T
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
54-1719854
|
(State or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S. Employer Identification No.)
|
1680 Capital One Drive, McLean, Virginia
|
22102
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
Large accelerated filer T
|
Accelerated filer o
|
Non-accelerated filer o
|
Smaller reporting company o
|
1
|
||||
Item 1.
|
57
|
|||
57
|
||||
58
|
||||
59
|
||||
60
|
||||
61
|
||||
Note 1 —
|
61
|
|||
Note 2 —
|
64
|
|||
Note 3 —
|
65
|
|||
Note 4 —
|
66
|
|||
Note 5 —
|
68
|
|||
Note 6 —
|
75
|
|||
Note 7 —
|
78
|
|||
Note 8 —
|
86
|
|||
Note 9 —
|
88
|
|||
Note 10 —
|
89
|
|||
Note 11 —
|
91
|
|||
Note 12 —
|
92
|
|||
Note 13 —
|
97
|
|||
Note 14 —
|
107
|
|||
Note 15 —
|
111
|
|||
Note 16 — | Subsequent Events | 112 |
Item 2.
|
1
|
||
I.
|
1
|
||
II.
|
4
|
||
III.
|
6
|
||
IV.
|
9
|
||
V.
|
11
|
||
VI.
|
12
|
||
VII.
|
12
|
||
VIII.
|
16
|
||
IX.
|
27
|
||
X.
|
36
|
||
XI.
|
39
|
||
XII.
|
40
|
||
XIV.
|
42
|
||
XV.
|
45
|
||
XVI.
|
46
|
||
XVII.
|
48
|
||
Item 3.
|
57
|
||
Item 4.
|
57
|
||
114
|
|||
Item 1.
|
114
|
||
Item 1A.
|
114
|
||
Item 2.
|
114
|
||
Item 3.
|
115
|
||
Item 5.
|
115
|
||
Item 6.
|
115 |
Table
|
Description
|
Page
|
||
—
|
MD&A Tables:
|
|||
1
|
Consolidated Corporate Financial Summary and Selected Metrics
|
2
|
||
2
|
Business Segment Results
|
3
|
||
3
|
Net Interest Income
|
12
|
||
4
|
Non-Interest Income
|
13
|
||
5
|
Non-Interest Expense
|
12
|
||
6
|
Securities Available for Sale
|
13
|
||
7
|
Loan Portfolio Composition
|
14
|
||
8
|
30+ Day Performing Delinquencies
|
15
|
||
9
|
Nonperforming Loans
|
16
|
||
10
|
Net Charge-Offs
|
17
|
||
11
|
Loan Modifications and Restructurings
|
17
|
||
12
|
Summary of Allowance for Loan and Lease Losses
|
19
|
||
13
|
Allocation of the Allowance for Loan and Lease Losses
|
20
|
||
14
|
Credit Card Business Results
|
23
|
||
15
|
Commercial Banking Business Results
|
26
|
||
16
|
Consumer Banking Business Results
|
27
|
||
17
|
Liquidity Reserves
|
30
|
||
18
|
Deposits
|
30
|
||
19
|
Borrowing Capacity
|
32
|
||
20
|
Interest Rate Sensitivity Analysis
|
34
|
||
21
|
Capital Ratios
|
35
|
||
—
|
Supplemental Statistical Tables:
|
|||
A
|
Statements of Average Balances, Income and Expense, Yields and Rates
|
42
|
||
B
|
Interest Variance Analysis
|
44
|
||
C
|
Managed Loan Portfolio
|
45
|
||
D
|
Composition of Reported Loan Portfolio
|
47
|
||
E
|
Delinquencies
|
47
|
||
F
|
Net Charge-Offs
|
48
|
||
G
|
Nonperforming Assets
|
48
|
·
|
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 July 30, 2009, we merged Chevy Chase Bank, F.S.B. (“Chevy Chase Bank”) into CONA.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||||||||||||||||||
2010
|
2009
|
% Change
|
2010
|
2009(1)
|
% Change
|
|||||||||||||||||||||||||||||||||||
(Dollars in millions)
|
Reported
|
Reported
|
Managed
|
Reported
|
Managed
|
Reported
|
Reported
|
Managed
|
Reported
|
Managed
|
||||||||||||||||||||||||||||||
Income statement data:
|
||||||||||||||||||||||||||||||||||||||||
Net interest income
|
$ | 3,097 | $ | 1,945 | $ | 2,957 | 59 | % | 5 | % | $ | 6,325 | $ | 3,738 | $ | 5,707 | 69 | % | 11 | % | ||||||||||||||||||||
Non-interest income
|
807 | 1,232 | 1,190 | (35 | ) | (32 | ) | 1,868 | 2,322 | 2,175 | (20 | ) | (14 | ) | ||||||||||||||||||||||||||
Total revenue(2)
|
3,904 | 3,177 | 4,147 | 23 | (6 | ) | 8,193 | 6,060 | 7,882 | 35 | 4 | |||||||||||||||||||||||||||||
Provision for loan and lease losses
|
723 | 934 | 1,904 | (23 | ) | (62 | ) | 2,201 | 2,213 | 4,036 | (1 | ) | (46 | ) | ||||||||||||||||||||||||||
Restructuring expenses(3)
|
— | 43 | 43 | (100 | ) | (100 | ) | — | 61 | 61 | (100 | ) | (100 | ) | ||||||||||||||||||||||||||
Other non-interest expense
|
2,000 | 1,879 | 1,879 | 6 | 6 | 3,847 | 3,606 | 3,606 | 7 | 7 | ||||||||||||||||||||||||||||||
Income (loss) from continuing operations before taxes
|
1,181 | 321 | 321 | 268 | 268 | 2,145 | 180 | 180 | 1,092 | 1,092 | ||||||||||||||||||||||||||||||
Provision for income taxes
|
369 | 92 | 92 | 301 | 301 | 613 | 34 | 34 | 1,703 | 1,703 | ||||||||||||||||||||||||||||||
Income (loss) from continuing operations, net of tax
|
812 | 229 | 229 | 255 | 255 | 1,532 | 146 | 146 | 949 | 949 | ||||||||||||||||||||||||||||||
Loss from discontinued operations, net of tax(4)
|
(204 | ) | (6 | ) | (6 | ) | ** | ** | (288 | ) | (31 | ) | (31 | ) | ** | ** | ||||||||||||||||||||||||
Net income
|
$ | 608 | $ | 223 | $ | 223 | 173 | % | 173 | % | $ | 1,244 | $ | 115 | $ | 115 | 982 | % | 982 | % | ||||||||||||||||||||
Net income (loss) available to common shareholders
|
$ | 608 | $ | (277 | ) | $ | (277 | ) | 319 | % | 319 | % | $ | 1,244 | $ | (449 | ) | $ | (449 | ) | 377 | % | 377 | % | ||||||||||||||||
Per common share data:
|
||||||||||||||||||||||||||||||||||||||||
Basic earnings per share
|
$ | 1.34 | $ | (0.66 | ) | $ | (0.66 | ) | 303 | % | 303 | % | $ | 2.75 | $ | (1.11 | ) | $ | (1.11 | ) | 347 | % | 347 | % | ||||||||||||||||
Diluted earnings per share
|
1.33 | (0.66 | ) | (0.66 | ) | 302 | 302 | 2.73 | (1.11 | ) | (1.11 | ) | 346 | 346 | ||||||||||||||||||||||||||
Average balances:
|
||||||||||||||||||||||||||||||||||||||||
Loans held for investment
|
$ | 128,203 | $ | 104,682 | $ | 148,013 | 23 | % | (13 | )% | $ | 131,222 | $ | 104,016 | $ | 147,649 | 26 | % | (11 | )% | ||||||||||||||||||||
Investment securities
|
39,022 | 37,499 | 37,499 | 4 | 4 | 38,525 | 35,871 | 35,871 | 7 | 7 | ||||||||||||||||||||||||||||||
Interest-bearing deposits
|
104,163 | 107,033 | 107,033 | (3 | ) | (3 | ) | 104,083 | 104,047 | 104,047 | — | — | ||||||||||||||||||||||||||||
Total deposits
|
118,484 | 119,604 | 119,604 | (1 | ) | (1 | ) | 118,011 | 115,967 | 115,967 | 2 | 2 | ||||||||||||||||||||||||||||
Other borrowings
|
6,375 | 10,399 | 10,399 | (39 | ) | (39 | ) | 6,900 | 9,537 | 9,537 | (28 | ) | (28 | ) | ||||||||||||||||||||||||||
Selected metrics:
|
||||||||||||||||||||||||||||||||||||||||
Revenue margin(5)
|
8.94 | % | 8.43 | % | 8.68 | % |
51bps
|
26bps
|
9.19 | % | 8.21 | % | 8.36 | % |
98bps
|
83bps
|
||||||||||||||||||||||||
Net interest margin(6)
|
7.09 | 5.16 | 6.19 | 193 | 90 | 7.09 | 5.06 | 6.05 | 204 | 105 | ||||||||||||||||||||||||||||||
Risk-adjusted margin(7)
|
5.01 | 5.46 | 4.31 | (45 | ) | 70 | 5.00 | 5.15 | 4.04 | (15 | ) | 96 | ||||||||||||||||||||||||||||
Net charge-off rate(8)
|
5.36 | 4.28 | 5.64 | 108 | (28 | ) | 5.69 | 4.34 | 5.52 | 135 | 17 | |||||||||||||||||||||||||||||
Return on average assets(9)
|
1.63 | 0.52 | 0.42 | 111 | 121 | 1.51 | 0.17 | 0.14 | 134 | 137 | ||||||||||||||||||||||||||||||
Return on average equity(10)
|
13.24 | 3.31 | 3.31 | 993 | 993 | 12.71 | 1.06 | 1.06 | 1,165 | 1,165 | ||||||||||||||||||||||||||||||
Period-end 30 + day performing delinquency rate
|
3.81 | 3.71 | 4.10 | 10 | (29 | ) | 3.81 | 3.71 | 4.10 | 10 | (29 | ) |
(1)
|
Effective February 27, 2009, we acquired Chevy Chase Bank. Accordingly, our results for the first three and six months of 2009 include only a partial impact from Chevy Chase Bank.
|
(2)
|
Billed finance charges and fees not recognized as revenue because we have established an allowance for estimated uncollectible amounts totaled $261 million and $572 million for the three months ended June 30, 2010 and 2009, respectively, and $616 million and $1.1 billion for the six months ended June 30, 2010 and 2009, respectively.
|
(3)
|
In 2009, we completed the restructuring of our operations that was initiated in 2007 to reduce expenses and improve our competitive cost position.
|
(4)
|
Discontinued operations reflect ongoing costs, which primarily consist of loan repurchase representation and warranty charges, related to the mortgage origination operations of GreenPoint’s wholesale mortgage banking unit, which we closed in 2007.
|
(5)
|
Calculated by dividing annualized revenues for the period by average loans held for investment during the period.
|
(6)
|
Calculated by dividing annualized net interest income for the period by average interest-earning assets.
|
(7)
|
Calculated by dividing annualized total revenues less net charge-offs for the period by average interest-earning assets.
|
(8)
|
Calculated by dividing annualized net charge-offs for the period by average loans held for investment during the period.
|
(9)
|
Calculated by dividing annualized net income (loss) available to common stockholders for the period by average total assets.
|
(10)
|
Calculated by dividing annualized net income (loss) available to common stockholders for the period by average equity.
|
·
|
Credit Card: Consists of our domestic consumer and small business card lending, domestic small business lending, national closed end installment lending and the international card lending businesses in Canada and the United Kingdom.
|
·
|
Consumer Banking: Consists of our branch-based lending and deposit gathering activities for consumer and small businesses, national deposit gathering, national automobile lending and consumer mortgage lending and servicing activities.
|
·
|
Commercial Banking: Consists of our lending, deposit gathering and treasury management services to commercial real estate and middle market customers. Our Commercial Banking business results also include the results of a national portfolio of small ticket commercial real-estate loans that are in run-off mode.
|
Three Months Ended June 30,
|
||||||||||||||||||||||||||||||||
2010
|
2009
|
|||||||||||||||||||||||||||||||
Total Revenue (1)
|
Net Income (Loss)(2)
|
Total Revenue (1)
|
Net Income (Loss)(2)
|
|||||||||||||||||||||||||||||
(Dollars in millions)
|
Amount
|
% of Total
|
Amount
|
% of Total
|
Amount
|
% of Total
|
Amount
|
% of Total
|
||||||||||||||||||||||||
Credit Card
|
$ | 2,636 | 67 | % | $ | 568 | 70 | % | $ | 2,695 | 65 | % | $ | 173 | 76 | % | ||||||||||||||||
Consumer Banking
|
1,097 | 28 | 305 | 38 | 1,052 | 25 | 81 | 35 | ||||||||||||||||||||||||
Commercial Banking
|
379 | 10 | 77 | 9 | 328 | 8 | 33 | 14 | ||||||||||||||||||||||||
Other(3)
|
(206 | ) | (5 | ) | (138 | ) | (17 | ) | 72 | 2 | (58 | ) | (25 | ) | ||||||||||||||||||
Total continuing operations
|
$ | 3,906 | 100 | % | $ | 812 | 100 | % | $ | 4,147 | 100 | % | $ | 229 | 100 | % |
Six Months Ended June 30,
|
||||||||||||||||||||||||||||||||
2010
|
2009
|
|||||||||||||||||||||||||||||||
Total Revenue (1)
|
Net Income (Loss)(2)
|
Total Revenue (1)
|
Net Income (Loss)(2)
|
|||||||||||||||||||||||||||||
(Dollars in millions)
|
Amount
|
% of Total
|
Amount
|
% of Total
|
Amount
|
% of Total
|
Amount
|
% of Total
|
||||||||||||||||||||||||
Credit Card
|
$ | 5,467 | 67 | % | $ | 1,057 | 69 | % | $ | 5,372 | 68 | % | $ | 176 | 121 | % | ||||||||||||||||
Consumer Banking
|
2,309 | 28 | 610 | 40 | 1,939 | 25 | 107 | 73 | ||||||||||||||||||||||||
Commercial Banking
|
733 | 9 | 28 | 2 | 614 | 8 | 50 | 34 | ||||||||||||||||||||||||
Other(3)(4)
|
(311 | ) | (4 | ) | (163 | ) | (11 | ) | (43 | ) | (1 | ) | (187 | ) | (128 | ) | ||||||||||||||||
Total continuing operations
|
$ | 8,198 | 100 | % | $ | 1,532 | 100 | % | $ | 7,882 | 100 | % | $ | 146 | 100 | % |
(1)
|
Total revenue consists of net interest income and non-interest income. Total company revenue displayed for 2009 is based on our non-GAAP managed basis results. For more information on this measure and a reconciliation to the comparable GAAP measure, see “Exhibit 99.3— Reconciliation to GAAP Financial Measures.”
|
(2)
|
Represents net income from continuing operations, net of tax.
|
(3)
|
Other includes our corporate treasury function, the net impact of our funds transfer pricing inter-segment allocation process, brokered deposits, certain unallocated costs, and gains and losses from securitizations.
|
(4)
|
During the first quarter of 2009, Chevy Chase Bank was included within the Other category.
|
Financial Statement
|
Accounting and Presentation Changes
|
|
Balance Sheet
|
· Significant increase in restricted cash, securitized loans and securitized debt resulting from the consolidation of securitization trusts.
· Significant increase in the allowance for loan and lease losses resulting from the establishment of a loan loss reserve for the loans underlying the consolidated securitization trusts.
· Significant reduction in accounts receivable from securitizations resulting from the reversal of retained interests held in securitization trusts that have been consolidated.
|
|
Statement of Income
|
· Significant increase in interest income and interest expense attributable to the securitized loans and debt underlying the consolidated securitization trusts.
· Changes in the amount recorded for the provision for loan and lease losses, resulting from the establishment of an allowance for loan and lease losses for the loans underlying the consolidated securitization trusts.
· Amounts previously recorded as servicing and securitization income are now classified in our results of operations in the same manner as the earnings on loans not held in securitization trusts.
|
|
Statement of Cash Flows
|
· Significant change in the amounts of cash flows from investing and financing activities.
|
·
|
Credit Card: Our Credit Card business generated net income of $568 million and $1.1 billion in the second quarter and first six months of 2010, respectively, up from $173 million and $176 million in the second quarter and first six months of 2009, respectively. The primary drivers of the improvement in our Credit Card business results were an increase in the net interest margin and a significant decrease in the provision for loan and lease losses. The increase in the net interest margin was attributable to the combined impact of higher asset yields and lower funding costs. The increase in the average yield on our credit card loan portfolio reflected the benefit of pricing changes that we implemented during 2009, while the decrease in our funding costs reflected the continued shift in the mix of our funding to lower cost consumer deposits from higher cost wholesale sources. The decrease in the provision for loan and lease losses was due to more favorable credit quality trends as well as a decline in outstanding loan balances. Of the $1.0 billion reduction in the allowance in the second quarter of 2010, $665 million was attributable to our Credit Card business.
|
·
|
Consumer Banking: Our Consumer Banking business generated net income of $305 million and $610 million in the second quarter and first six months of 2010, up from $81 million and $107 million in the second quarter and first six months of 2009, respectively. The significant improvement in profitability in our Consumer Banking business was attributable to improved credit conditions and consumer credit performance, particularly within our auto loan portfolio. Although our mortgage portfolio includes the distressed portfolio we acquired from Chevy Chase Bank, the fair value that we recorded for this portfolio at the date of acquisition already includes an estimate of credit losses expected to be realized over the remaining lives of the loans. The credit performance of these loans has been relatively consistent with our estimate of credit losses at the acquisition date.
|
·
|
Commercial Banking: Our Commercial Banking business generated net income of $77 million and $28 million in the second quarter and first six months of 2010, compared with net income of $33 million and $50 million in the second quarter and first six months of 2009. Lending and loan commitments have increased in our Commercial Banking business. The stress on our commercial real estate portfolio from the weak economy, however, continues to have an adverse impact on our Commercial Banking business, although we are seeing some signs that commercial real-estate values are beginning to stabilize.
|
·
|
Total Loans: Total loans held for investment decreased by $9.7 billion, or 7%, during the first six months of 2010 to $127.1 billion as of June 30, 2010, from $136.8 billion as of December 31, 2009. This decrease was primarily due to charge-offs and run-off of loans in our Credit Card and Consumer Banking businesses.
|
·
|
Charge-off and Delinquency Statistics: Although net charge-off and delinquency rates remain elevated, these rates continued to show signs of improvement in the second quarter of 2010. The net charge-off rate decreased to 5.36% in the second quarter of 2010, from 6.01% in the first quarter of 2010, and the 30+ day performing delinquency rate decreased to 3.81%, from 4.22% in the first quarter of 2010. Based on strong credit performance trends, such as the significant decline in the 30+ day performing delinquency rate from 4.73% at the end of 2009, we believe our net-charge offs peaked in the first quarter of 2010.
|
·
|
Allowance for Loan and Lease Losses: As a result of the adoption of the new consolidation accounting guidance, we increased our allowance for loan and lease losses by $4.3 billion to $8.4 billion on January 1, 2010. The initial recording of this amount on our reported balance sheet as of January 1, 2010 reduced our stockholders’ equity but had no impact on our reported results of operations. After taking into consideration the $4.3 billion addition to our allowance for loan and lease losses on January 1, 2010, our allowance for loan and lease losses decreased by $1.6 billion during the first six months of 2010, to $6.8 billion as of June 30, 2010. The $1.6 billion decrease in our allowance was attributable to an overall improvement in credit quality trends, as well as a decrease in the balance of our loan portfolio. The allowance as a percentage of our total reported loans was 5.35% as of June 30, 2010, compared with 5.96% as of March 31, 2010 and 4.55% as of December 31, 2009.
|
·
|
As higher-margin loan account balances pay down or charge-off, we expect that these accounts will be partially replaced by new loan originations with lower introductory promotional rates. These reduced rates will decrease our average asset yields, which we expect will reduce our net interest margin.
|
·
|
The credit-related benefit to revenue we experienced in the first and second quarters of 2010 from the recognition of previously billed finance charges and fees is likely to diminish, as the backlog of billed but unrecognized finance charges has decreased significantly due to the more favorable credit performance trends.
|
·
|
We expect a reduction in late fees as a result of the August 22, 2010 implementation of the Federal Reserve “reasonable and proportional” fee regulations related to the CARD Act. We expect a partial quarter impact in the third quarter of 2010 and a full quarter impact in the fourth quarter of 2010.
|
·
|
Fair value measurement, including the assessment of other-than-temporary impairment of available-for-sale securities;
|
·
|
Representation and Warranty Reserve;
|
·
|
Allowance for loan and lease losses;
|
·
|
Valuation of goodwill and other intangibles;
|
·
|
Finance charge, interest and fee revenue recognition;
|
·
|
Derivative and hedge accounting;
|
·
|
Loss contingency reserves; and
|
·
|
Income taxes.
|
Level 1:
|
Quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
Level 2:
|
Observable market-based inputs, other than quoted prices in active markets for identical assets or liabilities.
|
Level 3:
|
Unobservable inputs.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||
2010
|
2009 (1)
|
2010
|
2009 (1)
|
|||||||||||||||||||||
(Dollars in millions)
|
Reported
|
Reported
|
Managed
|
Reported
|
Reported
|
Managed
|
||||||||||||||||||
Interest income:
|
||||||||||||||||||||||||
Loans held-for-investment:
|
||||||||||||||||||||||||
Consumer loans(2)(3)
|
$ | 3,178 | $ | 1,853 | $ | 3,184 | $ | 6,445 | $ | 3,670 | $ | 6,289 | ||||||||||||
Commercial loans
|
298 | 384 | 384 | 689 | 758 | 758 | ||||||||||||||||||
Total loans held for investment, including past-due fees
|
3,476 | 2,237 | 3,568 | 7,134 | 4,428 | 7,047 | ||||||||||||||||||
Investment securities
|
342 | 412 | 412 | 691 | 808 | 808 | ||||||||||||||||||
Other
|
17 | 68 | 17 | 40 | 131 | 33 | ||||||||||||||||||
Total interest income
|
3,835 | 2,717 | 3,997 | 7,865 | 5,367 | 7,888 | ||||||||||||||||||
Interest expense:
|
||||||||||||||||||||||||
Deposits
|
368 | 560 | 560 | 767 | 1,187 | 1,187 | ||||||||||||||||||
Securitized debt obligations
|
212 | 74 | 342 | 454 | 165 | 717 | ||||||||||||||||||
Senior and subordinated notes
|
72 | 57 | 57 | 140 | 115 | 115 | ||||||||||||||||||
Other borrowings
|
86 | 81 | 81 | 179 | 162 | 162 | ||||||||||||||||||
Total interest expense
|
738 | 772 | 1,040 | 1,540 | 1,629 | 2,181 | ||||||||||||||||||
Net interest income
|
$ | 3,097 | $ | 1,945 | $ | 2,957 | $ | 6,325 | $ | 3,738 | $ | 5,707 |
(1)
|
Effective February 27, 2009, we acquired Chevy Chase Bank. Accordingly, our results for the first six months of 2009 include only a partial impact from Chevy Chase Bank.
|
(2)
|
Interest income on credit card, auto, mortgage and retail banking loans is reflected in consumer loans.
|
(3)
|
Interest income generated from small business credit cards is included in consumer loans.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||
2010
|
2009 (1)
|
2010
|
2009(1)
|
|||||||||||||||||||||
(Dollars in millions)
|
Reported
|
Reported
|
Managed
|
Reported
|
Reported
|
Managed
|
||||||||||||||||||
Non-interest income:
|
||||||||||||||||||||||||
Servicing and securitizations
|
$ | 21 | $ | 363 | $ | (130 | ) | $ | (15 | ) | $ | 816 | $ | (259 | ) | |||||||||
Service charges and other customer-related fees
|
496 | 492 | 725 | 1,081 | 998 | 1,505 | ||||||||||||||||||
Interchange
|
333 | 126 | 344 | 644 | 267 | 688 | ||||||||||||||||||
Net other-than-temporary impairment
|
(26 | ) | (10 | ) | (10 | ) | (57 | ) | (10 | ) | (10 | ) | ||||||||||||
Other
|
(17 | ) | 261 | 261 | 215 | 251 | 251 | |||||||||||||||||
Total non-interest income
|
$ | 807 | $ | 1,232 | $ | 1,190 | $ | 1,868 | $ | 2,322 | $ | 2,175 |
(1)
|
Effective February 27, 2009, we acquired Chevy Chase Bank. Accordingly, our results for the first six months of 2009 include only a partial impact from Chevy Chase Bank.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
(Dollars in millions)
|
Reported
|
Reported/Managed(1)
|
Reported
|
Reported/Managed(1)
|
||||||||||||
Non-interest expense:
|
||||||||||||||||
Salaries and associated benefits
|
$ | 650 | $ | 634 | $ | 1,296 | $ | 1,188 | ||||||||
Marketing
|
219 | 134 | 399 | 297 | ||||||||||||
Communications and data processing
|
164 | 195 | 333 | 394 | ||||||||||||
Supplies and equipment
|
129 | 128 | 253 | 247 | ||||||||||||
Occupancy
|
117 | 115 | 237 | 215 | ||||||||||||
Restructuring expense
|
0 | 43 | 0 | 61 | ||||||||||||
Other(2)
|
721 | 673 | 1,329 | 1,265 | ||||||||||||
Total non-interest expense
|
$ | 2,000 | $ | 1,922 | $ | 3,847 | $ | 3,667 |
(1)
|
Non-interest expense reported and managed amounts were the same for the three and six months ended June 30, 2009.
|
(2)
|
Consists of professional services expenses, credit collection costs, fee assessments and intangible amortization expense.
|
June 30, 2010
|
December 31, 2009
|
|||||||||||||||
(Dollars in millions)
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||||||
U.S. Treasury debt obligations
|
$ | 376 | $ | 391 | $ | 379 | $ | 392 | ||||||||
U.S. Agency debt obligations(1)
|
379 | 399 | 455 | 477 | ||||||||||||
Collateralized mortgage obligations (“CMO”):
|
||||||||||||||||
Agency(2)
|
13,429 | 13,903 | 8,174 | 8,300 | ||||||||||||
Non-agency
|
1,293 | 1,148 | 1,608 | 1,338 | ||||||||||||
Total CMOs
|
14,722 | 15,051 | 9,782 | 9,638 | ||||||||||||
Mortgage-backed securities (“MBS”):
|
||||||||||||||||
Agency(2)
|
12,599 | 13,154 | 19,429 | 19,858 | ||||||||||||
Non-agency
|
873 | 783 | 1,011 | 826 | ||||||||||||
Total MBS
|
13,472 | 13,937 | 20,440 | 20,684 | ||||||||||||
Asset-backed securities(3)
|
9,036 | 9,175 | 7,043 | 7,192 | ||||||||||||
Other securities(4)
|
415 | 471 | 440 | 447 | ||||||||||||
Total
|
$ | 38,400 | $ | 39,424 | $ | 38,539 | $ | 38,830 |
|
(1)
|
Consists of debt securities issued by Fannie Mae and Freddie Mac with amortized costs of $151 million and $227 million, respectively, and fair values of $157 million and $241 million, respectively, as of June 30, 2010.
|
|
(2)
|
Consists of mortgage-related securities issued by Fannie Mae, Freddie Mac and Ginnie Mae with amortized costs of $14.3 billion, $6.3 billion and $2.2 billion, respectively, and fair values of $14.8 billion, $6.5 billion and $2.3 billion, respectively, as of June 30, 2010. The Fannie Mae, Freddie Mac and Ginnie Mae investments exceeded 10% of our stockholders’ equity as of June 30, 2010.
|
|
(3)
|
Consists of securities collateralized by credit card loans, auto loans, auto dealer floor plan inventory loans, equipment loans, and home equity lines of credit. The distribution among these asset types was approximately 77.2% credit card loans, 6.6% auto loans, 10.1% student loans, 4.3% auto dealer floor plan inventory loans, 1.6% equipment loans, and 0.2% home equity lines of credit as of June 30, 2010. In comparison, the distribution was approximately 76.3% credit card loans, 14.0% auto loans, 6.9% student loans, 1.7% auto dealer floor plan inventory loans, 0.8% equipment loans and 0.3% home equity lines of credit as of December 31, 2009. Approximately 81.2% of the securities in our asset-backed security portfolio were rated AAA or its equivalent as of June 30, 2010, compared with 84.2% as of December 31, 2009.
|
|
(4)
|
Consists of municipal securities and equity investments, primarily related to CRA activities.
|
June 30, 2010
|
December 31, 2009
|
|||||||||||||||
(Dollars in millions)
|
Reported On-Balance Sheet
|
Reported On-Balance Sheet
|
Off-Balance Sheet
|
Total Managed
|
||||||||||||
Credit Card business:
|
||||||||||||||||
Credit card loans:
|
||||||||||||||||
Domestic credit card loans
|
$ | 49,625 | $ | 13,374 | $ | 39,827 | $ | 53,201 | ||||||||
International credit card loans
|
7,249 | 2,229 | 5,951 | 8,180 | ||||||||||||
Total credit card loans
|
56,874 | 15,603 | 45,778 | 61,381 | ||||||||||||
Installment loans:
|
||||||||||||||||
Domestic installment loans
|
4,888 | 6,693 | 406 | 7,099 | ||||||||||||
International installment loans
|
20 | 44 | — | 44 | ||||||||||||
Total installment loans
|
4,908 | 6,737 | 406 | 7,143 | ||||||||||||
Total credit card
|
61,782 | 22,340 | 46,184 | 68,524 | ||||||||||||
Consumer Banking business:
|
||||||||||||||||
Automobile
|
17,221 | 18,186 | — | 18,186 | ||||||||||||
Mortgage
|
13,322 | 14,893 | — | 14,893 | ||||||||||||
Other retail
|
4,770 | 5,135 | — | 5,135 | ||||||||||||
Total consumer banking
|
35,313 | 38,214 | — | 38,214 | ||||||||||||
Total consumer(1)
|
97,095 | 60,554 | 46,184 | 106,738 | ||||||||||||
Commercial Banking business:
|
||||||||||||||||
Commercial and multifamily real estate(2)
|
13,580 | 13,843 | — | 13,843 | ||||||||||||
Middle market
|
10,203 | 10,062 | — | 10,062 | ||||||||||||
Specialty lending
|
3,815 | 3,555 | — | 3,555 | ||||||||||||
Total commercial lending
|
27,598 | 27,460 | — | 27,460 | ||||||||||||
Small-ticket commercial real estate
|
1,977 | 2,153 | — | 2,153 | ||||||||||||
Total commercial banking
|
29,575 | 29,613 | — | 29,613 | ||||||||||||
Other:
|
||||||||||||||||
Other loans
|
470 | 452 | — | 452 | ||||||||||||
Total company
|
$ | 127,140 | $ | 90,619 | $ | 46,184 | $ | 136,803 |
(1)
|
Consumer loans consist of all of the loans within our Credit Card business and our Consumer Banking business.
