Statement Of Financial Position
Statement Of Financial Position Unclassified - Deposit Based Operations (USD $) | ||
In Thousands | Sep. 30, 2009
| Dec. 31, 2008
|
Assets: | ||
Cash and due from banks | $2,719,100 | $2,047,839 |
Federal funds sold and resale agreements | 544,793 | 636,752 |
Interest-bearing deposits at other banks | 863,310 | 4,806,752 |
Cash and cash equivalents | 4,127,203 | 7,491,343 |
Securities available for sale | 37,693,001 | 31,003,271 |
Securities held to maturity | 83,608 | 0 |
Mortgage loans held for sale | 141,158 | 68,462 |
Loans held for investment | 96,783,165 | 101,017,771 |
Less: Allowance for loan and lease losses | (4,513,493) | (4,523,960) |
Net loans held for investment | 92,269,672 | 96,493,811 |
Accounts receivable from securitizations | 6,985,200 | 6,342,754 |
Premises and equipment, net | 2,773,173 | 2,313,106 |
Interest receivable | 947,738 | 827,909 |
Goodwill | 13,524,978 | 11,964,487 |
Other | 9,958,190 | 9,408,309 |
Total assets | 168,503,921 | 165,913,452 |
Liabilities: | ||
Non-interest-bearing deposits | 12,734,589 | 11,293,852 |
Interest-bearing deposits | 101,768,522 | 97,326,937 |
Total deposits | 114,503,111 | 108,620,789 |
Senior and subordinated notes | 9,208,769 | 8,308,843 |
Other borrowings | 12,126,181 | 14,869,648 |
Interest payable | 582,969 | 676,398 |
Other | 5,860,739 | 6,825,341 |
Total liabilities | 142,281,769 | 139,301,019 |
Stockholders' Equity: | ||
Preferred stock, par value $.01 per share; authorized 50,000,000 shares, zero and 3,555,199 issued or outstanding as of September 30, 2009 and December 31, 2008, respectively | 0 | 3,096,466 |
Common stock, par value $.01 per share; authorized 1,000,000,000 shares, 502,097,580 and 438,434,235 issued as of September 30, 2009 and December 31, 2008, respectively | 5,021 | 4,384 |
Paid-in capital, net | 18,928,719 | 17,278,102 |
Retained earnings | 10,404,255 | 10,621,164 |
Cumulative other comprehensive income (loss) | 56,524 | (1,221,796) |
Less: Treasury stock, at cost; 47,014,878 and 46,637,241 shares as of September 30, 2009 and December 31, 2008, respectively | (3,172,367) | (3,165,887) |
Total stockholders' equity | 26,222,152 | 26,612,433 |
Total liabilities and stockholders' equity | $168,503,921 | $165,913,452 |
1_Statement Of Financial Positi
Statement Of Financial Position Unclassified - Deposit Based Operations (Parenthetical) (USD $) | ||
Sep. 30, 2009
| Dec. 31, 2008
| |
Preferred stock, par value | 0.01 | 0.01 |
Preferred stock, authorized | 50,000,000 | 50,000,000 |
Preferred stock, issued | 0 | 3,555,199 |
Preferred stock, outstanding | 0 | 3,555,199 |
Common stock, par value | 0.01 | 0.01 |
Common stock, authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, issued | 502,097,580 | 438,434,235 |
Treasury stock, shares | 47,014,878 | 46,637,241 |
Statement Of Income Interest Ba
Statement Of Income Interest Based Revenue (USD $) | |||||||||||||||||||
In Thousands, except Per Share data | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 | |||||||||||||||
Interest Income: | |||||||||||||||||||
Loans held for investment, including past-due fees | $2,265,720 | $2,347,480 | $6,689,859 | $7,153,582 | |||||||||||||||
Investment securities | 398,835 | 317,268 | 1,206,460 | 856,093 | |||||||||||||||
Other | 83,195 | 107,048 | 214,294 | 333,503 | |||||||||||||||
Total interest income | 2,747,750 | 2,771,796 | 8,110,613 | 8,343,178 | |||||||||||||||
Interest Expense: | |||||||||||||||||||
Deposits | 479,178 | 624,319 | 1,666,605 | 1,827,284 | |||||||||||||||
Senior and subordinated notes | 74,032 | 96,568 | 189,189 | 352,335 | |||||||||||||||
Other borrowings | 143,860 | 244,264 | 470,802 | 817,241 | |||||||||||||||
Total interest expense | 697,070 | 965,151 | 2,326,596 | 2,996,860 | |||||||||||||||
Net interest income | 2,050,680 | 1,806,645 | 5,784,017 | 5,346,318 | |||||||||||||||
Provision for loan and lease losses | 1,173,165 | 1,093,917 | 3,386,340 | 3,002,119 | |||||||||||||||
Net interest income after provision for loan and lease losses | 877,515 | 712,728 | 2,397,677 | 2,344,199 | |||||||||||||||
Non-Interest Income: | |||||||||||||||||||
Servicing and securitizations | 720,698 | 875,718 | 1,536,751 | 2,793,520 | |||||||||||||||
Service charges and other customer-related fees | 496,404 | 576,762 | 1,494,292 | 1,675,032 | |||||||||||||||
Mortgage servicing and other | 8,656 | 39,183 | 45,199 | 90,990 | |||||||||||||||
Interchange | 122,585 | 148,076 | 389,378 | 432,708 | |||||||||||||||
Net impairment losses recognized in earnings | (11,173) | [1] | 0 | [1] | (21,567) | [1] | 0 | [1] | |||||||||||
Other | 215,210 | 57,152 | 430,348 | 383,435 | |||||||||||||||
Total non-interest income | 1,552,380 | 1,696,891 | 3,874,401 | 5,375,685 | |||||||||||||||
Non-Interest Expense: | |||||||||||||||||||
Salaries and associate benefits | 648,180 | 571,686 | 1,836,430 | 1,761,538 | |||||||||||||||
Marketing | 103,698 | 267,372 | 400,380 | 853,265 | |||||||||||||||
Communications and data processing | 175,575 | 176,720 | 569,257 | 559,065 | |||||||||||||||
Supplies and equipment | 122,777 | 126,781 | 370,160 | 389,649 | |||||||||||||||
Occupancy | 113,913 | 96,483 | 329,049 | 264,700 | |||||||||||||||
Restructuring expense | 26,357 | 15,306 | 87,358 | 81,625 | |||||||||||||||
Other | 611,978 | 555,858 | 1,876,692 | 1,542,242 | |||||||||||||||
Total non-interest expense | 1,802,478 | 1,810,206 | 5,469,326 | 5,452,084 | |||||||||||||||
Income from continuing operations before income taxes | 627,417 | 599,413 | 802,752 | 2,267,800 | |||||||||||||||
Income tax provision | 158,191 | 213,624 | 190,246 | 786,958 | |||||||||||||||
Income from continuing operations, net of tax | 469,226 | 385,789 | 612,506 | 1,480,842 | |||||||||||||||
Loss from discontinued operations, net of tax | (43,587) | (11,650) | (74,543) | (105,294) | |||||||||||||||
Net Income | 425,639 | 374,139 | 537,963 | 1,375,548 | |||||||||||||||
Net income (loss) available to common shareholders | $425,639 | $374,139 | ($25,945) | $1,375,548 | |||||||||||||||
Basic earnings per common share: | |||||||||||||||||||
Income from continuing operations | 1.04 | 1.03 | 0.12 | 3.98 | |||||||||||||||
Loss from discontinued operations | -0.09 | -0.03 | -0.18 | -0.28 | |||||||||||||||
Net income (loss) | 0.95 | $1 | -0.06 | 3.7 | |||||||||||||||
Diluted earnings per common share: | |||||||||||||||||||
Income (loss) from continuing operations | 1.03 | 1.03 | 0.12 | 3.96 | |||||||||||||||
Loss from discontinued operations | -0.09 | -0.03 | -0.18 | -0.28 | |||||||||||||||
Net income (loss) | 0.94 | $1 | -0.06 | 3.68 | |||||||||||||||
Dividends paid per common share | 0.05 | 0.375 | 0.475 | 1.125 | |||||||||||||||
[1]For the three and nine months ended September 30, 2009, the Company recorded other-than-temporary impairment losses of $11.2 million and $21.6 million, respectively. Total unrealized losses on these securities recognized in other comprehensive income as a component of stockholders' equity at September 30, 2009 was $158.8 million. |
Statement Of Shareholders Equit
Statement Of Shareholders Equity And Other Comprehensive Income (USD $) | ||||||||
In Thousands, except Share data | Common Stock Amount
| Preferred Stock
| Paid-In Capital, Net
| Retained Earnings
| Cumulative Other Comprehensive Income (Loss)
| Treasury Stock
| Total
| |
Beginning Balance at Dec. 31, 2007 | $4,192 | $0 | $15,860,490 | $11,267,568 | $315,248 | ($3,153,386) | $24,294,112 | |
Beginning Balance at Dec. 31, 2007 | 419,224,900 | |||||||
Adjustment to initially apply the measurement date provision for post retirement benefits of ASC 715-20 of the Codification, net of income tax benefit of $317 | 572 | (1,161) | (589) | |||||
Comprehensive income: | ||||||||
Net income | 1,375,548 | 1,375,548 | ||||||
Other comprehensive income (loss), net of income tax: | ||||||||
