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Press release from PR Newswire

Capital One Reports Third Quarter 2012 Net Income of $1.2 billion, or $2.01 per share

Thursday, October 18, 2012

Capital One Reports Third Quarter 2012 Net Income of $1.2 billion, or $2.01 per share16:05 EDT Thursday, October 18, 2012Tier 1 common ratio of 10.7% under Basel I; expected to be above 8% on Basel III basis in 2013(1)MCLEAN, Va., Oct. 18, 2012 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the third quarter of 2012 of $1.2 billion, or $2.01 per diluted common share, compared with net income of $93 million, or $0.16 per diluted common share, for the second quarter of 2012, and net income of $813 million, or $1.77 per diluted common share, for the third quarter of 2011.  "Capital One posted solid results across all of our businesses in the third quarter, including strong contributions from ING Direct and the HSBC U.S. credit card business," said Richard D. Fairbank, Chairman and Chief Executive Officer. "We are well positioned to sustain strong returns and capital generation, even in an environment with low industry growth and prolonged low interest rates." Total Company ResultsAll comparisons in the following paragraphs are for the third quarter of 2012 compared with the second quarter of 2012 unless otherwise noted.    Loans and DepositsPeriod-end loans held for investment remained essentially flat at $203.1 billion. Domestic Card period-end loans decreased by $177 million as modest organic growth in revolving credit card loans was more than offset by the expected run-off in the quarter of HSBC credit card loans and the continuing run-off of installment loans. Period-end loans in Home Loans decreased by $1.9 billion, or 4 percent, to $46.3 billion driven by continued run-off of acquired portfolios.  Commercial Banking's period-end loans increased $1.2 billion, or 3 percent, to $37.2 billion, and period-end loans in Auto Finance grew $1.2 billion, or 5 percent, to $26.4 billion due to strong growth in both businesses.   Average loans in the quarter grew by $10.2 billion, or 5 percent, to $202.9 billion, primarily as a result of a $9.0 billion, or 13 percent, increase in Domestic Card average loans due to the full-quarter impact of the HSBC U.S. credit card acquisition.  Average Home Loans decreased by $1.7 billion, or 3 percent, to $47.3 billion driven by continued run-off of acquired portfolios.  Average Commercial Banking loans increased $1.5 billion, or 4 percent, to $36.8 billion, and average Auto Finance loans grew $1.4 billion, or 6 percent, to $25.9 billion, again due to strong growth in both businesses.  Period-end total deposits decreased $676 million to $213.3 billion, driven by a reduction in deposits in legacy banking segments. Deposit interest rates remained essentially flat in the quarter. RevenuesTotal net revenue for the third quarter of 2012 was $5.8 billion, an increase of $727 million, or 14 percent, largely due to the full-quarter impact of the HSBC credit card loans acquired in the second quarter and a lower non-principal reserve build related to the HSBC acquisition. This resulted in an increase in net interest margin of 93 basis points to 6.97 percent. Cost of funds in the third quarter of 1.06 percent remained flat relative to the second quarter. Non-interest income increased $82 million, or 8 percent, also due to the full-quarter impact of the HSBC U.S. credit card acquisition.Non-Interest ExpenseOperating expense for the third quarter decreased $79 million, or 3 percent, largely due to a decrease in charges for legal and regulatory matters and unique items as well as lower merger-related expenses, which were partially offset by the full-quarter impact of the HSBC U.S. credit card acquisition.  Marketing expense declined $18 million, or 5 percent. Provision for Credit LossesProvision for credit losses was $1.0 billion in the quarter, down $663 million from the previous quarter, driven by a significantly lower HSBC-related allowance build. The net charge-off rate was 1.75 percent in the third quarter of 2012, an increase of 22 basis points from 1.53 percent in the second quarter, largely because a lower proportion of charge-offs on the HSBC U.S. credit card loans was absorbed by the credit mark on such loans than in the second quarter. The net charge-off rate for Domestic Card remained at low levels, driven by merger-related impacts and favorable seasonal patterns. The company expects the Domestic Card charge-off rate to increase significantly in the fourth quarter as the impact of the mark has largely run its course and because the third quarter is the seasonal low point for the underlying Domestic Card charge-off rate. The net charge-off rate for Auto increased 68 basis points primarily due to seasonality, while the rate for Commercial Banking declined 19 basis points. Net charge-offs include approximately $25 million from the required implementation of newly issued Office of the Comptroller of the Currency (OCC) guidance regarding the treatment of consumer loans where the borrower has gone through Chapter 7 bankruptcy.Net IncomeIncome from continuing operations before income taxes of $1.7 billion in the quarter was impacted by lower provision expense and a full-quarter of HSBC results relative to the second quarter.  