Yesterday, Capital One (NYSE:COF), of "What's in your wallet?" fame, reported a disappointing end to a very good year. Earnings per diluted share increased for the year by a robust 26.2% over 2003's results, to reach $6.21. For the quarter, however, profits sank 31% to just $0.77 per diluted share.

If there was a primary culprit in Capital One's failing to meet analysts' consensus estimates for its quarterly profits, it was the company's sizable increase in marketing costs compared with what the bank spent in the fourth quarter of 2003. Capital One laid out 76% more in an effort to bring in new business this quarter, bumping its marketing expenses up to more than half a billion dollars for the quarter, and $1.3 billion for the year. But the bank was quick to reassure shareholders that this is not the beginning of a trend. Capital One expects that in fiscal 2005, it will spend approximately the same amount on promoting itself as it did in fiscal 2004.

Compared with the rest of 2004, the company's fourth quarter looks to have been pretty rough. But putting some of Capital One's Q4 2004 statistics next to their Q4 2003 counterparts shows that for the year as a whole, the bank has done quite well indeed. Average loans on the books have increased 15% year on year; average assets, 18%; and average earning assets, 21%.

Capital One has also slimmed down its operations over the past year, with operating expenses now accounting for a smaller proportion of both revenues and loans outstanding. The quality of its loan portfolio also appears to have increased, with delinquent loans dropping by 94 basis points and writeoffs down 86 basis points.

If there's a downside to that good news (aside from the diminished profits, of course), it's that Capital One shareholders won't be enjoying as much of the wealth that the bank generates next year, as they did this year. Diluted shares outstanding have risen to 253 million year-over-year, diluting outside shareholders by 5.8%.

Fool contributor Rich Smith has no position in Capital One.