CAPITAL ONE FINANCIAL CORP Quarterly Report for Q3 Ended Sep 30, 2009

Summary

Capital One Financial Corporation (COF) reported its third quarter 2009 results, demonstrating resilience amidst a challenging economic environment. The company saw an increase in net income to $425.6 million, or $0.94 per diluted share, driven by improved net interest income and a strategic reduction in non-interest expenses, particularly marketing. The acquisition of Chevy Chase Bank, completed in February 2009, is being integrated and contributing to the company's deposit base and operational scale, with goodwill recognized at $1.6 billion. Despite an increase in the provision for loan and lease losses due to continued economic deterioration and rising charge-offs, especially in the commercial segment, Capital One maintained a solid capital position, exceeding regulatory requirements and remaining well-capitalized across all segments. Key financial highlights include a reported net interest income increase of 13.5% year-over-year, driven by higher average deposit balances and lower interest expense, though net interest margin saw a slight decrease year-to-date. Non-interest income declined, largely due to lower servicing and securitization income stemming from unfavorable fair value adjustments on retained interests and higher charge-offs in the securitized portfolio. The company continues to navigate the economic downturn by focusing on core deposit gathering, managing credit risk, and optimizing its operational structure, which is reflected in the positive income from continuing operations and a strong regulatory capital position.

Key Highlights

• 1Net income increased to $425.6 million ($0.94 per diluted share) for Q3 2009, up from $374.1 million ($1.00 per diluted share) in Q3 2008.
• 2Income from continuing operations increased by 21.6% to $469.2 million.
• 3The company acquired Chevy Chase Bank for $475.9 million, adding $1.6 billion in preliminary goodwill and strengthening its deposit funding base.
• 4Reported net interest income increased by 13.5% to $2.05 billion, driven by higher deposit volumes and lower funding costs.
• 5Provision for loan and lease losses increased by 7.2% to $1.17 billion, reflecting the ongoing economic recession and increased charge-offs.
• 6Capital One maintained strong capital ratios, exceeding regulatory requirements and remaining 'well-capitalized' across all segments.
• 7Managed loans held for investment decreased by 4.3% year-over-year, reflecting strategic exits and the impact of higher charge-offs.

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