Net income was $1.2 billion in the third quarter, up from $93 million in the prior quarter.Capital RatiosThe company's estimated Tier 1 common ratio was approximately 10.7 percent as of September 30, 2012, up from 9.9 percent as of June 30, 2012. "Given our strong capital trajectory, we expect to exceed an assumed Basel III Tier 1 common ratio target of  8 percent in 2013," said Gary L. Perlin, Capital One's Chief Financial Officer. "This includes the estimated impact of implementing the Basel II Advanced Approaches to calculating regulatory capital, which we expect will apply to Capital One in 2016 or later."     Detailed segment information will be available in the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012.1 Assumed 8 percent Basel III Tier 1 common ratio target assumes a buffer of 50 basis points for a systemically important financial institution (SIFI) under applicable rules and regulations and a further buffer of 50 basis points. Actual target will depend on regulatory expectations and business judgments.  Estimated based on the company's current interpretation, expectations and understanding of the Basel III capital rules and other capital regulations proposed by U.S. regulators and the application of such rules to its businesses as currently conducted.  Basel III calculations are necessarily subject to change based on, among other things, the scope and terms of the final rules and regulations, model calibration and other implementation guidance, changes in the company's businesses and certain actions of management, including those affecting the composition of its balance sheet.  The company believes this ratio provides useful information to investors and others by measuring its progress against expected future regulatory capital standards.    Earnings Conference Call Webcast InformationThe company will hold an earnings conference call on October 18, 2012 at 5:00 PM, Eastern Daylight 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 November 1, 2012 at 10:00 PM. Forward-looking statementsThe company cautions that its current expectations in this release dated October 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); financial, legal, regulatory, tax or accounting changes or actions, including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder and regulations governing bank capital and liquidity standards, including Basel-related initiatives; the possibility that the company may not fully realize the projected cost savings and other projected benefits of the Transactions; difficulties and delays in integrating the assets and businesses acquired in the Transactions; business disruption following the Transactions; diversion of management time on issues related to the Transactions, including integration of the assets and businesses acquired; reputational risks and the reaction of customers and counterparties to the Transactions; disruptions relating to the Transactions negatively impacting the company's ability to maintain relationships with customers, employees and suppliers; changes in asset quality and credit risk as a result of the Transactions; the accuracy of estimates and assumptions the company uses to determine the fair value of assets acquired and liabilities assumed in the Transactions, 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; developments, changes or actions relating to any  litigation matter involving the company; the inability to sustain revenue and earnings growth; increases or decreases in interest rates; the company's ability to access the capital markets at attractive rates and terms to capitalize and fund its operations and future growth; the success of the company's marketing efforts in attracting and retaining customers; increases or decreases in the company's aggregate loan balances or the number of customers and the growth rate and composition thereof, including increases or decreases resulting from factors such as shifting product mix, amount of actual marketing expenses the company incurs and attrition of loan balances; the level of future repurchase or indemnification requests the company may receive, the actual future performance of mortgage loans relating to such requests, the success rates of claimants against the company, any developments in litigation and the actual recoveries the company may make on any collateral relating to claims against the company; the amount and rate of deposit growth; changes in the reputation of or expectations regarding the financial services industry or the company with respect to practices, products or financial condition; any significant disruption in the company's operations or technology platform; the company's ability to maintain a compliance infrastructure suitable for the nature of our business; the company's ability to control costs; the amount of, and rate of growth in, the company's expenses as its business develops or changes or as it expands into new market areas; the company's ability to execute on its strategic and operational plans; any significant disruption of, or loss of public confidence in, the United States Mail service affecting the company's response rates and consumer payments; the company's ability to recruit and retain experienced personnel to assist in the management and operations of new products and services; changes in the labor and employment markets; fraud or misconduct by the company's customers, employees or business partners; competition from providers of products and services that compete with the company's businesses; and other risk factors set forth from time to time in reports that the company files with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2011.About Capital 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 $213.3 billion in deposits and $302.0 billion in total assets outstanding as of September 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     