|
(2)
|
Includes construction and land development loans totaling $2.6 billion and $2.5 billion as of June 30, 2010 and December 31, 2009, respectively.
|
·
|
Credit card loans: We continue to classify credit card loans as performing until the loan is charged-off. We also continue to accrue finance charges and fees on credit card loans until the account is charged-off. We reduce, however, the carrying amount of credit card loan balances by the amount of finance charges and fees billed but not expected to be collected and exclude this amount from revenue.
|
·
|
Consumer loans: If we determine that collectability of principal and interest is reasonably assured, we classify delinquent consumer loans as performing and continue to accrue interest until the loan is 90 days past due for auto and mortgage loans and until the loan is 120 days past due for other non-credit card consumer loans. If we determine that collectability is not reasonably assured, or the loan is 90 days past due for auto and mortgage loans and 120 days past due for other non-credit card consumer loans, we consider the loan to be nonperforming and it is placed on nonaccrual status.
|
·
|
Commercial loans: We classify commercial loans as nonperforming and place them on nonaccrual status at the earlier of the date we determine that the collectability of interest or principal on the loan is not reasonably assured or the loan is 90 days past due.
|
·
|
Loans acquired from Chevy Chase Bank: Loans that we acquired from Chevy Chase Bank were recorded at fair value, including those considered to be impaired at the date of purchase. We therefore do not classify loans that we acquired from Chevy Chase Bank as delinquent or nonperforming unless they do not perform in accordance with our expectations as of the purchase date.
|
June 30, 2010
|
December 31, 2009(2)
|
June 30, 2009(2)
|
||||||||||||||||||||||
(Dollars in millions)
|
Amount
|
Rate
|
Amount
|
Rate
|
Amount
|
Rate
|
||||||||||||||||||
Credit Card business:
|
||||||||||||||||||||||||
Domestic credit card and installment
|
$ | 2,617 | 4.80 | % | $ | 3,487 | 5.78 | % | $ | 3,087 | 4.77 | % | ||||||||||||
International credit card and installment
|
438 | 6.03 | 539 | 6.55 | 578 | 6.69 | ||||||||||||||||||
Total credit card
|
3,055 | 4.95 | 4,026 | 5.88 | 3,665 | 4.99 | ||||||||||||||||||
Consumer Banking business:
|
||||||||||||||||||||||||
Automobile
|
1,334 | 7.74 | 1,824 | 10.03 | 1,770 | 8.89 | ||||||||||||||||||
Mortgage
|
91 | 0.68 | 188 | 1.26 | 161 | 0.97 | ||||||||||||||||||
Retail banking
|
41 | 0.87 | 63 | 1.23 | 49 | 0.91 | ||||||||||||||||||
Total consumer banking
|
1,466 | 4.15 | 2,075 | 5.43 | 1,980 | 4.73 | ||||||||||||||||||
Commercial Banking business:
|
||||||||||||||||||||||||
Commercial and multifamily real estate
|
138 | 1.01 | 84 | 0.61 | 79 | 0.56 | ||||||||||||||||||
Middle market
|
13 | 0.13 | 46 | 0.46 | 29 | 0.24 | ||||||||||||||||||
Specialty lending
|
42 | 1.10 | 60 | 1.69 | 58 | 1.79 | ||||||||||||||||||
Small ticket commercial real estate
|
100 | 5.07 | 121 | 5.59 | 112 | 4.47 | ||||||||||||||||||
Total commercial banking
|
293 | 0.99 | 311 | 1.05 | 278 | 0.92 | ||||||||||||||||||
Other:
|
||||||||||||||||||||||||
Other loans
|
30 | 6.29 | 53 | 11.60 | 64 | 9.26 | ||||||||||||||||||
Total company
|
$ | 4,844 | 3.81 | % | $ | 6,465 | 4.73 | % | $ | 5,987 | 4.10 | % |
(1)
|
Loans acquired from Chevy Chase Bank are not classified as delinquent unless they do not perform in accordance with our expectations as of the purchase date. We do, however, include these loans in the denominator used in calculating our delinquency rates. The 30 day+ delinquency rates, excluding loans acquired from Chevy Chase Bank, for mortgage, retail banking, total consumer banking and commercial banking were 1.14 %, 0.91%, 4.93% and 1.02%, respectively, as of June 30, 2010, compared with 2.18%, 1.30%, 6.56% and 1.08%, respectively, as of December 31, 2009.
|
(2)
|
Delinquency statistics are based on our total loan portfolio, which we previously referred to as our “managed” loan portfolio. The total loan portfolio includes loans recorded on our balance sheet and loans held in our securitization trusts.
|
June 30, 2010
|
December 31, 2009( 3)
|
|||||||||||||||
(Dollars in millions)
|
Amount
|
% of Loans Held for Investment
|
Amount
|
% of Loans Held for Investment
|
||||||||||||
Consumer Banking business:
|
||||||||||||||||
Automobile
|
$ | 85 | 0.49 | % | 143 | 0.79 | ||||||||||
Mortgage
|
478 | 3.59 | 323 | 2.17 | ||||||||||||
Retail banking
|
79 | 1.66 | 87 | 1.69 | ||||||||||||
Total consumer banking
|
642 | 1.82 | 553 | 1.45 | ||||||||||||
Commercial Banking business:
|
||||||||||||||||
Commercial and multifamily real estate
|
359 | 2.64 | 429 | 3.10 | ||||||||||||
Middle market
|
120 | 1.18 | 104 | 1.03 | ||||||||||||
Specialty lending
|
63 | 1.65 | 74 | 2.08 | ||||||||||||
Small-ticket commercial real estate
|
60 | 3.03 | 95 | 4.41 | ||||||||||||
Total commercial banking
|
602 | 2.04 | 702 | 2.37 | ||||||||||||
Other
|
66 | 14.04 | 34 | 7.52 | ||||||||||||
Total company
|
$ | 1,310 | 1.03 | % | $ | 1,289 | 0.94 | % |
(1)
|
Loans acquired from Chevy Chase Bank are not classified as nonperforming unless they do not perform in accordance with our expectations as of the purchase date. We do, however, include these loans in the denominator used in calculating our nonperforming loan ratios. The nonperforming loan ratios, excluding loans acquired from Chevy Chase Bank, for commercial and multifamily real estate, middle market, total commercial banking, mortgages, retail banking and total consumer banking were 2.72, 1.23, 2.09, 5.99, 1.76 and 2.16, respectively, as of June 30, 2010, compared with 3.18, 1,07, 2.43, 3.75, 1.78 and 1.75, respectively, as of December 31, 2009.
|
(2)
|
As permitted by regulatory guidance issued by The Federal Financial Institutions Examination Council (“FFIEC”), we continue to classify credit card loans as performing until the loan is charged off. Excluding credit card loans from the denominator, our nonperforming loans as a percentage of loans held for investment would 2.00% and 1.89% as of June 30, 2010 and December 31, 2009.
|
(3)
|
Nonperforming loans are based on our total loan portfolio, which we previously referred to as our “managed” loan portfolio. The total loan portfolio includes loans recorded on our balance sheet and loans held in our securitization trusts.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||||||||||
(Dollars in millions)
|
2010
|
2009(1)
|
2010
|
2009(1)
|
||||||||||||||||||||||||||||
Amount
|
Rate
|
Amount
|
Rate
|
Amount
|
Rate
|
Amount
|
Rate
|
|||||||||||||||||||||||||
Credit card
|
$ | 1,463 | 9.36 | % | $ | 1,713 | 9.24 | % | $ | 3,156 | 9.84 | % | $ | 3,319 | 8.75 | % | ||||||||||||||||
Consumer banking(2)(3)
|
131 | 1.47 | 238 | 2.23 | 326 | 1.76 | 539 | 2.72 | ||||||||||||||||||||||||
Commercial banking(2)(3)
|
90 | 1.21 | 68 | 0.89 | 191 | 1.29 | 109 | 0.73 | ||||||||||||||||||||||||
Other(4)
|
33 | 28.51 | 68 | 50.75 | 62 | 26.11 | 111 | 10.72 | ||||||||||||||||||||||||
Total company
|
$ | 1,717 | 5.36 | % | $ | 2,087 | 5.64 | % | $ | 3,735 | 5.69 | % | $ | 4,078 | 5.52 | % | ||||||||||||||||
Average loans held for investment(5)
|
$ | 128,203 | $ | 148,013 | $ | 131,222 | $ | 147,649 |
(1)
|
Net charge-offs reflect charge-offs, net of recoveries, related to our total loan portfolio, which we previously referred to as our “managed” loan portfolio. The total loan portfolio includes loans recorded on our balance sheet and loans held in our securitization trusts.
|
(2)
|
Excludes losses on the purchased credit-impaired loans acquired from Chevy Chase Bank.
|
(3)
|
Loans acquired as part of the Chevy Chase Bank acquisition are included in the total average loans held for investment used in calculating the net charge-off rates. The net charge-off rates for our total loan portfolio, excluding these loans, was 5.64% and 5.98% for the three months ended June 30, 2010 and 2009, respectively, and 6.00% and 5.70% for the six months ended June 30, 2010 and 2009, respectively.
|
(4)
|
During the first quarter of 2009, Chevy Chase Bank was included within the Other category.
|
(5
|
The average balances of the Chevy Chase Bank acquired loan portfolio, which are included in the total average loans held for investment used in calculating the net charge-off rates, were $6.5 billion and $8.7 billion for the three months ended June 30, 2010 and 2009, respectively, and $6.8 billion and $4.3 billion for the six months ended June 30, 2010 and 2009 respectively.
|
(Dollars in millions)
|
June 30, 2010
|
December 31, 2009(1)
|
||||||
Commercial and multifamily real estate
|
$ | 81 | $ | 41 | ||||
Mortgage
|
23 | 10 | ||||||
Credit card
|
805 | 678 | ||||||
Other
|
5 | 4 | ||||||
Total company (2)
|
$ | 914 | $ | 733 |
|
(1)
|
Reflects modifications and restructuring of loans in our total loan portfolio, which we previously referred to as our “managed” loan portfolio. The total loan portfolio includes loans recorded on our balance sheet and loans held in our securitization trusts. Certain prior period amounts have been reclassified to conform with the current period presentation.
|
|
(2)
|
Balances include nonperforming loans of $37 million and $20 million as of June 30, 2010 and December 31, 2009, respectively.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Dollars in millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Balance at beginning of period, as reported
|
$ | 7,752 | $ | 4,648 | $ | 4,127 | $ | 4,524 | ||||||||
Impact from January 1, 2010 adoption of new consolidation accounting standards
|
53 | (1) | — | 4,316 | (1) | — | ||||||||||
Balance at beginning of period, as adjusted
|
$ | 7,805 | $ | 4,648 | $ | 8,443 | $ | 4,524 | ||||||||
Charge-offs:
|
||||||||||||||||
Credit Card business:
|
||||||||||||||||
Domestic credit card and installment
|
(1,607 | ) | (654 | ) | (3,414 | ) | (1,456 | ) | ||||||||
International credit card and installment
|
(195 | ) | (226 | ) | (408 | ) | (294 | ) | ||||||||
Total credit card
|
(1,802 | ) | (880 | ) | (3,822 | ) | (1,750 | ) | ||||||||
Consumer Banking business:
|
||||||||||||||||
Automobile
|
(150 | ) | (249 | ) | (343 | ) | (567 | ) | ||||||||
Mortgage
|
(16 | ) | (18 | ) | (53 | ) | (30 | ) | ||||||||
Retail banking
|
(32 | ) | (41 | ) | (65 | ) | (78 | ) | ||||||||
Total consumer banking
|
(198 | ) | (308 | ) | (461 | ) | (675 | ) | ||||||||
Commercial Banking business:
|
||||||||||||||||
Commercial and multifamily real estate
|
(52 | ) | (32 | ) | (102 | ) | (53 | ) | ||||||||
Middle market
|
(22 | ) | (17 | ) | (45 | ) | (19 | ) | ||||||||
Specialty lending
|
(9 | ) | (9 | ) | (18 | ) | (17 | ) | ||||||||
Total commercial lending
|
(83 | ) | (58 | ) | (165 | ) | (89 | ) | ||||||||
Small-ticket commercial real estate
|
(23 | ) | (12 | ) | (47 | ) | (23 | ) | ||||||||
Total commercial banking
|
(106 | ) | (70 | ) | (212 | ) | (112 | ) | ||||||||
Other loans
|
(36 | ) | (68 | ) | (66 | ) | (112 | ) | ||||||||
Total charge-offs
|
(2,142 | ) | (1,326 | ) | (4,561 | ) | (2,649 | ) | ||||||||
Recoveries:
|
||||||||||||||||
Credit Card business:
|
||||||||||||||||
Domestic credit card and installment
|
299 | 104 | 586 | 209 | ||||||||||||
International credit card and installment
|
40 | 32 | 80 | 45 | ||||||||||||
Total credit card
|
339 | 136 | 666 | 254 | ||||||||||||
Consumer Banking business:
|
||||||||||||||||
Automobile
|
60 | 64 | 120 | 124 | ||||||||||||
Mortgage
|
1 | 1 | 2 | 1 | ||||||||||||
Retail banking
|
6 | 6 | 13 | 12 | ||||||||||||
Total consumer banking
|
67 | 71 | 135 | 137 | ||||||||||||
Commercial Banking business:
|
||||||||||||||||
Commercial and multifamily real estate
|
13 | — | 13 | — | ||||||||||||
Middle market
|
1 | 2 | 4 | 2 | ||||||||||||
Specialty lending
|
1 | — | 2 | — | ||||||||||||
Total commercial lending
|
15 | 2 | 19 | 2 | ||||||||||||
Small-ticket commercial real estate
|
1 | — | 2 | — | ||||||||||||
Total commercial banking
|
16 | 2 | 21 | 2 | ||||||||||||
Other loans
|
3 | — | 4 | 1 | ||||||||||||
Total recoveries
|
425 | 209 | 826 | 394 | ||||||||||||
Total charge-offs, net of recoveries
|
(1,717 | ) | (1,117 | ) | (3,735 | ) | (2,255 | ) | ||||||||
Provision for loan and lease losses
|
723 | 934 | 2,201 | 2,213 | ||||||||||||
Impact from acquisitions, sales and other changes
|
(12 | ) | 17 | (110 | )(2) | 0 | ||||||||||
Balance at end of period
|
$ | 6,799 | $ | 4,482 | $ | 6,799 | $ | 4,482 |
(1)
|
Represents an adjustment made in the second quarter for the impact of impairment on loans consolidated as of January 1, 2010 accounted for as troubled debt restructurings.
|
(2)
|
Includes a reduction in our allowance for loan and lease losses of $73 million during the first six months of 2010 attributable to the sale of certain interest-only option-ARM bonds and the deconsolidation of the related securitization trusts related to Chevy Chase Bank in the first quarter of 2010.
|
June 30, 2010
|
December 31, 2009
|
|||||||||||||||
(Dollars in millions)
|
Amount
|
% of Total Loans(1)
|
Amount
|
% of Total Loans(1)
|
||||||||||||
Credit Card:
|
||||||||||||||||
Domestic credit card and installment
|
$ | 4,579 | 8.40 | % | $ | 1,927 | 9.60 | % | ||||||||
International credit card and installment
|
530 | 7.28 | 199 | 8.75 | ||||||||||||
Total credit card
|
5,109 | 8.27 | 2,126 | 9.52 | ||||||||||||
Consumer Banking:
|
||||||||||||||||
Automobile
|
366 | 2.13 | 665 | 3.66 | ||||||||||||
Mortgage
|
115 | 0.86 | 175 | 1.18 | ||||||||||||
Retail banking
|
220 | 4.61 | 236 | 4.60 | ||||||||||||
Total consumer banking
|
701 | 1.99 | 1,076 | 2.82 | ||||||||||||
Commercial Banking:
|
||||||||||||||||
Commercial and multifamily real estate
|
524 | 3.86 | 471 | 3.40 | ||||||||||||
Middle market
|
172 | 1.69 | 131 | 1.30 | ||||||||||||
Specialty lending
|
109 | 2.86 | 90 | 2.54 | ||||||||||||
Total commercial lending
|
805 | 2.92 | 692 | 2.52 | ||||||||||||
Small-ticket commercial real estate
|
77 | 3.90 | 93 | 4.34 | ||||||||||||
Total commercial banking
|
882 | 2.98 | 785 | 2.65 | ||||||||||||
Other loans
|
107 | 22.74 | 140 | 30.91 | ||||||||||||
Total company
|
$ | 6,799 | 5.35 | % | $ | 4,127 | 4.55 | % | ||||||||
Total allowance for loan and lease losses as a percentage of:
|
||||||||||||||||
Period-end loans
|
$ | 127,140 | 5.35 | % | $ | 90,619 | 4.55 | % | ||||||||
Nonperforming loans(2)
|
1,310 | 519.01 | 1,289 | 320.17 | ||||||||||||
Allowance for loan and lease losses, by loan category, as a percentage of:
|
||||||||||||||||
Credit card (30 + day performing delinquent loans)
|
$ | 3,055 | 167.23 | % | $ | 1,308 | 162.54 | % | ||||||||
Consumer banking (30 + day performing delinquent loans)
|
1,466 | 47.82 | 2,075 | 51.86 | ||||||||||||
Commercial banking (nonperforming loans)
|
602 | 146.51 | 702 | 111.82 |
(1)
|
Calculated based on the allowance for loan and lease losses attributable to each loan category divided by the outstanding balance of loans within the specified loan category.
|
(2)
|
As permitted by regulatory guidance issued by the FFEIC, our policy is generally not to classify credit card loans as nonperforming. Instead, we typically charge-off credit cards loans when the account becomes 180 days past due.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||
(Dollars in millions)
|
2010
|
2009
|
% Change
|
2010
|
2009
|
% Change
|
||||||||||||||||||
Selected income statement data:
|
||||||||||||||||||||||||
Net interest income
|
$ | 1,977 | $ | 1,797 | 10 | % | $ | 4,090 | $ | 3,489 | 17 | % | ||||||||||||
Non-interest income
|
659 | 898 | (27 | ) | 1,377 | 1,883 | (27 | ) | ||||||||||||||||
Total revenue
|
2,636 | 2,695 | (2 | ) | 5,467 | 5,372 | 2 | |||||||||||||||||
Provision for loan and lease losses
|
765 | 1,520 | (50 | ) | 1,940 | 3,203 | (39 | ) | ||||||||||||||||
Non-interest expense
|
1,002 | 910 | 10 | 1,916 | 1,898 | 1 | ||||||||||||||||||
Income before taxes
|
869 | 265 | 228 | 1,611 | 271 | 494 | ||||||||||||||||||
Provision for income taxes
|
301 | 92 | 227 | 554 | 95 | 483 | ||||||||||||||||||
Net income
|
$ | 568 | $ | 173 | 228 | % | $ | 1,057 | $ | 176 | 501 | % | ||||||||||||
Selected metrics:
|
||||||||||||||||||||||||
Average loans held for investment
|
$ | 62,679 | $ | 74,190 | (16 | )% | $ | 64,292 | $ | 75,871 | (15 | )% | ||||||||||||
Average yield on loans held for investment
|
14.24 | % | 12.31 | % |
193 bps
|
14.57 | % | 11.90 | % |
267bps
|
||||||||||||||
Revenue margin(1)
|
16.82 | 14.53 | 229 | 17.01 | 14.16 | 285 | ||||||||||||||||||
Net charge-off rate(2)
|
9.36 | 9.24 | 12 | 9.84 | 8.75 | 109 | ||||||||||||||||||
Purchase volume(3)
|
$ | 26,570 | $ | 25,747 | 3 | % | $ | 50,494 | $ | 49,220 | 3 | % |
Selected period-end data:
|
June 30, 2010
|
December 31, 2009
|
% Change
|
|||||||||
Loans held for investment
|
$ | 61,897 | $ | 68,524 | (10 | )% | ||||||
30+ day performing delinquency rate
|
4.94 | % | 5.88 | % |
(94
|
)bps |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||
(Dollars in millions)
|
2010
|
2009
|
% Change
|
2010
|
2009
|
% Change
|
||||||||||||||||||
Selected income statement data:
|
||||||||||||||||||||||||
Net interest income
|
$ | 1,735 | $ | 1,586 | 9 | % | $ | 3,600 | $ | 3,090 | 17 | % | ||||||||||||
Non-interest income
|
560 | 795 | (30 | ) | 1,178 | 1,679 | (30 | ) | ||||||||||||||||
Total revenue
|
2,295 | 2,381 | (4 | ) | 4,778 | 4,769 | -- | |||||||||||||||||
Provision for loan and lease losses
|
675 | 1,336 | (49 | ) | 1,771 | 2,858 | (38 | ) | ||||||||||||||||
Non-interest expense
|
869 | 788 | 10 | 1,678 | 1,653 | 2 | ||||||||||||||||||
Income before taxes
|
751 | 257 | 192 | 1,329 | 258 | 415 | ||||||||||||||||||
Provision for income taxes
|
268 | 90 | 198 | 474 | 90 | 427 | ||||||||||||||||||
Net income
|
$ | 483 | $ | 167 | 189 | $ | 855 | $ | 168 | 409 | % | |||||||||||||
Selected metrics:
|
||||||||||||||||||||||||
Average loans held for investment
|
$ | 55,252 | $ | 65,862 | (16 | )% | $ | 56,672 | $ | 67,516 | (16 | )% | ||||||||||||
Average yield on loans held for investment
|
13.98 | % | 12.17 | % |
181bps
|
14.39 | % | 11.77 | % |
262bps
|
||||||||||||||
Revenue margin(1)
|
16.61 | 14.46 | 215 | 16.86 | 14.13 | 273 | ||||||||||||||||||
Net charge-off rate(2)
|
9.49 | 9.23 | 26 | 10.00 | 8.80 | 120 | ||||||||||||||||||
Purchase volume(3)
|
$ | 24,513 | $ | 23,611 | 4 | % | $ | 46,501 | $ | 45,213 | 3 | % |
Selected period-end data:
|
June 30, 2010
|
December 31, 2009
|
% Change
|
|||||||||
Loans held for investment
|
$ | 54,628 | $ | 60,300 | (9 | )% | ||||||
30+ day performing delinquency rate
|
4.79 | % | 5.78 | % |
(99
|
)bps |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||
(Dollars in millions)
|
2010
|
2009
|
% Change
|
2010
|
2009
|
% Change
|
||||||||||||||||||
Selected income statement data:
|
||||||||||||||||||||||||
Net interest income
|
$ | 242 | $ | 211 | 15 | % | $ | 490 | $ | 398 | 23 | % | ||||||||||||
Non-interest income
|
99 | 103 | (4 | ) | 199 | 205 | (3 | ) | ||||||||||||||||
Total revenue
|
341 | 314 | 9 | 689 | 603 | 14 | ||||||||||||||||||
Provision for loan and lease losses
|
90 | 184 | (51 | ) | 169 | 345 | (51 | ) | ||||||||||||||||
Non-interest expense
|
133 | 122 | 9 | 238 | 245 | (3 | ) | |||||||||||||||||
Income before taxes
|
118 | 8 | 1,375 | 282 | 13 | 2,069 | ||||||||||||||||||
Provision for income taxes
|
33 | 2 | 1,550 | 80 | 4 | 1,900 | ||||||||||||||||||
Net income
|
$ | 85 | $ | 6 | 1,317 | % | $ | 202 | $ | 9 | 2,144 | % | ||||||||||||
Selected metrics:
|
||||||||||||||||||||||||
Average loans held for investment
|
$ | 7,427 | $ | 8,328 | (11 | )% | $ | 7,620 | $ | 8,355 | (9 | )% | ||||||||||||
Average yield on loans held for investment
|
16.21 | % | 13.40 | % |
281bps
|
15.93 | % | 12.93 | % |
300bps
|
||||||||||||||
Revenue margin(1)
|
18.37 | 15.08 | 329 | 18.09 | 14.43 | 366 | ||||||||||||||||||
Net charge-off rate(2)
|
8.38 | 9.32 | (94 | ) | 8.61 | 8.30 | 31 | |||||||||||||||||
Purchase volume(3)
|
$ | 2,057 | $ | 2,136 | (4 | )% | $ | 3,993 | $ | 4,008 | — |
Selected period-end data:
|
June 30, 2010
|
December 31, 2009
|
% Change
|
|||||||||
Loans held for investment
|
$ | 7,269 | $ | 8,224 | (12 | )% | ||||||
30+ day performing delinquency rate
|
6.03 | % | 6.55 | % |
(52
|
)bps |
(1)
|
Revenue margin is calculated by dividing annualized revenues for the period by average loans held for investment during the period.
|
(2)
|
Net charge-off rate is calculated by dividing annualized net charge-offs for the period by average loans held for investment during the period.
|
(3)
|
Consists of purchase transactions for the period, net of returns. Excludes cash advance transactions.
|
·
|
Higher Net Interest Income: Despite a decline in average outstanding loans due to the run-off of the installment loan portfolio and reduced consumer demand, our Credit Card business experienced a significant increase in net interest income attributable to higher asset yields. The increase in the average yield on our credit card loan portfolio reflected the benefit of pricing changes that we implemented during 2009 and a reduction in the level of loans with low introductory promotional rates due to lower loan origination volumes. Net interest income also reflected the benefit of a net increase in previously suppressed billed finance charges and fees recognized in income, attributable to improving credit trends.
|
·
|
Lower Non-Interest Income: The decrease in non-interest income reflected the impact of an expected decline in overlimit fee revenue resulting from the February 22, 2010 implementation of Credit CARD Act regulations, as well as a reduction in customer accounts.
|
·
|
Lower Provision for Loan and Lease Losses: The significant reduction in the provision for loan and lease losses was attributable to continued improvement in credit performance trends, due in part to the slowly improving economic conditions, as well as lower period-end loans. As a result, we reduced the allowance for loan and lease losses for our Credit Card business by $665 million and $1.2 billion in the second quarter and first six months of 2010, respectively.
|
·
|
Higher Non-Interest Expense: Non-interest expense increased 10% in the second quarter of 2010 as compared to the second quarter of 2009, driven largely by an increase in reserves recorded for legal and non-income tax related contingencies. Non-interest expense in the first six months of 2010 was relatively flat compared with the first six months of 2009.
|
·
|
Decrease in Total Loans: Period-end loans held for investment in the Credit Card business declined by $6.6 billion, or 10%, during the first six months of 2010 to $61.9 billion as of June 30, 2010, from $68.5 billion as of December 31, 2009. The decrease was largely due to the expected run-off of installment loans in our Domestic Card division, continued low levels of marketing investment in response to the economic environment, elevated charge-off levels and normal seasonality in our revolving card portfolio.
|
·
|
Charge-off and Delinquency Statistics: Although net charge-off and delinquency rates remain elevated, these rates have continued to show signs of improvement in the second quarter of 2010. The net charge-off rate, after increasing from 9.24% in the second quarter of 2009 to a peak of 10.29% in the first quarter of 2010, decreased to 9.36% in the second quarter of 2010. The 30+ day performing delinquency rate decreased to 4.94% as of June 30, 2010, from 5.43% as of March 31, 2010 and 5.88% as of December 31, 2009. Based on strong credit performance trends, such as the significant decline in the 30+ day performing delinquency rate from 5.88% at the end of 2009, we believe net charge-offs for our Credit Card business peaked in the first quarter of 2010.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||
(Dollars in millions)
|
2010
|
2009
|
% Change
|
2010
|
2009
|
% Change
|
||||||||||||||||||
Selected income statement data:
|
||||||||||||||||||||||||
Net interest income
|
$ | 935 | $ | 826 | 13 | % | $ | 1,831 | $ | 1,550 | 18 | % | ||||||||||||
Non-interest income
|
162 | 226 | (28 | ) | 478 | 389 | 23 | |||||||||||||||||
Total revenue
|
1,097 | 1,052 | 4 | 2,309 | 1,939 | 19 | ||||||||||||||||||
Provision (benefit) for loan and lease losses
|
(112 | ) | 202 | (155 | ) | (62 | ) | 470 | (113 | ) | ||||||||||||||
Non-interest expense
|
735 | 725 | 1 | 1,423 | 1,305 | 9 | ||||||||||||||||||
Income before taxes
|
474 | 125 | 279 | 948 | 164 | 478 | ||||||||||||||||||
Provision for income taxes
|
169 | 44 | 284 | 338 | 57 | 493 | ||||||||||||||||||
Net income
|
$ | 305 | $ | 81 | 277 | % | $ | 610 | $ | 107 | 470 | % | ||||||||||||
Selected metrics:
|
||||||||||||||||||||||||
Average loans held for investment:
|
||||||||||||||||||||||||
Automobile
|
$ | 17,276 | $ | 20,303 | (15 | )% | $ | 17,521 | $ | 20,711 | (15 | )% | ||||||||||||
Mortgage
|
13,573 | 16,707 | (19 | ) | 14,531 | 13,303 | 9 | |||||||||||||||||
Retail banking
|
4,811 | 5,712 | (16 | ) | 4,926 | 5,636 | (13 | ) | ||||||||||||||||
Total consumer banking
|
$ | 35,660 | $ | 42,722 | (17 | )% | $ | 36,978 | $ | 39,650 | (7 | )% | ||||||||||||
Average yield on loans held for investment
|
8.99 | % | 8.69 | % |
30bps
|
8.97 | % | 9.03 | % |
(6)bps
|
||||||||||||||
Average deposits
|
$ | 77,082 | $ | 74,321 | 4 | % | $ | 76,104 | $ | 68,558 | 11 | % | ||||||||||||
Average deposit interest rate
|
1.18 | % | 1.76 | % |
(58)bps
|
1.23 | % | 1.89 | % |
(66)bps
|
||||||||||||||
Core deposit intangible amortization
|
$ | 36 | $ | 47 | (23 | )% | $ | 74 | $ | 83 | (11 | )% | ||||||||||||
Net charge-off rate(1)
|
1.47 | % | 2.23 | % |
(76)bps
|
1.76 | % | 2.72 | % |
(96)bps
|
||||||||||||||
Auto loan originations
|
$ | 1,765 | $ | 1,342 | 32 | % | $ | 3,108 | $ | 2,805 | 11 | % |
Selected period-end data:
|
June 30, 2010
|
December 31, 2009
|
% Change
|
|||||||||
Loans held for investment:
|
||||||||||||
Automobile
|
$ | 17,221 | $ | 18,186 | (5 | )% | ||||||
Mortgage
|
13,322 | 14,893 | (11 | ) | ||||||||
Retail banking
|
4,770 | 5,135 | (7 | ) | ||||||||
Total consumer banking
|
$ | 35,313 | $ | 38,214 | (8 | )% | ||||||
Nonperforming loans as a percentage of loans held for investment(2)
|
1.82 | % | 1.45 | % |
37
|
bps | ||||||
Nonperforming asset rate(3)
|
2.00 | 1.60 |
40
|
bps | ||||||||
Period-end deposits
|
$ | 77,407 | $ | 74,145 | 4 | |||||||
30+ day performing delinquency rate(4)
|
4.15 | % | 5.43 | % |
(128
|
)bps | ||||||
Period-end loans serviced for other investors
|
$ | 23,730 | $ | 30,283 | (22 | )% |
(1)
|
The denominator used in calculating the credit performance metrics includes the loans acquired as part of the Chevy Chase Bank acquisition. The net charge-off rates, excluding Chevy Chase Bank loans from the denominator, was 1.76% and 2.72% for the three months ended June 30, 2010 and 2009, respectively, and 2.10% and 3.13% for the six months ended June 30, 2010 and 2009, respectively.