Unrealized gain/(losses) on securities, net of income taxes of $544,333 in 2009 and income tax benefit of $144,858 in 2008 | (269,022) | (269,022) | ||||||
Defined benefit pension plans, net of income tax benefit of $1,641 in 2009 and $2,089 in 2008 | (4,032) | (4,032) | ||||||
Foreign currency translation adjustments | (253,790) | (253,790) | ||||||
Unrealized gains/(loss) on cash flow hedging instruments, net of income taxes of $51,792 in 2009 and income tax benefit of $5,964 in 2008 | 11,077 | 11,077 | ||||||
Other comprehensive income (loss) | (515,767) | (515,767) | ||||||
Cash dividends-Common stock $0.475 in 2009 and $1.125 in 2008 per share | (421,518) | (421,518) | ||||||
Purchase of treasury stock | (12,025) | (12,025) | ||||||
Issuances of common stock and restricted stock, net of forfeitures | 17,170,062 | |||||||
Issuances of common stock and restricted stock, net of forfeitures | 172 | 758,602 | 758,774 | |||||
Exercise of stock options and tax benefits of exercises and restricted stock vesting | 1,910,252 | |||||||
Exercise of stock options and tax benefits of exercises and restricted stock vesting | 19 | 60,699 | 60,718 | |||||
Compensation expense for restricted stock awards and stock options | 67,576 | 67,576 | ||||||
Allocation of ESOP shares | 4,711 | 4,711 | ||||||
Ending Balance at Sep. 30, 2008 | 438,305,214 | |||||||
Ending Balance at Sep. 30, 2008 | 4,383 | 0 | 16,752,078 | 12,222,170 | (201,680) | (3,165,411) | 25,611,540 | |
Beginning Balance at Jun. 30, 2008 | 0 | |||||||
Other comprehensive income (loss), net of income tax: | ||||||||
Ending Balance at Sep. 30, 2008 | 0 | |||||||
Beginning Balance at Dec. 31, 2008 | 4,384 | 3,096,466 | 17,278,102 | 10,621,164 | (1,221,796) | (3,165,887) | 26,612,433 | |
Beginning Balance at Dec. 31, 2008 | 438,434,235 | |||||||
Comprehensive income: | ||||||||
Net income | 537,963 | 537,963 | ||||||
Other comprehensive income (loss), net of income tax: | ||||||||
Unrealized gain/(losses) on securities, net of income taxes of $544,333 in 2009 and income tax benefit of $144,858 in 2008 | 1,026,279 | 1,026,279 | ||||||
Defined benefit pension plans, net of income tax benefit of $1,641 in 2009 and $2,089 in 2008 | (2,944) | (2,944) | ||||||
Foreign currency translation adjustments | 177,489 | 177,489 | ||||||
Unrealized gains/(loss) on cash flow hedging instruments, net of income taxes of $51,792 in 2009 and income tax benefit of $5,964 in 2008 | 77,496 | 77,496 | ||||||
Other comprehensive income (loss) | 1,278,320 | 1,278,320 | ||||||
Cash dividends-Common stock $0.475 in 2009 and $1.125 in 2008 per share | (190,964) | (190,964) | ||||||
Cash dividends-Preferred stock 5% per annum | (22,714) | (82,461) | (105,175) | |||||
Purchase of treasury stock | (6,480) | (6,480) | ||||||
Issuances of common stock and restricted stock, net of forfeitures | 61,009,827 | |||||||
Issuances of common stock and restricted stock, net of forfeitures | 610 | 1,528,688 | 1,529,298 | |||||
Exercise of stock options and tax benefits of exercises and restricted stock vesting | 92,917 | |||||||
Exercise of stock options and tax benefits of exercises and restricted stock vesting | 1 | 894 | 895 | |||||
Accretion of preferred stock discount | 33,554 | (33,554) | 0 | |||||
Redemption of preferred stock | (3,107,306) | (447,893) | (3,555,199) | |||||
Compensation expense for restricted stock awards and stock options | 88,972 | 88,972 | ||||||
Issuance of common stock for acquisition | 2,560,601 | |||||||
Issuance of common stock for acquisition | 26 | 30,830 | 30,856 | |||||
Allocation of ESOP shares | 1,233 | 1,233 | ||||||
Ending Balance at Sep. 30, 2009 | 502,097,580 | |||||||
Ending Balance at Sep. 30, 2009 | $5,021 | $0 | $18,928,719 | $10,404,255 | $56,524 | ($3,172,367) | $26,222,152 |
2_Statement Of Shareholders Equ
Statement Of Shareholders Equity And Other Comprehensive Income (Parenthetical) (USD $) | ||
In Thousands | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Adjustment to initially apply the measurement date provision for post retirement benefits of ASC 715-20 of the Codification, income tax benefit | $317 | |
Unrealized gains on securities, income taxes | 544,333 | 144,858 |
Defined benefit pension plans, income tax benefit | 1,641 | 2,089 |
Unrealized gains in cash flow hedging instruments, income taxes | $51,792 | $5,964 |
Cash dividends, per share | 0.475 | 1.125 |
Cash dividends-Preferred stock, percent per annum | 5% |
Statement Of Cash Flows Indirec
Statement Of Cash Flows Indirect Deposit Based Operations (USD $) | ||
In Thousands | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Operating Activities: | ||
Income from continuing operations, net of tax | $612,506 | $1,480,842 |
Loss from discontinued operations, net of tax | (74,543) | (105,294) |
Net Income | 537,963 | 1,375,548 |
Adjustments to reconcile net income to cash provided by operating activities: | ||
Provision for loan and lease losses | 3,386,340 | 3,002,119 |
Depreciation and amortization, net | 585,874 | 536,436 |
Gain on sales of securities available for sale | (217,044) | (13,713) |
Gain on sales of auto loans | 0 | (2,428) |
Gain on repurchase of senior notes | 0 | (53,860) |
Mortgage loans held for sale: | ||
Transfers and originations | (6,765,798) | (1,639,636) |
Loss (Gain) on sales | 399 | (26,062) |
Proceeds from sales | 6,924,248 | 1,864,311 |
Stock plan compensation expense | 102,036 | 81,239 |
Changes in assets and liabilities: | ||
(Increase) Decrease in interest receivable | (119,829) | 88,600 |
Increase in accounts receivable from securitizations | (642,446) | (262,944) |
Decrease (Increase) in other assets | 1,105,795 | (960,113) |
Decreases in interest payable | (93,429) | (123,518) |
(Decreases) Increase in other liabilities | (1,712,839) | 85,499 |
Net cash used in operating activities attributable to discontinued operations | 39,984 | 129,659 |
Net cash provided by operating activities | 3,131,254 | 4,081,137 |
Investing Activities: | ||
Purchases of securities available for sale | (22,368,668) | (15,266,177) |
Proceeds from maturities of securities available for sale | 7,710,694 | 5,189,006 |
Proceeds from sales of securities available for sale | 10,977,685 | 2,504,289 |
Proceeds from securitizations of loans | 8,816,378 | 8,446,956 |
Net (increase) decrease in loans held for investment | 375,936 | (7,649,922) |
Principal recoveries of loans previously charged off | 592,514 | 501,970 |
Additions of premises and equipment, net | (213,799) | (270,064) |
Net payment for companies acquired | (448,151) | 0 |
Net cash provided by investing activities attributable to discontinued operations | 451 | 11,659 |
Net cash provided by (used in) investing activities | 5,443,040 | (6,532,283) |
Financing Activities: | ||
Net (decrease) increase in deposits | (7,674,317) | 16,151,798 |
Net decreases in other borrowings | (4,748,368) | (10,834,872) |
Maturities of senior notes | (1,447,365) | (1,318,694) |
Repurchases of senior notes | 0 | (1,120,724) |
Redemptions of acquired company debt and noncontrolling interest | (464,915) | 0 |
Issuance of junior subordinated notes | 1,000,000 | 0 |
Issuance of senior notes | 1,000,000 | 0 |
Issuance of subordinated notes | 1,500,000 | 0 |
Redemption of preferred stock | (3,555,199) | 0 |
Purchases of treasury stock | (6,480) | (12,025) |
Dividends paid-common stock | (190,964) | (421,518) |
Dividends paid-preferred stock | (105,175) | 0 |
Net proceeds from issuances of common stock | 1,530,531 | 763,485 |
Proceeds from share based payment activities | 895 | 60,718 |
Net cash used in financing activities attributable to discontinued operations | (3,394) | (17,690) |
Net cash (used in) provided by financing activities | (13,164,751) | 3,250,478 |
Net (decrease) increase in cash and cash equivalents | (4,590,457) | 799,332 |
Cash and cash equivalents at beginning of year | 7,491,343 | 4,821,409 |
Cash and cash equivalents of acquired companies | 1,226,317 | 0 |