Third 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 September 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 U.S. card acquisition and the substantial majority of loans acquired in the ING Direct and Chevy Chase Bank ("CCB") acquisitions, which were recorded at fair value at acquisition and subsequently accounted for based on estimated cash flows expected to be collected over the life of the loans (under the accounting standard formerly known as "SOP 03-3"). Because SOP 03-3 takes into consideration future credit losses expected to be incurred over the life of the loans, there are no charge-offs or an allowance associated with these loans unless the estimated cash flows expected to be collected decrease subsequent to acquisition. In addition, these loans are not classified as delinquent or nonperforming even though the customer may be contractually past due because we expect that we will fully collect the carrying value of these loans. The accounting and classification of these loans may significantly alter some of our reported credit quality metrics. We therefore supplement certain reported credit quality metrics with metrics adjusted to exclude the impact of these acquired loans.CAPITAL ONE FINANCIAL CORPORATION (COF)Table 1:  Financial & Statistical Summary?Consolidated (1)(2)(3)(Dollars in millions, except per share data and as noted) (unaudited)    2012Q3     2012Q2 2011Q3EarningsNet interest income$            4,646$            4,001$              3,283Non-interest income(4) (5)1,1361,054871Total net revenue(6)5,7825,0554,154Provision for credit losses1,0141,677622Marketing expenses316334312Operating expenses(7)2,7292,8081,985Income from continuing operations before income taxes 1,7232361,235Income tax provision53543370Income from continuing operations, net of tax1,188193865Loss from discontinued operations, net of tax(4)(10)(100)(52)Net income1,17893813Dividends and undistributed earnings allocated to participating securities(5)(1)?Net income available to common stockholders$            1,173$                92$                 813Common Share StatisticsBasic EPS(8):    Income from continuing operations, net of tax$             2.05$             0.33$                1.89   Loss from discontinued operations, net of tax(0.02)(0.17)(0.11)   Net income per common share $             2.03$             0.16$                1.78Diluted EPS(8):    Income from continuing operations, net of tax$             2.03$             0.33$                1.88   Loss from discontinued operations, net of tax(0.02)(0.17)(0.11)   Net income per common share$             2.01$             0.16$                1.77Weighted average common shares outstanding (in millions):   Basic EPS578.3577.7456.0   Diluted EPS584.1582.8460.4Common shares outstanding (period end, in millions)581.3580.7459.6Dividends per common share$             0.05$             0.05$                0.05Tangible book value per common share (period end)(9)40.1735.6733.56Balance Sheet (Period End)Loans held for investment(10)$        203,132$        202,749$           129,952Interest-earning assets270,661264,331174,307Total assets301,989296,572200,148Interest-bearing deposits192,488193,859110,777Total deposits213,255213,931128,318Borrowings38,37735,87434,315Stockholders' equity39,67237,19229,378Balance Sheet (Quarterly Average Balances)Average loans held for investment(10)$        202,856$        192,632$           129,043Average interest-earning assets266,803265,019177,531Average total assets297,154295,306201,611Average interest-bearing deposits193,700195,597110,750Average total deposits213,323214,914128,268Average borrowings36,45135,41837,366Average stockholders' equity38,53537,53329,316Performance MetricsNet interest income growth (quarter over quarter) 16%17%5%Non-interest income growth(quarter over quarter)8(31)2Total net revenue growth(quarter over quarter)1424Total net revenue margin(11)8.677.639.36Net interest margin(12)6.976.047.40Return on average assets(13)1.600.261.72Return on average total stockholders' equity(14)12.332.0611.80Return on average tangible common equity(15)21.483.5322.58Non-interest expense as a % of average loans held for investment(16)6.006.527.12Efficiency ratio(17)52.6662.1655.30Effective income tax rate31.118.230.0Full-time equivalent employees (in thousands), period end37.637.429.5Credit Quality Metrics(10) (18)Allowance for loan and lease losses $            5,154$            4,998$              4,280Allowance as a % of loans held for investment 2.54%2.47%3.29%Allowance as a % of loans held for investment (excluding acquired loans) 3.113.083.40Net charge-offs $              887$              738$                 812Net charge-off rate(19)1.75%1.53%2.52%Net charge-off rate (excluding acquired loans)(19)2.181.962.6230+ day performing delinquency rate2.542.063.1330+ day performing delinquency rate (excluding acquired loans)3.152.593.2530+ day delinquency rate(20) **2.433.8130+ day delinquency rate (excluding acquired loans)(20) **3.063.95Capital Ratios (21)Tier 1 common ratio(22)10.7%9.9%10.0%Tier 1 risk-based capital ratio(23)12.711.612.4Total risk-based capital ratio(24)15.014.015.4Tangible common equity ("TCE") ratio(25)8.27.48.3CAPITAL 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 and thereafter 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 of $40.4 billion, other assets of $53.9 billion and deposits of $84.4 billion at acquisition.(4)We did not record a provision for repurchase losses in Q3 2012.  