|
(2)
|
Nonperforming loans as a percentage of period-end loans held for investment, excluding Chevy Chase Bank loans from the denominator, was 2.16% as of June 30, 2010 and 1.75% as of December 31, 2009.
|
(3)
|
Nonperforming assets consist of nonperforming loans and real-estate owned (“REO”). The nonperforming asset rate is calculated by dividing nonperforming assets as of the end of the period by period-end loans held for investment and REO. The nonperforming asset rate, excluding Chevy Chase Bank loans from the denominator, was 2.38% as of June 30, 2010 and 1.93% as of December 31, 2009.
|
(4)
|
The 30+ day performing delinquency rate, excluding Chevy Chase Bank loans from the denominator, was 4.93% as of June 30, 2010 and 6.56% as of December 31, 2009
|
·
|
Higher Net Interest Income: Despite a decline in average interest-earning assets due to the continued expected run-off of mortgage loans, our Consumer Banking business experienced a significant increase in net interest income. The increase was primarily attributable to improved margins in the auto portfolio, growth in deposits and improved deposit spreads as the mix of our deposits shifted to lower cost consumer savings and money market deposits from higher cost time deposits. In addition, as a result of the overall low interest rate environment, we made targeted pricing changes and repriced higher interest rate deposit accounts to lower rates.
|
·
|
Non-Interest Income: The decrease in non-interest income in the second quarter of 2010 from the second quarter of 2009 was due to the recognition of mortgage servicing rights impairment in the second quarter of 2010 due to the expected reduction in servicing advance expenses. In the first quarter of 2010, we recognized a net gain of $128 million from the sale of interest-only bonds and the related deconsolidation of certain option-adjustable rate mortgage trusts that were consolidated on January 1, 2010 as a result of our adoption of the new consolidation accounting standards. The increase in non-interest income in the first six months of 2010 from the first six months of 2009 was primarily attributable to the deconsolidation-related gain recorded in the first quarter of 2010.
|
·
|
Lower Provision for Loan and Lease Losses: The significant reduction in the provision for loan and lease losses was attributable to continued improvement in credit performance trends, due in part to the slowly improving economic conditions, as well as lower period-end loans. As a result, we reduced the allowance for loan and lease losses for our Consumer Banking business by $234 million and $375 million in the second quarter and first six months of 2010, respectively.
|
·
|
Higher Non-Interest Expense: The modest increase in non-interest expense was attributable to infrastructure investments made in the second quarter and first six months of 2010 to attract and support new business volume.
|
·
|
Decrease in Total Loans: Period-end loans held for investment in the Consumer Banking business declined by $2.9 billion, or 8%, during the first six months of 2010 to $35.3 billion as of June 30, 2010, from $38.2 billion as of December 31, 2009, primarily due to the expected run-off of mortgage loans.
|
·
|
Increase in Deposits: Period-end deposits in the Consumer Banking business increased by $3.3 billion, or 4%, during the first six months of 2010 to $77.4 billion as of June 30, 2010, from $74.1 billion as of December 31, 2009, reflecting the success of our retail banking strategy and continued efforts to attract new business in our National Direct Bank.
|
·
|
Charge-off and Delinquency Statistics: The net charge-off and delinquency rates for the Consumer Banking business continued to show signs of improvement in the second quarter of 2010. The net charge-off rate, after increasing from 2.23% in the second quarter of 2009 to a peak of 2.85% in the fourth quarter of 2009, began to decrease in 2010 to 1.47% in the second quarter of 2010. The 30+ day performing delinquency rate, which remained relatively stable at 4.15% as of June 30, 2010, compared with 4.13% as of March 31, 2010, reflected a decline from the rate of 5.43% as of December 31, 2009.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||
(Dollars in millions)
|
2010
|
2009
|
% Change
|
2010
|
2009
|
% Change
|
||||||||||||||||||
Selected income statement data:
|
||||||||||||||||||||||||
Net interest income
|
$ | 319 | $ | 279 | 14 | % | $ | 631 | $ | 524 | 20 | % | ||||||||||||
Non-interest income
|
60 | 49 | 22 | 102 | 90 | 13 | ||||||||||||||||||
Total revenue
|
379 | 328 | 16 | 733 | 614 | 19 | ||||||||||||||||||
Provision for loan and lease losses
|
62 | 122 | (49 | ) | 300 | 240 | 25 | |||||||||||||||||
Non-interest expense
|
198 | 156 | 27 | 390 | 297 | 31 | ||||||||||||||||||
Income before taxes
|
119 | 50 | 138 | 43 | 77 | (44 | ) | |||||||||||||||||
Provision for income taxes
|
42 | 17 | 147 | 15 | 27 | (44 | ) | |||||||||||||||||
Net income
|
$ | 77 | $ | 33 | 133 | % | $ | 28 | $ | 50 | (44 | )% | ||||||||||||
Selected metrics:
|
||||||||||||||||||||||||
Average loans held for investment:
|
||||||||||||||||||||||||
Commercial and multifamily real estate
|
$ | 13,543 | $ | 14,122 | (4 | )% | $ | 13,629 | $ | 13,782 | (1 | )% | ||||||||||||
Middle market
|
10,276 | 10,429 | (1 | ) | 10,300 | 10,217 | 1 | |||||||||||||||||
Specialty lending
|
3,654 | 3,472 | 5 | 3,632 | 3,488 | 4 | ||||||||||||||||||
Total commercial lending
|
27,473 | 28,023 | (2 | ) | 27,561 | 27,487 | ** | |||||||||||||||||
Small-ticket commercial real estate
|
2,060 | 2,542 | (19 | ) | 2,067 | 2,571 | (20 | ) | ||||||||||||||||
Total commercial banking
|
$ | 29,533 | $ | 30,565 | (3 | )% | $ | 29,628 | $ | 30,058 | (1 | )% | ||||||||||||
Average yield on loans held for investment
|
4.94 | % | 5.01 | % |
(7
|
)bps | 4.99 | % | 4.97 | % |
2
|
bps | ||||||||||||
Average deposits
|
$ | 22,171 | $ | 17,021 | 30 | % | $ | 22,016 | $ | 16,536 | 33 | % | ||||||||||||
Average deposit interest rate
|
0.67 | % | 0.77 | % |
(10
|
)bps | 0.71 | % | 0.86 | % |
(15
|
)bps | ||||||||||||
Core deposit intangible amortization
|
$ | 14 | $ | 10 | 40 | % | $ | 28 | $ | 19 | 47 | % | ||||||||||||
Net charge-off rate(1)
|
1.21 | % | 0.89 | % |
32
|
bps | 1.29 | % | 0.73 | % |
56
|
bps |
Selected period-end data:
|
June 30, 2010
|
December 31, 2009
|
% Change
|
|||||||||
Loans held for investment:
|
||||||||||||
Commercial and multifamily real estate
|
$ | 13,580 | $ | 13,843 | (2 | )% | ||||||
Middle market
|
10,203 | 10,062 | 1 | |||||||||
Specialty lending
|
3,815 | 3,555 | 7 | |||||||||
Total commercial lending
|
27,598 | 27,460 | 1 | |||||||||
Small-ticket commercial real estate
|
1,977 | 2,153 | (8 | ) | ||||||||
Total commercial banking
|
$ | 29,575 | $ | 29,613 | ** | % | ||||||
Nonperforming loans as a percentage of loans held for investment(2)
|
2.04 | % | 2.37 | % |
(33
|
)bps | ||||||
Nonperforming asset rate(3)
|
2.20 | 2.52 | (32 | ) | ||||||||
Period-end deposits
|
$ | 21,527 | $ | 20,480 | 5 | % |
**
|
Change is less than one percent.
|
(1)
|
The denominator used in calculating the credit performance metrics includes the loans acquired as part of the Chevy Chase Bank acquisition. The net charge-off rates, excluding Chevy Chase Bank loans from the denominator, was 1.24% and 0.92% for the three months ended June 30, 2010 and 2009, respectively, and 1.33% and 0.75% for the six months ended June 30, 2010 and 2009, respectively.
|
(2)
|
Nonperforming loans as a percentage of period-end loans held for investment, excluding Chevy Chase Bank loans from the denominator, was 2.09% as of June 30, 2010 and 2.43% as of December 31, 2009.
|
(3)
|
Nonperforming assets consist of nonperforming loans and real-estate owned (“REO”). The nonperforming asset rate is calculated by dividing nonperforming assets as of the end of the period by period-end loans held for investment and REO. The nonperforming asset rate, excluding Chevy Chase Bank loans from the denominator, was 2.26% as of June 30, 2010 and 2.62% as of December 31, 2009.
|
·
|
Higher Net Interest Income: The increase in net interest income was driven by strong deposit growth and a reduction in deposit interest rates.
|
·
|
Higher Non-Interest Income: The increase in non-interest income was driven by growth in the middle market segment driven by improvements in energy banking and commercial and industrial portfolios.
|
·
|
Lower Provision for Loan and Lease Losses: The decrease in the provision for loan and lease losses in the second quarter of 2010 from the second quarter of 2009 was attributable to a stabilization in credit performance trends since the end of 2009, coupled with the favorable impact from refinements we made in the second quarter of 2010 in estimating the allowance for our commercial loan portfolio. See “Critical Accounting Policies and Estimates—Allowance for Loan and Lease Losses” for additional information on this change. The increase in the provision for loan and lease losses for the first six months of 2010 was attributable to a higher build in our allowance for loan and lease losses as a result of the deterioration in the credit performance trends in the second half of 2009. Since the end of 2009, however, the credit performance trends for our commercial loan portfolio have stabilized and began to show some signs of improvement.
|
·
|
Higher Non-Interest Expense: The increase in non-interest expense was attributable to higher loan workout expenses and losses related to the write-down of REO, combined with increases in core deposit intangible amortization expense, integration costs related to the Chevy Chase Bank acquisition and corporate overhead costs.
|
·
|
Decrease in Total Loans: Period-end loans held for investment in the Commercial Banking business declined by $38 million, or less than one percent, during the first six months of 2010 to $29.6 billion as of June 30, 2010, due to run-off of the small-ticket commercial loan portfolio, which was partially offset by an increase in loan originations in the second quarter of 2010.
|
·
|
Increase in Deposits: Period-end deposits in the Commercial Banking business increased by $1.0 billion, or 5%, during the first six months of 2010 to $21.5 billion as of June 30, 2010, driven by growth in the government banking, commercial real estate and middle market segments.
|
·
|
Charge-off Statistics: Charge-offs in our Commercial Banking business, which increased significantly during the third and fourth quarters of 2009, have declined and begun to stabilize. The net charge-off rate, after increasing from 0.89% in the second quarter of 2009 to 2.91% in the fourth quarter of 2009, began to decrease in 2010 to 1.21% in the second quarter of 2010.
|
(Dollars in millions)
|
June 30, 2010
|
December 31, 2009
|
||||||
Cash and cash equivalents
|
$ | 5,199 | $ | 8,685 | ||||
Securities available for sale(1)
|
39,424 | 38,830 | ||||||
Less: Pledged securities available for sale
|
(10,583 | ) | (11,883 | ) | ||||
Unencumbered available-for-sale securities
|
28,841 | 26,947 | ||||||
Undrawn committed securitization borrowing facilities
|
5,569 | 2,913 | ||||||
Total liquidity reserves
|
$ | 39,609 | $ | 38,545 |
(1)
|
The weighted average life of our available-for-sale securities was approximately 4.0 and 4.9 years as of June 30, 2010 and December 31, 2009, respectively.
|
(Dollars in millions)
|
June 30, 2010
|
December 31, 2009
|
||||||
Non-interest bearing
|
$ | 14,159 | $ | 13,439 | ||||
NOW accounts
|
10,928 | 12,077 | ||||||
Savings accounts
|
21,761 | 17,019 | ||||||
Money market deposit accounts
|
42,927 | 38,094 | ||||||
Other consumer time deposits
|
19,208 | 25,456 | ||||||
Total core deposits
|
108,983 | 106,085 | ||||||
Public fund certificates of deposit $100,000 or more
|
219 | 579 | ||||||
Certificates of deposit $100,000 or more
|
7,245 | 8,248 | ||||||
Foreign time deposits
|
884 | 897 | ||||||
Total company deposits
|
$ | 117,331 | $ | 115,809 |
·
|
Federal Reserve’s Discount Window: The Discount Window allows eligible institutions to borrow funds from the Federal Reserve, typically on a short-term basis, to meet temporary liquidity needs. Borrowers must post collateral, which can be made up of securities or consumer or commercial loans. As of June 30, 2010, we were eligible to borrow up to $5.3 billion through the Discount Window. The eligible amount is reduced dollar for dollar by any borrowings under the TAF program. We did not borrow funds from the Discount Window during the second quarter or for the six months of 2010.
|
·
|
Federal Reserve’s Term Auction Facility: The TAF is designed to help increase liquidity in the U.S. credit markets. The Federal Reserve auctions collateral-backed short term loans under TAF. The auctions allow financial institutions to borrow funds at an interest rate below the Federal Reserve’s discount rate. As of June 30, 2010, we were eligible to borrow up to $2.6 billion under the TAF. The eligible amount is reduced dollar for dollar by any borrowings made under the Discount Window. We did not borrow funds through the TAF during the second quarter or for the six months of 2010.
|
(Dollars or dollar equivalents in millions)
|
Effective/ Issue Date
|
Capacity (1)
|
Outstanding
|
Availability(1)
|
Final Maturity(2)
|
|||||||||||||||
Senior and Subordinated Global Bank Note Program(3)
|
6/05 | $ | 3,141 | $ | 1,341 | $ | 1,800 | — | ||||||||||||
FHLB Advances (4)
|
— | 10,162 | 1,455 | 8,707 | — | |||||||||||||||
Committed Securitization Conduits(5)
|
— | 7,032 | 1,463 | 5,569 | 11/11 | |||||||||||||||
Federal Reserve Discount Window
|
— | 5,284 | 0 | 5,284 | — | |||||||||||||||
Federal Reserve Term Auction Facility
|
— | 2,642 | 0 | 2,642 | — |
(1)
|
All funding sources are non-revolving. Funding availability under all other sources is subject to market conditions. Capacity is the maximum amount that can be borrowed. Availability is the amount that can still be borrowed against the facility
|
(2)
|
Maturity date refers to the date the facility terminates, where applicable.
|
(3)
|
The Global Bank Note Program gives COBNA the ability to issue senior and subordinated notes with maturities of 30 days or more. COBNA last issued notes under the program in 2004, and the program was last updated in 2005.
|
(4)
|
The ability to draw down funding is based on membership status, and the amount is dependent upon the Banks’ ability to post collateral.
|
(5)
|
Securitization committed capacity was established at various dates and is scheduled to terminate in November 2011.
|
June 30, 2010
|
December 31, 2009
|
|||||||
Impact to projected base-line net interest income:
|
||||||||
+ 200 basis points (1)
|
0.2 | % | (0.4 | )% | ||||
- 50 basis points (1)
|
(0.3 | )% | (0.1 | )% | ||||
Impact to economic value of equity:
|
||||||||
+ 200 basis points (2)
|
(0.2 | )% | (3.2 | )% | ||||
- 50 basis points (2)
|
(0.7 | )% | 0.3 | % |
(1)
|
The impact includes our net interest income and mortgage servicing rights valuation change (net of hedges). For net interest income, the rate scenarios are based on a hypothetical gradual increase in interest rates of 200 basis points and a hypothetical gradual decrease of 50 basis points to forward rates over the next 9 months. For the mortgage servicing rights valuation change (net of hedges), the rate scenarios are based on a hypothetical instantaneous parallel rate shock of plus 200 basis points and minus 50 basis points to spot rates.
|
(2)
|
Based on a hypothetical instantaneous parallel shift in the level of interest rates of plus 200 basis points and minus 50 basis points to spot rates.
|
Regulatory Filing Basis Ratios
|
Minimum for Capital Adequacy Purposes
|
To Be “Well Capitalized” Under Prompt Corrective Action Provisions
|
||||||||||
As of June 30, 2010:
|
||||||||||||
Capital One Financial Corp.(2)
|
||||||||||||
Tier 1 capital
|
9.93 | % | 4.00 | % | N/A | |||||||
Total capital
|
16.99 | 8.00 | N/A | |||||||||
Tier 1 leverage
|
6.73 | 4.00 | N/A | |||||||||
Capital One Bank (USA) N.A.
|
||||||||||||
Tier 1 capital
|
14.13 | % | 4.00 | % | 6.00 | % | ||||||
Total capital
|
28.26 | 8.00 | 10.00 | |||||||||
Tier 1 leverage
|
7.95
|
4.00 | 5.00 | |||||||||
Capital One, N.A.
|
||||||||||||
Tier 1 capital
|
10.52 | % | 4.00 | % | 6.00 | % | ||||||
Total capital
|
11.87 | 8.00 | 10.00 | |||||||||
Tier 1 leverage
|
7.79 | 4.00 | 5.00 | |||||||||
As of December 31, 2009:
|
||||||||||||
Capital One Financial Corp.(2)
|
||||||||||||
Tier 1 capital
|
13.75 | % | 4.00 | % | N/A | |||||||
Total capital
|
17.70 | 8.00 | N/A | |||||||||
Tier 1 leverage
|
10.28 | 4.00 | N/A | |||||||||
Capital One Bank (USA) N.A.
|
||||||||||||
Tier 1 capital
|
18.27 | % | 4.00 | % | 6.00 | % | ||||||
Total capital
|
26.40 | 8.00 | 10.00 | |||||||||
Tier 1 leverage
|
13.03 | 4.00 | 5.00 | |||||||||
Capital One, N.A.
|
||||||||||||
Tier 1 capital
|
10.22 | % | 4.00 | % | 6.00 | % | ||||||
Total capital
|
11.46 | 8.00 | 10.00 | |||||||||
Tier 1 leverage
|
7.42 | 4.00 | 5.00 |
(1)
|
Effective January 1, 2010, we are no longer required to apply the subprime capital provisions to credit card loans with a credit score equal to or greater than 660. Accordingly, we will no longer disclose these ratios. See our 2009 Form 10-K under “Part II—Item 7. MD&A—Capital” for these ratios as of December 31, 2009.
|
(2)
|
The regulatory framework for prompt corrective action does not apply to Capital One Financial Corp. because it is a bank holding company.
|
1.
|
Individual businesses take and manage risk in pursuit of strategic, financial and other business objectives.
|
2.
|
Independent risk management organizations support individual businesses by providing risk management tools and policies and by aggregating risks; in some cases, risks are managed centrally.
|
3.
|
The Board of Directors and top management review our aggregate risk position and establish the risk appetite.
|
·
|
general economic and business conditions in the U.S., the U.K., or our local markets, including conditions affecting employment levels, interest rates, consumer income and confidence, spending and savings that may affect consumer bankruptcies, defaults, charge-offs and deposit activity;
|
·
|
an increase or decrease in credit losses (including increases due to a worsening of general economic conditions in the credit environment);
|
·
|
financial, legal, regulatory (including the impact of the Dodd-Frank Act and the regulations to be promulgated thereunder), tax or accounting changes or actions, including with respect to any litigation matter involving us;
|
·
|
increases or decreases in interest rates;
|
·
|
the success of our marketing efforts in attracting and retaining customers;
|
·
|
our ability to securitize our credit cards and consumer loans and to otherwise access the capital markets at attractive rates and terms to capitalize and fund our operations and future growth;
|
·
|
with respect to financial and other products, increases or decreases in our aggregate loan balances and/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 we incurred and attrition of loan balances;
|
·
|
the level of future repurchase or indemnification requests we may receive, the actual future performance of loans relating to such requests, the success rates of claimants against us, any developments in litigation and the actual recoveries we may make on any collateral relating to claims against us;
|
·
|
the amount and rate of deposit growth;
|
·
|
our ability to control costs;
|
·
|
changes in the reputation of or expectations regarding the financial services industry and/or us with respect to practices, products or financial condition;
|
·
|
any significant disruption in our operations or technology platform;
|
·
|
our ability to maintain a compliance infrastructure suitable for our size and complexity;
|
·
|
the amount of, and rate of growth in, our expenses as our business develops or changes or as it expands into new market areas;
|
·
|
our ability to execute on our strategic and operational plans;
|
·
|
any significant disruption of, or loss of public confidence in, the United States Mail service affecting our response rates and consumer payments;
|
·
|
our 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;
|
·
|
the risk that cost savings and any other synergies from our acquisitions may not be fully realized or may take longer to realize than expected;
|
·
|
disruptions from our acquisitions negatively impacting our ability to maintain relationships with customers, employees or suppliers;
|
·
|
competition from providers of products and services that compete with our businesses; and
|
·
|
other risk factors listed from time to time in reports that we file with the SEC, including, but not limited to, our 2009 Form 10-K.
|
Three Months Ended
|
||||||||||||||||||||||||||||||||||||
June 30, 2010
|
June 30, 2009(2)
|
|||||||||||||||||||||||||||||||||||
Reported
|
Reported
|
Managed
|
||||||||||||||||||||||||||||||||||
(Dollars in millions)
|
Average Balance
|
Income/ Expense
|
Yield/ Rate
|
Average Balance
|
Income/ Expense
|
Yield/ Rate
|
Average Balance
|
Income/ Expense
|
Yield/ Rate
|
|||||||||||||||||||||||||||
Assets:
|
||||||||||||||||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||||||||||||||
Consumer loans(1)
|
||||||||||||||||||||||||||||||||||||
Domestic
|
$ | 91,243 | $ | 2,882 | 12.63 | % | $ | 71,489 | $ | 1,771 | 9.91 | % | $ | 109,120 | $ | 2,906 | 10.65 | % | ||||||||||||||||||
International
|
7,427 | 296 | 15.94 | % | 2,628 | 82 | 12.48 | % | 8,328 | 278 | 13.35 | % | ||||||||||||||||||||||||
Total consumer loans
|
$ | 98,670 | $ | 3,178 | 12.88 | % | $ | 74,117 | $ | 1,853 | 10.00 | % | $ | 117,448 | $ | 3,184 | 10.84 | % | ||||||||||||||||||
Commercial loans
|
29,533 | 298 | 4.04 | % | 30,565 | 384 | 5.03 | % | 30,565 | 384 | 5.03 | % | ||||||||||||||||||||||||
Total loans held for investment
|
$ | 128,203 | $ | 3,476 | 10.85 | % | $ | 104,682 | $ | 2,237 | 8.55 | % | $ | 148,013 | $ | 3,568 | 9.64 | % | ||||||||||||||||||
Investment securities
|
39,022 | 342 | 3.51 | % | 37,499 | 412 | 4.39 | % | 37,499 | 412 | 4.39 | % | ||||||||||||||||||||||||
Other
|
||||||||||||||||||||||||||||||||||||
Domestic
|
6,911 | 17 | 0.98 | % | 7,638 | 60 | 3.14 | % | 5,121 | 17 | 1.33 | % | ||||||||||||||||||||||||
International
|
514 | 0 | 0.00 | % | 985 | 8 | 3.25 | % | 575 | 0 | 0.00 | % | ||||||||||||||||||||||||
Total
|
$ | 7,425 | $ | 17 | 0.92 | % | $ | 8,623 | $ | 68 | 3.15 | % | $ | 5,696 | $ | 17 | 1.19 | % | ||||||||||||||||||
Total interest-earning assets(3)
|
$ | 174,650 | $ | 3,835 | 8.78 | % | $ | 150,804 | 2,717 | 7.21 | % | $ | 191,208 | $ | 3,997 | 8.36 | % | |||||||||||||||||||
Cash and due from banks(3)
|
2,411 | 3,129 | 3,129 | |||||||||||||||||||||||||||||||||
Allowance for loan and lease losses (3)
|
(7,735 | ) | (4,657 | ) | (4,657 | ) | ||||||||||||||||||||||||||||||
Premises and equipment, net(3)
|
2,723 | 2,812 | 2,812 | |||||||||||||||||||||||||||||||||
Other (3)
|
27,280 | 25,540 | 25,910 | |||||||||||||||||||||||||||||||||
Total assets from discontinued operations
|
28 | 38 | 38 | |||||||||||||||||||||||||||||||||
Total assets
|
$ | 199,357 | $ | 177,666 | $ | 218,440 | ||||||||||||||||||||||||||||||
Liabilities and Equity:
|
||||||||||||||||||||||||||||||||||||
Interest-bearing liabilities
|
||||||||||||||||||||||||||||||||||||
Deposits
|
||||||||||||||||||||||||||||||||||||
Domestic
|
$ | 104,163 | $ | 368 | 1.41 | % | $ | 105,769 | $ | 551 | 2.08 | % | $ | 105,769 | $ | 551 | 2.08 | % | ||||||||||||||||||
International (4)
|
0 | 0 | 0.00 | % | 1,264 | 9 | 2.85 | % | 1,264 | 9 | 2.85 | % | ||||||||||||||||||||||||
Total deposits
|
$ | 104,163 | $ | 368 | 1.41 | % | $ | 107,033 | $ | 560 | 2.09 | % | $ | 107,033 | $ | 560 | 2.09 | % | ||||||||||||||||||
Securitized debt
|
||||||||||||||||||||||||||||||||||||
Domestic
|
$ | 30,333 | $ | 182 | 2.40 | % | $ | 5,876 | 74 | 5.04 | % | $ | 41,089 | 305 | 2.97 | % | ||||||||||||||||||||
International
|
4,915 | 30 | 2.44 | % | 0 | 0 | 0.00 | % | 5,593 | 37 | 2.65 | % | ||||||||||||||||||||||||
Total securitized debt
|
$ | 35,248 | $ | 212 | 2.41 | % | $ | 5,876 | 74 | 5.04 | % | $ | 46,682 | $ | 342 | 2.93 | % | |||||||||||||||||||
Senior and subordinated notes
|
8,760 | 72 | 3.29 | % | 8,323 | 57 | 2.74 | % | 8,323 | 57 | 2.74 | % | ||||||||||||||||||||||||
Other borrowings
|
||||||||||||||||||||||||||||||||||||
Domestic
|
$ | 4,871 | $ | 84 | 6.90 | % | $ | 9,315 | 79 | 3.39 | % | $ | 9,315 | 79 | 3.39 | % | ||||||||||||||||||||
International
|
1,504 | 2 | 0.53 | % | 1,084 | 2 | 0.74 | % | 1,084 | 2 | 0.74 | % | ||||||||||||||||||||||||
Total other borrowings
|
$ | 6,375 | $ | 86 | 5.40 | % | $ | 10,399 | $ | 81 | 3.12 | % | $ | 10,399 | $ | 81 | 3.12 | % | ||||||||||||||||||
Total interest-bearing liabilities(3)
|
$ | 154,546 | $ | 738 | 1.91 | % | $ | 131,631 | 772 | 2.35 | % | $ | 172,437 | 1,040 | 2.41 | % | ||||||||||||||||||||
Non-interest bearing deposits(3)
|
14,321 | 12,570 | 12,570 | |||||||||||||||||||||||||||||||||
Other (3)
|
5,617 | 5,641 | 5,609 | |||||||||||||||||||||||||||||||||
Total liabilities from discontinued operations
|
347 | 156 | 156 | |||||||||||||||||||||||||||||||||
Total liabilities
|
$ | 174,831 | $ | 149,998 | $ | 190,772 | ||||||||||||||||||||||||||||||
Equity (5)
|
24,526 | 27,668 | 27,668 | |||||||||||||||||||||||||||||||||
Total liabilities and equity
|
$ | 199,357 | $ | 177,666 | $ | 218,440 | ||||||||||||||||||||||||||||||
Net interest spread
|
6.87 | % | 4.86 | % | 5.95 | % | ||||||||||||||||||||||||||||||
Interest income to average earning assets
|
8.78 | % | 7.21 | % | 8.36 | % | ||||||||||||||||||||||||||||||
Interest expense to average earning assets
|
1.69 | % | 2.05 | % | 2.17 | % | ||||||||||||||||||||||||||||||
Net interest margin
|
7.09 | % | 5.16 | % | 6.19 | % |
(1)
|
Interest income includes past due fees on loans totaling approximately $312 million for the three months ended June 30, 2010 and $170 million and $335 million on the reported and managed basis, respectively, for the three months ended June 30, 2009.
