Capital One Reports Earnings Per Share Growth of 13 Percent for 2006
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Company Provides Earnings Guidance for 2007
MCLEAN, Va., Jan. 18 /PRNewswire-FirstCall/ -- Capital One Financial Corporation (NYSE: COF) today announced earnings per share (diluted) for 2006 of $7.62. Additionally, the company provided earnings guidance for 2007 of between $7.40 and $7.80 per share (diluted).
Earnings for the fourth quarter of 2006 were $390.7 million, or $1.14 per share (diluted), compared with $280.3 million, or $.97 per share (diluted), for the fourth quarter of 2005, and $587.8 million, or $1.89 per share (diluted), for the third quarter of 2006.
Full year results include a $0.32 per share (diluted) negative impact from the acquisition of North Fork Bancorporation, which was completed on December 1, 2006. Full year results also include a $.07 per share (diluted) negative impact from losses on the sale of securities in the fourth quarter of 2006 as part of the rebalancing a portion of the company's investment portfolio.
The company's 2007 earnings estimates include expectations for a continued challenging interest rate environment and cyclical pressures in the mortgage industry, a return to more normal charge-off levels in its US unsecured national lending businesses, and the repurchase of $2.25 billion of the company's shares beginning in the second quarter of 2007. Additionally, the 2007 earnings estimates include $430.0 million (after-tax) of financing costs, restructuring charges, and purchase accounting impacts resulting from the acquisition of North Fork. While the company still expects to achieve the target level of $275.0 million (pre-tax) of synergies in connection with the North Fork integration, it expects these synergies will be realized partially in 2007 and more significantly late in 2008 as a result of the challenging interest rate environment and the timeline for conversion to a single deposit platform and brand.
"Despite cyclical pressures in banking and the mortgage industry, the acquisitions of North Fork and Hibernia position us to drive growth, generate capital, and deliver sustainable and attractive shareholder returns well into the future," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "Our focus now is on sure-footed execution as we integrate these proven banking franchises and build the infrastructure to win long- term."
Managed loans held for investment at December 31, 2006 were $146.2 billion, up $40.6 billion, or 38 percent, from December 31, 2005. Excluding the impact of $31.7 billion of loans acquired through North Fork, managed loans grew 8.4 percent in 2006, in line with expectations. Growth in the fourth quarter of 2006, excluding the impact of North Fork, was $2.2 billion, spread broadly across all of its North American businesses.
The managed charge-off rate for the company decreased to 2.99 percent in the fourth quarter of 2006 from 4.53 percent in the fourth quarter of 2005, but rose from 2.92 percent in the previous quarter. The company increased its allowance for loan losses by $114.1 million in the fourth quarter of 2006, excluding the addition of allowance from the acquisition of North Fork. This increase was driven primarily by the expectation of continued normalization of charge-offs in the company's US unsecured national lending businesses. The managed delinquency rate (30+ days) decreased to 3.02 percent as of December 31, 2006 driven largely by the addition of North Fork loans to the portfolio. The delinquency rate decreased from 3.24 percent as of the end of December 31, 2005 and decreased from 3.29 percent as of September 30, 2006. Without the addition of the North Fork loans, the charge-off and delinquency rates would have increased in the fourth quarter of 2006 to 3.25 percent and 3.68 percent, respectively.
Fourth quarter marketing expenses decreased $51.7 million to $395.7 million from $447.4 million in the fourth quarter of 2005, but increased $27.2 million from the third quarter of 2006 expense of $368.5 million. Marketing expenses for 2006 were $1.4 billion, up $64.7 million, or five percent, over 2005.
Annualized operating expenses as a percentage of average managed loans decreased to 5.13 percent in the fourth quarter of 2006 from 5.27 percent in the fourth quarter of 2005, but increased from 4.92 percent in the previous quarter driven by the inclusion of North Fork, infrastructure investments, and branch expansion. This quarter's results also include resolution of certain federal and state tax issues resulting in a $28.8 million reduction of tax expense.
Capital One's managed revenue margin decreased to 9.69 percent in the fourth quarter of 2006 from 12.04 percent in the fourth quarter of 2005 and decreased from 10.95 percent in the previous quarter driven largely by in the inclusion of North Fork, seasonality, and one time impacts due to the company's system conversion in the fourth quarter of 2006. Return on managed assets for 2006 was 1.69 percent. Excluding the impact of the North Fork acquisition, return on managed assets was 1.77 percent for 2006 as compared to 1.72 percent in 2005.