We recorded a provision for repurchase losses of $180 million in Q2 2012 and $72 million in Q3 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 $919 million as of September 30, 2012, from $1.0 billion as of June 30, 2012, due to the settlement of claims in Q3 2012 totaling $83 million.(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 $185 million in Q3 2012, $311 million in Q2 2012, $123 million in Q1 2012, $130 million in Q4 2011 and $24 million in Q3 2011, for the estimated uncollectible amount of billed finance charges and fees.  Premium amortization related to the HSBC U.S. card and ING Direct acquisitions reduced revenue by $133 million in Q3 2012, $104 million in Q2 2012, and $30 million in Q1 2012. (7)Includes merger-related expenses, including transaction costs, attributable to acquisitions of $48 million in Q3 2012, $133 million in Q2 2012, and $18 million in Q3 2011.  Also includes intangible amortization expense related to purchased credit card relationships ("PCCR") from the HSBC U.S. card acquisition of $127 million in Q3 2012 and $85 million in Q2 2012.  Other asset and intangible amortization expense related to the HSBC U.S. card and ING Direct acquisitions totaled $42 million in Q3 2012 and $41 million in Q2 2012.(8)Earnings per share is computed independently for each period. Accordingly, the sum of the quarterly earnings per share amounts may not agree to the year-to-date amounts.(9)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.(10)See "Table 12: Notes to Loan and Business Segment Disclosures (Tables 6 ? 11)" for information on acquired loans accounted for based on estimated cash flows expected to be collected.(11)Calculated based on annualized total net revenue for the period divided by average interest-earning assets for the period.(12)Calculated based on annualized net interest income for the period divided by average interest-earning assets for the period.(13)Calculated based on annualized income from continuing operations, net of tax, for the period divided by average total assets for the period. (14)Calculated based on annualized income from continuing operations, net of tax, for the period divided by average stockholders' equity for the period. (15)Calculated based on annualized income from continuing operations, net of tax, for the period divided by average tangible common equity for the period. (16)Calculated based on annualized non-interest expense for the period divided by average loans held for investment for the period.(17)Calculated based on non-interest expense, excluding goodwill impairment charges, for the period divided by total net revenue for the period. (18)Loans acquired as part of the HSBC U.S. card, ING Direct and CCB acquisitions classified as held for investment are included in the denominator used in calculating our reported credit quality metrics.  We supplement certain reported credit quality metrics with metrics adjusted to exclude from the denominator acquired loans accounted for based on estimated expected cash flows to be collected (formerly SOP 03-3).  See "Table 7: Loan Information and Performance Statistics (Excluding Acquired Loans)" for additional information.(19)Calculated based on annualized net charge-offs for the period divided by average loans held for investment for the period. (20)The 30+ day total delinquency rate as of the end of Q3 2012 will be provided in the September 30, 2012 Quarterly Report on Form 10-Q.(21)Regulatory capital ratios as of the end of Q3 2012 are preliminary and therefore subject to change.(22)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.(23)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.(24)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.(25)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 EndedNine Months Ended(Dollars in millions, except per share data) (unaudited)September 30,2012June 30,2012September 30,2011September 30,2012September 30,2011Interest income:Loans held for investment$              4,901$              4,255$              3,550$            12,811$            10,334Investment securities335335264968893Other1826217059Total interest income5,2544,6163,83513,84911,286Interest expense:Deposits3713732941,055923Securitized debt obligations646989213342Senior and subordinated notes858784260211Other borrowings888685260251Total interest expense6086155521,7881,727Net interest income4,6464,0013,28312,0619,559Provision for credit losses1,0141,6776223,2641,499Net interest income after provision for credit losses3,6322,3242,6618,7978,060Non-interest income:Service charges and other customer-related fees5575395421,5111,527Interchange fees, net4524083211,188972Net other-than-temporary impairment losses recognized in earnings(13)(13)(6)(40)(15)Bargain purchase gain (1)???594?Other14012014458186Total non-interest income1,1361,0548713,7112,670Non-interest expense:Salaries and associate benefits1,0029717502,8372,206Marketing316334312971917Communications and data processing198203178573504Supplies and equipment209178143534402Occupancy145145122413359Merger-related expenses481331826718Other1,1271,1787743,0962,308Total non-interest expense3,0453,1422,2978,6916,714Income from continuing operations before income taxes1,7232361,2353,8174,016Income tax provision535433709311,174Income from continuing operations, net of tax1,1881938652,8862,842Loss from discontinued operations, net of tax(10)(100)(52)(212)(102)Net income1,178938132,6742,740Dividends and undistributed earnings allocated to participating securities(5)(1)?