Capital One Reports: Period-End Loans in Auto Finance Grew 7%

Published: July 20, 2012Digital Dealer Team

Both first and second quarter 2012 results were significantly impacted by acquisition accounting impacts and other items

MCLEAN, Va. — 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 Results

All comparisons in the following paragraphs are for second quarter 2012 compared to first quarter 2012 unless otherwise noted.

Loan and Deposit Volumes

Period-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.

Other

As 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.

RevenuesTotal 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 Margin

Net 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 Expenses

Operating 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 Losses

Provision 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 Income

Net 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 Operations

The 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 Ratios

The 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 (http://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 statements

The 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 One

Capital One Financial Corporation (http://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 99.2
Capital One Financial Corporation
Financial Supplement
Second Quarter 2012 ^{(1) (2)}
Table of Contents

			Page
Capital One Financial Corporation Consolidated
	Table 1:	Financial & Statistical Summary―Consolidated	1
	Table 2:	Notes to Consolidated Financial & Statistical Summary (Table 1)	2
	Table 3:	Consolidated Statements of Income	3
	Table 4:	Consolidated Balance Sheets	4
	Table 5:	Average Balances, Net Interest Income and Net Interest Margin	5
	Table 6:	Loan Information and Performance Statistics	6
	Table 7:	Loan Information and Performance Statistics (Excluding Acquired Loans) ⁽³⁾	7
Business Segment Detail
	Table 8:	Financial & Statistical Summary―Credit Card Business	8
	Table 9:	Financial & Statistical Summary―Consumer Banking Business	9
	Table 10:	Financial & Statistical Summary―Commercial Banking Business	10
	Table 11:	Financial & Statistical Summary―Other and Total	11
	Table 12:	Notes to Loan and Business Segment Disclosures (Tables 6 — 11)	12
Other
	Table 13:	Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures	13


⁽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.
⁽¹⁾

⁽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⁾

	2012		2012		2011
(Dollars in millions, except per share data and as noted) (unaudited)	Q2 ⁽²⁾⁽³⁾		Q1 ⁽³⁾		Q2
Earnings
Net interest income	$ 4,001		$ 3,414		$ 3,136
Non-interest income^{(4) (5)}	1,054		1,521		857
Total net revenue^{(5) (6)}	5,055		4,935		3,993
Provision for credit losses	1,677		573		343
Marketing expenses	334		321		329
Operating expenses⁽⁷⁾	2,808		2,183		1,926
Income from continuing operations before income taxes	236		1,858		1,395
Income tax provision	43		353		450
Income from continuing operations, net of tax	193		1,505		945
Loss from discontinued operations, net of tax⁽⁴⁾	(100)		(102)		(34)
Net income	93		1,403		911
Dividends and undistributed earnings allocated to participating securities	(1)		(7)		—
Net income available to common stockholders	$ 92		$ 1,396		$ 911

Common Share Statistics
Basic 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		$ 2.00
Diluted 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		$ 1.97
Weighted average common shares outstanding (in millions):
Basic EPS	577.7		508.7		455.6
Diluted EPS	582.8		513.1		462.2
Common shares outstanding (period end, in millions)	580.7		580.2		459.4
Dividends per common share	$ 0.05		$ 0.05		$ 0.05
Tangible book value per common share (period end)⁽⁸⁾	35.67		39.37		31.94

Balance Sheet (Period End)
Loans held for investment⁽⁹⁾	$ 202,749		$ 173,822		$ 128,965
Interest-earning assets	264,331		265,398		174,323
Total assets	296,572		294,481		199,753
Interest-bearing deposits	193,859		197,254		109,278
Total deposits	213,931		216,528		126,117
Borrowings	35,874		32,885		37,735
Stockholders’ equity	37,192		36,950		28,681

Balance Sheet (Quarterly Average Balances)
Average loans held for investment⁽⁹⁾	$ 192,632		$ 152,900		$ 127,916
Average interest-earning assets	265,019		220,246		174,113
Average total assets	295,306		246,384		199,229
Average interest-bearing deposits	195,597		151,625		109,251
Average total deposits	214,914		170,259		125,834
Average borrowings	35,418		35,994		39,451
Average stockholders’ equity	37,533		32,982		28,255