Cash and cash equivalents at end of period | $4,127,203 | $5,620,741 |
Note 1 Significant Accounting P
Note 1 Significant Accounting Policies | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 1 Significant Accounting Policies | Note 1 Significant Accounting Policies Business Capital One Financial Corporation (the Corporation) is a diversified financial services company whose banking and non-banking subsidiaries market a variety of financial products and services. The Corporations principal subsidiaries are: Capital One Bank (USA), National Association (COBNA) which currently offers credit and debit card products, other lending products and deposit products. Capital One, National Association (CONA) which offers a broad spectrum of banking products and financial services to consumers, small businesses and commercial clients. On February27, 2009, the Corporation acquired Chevy Chase Bank, F.S.B. (Chevy Chase Bank) for $475.9 million comprised of cash of $445.0 million and 2.56million shares of common stock valued at $30.9 million. Chevy Chase Bank has the largest retail branch presence in the Washington D.C. region. See Note 2 for more information regarding the acquisition. On July30, 2009 the Company merged Chevy Chase Bank with and into CONA. During the third quarter of 2009, the Company realigned its business segment reporting structure to better reflect the manner in which the performance of the Companys operations are evaluated. The Company now reports the results of its business through three operating segments: Credit Card, Commercial Banking and Consumer Banking. Segment and sub-segment results where presented have been recast for all periods presented. The three segments consist of the following: Credit Card includes the Companys domestic consumer and small business card lending, domestic national small business lending, national closed end installment lending and the international card lending businesses in Canada and the United Kingdom. Commercial Banking includes the Companys lending, deposit gathering and treasury management services to commercial real estate and middle market customers. The Commercial segment also includes the financial results of a national portfolio of small ticket commercial real estate loans that are in run-off mode. Consumer Banking includes the Companys branch based lending and deposit gathering activities for small business customers as well as its branch based consumer deposit gathering and lending activities, national deposit gathering, consumer mortgage lending and servicing activities and national automobile lending. The segment reorganization includes the allocation of Chevy Chase Bank to the appropriate segments. Chevy Chase Banks operations are included in the Commercial Banking and Consumer Banking segments beginning in the second quarter 2009. Chevy Chase Banks operations for the first quarter of 2009 remain in the Other category due to the short duration since acquisition. The Other category includes GreenPoint originated consumer mortgages originated for sale but held for investment since originations were suspended in 2007, the results of corporate treasury activities, including asset-liability management and the investment portfolio, the net impact of transfer pricing, brokered deposits, certain unallocated expenses, gains/losses related to |
Note 2 Acquisitions
Note 2 Acquisitions | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 2 Acquisitions | Note 2 Acquisitions Chevy Chase Bank On February27, 2009, the Company acquired all of the outstanding common stock of Chevy Chase Bank in exchange for Capital One common stock and cash with a total value of $475.9 million. Under the terms of the stock purchase agreement, Chevy Chase Bank common shareholders received $445.0 million in cash and 2.56million shares of Capital One common stock. In addition, to the extent that losses on certain of Chevy Chase Banks mortgage loans are less than the level reflected in the net credit mark estimated at the time the deal was signed, the Company will share a portion of the benefit with the former Chevy Chase Bank common shareholders (the earn-out). The maximum payment under the earn-out is $300.0 million and would occur after December31, 2013. As of September30, 2009, the Company has not recognized a liability nor does it expect to make any payments associated with the earn-out based on our expectations for credit losses on the portfolio. Subsequent to the closing of the acquisition all of the outstanding shares of preferred stock of Chevy Chase Bank and the subordinated debt of its wholly-owned REIT subsidiary, were redeemed. This acquisition improves the Companys core deposit funding base, increases readily available and committed liquidity, adds additional scale in bank operations, and brings a strong customer base in an attractive banking market. Chevy Chase Banks results of operations are included in the Companys results after the acquisition date of February27, 2009. The Chevy Chase Bank acquisition is being accounted for under the acquisition method of accounting. Accordingly, the purchase price was allocated to the acquired assets and liabilities based on their estimated fair values at the Chevy Chase Bank acquisition date, as summarized in the following table. Preliminary goodwill of $1.6 billion is calculated as the purchase premium after adjusting for the fair value of net assets acquired and represents the value expected from the synergies created through the scale, operational and product enhancement benefits that will result from combining the operations of the two companies. During the third quarter of 2009, the Company continued the analysis of the fair values and purchase price allocation of Chevy Chase Banks assets and liabilities. The Company recorded an increase to goodwill of $146.9 million as a result. The change was predominantly related to a reduction in the fair value of net loans. The Company has not finalized the analysis and still considers goodwill to be preliminary, except as it relates to deposits and borrowings. Upon completion of the analysis, the Company expects to recast previously presented information as if all adjustments to the purchase price allocation had occurred at the date of acquisition. The Company has not recast previously presented information as adjustments to the initial purchase price allocation made during the second and third quarters of 2009 have not been considered material. The fair value of the non-controlling interest was calculated based on the redemption price of the interests, as well as any accrued but unpaid dividends. The shares o |
Note 3 Loans Acquired in a Tran
Note 3 Loans Acquired in a Transfer | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 3 Loans Acquired in a Transfer | Note 3 Loans Acquired in a Transfer The Companys acquired loans from the Chevy Chase Bank acquisition, subject to ASC 805-10/SFAS 141(R), are recorded at fair value and no separate valuation allowance is recorded at the date of acquisition. The Company is required to review each loan at acquisition to determine if it should be accounted for under ASC 310-10/SOP03-3 and if so, determines whether each such loan is to be accounted for individually or whether such loans will be aggregated into pools of loans based on common risk characteristics. The Company has performed its analysis of the loans to be accounted for as impaired under ASC 310-10/SOP03-3 (Impaired Loans in the tables below). The loans acquired with the Chevy Chase Bank acquisition not accounted for under ASC 310-10/SOP03-3 have been accounted for under ASC 805-10/SFAS 141(R) (Non-Impaired Loans in the tables below) and are considered performing. The accounting treatment is essentially the same under both standards. The disclosure requirements under ASC 310-10/SOP03-3 are more extensive, though the Company