(12)?Net income available to common stockholders$              1,173$                   92$                 813$              2,662$              2,740Basic earnings per common share:Income from continuing operations$                2.05$                0.33$                1.89$                5.18$                6.24Loss from discontinued operations(0.02)(0.17)(0.11)(0.38)(0.22)Net income per basic common share$                2.03$                0.16$                1.78$                4.80$                6.02Diluted earnings per common share:Income from continuing operations$                2.03$                0.33$                1.88$                5.13$                6.17Loss from discontinued operations(0.02)(0.17)(0.11)(0.38)(0.22)Net income per diluted common share$                2.01$                0.16$                1.77$                4.75$                5.95Weighted average common shares outstanding (in millions):Basic EPS578.3577.7456.0555.0455.2Diluted EPS584.1582.8460.4560.1461.0Dividends paid per common share$                0.05$                0.05$                0.05$                0.15$                0.15(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 SheetsSeptember 30,June 30,December 31,September 30,(Dollars in millions)(unaudited)2012201220112011Assets:Cash and due from banks$             1,855$             2,297$             2,097$             1,794Interest-bearing deposits with banks3,8603,3523,3993,238Federal funds sold and securities purchased under agreements to resell2543303421,326Cash and cash equivalents5,9695,9795,8386,358Restricted cash for securitization investors760370791984Securities available for sale, at fair value61,46455,28938,75938,400Loans held for investment:Unsecuritized loans held for investment159,219158,68088,24283,010Restricted loans for securitization investors43,91344,06947,65046,942Total loans held for investment203,132202,749135,892129,952    Less: Allowance for loan and lease losses(5,154)(4,998)(4,250)(4,280)Net loans held for investment197,978197,751131,642125,672Loans held for sale, at lower-of-cost-or-fair-value1871,047201312Accounts receivable from securitizations1669694101Premises and equipment, net3,5193,5562,7482,785Interest receivable1,6141,6231,029958Goodwill13,90113,86413,59213,593Other16,43116,99711,32510,985Total assets$         301,989$         296,572$         206,019$         200,148Liabilities:Interest payable$                368$                462$                466$                401Customer deposits:Non-interest bearing deposits20,76720,07218,28117,541Interest-bearing deposits192,488193,859109,945110,777Total customer deposits213,255213,931128,226128,318Securitized debt obligations12,68613,60816,52717,120Other debt:Federal funds purchased and securities loaned or sold under agreements to repurchase9671,1011,4641,441Senior and subordinated notes11,75612,07911,03411,051Other borrowings12,9689,08610,5364,703Total other debt25,69122,26623,03417,195Other liabilities10,3179,1138,1007,736Total liabilities262,317259,380176,353170,770Stockholders' equity:Preferred stock853???Common stock6655Paid-in capital, net25,26525,21719,27419,234Retained earnings and accumulated other comprehensive income16,83515,25513,63113,382Treasury stock, at cost(3,287)(3,286)(3,244)(3,243)Total stockholders' equity39,67237,19229,66629,378Total liabilities and stockholders' equity$         301,989$         296,572$         206,019$         200,148CAPITAL ONE FINANCIAL CORPORATION (COF)Table 5:  Average Balances, Net Interest Income and Net Interest Margin2012 Q32012 Q22011 Q3(Dollars in millions)(unaudited)AverageBalanceInterest Income/ExpenseYield/RateAverageBalanceInterestIncome/ExpenseYield/RateAverageBalanceInterestIncome/ExpenseYield/RateInterest-earning assets:Loans held for investment$  202,856$  4,9019.66%$  192,632$  4,2558.84%$  129,043$  3,55011.00%Investment securities 57,9283352.3156,9723352.3537,1892642.84Cash equivalents and other6,019181.2015,415260.6711,299210.74Total interest-earning assets $  266,803$  5,2547.88%$  265,019$  4,6166.97%$  177,531$  3,8358.64%Interest-bearing liabilities:Interest-bearing depositsNOW accounts$    36,965$       610.66%$    35,783$       560.63%$    12,602$         90.29%Money market deposit accounts107,3401890.70108,4011900.7047,4831000.84Savings accounts29,963210.2831,379250.3230,944560.72CD's of $100,000 or more4,838352.895,030352.785,407433.18Other consumer time deposits12,878631.9613,658651.9013,530842.48Public fund CD's of $100,000 or more6815.887515.339214.35Foreign time deposits1,64810.241,27110.3169210.58Total interest-bearing deposits193,7003710.77195,5973730.76110,7502941.06Securitized debt obligations13,331641.9214,948691.8518,478891.93Senior and subordinated notes11,035853.0811,213873.1010,519843.19Other borrowings12,085882.919,257863.728,369854.06Total interest-bearing liabilities$  230,151$     6081.06%$  231,015$     6151.06%$  148,116$     5521.49%Net interest income/spread$  4,6466.82%$  4,0015.91%$  3,2837.15%Impact of non-interest bearing funding0.150.130.25Net interest margin6.97%6.04%7.40%CAPITAL ONE FINANCIAL CORPORATION (COF)Table 6: Loan Information and Performance Statistics(1)(2)(3)201220122011(Dollars in millions)(unaudited)Q3 Q2 Q3Period-end Loans Held For InvestmentCredit card:   Domestic credit card $           80,621$           80,798$           53,820   International credit card8,4128,1168,210      Total credit card89,03388,91462,030Consumer banking:   Automobile26,43425,25120,422   Home loan46,27548,22410,916   Retail banking4,0294,1404,014      Total consumer banking76,73877,61535,352Commercial banking:(4)   Commercial and multifamily real estate16,96316,25414,660   Commercial and industrial18,96518,46716,145      Total commercial lending35,92834,72130,805   Small-ticket