Performance Metrics
Net 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)	2		22		(2)
Total net revenue margin⁽¹⁰⁾	7.63		8.96		9.17
Net interest margin⁽¹¹⁾	6.04		6.20		7.20
Return on average assets⁽¹²⁾	0.26		2.44		1.90
Return on average total stockholders’ equity⁽¹³⁾	2.06		18.25		13.38
Return on average tangible common equity⁽¹⁴⁾	3.53		31.60		26.57
Non-interest expense as a % of average loans held for investment⁽¹⁵⁾	6.52		6.55		7.05
Efficiency ratio⁽¹⁶⁾	62.16		50.74		56.47
Effective income tax rate	18.2		19.0		32.3
Full-time equivalent employees (in thousands), period end	37.4		34.2		28.2

Credit Quality Metrics⁽¹⁷⁾
Allowance for loan and lease losses	$ 4,998		$ 4,060		$ 4,488
Allowance as a % of loans held for investment	2.47	%	2.34	%	3.48	%
Allowance as a % of loans held for investment (excluding acquired loans)	3.08		3.08		3.62
Net charge-offs	$ 738		$ 780		$ 931
Net charge-off rate⁽¹⁸⁾	1.53	%	2.04	%	2.91	%
Net charge-off rate (excluding acquired loans)⁽¹⁸⁾	1.96		2.40		3.03
30+ day performing delinquency rate	2.06		2.23		2.90
30+ day performing delinquency rate (excluding acquired loans)	2.59		2.96		3.02
30+ day delinquency rate⁽¹⁹⁾	**		2.69		3.57
30+ day delinquency rate (excluding acquired loans)⁽¹⁹⁾	**		3.57		3.72

Capital Ratios ⁽²⁰⁾
Tier 1 common ratio⁽²¹⁾	9.9	%	11.9	%	9.4	%
Tier 1 risk-based capital ratio⁽²²⁾	11.6		13.9		11.8
Total risk-based capital ratio⁽²³⁾	14.0		16.5		15.0
Tangible common equity (“TCE”) ratio⁽²⁴⁾	7.4		8.2		7.9

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 Income


		Three Months Ended			Six Months Ended
(Dollars in millions, except per share data) (unaudited)		June 30,2012	March 31,2012	June 30,2011	June 30,2012	June 30,2011

Interest income:
Loans held for investment, including past-due fees		$ 4,255	$ 3,655	$ 3,367	$ 7,910	$ 6,784
Investment securities		335	298	313	633	629
Other		26	26	19	52	38
	Total interest income	4,616	3,979	3,699	8,595	7,451

Interest expense:
Deposits		373	311	307	684	629
Securitized debt obligations		69	80	113	149	253
Senior and subordinated notes		87	88	63	175	127
Other borrowings		86	86	80	172	166
	Total interest expense	615	565	563	1,180	1,175

Net interest income		4,001	3,414	3,136	7,415	6,276
Provision for credit losses		1,677	573	343	2,250	877
	Net interest income after provision for credit losses	2,324	2,841	2,793	5,165	5,399

Non-interest income:
Service charges and other customer-related fees		539	415	460	954	985
Interchange fees, net		408	328	331	736	651
Net other-than-temporary impairment losses recognized in earnings		(13)	(14)	(6)	(27)	(9)
Bargain purchase gain ⁽¹⁾		—	594	—	594	—
Other		120	198	72	318	172
	Total non-interest income	1,054	1,521	857	2,575	1,799

Non-interest expense:
Salaries and associate benefits		971	864	715	1,835	1,456
Marketing		334	321	329	655	605
Communications and data processing		203	172	162	375	326
Supplies and equipment		178	147	124	325	259
Occupancy		145	123	118	268	237
Merger-related expenses		133	86	—	219	—
Other		1,178	791	807	1,969	1,534
	Total non-interest expense	3,142	2,504	2,255	5,646	4,417
Income from continuing operations before income taxes		236	1,858	1,395	2,094	2,781
Income tax provision		43	353	450	396	804
Income from continuing operations, net of tax		193	1,505	945	1,698	1,977
Loss from discontinued operations, net of tax		(100)	(102)	(34)	(202)	(50)
	Net income	93	1,403	911	1,496	1,927
Dividends and undistributed earnings allocated to participating securities		(1)	(7)	—	(8)	—
	Net income available to common stockholders	$ 92	$ 1,396	$ 911	$ 1,488	$ 1,927