has elected to provide such disclosures for all of the acquired Chevy Chase Bank loans. During the evaluation of whether a loan was considered impaired under ASC 310-10/SOP03-3 or performing under ASC 805-10/SFAS 141(R), the Company considered a number of factors, including the delinquency status of the loan, payment options and other loan features (i.e. reduced documentation, interest only, or negative amortization features), the geographic location of the borrower or collateral and the risk rating assigned to the loans. Based on the criteria, the Company considered the entire Chevy Chase Bank option arm, hybrid arm and construction to permanent portfolios to be impaired and accounted for under ASC 310-10/SOP03-3. Portions of the Chevy Chase Bank commercial loan, auto, HELOC and other consumer loan portfolios and the fixed mortgage portfolio were also considered impaired. The Company makes an estimate of the total cash flows it expects to collect from the loans (or pools of loans), which includes undiscounted expected principal and interest. The excess of that amount over the fair value of the loans is referred to as accretable yield. Accretable yield is recognized as interest income on a constant yield basis over the life of the loans. The Company also determines the loans contractual principal and contractual interest payments. The excess of that amount over the total cash flows it expects to collect from the loans is referred to as nonaccretable difference, which is not accreted into income. Judgmental prepayment assumptions are applied to both contractually required payments and cash flows expected to be collected at acquisition. The Company continues to estimate cash flows expected to be collected over the life of the loans. Subsequent increases in total cash flows it expects to collect are recognized as an adjustment to the accretable yield with the amount of periodic accretion adjusted over the remaining life of the loans. Subsequent decreases in cash flows expected to be collected over the life of the loans are recognized as impairment in the current period throu |
Note 4 Discontinued Operations
Note 4 Discontinued Operations | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 4 Discontinued Operations | Note 4 Discontinued Operations Shutdown of Mortgage Origination Operations of Wholesale Mortgage Banking Unit In the third quarter of 2007, the Company shut down the mortgage origination operations of its wholesale mortgage banking unit, GreenPoint Mortgage (GreenPoint). GreenPoint was acquired by the Company in December 2006 as part of the North Fork acquisition. The results of the mortgage origination operations of GreenPoint have been accounted for as a discontinued operation and have been removed from the Companys results from continuing operations for the three and nine months ended September30, 2009 and 2008. The Company will have no significant continuing involvement in the operations of the originate and sell business of GreenPoint. The loss from discontinued operations for the three and nine months ended September30, 2009 includes an expense of $83.0 million and $109.0 million, respectively, recorded in non-interest expense, for representations and warranties provided by the Company on loans previously sold to third parties by GreenPoints mortgage origination operation. The expense for representations and warranties is offset by a valuation adjustment for expected returns of spread account funding for certain securitization transactions. The following is summarized financial information for discontinued operations related to the closure of the Companys wholesale mortgage banking unit: ThreeMonthsEnded September 30 NineMonthsEnded September 30 2009 2008 2009 2008 Net interest income $ $ 1,612 $ 776 $ 5,332 Non-interest income 2,150 2,287 2,275 5,517 Non-interest expense 69,853 22,125 118,837 175,577 Income tax benefit (24,116 ) (6,576 ) (41,243 ) (59,434 ) Loss from discontinued operations, net of taxes $ (43,587 ) $ (11,650 ) $ (74,543 ) $ (105,294 ) The Companys wholesale mortgage banking unit had assets of approximately $31.5 million as of September30, 2009 consisting of $15.8 million of mortgage loans held for sale and other related assets. The related liabilities consisted of obligations to fund these assets, and obligations for representations and warranties provided by the Company on loans previously sold to third parties. |
Note 5 Segments
Note 5 Segments | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 5 Segments | Note 5 Segments During the third quarter of 2009, the Company realigned its business segment reporting structure to better reflect the manner in which the performance of the Companys operations are evaluated. The Company now reports the results of its business through three operating segments: Credit Card, Commercial Banking and Consumer Banking. Segment and sub-segment results where presented have been recast for all periods presented. The three segments consist of the following: Credit Card includes the Companys domestic consumer and small business card lending, domestic national small business lending, national closed end installment lending and the international card lending businesses in Canada and the United Kingdom. Commercial Banking includes the Companys lending, deposit gathering and treasury management services to commercial real estate and middle market customers. The Commercial segment also includes the financial results of a national portfolio of small ticket commercial real estate loans that are in run-off mode. Consumer Banking includes the Companys branch based lending and deposit gathering activities for small business customers as well as its branch based consumer deposit gathering and lending activities, national deposit gathering, consumer mortgage lending and servicing activities and national automobile lending. The segment reorganization includes the allocation of Chevy Chase Bank to the appropriate segments. Chevy Chase Banks operations are included in the Commercial Banking and Consumer Banking segments beginning in the second quarter 2009. Chevy Chase Banks operations for the first quarter of 2009 remain in the Other category due to the short duration since acquisition. The Other category includes GreenPoint originated consumer mortgages originated for sale but held for investment since originations were suspended in 2007, the results of corporate treasury activities, including asset-liability management and the investment portfolio, the net impact of transfer pricing, brokered deposits, certain unallocated expenses, gains/losses related to the securitization of assets, and restructuring charges related to the Companys cost initiative and Chevy Chase Bank acquisition. The Company maintains its books and records on a legal entity basis for the preparation of financial statements in conformity with GAAP. The following tables present information prepared from the Companys internal management information systems, which is maintained on a line of business level through allocations from the consolidated financial results. ThreeMonthsEnded September30, 2009 Credit Card Commercial Banking Consumer Banking Other Total Managed (Non-GAAP) Securitization Adjustments Total Reported Net interest income $ 2,024,250 $ 297,484 $ 908,744 $ 27,069 $ 3,257,547 $ (1,206,867 ) $ 2,050,680 Non-interest income 966,862 43,299 212,716 149,803 1,372,680 179,700 1,552,380 Provisions for loan and lease losses 1,643,721 375,095 156,052 25,464 |
Note 6 Securities Available for