|
(2)
|
Certain prior period amounts have been reclassified to conform with the current period presentation.
|
(3)
|
Based on continuing operations.
|
(4)
|
U.K. deposit business was sold during the third quarter of 2009.
|
(5)
|
Includes a reduction of $2.9 billion due to the impact from the consolidation of certain securitization trusts.
|
Six Months Ended
|
||||||||||||||||||||||||||||||||||||
June 30, 2010
|
June 30, 2009(2)
|
|||||||||||||||||||||||||||||||||||
Reported
|
Reported
|
Managed
|
||||||||||||||||||||||||||||||||||
(Dollars in millions)
|
Average Balance
|
Income/ Expense
|
Yield/ Rate
|
Average Balance
|
Income/ Expense
|
Yield/ Rate
|
Average Balance
|
Income/ Expense
|
Yield/ Rate
|
|||||||||||||||||||||||||||
Assets:
|
||||||||||||||||||||||||||||||||||||
Interest-earning assets:
|
||||||||||||||||||||||||||||||||||||
Consumer loans(1)
|
||||||||||||||||||||||||||||||||||||
Domestic
|
$ | 93,975 | $ | 5,844 | 12.44 | % | $ | 71,151 | $ | 3,496 | 9.83 | % | $ | 109,236 | $ | 5,749 | 10.53 | % | ||||||||||||||||||
International
|
7,619 | 601 | 15.78 | % | 2,806 | 174 | 12.40 | % | 8,355 | 540 | 12.93 | % | ||||||||||||||||||||||||
Total consumer loans
|
$ | 101,594 | $ | 6,445 | 12.69 | % | $ | 73,957 | $ | 3,670 | 9.92 | % | $ | 117,591 | $ | 6,289 | 10.70 | % | ||||||||||||||||||
Commercial loans
|
29,627 | 689 | 4.65 | % | 30,058 | 758 | 5.04 | % | 30,058 | 758 | 5.04 | % | ||||||||||||||||||||||||
Total loans held for investment
|
$ | 131,221 | $ | 7,134 | 10.87 | % | $ | 104,015 | $ | 4,428 | 8.51 | % | $ | 147,649 | $ | 7,047 | 9.55 | % | ||||||||||||||||||
Investment securities
|
38,525 | 691 | 3.59 | % | 35,871 | 808 | 4.51 | % | 35,871 | 808 | 4.51 | % | ||||||||||||||||||||||||
Other
|
||||||||||||||||||||||||||||||||||||
Domestic
|
7,920 | 39 | 0.98 | % | 6,791 | 118 | 3.48 | % | 4,412 | 31 | 1.41 | % | ||||||||||||||||||||||||
International
|
608 | 1 | 0.33 | % | 912 | 13 | 2.85 | % | 577 | 2 | 0.69 | % | ||||||||||||||||||||||||
Total
|
$ | 8,528 | $ | 40 | 0.94 | % | $ | 7,703 | $ | 131 | 3.40 | % | $ | 4,989 | $ | 33 | 1.32 | % | ||||||||||||||||||
Total interest-earning assets(3)
|
$ | 178,274 | $ | 7,865 | 8.82 | % | $ | 147,589 | $ | 5,367 | 7.27 | % | $ | 188,509 | $ | 7,888 | 8.37 | % | ||||||||||||||||||
Cash and due from banks(3)
|
2,336 | 3,110 | 3,110 | |||||||||||||||||||||||||||||||||
Allowance for loan and lease losses (3)
|
(8,040 | ) | (4,590 | ) | (4,590 | ) | ||||||||||||||||||||||||||||||
Premises and equipment, net(3)
|
2,724 | 2,653 | 2,653 | |||||||||||||||||||||||||||||||||
Other (3)
|
27,839 | 24,365 | 24,669 | |||||||||||||||||||||||||||||||||
Total assets from discontinued operations
|
26 | 26 | 26 | |||||||||||||||||||||||||||||||||
Total assets
|
$ | 203,159 | $ | 173,153 | $ | 214,377 | ||||||||||||||||||||||||||||||
Liabilities and Equity:
|
||||||||||||||||||||||||||||||||||||
Interest-bearing liabilities
|
||||||||||||||||||||||||||||||||||||
Deposits
|
||||||||||||||||||||||||||||||||||||
Domestic
|
$ | 104,083 | $ | 767 | 1.47 | % | $ | 102,728 | $ | 1,166 | 2.27 | % | $ | 102,728 | $ | 1,166 | 2.27 | % | ||||||||||||||||||
International (4)
|
0 | 0 | 0.00 | % | 1,319 | 21 | 3.18 | % | 1,319 | 21 | 3.18 | % | ||||||||||||||||||||||||
Total deposits
|
$ | 104,083 | $ | 767 | 1.47 | % | $ | 104,047 | $ | 1,187 | 2.28 | % | $ | 104,047 | $ | 1,187 | 2.28 | % | ||||||||||||||||||
Securitized debt
|
||||||||||||||||||||||||||||||||||||
Domestic
|
$ | 34,253 | $ | 390 | 2.28 | % | $ | 6,458 | $ | 165 | 5.11 | % | $ | 42,296 | $ | 638 | 3.02 | % | ||||||||||||||||||
International
|
5,230 | 64 | 2.45 | % | 0 | 0 | 0.00 | % | 5,446 | 79 | 2.90 | % | ||||||||||||||||||||||||
Total securitized debt
|
$ | 39,483 | $ | 454 | 2.30 | % | $ | 6,458 | $ | 165 | 5.11 | % | $ | 47,742 | $ | 717 | 3.00 | % | ||||||||||||||||||
Senior and subordinated notes
|
8,758 | 140 | 3.20 | % | $ | 8,050 | $ | 115 | 2.86 | % | $ | 8,050 | $ | 115 | 2.86 | % | ||||||||||||||||||||
Other borrowings
|
||||||||||||||||||||||||||||||||||||
Domestic
|
$ | 5,292 | $ | 173 | 6.54 | % | $ | 8,350 | $ | 158 | 3.78 | % | $ | 8,350 | $ | 158 | 3.78 | % | ||||||||||||||||||
International
|
1,608 | 6 | 0.75 | % | 1,187 | 4 | 0.67 | % | 1,187 | 4 | 0.67 | % | ||||||||||||||||||||||||
Total other borrowings
|
$ | 6,900 | $ | 179 | 5.19 | % | $ | 9,537 | $ | 162 | 3.40 | % | $ | 9,537 | $ | 162 | 3.40 | % | ||||||||||||||||||
Total interest-bearing liabilities(3)
|
$ | 159,224 | $ | 1,540 | 1.93 | % | $ | 128,092 | 1,629 | 2.54 | % | $ | 169,376 | 2,181 | 2.58 | % | ||||||||||||||||||||
Non-interest bearing deposits(3)
|
13,928 | 11,920 | 11,920 | |||||||||||||||||||||||||||||||||
Other (3)
|
5,628 | 5,633 | 5,573 | |||||||||||||||||||||||||||||||||
Total liabilities from discontinued operations
|
288 | 146 | 146 | |||||||||||||||||||||||||||||||||
Total liabilities
|
$ | 179,068 | $ | 145,791 | $ | 187,015 | ||||||||||||||||||||||||||||||
Equity (5)
|
24,091 | 27,362 | 27,362 | |||||||||||||||||||||||||||||||||
Total liabilities and equity
|
$ | 203,159 | $ | 173,153 | $ | 214,377 | ||||||||||||||||||||||||||||||
Net interest spread
|
6.89 | % | 4.73 | % | 5.79 | % | ||||||||||||||||||||||||||||||
Interest income to average earning assets
|
8.82 | % | 7.27 | % | 8.37 | % | ||||||||||||||||||||||||||||||
Interest expense to average earning assets
|
1.73 | % | 2.21 | % | 2.31 | % | ||||||||||||||||||||||||||||||
Net interest margin
|
7.09 | % | 5.06 | % | 6.06 | % |
(1)
|
Interest income includes past due fees on loans totaling approximately $644 million for the six months ended June 30, 2010 and $332 million and $698 million on the reported and managed basis, respectively, for the six months ended June 30, 2009.
|
(2)
|
Certain prior period amounts have been reclassified to conform with the current period presentation.
|
(3)
|
Based on continuing operations.
|
(4)
|
U.K. deposit business was sold during the third quarter of 2009.
|
(5)
|
Includes a reduction of $2.9 billion due to consolidation impact of certain securitized trusts.
|
Three Months Ended June 30, 2010 vs. 2009 Managed
|
||||||||||||
Change due to(1)
|
||||||||||||
(Dollars in millions)
|
Increase (Decrease)
|
Volume
|
Increase (Decrease)
|
|||||||||
Interest Income(3) :
|
||||||||||||
Consumer loans
|
||||||||||||
Domestic
|
$ | (23 | ) | $ | (518 | ) | $ | 495 | ||||
International
|
18 | (32 | ) | 50 | ||||||||
Total
|
$ | (5 | ) | $ | (553 | ) | $ | 548 | ||||
Commercial loans
|
(87 | ) | (13 | ) | (74 | ) | ||||||
Total loans held for investment
|
$ | (92 | ) | $ | (508 | ) | $ | 416 | ||||
Investment securities
|
(71 | ) | 16 | (87 | ) | |||||||
Other
|
||||||||||||
Domestic
|
0 | 5 | (5 | ) | ||||||||
International
|
0 | 0 | 0 | |||||||||
Total
|
$ | 0 | $ | 5 | $ | (5 | ) | |||||
Total interest income
|
$ | (163 | ) | $ | (357 | ) | $ | 194 | ||||
Interest Expense(3) :
|
||||||||||||
Deposits
|
||||||||||||
Domestic (2)
|
$ | (183 | ) | $ | (8 | ) | $ | (175 | ) | |||
International
|
(9 | ) | (9 | ) | 0 | |||||||
Total
|
(192 | ) | (15 | ) | (177 | ) | ||||||
Senior notes
|
14 | 3 | 11 | |||||||||
Other borrowings
|
||||||||||||
Domestic (2)
|
4 | (50 | ) | 54 | ||||||||
International
|
1 | 1 | 0 | |||||||||
Total (2)
|
$ | 5 | $ | (39 | ) | $ | 44 | |||||
Securitized debt
|
||||||||||||
Domestic (2)
|
(124 | ) | (71 | ) | (53 | ) | ||||||
International
|
(6 | ) | (4 | ) | (2 | ) | ||||||
Total (2)
|
$ | (130 | ) | $ | (75 | ) | $ | (55 | ) | |||
Total interest expense
|
$ | (303 | ) | $ | (100 | ) | $ | (203 | ) | |||
Net interest income
|
$ | 140 | $ | (270 | ) | $ | 410 |
Six Months Ended June 30, 2010 vs. 2009 Managed
|
||||||||||||
Change due to(1)
|
||||||||||||
(Dollars in millions)
|
Increase (Decrease)
|
Volume
|
Increase (Decrease)
|
|||||||||
Interest Income(3) :
|
||||||||||||
Consumer loans
|
||||||||||||
Domestic
|
$ | 94 | $ | (867 | ) | $ | 961 | |||||
International
|
62 | (50 | ) | 112 | ||||||||
Total
|
$ | 156 | $ | (923 | ) | $ | 1,079 | |||||
Commercial loans
|
(69 | ) | (11 | ) | (58 | ) | ||||||
Total loans held for investment
|
$ | 87 | $ | (832 | ) | $ | 919 | |||||
Investment securities
|
(117 | ) | 57 | (174 | ) | |||||||
Other
|
||||||||||||
Domestic
|
7 | 19 | (12 | ) | ||||||||
International
|
0 | 0 | 0 | |||||||||
Total
|
$ | 7 | $ | 19 | $ | (12 | ) | |||||
Total interest income
|
$ | (23 | ) | $ | (439 | ) | $ | 416 | ||||
Interest Expense(3) :
|
||||||||||||
Deposits
|
||||||||||||
Domestic (2)
|
$ | (400 | ) | $ | 15 | $ | (415 | ) | ||||
International
|
(21 | ) | (21 | ) | 0 | |||||||
(421 | ) | 0 | (421 | ) | ||||||||
Senior notes
|
25 | 11 | 14 | |||||||||
Other borrowings
|
||||||||||||
Domestic (2)
|
15 | (72 | ) | 87 | ||||||||
International
|
2 | 1 | 1 | |||||||||
Total (2)
|
$ | 17 | $ | (53 | ) | $ | 70 | |||||
Securitized debt
|
||||||||||||
Domestic (2)
|
(248 | ) | (108 | ) | (140 | ) | ||||||
International
|
(15 | ) | (3 | ) | (12 | ) | ||||||
Total (2)
|
$ | (263 | ) | $ | (112 | ) | $ | (151 | ) | |||
Total interest expense
|
$ | (642 | ) | $ | (124 | ) | $ | (518 | ) | |||
Net interest income
|
$ | 619 | $ | (323 | ) | $ | 942 |
(1)
|
The change in net interest income attributable to both volume and rates has been allocated in proportion to the relationship of the absolute dollar amounts of the change in each. We calculate the change in interest income and interest expense separately for each item. As a result, the totals presented in the volume and yield/rate columns do not equal the sum of amounts presented in the individual categories presented.
|
(2)
|
Certain prior period amounts have been reclassified to conform with the current period presentation.
|
(3)
|
Based on continuing operations.
|
(Dollars in millions)
|
June 30, 2010
|
December 31, 2009
|
||||||
Period-End Balances:
|
||||||||
Reported loans held for investment:
|
||||||||
Consumer loans
|
||||||||
Credit card loans
|
||||||||
Domestic
|
$ | 49,625 | $ | 13,374 | ||||
International
|
7,249 | 2,229 | ||||||
Total credit card loans
|
$ | 56,874 | $ | 15,603 | ||||
Installment loans
|
||||||||
Domestic
|
4,888 | 6,693 | ||||||
International
|
20 | 44 | ||||||
Total installment loans
|
$ | 4,908 | $ | 6,737 | ||||
Total Credit Card business
|
$ | 61,782 | $ | 22,340 | ||||
Auto loans
|
17,221 | 18,186 | ||||||
Mortgage loans
|
13,322 | 14,893 | ||||||
Retail banking
|
4,770 | 5,135 | ||||||
Total Consumer Banking business
|
$ | 35,313 | $ | 38,214 | ||||
Total consumer loans
|
$ | 97,095 | $ | 60,554 | ||||
Commercial loans
|
||||||||
Commercial and multi-family real estate
|
13,580 | 13,843 | ||||||
Middle market
|
10,203 | 10,062 | ||||||
Specialty lending
|
3,815 | 3,555 | ||||||
Small ticket commercial real estate
|
1,977 | 2,153 | ||||||
Total commercial loans
|
$ | 29,575 | $ | 29,613 | ||||
Other loans
|
470 | 452 | ||||||
Total reported loans held for investment
|
$ | 127,140 | $ | 90,619 | ||||
Securitization adjustments(1) :
|
||||||||
Consumer loans
|
||||||||
Credit cards
|
||||||||
Domestic
|
$ | — | $ | 39,827 | ||||
International
|
— | 5,951 | ||||||
Total credit card loans
|
$ | — | $ | 45,778 | ||||
Installment loans – Domestic
|
115 | 406 | ||||||
Total credit card
|
$ | 115 | $ | 46,184 | ||||
Total consumer loans
|
$ | 115 | $ | 46,184 | ||||
Total securitization adjustments
|
$ | 115 | $ | 46,184 | ||||
Managed loans held for investment:
|
||||||||
Consumer loans
|
||||||||
Credit cards
|
||||||||
Domestic
|
$ | 49,625 | $ | 53,201 | ||||
International
|
7,249 | 8,180 | ||||||
Total credit card loans
|
$ | 56,874 | $ | 61,381 | ||||
Installment loans
|
||||||||
Domestic
|
5,003 | 7,099 | ||||||
International
|
20 | 44 | ||||||
Total installment loans
|
$ | 5,023 | $ | 7,143 | ||||
Total Credit Card business
|
$ | 61,897 | $ | 68,524 | ||||
Auto loans
|
17,221 | 18,186 | ||||||
Mortgage loans
|
13,322 | 14,893 | ||||||
Retail banking
|
4,770 | 5,135 | ||||||
Total Consumer Banking business
|
$ | 35,313 | $ | 38,214 | ||||
Total consumer loans
|
$ | 97,210 | $ | 106,738 | ||||
Commercial loans
|
||||||||
Commercial and multi-family real estate
|
13,580 | 13,843 | ||||||
Middle market
|
10,203 | 10,062 | ||||||
Specialty lending
|
3,815 | 3,555 | ||||||
Small ticket commercial real estate
|
1,977 | 2,153 | ||||||
Total commercial loans
|
$ | 29,575 | $ | 29,613 | ||||
Other loans
|
470 | 452 | ||||||
Total managed loans held for investment
|
$ | 127,255 | $ | 136,803 |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Dollars in millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Average Balances:
|
||||||||||||||||
Reported loans held for investment:
|
||||||||||||||||
Consumer loans:
|
||||||||||||||||
Credit Card business:
|
||||||||||||||||
Credit card loans:
|
||||||||||||||||
Domestic
|
$ | 49,962 | $ | 18,955 | $ | 50,827 | $ | 19,776 | ||||||||
International
|
7,418 | 2,544 | 7,597 | 2,712 | ||||||||||||
Total credit card loans
|
$ | 57,380 | $ | 21,499 | $ | 58,424 | $ | 22,488 | ||||||||
Installment loans:
|
||||||||||||||||
Domestic
|
5,159 | 9,276 | 5,693 | 9,656 | ||||||||||||
International
|
9 | 84 | 23 | 94 | ||||||||||||
Total installment loans
|
$ | 5,168 | $ | 9,360 | $ | 5,716 | $ | 9,750 | ||||||||
Total Credit Card business
|
$ | 62,548 | $ | 30,859 | $ | 64,140 | $ | 32,238 | ||||||||
Consumer Banking business:
|
||||||||||||||||
Auto loans
|
17,276 | 20,303 | 17,521 | 20,711 | ||||||||||||
Mortgage loans
|
13,573 | 16,707 | 14,531 | 13,302 | ||||||||||||
Retail banking
|
4,811 | 5,712 | 4,926 | 5,636 | ||||||||||||
Total Consumer Banking business
|
$ | 35,660 | $ | 42,722 | $ | 36,978 | $ | 39,649 | ||||||||
Total consumer loans
|
$ | 98,208 | $ | 73,581 | $ | 101,118 | $ | 71,887 | ||||||||
Commercial loans:
|
||||||||||||||||
Commercial and multifamily real estate
|
13,543 | 14,122 | 13,629 | 13,782 | ||||||||||||
Middle market
|
10,276 | 10,428 | 10,300 | 10,217 | ||||||||||||
Specialty lending
|
3,654 | 3,472 | 3,632 | 3,488 | ||||||||||||
Small-ticket commercial real estate
|
2,060 | 2,542 | 2,067 | 2,571 | ||||||||||||
Total commercial loans
|
$ | 29,533 | $ | 30,565 | $ | 29,628 | $ | 30,058 | ||||||||
Other loans
|
463 | 536 | 475 | 2,071 | ||||||||||||
Total reported loans held for investment
|
$ | 128,204 | $ | 104,682 | $ | 131,221 | $ | 104,016 | ||||||||
Securitization adjustments: (1)
|
||||||||||||||||
Consumer loans:
|
||||||||||||||||
Credit cards:
|
||||||||||||||||
Domestic
|
$ | — | $ | 36,937 | $ | — | $ | 37,313 | ||||||||
International
|
— | 5,700 | — | 5,549 | ||||||||||||
Total credit card loans
|
$ | — | $ | 42,637 | $ | — | $ | 42,862 | ||||||||
Installment loans – Domestic
|
131 | 694 | 152 | 771 | ||||||||||||
Total Credit Card business
|
$ | 131 | $ | 43,331 | $ | 152 | $ | 43,633 | ||||||||
Auto loans
|
— | — | — | — | ||||||||||||
Total consumer banking
|
$ | 131 | $ | 43,331 | $ | 152 | $ | 43,633 | ||||||||
Total consumer loans
|
$ | 131 | $ | 43,331 | $ | 152 | $ | 43,633 | ||||||||
Total securitization adjustments
|
$ | 131 | $ | 43,331 | $ | 152 | $ | 43,633 | ||||||||
Managed loans held for investment:
|
||||||||||||||||
Consumer loans
|
||||||||||||||||
Credit cards
|
||||||||||||||||
Domestic
|
$ | 49,962 | $ | 55,892 | $ | 50,827 | $ | 57,809 | ||||||||
International
|
7,418 | 8,244 | 7,597 | 8,261 | ||||||||||||
Total credit card loans
|
$ | 57,380 | $ | 64,136 | $ | 58,424 | $ | 65,350 | ||||||||
Installment loans
|
||||||||||||||||
Domestic
|
5,290 | 9,970 | 5,845 | 10,427 | ||||||||||||
International
|
9 | 84 | 23 | 94 | ||||||||||||
Total installment loans
|
$ | 5,299 | $ | 10,054 | $ | 5,868 | $ | 10,521 | ||||||||
Total Credit Card business
|
$ | 62,679 | $ | 74,190 | $ | 64,292 | $ | 75,871 | ||||||||
Consumer Banking business:
|
||||||||||||||||
Auto loans
|
17,276 | 20,303 | 17,521 | 20,711 | ||||||||||||
Mortgage loans
|
13,573 | 16,707 | 14,531 | 13,302 | ||||||||||||
Retail banking
|
4,811 | 5,712 | 4,926 | 5,636 | ||||||||||||
Total Consumer Banking business
|
$ | 35,660 | $ | 42,722 | $ | 36,978 | $ | 39,649 | ||||||||
Total consumer loans
|
$ | 98,339 | $ | 116,912 | $ | 101,270 | $ | 115,520 | ||||||||
Commercial loans
|
||||||||||||||||
Commercial and multi-family real estate
|
13,543 | 14,122 | 13,629 | 13,782 | ||||||||||||
Middle market
|
10,276 | 10,429 | 10,300 | 10,217 | ||||||||||||
Specialty lending
|
3,654 | 3,472 | 3,632 | 3,488 | ||||||||||||
Small ticket commercial real estate
|
2,060 | 2,542 | 2,067 | 2,571 | ||||||||||||
Total commercial loans
|
$ | 29,533 | $ | 30,565 | $ | 29,628 | $ | 30,058 | ||||||||
Other loans
|
463 | 536 | 475 | 2,071 | ||||||||||||
Total managed loans held for investment
|
$ | 128,335 | $ | 148,013 | $ | 131,373 | $ | 147,649 |
(1)
|
Effective January 1, 2010, we consolidated all but one installment loan trust under the new consolidation accounting standards. All credit card loans restricted for the benefit of securitization investors are included in reported loans held for investment as they are no longer accounted for as off-balance sheet.
|
June 30, 2010
|
December 31, 2009
|
|||||||||||||||||||||||
Reported
|
Reported
|
Managed
|
||||||||||||||||||||||
(Dollars in millions)
|
Loans
|
% of Total Loans
|
Loans
|
% of Total Loans
|
Loans
|
% of Total Loans
|
||||||||||||||||||
Consumer loans
|
$ | 97,095 | 76.37 | % | $ | 60,554 | 66.82 | % | $ | 106,738 | 78.02 | % | ||||||||||||
Commercial loans
|
29,575 | 23.26 | % | 29,613 | 32.68 | % | 29,613 | 21.65 | % | |||||||||||||||
Other
|
470 | 0.37 | % | 452 | 0.50 | % | 452 | 0.33 | % | |||||||||||||||
Total
|
$ | 127,140 | 100.00 | % | $ | 90,619 | 100.00 | % | $ | 136,803 | 100.00 | % |
June 30, 2010(4)
|
December 31, 2009(4)
|
June 30, 2009(4)
|
||||||||||||||||||||||||||||||||||||||
Reported
|
Reported
|
Managed
|
Reported
|
Managed
|
||||||||||||||||||||||||||||||||||||
(Dollars in millions)
|
Loans(3)
|
% of Total Loans
|
Loans
|
% of Total Loans
|
Loans
|
% of Total Loans
|
Loans
|
% of Total Loans
|
Loans
|
% of Total Loans
|
||||||||||||||||||||||||||||||
Loans held for investment(1)(2)
|
$ | 127,140 | 100.0 | % | $ | 90,619 | 100.0 | % | $ | 136,803 | 100.0 | % | $ | 100,940 | 100.0 | % | $ | 146,117 | 100.0 | % | ||||||||||||||||||||
Loans delinquent(3):
|
||||||||||||||||||||||||||||||||||||||||
30-59 days
|
2,027 | 1.59 | % | 1,908 | 2.10 | % | 2,623 | 1.92 | % | 1,860 | 1.84 | % | 2,467 | 1.69 | % | |||||||||||||||||||||||||
60-89 days
|
1,113 | 0.88 | % | 985 | 1.09 | % | 1,576 | 1.15 | % | 967 | 0.96 | % | 1,421 | 0.97 | % | |||||||||||||||||||||||||
90-119 days
|
697 | 0.55 | % | 499 | 0.55 | % | 1,038 | 0.76 | % | 525 | 0.52 | % | 966 | 0.66 | % | |||||||||||||||||||||||||
120-149 days
|
563 | 0.44 | % | 190 | 0.21 | % | 660 | 0.48 | % | 204 | 0.20 | % | 596 | 0.41 | % | |||||||||||||||||||||||||
150 or more days
|
444 | 0.35 | % | 164 | 0.18 | % | 568 | 0.42 | % | 190 | 0.19 | % | 537 | 0.37 | % | |||||||||||||||||||||||||
Total
|
$ | 4,844 | 3.81 | % | $ | 3,746 | 4.13 | % | $ | 6,465 | 4.73 | % | $ | 3,746 | 3.71 | % | $ | 5,987 | 4.10 | % | ||||||||||||||||||||
Loans delinquent by geographic area:
|
||||||||||||||||||||||||||||||||||||||||
Domestic
|
4,406 | 3.68 | % | 3,613 | 4.09 | % | 5,926 | 4.61 | % | 3,590 | 3.56 | % | 5,409 | 3.93 | % | |||||||||||||||||||||||||
International
|
438 | 6.03 | % | 133 | 5.85 | % | 539 | 6.55 | % | 156 | 6.63 | % | 578 | 6.69 | % |
(1)
|
All loans are accruing except for consumer auto loans included in the 90-119 days past due bucket of $85 million, $143 million and $131 million as of June 30, 2010, December 31, 2009 and June 30, 2009, respectively.
|
(2)
|
Includes credit card loans that continue to accrue finance charges and fees until charged-off at 180 days. The amounts are net of finance charges and fees considered uncollectible that are suppressed and are not recognized in income. Amounts reserved for finance charges and fees considered uncollectible are $261 million, $490 million and $572 million for the three months ended June 30, 2010, December 31, 2009 and June 30, 2009, respectively. Reported and Managed credit card loans 90 days or greater past due totaled $1.6 billion as of June 30, 2010, $640 million and $1.9 billion as of December 31, 2009, and $697 million and $1.9 billion as of June 30, 2009.
|
(3)
|
The Chevy Chase Bank acquired loan portfolio is included in loans held for investment, but excluded from loans delinquent as these loans are considered performing under accounting guidance for purchased loans with credit impairment. As of June 30, 2010, December 31, 2009 and June 30, 2009, the acquired loan portfolio’s contractual 30 to 89 day delinquencies total $200 million and $294 million and $254 million, respectively. For loans 90+ days past due see Table G – Nonperforming Assets.
|
(4)
|
Our managed results prior to the adoption of new consolidation standards on January 1, 2010 is more comparable to our reported results as the managed results were previously adjusted to include securitized loans related to our credit card and installment loan securitization trusts previously accounted for as sales and treated as off-balance sheet. Because of the January 1, 2010, adoption of the new consolidation accounting standards, our consolidated reported results subsequent to January 1, 2010 will be comparable to our consolidated results on a “managed” basis.
|
(Dollars in millions)
|
Three Months Ended June 30,
|
Six Months Ended June 30
|
||||||||||||||||||||||
2010(1)
|
2009(2)
|
2010(1)
|
2009(2)
|
|||||||||||||||||||||
Reported
|
Reported
|
Managed
|
Reported
|
Reported
|
Managed
|
|||||||||||||||||||
Average loans held for investment
|
$ | 128,203 | $ | 104,682 | $ | 148,013 | $ | 131,222 | $ | 104,016 | $ | 147,649 | ||||||||||||
Net charge-offs
|
1,717 | 1,117 | 2,087 | 3,735 | 2,255 | 4,078 | ||||||||||||||||||
Net charge-offs as a percentage of average loans held for investment
|
5.36 | % | 4.28 | % | 5.64 | % | 5.69 | % | 4.34 | % | 5.52 | % |
(1)
|
Includes average Chevy Chase Bank acquired loan portfolio of $6.5 billion and $6.8 billion for three and six months ended June 30, 2010, respectively, compared with of $8.7 billion and $4.4 billion for three and six months ended June 30, 2009, respectively. Charge-offs exclude net charge-offs of $82 million and $180 million on the Chevy Chase Bank acquired loan portfolio for three and six months ended June 30, 2010, respectively, compared with of $152 million and $193 million for three and six months ended June 30, 2009, respectively. Charge-offs on the Chevy Chase Bank acquired loan portfolio are applied against the expected principal losses established under ASC 805-10/FAS 141(R) upon acquisition.