Basic earnings per common share:
	Income from continuing operations	$ 0.33	$ 2.94	$ 2.07	$ 3.11	$ 4.35
	Loss 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	$ 4.24

Diluted earnings per common share:
	Income from continuing operations	$ 0.33	$ 2.92	$ 2.04	$ 3.09	$ 4.29
	Loss 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	$ 4.18

Weighted average common shares outstanding (in millions):
	Basic EPS	577.7	508.7	455.6	543.3	454.9
	Diluted EPS	582.8	513.1	462.2	548.0	461.3

Dividends 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 Sheets


		June 30,	December 31,	June 30,
(Dollars in millions)(unaudited)		2012	2011	2011

Assets:
Cash and due from banks		$ 2,297	$ 2,097	$ 1,954
Interest-bearing deposits with banks		3,352	3,399	4,037
Federal funds sold and securities purchased under agreements to resell		330	342	652
	Cash and cash equivalents	5,979	5,838	6,643
Restricted cash for securitization investors		370	791	1,328
Securities available for sale, at fair value		55,289	38,759	39,474
Loans held for investment:
	Unsecuritized loans held for investment	158,680	88,242	81,585
	Restricted loans for securitization investors	44,069	47,650	47,380
	Total loans held for investment	202,749	135,892	128,965
	Less: Allowance for loan and lease losses	(4,998)	(4,250)	(4,488)
	Net loans held for investment	197,751	131,642	124,477
Loans held for sale, at lower-of-cost-or-fair-value		1,047	201	80
Accounts receivable from securitizations		96	94	106
Premises and equipment, net		3,556	2,748	2,754
Interest receivable		1,623	1,029	1,027
Goodwill		13,864	13,592	13,596
Other		16,997	11,325	10,268
	Total assets	$ 296,572	$ 206,019	$ 199,753


Liabilities:
Interest payable		$ 462	$ 466	$ 469
Customer deposits:
	Non-interest bearing deposits	20,072	18,281	16,839
	Interest-bearing deposits	193,859	109,945	109,278
	Total customer deposits	213,931	128,226	126,117
Securitized debt obligations		13,608	16,527	19,860
Other debt:
	Federal funds purchased and securities loaned or sold under agreements to repurchase	1,101	1,464	2,575
	Senior and subordinated notes	12,079	11,034	8,664
	Other borrowings	9,086	10,536	6,636
	Total other debt	22,266	23,034	17,875
Other liabilities		9,113	8,100	6,751
	Total liabilities	259,380	176,353	171,072

Stockholders’ equity:
Common stock		6	5	5
Paid-in capital, net		25,217	19,274	19,188
Retained earnings and accumulated other comprehensive income		15,255	13,631	12,729
Less: Treasury stock, at cost		(3,286)	(3,244)	(3,241)
	Total stockholders’ equity	37,192	29,666	28,681
	Total 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 Margin


			2012 Q2				2012 Q1				2011 Q2
(Dollars in millions)(unaudited)			Average Balance	Interest Income/ Expense	Yield/ Rate		Average Balance	Interest Income/ Expense	Yield/ Rate		Average Balance	Interest Income/ Expense	Yield/ Rate
Interest-earning assets:
	Loans held for investment		$ 192,632	$ 4,255	8.84	%	$ 152,900	$ 3,655	9.56	%	$ 127,916	$ 3,367	10.53	%
	Investment securities		56,972	335	2.35		50,543	298	2.36		40,381	313	3.10
	Cash equivalents and other		15,415	26	0.67		16,803	26	0.62		5,846	19	1.30
Total interest-earning assets			$ 265,019	$ 4,616	6.97	%	$ 220,246	$ 3,979	7.23	%	$ 174,143	$ 3,699	8.50	%