Note 6 Securities Available for Sale | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 6 Securities Available for Sale | Note 6 Securities Available for Sale Expected maturities aggregated by investment category, gross unrealized gains and gross unrealized losses on securities available-for sale as of September30, 2009 and December31, 2008 were as follows: Expected Maturity Schedule 1Yearor Less 15 Years 510 Years Over 10 Years Market Value Totals Gross Unrealized Gains Gross Unrealized Losses Amortized Cost Totals September30, 2009 U.S.TreasuryandotherU.S. government agency obligations U.S. Treasury $ 30,000 $ 394,301 $ $ $ 424,301 $ 14,096 $ $ 410,205 FNMA 77,914 161,150 239,064 10,645 228,419 FHLMC 214,063 214,063 14,425 199,638 Other GSE and FDIC Debt Guaranteed Program (DGP) 1,073 1,073 77 996 Total U.S. Treasury and other U.S. government agency obligations 107,914 770,587 878,501 39,243 839,258 Collateralized mortgage obligations (CMO) FNMA 51,163 2,493,631 671,825 3,216,619 102,484 (12,912 ) 3,127,047 FHLMC 74,583 1,977,531 696,389 2,748,503 85,969 (10,108 ) 2,672,642 GNMA 7,023 179,671 809,158 995,852 17,428 (88 ) 978,512 Non GSE 50,807 1,144,781 165,746 125,789 1,487,123 (304,221 ) 1,791,344 Total CMO 183,576 5,795,614 2,343,118 125,789 8,448,097 205,881 (327,329 ) 8,569,545 Mortgage backed securities (MBS) FNMA 27,909 3,241,173 4,603,616 103,953 7,976,651 257,054 (1,311 ) 7,720,908 FHLMC 75,087 1,951,156 2,678,215 546 4,705,004 136,690 (11,956 ) 4,580,270 GNMA 48 70,971 7,962,608 8,033,627 115,079 (667 ) 7,919,215 Other GSE 843 843 1 (3 ) 845 Non GSE 141,290 656,028 60,825 858,143 (210,231 ) 1,068,374 Total MBS 103,044 5,405,433 15,900,467 165,324 21,574,268 508,824 (224,168 ) 21,289,612 Expected Maturity Schedule 1 Year or Less 15 Years 510 Years Over 10 Years Market Value Totals Gross Unrealized Gains Gross Unrealized Losses Amortized Cost Totals Asset backed securities 2,324,220 3,844,643 192,097 6,360,960 162,349 (7,070 ) 6,205,681 Other 137,634 133,282 40,613 119,646 431,175 9,922 (3,827 ) 425,080 |
Note 7 Fair Values of Assets an
Note 7 Fair Values of Assets and Liabilities | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 7 Fair Values of Assets and Liabilities | Note 7 Fair Values of Assets and Liabilities ASC 820-10/SFAS157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10/SFAS157 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820-10/SFAS157 also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels. These levels are: Level 1Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1 assets and liabilities include debt and equity securities traded in an active exchange market, as well as U.S. Treasury securities. Level 2Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3Valuation is determined using model-based techniques with significant assumptions not observable in the market. These unobservable assumptions reflect the Companys own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of third party pricing services, option pricing models, discounted cash flow models and similar techniques. ASC 825-10/SFAS 159 allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. The Company has not made any material ASC 825-10/SFAS 159 elections as of the end of the third quarter of 2009. Assets and Liabilities Measured at Fair Value on a Recurring Basis September30, 2009 Fair Value Measurements Using (3) Assets/Liabilities at Fair Value Level 1 Level 2 Level 3 Assets Securities available for sale U.S. Treasury and other U.S. Govt agency 424,301 454,200 878,501 Collateralized mortgage obligations 7,204,977 1,243,120 8,448,097 Mortgage-backed securities 21,007,992 566,276 21,574,268 Asset-backed securities 6,285,960 75,000 6,360,960 Other 70,019 335,909 25,247 431,175 Total securities available for sale $ 494,320 $ 35,289,038 $ 1,909,643 $ 37,693,001 Other assets Mortgage servicing rights 271,518 271,518 Derivative receivables(1) 10,514 877,022 537,137 1,424,673 Retained interests in securitizations 3,871,050 3,871,050 |
Note 8 Goodwill and Other Intan
Note 8 Goodwill and Other Intangible Assets | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 8 Goodwill and Other Intangible Assets | Note 8 Goodwill and Other Intangible Assets During the first quarter of 2009, the Company acquired Chevy Chase Bank, the largest retail branch presence in the Washington, D.C. region, which created $1.6 billion of goodwill. The goodwill associated with the acquisition of Chevy Chase Bank was initially held in the Other category. During the third quarter of 2009, the Company realigned its business segment reporting structure to better reflect the manner in which the performance of the Companys operations are evaluated. The Company now reports the results of its business through three operating segments: Credit Card, Commercial Banking and Consumer Banking. As a result goodwill was reassigned to the new reporting units using a relative fair value allocation approach. As part of the segment reorganization in the third quarter of 2009, discussed below, the goodwill associated with the Chevy Chase Bank acquisition was assigned to the Commercial Banking and Consumer Banking segments. See Note 2 for information regarding the Chevy Chase Bank acquisition. Goodwill impairment is tested at the reporting unit level, which is an operating segment or one level below on an annual basis. The Companys reporting units are Domestic Card, International Card, Auto, Commercial Banking, and Retail Banking, which is comprised of in footprint retail banking and residential mortgage activities. The goodwill impairment analysis is a two-step test. The first step, used to identify potential impairment, involves comparing each reporting units fair value to its carrying value including goodwill. If the fair value of a reporting unit exceeds its carrying value, applicable goodwill is considered not to be impaired. If the carrying value exceeds fair value, there is an indication of impairment and the second step is performed to measure the amount of impairment. The Company has continued to monitor its market capitalization, regulatory actions and assessments, as well as overall economic conditions and other events or circumstances. The following table provides a summary of goodwill. Total Company National Lending Local Banking Credit Card Commercial Consumer Other Total Balance at December31, 2008 $ 5,303,299 $ 6,661,188 $ $ $ $ $ 11,964,487 Additions 1,405,148 1,405,148 Other adjustments (4 ) 146,868 146,864 Foreign currency translation 8,479 8,479 Segment reorganization (5,311,778 ) (6,661,184 ) 4,692,266 4,281,605 4,551,117 (1,552,016 ) Balance at September30, 2009 $ $ $ 4,692,266 $ 4,281,605 $ 4,551,117 $ $ 13,524,978 Credit Card Consumer Banking DomesticCard International Card TotalCredit Card Auto RetailBanking TotalConsumer Banking Balance at December31, 2008 $ $ $ $ $ $ Additions |
Note 9 Deposits and Borrowings
Note 9 Deposits and Borrowings | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 9 Deposits and Borrowings | Note 9 Deposits and Borrowings Borrowings as of September30, 2009 and December31, 2008 were as follows: September30,2009 Outstanding December31,2008 Outstanding Deposits Non-interest bearing deposits $ 12,734,589 $ 11,293,852 Interest-bearing deposits (1) 101,768,522 97,326,937 Total deposits $ 114,503,111 $ 108,620,789 Senior and subordinated notes Bank notes: 5.00% Senior Fixed Notes par value of $417,539 due 2009 $ $ 417,419 5.75% Senior Fixed Notes par value of $516,722 due 2010 516,691 516,621 5.125% Senior Fixed Notes par value of $274,696 due 2014 274,553 274,520 9.25% Subordinated Fixed Notes par value of $150,000 due 2010 155,752 159,851 6.50% Subordinated Fixed Notes par value of $500,000 due 2013 499,333 499,216 8.80% Subordinated Fixed Notes par value of $1,500,000 due 2019 1,499,411 Fair value hedge-related basis adjustments 118,125 55,800 Corporation notes: 5.70% Senior Fixed Notes par value of $854,451 due 2011 854,274 854,135 4.80% Senior Fixed Notes par value of $282,335 due 2012 281,937 281,815 6.25% Senior Fixed Notes par value of $277,665 due 2013 277,015 276,903 7.375% Senior Fixed Notes par value of $1,000,000 due 2014 995,321 5.50% Senior Fixed Notes par value of $375,005 