|
(2)
|
Our “managed” results prior to the adoption of new consolidation standards on January 1, 2010 is more comparable to our current period reported results as the “managed” results were previously adjusted to include securitized loans related to the our credit card and installment loan securitization trusts previously accounted for as sales and treated as off-balance sheet. Because of the adoption of the new consolidation accounting standards, our consolidated reported results subsequent to January 1, 2010 will be comparable to our consolidated results on a “managed” basis.
|
(Dollars in millions)
|
June 30, 2010
|
December 31, 2009
|
||||||
Nonperforming loans held for investment(1) (2) :
|
||||||||
Commercial lending
|
||||||||
Commercial and multi-family real estate
|
$ | 359 | $ | 429 | ||||
Middle market
|
120 | 104 | ||||||
Specialty lending
|
63 | 74 | ||||||
Small-ticket commercial real estate
|
60 | 95 | ||||||
Total commercial loans
|
602 | 702 | ||||||
Consumer lending
|
||||||||
Automobile
|
85 | 143 | ||||||
Mortgage
|
478 | 323 | ||||||
Other consumer loans
|
145 | 121 | ||||||
Total consumer loans
|
708 | 587 | ||||||
Total nonperforming loans held for investment
|
1,310 | 1,289 | ||||||
Foreclosed property
|
289 | 234 | ||||||
Repossessed assets
|
23 | 24 | ||||||
Total nonperforming assets
|
$ | 1,622 | $ | 1,547 | ||||
Nonperforming loans as a percentage of loans held for investment(3) (4)
|
1.03 | % | 0.94 | % | ||||
Nonperforming assets as a percentage of loans held for investment(3) (4)
|
1.28 | % | 1.13 | % |
(1)
|
Our policy is not to classify credit card loans as nonperforming loans. See Table E-Delinquencies for accruing loans contractually past due 90 days or more.
|
(2)
|
Excludes loans acquired from the Chevy Chase Bank acquisition and previously considered nonperforming of $1.1 billion as these loans were recorded at fair value and are considered performing in accordance with ASC 805/SFAS 141(R) and/or ASC 310/SOP 03-3.
|
(3)
|
Includes the loans acquired from the CCB acquisition totaling $6.5 and $7.3 billion as of June 30, 2010 and December 31, 2009, respectively, in the denominator. The nonperforming loan rate excluding the Chevy Chase Bank loans is 1.08% and 0.99% for June 30, 2010 and December 31, 2009, respectively. The nonperforming asset rate excluding the Chevy Chase Bank loans is 1.34% and 1.19% for June 30, 2010 and December 31, 2009, respectively.
|
(4)
|
Nonperforming loans are based on our total loan portfolio, which we previously referred to as our "managed" loan portfolio. The total loan portfolio includes loans recorded on our balance sheet and loans held in our securitization trusts. The nonperforming loan rate excluding credit card loans is 2.00% and 1.89% as of June 30, 2010 and December 31, 2009, respectively.
|
(Dollars in millions, except per share-related data)
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Interest income:
|
||||||||||||||||
Loans held for investment, including past-due fees
|
$ | 3,476 | $ | 2,237 | $ | 7,134 | $ | 4,428 | ||||||||
Investment securities
|
342 | 412 | 691 | 808 | ||||||||||||
Other
|
17 | 68 | 40 | 131 | ||||||||||||
Total interest income
|
3,835 | 2,717 | 7,865 | 5,367 | ||||||||||||
Interest expense:
|
||||||||||||||||
Deposits
|
368 | 560 | 767 | 1,187 | ||||||||||||
Securitized debt obligations
|
212 | 74 | 454 | 165 | ||||||||||||
Senior and subordinated notes
|
72 | 57 | 140 | 115 | ||||||||||||
Other borrowings
|
86 | 81 | 179 | 162 | ||||||||||||
Total interest expense
|
738 | 772 | 1,540 | 1,629 | ||||||||||||
Net interest income
|
3,097 | 1,945 | 6,325 | 3,738 | ||||||||||||
Provision for loan and lease losses
|
723 | 934 | 2,201 | 2,213 | ||||||||||||
Net interest income after provision for loan and lease losses
|
2,374 | 1,011 | 4,124 | 1,525 | ||||||||||||
Non-interest income:
|
||||||||||||||||
Servicing and securitizations
|
21 | 363 | (15 | ) | 816 | |||||||||||
Service charges and other customer-related fees
|
496 | 492 | 1,081 | 998 | ||||||||||||
Interchange fees
|
333 | 126 | 644 | 267 | ||||||||||||
Net other-than-temporary impairment losses recognized in earnings (2)
|
(26 | ) | (10 | ) | (57 | ) | (10 | ) | ||||||||
Other
|
(17 | ) | 261 | 215 | 251 | |||||||||||
Total non-interest income
|
807 | 1,232 | 1,868 | 2,322 | ||||||||||||
Non-interest expense:
|
||||||||||||||||
Salaries and associate benefits
|
650 | 634 | 1,296 | 1,188 | ||||||||||||
Marketing
|
219 | 134 | 399 | 297 | ||||||||||||
Communications and data processing
|
164 | 195 | 333 | 394 | ||||||||||||
Supplies and equipment
|
129 | 128 | 253 | 247 | ||||||||||||
Occupancy
|
117 | 115 | 237 | 215 | ||||||||||||
Restructuring expense(1)
|
0 | 43 | 0 | 61 | ||||||||||||
Other
|
721 | 673 | 1,329 | 1,265 | ||||||||||||
Total non-interest expense
|
2,000 | 1,922 | 3,847 | 3,667 | ||||||||||||
Income from continuing operations before income taxes
|
1,181 | 321 | 2,145 | 180 | ||||||||||||
Income tax provision
|
369 | 92 | 613 | 34 | ||||||||||||
Income from continuing operations, net of tax
|
812 | 229 | 1,532 | 146 | ||||||||||||
Loss from discontinued operations, net of tax
|
(204 | ) | (6 | ) | (288 | ) | (31 | ) | ||||||||
Net income
|
$ | 608 | $ | 223 | $ | 1,244 | $ | 115 | ||||||||
Net income (loss) available to common shareholders
|
$ | 608 | $ | (277 | ) | $ | 1,244 | $ | (449 | ) | ||||||
Basic earnings per common share:
|
||||||||||||||||
Income (loss) from continuing operations
|
$ | 1.79 | $ | (0.64 | ) | $ | 3.38 | $ | (1.03 | ) | ||||||
Loss from discontinued operations
|
(0.45 | ) | (0.01 | ) | (0.63 | ) | (0.07 | ) | ||||||||
Net income (loss) per basic common share
|
$ | 1.34 | $ | (0.66 | ) | $ | 2.75 | (1.11 | ) | |||||||
Diluted earnings per common share:
|
||||||||||||||||
Income (loss) from continuing operations
|
$ | 1.78 | $ | (0.64 | ) | $ | 3.36 | $ | (1.03 | ) | ||||||
Loss from discontinued operations
|
(0.45 | ) | (0.01 | ) | (0.63 | ) | (0.07 | ) | ||||||||
Net income (loss) per diluted common share
|
$ | 1.33 | $ | (0.66 | ) | $ | 2.73 | (1.11 | ) | |||||||
Dividends paid per common share
|
$ | 0.05 | $ | 0.05 | $ | 0.10 | $ | 0.43 |
(1)
|
We completed our 2007 restructuring initiative during 2009.
|
(2)
|
For the three months ended June 30, 2010 and June 30, 2009, we recorded other-than-temporary impairment losses of $26 million and $10 million, respectively. For the six months ended June 30, 2010 and June 30, 2009, we recorded other-than-temporary impairment losses of $57 million and $10 million, respectively. Unrealized losses of $120 million and $149 million on these securities have been recognized in accumulated other comprehensive income as a component of stockholders’ equity at June 30, 2010 and June 30, 2009, respectively.
|
(Dollars in millions, except per share data)
|
June 30,
2010
|
December 31,
2009
|
||||||
Assets:
|
||||||||
Cash and due from banks
|
$ | 2,668 | $ | 3,100 | ||||
Interest-bearing deposits with banks
|
2,147 | 5,043 | ||||||
Federal funds sold and repurchase agreements
|
384 | 542 | ||||||
Cash and cash equivalents
|
5,199 | 8,685 | ||||||
Restricted cash for securitization investors
|
3,446 | 501 | ||||||
Investment in securities:
|
||||||||
Available for sale, at fair value
|
39,424 | 38,830 | ||||||
Held to maturity, at amortized cost
|
0 | 80 | ||||||
Total investment in securities
|
39,424 | 38,910 | ||||||
Loan held for investment:
|
||||||||
Unsecuritized loans held for investment, at amortized cost
|
71,491 | 75,097 | ||||||
Restricted loans for securitization investors
|
55,649 | 15,522 | ||||||
Total loans held for investment
|
127,140 | 90,619 | ||||||
Less: Allowance for loan and lease losses
|
(6,799 | ) | (4,127 | ) | ||||
Net loans held for investment
|
120,341 | 86,492 | ||||||
Loans held for sale, at lower-of-cost-or-fair value
|
249 | 268 | ||||||
Accounts receivable from securitizations
|
206 | 7,128 | ||||||
Premises and equipment, net
|
2,730 | 2,736 | ||||||
Interest receivable
|
1,077 | 936 | ||||||
Goodwill
|
13,588 | 13,596 | ||||||
Other
|
11,229 | 10,394 | ||||||
Total assets
|
$ | 197,489 | $ | 169,646 | ||||
Liabilities:
|
||||||||
Interest payable
|
$ | 543 | $ | 509 | ||||
Customer deposits
|
117,331 | 115,809 | ||||||
Securitized debt obligations
|
33,009 | 3,954 | ||||||
Other debt:
|
||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase
|
728 | 1,140 | ||||||
Senior and subordinated notes
|
9,424 | 9,045 | ||||||
Other borrowings
|
4,857 | 6,875 | ||||||
Total other debt
|
15,009 | 17,060 | ||||||
Other liabilities
|
6,327 | 5,725 | ||||||
Total liabilities
|
172,219 | 143,057 | ||||||
Stockholders’ equity:
|
||||||||
Common stock, par value $.01 per share; authorized 1,000,000,000 shares; 504,473,510 and 502,394,396 issued as of June 30, 2010 and December 31, 2009, respectively
|
5 | 5 | ||||||
Paid-in capital, net
|
19,029 | 18,955 | ||||||
Retained earnings
|
8,969 | 10,726 | ||||||
Accumulated other comprehensive income
|
467 | 83 | ||||||
Less: Treasury stock, at cost; 47,726,876 and 47,224,200 shares as of June 30, 2010 and December 31, 2009 respectively
|
(3,200 | ) | (3,180 | ) | ||||
Total stockholders’ equity
|
25,270 | 26,589 | ||||||
Total liabilities and stockholders’ equity
|
$ | 197,489 | $ | 169,646 |
Common Stock
|
||||||||||||||||||||||||||||||||
(Dollars in millions, except per share-related data)
|
Shares
|
Amount
|
Preferred Stock
|
Paid-In Capital, Net
|
Retained Earnings
|
Accumulated Other Comprehensive Income (Loss)
|
Treasury Stock
|
Total Stockholders’ Equity
|
||||||||||||||||||||||||
Balance, December 31, 2008
|
438,434,235 | $ | 4 | $ | 3,096 | $ | 17,278 | $ | 10,621 | $ | (1,221 | ) | $ | (3,166 | ) | $ | 26,612 | |||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||
Net income
|
115 | 115 | ||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax:
|
||||||||||||||||||||||||||||||||
Unrealized gains on securities, net of income taxes of $345
|
679 | 679 | ||||||||||||||||||||||||||||||
Other-than-temporary impairment not recognized in earnings on securities, net of income taxes of $53
|
(96 | ) | (96 | ) | ||||||||||||||||||||||||||||
Defined benefit pension plans,
|
(1 | ) | (1 | ) | ||||||||||||||||||||||||||||
Foreign currency translation adjustments
|
184 | 184 | ||||||||||||||||||||||||||||||
Unrealized gains in cash flow hedging instruments, net of income taxes of $37
|
56 | 56 | ||||||||||||||||||||||||||||||
Other comprehensive income
|
822 | 822 | ||||||||||||||||||||||||||||||
Comprehensive income
|
937 | |||||||||||||||||||||||||||||||
Cash dividends-Common stock $0.43 per share
|
(168 | ) | (168 | ) | ||||||||||||||||||||||||||||
Cash dividends-Preferred stock 5% per annum
|
(23 | ) | (82 | ) | (105 | ) | ||||||||||||||||||||||||||
Purchase of treasury stock
|
(3 | ) | (3 | ) | ||||||||||||||||||||||||||||
Issuances of common stock and restricted stock, net of forfeitures
|
60,856,434 | 1 | 1,522 | 1,523 | ||||||||||||||||||||||||||||
Exercise of stock options and tax benefits of exercises and restricted stock vesting
|
1,900 | (2 | ) | (2 | ) | |||||||||||||||||||||||||||
Accretion of preferred stock discount
|
34 | (34 | ) | 0 | ||||||||||||||||||||||||||||
Redemption of preferred stock
|
(3,107 | ) | (448 | ) | (3,555 | ) | ||||||||||||||||||||||||||
Compensation expense for restricted stock awards and stock options
|
61 | 61 | ||||||||||||||||||||||||||||||
Issuance of common stock for acquisition
|
2,560,601 | 0 | 31 | 31 | ||||||||||||||||||||||||||||
Allocation of ESOP shares
|
1 | 1 | ||||||||||||||||||||||||||||||
Balance, June 30, 2009
|
501,853,170 | $ | 5 | $ | 0 | $ | 18,891 | $ | 10,004 | $ | (399 | ) | $ | (3,169 | ) | $ | 25,332 | |||||||||||||||
Balance, December 31, 2009
|
502,394,396 | $ | 5 | $ | 0 | $ | 18,955 | $ | 10,726 | $ | 83 | $ | (3,180 | ) | $ | 26,589 | ||||||||||||||||
Cumulative effect from adoption of new consolidation accounting standards
|
(2,955 | ) | (16 | ) | (2,971 | ) | ||||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||
Net Income
|
1,244 | 1,244 | ||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax:
|
||||||||||||||||||||||||||||||||
Unrealized gains on securities, net of income taxes of $226
|
447 | 447 | ||||||||||||||||||||||||||||||
Other-than-temporary impairment not recognized in earnings on securities, net of income taxes of $17
|
30 | 30 | ||||||||||||||||||||||||||||||
Defined benefit pension plans
|
(1 | ) | (1 | ) | ||||||||||||||||||||||||||||
Foreign currency translation adjustments
|
(98 | ) | (98 | ) | ||||||||||||||||||||||||||||
Unrealized gains in cash flow hedging instruments, net of income taxes of $14
|
22 | 22 | ||||||||||||||||||||||||||||||
Other comprehensive income (loss)
|
400 | 400 | ||||||||||||||||||||||||||||||
Comprehensive income (loss)
|
1,644 | |||||||||||||||||||||||||||||||
Cash dividends-Common stock $0.10 per share
|
(46 | ) | (46 | ) | ||||||||||||||||||||||||||||
Purchase of treasury stock
|
(20 | ) | (20 | ) | ||||||||||||||||||||||||||||
Issuances of common stock and restricted stock, net of forfeitures
|
1,600,902 | 15 | 15 | |||||||||||||||||||||||||||||
Exercise of stock options and tax benefits of exercises and restricted stock vesting
|
478,212 | 4 | 4 | |||||||||||||||||||||||||||||
Compensation expense for restricted stock awards and stock options
|
55 | 55 | ||||||||||||||||||||||||||||||
Balance, June 30, 2010
|
504,473,510 | $ | 5 | $ | 0 | $ | 19,029 | $ | 8,969 | $ | 467 | $ | (3,200 | ) | $ | 25,270 |
(Dollars in millions)
|
Six Months Ended June 30,
|
|||||||
2010
|
2009
|
|||||||
Operating activities:
|
||||||||
Income from continuing operations, net of tax
|
$ | 1,532 | $ | 146 | ||||
Loss from discontinued operations, net of tax
|
(288 | ) | (31 | ) | ||||
Net income
|
1,244 | 115 | ||||||
Adjustments to reconcile net income to cash provided by operating activities:
|
||||||||
Provision for loan and lease losses
|
2,201 | 2,213 | ||||||
Depreciation and amortization, net
|
316 | 381 | ||||||
Net gains on sales of securities available for sale
|
(108 | ) | (52 | ) | ||||
Net gains on deconsolidation
|
(177 | ) | 0 | |||||
Loans held for sale:
|
||||||||
Transfers in and originations
|
(450 | ) | (815 | ) | ||||
Losses on sales
|
1 | 0 | ||||||
Proceeds from sales
|
488 | 794 | ||||||
Stock plan compensation expense
|
87 | 58 | ||||||
Changes in assets and liabilities, net of effects from purchase of companies acquired and the effect of new accounting standards:
|
||||||||
Increase in interest receivable
|
(144 | ) | (123 | ) | ||||
(Increase) decrease in accounts receivable from securitizations(1)
|
(61 | ) | 965 | |||||
Decrease in other assets(1)
|
1,647 | 471 | ||||||
Increase (decrease) in interest payable
|
34 | (16 | ) | |||||
Decrease in other liabilities(1)
|
(286 | ) | (1,126 | ) | ||||
Net cash provided by (used in) operating activities attributable to discontinued operations
|
19 | (9 | ) | |||||
Net cash provided by operating activities
|
4,811 | 2,856 | ||||||
Investing activities:
|
||||||||
Increase in restricted cash for securitization investors(1)
|
552 | 157 | ||||||
Purchases of securities available for sale
|
(14,982 | ) | (11,930 | ) | ||||
Proceeds from paydowns and maturities of securities available for sale
|
6,085 | 4,414 | ||||||
Proceeds from sales of securities available for sale
|
9,061 | 3,057 | ||||||
Proceeds from securitizations of loans
|
0 | 7,050 | ||||||
Proceeds from sale of interest-only bonds
|
57 | 0 | ||||||
Net (increase) decrease in loans held for investment (1)
|
5,023 | (565 | ) | |||||
Principal recoveries of loans previously charged off
|
826 | 402 | ||||||
Additions of premises and equipment
|
(150 | ) | (178 | ) | ||||
Net cash provided by companies acquired
|
0 | 778 | ||||||
Net cash provided by investing activities
|
6,472 | 3,185 | ||||||
Financing activities:
|
||||||||
Net increase (decrease) in deposits
|
1,522 | (5,453 | ) | |||||
Net decrease in other borrowings(1)
|
(16,225 | ) | (2,613 | ) | ||||
Maturities of senior notes
|
0 | (418 | ) | |||||
Redemptions of acquired company debt and noncontrolling interest
|
0 | (465 | ) | |||||
Issuance of senior and subordinated notes and junior subordinated debentures
|
0 | 2,500 | ||||||
Purchases of treasury stock
|
(20 | ) | (3 | ) | ||||
Dividends paid on common stock
|
(46 | ) | (168 | ) | ||||
Dividends paid on preferred stock
|
0 | (105 | ) | |||||
Net proceeds from issuances of common stock
|
15 | 1,524 | ||||||
Net payments from redemption of preferred stock and warrants
|
0 | (3,555 | ) | |||||
Proceeds from share-based payment activities
|
4 | (2 | ) | |||||
Net cash used in financing activities attributable to discontinued operations
|
(19 | ) | (3 | ) | ||||
Net cash used in financing activities
|
(14,769 | ) | (8,761 | ) | ||||
Net decrease in cash and cash equivalents
|
(3,486 | ) | (2,720 | ) | ||||
Cash and cash equivalents at beginning of the period
|
8,685 | 7,492 | ||||||
Cash and cash equivalents at end of the period
|
$ | 5,199 | $ | 4,772 | ||||
Supplemental cash flow information:
|
||||||||
Non-cash items:
|
||||||||
Cumulative effect from adoption of new consolidation accounting standards
|
$ | 2,971 |
•
|
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.
|
(Dollars in millions)
|
Ending balance sheet December 31, 2009
|
VIE Consolidation Impact
|
Opening Balance sheet January 1, 2010
|
|||||||||
Assets:
|
||||||||||||
Cash and cash equivalents
|
$ | 8,685 | $ | 3,998 | $ | 12,683 | ||||||
Loans held for investment
|
90,619 | 47,565 | 138,184 | |||||||||
Less: Allowance for loan and lease losses
|
(4,127 | ) | (4,264 | )(1) | (8,391 | ) | ||||||
Net loans held for investment
|
86,492 | 43,301 | 129,793 | |||||||||
Accounts receivable from securitizations
|
7,629 | (7,463 | ) | 166 | ||||||||
Other assets
|
66,840 | 2,029 | 68,869 | |||||||||
Total assets
|
$ | 169,646 | $ | 41,865 | $ | 211,511 | ||||||
Liabilities:
|
||||||||||||
Securitized debt obligations
|
$ | 3,954 | $ | 44,346 | $ | 48,300 | ||||||
Other liabilities
|
139,103 | 458 | 139,561 | |||||||||
Total liabilities
|
143,057 | 44,804 | 187,861 | |||||||||
Stockholders’ Equity:
|
26,589 | (2,939 | )(1) | 23,650 | ||||||||
$ | 169,646 | $ | 41,865 | $ | 211,511 |
|
•
|
Consolidation of $47.6 billion in securitized loan receivables and $44.3 billion in related debt securities issued from the trusts to third party investors. Included in the total loan receivables is $1.5 billion of mortgage loan securitizations related to the Chevy Chase Bank acquisition which had not been included in our historical managed financial statements. Also included in total loan receivables are $2.6 billion of retained interests, previously classified as accounts receivable from securitizations.
|
|
•
|
Reclassification of $0.7 billion of net finance charge and fee receivables from accounts receivable from securitizations to loans held for investment.
|
|
•
|
Reclassification of $4.0 billion in accounts receivable from securitization to cash restricted for securitization investors.
|
|
•
|
Recording a $4.3 billion allowance for loan and lease losses for the newly consolidated loan receivables. Previously, the losses inherent in the off-balance sheet loans were captured as a reduction in the valuation of retained residual interests.
|
|
•
|
Recording derivative assets of $0.3 billion and derivative liabilities of $0.5 billion, representing the fair value of interest rate swaps and foreign currency derivatives entered into by the trusts.
|
|
•
|
Recording net deferred tax assets of $1.6 billion, largely related to establishing an allowance for loan and lease losses on the newly consolidated loan receivables.
|
January 1, 2010
|
December 31, 2009
|
Difference
|
||||||||||
Tier 1 Capital
|
9.93 | % | 13.75 | % | (3.82 | )% | ||||||
Total Capital
|
17.58 | % | 17.70 | % | (0.12 | )% | ||||||
Tier 1 Leverage
|
5.84 | % | 10.28 | % | (4.44 | )% |
At Acquisition on February 27, 2009
|
||||||||||||
(Dollars in millions)
|
Total Acquired Loans
|
Purchased Credit-Impaired Loans
|
Non-Impaired Loans
|
|||||||||
Contractually required principal and interest at acquisition
|
$ | 15,387 | $ | 12,039 | $ | 3,348 | ||||||
Less: Nonaccretable difference (expected principal losses of $2,207 and foregone interest of $1,820) (1)
|
(4,027 | ) | (3,851 | ) | (176 | ) | ||||||
Cash flows expected to be collected at acquisition(2)
|
$ | 11,360 | 8,188 | 3,172 | ||||||||
Less: Accretable yield
|
(2,360 | ) | (1,861 | ) | (499 | ) | ||||||
Fair value of loans acquired(3)
|
$ | 9,000 | $ | 6,327 | $ | 2,673 |
(1)
|
Expected principal losses and foregone interest on purchased credit-impaired loans at acquisition totaled $2.1 billion and $1.8 billion, respectively. Expected principal losses and foregone interest on non-impaired loans at acquisition totaled $154 million and $23 million, respectively.
|
(2)
|
Represents undiscounted expected principal and interest cash flows at acquisition.
|
(3)
|
A portion of the loans acquired in connection with the Chevy Chase Bank acquisition was classified as held for sale. These loans, which had an estimated fair value at acquisition of $235 million, are not included in the above tables.
|
June 30, 2010
|
December 31, 2009
|
|||||||||||||||||||||||
(Dollars in millions)
|
Total Acquired Loans
|
Purchased Credit-Impaired Loans
|
Non-Impaired Loans
|
Total Acquired Loans
|
Purchased Credit-Impaired Loans
|
Non-Impaired Loans
|
||||||||||||||||||
Contractual balance
|
$ | 8,189 | $ | 6,263 | $ | 1,926 | $ | 9,264 | $ | 7,114 | $ | 2,150 | ||||||||||||
Carrying value
|
$ | 6,381 | $ | 4,579 | $ | 1,802 | $ | 7,251 | $ | 5,256 | $ | 1,995 |
(Dollars in millions)
|
Total Acquired Loans
|
Purchased Credit-Impaired Loans
|
Non-Impaired Loans
|
|||||||||
Accretable yield as of December 31, 2008
|
$ | 0 | $ | 0 | $ | 0 | ||||||
Additions from new acquisitions
|
2,360 | 1,861 | 499 | |||||||||
Accretion recognized in earnings
|
(293 | ) | (210 | ) | (83 | ) | ||||||
Accretable yield as of December 31, 2009
|
2,067 | 1,651 | 416 | |||||||||
Accretion recognized in earnings
|
(200 | ) | (144 | ) | (56 | ) | ||||||
Reclassifications from nonaccretable difference for loans with improving cash flows(1)
|
214 | 214 | 0 | |||||||||
Accretable yield as of June 30, 2010
|
$ | 2,081 | $ | 1,721 | $ | 360 |
(1)
|
Represents the change in expected cash flows due to improved credit performance.