Interest-bearing liabilities:
	Interest-bearing deposits
		NOW accounts	$ 35,783	$ 56	0.63	%	$ 24,912	$ 34	0.55	%	$ 13,186	$ 9	0.27	%
		Money market deposit accounts	108,401	190	0.70		76,362	131	0.69		45,527	99	0.87
		Savings accounts	31,379	25	0.32		31,743	34	0.43		29,329	60	0.82
		Other consumer time deposits	13,658	65	1.90		12,763	74	2.32		14,330	91	2.54
		Public fund CD’s of $100,000 or more	75	1	5.33		84	—	—		110	1	3.64
		CD’s of $100,000 or more	5,030	35	2.78		4,787	37	3.09		5,867	46	3.14
		Foreign time deposits	1,271	1	0.31		974	1	0.41		902	1	0.44
	Total interest-bearing deposits		195,597	373	0.76		151,625	311	0.82		109,251	307	1.12
	Securitized debt obligations		14,948	69	1.85		16,185	80	1.98		22,191	113	2.04
	Senior and subordinated notes		11,213	87	3.10		10,268	88	3.43		8,093	63	3.11
	Other borrowings		9,257	86	3.72		9,541	86	3.61		9,167	80	3.49
Total interest-bearing liabilities			$ 231,015	$ 615	1.06	%	$ 187,619	$ 565	1.20	%	$ 148,702	$ 563	1.51	%
Net interest income/spread				$ 4,001	5.90	%		$ 3,414	6.03	%		$ 3,136	6.99	%
Impact of non-interest bearing funding					0.14				0.17				0.21
Net interest margin					6.04	%			6.20	%			7.20	%

CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 6: Loan Information and Performance Statistics⁽¹⁾

	2012		2012		2011
(Dollars in millions)(unaudited)	Q2⁽²⁾⁽³⁾		Q1⁽³⁾		Q2
Period-end Loans Held For Investment
Credit card:
Domestic credit card	$ 80,798		$ 53,173		$ 53,994
International credit card	8,116		8,303		8,711
Total credit card	88,914		61,476		62,705
Consumer banking:
Automobile	25,251		23,568		19,223
Home loan	48,224		49,550		11,323
Retail banking	4,140		4,182		4,046
Total consumer banking	77,615		77,300		34,592
Commercial banking:⁽⁴⁾
Commercial and multifamily real estate	16,254		15,702		14,304
Commercial and industrial	18,467		17,761		15,526
Total commercial lending	34,721		33,463		29,830
Small-ticket commercial real estate	1,335		1,443		1,641
Total commercial banking	36,056		34,906		31,471
Other loans	164		140		197
Total	$ 202,749		$ 173,822		$ 128,965

Average Loans Held For Investment
Credit card:
Domestic credit card	$ 71,468		$ 54,131		$ 53,868
International credit card	8,194		8,301		8,823
Total credit card	79,662		62,432		62,691
Consumer banking:
Automobile	24,487		22,582		18,753
Home loan	48,966		29,502		11,534
Retail banking	4,153		4,179		4,154
Total consumer banking	77,606		56,263		34,441
Commercial banking:⁽⁴⁾
Commercial and multifamily real estate	15,838		15,514		13,859
Commercial and industrial	18,001		17,038		14,993
Total commercial lending	33,839		32,552		28,852
Small-ticket commercial real estate	1,388		1,480		1,726
Total commercial banking	35,227		34,032		30,578
Other loans	137		173		206
Total	$ 192,632		$ 152,900		$ 127,916

Net Charge-off Rates
Credit card:
Domestic credit card	2.86	%	3.92	%	4.74	%
International credit card	5.49		5.52		7.02
Total credit card	3.13		4.14		5.06
Consumer Banking:
Automobile	1.11		1.41		1.11
Home loan	0.09		0.20		0.60
Retail banking	1.27		1.39		1.73
Total consumer banking	0.48		0.77		1.01
Commercial banking:⁽⁴⁾
Commercial and multifamily real estate	0.18		0.09		0.38
Commercial and industrial	0.10		(0.08)		0.22
Total commercial lending	0.14		—		0.30
Small-ticket commercial real estate	1.46		4.24		3.77
Total commercial banking	0.19		0.19		0.50
Other loans	18.04		23.30		23.96
Total	1.53	%	2.04	%	2.91	%