commercial real estate1,2811,3351,571      Total commercial banking37,20936,05632,376Other loans152164194     Total $         203,132$         202,749$         129,952Average Loans Held For InvestmentCredit card:   Domestic credit card $           80,502$           71,468$           53,668   International credit card8,1548,1948,703      Total credit card88,65679,66262,371Consumer banking:   Automobile25,92324,48719,757   Home loan 47,26248,96611,126   Retail banking4,0864,1533,979      Total consumer banking77,27177,60634,862Commercial banking:(4)   Commercial and multifamily real estate16,65415,83814,291   Commercial and industrial18,81718,00115,726      Total commercial lending35,47133,83930,017   Small-ticket commercial real estate1,2961,3881,598      Total commercial banking36,76735,22731,615Other loans162137195      Total$         202,856$         192,632$         129,043Net Charge-off Rates(7)Credit card:   Domestic credit card3.04%2.86%3.92%   International credit card4.955.496.15      Total credit card3.223.134.23Consumer Banking:   Automobile1.791.111.69   Home loan0.280.090.53   Retail banking1.201.271.67      Total consumer banking0.830.481.32Commercial banking:(4)   Commercial and multifamily real estate(0.05)0.180.11   Commercial and industrial-0.100.42      Total commercial lending(0.03)0.140.27   Small-ticket commercial real estate0.791.462.19      Total commercial banking-0.190.37Other loans30.1118.0415.28      Total1.75%1.53%2.52%30+ Day Performing Delinquency Rates(7)Credit card:   Domestic credit card3.52%2.79%3.65%   International credit card4.924.845.35      Total credit card3.65%2.97%3.87%Consumer Banking:   Automobile6.12%5.20%6.34%   Home loan0.150.150.78   Retail banking0.730.690.89      Total consumer banking2.23%1.82%4.01%Nonperforming Asset Rates(5)(6)(7)Consumer banking:   Automobile0.52%0.41%0.53%   Home loan0.980.944.74   Retail banking2.252.212.37      Total consumer banking0.89%0.83%2.04%Commercial banking:(4)   Commercial and multifamily real estate1.04%1.28%2.12%   Commercial and industrial0.680.811.00      Total commercial lending0.85%1.03%1.53%   Small-ticket commercial real estate1.491.251.58      Total commercial banking0.87%1.04%1.54%CAPITAL ONE FINANCIAL CORPORATION (COF)Table 7: Loan Information and Performance Statistics (Excluding Acquired Loans)(1)(2)(3)(7)201220122011(Dollars in millions)(unaudited)Q3 Q2 Q3Period-end Loans Held For Investment (Excluding Acquired Loans)Credit card:   Domestic credit card $           80,250$           80,269$           53,820   International credit card8,4128,1168,210      Total credit card88,66288,38562,030Consumer banking:   Automobile26,41125,22120,366   Home loan7,7197,5826,634   Retail banking3,9904,0993,969      Total consumer banking38,12036,90230,969Commercial banking:(4)   Commercial and multifamily real estate16,80016,06414,496   Commercial and industrial18,72918,22615,820      Total commercial lending35,52934,29030,316   Small-ticket commercial real estate1,2811,3351,571      Total commercial banking36,81035,62531,887Other loans152164194     Total $         163,744$         161,076$         125,080Average Loans Held For Investment (Excluding Acquired Loans)Credit card:   Domestic credit card $           80,079$           71,080$           53,668   International credit card8,1548,1948,703      Total credit card88,23379,27462,371Consumer banking:   Automobile25,89724,45419,692   Home loan 7,9967,6866,759   Retail banking4,0464,1103,933      Total consumer banking37,93936,25030,384Commercial banking:(4)   Commercial and multifamily real estate16,48915,64614,101   Commercial and industrial18,57917,75515,396      Total commercial lending35,06833,40129,497   Small-ticket commercial real estate1,2961,3881,598      Total commercial banking36,36434,78931,095Other loans162137195      Total$         162,698$         150,450$         124,045Net Charge-off Rates (Excluding Acquired Loans)Credit card:   Domestic credit card3.06%2.87%3.92%   International credit card4.955.496.15      Total credit card3.233.144.23Consumer Banking:   Automobile1.791.111.69   Home loan1.650.600.87   Retail banking1.221.291.69      Total consumer banking1.701.021.51Commercial banking:(4)   Commercial and multifamily real estate(0.05)0.180.11   Commercial and industrial-0.100.43      Total commercial lending(0.03)0.140.28   Small-ticket commercial real estate0.791.462.19      Total commercial banking-0.190.38Other loans30.1118.0415.28      Total2.18%1.96%2.62%30+ Day Performing Delinquency Rates (Excluding Acquired Loans)Credit card:   Domestic credit card3.53%2.81%3.65%   International credit card4.924.845.35      Total credit card3.67%2.99%3.87%Consumer Banking:   Automobile6.12%5.20%6.36%   Home loan0.890.931.28   Retail banking0.740.700.90      Total consumer banking4.50%3.82%4.57%Nonperforming Asset Rates (Excluding Acquired Loans)(5)(6)Consumer banking:   Automobile0.52%0.41%0.53%   Home loan5.855.967.80   Retail banking2.272.242.40      Total consumer banking1.78%1.75%2.33%Commercial banking:(4)   Commercial and multifamily real estate1.05%1.29%2.14%   Commercial and industrial0.690.821.02      Total commercial lending0.861.041.56   Small-ticket commercial real estate1.491.251.58      Total commercial banking0.88%1.05%1.56% CAPITAL ONE FINANCIAL CORPORATION (COF)Table 8:  Financial & Statistical Summary?Credit Card Business(2)201220122011(Dollars in millions) (unaudited)Q3 Q2 Q3Credit CardEarnings:  Net interest income$            2,991$            2,350$            2,042  Non-interest income826771678  Total net revenue3,8173,1212,720  Provision for credit losses8921,711511  