due 2015 374,780 374,745 5.25% Senior Fixed Notes par value of $226,290 due 2017 225,764 225,712 6.75% Senior Fixed Notes par value of $1,341,045 due 2017 1,337,820 1,337,466 5.875% Subordinated Fixed Notes par value of $350,000 due 2012 355,561 356,888 5.35% Subordinated Fixed Notes par value of $100,000 due 2014 98,581 98,379 6.15% Subordinated Fixed Notes par value of $1,000,000 due 2016 997,637 997,365 Floating Rate Senior Notes due 2009(2) 1,029,826 Fair value hedge-related basis adjustments 346,214 552,182 Total senior and subordinated notes $ 9,208,769 $ 8,308,843 Other borrowings Junior subordinated debentures 8.00% Subordinated Fixed Notes par value of $103,093 due 2027 $ 108,815 $ 108,937 8.17% Subordinated Fixed Notes par value of $46,547 due 2028 49,586 49,639 4.5175% Subordinated Floating Notes par value of $10,310 due 2033 10,847 10,851 7.686% Subordinated Fixed Notes par value of $651,000 due 2036 650,962 650,911 6.745% Subordinated Fixed Notes par value of $500,010 due 2037 499,990 499,956 7.50% Subordinated Fixed Notes par value of $346,000 due 2066 346,000 346,000 10.25% Subordinated Fixed Notes par value of $1,000,010 due 2039 988,198 Unamortized Fees (15,353 ) (18,026 ) Total junior subordinated debentures $ 2,639,045 $ 1,648,268 Secured borrowings (5) Fixed, interest rates rang |
Note 10 Shareholders' Equity, C
Note 10 Shareholders' Equity, Comprehensive Income and Earnings Per Common Share | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 10 Shareholders' Equity, Comprehensive Income and Earnings Per Common Share | Note 10 Shareholders Equity, Comprehensive Income and Earnings Per Common Share Comprehensive Income Comprehensive income for the three months ended September30, 2009 and 2008, respectively was as follows: ThreeMonthsEnded September30 2009 2008 Comprehensive Income: Net income $ 425,639 $ 374,139 Other comprehensive income (loss), net of tax 455,303 (328,283 ) Total comprehensive income $ 880,942 $ 45,856 Earnings Per Common Share The following table sets forth the computation of basic and diluted earnings per common share: ThreeMonthsEndedSeptember30 NineMonthsEndedSeptember30 (Shares in Thousands) 2009 2008 2009 2008 Numerator: Income from continuing operations, net of tax $ 469,226 $ 385,789 $ 612,506 $ 1,480,842 Loss from discontinued operations, net of tax (43,587 ) (11,650 ) (74,543 ) (105,294 ) Net income $ 425,639 $ 374,139 $ 537,963 $ 1,375,548 Preferred stock dividends and accretion of discount $ $ $ 563,908 $ Net income (loss) available to common shareholders $ 425,639 $ 374,139 $ (25,945 ) $ 1,375,548 Denominator: Denominator for basic earnings per share-weighted-average shares 449,408 372,928 420,788 372,010 Effect of dilutive securities (1): Stock options 942 328 491 Restricted stock and units 3,376 1,037 909 Dilutive potential common shares 4,318 1,365 1,400 Denominator for diluted earnings per share-adjusted weighted-average shares 453,726 374,293 420,788 373,410 Basic earnings per share Income from continuing operations $ 1.04 $ 1.03 $ 0.12 $ 3.98 Loss from discontinued operations (0.09 ) (0.03 ) (0.18 ) (0.28 ) Net income (loss) $ 0.95 $ 1.00 $ (0.06 ) $ 3.70 Diluted earnings per share Income from continuing operations $ 1.03 $ 1.03 $ 0.12 $ 3.96 Loss from discontinued operations (0.09 ) (0.03 ) (0.18 ) (0.28 ) Net income $ 0.94 $ 1.00 $ (0.06 ) $ 3.68 (1) Antidilutive weighted shares excluded from the computation of diluted earnings per share were 32.4million and 24.4million for the three months ended September30, 2009 and 2008, respectively, and 36.1million and 24.6million for the nine months ended September30, 2009 and 2008, respectively. |
Note 11 Mortgage Servicing Righ
Note 11 Mortgage Servicing Rights | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 11 Mortgage Servicing Rights | Note 11 Mortgage Servicing Rights MSRs are recognized in conjunction with loan sales and securitization transactions when servicing rights are retained or acquired by the Company; changes in fair value are recognized in mortgage servicing and other income. The Company may enter into derivatives to economically hedge changes in fair value of MSRs. The Company has sold mortgage loans through whole loan sale transactions, and in some instances the loans were subsequently securitized by the third party purchaser and transferred into a VIE, and also through securitization transactions. The Company records the MSR at estimated fair value and has no other loss exposure in excess of the recorded fair value. The Company continues to operate the mortgage servicing business and to report the changes in the fair value of MSRs in continuing operations. To evaluate and measure fair value, the underlying loans are stratified based on certain risk characteristics, including loan type, note rate and investor servicing requirements. The following table sets forth the changes in the fair value of mortgage servicing rights during the three and nine months ended September30, 2009 and September30, 2008: ThreeMonthsEnded September30 NineMonthsEnded September30 Mortgage Servicing Rights: 2009 2008 2009 2008 Balance, beginning of period $ 280,742 $ 232,423 $ 150,544 $ 247,589 Acquired in acquisitions (1) 109,538 Originations 6,532 13,772 Sales (273 ) Change in fair value, net (15,756 ) (5,322 ) (2,336 ) (20,215 ) Balance, end of period $ 271,518 $ 227,101 $ 271,518 $ 227,101 Ratio of mortgage servicing rights to related loans serviced for others 0.88 % 0.90 % 0.88 % 0.90 % ThreeMonthsEnded September30 NineMonthsEnded September30 Mortgage Servicing Rights: 2009 2008 2009 2008 Weighted average service fee 0.29 0.28 0.29 0.28 (1) Related to the Chevy Chase Bank acquisition completed on February27, 2009. Fair value adjustments to the MSRs for the three and nine months ended September30, 2009 included a $7.9 million and $21.9 million decrease due to run-off, respectively, and a $7.9 million decrease and $19.6 million increase due to changes in the valuation inputs and assumptions, respectively. The valuation adjustments for the MSR were partially offset by changes in the fair value of economic hedging instruments of $10.3 million and $15.4 million for the three months ended September30, 2009 and 2008, respectively, which were recognized in non-interest income. For additional information on hedging activities, refer to Note 13. The significant assumptions used in estimating the fair value of the servicing assets at September30, 2009 and 2008 were as follows: September30, 2009 September30, 2008 Weighted average prepayment rate (includes default rate) 18.04 % 22.61 % Weig |
Note 12 Restructuring
Note 12 Restructuring | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 12 Restructuring | Note 12 Restructuring During the second quarter of 2007, the Company announced a broad-based initiative to reduce expenses and improve the competitive cost position of the Company. Restructuring initiatives leverage the capabilities of recently completed infrastructure projects in several of the Companys businesses. The scope and timing of the expected cost reductions are the result of an ongoing, comprehensive review of operations within and across the Companys businesses, which began early in 2007. The Company anticipates recording charges of approximately $60.0 million in excess of the original $300.0 million pre-tax over the course of the cost reduction initiative as the Company has extended the initiative due to the continued economic deterioration. Approximately half of these charges are related to severance benefits, while the remaining charges are associated with items such as contract and lease terminations and consolidation of facilities and infrastructure. Since the start of the initiative the Company has incurred charges of $340.1million. The Company has recorded certain restructuring charges within the income statement associated with the integration of