30+ Day Performing Delinquency Rates
Credit card:
Domestic credit card	2.79	%	3.25	%	3.33	%
International credit card	4.84		5.14		5.30
Total credit card	2.97	%	3.51	%	3.60	%
Consumer Banking:
Automobile	5.20	%	4.87	%	6.09	%
Home loan	0.15		0.15		0.70
Retail banking	0.69		0.80		0.76
Total consumer banking	1.82	%	1.63	%	3.70	%

Nonperforming Asset Rates⁽⁵⁾⁽⁶⁾
Consumer banking:
Automobile	0.41	%	0.32	%	0.49	%
Home loan	0.94		0.94		4.40
Retail banking	2.21		2.25		2.45
Total consumer banking	0.83	%	0.82	%	2.00	%
Commercial banking:⁽⁴⁾
Commercial and multifamily real estate	1.28	%	1.55	%	2.31	%
Commercial and industrial	0.81		0.69		1.13
Total commercial lending	1.03	%	1.09	%	1.69	%
Small-ticket commercial real estate	1.25		4.35		0.75
Total commercial banking	1.04	%	1.23	%	1.64	%

CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 7: Loan Information and Performance Statistics (Excluding Acquired Loans)⁽¹⁾⁽⁷⁾

	2012		2012		2011
(Dollars in millions)(unaudited)	Q2⁽²⁾⁽³⁾		Q1⁽³⁾		Q2
Period-end Loans Held For Investment (Excluding Acquired Loans)
Credit card:
Domestic credit card	$ 80,269		$ 53,173		$ 53,994
International credit card	8,116		8,303		8,711
Total credit card	88,385		61,476		62,705
Consumer banking:
Automobile	25,221		23,530		19,152
Home loan	7,582		6,967		6,738
Retail banking	4,099		4,142		3,997
Total consumer banking	36,902		34,639		29,887
Commercial banking:⁽⁴⁾
Commercial and multifamily real estate	16,064		15,490		14,089
Commercial and industrial	18,226		17,503		15,265
Total commercial lending	34,290		32,993		29,354
Small-ticket commercial real estate	1,335		1,443		1,641
Total commercial banking	35,625		34,436		30,995
Other loans	164		140		197
Total	$ 161,076		$ 130,691		$ 123,784

Average Loans Held For Investment (Excluding Acquired Loans)
Credit card:
Domestic credit card	$ 71,080		$ 54,131		$ 53,868
International credit card	8,194		8,301		8,823
Total credit card	79,274		62,432		62,691
Consumer banking:
Automobile	24,454		22,540		18,679
Home loan	7,686		6,994		7,002
Retail banking	4,110		4,136		4,083
Total consumer banking	36,250		33,670		29,764
Commercial banking:⁽⁴⁾
Commercial and multifamily real estate	15,646		15,328		13,640
Commercial and industrial	17,755		16,750		14,777
Total commercial lending	33,401		32,078		28,417
Small-ticket commercial real estate	1,388		1,480		1,726
Total commercial banking	34,789		33,558		30,143
Other loans	137		173		206
Total	$ 150,450		$ 129,833		$ 122,804

Net Charge-off Rates (Excluding Acquired Loans)
Credit card:
Domestic credit card	2.87	%	3.92	%	4.74	%
International credit card	5.49		5.52		7.02
Total credit card	3.14		4.14		5.06
Consumer Banking:
Automobile	1.11		1.41		1.12
Home loan	0.60		0.82		0.98
Retail banking	1.29		1.40		1.76
Total consumer banking	1.02		1.29		1.17
Commercial banking:⁽⁴⁾
Commercial and multifamily real estate	0.18		0.09		0.39
Commercial and industrial	0.10		(0.08)		0.23
Total commercial lending	0.14		0.01		0.30
Small-ticket commercial real estate	1.46		4.24		3.77
Total commercial banking	0.19		0.19		0.50
Other loans	18.04		23.30		23.96
Total	1.96	%	2.40	%	3.03	%