"Strong underlying business performance enabled Capital One to deliver 13 percent earnings per share growth in 2006 while achieving a number of significant milestones including the successful integration of Hibernia, the acquisition of North Fork, and a significant upgrade of our systems infrastructure," said Gary L. Perlin, Capital One's Chief Financial Officer. "We enter 2007 with a more diversified and resilient balance sheet."
Segment results
The US Card segment's net income for 2006 was $1.8 billion, up $214.0 million, or 13.3 percent, from $1.6 billion in 2005. US Card reported net income for the fourth quarter of 2006 of $337.2 million, compared with $237.0 million in the fourth quarter of 2005, and $461.6 million in the third quarter of 2006. The business continues to deliver strong profits driven by solid credit and growth in managed loans. Managed loans at December 31, 2006 were $53.6 billion, up $4.2 billion or 8.4 percent, from December 31, 2005, and up $2.5 billion, or 4.9 percent from the prior quarter. The managed charge-off rate decreased to 3.82 percent in the fourth quarter of 2006 from 5.70 percent in the fourth quarter of 2005 but increased from 3.39 percent in the previous quarter due to expected seasonality and normalization of credit.
Results in the Global Financial Services segment continue to reflect strong performance in its North American businesses offset by ongoing challenges in the UK. The segment's net income for 2006 was $274.0 million, up $88.0 million, or 47.3 percent, from $186.0 million in 2005. Net income in the fourth quarter of 2006 was $2.1 million, compared with $7.1 million in the fourth quarter of 2005, and $107.2 million in the third quarter of 2006. Managed loans at December 31, 2006 were $27.0 billion, up $3.6 billion, or 15.4 percent, from the prior year's fourth quarter, and up $.4 billion, or 1.4 percent, from the third quarter of 2006. The managed charge-off rate decreased to 3.89 percent in the fourth quarter of 2006 from 4.33 percent in the fourth quarter of 2005 driven largely by strong credit in its North American businesses. The managed charge-off rate increased in the fourth quarter from 3.70 percent in the previous quarter reflecting seasonality.
The Auto Finance segment reported a solid quarter as it continues to gain scale and grow originations by taking advantage of its multi-channel, full credit spectrum strategy. The Auto Finance segment's net income for 2006 was $233.5 million, up $101.4 million, or 76.8 percent, from $132.1 million in 2005. Net income in the fourth quarter of 2006 was $33.7 million, compared with $8.1 million in the fourth quarter of 2005, and $35.3 million in the third quarter of 2006. Managed loans at December 31, 2006 were $21.8 billion, up $5.4 billion, or 32.9 percent, from December 31, 2005, and up $.6 billion, or 2.8 percent from the prior quarter. The managed charge-off rate decreased to 2.85 percent in the fourth quarter of 2006 from 3.32 percent in the fourth quarter of 2005 because of a mix shift towards lower risk borrowers from the acquisition of Hibernia in 2005. The managed charge-off rate increased from 2.34 percent in the previous quarter primarily driven by seasonality.
The Banking segment delivered $45.7 million of net income in the fourth quarter of 2006, down $0.5 million, or 1.1 percent, from the third quarter of 2006. Decreases in revenue and increases in operating expenses where largely off-set by a $26.0 million reduction in provision expense due to favorable credit performance in loans impacted by 2005 Gulf Coast hurricanes. Total deposits at the end of the quarter were $35.3 billion, relatively flat as compared to $35.7 billion at the end of the third quarter of 2006. The company has opened a total of 39 de novo branches since the beginning of 2006. The integration of Hibernia is largely complete, and the company is on track to achieve the expected run-rate synergies of $135.0 million in 2007.
The company generates earnings from its managed loan portfolio, which includes both on-balance sheet loans and securitized (off-balance sheet) loans. For this reason, the company believes managed financial measures to be useful to stakeholders. In compliance with Regulation G of the Securities and Exchange Commission, the company is providing a numerical reconciliation of managed financial measures to comparable measures calculated on a reported basis using generally accepted accounting principles (GAAP). Please see the schedule titled "Reconciliation to GAAP Financial Measures" attached to this release for more information.
Forward looking statements
The company cautions that its current expectations in this release, in the presentation slides available on the company's website and in its Form 8-K dated January 18, 2007 for 2007 earnings, the interest rate environment, charge-off rates, mortgage market trends, branch growth, integration costs and synergies, and the benefits of the business combination transaction involving Capital One and North Fork, including future financial and operating results, and the company's plans, objectives, expectations and intentions are forward- looking statements and actual results could differ materially from current expectations due to a number of factors, including: the risk that the company's acquired businesses will not be integrated successfully and that the cost savings and other synergies from such acquisitions may not be fully realized; continued intense competition from numerous providers of products and services which compete with Capital One's businesses; changes in our aggregate accounts and balances, and the growth rate and composition thereof; the success of the company's marketing efforts; general economic conditions affecting interest rates and consumer income, spending, and savings which may affect consumer bankruptcies, defaults, charge-offs and deposit activity; and the company's ability to execute on its strategic and operational plans. A discussion of these and other factors can be found in Capital One's annual report and other reports filed with the Securities and Exchange Commission, including, but not limited to, Capital One's report on Form 10-K for the fiscal year ended December 31, 2005.