Chevy Chase Bank into the operations of the Company. Expenses for employee termination benefits presented below represent one-time activities and do not represent ongoing costs to fully integrate Chevy Chase Bank. The Company also expects to incur costs associated with contract and lease terminations and consolidation of facilities and infrastructure. Restructuring expenses associated with continuing operations were comprised of the following: ChevyChase Acquisition 2007 Company Initiative Threemonths ended September30, 2009 Ninemonths ended September30, 2009 Threemonths ended September30, 2009 Ninemonths ended September30, 2009 Restructuring expenses: Employee termination benefits $ 5,542 $ 19,953 $ 8,448 $ 36,339 Communication and data processing 40 745 Supplies and equipment 406 3,135 Occupancy 9,817 21,248 Other 2,104 5,938 Total restructuring expenses $ 5,542 $ 19,953 $ 20,815 $ 67,405 Employee termination benefits include for the 2007 company initiative charges for executives of the Company for the three and nine months ended September30, 2009 of $6.2 million and $9.5 million, respectively, and charges for associates of $2.2 million and $26.8 million for the three and nine months ended September30, 2009, respectively. The Company made $20.5 million ($19.6 million related to 2007 initiative and $0.9 related to the Chevy Chase acquisition) and $59.5 million ($52.3 million related to 2007 initiative and $7.2 million related to the Chevy Chase acquisition) in cash payments for restructuring charges during the three and nine months ended September30, 2009, respectively that related to employee termination benefits. Restructuring accrual activity for the three and nine months ended September30, 2009, was as follows: |
Note 13 Derivative Instruments
Note 13 Derivative Instruments and Hedging Activities | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 13 Derivative Instruments and Hedging Activities | Note 13 Derivative Instruments and Hedging Activities The Company manages market risk within conservative limitsgoverned by its risk management policies as established by the Asset and Liability Management Committee (ALCO) and approved by the Board of Directors.The Company utilizes derivatives to manage and position its sensitivity within the approved limits.These derivatives are used to primarily manage risk related to changes in interest rates and to a lesser extent, foreign exchange rates.The Company uses interest rate swaps, interest rate caps, floors, options, futures and forward contracts to manage interest rate risk. By using derivative instruments, the Company is exposed to credit and market risk on those derivative positions. The Company manages both market risk and credit risk associated with interest rate and foreign exchange contracts by establishing and monitoring limits as to the types and degree of risk that may be undertaken. Credit risk is equal to the extent of the fair value gain in a derivative, if the counterparty fails to perform. When the fair value of a derivative contract is positive, this generally indicates that the counterparty owes the Company, and, therefore, creates a repayment risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty, and therefore, has no repayment risk. The Company minimizes the credit (or repayment) risk in derivative instruments by entering into transactions with high-quality counterparties that are reviewed periodically. The Company also maintains a policy of requiring that all derivative contracts be governed by an International Swaps and Derivatives Association Master Agreement; depending on the nature of the derivative transaction, bilateral collateral agreements are generally required as well. The Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps generally involve the exchange of fixed and variable rate interest payments between two parties, based on a common notional principal amount and maturity date with no exchange of underlying principal amounts. As a result of interest rate fluctuations, assets and liabilities hedged by fair value instruments will appreciate or depreciate in market value. To the extent that there is a high degree of correlation between the hedged asset or liability and the derivative instrument, the income or loss generated will generally offset the effect of this unrealized appreciation or depreciation. The Companys foreign currency denominated assets and liabilities expose it to foreign currency exchange risk. The Company enters into various foreign exchange derivative contracts for managing foreign currency exchange risk. Changes in the fair value of the derivative instrument effectively offset the related foreign exchange gains or losses on the items to which they are designated. The Company has non-trading and trading derivatives that do not qualify as accounting hedges. These derivatives are in many cases associated with asset, liability, and securitization transactions or may be used outright to manage our interest rate risk exp |
Note 14 Securitizations
Note 14 Securitizations | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 14 Securitizations | Note 14 Securitizations The Company engages in securitization transactions of loans for funding purposes. The Company receives the proceeds from third party investors for securities issued from the Companys securitization trusts which are collateralized by transferred receivables from the Companys portfolio. The Company removes loans from the reported financial statements for securitizations that qualify as sales in accordance with ASC 860-10/SFAS 140. Alternatively, when the transfer is not considered a sale but rather a financing, the assets will remain on the Companys reported financial statements with an offsetting liability recognized in the amount of proceeds received. The Company uses QSPEs to conduct off-balance sheet securitization activities and SPEs that are considered VIEs to conduct other securitization activities. Interests in the securitized and sold loans may be retained in the form of interest-only strips, retained senior tranches, retained subordinated tranches, cash collateral accounts, cash reserve accounts and unpaid interest and fees on the investors portion of the transferred principal receivables. The Company also retains a transferors interest in the securitized non mortgage loan receivables transferred to the trusts which is carried on a historical cost basis and reported as loans held for investment on the Reported Consolidated Balance Sheet. Accounts Receivable from Securitizations The following is a breakdown of Accounts Receivable From Securitizations as of September30, 2009: As of September30, 2009 NonMortgage Mortgage Total Interest-only strip classified as trading $ 4,190 $ 253,508 $ 257,698 Retained interests classified as trading: Retained notes 551,593 551,593 Cash collateral 502,344 868 503,212 Investor accrued interest receivable 775,191 775,191 Total retained interests classified as trading 1,829,128 868 1,829,996 Retained notes classified as available for sale 1,783,356 1,783,356 Other retained interests 12,923 12,923 Total retained residual interests 3,616,674 267,299 3,883,973 Collections on deposit for off balance sheet securitizations (1) 2,554,994 (426 ) 2,554,568 As of September30, 2009 NonMortgage Mortgage Total Collections on deposit for secured borrowings 546,659 546,659 Total Accounts Receivable from Securitizations $ 6,718,327 $ 266,873 $ 6,985,200 (1) Collections on deposit for off-balance sheet securitizations include $1,812.4 million of principal collections accumulated for expected maturities of securitization transactions as of September30, 2009. Collections on deposit for off-balance sheet securitizations is shown net of payments due to investors for interest on the notes. Off-Balance Sheet SecuritizationsNon Mortgage Off-balance sheet securitizations involve the transfer of pools of loan receivables by the Company |