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
(Dollars in millions)
|
June 30, 2010
|
June 30, 2009
|
June 30, 2010
|
June 30, 2009
|
||||||||||||
Net interest income (expense)
|
$ | 0 | $ | 0 | $ | (1 | ) | $ | 0 | |||||||
Non-interest income (expense)
|
(316 | ) | (9 | ) | (445 | ) | (48 | ) | ||||||||
Income tax benefit
|
(112 | ) | (3 | ) | (158 | ) | (17 | ) | ||||||||
Loss from discontinued operations, net of taxes
|
$ | (204 | ) | $ | (6 | ) | $ | (288 | ) | $ | (31 | ) |
(Dollars in millions)
|
Three Months Ended June 30, 2010
|
|||||||||||||||||||||||||||
Total Company
|
Credit Card
|
Commercial Banking
|
Consumer Banking
|
Other
|
Total Managed
|
Securitization Adjustment (1)
|
Total Reported
|
|||||||||||||||||||||
Net interest income
(expense)
|
$ | 1,977 | $ | 319 | $ | 935 | $ | (132 | ) | $ | 3,099 | $ | (2 | ) | $ | 3,097 | ||||||||||||
Non-interest income (expense)
|
659 | 60 | 162 | (74 | ) | 807 | 0 | 807 | ||||||||||||||||||||
Total revenues
|
2,636 | 379 | 1,097 | (206 | ) | 3,906 | (2 | ) | 3,904 | |||||||||||||||||||
Provision (benefit) for loan and lease losses
|
765 | 62 | (112 | ) | 10 | 725 | (2 | ) | 723 | |||||||||||||||||||
Core deposit intangible amortization
|
0 | 14 | 36 | 0 | 50 | 0 | 50 | |||||||||||||||||||||
Other non-interest expense
|
1,002 | 184 | 699 | 65 | 1,950 | 0 | 1,950 | |||||||||||||||||||||
Income tax provision (benefit)
|
301 | 42 | 169 | (143 | ) | 369 | 0 | 369 | ||||||||||||||||||||
Net income (loss) from continuing operations net of tax
|
$ | 568 | $ | 77 | $ | 305 | $ | (138 | ) | $ | 812 | $ | 0 | $ | 812 |
Three Months Ended June 30, 2009
|
||||||||||||||||||||||||||||
Total Company
|
Credit Card
|
Commercial Banking
|
Consumer Banking
|
Other
|
Total Managed
|
Securitization Adjustment (2)
|
Total Reported
|
|||||||||||||||||||||
Net interest income
(expense)
|
$ | 1,797 | $ | 279 | $ | 826 | $ | 55 | $ | 2,957 | $ | (1,012 | ) | $ | 1,945 | |||||||||||||
Non-interest income (expense)
|
898 | 49 | 226 | 17 | 1,190 | 42 | 1,232 | |||||||||||||||||||||
Total revenues
|
2,695 | 328 | 1,052 | 72 | 4,147 | (970 | ) | 3,177 | ||||||||||||||||||||
Provision for loan and lease losses
|
1,520 | 122 | 202 | 60 | 1,904 | (970 | ) | 934 | ||||||||||||||||||||
Restructuring expense(3)
|
0 | 0 | 0 | 43 | 43 | 0 | 43 | |||||||||||||||||||||
Core deposit intangible amortization
|
0 | 10 | 47 | 0 | 57 | 0 | 57 | |||||||||||||||||||||
Other non-interest expense
|
910 | 146 | 678 | 88 | 1,822 | 0 | 1,822 | |||||||||||||||||||||
Income tax provision (benefit)
|
92 | 17 | 44 | (61 | ) | 92 | 0 | 92 | ||||||||||||||||||||
Net income (loss) from continuing operations net of tax
|
$ | 173 | $ | 33 | $ | 81 | $ | (58 | ) | $ | 229 | $ | 0 | $ | 229 |
(1)
|
Income statement adjustments for the three months ended June 30, 2010 reclassify the finance charge of $3 million, and interest expense of $1 million; from non –interest income to net interest income. Net charge-offs of $2 million are reclassified from non-interest income to provision for loan losses.
|
(2)
|
Income statement adjustments for the three months ended June 30, 2009 reclassify the finance charge of $1.2 billion, past due fees of $165 million, other interest income of $(39) million and interest expense of $268 million; from non – interest income to net interest income. Net charge-offs of $1 billion are reclassified from non-interest income to provision for loan losses.
|
(3)
|
We completed the 2007 restructuring initiative during 2009.
|
(Dollars in millions)
|
Six Months Ended June 30, 2010
|
|||||||||||||||||||||||||||
Total Company
|
Credit Card
|
Commercial Banking
|
Consumer Banking
|
Other
|
Total Managed
|
Securitization Adjustment (1)
|
Total Reported
|
|||||||||||||||||||||
Net interest income(expense)
|
$ | 4,090 | $ | 631 | $ | 1,831 | $ | (223 | ) | $ | 6,329 | $ | (4 | ) | $ | 6,325 | ||||||||||||
Non-interest income (expense)
|
1,377 | 102 | 478 | (88 | ) | 1,869 | (1 | ) | 1,868 | |||||||||||||||||||
Total revenues
|
5,467 | 733 | 2,309 | (311 | ) | 8,198 | (5 | ) | 8,193 | |||||||||||||||||||
Provision (benefit) for loan and lease losses
|
1,940 | 300 | (62 | ) | 28 | 2,206 | (5 | ) | 2,201 | |||||||||||||||||||
Core deposit intangible amortization
|
0 | 28 | 74 | 0 | 102 | 0 | 102 | |||||||||||||||||||||
Other non-interest expense
|
1,916 | 362 | 1,349 | 118 | 3,745 | 0 | 3,745 | |||||||||||||||||||||
Income tax provision (benefit)
|
554 | 15 | 338 | (294 | ) | 613 | 0 | 613 | ||||||||||||||||||||
Net income (loss) from continuing operations net of tax
|
$ | 1,057 | $ | 28 | $ | 610 | $ | (163 | ) | $ | 1,532 | $ | 0 | $ | 1,532 |
Six Months Ended June 30, 2009
|
||||||||||||||||||||||||||||
Total Company
|
Credit
Card
|
Commercial
Banking
|
Consumer
Banking
|
Other
|
Total
Managed
|
Securitization
Adjustment (2)
|
Total
Reported
|
|||||||||||||||||||||
Net interest income
(expense)
|
$ | 3,489 | $ | 524 | $ | 1,550 | $ | 144 | $ | 5,707 | $ | (1,969 | ) | $ | 3,738 | |||||||||||||
Non-interest income (expense)
|
1,883 | 90 | 389 | (187 | ) | 2,175 | 147 | 2,322 | ||||||||||||||||||||
Total revenues
|
5,372 | 614 | 1,939 | (43 | ) | 7,882 | (1,822 | ) | 6,060 | |||||||||||||||||||
Provision for loan and lease losses
|
3,203 | 240 | 470 | 122 | 4,035 | (1,822 | ) | 2,213 | ||||||||||||||||||||
Restructuring expense(3)
|
0 | 0 | 0 | 61 | 61 | 0 | 61 | |||||||||||||||||||||
Core deposit intangible amortization
|
0 | 19 | 83 | 0 | 102 | 0 | 102 | |||||||||||||||||||||
Other non-interest expense
|
1,898 | 278 | 1,222 | 106 | 3,504 | 0 | 3,504 | |||||||||||||||||||||
Income tax provision (benefit)
|
95 | 27 | 57 | (145 | ) | 34 | 0 | 34 | ||||||||||||||||||||
Net income (loss) from continuing operations net of tax
|
$ | 176 | $ | 50 | $ | 107 | $ | (187 | ) | $ | 146 | $ | 0 | $ | 146 |
As of June 30, 2010
|
||||||||||||||||||||||||||||
Total Company
|
Credit
Card
|
Commercial
Banking
|
Consumer
Banking
|
Other
|
Total
Managed
|
Securitization
Adjustment
|
Total
Reported
|
|||||||||||||||||||||
Loans held for investment
|
$ | 61,897 | $ | 29,575 | $ | 35,313 | $ | 470 | $ | 127,255 | $ | (115 | ) | $ | 127,140 | |||||||||||||
Total deposits
|
$ | 0 | $ | 21,527 | $ | 77,407 | $ | 18,397 | $ | 117,331 | $ | 0 | $ | 117,331 |
As of December 31, 2009
|
||||||||||||||||||||||||||||
Total Company
|
Credit Card
|
Commercial Banking
|
Consumer Banking
|
Other
|
Total Managed
|
Securitization Adjustment
|
Total Reported
|
|||||||||||||||||||||
Loans held for investment
|
$ | 68,524 | $ | 29,613 | $ | 38,214 | $ | 452 | $ | 136,803 | $ | (46,184 | ) | $ | 90,619 | |||||||||||||
Total deposits
|
$ | 0 | $ | 20,480 | $ | 74,145 | $ | 21,184 | $ | 115,809 | $ | 0 | $ | 115,809 |
(1)
|
Income statement adjustments for the six months ended June 30, 2010 reclassify the finance charge of $7 million, and interest expense of $3 million; from non –interest income to net interest income. Net charge-offs of $5 million are reclassified from non-interest income to provision for loan losses.
|
(2)
|
Income statement adjustments for the six months ended June 30, 2009 reclassify the finance charge of $2.2 billion, past due fees of $366 million, other interest income of $(72) million and interest expense of $551 million; from non–interest income to net interest income. Net charge-offs of $1.8 billion are reclassified from non-interest income to provision for loan losses.
|
(3)
|
We completed the 2007 restructuring initiative during 2009.
|
June 30, 2010
|
||||||||||||||||||||||||
(Dollars in millions)
|
Amortized Cost
|
Total Gross Unrealized Gains
|
Gross Unrealized Losses-OTTI(1)
|
Gross Unrealized Losses-Other(2)
|
Total Gross Unrealized Losses
|
Fair Value
|
||||||||||||||||||
Securities available for sale:
|
||||||||||||||||||||||||
U.S. Treasury debt obligations
|
$ | 376 | $ | 15 | $ | 0 | $ | 0 | $ | 0 | $ | 391 | ||||||||||||
U.S. Agency debt obligations(3)
|
379 | 20 | 0 | 0 | 0 | 399 | ||||||||||||||||||
Collateralized mortgage obligations (“CMOs”):
|
||||||||||||||||||||||||
Agency(4)
|
13,429 | 478 | 0 | (4 | ) | (4 | ) | 13,903 | ||||||||||||||||
Non-agency
|
1,293 | 0 | (64 | ) | (81 | ) | (145 | ) | 1,148 | |||||||||||||||
Total CMOs
|
14,722 | 478 | (64 | ) | (85 | ) | (149 | ) | 15,051 | |||||||||||||||
Mortgage-backed securities (“MBS”):
|
||||||||||||||||||||||||
Agency(4)
|
12,599 | 566 | 0 | (11 | ) | (11 | ) | 13,154 | ||||||||||||||||
Non-agency
|
873 | 0 | (56 | ) | (34 | ) | (90 | ) | 783 | |||||||||||||||
Total MBS
|
13,472 | 566 | (56 | ) | (45 | ) | (101 | ) | 13,937 | |||||||||||||||
Asset-backed securities(5)
|
9,036 | 146 | 0 | (7 | ) | (7 | ) | 9,175 | ||||||||||||||||
Other(6)
|
415 | 60 | 0 | (4 | ) | (4 | ) | 471 | ||||||||||||||||
Total securities available for sale
|
$ | 38,400 | $ | 1,285 | $ | (120 | ) | $ | (141 | ) | $ | (261 | ) | $ | 39,424 | |||||||||
Securities held to maturity:
|
||||||||||||||||||||||||
Total securities held to maturity(7)
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
December 31, 2009
|
||||||||||||||||||||||||
(Dollars in millions)
|
Amortized Cost
|
Total Gross Unrealized Gains
|
Gross Unrealized Losses-OTTI(1)
|
Gross Unrealized Losses-Other(2)
|
Total Gross Unrealized Losses
|
Fair Value
|
||||||||||||||||||
Securities available for sale:
|
||||||||||||||||||||||||
U.S. Treasury debt obligations
|
$ | 379 | $ | 13 | $ | 0 | $ | 0 | $ | 0 | $ | 392 | ||||||||||||
U.S. Agency debt obligations(3)
|
455 | 22 | 0 | 0 | 0 | 477 | ||||||||||||||||||
CMO:
|
||||||||||||||||||||||||
Agency(4)
|
8,174 | 173 | 0 | (47 | ) | (47 | ) | 8,300 | ||||||||||||||||
Non-agency
|
1,608 | 0 | (96 | ) | (174 | ) | (270 | ) | 1,338 | |||||||||||||||
Total CMOs
|
9,782 | 173 | (96 | ) | (221 | ) | (317 | ) | 9,638 | |||||||||||||||
MBS:
|
||||||||||||||||||||||||
Agency(4)
|
19,429 | 466 | 0 | (37 | ) | (37 | ) | 19,858 | ||||||||||||||||
Non-agency
|
1,011 | 0 | (85 | ) | (100 | ) | (185 | ) | 826 | |||||||||||||||
Total MBS
|
20,440 | 466 | (85 | ) | (137 | ) | (222 | ) | 20,684 | |||||||||||||||
Asset-backed securities(5)
|
7,043 | 154 | 0 | (5 | ) | (5 | ) | 7,192 | ||||||||||||||||
Other securities(6)
|
440 | 12 | 0 | (5 | ) | (5 | ) | 447 | ||||||||||||||||
Total securities available for sale
|
$ | 38,539 | $ | 840 | $ | (181 | ) | $ | (368 | ) | $ | (549 | ) | $ | 38,830 | |||||||||
Securities held to maturity:
|
||||||||||||||||||||||||
Total securities held to maturity(7)
|
$ | 80 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 80 |
(1)
|
Represents the amount of cumulative non-credit OTTI losses recorded in AOCI on securities that also had credit impairments. These losses are included in total gross unrealized losses.
|
(2)
|
Represents the amount of cumulative gross unrealized losses on securities for which we have not recognized OTTI impairment.
|
(3)
|
Consists of debt securities issued by Fannie Mae and Freddie Mac with amortized costs of $151 million and $227 million, respectively, and fair values of $157 million and $241 million, respectively, as of June 30, 2010.
|
(4)
|
Consists of mortgage-related securities issued by Fannie Mae, Freddie Mac and Ginnie Mae with amortized costs of $14.3 billion, $6.3 billion and $2.2 billion, respectively, and fair values of $14.8 billion, $6.5 billion and $2.3 billion, respectively, as of June 30, 2010. The book value of the Fannie Mae, Freddie Mac and Ginnie Mae investments exceeded 10% of our stockholders’ equity as of June 30, 2010.
|
(5)
|
Consists of securities collateralized by credit card loans, auto loans, auto dealer floor plan inventory loans, equipment loans, and home equity lines of credit. The distribution among these asset types was approximately 77.2% credit card loans, 6.6% auto loans, 10.1% student loans, 4.3% auto dealer floor plan inventory loans, 1.6% equipment loans, and 0.2% home equity lines of credit as of June 30, 2010. In comparison, the distribution was approximately 76.3% credit card loans, 14.0% auto loans, 6.9% student loans, 1.7% auto dealer floor plan inventory loans, 0.8% equipment loans and 0.3% home equity lines of credit as of December 31, 2009. Approximately 89.2% of the securities in our asset-backed security portfolio were rated AAA or its equivalent as of June 30, 2010, compared with 84.2% as of December 31, 2009.
|
(6)
|
Consists of municipal securities and equity investments, primarily related to CRA activities.
|
(7)
|
Consists of negative amortization mortgage-backed securities.
|
June 30, 2010
|
||||||||||||||||||||||||
Less than 12 Months
|
12 Months or Longer
|
Total
|
||||||||||||||||||||||
(Dollars in millions)
|
Fair Value
|
Gross Unrealized Losses
|
Fair Value
|
Gross Unrealized Losses
|
Fair Value
|
Gross Unrealized Losses
|
||||||||||||||||||
Securities available for sale:
|
||||||||||||||||||||||||
U.S. Treasury debt obligations
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
U.S. Agency debt obligations(1)
|
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
CMO:
|
||||||||||||||||||||||||
Agency(2)
|
470 | (2 | ) | 507 | (2 | ) | 977 | (4 | ) | |||||||||||||||
Non-agency
|
4 | 0 | 1,139 | (145 | ) | 1,143 | (145 | ) | ||||||||||||||||
Total CMOs
|
474 | (2 | ) | 1,646 | (147 | ) | 2,120 | (149 | ) | |||||||||||||||
MBS:
|
||||||||||||||||||||||||
Agency(2)
|
29 | 0 | 229 | (11 | ) | 258 | (11 | ) | ||||||||||||||||
Non-agency
|
31 | 0 | 743 | (90 | ) | 774 | (90 | ) | ||||||||||||||||
Total MBS
|
60 | 0 | 972 | (101 | ) | 1,032 | (101 | ) | ||||||||||||||||
Asset-backed securities
|
1,015 | (3 | ) | 42 | (4 | ) | 1,057 | (7 | ) | |||||||||||||||
Other
|
176 | (1 | ) | 102 | (3 | ) | 278 | (4 | ) | |||||||||||||||
Total securities available for sale in a gross unrealized loss position
|
$ | 1,725 | $ | (6 | ) | $ | 2,762 | $ | (255 | ) | $ | 4,487 | $ | (261 | ) |
December 31, 2009
|
||||||||||||||||||||||||
Less than 12 Months
|
12 Months or Longer
|
Total
|
||||||||||||||||||||||
(Dollars in millions)
|
Fair Value
|
Gross Unrealized Losses
|
Fair Value
|
Gross Unrealized Losses
|
Fair Value
|
Gross Unrealized Losses
|
||||||||||||||||||
Securities available for sale:
|
||||||||||||||||||||||||
U.S. Treasury debt obligations
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
U.S. Agency debt obligations(1)
|
27 | 0 | 0 | 0 | 27 | 0 | ||||||||||||||||||
CMO:
|
||||||||||||||||||||||||
Agency(2)
|
2,188 | (38 | ) | 689 | (9 | ) | 2,877 | (47 | ) | |||||||||||||||
Non-agency
|
3 | (1 | ) | 1,313 | (269 | ) | 1,316 | (270 | ) | |||||||||||||||
Total CMOs
|
2,191 | (39 | ) | 2,002 | (278 | ) | 4,193 | (317 | ) | |||||||||||||||
MBS:
|
||||||||||||||||||||||||
Agency(2)
|
2,520 | (30 | ) | 325 | (7 | ) | 2,845 | (37 | ) | |||||||||||||||
Non-agency
|
0 | 0 | 810 | (185 | ) | 810 | (185 | ) | ||||||||||||||||
Total MBS
|
2,520 | (30 | ) | 1,135 | (192 | ) | 3,655 | (222 | ) | |||||||||||||||
Asset-backed securities
|
490 | (1 | ) | 56 | (4 | ) | 546 | (5 | ) | |||||||||||||||
Other
|
30 | 0 | 115 | (5 | ) | 145 | (5 | ) | ||||||||||||||||
Total securities available for sale in a gross unrealized loss position
|
$ | 5,258 | $ | (70 | ) | $ | 3,308 | $ | (479 | ) | $ | 8,566 | $ | (549 | ) |
(1)
|
Consists of debt securities issued by Fannie Mae and Freddie Mac.
|
(2)
|
Consists of mortgage-related securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.
|
June 30, 2010
|
||||||||
(Dollars in millions)
|
Amortized Cost
|
Fair Value
|
||||||
Due in 1 year or less
|
$ | 483 | $ | 489 | ||||
Due after 1 year through 5 years
|
7,653 | 7,807 | ||||||
Due after 5 years through 10 years
|
1,995 | 2,043 | ||||||
Due after 10 years(1)
|
28,269 | 29,085 | ||||||
Total
|
$ | 38,400 | $ | 39,424 |
(1)
|
Investments with no stated maturities are included with contractual maturities due after 10 years.
|
June 30, 2010
|
||||||||||||||||||||||||||||||||||||||||
Due in 1 Year or Less
|
Due > 1 Year through 5 Years
|
Due > 5 Years through 10 Years
|
Due > 10 Years
|
Total
|
||||||||||||||||||||||||||||||||||||
(Dollars in millions)
|
Amount
|
Average Yield
|
Amount
|
Average Yield
|
Amount
|
Average Yield
|
Amount
|
Average Yield
|
Amount
|
Average Yield
|
||||||||||||||||||||||||||||||
Fair value of securities available for sale:
|
||||||||||||||||||||||||||||||||||||||||
U.S. Treasury debt obligations
|
$ | 70 | 0.81 | % | $ | 321 | 2.80 | % | $ | 0 | 0 | % | $ | 0 | 0 | % | $ | 391 | 2.44 | % | ||||||||||||||||||||
Agency debt obligations(1)
|
191 | 4.67 | 180 | 4.52 | 28 | 3.29 | 0 | 0 | 399 | 4.49 | ||||||||||||||||||||||||||||||
CMO:
|
||||||||||||||||||||||||||||||||||||||||
Agency(2)
|
313 | 5.26 | 7,923 | 4.66 | 5,645 | 4.46 | 22 | 4.64 | 13,903 | 4.59 | ||||||||||||||||||||||||||||||
Non-agency
|
223 | 5.23 | 863 | 5.73 | 57 | 8.51 | 5 | 6.58 | 1,148 | 5.76 | ||||||||||||||||||||||||||||||
Total CMOs
|
536 | 5.25 | 8,786 | 4.77 | 5,702 | 4.50 | 27 | 5.00 | 15,051 | 4.68 | ||||||||||||||||||||||||||||||
MBS:
|
||||||||||||||||||||||||||||||||||||||||
Agency(2)
|
38 | 5.24 | 8,325 | 4.56 | 4,791 | 5.17 | 0 | 0 | 13,154 | 4.78 | ||||||||||||||||||||||||||||||
Non-agency
|
33 | 5.87 | 679 | 5.96 | 71 | 5.95 | 0 | 0 | 783 | 5.96 | ||||||||||||||||||||||||||||||
Total MBS
|
71 | 5.53 | 9,004 | 4.67 | 4,862 | 5.18 | 0 | 0 | 13,937 | 4.85 | ||||||||||||||||||||||||||||||
Asset-backed securities
|
2,419 | 3.52 | 6,512 | 3.35 | 244 | 4.79 | 0 | 0 | 9,175 | 3.43 | ||||||||||||||||||||||||||||||
Other
|
151 | 3.12 | 112 | 4.21 | 41 | 4.53 | 167 | 4.57 | 471 | 4.04 | ||||||||||||||||||||||||||||||
Total securities available for sale
|
$ | 3,438 | 3.81 | % | $ | 24,915 | 4.33 | % | $ | 10,877 | 4.81 | % | $ | 194 | 4.65 | % | $ | 39,424 | 4.42 | % |
(1)
|
Consists of debt securities issued by Fannie Mae and Freddie Mac.
|
(2)
|
Consists of mortgage-related securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.
|
June 30, 2010
|
December 31, 2009
|
|||||||||||||||||||||||||||||||
(Dollars in millions)
|
% of Investment Securities Portfolio(1)
|
AAA
|
Other Investment Grade
|
Below Investment Grade or Not Rated
|
% of Investment Securities Portfolio(1)
|
AAA
|
Other Investment Grade
|
Below Investment Grade or Not Rated
|
||||||||||||||||||||||||
Non-agency CMOs
|
3 | % | 1 | % | 14 | % | 85 | % | 4 | % | 2 | % | 24 | % | 74 | % | ||||||||||||||||
Non-agency MBS
|
2 | % | 4 | % | 2 | % | 94 | % | 3 | % | 4 | % | 7 | % | 89 | % | ||||||||||||||||
Asset-backed securities
|
24 | % | 89 | % | 11 | % | 0 | % | 18 | % | 84 | % | 16 | % | 0 | % |
(1)
|
Calculated based on the amortized cost of the major security type presented divided by the amortized cost of our total investment securities portfolio as of the end of each period.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
(Dollars in millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Beginning balance of credit losses
|
$ | 34 | $ | 0 | $ | 32 | $ | 0 | ||||||||
Additions for the credit component of OTTI on debt securities for which OTTI losses were not previously recognized
|
2 | 10 | 3 | 10 | ||||||||||||
Additions for the credit component of OTTI on debt securities for which OTTI losses were previously recognized
|
7 | 0 | 14 | 0 | ||||||||||||
Reductions for securities for which the non-credit component previously recorded in AOCI comprehensive income was recognized in earnings because of our intent to sell the securities(1)
|
(2 | ) | 0 | (8 | ) | 0 | ||||||||||
Ending balance of credit losses
|
$ | 41 | $ | 10 | $ | 41 | $ | 10 |
(1)
|
During the three and six months ended June 30, 2010, we recognized $17 million and $35 million of other-than-temporary impairment losses on securities for which no portion of the other-than-temporary impairment losses remained in AOCI.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
(Dollars in millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Beginning balance AOCI related to securities available for sale, net of tax(1)
|
$ | 333 | $ | 376 | $ | 186 | $ | 725 | ||||||||
Net unrealized holding gains (losses), net of tax(2)
|
337 | (181 | ) | 509 | (536 | ) | ||||||||||
Net realized losses (gains) reclassified from AOCI into earnings, net of tax(3)
|
4 | 8 | (21 | ) | 14 | |||||||||||
Ending balance AOCI related to securities available for sale, net of tax
|
$ | 674 | $ | 203 | $ | 674 | $ | 203 |
(1)
|
Net of tax benefit (expense) of $(183) million and (207) million for the three months ended June 30, 2010 and 2009, respectively, and $(102) million and $(399) million for the six months ended June 30, 2010 and 2009, respectively.
|
(2)
|
Net of tax benefit (expense) of $(185) million and $100 million for the three months ended June 30, 2010 and 2009, respectively, and $(280) million and $295 million for the six months ended June 30, 2010 and 2009, respectively.
|
(3)
|
Net of tax benefit (expense) of $2 million and $4 million for the three months ended June 30, 2010 and 2009, respectively, and ($11) million and $8 million for the six months ended June 30, 2010 and 2009, respectively.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
(Dollars in millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Gross realized investment gains
|
$ | 14 | $ | 51 | $ | 108 | $ | 53 | ||||||||
Gross realized investment losses
|
(0 | ) | 0 | (0 | ) | (1 | ) | |||||||||
Net realized gains (losses)
|
$ | 14 | $ | 51 | $ | 108 | $ | 52 | ||||||||
Total proceeds from sales
|
$ | 1,632 | $ | 2,317 | $ | 9,061 | $ | 3,057 |
(Dollars in millions)
|
June 30, 2010
|
December 31, 2009
|
||||||
Credit Card business:
|
||||||||
Domestic credit card loans
|
$ | 49,625 | $ | 13,374 | ||||
International credit card loans
|
7,249 | 2,229 | ||||||
Total credit card loans
|
56,874 | 15,603 | ||||||
Domestic installment loans
|
4,888 | 6,693 | ||||||
International installment loans
|
20 | 44 | ||||||
Total installment loans
|
4,908 | 6,737 | ||||||
Total credit card
|
61,782 | 22,340 | ||||||
Consumer Banking business:
|
||||||||
Automobile
|
17,221 | 18,186 | ||||||
Mortgage
|
13,322 | 14,893 | ||||||
Other retail
|
4,770 | 5,135 | ||||||
Total consumer banking
|
35,313 | 38,214 | ||||||
Total consumer
|
97,095 | 60,554 | ||||||
Commercial Banking business:
|
||||||||
Commercial and multifamily real estate
|
13,580 | 13,843 | ||||||
Middle market
|
10,203 | 10,062 | ||||||
Specialty lending
|
3,815 | 3,555 | ||||||
Total commercial lending
|
27,598 | 27,460 | ||||||
Small-ticket commercial real estate
|
1,977 | 2,153 | ||||||
Total commercial banking
|
29,575 | 29,613 | ||||||
Other:
|
||||||||
Other loans
|
470 | 452 | ||||||
Total loans
|
$ | 127,140 | $ | 90,619 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30 , 2010
|
June 30, 2009
|
June 30, 2010
|
June 30, 2009
|
|||||||||||||
Balance at beginning of year
|
$ | 7,752 | $ | 4,648 | $ | 4,127 | $ | 4,524 | ||||||||
Impact of consolidation of securitization trusts
|
53 | (1) | 0 | 4,316 | (1) | 0 | ||||||||||
Adjusted balance at the beginning of the period
|
7,805 | 4,648 | 8,443 | 4,524 | ||||||||||||
Provision for loan and lease losses
|
723 | 934 | 2,201 | 2,213 | ||||||||||||
Other
|
(12 | ) | 17 | (110 | ) | 0 | ||||||||||
Charge-offs
|
(2,142 | )(2) | (1,326 | ) | (4,561 | )(2) | (2,649 | ) | ||||||||
Principal recoveries
|
425 | (2) | 209 | 826 | (2) | 394 | ||||||||||
Net charge-offs
|
(1,717 | ) | (1,117 | ) | (3,735 | ) | (2,255 | ) | ||||||||
Balance at June 30
|
$ | 6,799 | $ | 4,482 | $ | 6,799 | $ | 4,482 |
(1)
|
Represents an adjustment made in the second quarter for the impact of impairment on loans consolidated as of January 1, 2010 accounted for as troubled debt restructurings.
|
(2)
|
Includes charge-offs and recoveries for newly consolidated loans related to trusts previously accounted for as off-balance sheet arrangements.
|
·
|
Credit card loans: We continue to classify credit card loans as performing until the loan is charged off. We also continue to accrue finance charges and fees on credit card loans until the account is charged-off. We reduce, however, the carrying amount of credit card loan balances by the amount of finance charges and fees billed but not expected to be collected and exclude this amount from revenue.
|
·
|
Consumer loans: If we determine that collectability of principal and interest is reasonably assured, we classify delinquent consumer loans as performing and continue to accrue interest until the loan is 90 days past due for auto and mortgage loans and until the loan is 120 days past due for other non-credit card consumer loans. If we determine that collectability is not reasonably assured, or the loan is 90 days past due for auto and mortgage loans and 120 days past due for other non-credit card consumer loans, we consider the loan to be nonperforming and it is placed on nonaccrual status.
|
·
|
Commercial loans: We classify commercial loans as nonperforming and place them on nonaccrual status at the earlier of the date we determine that the collectability of interest or principal on the loan is not reasonably assured or the loan is 90 days past due.
|
·
|
Loans acquired from Chevy Chase Bank: Loans that we acquired from Chevy Chase Bank were recorded at fair value, including those considered to be impaired at the date of purchase. We therefore do not classify loans that we acquired from Chevy Chase Bank as delinquent or nonperforming unless they do not perform in accordance with our expectations as of the purchase date.
|
June 30, 2010
|
December 31, 2009
|
|||||||||||||||||||||||
(Dollars in millions)
|
Commercial
|
Consumer(1)
|
Total
|
Commercial
|
Consumer(1)
|
Total
|
||||||||||||||||||
Nonperforming loans
|
$ | 602 | $ | 708 | $ | 1,310 | $ | 702 | $ | 507 | $ | 1,289 | ||||||||||||
Total allowance for nonperforming loans
|
88 | 106 | 194 | 94 | 160 | 254 |
June 30, 2010
|
December 31, 2009
|
|||||||||||||||||||||||
(Dollars in millions)
|
Commercial
|
Consumer
|
Total
|
Commercial
|
Consumer
|
Total
|
||||||||||||||||||
TDR loans:(1)
|
||||||||||||||||||||||||
With an allowance
|
$ | 17 | $ | 833 | $ | 850 | $ | 1 | $ | 238 | $ | 239 | ||||||||||||
Without an allowance
|
64 | 0 | 64 | 41 | 0 | 41 | ||||||||||||||||||
Total TDR loans
|
81 | 833 | 914 | 42 | 238 | 280 | ||||||||||||||||||
Allowance for TDR loans
|
2 | 392 | 394 | 1 | 65 | 66 | ||||||||||||||||||
Net investment TDR loans
|
$ | 79 | $ | 441 | $ | 520 | $ | 41 | $ | 173 | $ | 214 |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||
2010
|
2010
|
|||||||||||||||||||||||
(Dollars in millions)
|
Commercial
|
Consumer
|
Total
|
Commercial
|
Consumer
|
Total
|
||||||||||||||||||
Average balance of TDR loans
|
$ | 59 | $ | 811 | $ | 870 | $ | 62 | $ | 819 | $ | 881 | ||||||||||||
Interest income recognized on TDR loans
|
$ | 1 | $ | 17 | $ | 18 | $ | 1 | $ | 32 | $ | 33 |
(1)
|
Reflects the recorded investment that are TDR loans.
|
Level 1:
|
Quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
Level 2:
|
Observable market-based inputs, other than quoted prices in active markets for identical assets or liabilities.
|
Level 3:
|
Unobservable inputs.
