" segment, are included in the commercial and multifamily real estate category of our Commercial Banking segment.(5)Nonperforming assets consist of nonperforming loans, real estate owned ("REO") and other foreclosed assets. The nonperforming asset ratios are calculated based on nonperforming assets for each category divided by the combined period-end total of loans held for investment, REO and other foreclosed assets for each respective category.(6)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. Revenue is reduced each period by the amount of estimated uncollectible billed finance charges and fees.(7)Loans acquired as part of the HSBC domestic card, ING Direct and CCB acquisitions are included in the denominator used in calculating the credit quality metrics presented in Table 6. These metrics, adjusted to exclude from the denominator acquired loans accounted for based on estimated cash flows expected to be collected over the life of the loans (formerly SOP 03-3), are presented in Table 7.  The table below presents amounts related to acquired loans accounted for under SOP 03-3.(Dollars in millions) (unaudited)2012Q22012Q1 2011Q2Acquired loans accounted for under SOP 03-3:Period-end unpaid principal balance$       43,333$       44,798$     6,356Period-end carrying value41,67343,1315,181Average carrying value42,18223,0675,112(8)Includes credit card purchase transactions net of returns. Excludes cash advance transactions.(9)The 30+ day total delinquency rate as of the end of Q2 2012 will be provided in the June 30, 2012 Quarterly Report on Form 10-Q.(10)Criticized exposures correspond to the "Special Mention," "Substandard" and "Doubtful" asset categories defined by bank regulatory authorities.(11)Because some of our tax-related commercial investments generate tax-exempt income or tax credits, we make certain reclassifications within our Commercial Banking business results to present revenues on a taxable-equivalent basis, calculated assuming an effective tax rate approximately equal to our statutory tax rate of 35%. CAPITAL ONE FINANCIAL CORPORATION (COF)Table 13: 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") and TCE ratio. The table below provides the details of the calculation of our regulatory capital and non-GAAP capital measures. While our non-GAAP capital measures are widely used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies, they may not be comparable to similarly titled measures reported by other companies. (Dollars in millions)(unaudited)2012Q22012Q12011Q2Average Equity to Non-GAAP Average Tangible Common EquityAverage total stockholders' equity$     37,533$     32,982$     28,255Less:  Average intangible assets (1)(15,689)(13,931)(14,025)Average tangible common equity$     21,844$     19,051$     14,230Stockholders' Equity to Non-GAAP Tangible Common EquityTotal stockholders' equity$     37,192$     36,950$     28,681Less:  Intangible assets (1)(16,477)(14,110)(14,006)Tangible common equity$     20,715$     22,840$     14,675Total Assets to Tangible AssetsTotal assets$    296,572$    294,481$    199,753Less:  Assets from discontinued operations(310)(304)(32)Total assets from continuing operations296,262294,177199,721Less:  Intangible assets(1)(16,477)(14,110)(14,006)Tangible assets$    279,785$    280,067$    185,715Non-GAAP TCE RatioTangible common equity$     20,715$     22,840$     14,675Tangible assets279,785280,067185,715TCE ratio(2)7.4%8.2%7.9%Regulatory Capital Ratios(3)Total stockholders' equity$     37,192$     36,950$     28,681Less:  Net unrealized (gains) losses on AFS securities recorded in AOCI(4)(422)(327)(482)Net (gains) losses on cash flow hedges recorded in AOCI(4)347071Disallowed goodwill and other intangible assets(14,563)(14,057)(13,954)Disallowed deferred tax assets(758)(902)(647)Other (3)(3)(2)Tier 1 common capital21,48021,73113,667Plus:   Tier 1 restricted core capital items(5)3,6363,6363,636Tier 1 capital25,11625,36717,303Plus:   Long-term debt qualifying as Tier 2 capital2,3182,4382,727Qualifying allowance for loan and lease losses2,7382,3141,864 Other Tier 2 components151728Tier 2 capital5,0714,7694,619Total risk-based capital(6)$     30,187$     30,136$     21,922Risk-weighted assets(7)$    216,218$    182,704$    146,201Tier 1 common ratio(8)9.9%11.9%9.4%Tier 1 risk-based capital ratio(9)11.613.911.8Total risk-based capital ratio(10)14.016.515.0___________________(1)Includes impact from related deferred taxes.(2)Calculated based on tangible common equity divided by tangible assets.  (3)Regulatory capital ratios as of the end of Q2 2012 are preliminary and therefore subject to change.(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 ratio is a regulatory measure calculated based on Tier 1 common capital 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-weighed assets.(10)Total risk-based capital ratio is a regulatory capital measure calculated based on total risk-based capital divided by risk-weighed assets.SOURCE Capital One Financial CorporationFor further information: Investor Relations: Jeff Norris, +1-703-720-2455 or Danielle Dietz, +1-703-720-2455; Media Relations: Julie Rakes, +1-804-284-5800 or Tatiana Stead, +1-703-720-2352