Capital One 2008 Annual Report Download - page 10

completed large-scale integration activities while battling a challenging banking environment. As the
year unfolded, we increasingly turned our attention to building scalable infrastructure and driving
new innovative products, like Rewards Checking accounts, in each of our markets.
Local Banking delivered solid results in 2008, despite facing the most challenging banking
environment perhaps in our lifetimes. During the year, we grew deposits across the company by
$25.8 billion ($5.8 billion in our Local Banking segment), while expanding net interest margin.
Net income for the Local Banking business in 2008 was $225 million. While charge-offs and
non-performing loans increased, the charge-off rate in Local Banking in 2008 was just 50 basis
points. And the credit quality and trends in our Local Banking portfolio continued to outperform
most competitors across the country and in our footprint, benefiting from the relative economic
strength of our local banking markets. As we go forward, we will continue aggressively managing
our loan portfolio in our local markets given the credit risk arising from the damage to the financial
industry in New York and the declines in energy prices affecting Louisiana and Texas.
Our Local Banking business has a favorable loan mix. We maintained relatively low exposure to
construction lending, residential mortgage, and other types of lending that are being hardest hit during
the economic downturn. In our $30 billion commercial loan portfolio, we have less than $3 billion
in construction loans, and only about half that amount is for residential for-sale construction.
Our national direct bank, which provides world class savings products directly to consumers,
continued to deliver strong deposit growth in 2008. We have been investing in that platform
for many years and it is providing a brand-defining customer experience.
As we head into 2009, we will continue to focus on building strong deposit relationships and
ramping up our promising consumer banking strategies across our franchise. We also will continue
to support our valued commercial and small business customers. We are the funding source for
our business customers and we want to help them through this difficult time, consistent with
maintaining credit and pricing discipline during the downturn.
Our Local Banking team continued to perform well. They did stellar work delivering on the integration
plan. The team also flawlessly executed our robust contingency plans to sustain our Gulf Coast
operations through several hurricanes. And we continued to be a destination for great banking talent,
attracting experienced and talented consumer and commercial bankers from across the nation.
We Are Coming To Our Hometown
In December of 2008, we announced the acquisition of Chevy Chase Bank, headquartered in the
Washington, D.C. suburb of Bethesda, Maryland, for $520 million. The transaction was completed
in the first quarter of 2009.
Chevy Chase Bank is the leading banking franchise in the Washington, D.C. area, Capital One’s
corporate headquarters and hometown. Washington, D.C. is a strong and resilient banking market.
8