Capital One Financial Corporation announced it intends to acquire Chevy Chase Bank for approximately $520 million in cash and stock. 

Capital One Financial Corporation is a financial holding company that has roughly $98.9 billion in deposits and $147.3 billion in loans.  Capital One Financial is a holding company that owns and operates Capital One Bank a diversified bank with 739 bank branch locations primarily in New York, New Jersey, Louisiana, and Texas.  The bank offers an expansive range of financial products and services to consumers, small businesses and commercial clients.  The bank subsidiary of Capital One is the largest retail depository institution headquartered in the Washington, D.C. region. 

Chevy Chase Bank was founded in 1969.  The bank is a federally chartered savings bank that is the largest locally based banking company in the Washington metropolitan area.  Chevy Chase Bank currently has over $14 billion in assets and services over 1 million customers.  Chevy Chase is a leading consumer and business lender in the area.  Chevy Chase Bank provides a complete array of financial products and services to consumers and businesses in Maryland, Virginia, and the District of Columbia.  The bank is headquartered in Bethesda, Maryland and operates more than 250 bank branches and has over 1,000 ATMs. 

With addition of the Chevy Chase Bank ATM network, Capital One Bank will have the largest branch and ATM network in the Washington metropolitan area.  The combined company will have deposits of more than $110 billion, and a $159 billion loan portfolio.   Totaling up of the Chevy Chase bank branches, Capital One will have a total of 983 bank branches.  The total deposits of the banks will make Capital One the 8th largest bank, by deposits, in the U.S.

As part of this transaction, the selling shareholders of Chevy Chase Bank will retain certain assets currently owned by the bank.  These assets include; ASB Capital Management, Chevy Chase Trust, and Chevy Chase’s headquarters building in Bethesda, MD.

Capital One will take a markdown on approximately $1.75 billion for potential losses in Chevy Chase’s loan portfolio.  As part of a press release provided by Capital One, the following comments were included regarding the banks capital and financial strength.  Capital One’s strong capital, diversified funding, and ample liquidity make the balance sheet a continuing source of strength.  As of the end of the third quarter, the company maintained readily available and committed liquidity of $32 billion.  After the impact of this transaction, Capital One will continue to maintain strong capital levels, with a pro forma tangible common equity to tangible managed assets (TCE) ratio of 5.4 percent and a pro forma Tier 1 ratio of 12.9 percent as of September 30, 2008.  On a pro forma basis, the balance sheet will remain a source of strength for the combined company. The company expects the transaction to enhance deposit funding and increase readily available and committed liquidity.

Capital One expects to benefit by increasing their banking properties and local banking business, including an expanded branch presence in the Mid-Atlantic and increased retail deposit base that affords the bank the opportunity to offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients.  Expanding their retail banking services is intended to enhance their large deposit base, providing the bank with greater scale.

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