Capital One 2004 Annual Report Download - page 92

For the Year Ended December 31, 2002
U.S. Card
Auto
Finance
Global
Financial
Services Other
Total
Managed
Securitization
Adjustments
Total
Reported
Net interest income $ 3,931,880 $ 544,501 $ 750,540 $ 57,417 $ 5,284,338 $ (2,565,226) $ 2,719,112
Non-interest income 3,874,987 65,509 504,438 (33,760) 4,411,174 1,055,662 5,466,836
Provision for loan losses 2,801,423 361,717 440,616 55,136 3,658,892 (1,509,564) 2,149,328
Non-interest expenses 3,391,283 231,741 827,376 135,181 4,585,581 — 4,585,581
Income tax provision
(benefit) 613,381 6,290 (4,883) (63,393) 551,395 — 551,395
Net income (loss) $ 1,000,780 $ 10,262 $ (8,131) $(103,267) $ 899,644 $ — $ 899,644
Loans receivable $40,862,142 $6,992,541 $11,868,006 $ 23,848 $59,746,537 $(32,402,607) $27,343,930
During the year ended December 31, 2004, the Company recognized non-interest expenses which included
$124.8 million in early termination and facility consolidation charges related to cost reduction initiatives, $20.6
million related to a change in asset capitalization thresholds and $15.8 million related to impairment of internally
developed software. Of these amounts, $109.6 million was allocated to the U.S. Card segment, $45.4 million was
allocated to the Global Financial Services segment, $4.5 million was allocated to the Auto Finance segment, and
$1.7 million was held in the Other category.
During 2002, the Company expensed $38.8 million related to early termination of leases, unused facility
capacity, and accelerated depreciation of related fixed assets. The Company allocated $32.8 million of these
expenses to the U.S. Card segment, $1.6 million to the Other category, $1.1 million to the Auto Finance segment
and $3.3 million to the Global Financial Services segment.
During the years ended December 31, 2004, 2003 and 2002, the Company sold $901.3 million, $1.9 billion and
$1.5 billion respectively, of auto loans. These transactions resulted in pre-tax gains allocated to the Auto Finance
segment, inclusive of allocations related to funds transfer pricing, of $41.7 million, $57.3 million and $24.6
million in 2004, 2003 and 2002, respectively. Any unallocated pre-tax gains were held in the Other category for
each of the periods.
During the year ended December 31, 2004, the Company changed its practice for charging-off auto loans when
notified of a bankruptcy. Auto loans in bankruptcy are now charged-off at 120 days past due. This change in
practice resulted in the acceleration of $20.4 million in charge-offs for the Auto Finance segment in 2004.
During 2004, the Company provided notice to terminate its forward flow auto receivables agreement; however,
the Company plans to continue to sell auto receivables through other channels.
During 2004, the Company sold its interest in a South African joint venture with a book value of $3.9 million to
its joint venture partner. The Company received $26.2 million in cash, was forgiven $9.2 million in liabilities and
recognized a pre-tax gain of $31.5 million. Also during 2004, the Company sold its French loan portfolio with a
book value of $144.8 million to an external party. The Company received $178.7 million in cash, recorded $7.2
million in notes receivables and recognized a pre-tax gain of $41.1 million. The respective gains were recorded
in non-interest income and reported in the Global Financial Services segment.
During 2002, the Company realigned certain aspects of its European operations. Charges related to the
realignment of $12.5 million were recognized and allocated to the Global Financial Services segment.
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