|
June 30, 2010
|
||||||||||||||||
Fair Value Measurements Using (2)
|
Assets/Liabilities
|
|||||||||||||||
Level 1
|
Level 2
|
Level 3
|
at Fair Value
|
|||||||||||||
Assets
|
||||||||||||||||
Securities available for sale
|
||||||||||||||||
U.S. Treasury and other U.S. Gov’t agency
|
$ | 391 | $ | 399 | $ | 0 | $ | 790 | ||||||||
Collateralized mortgage obligations
|
0 | 14,418 | 633 | 15,051 | ||||||||||||
Mortgage-backed securities
|
0 | 13,509 | 428 | 13,937 | ||||||||||||
Asset-backed securities
|
0 | 9,043 | 132 | 9,175 | ||||||||||||
Other
|
126 | 326 | 19 | 471 | ||||||||||||
Total securities available for sale
|
$ | 517 | $ | 37,695 | $ | 1,212 | $ | 39,424 | ||||||||
Other assets
|
||||||||||||||||
Mortgage servicing rights
|
0 | 0 | 137 | 137 | ||||||||||||
Derivative receivables(1) (2)
|
21 | 1,391 | 51 | 1,463 | ||||||||||||
Retained interests in securitization
|
0 | 0 | 196 | 196 | ||||||||||||
Total Assets
|
$ | 538 | $ | 39,086 | $ | 1,596 | $ | 41,220 | ||||||||
Liabilities
|
||||||||||||||||
Other liabilities
|
||||||||||||||||
Derivative payables(1)
|
$ | 5 | $ | 525 | $ | 47 | $ | 577 | ||||||||
Total Liabilities
|
$ | 5 | $ | 525 | $ | 47 | $ | 577 |
December 31, 2009
|
||||||||||||||||
Fair Value Measurements Using (2)
|
Assets/Liabilities
|
|||||||||||||||
Level 1
|
Level 2
|
Level 3
|
at Fair Value
|
|||||||||||||
Assets
|
||||||||||||||||
Securities available for sale
|
||||||||||||||||
U.S. Treasury and other U.S. Gov’t agency
|
$ | 392 | $ | 477 | $ | 0 | $ | 869 | ||||||||
Collateralized mortgage obligations
|
0 | 8,656 | 982 | 9,638 | ||||||||||||
Mortgage-backed securities
|
0 | 20,198 | 486 | 20,684 | ||||||||||||
Asset-backed securities
|
0 | 7,179 | 13 | 7,192 | ||||||||||||
Other
|
73 | 349 | 25 | 447 | ||||||||||||
Total securities available for sale
|
$ | 465 | $ | 36,859 | $ | 1,506 | $ | 38,830 | ||||||||
Other assets
|
||||||||||||||||
Mortgage servicing rights
|
0 | 0 | 240 | 240 | ||||||||||||
Derivative receivables(1)(2)
|
4 | 625 | 440 | 1,069 | ||||||||||||
Retained interests in securitizations
|
0 | 0 | 3,945 | 3,945 | ||||||||||||
Total Assets
|
$ | 469 | $ | 37,484 | $ | 6,131 | $ | 44,084 | ||||||||
Liabilities
|
||||||||||||||||
Other liabilities
|
||||||||||||||||
Derivative payables(1)
|
$ | 8 | $ | 366 | $ | 33 | $ | 407 | ||||||||
Total Liabilities
|
$ | 8 | $ | 366 | $ | 33 | $ | 407 |
(1)
|
We do not offset the fair value of derivative contracts in a loss position against the fair value of contracts in a gain position. We also do not offset fair value amounts recognized for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement.
|
(2)
|
The above table does not reflect $20 million and $4 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of June 30, 2010 and December 31, 2009, respectively. Non-performance risk is reflected in other assets/liabilities on the balance sheet and offset through the income statement in other income.
|
For the Three Months Ended June 30, 2010
|
||||||||||||||||||||
Securities Available for Sale
|
Mortgage Servicing Rights(1)
|
Derivative Receivables(2)
|
Retained Interests in Securitizations(3)
|
Derivative Payables(2)
|
||||||||||||||||
Balance, March 31, 2010
|
$ | 1,253 | $ | 230 | $ | 38 | $ | 196 | $ | 35 | ||||||||||
Total realized and unrealized gains (losses):
|
||||||||||||||||||||
Included in earnings
|
0 | (47 | ) | 12 | 6 | 11 | ||||||||||||||
Included in other comprehensive income
|
(28 | ) | 0 | 0 | 0 | 0 | ||||||||||||||
Purchases, issuances and settlements, net
|
0 | (46 | ) | 1 | (6 | ) | 1 | |||||||||||||
Impact of adoption of consolidation standards
|
0 | 0 | 0 | 0 | 0 | |||||||||||||||
Transfers in to Level 3(4)
|
437 | 0 | 0 | 0 | 0 | |||||||||||||||
Transfers out of Level 3 (4)
|
(450 | ) | 0 | 0 | 0 | 0 | ||||||||||||||
Balance, June 30, 2010
|
$ | 1,212 | $ | 137 | $ | 51 | $ | 196 | $ | 47 | ||||||||||
Change in unrealized gains (losses) included in earnings related to financial instruments held at June 30, 2010
|
$ | 0 | $ | (47 | ) | $ | 12 | $ | 5 | $ | 11 |
For the Three Months Ended June 30, 2010
|
||||||||||||||||||||||||
Securities Available for Sale
|
U.S. Treasury & other U.S. Gov’t agency
|
Collateralized mortgage obligations
|
Mortgage- backed securities
|
Asset- backed securities
|
Other
|
Total
|
||||||||||||||||||
Balance, March 31, 2010
|
$ | 0 | $ | 774 | $ | 371 | $ | 83 | $ | 25 | $ | 1,253 | ||||||||||||
Total realized and unrealized gains (losses):
|
||||||||||||||||||||||||
Included in earnings
|
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Included in other comprehensive income
|
0 | (13 | ) | (14 | ) | (1 | ) | 0 | (28 | ) | ||||||||||||||
Purchases, issuances and settlements, net
|
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Transfers in to Level 3 (4)
|
0 | 172 | 215 | 50 | 0 | 437 | ||||||||||||||||||
Transfers out of Level 3 (4)
|
0 | (300 | ) | (144 | ) | 0 | (6 | ) | (450 | ) | ||||||||||||||
Balance, June 30, 2010
|
$ | 0 | $ | 633 | $ | 428 | $ | 132 | $ | 19 | $ | 1,212 | ||||||||||||
Change in unrealized gains (losses) included in earnings related to financial instruments held at June 30, 2010
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
For the Three Months Ended June 30, 2009
|
||||||||||||||||||||
Securities Available for Sale
|
Mortgage Servicing Rights(1)
|
Derivative Receivables(2)
|
Retained Interests in Securitizations(3)
|
Derivative Payables(2)
|
||||||||||||||||
Balance, March 31, 2009
|
$ | 2,311 | $ | 259 | $ | 654 | $ | 2,186 | $ | 54 | ||||||||||
Total realized and unrealized gains (losses):
|
||||||||||||||||||||
Included in earnings
|
0 | 25 | (148 | ) | (117 | ) | (17 | ) | ||||||||||||
Included in other comprehensive income
|
(142 | ) | 0 | 0 | 28 | 0 | ||||||||||||||
Purchases, issuances and settlements, net
|
(92 | ) | (3 | ) | (554 | ) | 1,842 | 1 | ||||||||||||
Transfers in/(out) of Level 3
|
(107 | ) | 0 | 589 | 0 | (1 | ) | |||||||||||||
Balance, June 30, 2009
|
$ | 1,970 | $ | 281 | $ | 541 | $ | 3,939 | $ | 37 | ||||||||||
Change in unrealized gains (losses) included in earnings related to financial instruments held at June 30, 2009
|
$ | 0 | $ | 25 | $ | (148 | ) | $ | (4 | ) | $ | (17 | ) |
For the Three Months Ended June 30, 2009
|
||||||||||||||||||||||||
Securities Available for Sale
|
U.S. Treasury & other U.S. Gov’t agency
|
Collateralized mortgage obligations
|
Mortgage- backed securities
|
Asset- backed securities
|
Other
|
Total
|
||||||||||||||||||
Balance, March 31, 2009
|
$ | 0 | $ | 1,650 | $ | 627 | $ | 2 | $ | 32 | $ | 2,311 | ||||||||||||
Total realized and unrealized gains (losses):
|
||||||||||||||||||||||||
Included in earnings
|
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Included in other comprehensive income
|
0 | (136 | ) | (6 | ) | 0 | 0 | (142 | ) | |||||||||||||||
Purchases, issuances and settlements, net
|
0 | (137 | ) | 48 | 0 | (3 | ) | (92 | ) | |||||||||||||||
Transfers in to Level 3 (4)
|
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Transfers out of Level 3 (4)
|
0 | (67 | ) | (40 | ) | 0 | 0 | (107 | ) | |||||||||||||||
Balance, June 30, 2009……………………
|
$ | 0 | $ | 1,310 | $ | 629 | $ | 2 | $ | 29 | $ | 1,970 | ||||||||||||
Change in unrealized gains (losses) included in earnings related to financial instruments held at June 30, 2009
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
For the Six Months Ended June 30, 2010
|
||||||||||||||||||||
Securities Available for Sale
|
Mortgage Servicing Rights(1)
|
Derivative Receivables(2)
|
Retained Interests in Securitizations(3)
|
Derivative Payables(2)
|
||||||||||||||||
Balance, December 31, 2009
|
$ | 1,506 | $ | 240 | $ | 441 | $ | 3,945 | $ | 33 | ||||||||||
Total realized and unrealized gains (losses):
|
||||||||||||||||||||
Included in earnings
|
0 | (53 | ) | 10 | 9 | 13 | ||||||||||||||
Included in other comprehensive income
|
(49 | ) | 0 | 0 | 0 | 0 | ||||||||||||||
Purchases, issuances and settlements, net
|
61 | (50 | ) | 1 | (7 | ) | 1 | |||||||||||||
Impact of adoption of consolidation standards
|
0 | 0 | (401 | ) | (3,751 | ) | 0 | |||||||||||||
Transfers in to Level 3(4)
|
752 | 0 | 0 | 0 | 0 | |||||||||||||||
Transfers out of Level 3 (4)
|
(1,058 | ) | 0 | 0 | 0 | 0 | ||||||||||||||
Balance, June 30, 2010
|
$ | 1,212 | $ | 137 | $ | 51 | $ | 196 | $ | 47 | ||||||||||
Change in unrealized gains (losses) included in earnings related to financial instruments held at June 30, 2010
|
$ | 0 | $ | (53 | ) | $ | 10 | $ | 8 | $ | 13 |
For the Six Months Ended June 30, 2010
|
||||||||||||||||||||||||
Securities Available for Sale
|
U.S. Treasury & other U.S. Gov’t agency
|
Collateralized mortgage obligations
|
Mortgage- backed securities
|
Asset- backed securities
|
Other
|
Total
|
||||||||||||||||||
Balance, December 31, 2009
|
$ | 0 | $ | 982 | $ | 486 | $ | 13 | $ | 25 | $ | 1,506 | ||||||||||||
Total realized and unrealized gains (losses):
|
||||||||||||||||||||||||
Included in earnings
|
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Included in other comprehensive income
|
0 | (36 | ) | (12 | ) | (1 | ) | 0 | (49 | ) | ||||||||||||||
Purchases, issuances and settlements, net
|
0 | (9 | ) | 0 | 70 | 0 | 61 | |||||||||||||||||
Transfers in to Level 3 (4)
|
0 | 285 | 417 | 50 | 0 | 752 | ||||||||||||||||||
Transfers out of Level 3 (4)
|
0 | (589 | ) | (463 | ) | 0 | (6 | ) | (1,058 | ) | ||||||||||||||
Balance, June 30, 2010
|
$ | 0 | $ | 633 | $ | 428 | $ | 132 | $ | 19 | $ | 1,212 | ||||||||||||
Change in unrealized gains (losses) included in earnings related to financial instruments held at June 30, 2010
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
For the Six Months Ended June 30, 2009
|
||||||||||||||||||||
Securities Available for Sale
|
Mortgage Servicing Rights(1)
|
Derivative Receivables(2)
|
Retained Interests in Securitizations(3)
|
Derivative Payables(2)
|
||||||||||||||||
Balance, December 31, 2008
|
$ | 2,380 | $ | 151 | $ | 60 | $ | 1,470 | $ | 61 | ||||||||||
Total realized and unrealized gains (losses):
|
||||||||||||||||||||
Included in earnings
|
0 | 27 | (154 | ) | (218 | ) | (23 | ) | ||||||||||||
Included in other comprehensive income
|
(253 | ) | 0 | 0 | 51 | 0 | ||||||||||||||
Purchases, issuances and settlements, net
|
(30 | ) | 103 | 46 | 2,636 | 0 | ||||||||||||||
Transfers in/(out) of Level 3
|
(127 | ) | 0 | 589 | 0 | (1 | ) | |||||||||||||
Balance, June 30, 2009
|
$ | 1,970 | $ | 281 | $ | 541 | $ | 3,939 | $ | 37 | ||||||||||
Change in unrealized gains (losses) included in earnings related to financial instruments held at June 30, 2009
|
$ | 0 | $ | 27 | $ | (154 | ) | $ | (30 | ) | $ | (23 | ) |
For the Six Months Ended June 30, 2009
|
||||||||||||||||||||||||
Securities Available for Sale
|
U.S. Treasury & other U.S. Gov’t agency
|
Collateralized mortgage obligations
|
Mortgage- backed securities
|
Asset- backed securities
|
Other
|
Total
|
||||||||||||||||||
Balance, December 31, 2008
|
$ | 0 | $ | 1,580 | $ | 773 | $ | 0 | $ | 27 | $ | 2,380 | ||||||||||||
Total realized and unrealized gains (losses):
|
||||||||||||||||||||||||
Included in earnings
|
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Included in other comprehensive income
|
0 | (222 | ) | (31 | ) | 0 | 0 | (253 | ) | |||||||||||||||
Purchases, issuances and settlements, net
|
0 | (79 | ) | 48 | (1 | ) | 2 | (30 | ) | |||||||||||||||
Transfers in to Level 3 (4)
|
0 | 31 | 0 | 3 | 0 | 34 | ||||||||||||||||||
Transfers out of Level 3 (4)
|
0 | 0 | (161 | ) | 0 | 0 | (161 | ) | ||||||||||||||||
Balance, June 30, 2009
|
$ | 0 | $ | 1,310 | $ | 629 | $ | 2 | $ | 29 | $ | 1,970 | ||||||||||||
Change in unrealized gains (losses) included in earnings related to financial instruments held at June 30, 2009
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
(1)
|
Gains (losses) related to Level 3 mortgage servicing rights are reported in mortgage servicing and other income, which is a component of non-interest income.
|
(2)
|
An end of quarter convention is used to measure derivative activity, resulting in end of quarter values being reflected as purchases, issuances and settlements for derivatives having a zero fair value at inception. Gains (losses) related to Level 3 derivative receivables and derivative payables are reported in other non-interest income, which is a component of non-interest income.
|
(3)
|
An end of quarter convention is used to reflect activity in retained interests in securitizations, resulting in all transactions and assumption changes being reflected as if they occurred on the last day of the quarter. Gains (losses) related to Level 3 retained interests in securitizations are reported in servicing and securitizations income, which is a component of non-interest income.
|
(4)
|
The transfer out of Level 3 for the second quarter of 2010 was driven by a combination of greater consistency amongst multiple pricing sources and the on-going run-off of non-agency MBS. The transfers into Level 3 were driven by the overall tightening in the differences amongst vendor pricing on non-agency MBS, which were caused by individual instances where either the differences amongst vendor pricing were too great or there were an inadequate number of vendors providing pricing for corroboration. This resulted in transfers in a number of securities being moved from Level 2 to Level 3, but the trend has most of the non-agency movement going from Level 3 to Level 2.
|
June 30, 2010
|
||||||||||||||||||||
Fair Value Measurements Using
|
Assets at Fair
|
Total
|
||||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Value
|
Losses
|
||||||||||||||||
Assets
|
||||||||||||||||||||
Loans held for sale
|
$ | 0 | $ | 245 | $ | 0 | $ | 245 | $ | 4 | ||||||||||
Loans held for investment
|
0 | 19 | 181 | 200 | 107 | |||||||||||||||
Foreclosed assets(1)
|
0 | 238 | 0 | 238 | 20 | |||||||||||||||
Other
|
0 | 8 | 0 | 8 | 2 | |||||||||||||||
Total
|
$ | 0 | $ | 510 | $ | 181 | $ | 691 | $ | 133 |
December 31, 2009
|
||||||||||||||||||||
Fair Value Measurements Using
|
Assets at Fair
|
Total
|
||||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Value
|
Losses
|
||||||||||||||||
Assets
|
||||||||||||||||||||
Loans held for sale
|
$ | 0 | $ | 266 | $ | 0 | $ | 266 | $ | 16 | ||||||||||
Loans held for investment
|
0 | 39 | 232 | 271 | 115 | |||||||||||||||
Foreclosed assets(1)
|
0 | 197 | 0 | 197 | 26 | |||||||||||||||
Other
|
0 | 31 | 0 | 31 | (4 | ) | ||||||||||||||
Total
|
$ | 0 | $ | 533 | $ | 232 | $ | 765 | $ | 153 |
(1)
|
Represents the fair value and related losses of foreclosed properties that were written down subsequent to their initial classification as foreclosed properties.
|
June 30, 2010
|
December 31, 2009
|
|||||||||||||||
Carrying Amount
|
Estimated Fair Value
|
Carrying Amount (1)
|
Estimated Fair Value(1)
|
|||||||||||||
Financial Assets
|
||||||||||||||||
Cash and cash equivalents
|
$ | 5,199 | $ | 5,199 | $ | 8,685 | $ | 8,685 | ||||||||
Restricted cash for securitization investors
|
3,446 | 3,446 | 501 | 501 | ||||||||||||
Securities available for sale
|
39,424 | 39,424 | 38,830 | 38,830 | ||||||||||||
Securities held to maturity
|
0 | 0 | 80 | 80 | ||||||||||||
Loans held for sale
|
249 | 249 | 268 | 268 | ||||||||||||
Net loans held for investment
|
120,341 | 123,962 | 86,492 | 86,158 | ||||||||||||
Interest receivable
|
1,077 | 1,077 | 936 | 936 | ||||||||||||
Accounts receivable from securitization
|
206 | 206 | 7,128 | 7,128 | ||||||||||||
Derivatives
|
1,463 | 1,463 | 1,069 | 1,069 | ||||||||||||
Mortgage servicing rights
|
137 | 137 | 240 | 240 | ||||||||||||
Financial Liabilities
|
||||||||||||||||
Non-interest bearing deposits
|
$ | 14,159 | $ | 14,159 | $ | 13,439 | $ | 13,439 | ||||||||
Interest-bearing deposits
|
103,172 | 103,637 | 102,370 | 102,616 | ||||||||||||
Senior and subordinated notes
|
9,424 | 9,922 | 9,045 | 9,156 | ||||||||||||
Securitized debt obligations
|
33,009 | 33,101 | 3,954 | 3,890 | ||||||||||||
Other borrowings
|
5,585 | 5,288 | 8,015 | 7,833 | ||||||||||||
Interest payable
|
543 | 543 | 509 | 509 | ||||||||||||
Derivatives
|
577 | 577 | 407 | 407 |
(1)
|
Certain prior period amounts have been revised to conform to current presentation.
|
June 30, 2010
|
|||||||||||||
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
Remaining Amortization Period
|
||||||||||
Core deposit intangibles
|
$ | 1,562 | $ | (816 | ) | $ | 746 |
7.5 years
|
|||||
Lease intangibles
|
54 | (25 | ) | 29 |
22.2 years
|
||||||||
Trust intangibles
|
11 | (5 | ) | 6 |
13.4 years
|
||||||||
Other intangibles
|
35 | (22 | ) | 13 |
2.7 years
|
||||||||
Total
|
$ | 1,662 | $ | (868 | ) | $ | 794 |
December 31, 2009
|
|||||||||||||
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
Remaining Amortization Period
|
||||||||||
Core deposit intangibles
|
$ | 1,562 | $ | (713 | ) | $ | 849 |
8.0 years
|
|||||
Lease intangibles
|
54 | (23 | ) | 31 |
22.7 years
|
||||||||
Trust intangibles
|
11 | (5 | ) | 6 |
13.9 years
|
||||||||
Other intangibles
|
35 | (15 | ) | 20 |
3.2 years
|
||||||||
Total
|
$ | 1,662 | $ | (756 | ) | $ | 906 |
Current Period Amortization Amount
|
||||
Three months ended June 30, 2010
|
$ | 55 | ||
Estimated Future Amortization Amounts
|
||||
2010 (remaining six months)
|
$ | 103 | ||
2011
|
183 | |||
2012
|
151 | |||
2013
|
122 | |||
2014
|
94 | |||
2015
|
67 | |||
Thereafter
|
74 | |||
Total
|
$ | 794 |
(Dollars in millions)
|
June 30, 2010
|
December 31, 2009
|
||||||
Customer deposits:
|
||||||||
Non-interest bearing deposits
|
$ | 14,159 | $ | 13,439 | ||||
Interest-bearing deposits
|
103,172 | 102,370 | ||||||
Total customer deposits
|
$ | 117,331 | $ | 115,809 | ||||
Securitized debt obligations:
|
||||||||
Securitized debt obligations—fixed rate
|
$ | 9,262 | $ | 995 | ||||
Securitized debt obligations—variable rate
|
23,747 | 2,959 | ||||||
Total securitized debt obligations
|
$ | 33,009 | $ | 3,954 | ||||
Borrowings:
|
||||||||
Senior and subordinated notes:
|
||||||||
Bank notes—fixed rate
|
$ | 3,139 | $ | 2,997 | ||||
Corporate debt—fixed rate
|
6,285 | 6,048 | ||||||
Total senior and subordinated notes
|
$ | 9,424 | $ | 9,045 | ||||
Other borrowings:
|
||||||||
Junior subordinated borrowings:
|
||||||||
Junior subordinated borrowings—fixed rate
|
$ | 3,631 | $ | 3,629 | ||||
Junior subordinated borrowings—variable rate
|
11 | 11 | ||||||
Total junior subordinated borrowings
|
$ | 3,642 | $ | 3,640 | ||||
FHLB advances:
|
||||||||
FHLB advances—fixed rate
|
$ | 290 | $ | 2,309 | ||||
FHLB advances—variable rate
|
925 | 925 | ||||||
Total FHLB advances
|
$ | 1,215 | $ | 3,234 | ||||
Federal funds purchased and repurchase agreements due 2010
|
728 | 1,140 | ||||||
Other borrowings
|
0 | 1 | ||||||
Total other borrowings
|
5,585 | 8,015 | ||||||
Total debt
|
$ | 15,009 | $ | 17,060 |
June 30, 2010
|
December 31, 2009
|
|||||||
Net unrealized gains on securities(1)
|
$ | 676 | $ | 199 | ||||
Net unrecognized elements of defined benefit plans
|
(30 | ) | (29 | ) | ||||
Foreign currency translation adjustments
|
(124 | ) | (26 | ) | ||||
Unrealized losses on cash flow hedging instruments
|
(38 | ) | (60 | ) | ||||
Initial application of the measurement date provisions for postretirement benefits other than pensions
|
(1 | ) | (1 | ) | ||||
Initial application from adoption of consolidation standards
|
(16 | ) | 0 | |||||
Total accumulated other comprehensive income
|
$ | 467 | $ | 83 |
(1)
|
Includes net unrealized gains (losses) on securities available for sale and retained subordinated notes. Unrealized losses not related to credit on other-than-temporarily impaired securities of $120 million (net of income tax was $77 million) and $181 million (net of income tax was $117 million) was reported in accumulated other comprehensive income as of June 30, 2010 and December 31, 2009, respectively.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Shares in millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Numerator:
|
||||||||||||||||
Income (loss) from continuing operations, net of tax
|
$ | 812 | $ | 229 | $ | 1,532 | $ | 146 | ||||||||
Loss from discontinued operations, net of tax
|
(204 | ) | (6 | ) | (288 | ) | (31 | ) | ||||||||
Net income (loss)
|
$ | 608 | $ | 223 | $ | 1,244 | $ | 115 | ||||||||
Preferred stock dividends and accretion of discount
|
0 | (500 | ) | 0 | (564 | ) | ||||||||||
Net income (loss) available to common shareholders
|
$ | 608 | $ | (277 | ) | $ | 1,244 | $ | (449 | ) | ||||||
Denominator:
|
||||||||||||||||
Denominator for basic earnings per share-weighted-average shares
|
452 | 422 | 452 | 406 | ||||||||||||
Effect of dilutive securities (1) :
|
||||||||||||||||
Stock options
|
1 | 0 | 1 | 0 | ||||||||||||
Contingently issuable shares
|
0 | 0 | 0 | 0 | ||||||||||||
Restricted stock and units
|
3 | 0 | 3 | 0 | ||||||||||||
Dilutive potential common shares
|
4 | 0 | 4 | 0 | ||||||||||||
Denominator for diluted earnings per share-adjusted weighted-average shares
|
456 | 422 | 456 | 406 | ||||||||||||
Basic earnings per share
|
||||||||||||||||
Income (loss) from continuing operations
|
$ | 1.79 | $ | (0.64 | ) | $ | 3.38 | $ | (1.03 | ) | ||||||
Loss from discontinued operations
|
(0.45 | ) | (0.01 | ) | (0.63 | ) | (0.07 | ) | ||||||||
Net income (loss)
|
$ | 1.34 | $ | (0.66 | ) | $ | 2.75 | $ | (1.11 | ) | ||||||
Diluted earnings per share
|
||||||||||||||||
Income (loss) from continuing operations
|
$ | 1.78 | $ | (0.64 | ) | $ | 3.36 | $ | (1.03 | ) | ||||||
Loss from discontinued operations
|
(0.45 | ) | (0.01 | ) | (0.63 | ) | (0.07 | ) | ||||||||
Net income (loss)
|
$ | 1.33 | $ | (0.66 | ) | $ | 2.73 | $ | (1.11 | ) |
(1)
|
Excluded from the computation of diluted earnings per share were 17 million and 37 million, respectively of awards, options or warrants, for the three months ended June 30, 2010 and 2009, respectively, and 24 million and 38 million for the six months ended June 30, 2010 and 2009, respectively, because their inclusion would be antidilutive.
|
Mortgage Servicing Rights:
|
Three Months Ended June 30
|
Six Months Ended June 30
|
||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Balance, beginning of period
|
$ | 230 | $ | 259 | $ | 240 | $ | 151 | ||||||||
Acquired in acquisitions (1)
|
0 | 0 | 0 | 110 | ||||||||||||
Originations
|
3 | 5 | 6 | 7 | ||||||||||||
Sales
|
(42 | ) | 0 | (42 | ) | 0 | ||||||||||
Change in fair value, net
|
(54 | ) | 17 | (67 | ) | 13 | ||||||||||
Balance at June 30
|
$ | 137 | $ | 281 | $ | 137 | $ | 281 | ||||||||
Ratio of mortgage servicing rights to related loans serviced for others
|
0.65 | % | 0.91 | % | 0.65 | % | 0.91 | % | ||||||||
Weighted average service fee
|
0.28 | 0.30 | 0.28 | 0.30 |
(1)
|
Related to the Chevy Chase Bank acquisition completed on February 27, 2009.
|
June 30, 2010
|
June 30, 2009
|
|||||||
Weighted average prepayment rate (includes default rate)
|
18.26 | % | 18.98 | % | ||||
Weighted average life (in years)
|
4.97 | 4.89 | ||||||
Discount rate
|
11.83 | % | 11.89 | % |
·
|
Fair Value Hedges: We designate derivatives as fair value hedges to manage our exposure to changes in the fair value of certain financial assets and liabilities, which fluctuate in value as a result of movements in interest rates. Changes in the fair value of derivatives designated as fair value hedges are recorded in earnings together with offsetting changes in the fair value of the hedged item and any resulting ineffectiveness. Our fair value hedges consist of interest rate swaps that are intended to modify our exposure to interest rate risk on various fixed-rate senior notes, subordinated notes, brokered certificates of deposits and U.S. agency investments. These hedges have maturities through 2019 and have the effect of converting some of our fixed-rate debt, deposits and investments to variable rate.
|
·
|
Cash Flow Hedges: We designate derivatives as cash flow hedges to manage our exposure to variability in cash flows related to forecasted transactions. Changes in the fair value of derivatives designated as cash flow hedges are recorded as a component of AOCI, to the extent that the hedge relationships are effective, and amounts are reclassified from AOCI to earnings as the forecasted transactions occur. To the extent that any ineffectiveness exists in the hedge relationships, the amounts are recorded in current period earnings. Our cash flow hedges consist of interest rate swaps that are intended to hedge the variability in interest payments on some of our variable-rate debt issuances and assets through 2017. These hedges have the effect of converting some of our variable-rate debt and assets to a fixed rate. We also have entered into forward foreign currency derivative contracts to hedge our exposure to variability in cash flows related to foreign-currency denominated debt. These hedges are used to hedge foreign exchange exposure on foreign-currency denominated debt by converting the funding currency to the same currency as the assets being financed.
|
·
|
Net Investment Hedges: We use net investment hedges, primarily forward foreign exchange contracts, to manage the exposure related to our net investments in consolidated foreign operations that have functional currencies other than the U.S. dollar. Changes in the fair value of net investment hedges are recorded in the translation adjustment component of AOCI.
|
·
|
Free-Standing Derivatives: We use free-standing derivatives, or economic hedges, to hedge the risk of changes in the fair value of residential MSRs, mortgage loan origination and purchase commitments and other interests held. We also categorize our customer-accommodation derivatives and the related offsetting contracts as free-standing derivatives. Changes in the fair value of free-standing derivatives are recorded in earnings as a component of servicing and securitizations income or as a component of other non-interest income.