30+ Day Performing Delinquency Rates (Excluding Acquired Loans)
Credit card:
Domestic credit card	2.81	%	3.25	%	3.33	%
International credit card	4.84		5.14		5.30
Total credit card	2.99	%	3.51	%	3.60	%
Consumer Banking:
Automobile	5.20	%	4.88	%	6.11	%
Home loan	0.93		1.10		1.18
Retail banking	0.70		0.81		0.77
Total consumer banking	3.82	%	3.63	%	4.29	%

Nonperforming Asset Rates (Excluding Acquired Loans)⁽⁵⁾⁽⁶⁾
Consumer banking:
Automobile	0.41	%	0.32	%	0.49	%
Home loan	5.96		6.66		7.38
Retail banking	2.24		2.28		2.48
Total consumer banking	1.75	%	1.83	%	2.32	%
Commercial banking^(4):
Commercial and multifamily real estate	1.29	%	1.57	%	2.35	%
Commercial and industrial	0.82		0.70		1.14
Total commercial lending	1.04		1.11		1.72
Small-ticket commercial real estate	1.25		4.35		0.75
Total commercial banking	1.05	%	1.25	%	1.67	%

CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 8: Financial & Statistical Summary—Credit Card Business

	2012		2012		2011
(Dollars in millions) (unaudited)	Q2⁽²⁾		Q1		Q2
Credit Card
Earnings:
Net interest income	$ 2,350		$ 1,992		$ 1,890
Non-interest income	771		598		619
Total net revenue	3,121		2,590		2,509
Provision for credit losses	1,711		458		309
Non-interest expense	1,863		1,268		1,238
Income (loss) from continuing operations before taxes	(453)		864		962
Income tax provision (benefit)	(156)		298		344
Income (loss) from continuing operations, net of tax	$ (297)		$ 566		$ 618

Selected performance metrics:
Period-end loans held for investment	$ 88,914		$ 61,476		$ 62,705
Average loans held for investment	79,662		62,432		62,691
Average yield on loans held for investment	13.42	%	14.41	%	13.83	%
Total net revenue margin	15.67		16.59		16.01
Net charge-off rate	3.13		4.14		5.06
30+ day delinquency rate	2.97		3.51		3.60
Purchase volume⁽⁸⁾	$ 45,228		$ 34,498		$ 34,226

Domestic Card
Earnings:
Net interest income	$ 2,118		$ 1,713		$ 1,607
Non-interest income	708		497		584
Total net revenue	2,826		2,210		2,191
Provision for credit losses	1,600		361		187
Non-interest expense	1,634		1,052		1,008
Income from continuing operations before taxes	(408)		797		996
Income tax provision	(144)		282		354
Income from continuing operations, net of tax	$ (264)		$ 515		$ 642

Selected performance metrics:
Period-end loans held for investment	$ 80,798		$ 53,173		$ 53,994
Average loans held for investment	71,468		54,131		53,868
Average yield on loans held for investment	13.33	%	14.11	%	13.52	%
Total net revenue margin	15.82		16.33		16.27
Net charge-off rate⁽⁷⁾	2.86		3.92		4.74
30+ day delinquency rate⁽⁷⁾	2.79		3.25		3.33
Purchase volume⁽⁸⁾	$ 41,807		$ 31,417		$ 31,070

International Card
Earnings:
Net interest income	$ 232		$ 279		$ 283
Non-interest income	63		101		35
Total net revenue	295		380		318
Provision for credit losses	111		97		122
Non-interest expense	229		216		230
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 investment	8,194		8,301		8,823
Average yield on loans held for investment	14.18	%	16.38	%	15.77	%
Total net revenue margin	14.40		18.31		14.42
Net charge-off rate	5.49		5.52		7.02
30+ day delinquency rate	4.84		5.14		5.30
Purchase volume⁽⁸⁾	$ 3,421		$ 3,081		$ 3,156

CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 9: Financial & Statistical Summary—Consumer Banking Business