About Capital One
Headquartered in McLean, Virginia, Capital One Financial Corporation (http://www.capitalone.com) is a financial holding company, with more than 700 locations in New York, New Jersey, Connecticut, Texas and Louisiana that offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Its principal subsidiaries, Capital One Bank, Capital One, F.S.B., Capital One Auto Finance, Inc., Capital One, N.A., and North Fork Bank offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One's subsidiaries collectively had $85.8 billion in deposits and $146.2 billion in managed loans outstanding as of December 31, 2006. Capital One, a Fortune 500 company, trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.
NOTE: Fourth quarter 2006 financial results, SEC Filings, and fourth quarter earnings conference call slides are accessible on Capital One's home page (http://www.capitalone.com). Choose "Investors" on the bottom of the home page to view and download the earnings press release, slides, and other financial information. Additionally, a webcast of today's 5:00 pm (ET) earnings conference call is accessible through the same link.
CAPITAL ONE FINANCIAL CORPORATION (COF) FINANCIAL & STATISTICAL SUMMARY REPORTED BASIS 2006 2006 2005 (in millions, except per share data and as noted) Q4 Q3(10) Q4 Earnings (Reported Basis) Net Interest Income $1,401.2 $1,294.5 $1,037.0 Non-Interest Income 1,667.2 (2) 1,761.4 (2) 1,665.5 (1) Total Revenue(3) 3,068.4 3,055.9 2,702.5 Provision for Loan Losses 513.2 430.6 565.7 Marketing Expenses 395.7 368.5 447.4 Operating Expenses 1,590.5 1,358.1 1,241.7 (4) Income Before Taxes 569.0 898.7 447.7 Tax Rate(5) 31.3 % 34.6 % 37.3 % Net Income $390.7 $587.8 $280.3 Common Share Statistics Basic EPS $1.16 $1.95 $1.01 Diluted EPS $1.14 $1.89 $0.97 Dividends Per Share $0.03 $0.03 $0.03 Book Value Per Share (period end) $61.56 $54.79 $46.97 Stock Price Per Share (period end) $76.82 $78.66 $86.40 Total Market Capitalization (period end) $31,488.5 $23,944.1 $25,989.1 Shares Outstanding (period end) 409.9 304.4 300.8 Shares Used to Compute Basic EPS 336.5 301.6 278.8 Shares Used to Compute Diluted EPS 343.8 310.4 287.7 Reported Balance Sheet Statistics (period avg.) Average Loans Held for Investment $74,738 $62,429 $48,701 Average Earning Assets(6) $99,416 $81,311 $66,780 Average Assets $113,890 $92,295 $74,443 Average Interest Bearing Deposits $53,735 $42,984 $34,738 Average Non-Interest Bearing Deposits $6,647 $4,212 $2,356 Average Equity $18,311 $16,310 $12,528 Return on Average Assets (ROA) 1.37 % 2.55 % 1.51 % Return on Average Equity (ROE) 8.53 % 14.42 % 8.95 % Reported Balance Sheet Statistics (period end) Loans Held for Investment $96,512 $63,612 $59,848 Total Assets $149,996 $94,907 $88,701 Held for Investment Loan Growth Q Over Q $32,900 $3,009 $20,996 % Held for Investment Loan Growth Y Over Y 61 % 64 % 57 % Revenue & Expense Statistics (Reported) Net Interest Income Growth (annualized) 33 % 33 % 56 % Non Interest Income Growth (annualized) (21)% 12 % 18 % Revenue Growth (annualized) 2 % 20 % 32 % Net Interest Margin 5.64 % 6.37 % 6.21 % Revenue Margin 12.35 % 15.03 % 16.19 % Risk Adjusted Margin(9) 10.56 % 13.22 % 13.49 % Operating Expense as a % of Revenues 51.83 % 44.44 % 45.95 % Operating Expense as a % of Avg Loans (annualized) 8.51 % 8.70 % 10.20 % Asset Quality Statistics (Reported) Allowance $2,180 $1,840 $1,790 30+ Day Delinquencies $2,648 $2,060 $1,879 Net Charge-Offs $443 $369 $451 Allowance as a % of Reported Loans 2.26 % 2.89 % 2.99 % Delinquency Rate (30+ days) 2.74 % 3.24 % 3.14 % Net Charge-Off Rate 2.37 % 2.36 % 3.70 % CAPITAL ONE FINANCIAL CORPORATION (COF) FINANCIAL & STATISTICAL SUMMARY MANAGED