|
June 30, 2010
|
December 31, 2009
|
|||||||||||||||||||||||
Derivatives at Fair Value
|
Derivatives at Fair Value
|
|||||||||||||||||||||||
(Dollars in millions)
|
Notional or Contractual Amount
|
Assets(1)
|
Liabilities(1)
|
Notional or Contractual Amount
|
Assets(1)
|
Liabilities(1)
|
||||||||||||||||||
Derivatives designated as accounting hedges:
|
||||||||||||||||||||||||
Interest rate contracts:
|
||||||||||||||||||||||||
Fair value interest rate contracts
|
16,531 | $ | 862 | $ | 5 | 17,289 | $ | 359 | $ | 27 | ||||||||||||||
Cash flow interest rate contracts
|
8,145 | 7 | 144 | 5,096 | 0 | 91 | ||||||||||||||||||
Total interest rate contracts
|
24,676 | 869 | 149 | 22,385 | 359 | 118 | ||||||||||||||||||
Foreign exchange contracts:
|
||||||||||||||||||||||||
Cash flow foreign exchange contracts
|
1,395 | 49 | 0 | 1,576 | 15 | 12 | ||||||||||||||||||
Net investment foreign exchange contracts
|
49 | 4 | 0 | 53 | 0 | 0 | ||||||||||||||||||
Total foreign exchange contracts
|
1,444 | 53 | 0 | 1,629 | 15 | 12 | ||||||||||||||||||
Total derivatives designated as accounting hedges
|
26,120 | 922 | 149 | 24,014 | 374 | 130 | ||||||||||||||||||
Derivatives not designated as accounting hedges:(1)
|
||||||||||||||||||||||||
Interest rate contracts covering:
|
||||||||||||||||||||||||
MSRs
|
895 | 6 | 28 | 935 | 4 | 20 | ||||||||||||||||||
Customer accommodation
|
10,367 | 297 | 271 | 9,968 | 193 | 173 | ||||||||||||||||||
Other interest rate exposures
|
9,996 | 71 | 42 | 23,338 | 494 | 77 | ||||||||||||||||||
Total interest rate contracts
|
21,258 | 374 | 341 | 34,241 | 691 | 270 | ||||||||||||||||||
Foreign exchange contracts
|
1,295 | 148 | 82 | 0 | 0 | 0 | ||||||||||||||||||
Other contracts
|
892 | 19 | 5 | 981 | 4 | 7 | ||||||||||||||||||
Total derivatives not designated as accounting hedges
|
23,445 | 541 | 428 | 35,222 | 695 | 277 | ||||||||||||||||||
Total derivatives
|
49,565 | $ | 1,463 | $ | 577 | 59,236 | $ | 1,069 | $ | 407 |
|
(1) Derivative asset and liability amounts are presented on a gross basis based on individual contracts and do not reflect the impact of legally enforceable master counterparty netting agreements, collateral received/posted or net credit risk valuation adjustments. We recorded a net cumulative credit risk valuation adjustment related to our derivative counterparties of $20 million and $4 million as of June 30, 2010 and December 31, 2009, respectively. See “Derivative Counterparty Credit Risk” below for additional information.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Dollars in millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Derivatives designated as accounting hedges:
|
||||||||||||||||
Fair value interest rate contracts:
|
||||||||||||||||
Gain (loss) recognized in earnings on derivatives:(1)
|
$ | 374 | $ | (262 | ) | $ | 525 | $ | (309 | ) | ||||||
Gain (loss) recognized in earnings on hedged items: (1)
|
(353 | ) | 269 | (487 | ) | 316 | ||||||||||
Net fair value hedge ineffectiveness gain (loss)
|
21 | 7 | 38 | 7 | ||||||||||||
Derivatives not designated as accounting hedges:
|
||||||||||||||||
Gain (loss) recognized in earnings on derivatives:
|
||||||||||||||||
Interest rate contracts covering:
|
||||||||||||||||
MSRs(2)
|
(7 | ) | (12 | ) | (13 | ) | (17 | ) | ||||||||
Customer accommodation (1)
|
6 | 5 | 8 | 7 | ||||||||||||
Other interest rate exposures(1)
|
2 | 61 | 6 | (5 | ) | |||||||||||
Total interest rate contracts
|
1 | 54 | 1 | (15 | ) | |||||||||||
Foreign exchange contracts (1)
|
(3 | ) | 0 | 9 | 0 | |||||||||||
Other interest rate contracts (1)
|
(8 | ) | 0 | (10 | ) | 0 | ||||||||||
Other contracts (2)
|
31 | (21 | ) | 42 | (12 | ) | ||||||||||
Total gain (loss) on derivatives not designated as accounting hedges
|
21 | 33 | 42 | (27 | ) | |||||||||||
Net derivatives gain (loss) recognized in earnings
|
$ | 42 | $ | 40 | $ | 80 | $ | (20 | ) |
|
(1) Amounts are recorded in our consolidated statements of income in other non-interest income.
|
|
(2) Amounts are recorded in our consolidated statements of income in servicing and securitizations income.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Dollars in millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Cash flow hedges:
|
||||||||||||||||
Gain (loss) recognized in AOCI(1):
|
||||||||||||||||
Interest rate contracts
|
$ | 19 | $ | 43 | $ | 57 | $ | 106 | ||||||||
Foreign exchange contracts
|
(1 | ) | (4 | ) | (4 | ) | 12 | |||||||||
Subtotal
|
18 | 39 | 53 | 118 | ||||||||||||
Gain (loss) reclassified from AOCI into earnings:
|
||||||||||||||||
Interest rate contracts(2)
|
(11 | ) | (24 | ) | (34 | ) | (60 | ) | ||||||||
Foreign exchange contracts(3)
|
0 | 7 | 3 | (3 | ) | |||||||||||
Subtotal
|
(11 | ) | (17 | ) | (31 | ) | (63 | ) | ||||||||
Gain (loss) recognized in earnings due to ineffectiveness:
|
||||||||||||||||
Interest rate contracts(3)
|
0 | 0 | 1 | 0 | ||||||||||||
Foreign exchange contracts(3)
|
0 | 0 | 0 | 0 | ||||||||||||
Subtotal
|
0 | 0 | 1 | 0 | ||||||||||||
Net investment hedges:
|
||||||||||||||||
Gain (loss) recognized in AOCI(1):
|
||||||||||||||||
Foreign exchange contracts
|
0 | (4 | ) | 3 | (4 | ) | ||||||||||
Gain (loss) recognized in earnings due to ineffectiveness:
|
||||||||||||||||
Foreign exchange contracts
|
0 | 0 | 0 | 0 | ||||||||||||
Foreign exchange contracts
|
0 | (4 | ) | 3 | (4 | ) | ||||||||||
Net derivatives gain (loss) recognized in earnings
|
$ | (11 | ) | $ | (17 | ) | $ | (30 | ) | $ | (63 | ) |
Consolidated
|
Unconsolidated
|
|||||||||||||||||||
Carrying Amount of Assets
|
Carrying Amount of Liabilities
|
Carrying Amount of Assets(1)
|
Carrying Amount of Liabilities(2)
|
Maximum Exposure to Loss(3)
|
||||||||||||||||
Variable interest entities, June 30, 2010
|
||||||||||||||||||||
Credit card securitizations
|
$ | 50,329 | $ | 42,514 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Auto securitizations
|
3,561 | 2,634 | 0 | 0 | 0 | |||||||||||||||
Installment loan securitizations
|
173 | 48 | 49 | 0 | 49 | |||||||||||||||
Mortgage securitizations
|
0 | 0 | 200 | 41 | 326 | |||||||||||||||
Total variable interest entities
|
$ | 54,063 | $ | 45,196 | $ | 249 | $ | 41 | $ | 375 |
(1)
|
The carrying amount of assets is comprised of retained interests reported as accounts receivable from securitizations and letters of credit related to manufactured housing securitizations, separately disclosed in the Accounts Receivable from Securitizations and Other Mortgage Securitizations sections of this Note, respectively. Please see “Note 11 – Mortgage Servicing Rights” for carrying value of mortgage servicing rights related to unconsolidated VIEs.
|
(2)
|
The carrying amount of liabilities is comprised of obligations to fund negative amortization bonds associated with the securitization of option arm mortgage loans and obligations on certain swap agreements associated with the securitization of manufacturing housing loans.
|
(3)
|
The maximum exposure to loss represents the amount of loss we would incur in the unlikely event that all of our assets in the VIEs became worthless and we were required to meet our maximum remaining funding obligations.
|
As of June 30, 2010
|
||||||||||||
Installment Loans
|
Mortgage (3)
|
Total
|
||||||||||
Interest-only strip classified as trading
|
$ | 18 | $ | 85 | $ | 103 | ||||||
Retained interests classified as trading:
|
||||||||||||
Retained notes
|
0 | 0 | 0 | |||||||||
Cash collateral
|
20 | 9 | 29 | |||||||||
Investor accrued interest receivable
|
0 | 0 | 0 | |||||||||
Total retained interests classified as trading
|
20 | 9 | 29 | |||||||||
Retained notes classified as available for sale
|
11 | 53 | 64 | |||||||||
Other retained interests
|
0 | 10 | 10 | |||||||||
Total retained residual interests
|
49 | 157 | 206 | |||||||||
Payments due to investors for interest on the notes
|
0 | 0 | 0 | |||||||||
Total Accounts Receivable from Securitizations
|
$ | 49 | $ | 157 | $ | 206 |
As of December 31, 2009
|
||||||||||||
Non Mortgage (2)
|
Mortgage (3)
|
Total
|
||||||||||
Interest-only strip classified as trading
|
$ | 22 | $ | 223 | $ | 245 | ||||||
Retained interests classified as trading:
|
||||||||||||
Retained notes
|
573 | 0 | 573 | |||||||||
Cash collateral
|
138 | 3 | 141 | |||||||||
Investor accrued interest receivable
|
898 | 0 | 898 | |||||||||
Total retained interests classified as trading
|
1,609 | 3 | 1,612 | |||||||||
Retained notes classified as available for sale
|
2,088 | 0 | 2,088 | |||||||||
Other retained interests
|
0 | 12 | 12 | |||||||||
Total retained residual interests
|
3,719 | 238 | 3,957 | |||||||||
Payments due to investors for interest on the notes
|
(61 | ) | (1 | ) | (62 | ) | ||||||
Collections on deposit for off-balance sheet securitizations (1)
|
3,233 | 0 | 3,233 | |||||||||
Total Accounts Receivable from Securitizations
|
$ | 6,891 | $ | 237 | $ | 7,128 |
(1)
|
Collections on deposit for off-balance sheet securitizations include $2.2 billion of principal collections accumulated for expected maturities of securitization transactions as of December 31, 2009. There were no collections on deposit for off-balance sheet securitizations as of June 30, 2010. Collections on deposit for secured borrowings are included in restricted cash on the consolidated balance sheet as of January 1, 2010 and thereafter.
|
(2)
|
As of December 31, 2009, non mortgage related accounts receivable from securitizations includes credit card, installment loan and auto trusts. Effective January 1, 2010, we only have one installment loan trust that we have not consolidated and continues to treat as an off-balance sheet arrangement.
|
(3)
|
The mortgage securitization transactions relate to the Chevy Chase Bank acquisition which occurred on February 27, 2009.
|
Three Months Ended
June 30, 2010
|
Three Months Ended
June 30, 2009
|
|||||||
Interest only strip valuation changes
|
$ | 6 | $ | (1 | ) | |||
Fair value adjustments related to spread accounts
|
0 | (41 | ) | |||||
Fair value adjustments related to investors’ accrued interest receivable
|
0 | (24 | ) | |||||
Fair value adjustments related to retained subordinated notes
|
0 | (61 | ) | |||||
Total income statement impact
|
$ | 6 | $ | (127 | ) |
Six Months Ended
|
Six Months Ended
|
|||||||
June 30, 2010 | June 30, 2009 | |||||||
Interest only strip valuation changes
|
$ | 10 | $ | (119 | ) | |||
Fair value adjustments related to spread accounts
|
0 | (46 | ) | |||||
Fair value adjustments related to investors’ accrued interest receivable
|
0 | (24 | ) | |||||
Fair value adjustments related to retained subordinated notes
|
0 | (65 | ) | |||||
Total income statement impact
|
$ | 10 | $ | (254 | ) |
As of June 30, 2010
|
As of December31, 2009
|
||||
Weighted average life for receivables (months)
|
7 |
7 to 9
|
|||
Principal repayment rate (weighted average rate)
|
19 | % |
13% to 16%
|
||
Charge-off rate (weighted average rate)
|
8 | % |
9% to 10%
|
||
Interest-only strip discount rate (weighted average rate)
|
11 | % |
12% to 15%
|
||
Retained Interests discount rate (weighted average rate)
|
11 | % |
8% to 12%
|
As of
|
June 30, 2010
|
December 31, 2009
|
||||||||||||||
Interest-only strip
|
Retained Interests
|
Interest-only strip
|
Retained Interests
|
|||||||||||||
Interest-only strip/ Retained Interests
|
$ | 18 | $ | 31 | $ | 22 | $ | 3,697 | ||||||||
Weighted average life for receivables (months)
|
7 | 7 | 7 | 7 | ||||||||||||
Principal repayment rate (weighted average rate)
|
19 | % | 19 | % | 16 | % | 16 | % | ||||||||
Impact on fair value of 10% adverse change
|
$ | 0 | $ | 0 | $ | 1 | $ | (5 | ) | |||||||
Impact on fair value of 20% adverse change
|
$ | 0 | $ | 0 | $ | 2 | $ | (8 | ) | |||||||
Charge-off rate (weighted average rate)
|
8 | % | 8 | % | 10 | % | 10 | % | ||||||||
Impact on fair value of 10% adverse change
|
$ | 0 | $ | 0 | $ | (9 | ) | $ | (6 | ) | ||||||
Impact on fair value of 20% adverse change
|
$ | (1 | ) | $ | 0 | $ | (11 | ) | $ | (12 | ) | |||||
Discount rate (weighted average rate)
|
11 | % | 11 | % | 12 | % | 8 | % | ||||||||
Impact on fair value of 10% adverse change
|
$ | 0 | $ | 0 | $ | (1 | ) | $ | (11 | ) | ||||||
Impact on fair value of 20% adverse change
|
$ | 0 | $ | 0 | $ | (2 | ) | $ | (23 | ) |
Three Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
Proceeds from new securitizations
|
$ | 0 | $ | 4 | ||||
Collections reinvested in revolving securitizations
|
$ | 0 | $ | 16 | ||||
Repurchases of accounts from the trust
|
$ | 0 | $ | 0 | ||||
Servicing fees received
|
$ | 0 | $ | 0 | ||||
Cash flows received on retained interests (1)
|
$ | 4 | $ | 1 |
Six Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
Proceeds from new securitizations
|
$ | 0 | $ | 7 | ||||
Collections reinvested in revolving securitizations
|
$ | 0 | $ | 33 | ||||
Repurchases of accounts from the trust
|
$ | 0 | $ | 0 | ||||
Servicing fees received
|
$ | 1 | $ | 0 | ||||
Cash flows received on retained interests (1)
|
$ | 6 | $ | 3 |
(1)
|
Includes all cash receipts of excess spread and other payments (excluding servicing fees) from the program. Cash flows for the three and six months ended June 30, 2010 include credit card securitizations that no longer qualify as off -balance sheet.
|
As of June 30, 2010 (1)
|
As of December 31, 2009 (1)
|
|||||||
Interest-only strip/Retained Interests (2)(3)
|
$ | 147 | $ | 226 | ||||
Weighted average life (in years)
|
4.3 – 4.8 | 3.4 | ||||||
Prepayment speed assumption
|
18.3% - 19.0 | % | 27.8 | % | ||||
Impact on fair value at 10% adverse change
|
$ | (3 | ) | $ | (5 | ) | ||
Impact on fair value at 20% adverse change
|
$ | (6 | ) | $ | (9 | ) | ||
Residual cash flow discount rate (annual)
|
25.4% - 42.2 | % | 11.5 | % | ||||
Impact on fair value at 10% adverse change
|
$ | (8 | ) | $ | (6 | ) | ||
Impact on fair value at 20% adverse change
|
$ | (15 | ) | $ | (12 | ) |
(1)
|
Mortgage related retained interests were acquired in connection with the Chevy Chase Bank acquisition during 2009.
|
(2)
|
We sold interest-only bonds during the period ended June 30, 2010 which resulted in the decline in retained interests from December 31, 2009. Additionally, we reclassified the negative amortization bonds from held to maturity to available for sale and recognized an other-than-temporary impairment of $5 million on these securities during the six months ending June 30, 2010. We also recorded non credit related unrealized losses of $14 million ($9 million net of tax) in other comprehensive income.
|
(3)
|
The sale of certain interest-only bonds provided us with updated market observable inputs to incorporate into the valuations of the interest-only bonds that continue to be held by us. As a result, we recorded a $49 million decrease to the fair value of the interest-only bonds during the six months ended June 30, 2010 through an increase to the discount rate, which is attributable to illiquidity in the market for these types of securities.
|
Three Months Ended
June 30, 2010
|
Three Months Ended
June 30, 2009
|
|||||||
Proceeds from new securitizations
|
$ | 0 | $ | 0 | ||||
Servicing fees received
|
4 | 5 | ||||||
Other cash flows received on retained interests
|
13 | 25 |
Six Months Ended
June 30, 2010
|
Sin Months Ended
June 30, 2009
|
|||||||
Proceeds from new securitizations
|
$ | 0 | $ | 0 | ||||
Servicing fees received
|
8 | 7 | ||||||
Other cash flows received on retained interests
|
88 | 34 |
As of June 30, 2010
|
As of December 31, 2009
|
|||||||
Total Principal Amount of Loans
|
$ | 1,505 | $ | 4,642 | ||||
Principal Amount of Loans Past Due 90 Days or More
|
$ | 277 | $ | 1,247 | ||||
Net Credit Losses
|
||||||||
Six months ended June 30, 2010 and year ended December 31, 2009
|
$ | 28 | $ | 217 |
Consolidated
|
Unconsolidated
|
|||||||||||||||||||
Carrying Amount of Assets
|
Carrying Amount of Liabilities
|
Carrying Amount of Assets
|
Carrying Amount of Liabilities
|
Maximum Exposure to Loss(1)
|
||||||||||||||||
Variable interest entities, June 30, 2010
|
||||||||||||||||||||
Affordable housing entities
|
$ | 0 | $ | 0 | $ | 1,006 | $ | 257 | $ | 1,006 | ||||||||||
Entities that provide capital to low-income and rural communities
|
221 | 0 | 6 | 2 | 6 | |||||||||||||||
Other
|
0 | 0 | 185 | 0 | 185 | |||||||||||||||
Total variable interest entities
|
$ | 221 | $ | 0 | $ | 1,197 | $ | 259 | $ | 1,197 | ||||||||||
Variable interest entities, December 31, 2009
|
||||||||||||||||||||
Affordable housing entities
|
$ | 0 | $ | 0 | $ | 1,401 | $ | 638 | $ | 1,401 | ||||||||||
Entities that provide capital to low-income and rural communities
|
155 | 0 | 58 | 2 | 58 | |||||||||||||||
Other
|
0 | 0 | 203 | 0 | 203 | |||||||||||||||
Total variable interest entities
|
$ | 155 | $ | 0 | $ | 1,662 | $ | 640 | $ | 1,662 |
(1)
|
The maximum exposure to loss represents the amount of loss we would incur in the unlikely event that all of our assets in the VIEs became worthless.
|
(Dollars in millions, except per share information)
|
Total Number of Shares Purchased(1)
|
Average Price Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans(1)
|
Maximum Amount That May Yet be Purchased Under the Plan or Program(1)
|
||||||||||||
April 1-30, 2010
|
8,936 | $ | 45.64 | — | $ | 2,000 | ||||||||||
May 1-31, 2010
|
7,112 | 43.29 | — | 2,000 | ||||||||||||
June 1-30, 2010
|
3,020 | 38.02 | — | 2,000 | ||||||||||||
Total
|
19,068 | — |
(1)
|
Shares purchased represent shares purchased and share swaps made in connection with stock option exercises and the withholding of shares to cover taxes on restricted stock lapses. The stock repurchase program is intended to comply with Rules 10b5-1(c) (1) (i) and 10b-18 of the Securities Exchange Act of 1934, as amended.
|
CAPITAL ONE FINANCIAL CORPORATION
(Registrant)
|
||
Date: August 9, 2010
|
By:
|
/s/ GARY L. PERLIN
|
Gary L. Perlin
|
||
Chief Financial Officer and Principal Accounting Officer
|
Exhibit
No.
|
Description
|
|
2.1
|
Stock Purchase Agreement, dated as of December 3, 2008, by and among Capital One Financial Corporation, B.F. Saul Real Estate Investment Trust, Derwood Investment Corporation, and B.F. Saul Company Employee’s Profit Sharing and Retirement Trust (incorporated by reference to Exhibit 2.4 of the Corporation’s 2008 Form 10-K).
|
|
3.1
|
Restated Certificate of Incorporation of Capital One Financial Corporation, (as amended May 15, 2007 (incorporated by reference to Exhibit 3.1 of the Corporation’s Report on Form 8-K, filed on August 28, 2007).
|
|
3.2
|
Amended and Restated Bylaws of Capital One Financial Corporation (as amended October 30, 2008) (incorporated by reference to Exhibit 3.1 of the Corporation’s Report on Form 8-K, filed November 3, 2008).
|
|
4.1.1
|
Specimen certificate representing the Common Stock (incorporated by reference to Exhibit 4.1 of the Corporation’s Annual Report on Form 10-K filed March 5, 2004).
|
|
4.1.2
|
Warrant Agreement, dated December 3, 2009, between Capital One Financial Corporation and Computershare Trust Company, N.A. (incorporated herein by reference to the Exhibit 4.1 of the Company’s Form 8-A filed on December 4, 2009).
|
|
4.2.1
|
Senior Indenture dated as of November 1, 1996 between Capital One Financial Corporation and The Bank of New York Mellon Trust Company, N.A., formerly known as The Bank of New York Trust Company, N.A. (as successor to Harris Trust and Savings Bank), as trustee (incorporated by reference to Exhibit 4.1 of the Corporation’s Report on Form 8-K, filed on November 13, 1996).
|
|
4.2.2
|
Copy of 6.25% Notes, due 2013, of Capital One Financial Corporation (incorporated by reference to Exhibit 4.5.5 of the 2003 Form 10-K).
|
|
4.2.3
|
Copy of 5.25% Notes, due 2017, of Capital One Financial Corporation (incorporated by reference to Exhibit 4.5.6 of the 2004 Form 10-K).
|
|
4.2.4
|
Copy of 4.80% Notes, due 2012, of Capital One Financial Corporation (incorporated by reference to Exhibit 4.5.7 of the 2004 Form 10-K).
|
|
4.2.5
|
Copy of 5.50% Senior Notes, due 2015, of Capital One Financial Corporation (incorporated by reference to Exhibit 4.1 of the Corporation’s Quarterly Report on Form 10-Q for the period ending June 30, 2005).
|
|
4.2.6
|
Specimen of 5.70% Senior Note, due 2011, of Capital One Financial Corporation (incorporated by reference to Exhibit 4.2 of the Corporation’s Report on Form 8-K, filed on September 18, 2006).
|
|
4.2.7
|
Specimen of 6.750% Senior Note, due 2017, of Capital One Financial Corporation (incorporated by reference to Exhibit 4.1 of the Corporation’s Report on Form 8-K, filed on September 5, 2007).
|
|
4.2.8
|
Specimen of 7.375% Senior Note, due 2014, of Capital One Financial Corporation (incorporated by reference to Exhibit 4.1 of the Corporation’s Report on Form 8-K, filed on May 22, 2009).
|
|
4.3
|
Indenture (providing for the issuance of Junior Subordinated Debt Securities), dated as of June 6, 2006, between Capital One Financial Corporation and The Bank of New York Mellon Trust Company, N.A., as indenture trustee (incorporated by reference to Exhibit 4.1 of the Corporation’s Current Report on Form 8-K, filed on June 12, 2006).
|
|
4.4.1
|
First Supplemental Indenture, dated as of June 6, 2006, between Capital One Financial Corporation and The Bank of New York Mellon Trust Company, N.A., as indenture trustee (incorporated by reference to Exhibit 4.2 of the Corporation’s Current Report on Form 8-K, filed on June 12, 2006).
|
|
4.4.2
|
Amended and Restated Declaration of Trust of Capital One Capital II, dated as of June 6, 2006, between Capital One Financial Corporation as Sponsor, The Bank of New York Mellon, as institutional trustee, BNY Mellon Trust of Delaware, as Delaware Trustee and the Administrative Trustees named therein (incorporated by reference to Exhibit 4.3 of the Corporation’s Current Report on Form 8-K, filed on June 12, 2006).
|
Exhibit
No.
|
Description
|
|
4.4.3
|
Guarantee Agreement, dated as of June 6, 2006, between Capital One Financial Corporation and The Bank of New York Mellon Trust Company, N.A., as guarantee trustee (incorporated by reference to Exhibit 4.4 of the Corporation’s Current Report on Form 8-K, filed on June 12, 2006).
|
|
4.4.4
|
Specimen certificate representing the Enhanced TRUPS (incorporated by reference to Exhibit 4.5 of the Corporation’s Current Report on Form 8-K, filed on June 12, 2006).
|
|
4.4.5
|
Specimen certificate representing the Junior Subordinated Debt Security (incorporated by reference to Exhibit 4.6 of the Corporation’s Current Report on Form 8-K, filed on June 12, 2006).
|
|
4.5.1
|
Second Supplemental Indenture, dated as of August 1, 2006, between Capital One Financial Corporation and The Bank of New York Mellon Trust Company, N.A., as indenture trustee (incorporated by reference to Exhibit 4.2 of the Corporation’s Current Report on Form 8-K, filed on August 4, 2006).
|
|
4.5.2
|
Copy of Junior Subordinated Debt Security Certificate (incorporated by reference to Exhibit 4.6 of the Corporation’s Current Report on Form 8-K, filed on August 4, 2006).
|
|
4.5.3
|
Amended and Restated Declaration of Trust of Capital One Capital III, dated as of August 1, 2006, between Capital One Financial Corporation, as Sponsor, The Bank of New York Mellon, as institutional trustee, BNY Mellon Trust of Delaware, as Delaware trustee and the Administrative Trustees named therein (incorporated by reference to Exhibit 4.3 of the Corporation’s Current Report on Form 8-K, filed on August 4, 2006).
|
|
4.5.4
|
Guarantee Agreement, dated as of August 1, 2006, between Capital One Financial Corporation and The Bank of New York Mellon Trust Company, N.A., as guarantee trustee (incorporated by reference to Exhibit 4.4 of the Corporation’s Current Report on Form 8-K, filed on August 4, 2006).
|
|
4.5.5
|
Copy of Capital Security Certificate (incorporated by reference to Exhibit 4.5 of the Corporation’s Current Report on Form 8-K, filed on August 4, 2006)
|
|
4.6.1
|
Third Supplemental Indenture, dated as of February 5, 2007, between Capital One Financial Corporation and The Bank of New York Mellon Trust Company, N.A., as indenture trustee (incorporated by reference to Exhibit 4.2 of the Corporation’s Current Report on Form 8-K, filed on February 8, 2007).
|
|
4.6.3
|
Guarantee Agreement, dated as of February 5, 2007, between Capital One Financial Corporation and The Bank of New York Mellon Trust Company, N.A., as guarantee trustee (incorporated by reference to Exhibit 4.4 of the Corporation’s Current Report on Form 8-K, filed on February 8, 2007).
|
|
4.6.4
|
Specimen certificate representing the Capital Security (incorporated by reference to Exhibit 4.5 of the Corporation’s Current Report on Form 8-K, filed on February 8, 2007).
|
|
4.6.5
|
Specimen certificate representing the Capital Efficient Note (incorporated by reference to Exhibit 4.6 of the Corporation’s Current Report on Form 8-K, filed on February 8, 2007).
|
|
4.7.1
|
Fourth Supplemental Indenture, dated as of August 5, 2009, between Capital One Financial Corporation and The Bank of New York Mellon Trust Company, N.A., as indenture trustee (incorporated by reference to Exhibit 4.2 of the Corporation’s Current Report on Form 8-K, filed on August 6, 2009).
|
|
4.7.3
|
Guarantee Agreement, dated as of August 5, 2009, between Capital One Financial Corporation and The Bank of New York Mellon Trust Company, N.A., as guarantee trustee (incorporated by reference to Exhibit 4.4 of the Corporation’s Current Report on Form 8-K, filed on August 6, 2009).
|
|
4.7.4
|
Specimen Trust Preferred Security Certificate (incorporated by reference to Exhibit 4.5 of the Corporation’s Current Report on Form 8-K, filed on August 6, 2009).
|
|
4.7.5
|
Specimen Junior Subordinated Debt Security (incorporated by reference to Exhibit 4.6 of the Corporation’s Current Report on Form 8-K, filed on August 6, 2009).
|
|
4.8.1
|
Fifth Supplemental Indenture, dated as of November 13, 2009, between Capital One Financial Corporation and The Bank of New York Mellon Trust Company, N.A., as indenture trustee (incorporated by reference to Exhibit 4.2 of the Corporation’s Current Report on Form 8-K, filed on November 13, 2009).
|
|
4.8.2
|
Amended and Restated Declaration of Trust of Capital One Capital VI, dated as of November 13, 2009, between Capital One Financial Corporation as Sponsor, The Bank of New York Mellon Trust Company, N.A., as institutional trustee, BNY Mellon Trust of Delaware, as Delaware Trustee and the Administrative Trustees named therein (incorporated by reference to Exhibit 4.3 of the Corporation’s Current Report on Form 8-K, filed on November 13, 2009).
|
Exhibit
No.
|
Description
|
|
4.8.3
|
Guarantee Agreement, dated as of November 13, 2009, between Capital One Financial Corporation and The Bank of New York Mellon Trust Company, N.A., as guarantee trustee (incorporated by reference to Exhibit 4.4 of the Corporation’s Current Report on Form 8-K, filed on November 13, 2009).
|
|
4.8.4
|
Specimen Trust Preferred Security Certificate (incorporated by reference to Exhibit 4.5 of the Corporation’s Current Report on Form 8-K, filed on November 13, 2009).
|
|
4.8.5
|
Specimen Junior Subordinated Debt Security (incorporated by reference to Exhibit 4.6 of the Corporation’s Current Report on Form 8-K, filed on November 13, 2009).
|
|
4.9.1
|
Indenture, dated as of August 29, 2006, between Capital One Financial Corporation and The Bank of New York Mellon Trust Company, N.A., as indenture trustee (incorporated by reference to Exhibit 4.1 of the Corporation’s Current Report on Form 8-K, filed on August 31, 2006).
|
|
4.9.2
|
Copy of Subordinated Note Certificate (incorporated by reference to Exhibit 4.2 of the Corporation’s Current Report on Form 8-K, filed on August 31, 2006).
|
|
Certification of Richard D. Fairbank
|
||
Certification of Gary L. Perlin
|
||
Certification** of Richard D. Fairbank
|
||
Certification** of Gary L. Perlin
|
||
Reconciliation to GAAP Financial Measures
|
||
101.INS*
|
XBRL Instance Document
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE*
|
XBRL Taxonomy Presentation Linkbase Document
|
*
|
Indicates a document being filed with this Form 10-Q.
|
**
|
Information in this Form 10-Q furnished herewith shall not be deemed to be “filed” for the purposes of Section 18 of the 1934 Act or otherwise subject to the liabilities of that section.
|