		2012		2012		2011
(Dollars in millions) (unaudited)		Q2⁽³⁾		Q1⁽³⁾		Q2
Consumer Banking
Earnings:
	Net interest income	$ 1,496		$ 1,288		$ 1,051
	Non-interest income	185		176		194
	Total net revenue	1,681		1,464		1,245
	Provision for credit losses	44		174		41
	Non-interest expense	959		943		758
	Income from continuing operations before taxes	678		347		446
	Income tax provision	240		123		159
	Income from continuing operations, net of tax	$ 438		$ 224		$ 287

Selected performance metrics:
	Period-end loans held for investment	$ 77,615		$ 77,300		$ 34,592
	Average loans held for investment	77,606		56,263		34,441
	Average yield on loans held for investment	6.17	%	7.20	%	9.51	%
	Auto loan originations	$ 4,306		$ 4,270		$ 2,910
	Period-end deposits	173,966		176,007		87,282
	Average deposits	174,416		129,915		86,926
	Deposit interest expense rate	0.70	%	0.73	%	1.00	%
	Core deposit intangible amortization	$ 42		$ 37		$ 34
	Net charge-off rate⁽⁷⁾	0.48	%	0.77	%	1.01	%
	30+ day performing delinquency rate⁽⁷⁾	1.82		1.63		3.70
	30+ day delinquency rate⁽⁷⁾⁽⁹⁾	**		2.25		5.26
	Nonperforming loan rate⁽⁵⁾⁽⁷⁾	0.79		0.77		1.83
	Nonperforming asset rate⁽⁵⁾⁽⁷⁾	0.83		0.82		2.00
	Period-end loans serviced for others	$ 16,108		$ 17,586		$ 19,226

CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 10: Financial & Statistical Summary—Commercial Banking Business

		2012		2012		2011
(Dollars in millions) (unaudited)		Q2⁽³⁾		Q1⁽³⁾		Q2
Commercial Banking^(4)(11)
Earnings:
	Net interest income	$ 427		$ 431		$ 388
	Non-interest income	82		85		62
	Total net revenue	509		516		450
	Provision for credit losses	(94)		(69)		(19)
	Non-interest expense	251		261		222
	Income from continuing operations before taxes	352		324		247
	Income tax provision	124		114		88
	Income from continuing operations, net of tax	$ 228		$ 210		$ 159

Selected performance metrics:
	Period-end loans held for investment	$ 36,056		$ 34,906		$ 31,471
	Average loans held for investment	35,227		34,032		30,578
	Average yield on loans held for investment	4.27	%	4.47	%	4.75	%
	Period-end deposits	$ 27,784		$ 28,046		$ 24,409
	Average deposits	27,943		27,569		24,371
	Deposit interest expense rate	0.33	%	0.37	%	0.52	%
	Core deposit intangible amortization	$ 9		$ 9		$ 10
	Net charge-off rate⁽⁵⁾	0.19	%	0.19	%	0.50	%
	Nonperforming loan rate⁽⁵⁾⁽⁷⁾	0.99		1.15		1.53
	Nonperforming asset rate ⁽⁵⁾⁽⁷⁾	1.04		1.23		1.64

Risk category:⁽¹⁰⁾
	Noncriticized	$ 33,746		$ 32,339		$ 28,723
	Criticized performing	1,524		1,695		1,769
	Criticized nonperforming	356		402		481
	Total risk-rated loans	35,626		34,436		30,973
	Acquired commercial loans	430		470		498
	Total commercial loans	$ 36,056		$ 34,906		$ 31,471

	% of period-end held for investment commercial loans:
	Noncriticized	93.6	%	92.6	%	91.2	%
	Criticized performing	4.2		4.9		5.7
	Criticized nonperforming	1.0		1.2		1.5
	Total risk-rated loans	98.8		98.7		98.4
	Acquired commercial loans	1.2		1.3		1.6
	Total commercial loans	100.0	%	100.0	%	100.0	%

CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 11: Financial & Statistical Summary—Other and Total

		2012	2012	2011
(Dollars in millions) (unaudited)		Q2⁽²⁾⁽³⁾	Q1⁽³⁾	Q2
Other ⁽⁴⁾
Earnings:
	Net interest expense	$ (272)	$ (297)	$ (193)
	Non-interest income (loss)	16	662	(18)
	Total net revenue	(256)	365	(211)
	Provision for credit losses	16	10	12
	Non-interest expense	69	32	37
	Income (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	$ 197
	Average loans held for investment	137	173	206
	Period-end deposits	12,181	12,475	14,426
	Average deposits	12,555	12,775	14,537

