Capital One Financial Corp. (COF, Financial) filed Quarterly Report for the period ended 2009-09-30.
Capital One Financial is a holding company whose subsidiaries provide a variety of products and services to consumers using its proprietary information-based strategy. The corporation's principal subsidiaryCapital One Bank offers credit card products. Capital One ServicesInc.another subsidiary of the corporationprovides various operatingadministrative and other services to the corporation and its subsidiaries. Capital One Financial Corp. has a market cap of $17.14 billion; its shares were traded at around $37.67 with and P/S ratio of 0.96. The dividend yield of Capital One Financial Corp. stocks is 0.53%. Capital One Financial Corp. had an annual average earning growth of 16.3% over the past 10 years.
In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 166, An Amendment of FASB Statement No. 140 (SFAS 166), and Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167). SFAS 166 removes the concept of a qualifying special-purpose entity (QSPE) from SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities and removes the exception from applying FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (ASC 810-10/FIN 46R), to variable interest entities that are qualifying special-purpose entities. SFAS 167 retains the scope of ASC 810-10/FIN 46R with the addition of entities previously considered qualifying special-purpose entities. SFAS 166 and SFAS 167 are effective for the Companys annual reporting period beginning January 1, 2010. The adoption of SFAS 166 and SFAS 167 could have a significant impact on the Companys consolidated financial statements because the Company expects it will be required to consolidate at least some of its special purpose entities to which pools of loan receivables have been transferred in transactions previously qualifying as sales. Holding more of these assets on the Companys balance sheet may require it to take various actions, including raising additional capital, in order to meet regulatory capital requirements. Such capital may not be available on terms favorable to the Company, if at all, and could have a negative impact on the Companys financial results. As of September 30, 2009, the Company had approximately $44.3 billion of credit card receivables held by QSPEs of which $41.3 billion are backed securities held by external investors; and $4.8 billion of mortgage loans serviced by others that the Company believes are subject to consolidation upon adoption of these standards.
The Company had a net income available to common shareholders of $425.6 million or $0.94 per common share (diluted) for the three months ended September 30, 2009, compared to net income of $374.1 million, or $1.00 per common share (diluted) for the three months ended September 30, 2008. Net income for the three month period ended September 30, 2009 included an after-tax loss from discontinued operations of $43.6 million, or $0.09 per common share (diluted), compared to an after-tax loss from discontinued operations $11.7 million, or $0.03 common share (diluted) for the three month period ended September 30, 2008.
Income from continuing operations for the period ended September 30, 2009 was $469.2 million, an increase of $83.4 million, or 21.6% compared to earnings from continuing operations of $385.8 million at September 30, 2008. Diluted earnings per common share from continuing operations at September 30, 2009 and September 30, 2008 was $1.03.
On February 27, 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 2.56 million 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 December 31, 2013. As of September 30, 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 February 27, 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. 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 of preferred stock of Chevy Chase Bank have been redeemed as noted above, and therefore, there is no longer a non-controlling interest. See Note 2 for further information.
Read the The complete ReportCOF is in the portfolios of David Tepper of APPALOOSA MANAGEMENT LP, Arnold Schneider of Schneider Capital Management, Bill Nygren of Oak Mark Fund, Edward Lampert of ESL Investments, John Paulson of Paulson & Co., Bill Miller of Legg Mason Value Trust, Dodge & Cox, Richard Pzena of Pzena Investment Management LLC, Brian Rogers of T Rowe Price Equity Income Fund, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC.
Capital One Financial is a holding company whose subsidiaries provide a variety of products and services to consumers using its proprietary information-based strategy. The corporation's principal subsidiaryCapital One Bank offers credit card products. Capital One ServicesInc.another subsidiary of the corporationprovides various operatingadministrative and other services to the corporation and its subsidiaries. Capital One Financial Corp. has a market cap of $17.14 billion; its shares were traded at around $37.67 with and P/S ratio of 0.96. The dividend yield of Capital One Financial Corp. stocks is 0.53%. Capital One Financial Corp. had an annual average earning growth of 16.3% over the past 10 years.
Highlight of Business Operations:
On February 27, 2009, the Company acquired Chevy Chase Bank, F.S.B. (Chevy Chase Bank) for $475.9 million comprised of cash of $445.0 million and 2.56 million 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.In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 166, An Amendment of FASB Statement No. 140 (SFAS 166), and Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167). SFAS 166 removes the concept of a qualifying special-purpose entity (QSPE) from SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities and removes the exception from applying FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (ASC 810-10/FIN 46R), to variable interest entities that are qualifying special-purpose entities. SFAS 167 retains the scope of ASC 810-10/FIN 46R with the addition of entities previously considered qualifying special-purpose entities. SFAS 166 and SFAS 167 are effective for the Companys annual reporting period beginning January 1, 2010. The adoption of SFAS 166 and SFAS 167 could have a significant impact on the Companys consolidated financial statements because the Company expects it will be required to consolidate at least some of its special purpose entities to which pools of loan receivables have been transferred in transactions previously qualifying as sales. Holding more of these assets on the Companys balance sheet may require it to take various actions, including raising additional capital, in order to meet regulatory capital requirements. Such capital may not be available on terms favorable to the Company, if at all, and could have a negative impact on the Companys financial results. As of September 30, 2009, the Company had approximately $44.3 billion of credit card receivables held by QSPEs of which $41.3 billion are backed securities held by external investors; and $4.8 billion of mortgage loans serviced by others that the Company believes are subject to consolidation upon adoption of these standards.
The Company had a net income available to common shareholders of $425.6 million or $0.94 per common share (diluted) for the three months ended September 30, 2009, compared to net income of $374.1 million, or $1.00 per common share (diluted) for the three months ended September 30, 2008. Net income for the three month period ended September 30, 2009 included an after-tax loss from discontinued operations of $43.6 million, or $0.09 per common share (diluted), compared to an after-tax loss from discontinued operations $11.7 million, or $0.03 common share (diluted) for the three month period ended September 30, 2008.
Income from continuing operations for the period ended September 30, 2009 was $469.2 million, an increase of $83.4 million, or 21.6% compared to earnings from continuing operations of $385.8 million at September 30, 2008. Diluted earnings per common share from continuing operations at September 30, 2009 and September 30, 2008 was $1.03.
On February 27, 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 2.56 million 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 December 31, 2013. As of September 30, 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 February 27, 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. 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 of preferred stock of Chevy Chase Bank have been redeemed as noted above, and therefore, there is no longer a non-controlling interest. See Note 2 for further information.
Read the The complete ReportCOF is in the portfolios of David Tepper of APPALOOSA MANAGEMENT LP, Arnold Schneider of Schneider Capital Management, Bill Nygren of Oak Mark Fund, Edward Lampert of ESL Investments, John Paulson of Paulson & Co., Bill Miller of Legg Mason Value Trust, Dodge & Cox, Richard Pzena of Pzena Investment Management LLC, Brian Rogers of T Rowe Price Equity Income Fund, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC.
