Capital One 2009 Annual Report Download - page 116

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Note 1
Significant Accounting Policies
Business
Capital One Financial Corporation (the “Corporation”) is a diversified financial services company whose banking and non-banking
subsidiaries market a variety of financial products and services. The Corporation’s principal subsidiaries are:
• 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 February 27, 2009, the Corporation acquired Chevy Chase Bank, F.S.B. (“Chevy Chase Bank”) for $475.9 million comprised of
cash of $445.0 million and 2.56 million shares of common stock valued at $30.9 million. Chevy Chase Bank has the largest retail
branch presence in the Washington D.C. region. See “Note 2- Acquisition of Chevy Chase Bank” for more information regarding the
acquisition. Final goodwill of $1.6 billion was calculated as the purchase premium after adjusting for the fair value of net assets
acquired and represents the value expected from the synergies created through the scale, operational and product enhancement benefits
that will result from combining the operations of the two companies. On July 30, 2009, the Company merged Chevy Chase Bank with
and into CONA.
During the third quarter of 2009, the Company realigned its business segment reporting structure to better reflect the manner in which
the performance of the Company’s operations is evaluated. The Company now reports the results of its business through three
operating segments: Credit Card, Commercial Banking and Consumer Banking.
Segment results where presented have been recast for all periods presented. The three segments consist of the following:
• Credit Card includes the Company’s domestic consumer and small business card lending, domestic national small
business lending, national closed end installment lending and the international card lending businesses in Canada and the
United Kingdom.
• Commercial Banking includes the Company’s lending, deposit gathering and treasury management services to
commercial real estate and middle market customers. The Commercial segment also includes the financial results of a
national portfolio of small ticket commercial real estate loans that are in run-off mode.
• Consumer Banking includes the Company’s branch based lending and deposit gathering activities for small business
customers as well as its branch based consumer deposit gathering and lending activities, national deposit gathering,
consumer mortgage lending and servicing activities and national automobile lending.
The segment reorganization includes the allocation of Chevy Chase Bank to the appropriate segments. Chevy Chase Bank’s operations
are included in the Commercial Banking and Consumer Banking segments beginning in the second quarter 2009 but remained in
Other for the first quarter due to the short duration since acquisition. The Other category includes GreenPoint originated consumer
mortgages originated for sale but held for investment since originations were suspended in 2007, the results of corporate treasury
activities, including asset-liability management and the investment portfolio, the net impact of transfer pricing, brokered deposits,
certain unallocated expenses, gains/losses related to the securitization of assets, and restructuring charges related to the Company’s
cost initiative and to the Chevy Chase Bank acquisition. See “Note 5- Segments” for additional detail.
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 called 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.
The Corporation and its subsidiaries are hereafter collectively referred to as the “Company”.
CONA and COBNA are hereafter collectively referred to as the “Banks”.