Capital One 2011 Annual Report Download - page 271

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED STATEMENTS—(Continued)
October 21, 2011, the Fourth Circuit Court of Appeals affirmed the Tax Court’s unfavorable decision on the
issues we appealed. As we do not intend to pursue further appeals on these issues, the Fourth Circuit’s decision
represents a final resolution of the remaining issues in the case. We have accounted for these matters in
accordance with the accounting guidance for income taxes, and the resolution of these matters will not have a
material effect on our financial position.
Other Pending and Threatened Litigation
In addition, we are commonly subject to various pending and threatened legal actions relating to the conduct of
our normal business activities. In the opinion of management, the ultimate aggregate liability, if any, arising out
of all such other pending or threatened legal actions will not be material to our consolidated financial position or
our results of operations.
Pending Acquisitions
HSBC U.S. Credit Card Business
In August 2011, we announced that we entered into a purchase agreement to acquire substantially all of the assets
and assume liabilities of HSBC’s credit card and private-label credit card business in the United States for a
premium estimated at $2.6 billion as of June 30, 2011. We currently expect the HSBC acquisition to close in the
second quarter of 2012, subject to customary closing conditions, including certain governmental clearances and
approvals. Pursuant to the purchase agreement, we have the option, subject to certain conditions, to pay up to
$750 million of the consideration to HSBC in the form of our common stock (valued at $39.23 per share).
NOTE 22—SIGNIFICANT CONCENTRATION OF CREDIT RISK
We are active in originating loans in the United States and internationally. International loans are originated in
Canada and the United Kingdom. We review each potential customer’s credit application and evaluate the
applicant’s financial history and ability and willingness to repay. Loans are made on an unsecured and secured
basis. Certain commercial, small business, home loans and auto loans require collateral in various forms
including cash deposits, auto and real estate, as appropriate. We have higher concentrations of loans where the
Commercial and Consumer Banking segments operate, the South and Northeast regions of the U.S. In particular,
our commercial portfolio is concentrated in the New York metropolitan area. The regional economic conditions
in the New York area affect the demand for our commercial products and services as well as the ability of our
customers to repay their commercial loans and the value of the collateral securing these loans.
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