Note 15 Commitments, Contingenc
Note 15 Commitments, Contingencies and Guarantees | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 15 Commitments, Contingencies and Guarantees | Note 15 Commitments, Contingencies and Guarantees Letters of Credit The Company issues letters of credit (financial standby, performance standby and commercial) to meet the financing needs of its customers. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party in a borrowing arrangement. Commercial letters of credit are short-term commitments issued primarily to facilitate trade finance activities for customers and are generally collateralized by the goods being shipped to the client. Collateral requirements are similar to those for funded transactions and are established based on managements credit assessment of the customer. Management conducts regular reviews of all outstanding letters of credit and customer acceptances, and the results of these reviews are considered in assessing the adequacy of the Companys allowance for loan and lease losses. The Company had contractual amounts of standby letters of credit and commercial letters of credit of $1.4 billion at September30, 2009. As of September30, 2009, financial guarantees had expiration dates ranging from 2009 to 2018. The fair value of the guarantees outstanding at September30, 2009 that have been issued since January1, 2003, was $2.6 million and was included in other liabilities. Loan and Line of Credit Commitments The Companys discontinued wholesale mortgage banking unit, GreenPoint, previously sold home equity lines of credit in whole loan sales and subsequently acquired a residual interest in certain SPEs which securitized some of those loans. Those SPEs had aggregate assets of $80.8 million at September30, 2009, representing the amount outstanding on the home equity lines of credit at that date. As residual interest holder, GreenPoint is required to fund advances on the home equity lines of credit when certain performance triggers are met due to deterioration in asset performance. GreenPoints ability to recover the full amount advanced to customers is dependent on monthly collections on the loans. In certain limited circumstances, such future advances could be reduced if GreenPoint suspends the right of mortgagors to receive draws or reduces the credit limit on home equity lines of credit. There are eight securitization transactions where GreenPoint is a residual interest holder with the longest draw period currently extending through 2023. GreenPoint has funded $22.2 million of advances through September30, 2009, of which $1.1 million and $6.5million was advanced in the three and nine months ended September30, 2009, respectively, related to these transactions. The Company believes it is probable that a loss has been incurred on these transactions due to the deterioration in asset performance through September30, 2009, and has written off the entire amount of the advances as incurred. The maximum potential amount of future advances related to all third-party securitizations where GreenPoint is the residual interest holder is $108.9 million, an amount which represents the total loan amount on the home equity lines of credit within those eight securitizations. The total unutilized amoun |
Note 16 Other Variable Interest
Note 16 Other Variable Interest Entities | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 16 Other Variable Interest Entities | Note 16 Other Variable Interest Entities The Company has various types of off-balance sheet arrangements that we enter into in the ordinary course of business. Off-balance sheet activities typically utilize SPEs that may be in the form of limited liability companies, partnerships or trusts. The SPEs raise funds by issuing debt to third party investors. The SPEs hold various types of financial assets whose cash flows are the primary source of repayment for the liabilities of the SPE. Investors only have recourse to the assets held by the SPE but may also benefit from other credit enhancements. The Company is involved with various SPEs that are considered to be VIEs, as defined by ASC 810-10/FIN 46(R). With respect to its investments, the Company is required to consolidate any VIE in which it is determined to be the primary beneficiary. The Company reviews all significant interests in VIEs it is involved with such as amounts and types of financial and other support including ownership interests, debt financing and guarantees. The Company also considers its rights and obligations as well as the rights and obligations of other variable interest holders to determine whether it is required to consolidate the VIEs. To provide the necessary disclosures, the Company aggregates similar VIEs based on the nature and purpose of the entities. The Companys involvement in these arrangements can take many different forms, including securitization activities, servicing activities, the purchase or sale of mortgage-backed securities (MBS) and other asset-backed securities (ABS) in connection with our investment portfolio, and loans to VIEs that hold debt, equity, real estate or other assets. In certain instances, the Company also provides guarantees to VIEs or holders of variable interests in VIEs. In addition to the information contained in this Note, the Company has disclosed its involvement with other types of VIEs in Note 11Mortgage Servicing Rights, Note 14Securitizations and Note 15Commitments, Contingencies and Guarantees. The Company may purchase and sell mortgage-backed securities and other asset-backed securities related to its investment portfolio. The Companys investment portfolio consists of commercial mortgage-backed securities (CMBS), collateralized mortgage obligations (CMO), MBS and ABS investments that were issued by QSPEs or VIEs that are subject to the requirements of ASC 810-10/FIN 46(R). The Companys variable interest in these structures is limited to high quality or investment grade securities and the Company does not hold subordinate residual interests or enter into other guarantees or liquidity agreements with these structures. The Company records its investment securities at fair value and has no other loss exposure over and above the recorded fair value. The Company is not considered to be the primary beneficiary and the Company does not hold a significant interest in any specific structure. As part of its community reinvestment initiatives, the Company invests in private investment funds that hold ownership interests in VIEs or provide debt financing to VIEs to support multi-family affordable housing properties. The Com |
Note 17 Subsequent Events
Note 17 Subsequent Events | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
Note 17 Subsequent Events | Note 17 Subsequent Events In accordance with ASC 855-10/SFAS 165, the Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued.There are two types of subsequent events: (1)recognized, or those that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2)nonrecognized, or those that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date.The Company evaluated subsequent events through November 6, 2009. Based on the evaluation, the Company did not identify any recognized or nonrecognized subsequent events that would haverequired adjustment to the financial statements. |
Document Information
Document Information | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Document Information [Text Block] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | 2009-09-30 |
Entity Information
Entity Information (USD $) | ||
9 Months Ended
Sep. 30, 2009 | Oct. 31, 2009
| |
Entity [Text Block] | ||
Trading Symbol | COF | |
Entity Registrant Name | CAPITAL ONE FINANCIAL CORP | |
Entity Central Index Key | 0000927628 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 449,924,631 |