Total
Earnings:
	Net interest income	$ 4,001	$ 3,414	$ 3,136
	Non-interest income	1,054	1,521	857
	Total net revenue	5,055	4,935	3,993
	Provision credit losses	1,677	573	343
	Non-interest expense	3,142	2,504	2,255
	Income from continuing operations before taxes	236	1,858	1,395
	Income tax provision	43	353	450
	Income from continuing operations, net of tax	$ 193	$ 1,505	$ 945

Selected performance metrics:
	Period-end loans held for investment	$ 202,749	$ 173,822	$ 128,965
	Average loans held for investment	192,632	152,900	127,916
	Period-end deposits	213,931	216,528	126,117
	Average deposits	214,914	170,259	125,834

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⁾

⁽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)

2012Q2

2012Q1

2011Q2

Acquired loans accounted for under SOP 03-3:

Period-end unpaid principal balance

$ 43,333

$ 44,798

$ 6,356

Period-end carrying value

41,673

43,131

5,181

Average carrying value

42,182

23,067

5,112

⁽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 Measures

In addition to disclosing required regulatory capital measures, we also report certain non-GAAP capital measures that management uses in assessing its capital adequacy. These non-GAAP measures include average tangible common equity, tangible common equity (“TCE”) and TCE ratio. The table below provides the details of the calculation of our regulatory capital and non-GAAP capital measures. While our non-GAAP capital measures are widely used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies, they may not be comparable to similarly titled measures reported by other companies.

(Dollars in millions)(unaudited)		2012 Q2		2012 Q1		2011 Q2
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders’ equity		$ 37,533		$ 32,982		$ 28,255
Less: Average intangible assets⁽¹⁾		(15,689)		(13,931)		(14,025)
Average tangible common equity		$ 21,844		$ 19,051		$ 14,230

Stockholders’ Equity to Non-GAAP Tangible Common Equity
Total stockholders’ equity		$ 37,192		$ 36,950		$ 28,681
Less: Intangible assets⁽¹⁾		(16,477)		(14,110)		(14,006)
Tangible common equity		$ 20,715		$ 22,840		$ 14,675

Total Assets to Tangible Assets
Total assets		$ 296,572		$ 294,481		$ 199,753
Less: Assets from discontinued operations		(310)		(304)		(32)
Total assets from continuing operations		296,262		294,177		199,721
Less: Intangible assets⁽¹⁾		(16,477)		(14,110)		(14,006)
Tangible assets		$ 279,785		$ 280,067		$ 185,715

Non-GAAP TCE Ratio
Tangible common equity		$ 20,715		$ 22,840		$ 14,675
Tangible assets		279,785		280,067		185,715
TCE ratio⁽²⁾		7.4	%	8.2	%	7.9	%

Regulatory Capital Ratios⁽³⁾
Total stockholders’ equity		$ 37,192		$ 36,950		$ 28,681
Less: 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⁾	34		70		71
	Disallowed 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 capital		21,480		21,731		13,667
Plus: Tier 1 restricted core capital items⁽⁵⁾		3,636		3,636		3,636
Tier 1 capital		25,116		25,367		17,303
Plus: Long-term debt qualifying as Tier 2 capital		2,318		2,438		2,727
	Qualifying allowance for loan and lease losses	2,738		2,314		1,864
	Other Tier 2 components	15		17		28
Tier 2 capital		5,071		4,769		4,619
Total risk-based capital⁽⁶⁾		$ 30,187		$ 30,136		$ 21,922

Risk-weighted assets⁽⁷⁾		$ 216,218		$ 182,704		$ 146,201

Tier 1 common ratio⁽⁸⁾		9.9	%	11.9	%	9.4	%
Tier 1 risk-based capital ratio⁽⁹⁾		11.6		13.9		11.8
Total risk-based capital ratio⁽¹⁰⁾		14.0		16.5		15.0
___________________

⁽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 Corporation

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