Non-interest expense1,7901,8631,188  Income (loss) from continuing operations  before taxes1,135(453)1,021  Income tax provision (benefit)394(156)358  Income (loss) from continuing operations,  net of tax$               741$              (297)$               663Selected performance metrics:  Period-end loans held for investment$           89,033$           88,914$           62,030  Average loans held for investment88,65679,66262,371  Average yield on loans held for investment15.03%13.42%14.84%  Total net revenue margin17.2215.6717.44  Net charge-off rate(7)3.223.134.23  30+ day delinquency rate(7)3.652.973.87  Purchase volume(8)$           48,020$           45,228$           34,918Domestic CardEarnings:  Net interest income$            2,715$            2,118$            1,753  Non-interest income722708588  Total net revenue3,4372,8262,341  Provision for credit losses8111,600381  Non-interest expense1,5841,634972  Income (loss) from continuing operations  before taxes1,042(408)988  Income tax provision (benefit)369(144)351  Income (loss) from continuing operations,  net of tax$               673$              (264)$               637Selected performance metrics:  Period-end loans held for investment$           80,621$           80,798$           53,820  Average loans held for investment80,50271,46853,668  Average yield on loans held for investment14.88%13.33%14.62%  Total net revenue margin17.0815.8217.45  Net charge-off rate(7)3.042.863.92  30+ day delinquency rate(7)3.522.793.65  Purchase volume(8)$           44,552$           41,807$           31,686International CardEarnings:  Net interest income$               276$               232$               289  Non-interest income1046390  Total net revenue380295379  Provision for credit losses81111130  Non-interest expense206229216  Income (loss) from continuing operations  before taxes93(45)33  Income tax provision (benefit)25(12)7  Income (loss) from continuing operations,  net of tax$                 68$                (33)$                 26Selected performance metrics:  Period-end loans held for investment$            8,412$            8,116$            8,210  Average loans held for investment8,1548,1948,703  Average yield on loans held for investment16.47%14.18%16.24%  Total net revenue margin18.6414.4017.42  Net charge-off rate4.955.496.15  30+ day delinquency rate 4.924.845.35  Purchase volume(8)$            3,468$            3,421$            3,232CAPITAL ONE FINANCIAL CORPORATION (COF)Table 9:  Financial & Statistical Summary?Consumer Banking Business(3)201220122011(Dollars in millions) (unaudited)Q3 Q2 Q3Consumer BankingEarnings:Net interest income$            1,501$            1,496$            1,097Non-interest income260185188Total net revenue1,7611,6811,285Provision for credit losses20244136Non-interest expense977959853Income from continuing operations before taxes582678296Income tax provision206240106Income from continuing operations, net of tax$               376$               438$               190Selected performance metrics:Period-end loans held for investment $           76,738$           77,615$           35,352Average loans held for investment 77,27177,60634,862Average yield on loans held for investment6.05%6.17%9.83%Auto loan originations$            3,905$            4,306$            3,409Period-end deposits173,100173,96688,589Average deposits 173,334174,41688,266Deposit interest expense rate0.71%0.70%0.95%Core deposit intangible amortization$                 41$                 42$                 32Net charge-off rate(7)0.83%0.48%1.32%30+ day performing delinquency rate(7)2.231.824.0130+ day delinquency rate(7)(9)**2.475.57Nonperforming loan rate(5)(7)0.840.791.88Nonperforming asset rate(5)(7)0.890.832.04Period-end loans serviced for others$           15,659$           16,108$           18,624CAPITAL ONE FINANCIAL CORPORATION (COF)Table 10:  Financial & Statistical Summary?Commercial Banking Business(3)201220122011(Dollars in millions) (unaudited)Q3 Q2 Q3Commercial Banking(4)(11)Earnings:Net interest income$               432$               427$               407Non-interest income878263Total net revenue519509470Provision for credit losses(87)(94)(10)Non-interest expense253251237Income from continuing operations before taxes353352243Income tax provision 12512486Income from continuing operations, net of tax$               228$               228$               157Selected performance metrics:Period-end loans held for investment $           37,209$           36,056$           32,376Average loans held for investment 36,76735,22731,615Average yield on loans held for investment4.14%4.27%4.71%Period-end deposits $           28,670$           27,784$           25,376Average deposits 28,06327,94325,321Deposit interest expense rate0.31%0.33%0.47%Core deposit intangible amortization$                   8$                   9$                 10Net charge-off rate(7)-%0.19%0.37%Nonperforming loan rate(5)(7)0.820.991.42Nonperforming asset rate(5)(7)0.871.041.54Risk category:(10)Noncriticized$           35,112$           33,745$           29,636Criticized performing1,3941,5241,790Criticized nonperforming305356459    Total risk-rated loans36,81135,62531,885Acquired commercial loans398431491    Total commercial loans$           37,209$           36,056$           32,376% of period-end held for investment commercial loans:Noncriticized94.4%93.6%91.6%Criticized performing3.74.25.5Criticized nonperforming0.81.01.4    Total risk-rated loans98.998.898.5Acquired commercial loans1.11.21.5    Total commercial loans100.0%100.0%100.0%CAPITAL ONE FINANCIAL CORPORATION (COF)Table 11:  Financial & Statistical Summary?Other and Total(2)(3)201220122011(Dollars in millions) (unaudited)Q3 Q2Q3Other (4)Earnings:Net interest expense$              (278)$              (272)$                (263)Non-interest income(37)16(58)Total net revenue(315)(256)(321)Provision for credit losses716(15)Non-interest expense256919Income (loss) from continuing operations before taxes(347)(341)(325)Income tax benefit(190)(165)(180)Income (loss) from continuing operations, net of tax$              (157)$              (176)$                (145)Selected performance metrics:Period-end loans held for investment$               152$               164$                 194Average loans held for investment162137195Period-end deposits11,48512,18114,353Average deposits11,92612,55514,681TotalEarnings:Net interest income$            4,646$            4,001$              3,283Non-interest income1,1361,054871Total net revenue5,7825,0554,154Provision for credit losses1,0141,677622Non-interest expense3,0453,1422,297Income from continuing operations before taxes1,7232361,235Income tax provision53543370Income from continuing operations, net of tax$            1,188$               193$                 865Selected performance metrics:  Period-end loans held for investment $         203,132$         202,749$           129,952  Average loans held for investment202,856192,632129,043  Period-end deposits213,255213,931128,318  Average deposits213,323214,914128,268CAPITAL 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 and thereafter 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 of $40.4 billion, other assets of $53.9 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 commerical real estate investments, some of which were previously included in the "Other" segment, are now included in the commercial and multifamily real estate category of our Commercial Banking segment. Prior period amounts have been recast to conform to the current period presentation.(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 U.S. card, ING Direct and CCB acquisitions are included in the denominator used in calculating the credit quality metrics presented in Tables 6, 8, 9, and 10. 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 these acquired loans.201220122011(Dollars in millions) (unaudited)Q3Q2Q3Acquired loans accounted for under SOP 03-3:Period-end unpaid principal balance$       40,749$       43,333$     6,021Period-end loans held for investment39,38841,6734,873Average loans held for investment40,15842,1824,998(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 Q3 2012 will be provided in the September 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 federal 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. 201220122011(Dollars in millions)(unaudited)Q3Q2Q3Average Equity to Non-GAAP Average Tangible Common EquityAverage total stockholders' equity$     38,535$     37,533$     29,316Less:  Average intangible assets(1)(16,408)(15,689)(13,990)Average tangible common equity$     22,127$     21,844$     15,326Stockholders' Equity to Non-GAAP Tangible Common EquityTotal stockholders' equity$     39,672$     37,192$     29,378Less:  Intangible assets(1)(16,323)(16,477)(13,953)Tangible common equity$     23,349$     20,715$     15,425Total Assets to Tangible AssetsTotal assets$    301,989$    296,572$    200,148Less:  Assets from discontinued operations(309)(310)(304)Total assets from continuing operations301,680296,262199,844Less:  Intangible assets(1)(16,323)(16,477)(13,953)Tangible assets$    285,357$    279,785$    185,891Non-GAAP TCE RatioTangible common equity$     23,349$     20,715$     15,425Tangible assets285,357279,785185,891TCE ratio(2)8.2%7.4%8.3%Regulatory Capital Ratios(3)Total stockholders' equity$     39,672$     37,192$     29,378Less:  Net unrealized (gains) losses on AFS securities recorded in AOCI(4)(752)(422)(401)     Net (gains) losses on cash flow     hedges recorded in AOCI(4)(6)3454     Disallowed goodwill and other     intangible assets(14,497)(14,563)(13,898)     Disallowed deferred tax assets(221)(758)(227)     Noncumulative perpetual preferred     stock(5)(853)--     Other (12)(12)(2)Tier 1 common capital23,33121,47114,904Plus:   Noncumulative perpetual preferred stock(5)853--     Tier 1 restricted core capital items(6)3,6363,6363,636Tier 1 capital27,82025,10718,540Plus:   Long-term debt qualifying as Tier 2 capital2,1192,3182,438     Qualifying allowance for loan and     lease losses2,7672,7401,896     Other Tier 2 components171524Tier 2 capital4,9035,0734,358Total risk-based capital(7)$     32,723$     30,180$     22,898Risk-weighted assets(8)$    218,369$    216,341$    149,028Tier 1 common ratio(9)10.7%9.9%10.0%Tier 1 risk-based capital ratio(10)12.711.612.4Total risk-based capital ratio(11)15.014.015.4___________________(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 Q3 2012 are preliminary and therefore subject to change.(4)Amounts presented are net of tax.(5)Noncumulative perpetual preferred stock qualifies for Tier 1 capital; however, it is not includable in Tier 1 common capital.(6)Consists primarily of trust preferred securities.(7)Total risk-based capital equals the sum of Tier 1 capital and Tier 2 capital.(8)Calculated based on prescribed regulatory guidelines.(9)Tier 1 common ratio is a regulatory measure calculated based on Tier 1 common capital divided by risk-weighted assets.(10)Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighed assets.(11)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 Media Relations, Julie Rakes, +1-804-284-5800, or Tatiana Stead, +1-703-720-2352