Capital One 2008 Annual Report Download - page 48

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During 2008, the Corporation completed several reorganizations and consolidations to streamline operations and regulatory
relationships. On January 1, Capital One Auto Finance Inc. (COAF) moved from a direct subsidiary of the Corporation to become a
direct operating subsidiary of CONA. In connection with the COAF move, one of COAFs direct operating subsidiaries, Onyx
Acceptance Corporation (Onyx), became a direct subsidiary of the Corporation. On March 1, the Corporation converted Capital One
Bank from a Virginia-state chartered bank to a national association, Capital One Bank (USA), National Association (COBNA). On
March 8, Superior Savings of New England, N.A. (Superior) merged with and into CONA. Both COBNA and CONA are primarily
regulated by the Office of the Comptroller of the Currency (the OCC). In May 2008, we consolidated the business and operations of
two registered broker-dealers, Capital One Securities, LLC (dba Capital One Investments, LLC) and Capital One Investment Services
Corporation (formerly NFB Investment Services Corporation), into Capital One Investments Services Corporation. In addition, in May
2008, we consolidated the business and operations of three insurance agencies, Capital One Agency Corp., GreenPoint Agency, Inc.
and Hibernia Insurance Agency, LLC into Green Point Agency, Inc., which is now known as Capital One Agency LLC.
During the first quarter of 2008, the Company reorganized its National Lending sub-segments. Segment and sub-segment results have
been restated for all periods presented. The National Lending segment consists of the following sub-segments:
 U.S. Card sub-segment which consists of the Companys domestic credit card business, including small business credit
cards, and the installment loan businesses.
 Other National Lending sub-segment which includes the Companys auto finance and international lending sub-segments.
On December 4, 2008, the Company announced its intention to acquire Chevy Chase Bank F.S.B., the largest retail depository
institution in the Washington, D.C. region in a cash and stock transaction valued at approximately $520 million. On February 13,
2009, the Company received approval from the Federal Reserve to acquire all of the shares of Chevy Chase Bank F.S.B. and certain of
its subsidiaries. The Company expects the transaction to close in the first quarter of 2009.
During 2007, Capital One F.S.B. and North Fork Bank merged with and into CONA.
During 2007, the Company shut down the mortgage origination operations of its wholesale mortgage banking unit, GreenPoint
Mortgage (GreenPoint), an operating subsidiary of CONA. Additional information can be found in Item 8Financial Statements
and Supplementary DataNotes to the Consolidated Financial StatementsNote 2.
II. Critical Accounting Estimates
The Notes to the Consolidated Financial Statements contain a summary of the Companys significant accounting policies, including a
discussion of recently issued accounting pronouncements. Several of these policies are considered to be more critical to the portrayal
of the Companys financial condition, since they require management to make difficult, complex or subjective judgments, some of
which may relate to matters that are inherently uncertain. Areas with significant judgment and/or estimates or that are materially
dependent on management judgment include: fair value measurements including assessments of other-than-temporary impairments of
securities available for sale; determination of the level of allowance for loan and lease losses; valuation of goodwill and other
intangibles; finance charge, interest and fee revenue recognition; valuation of mortgage servicing rights; valuation of representation
and warranty reserves; valuation of retained interests from securitization transactions; recognition of customer reward liability;
treatment of derivative instruments and hedging activities; and accounting for income taxes.
Additional information about accounting policies can be found in Item 8 Financial Statements and Supplementary DataNotes to
the Consolidated Financial StatementsNote 1.
Fair Value Measurements
Certain financial instruments are reported under generally accepted accounting principles, or GAAP, at fair value. The estimated fair
value of other financial instruments not recorded at fair value must be disclosed. Securities available for sale, derivatives, mortgage
servicing rights and retained interest in securitizations are financial instruments recorded at fair value on a recurring basis.
Additionally, from time to time, we may be required to record at fair value other financial instruments on a nonrecurring basis, such as
loans held for investment and mortgage loans held for sale. We include in Item 8 Financial Statements and Supplementary Data
Notes to the Consolidated Financial StatementsNote 12 information about the extent to which fair value is used to measure assets
and liabilities, the valuation methodologies used and impact to earnings. Additionally, for financial instruments not recorded at fair
value we disclose the estimate of their fair value.