BASIS (*) 2006 2006 2005 (in millions) Q4 Q3(10) Q4 Earnings (Managed Basis) Net Interest Income $2,347.3 $2,217.8 $2,075.2 Non-Interest Income 1,206.0 (2) 1,275.4 (2) 1,243.4 (1) Total Revenue(3) 3,553.3 3,493.2 3,318.6 Provision for Loan Losses 998.1 867.9 1,181.8 Marketing Expenses 395.7 368.5 447.4 Operating Expenses 1,590.5 1,358.1 1,241.7 (4) Income Before Taxes 569.0 898.7 447.7 Tax Rate(5) 31.3 % 34.6 % 37.3 % Net Income $390.7 $587.8 $280.3 Managed Balance Sheet Statistics (period avg.) Average Loans Held for Investment $123,902 $110,512 $94,241 Average Earning Assets(6) $146,680 $127,616 $110,253 Average Assets $162,396 $139,833 $119,406 Return on Average Assets (ROA) 0.96 % 1.68 % 0.94 % Managed Balance Sheet Statistics (period end) Loans Held for Investment $146,151 $112,239 $105,527 Total Assets $198,902 $142,977 $133,786 Held for Investment Loan Growth Q Over Q $33,912 $3,806 $20,759 % Held for Investment Loan Growth Y over Y 38 % 32 % 32 % Tangible Assets(7) $184,007 $138,673 $129,484 Tangible Capital(8) $11,964 $13,514 $9,994 Tangible Capital to Tangible Assets Ratio 6.50 % 9.75 % 7.72 % % Off-Balance Sheet Securitizations 34 % 43 % 43 % Revenue & Expense Statistics (Managed) Net Interest Income Growth (annualized) 23 % 14 % 30 % Non Interest Income Growth (annualized) (22)% 25 % 52 % Revenue Growth (annualized) 7 % 18 % 38 % Net Interest Margin 6.40 % 6.95 % 7.53 % Revenue Margin 9.69 % 10.95 % 12.04 % Risk Adjusted Margin(9) 7.16 % 8.42 % 8.17 % Operating Expense as a % of Revenues 44.76 % 38.88 % 37.42 % Operating Expense as a % of Avg Loans (annualized) 5.13 % 4.92 % 5.27 % Asset Quality Statistics (Managed) 30+ Day Delinquencies $4,414 $3,693 $3,424 Net Charge-Offs $927 $806 $1,067 Delinquency Rate (30+ days) 3.02 % 3.29 % 3.24 % Net Charge-Off Rate 2.99 % 2.92 % 4.53 % (*) The information in this statistical summary reflects the adjustment to add back the effect of securitization transactions qualifying as sales under generally accepted accounting principles. See accompanying schedule -- "Reconciliation to GAAP Financial Measures." CAPITAL ONE FINANCIAL CORPORATION (COF) FINANCIAL & STATISTICAL SUMMARY NOTES (1) Includes a $34 million gain from the sale of previously purchased charged-off loan portfolios. (2) Includes a $20.5 million gain in Q2 2006 as a result of the MasterCard, Inc. initial public offering and losses of $20.8 million in Q2 2006, $9.4 million in Q3 2006 and $19.9 million in Q4 2006 related to the derivative entered into in April 2006 to mitigate certain exposures we faced as a result of our acquisition of North Fork. (3) In accordance with the Company's finance charge and fee revenue recognition policy, the amounts billed to customers but not recognized as revenue were as follows: Q4 2006 - $248.3, Q3 2006 - $226.3, Q2 2006 - $215.0, Q1 2006 - $170.9 and Q4 2005 - $227.9. (4) Includes a $28.2 million impairment charge related to our insurance business in Global Financial Services and a $20.6 million prepayment penalty for the refinancing of the McLean Headquarters facility. (5) Includes resolution of IRS tax issues resulting in reduction of tax expense as follows: Q4 2006 - $28.8 million, Q3 2006 - $18.7 million, Q2 - $10.7 million and Q1 - $34.9 million. (6) Prior quarter data has been updated to include Average Mortgage Loans Held for Sale. (7) Includes managed assets less intangible assets. (8) Includes stockholders' equity and preferred interests less intangible assets. Tangible Capital on a reported and managed basis is the same. (9) Risk adjusted margin is total revenue less net charge-offs as a percentage of average earning assets. (10) Subsequent to the Company's Form 8-K filing dated October 18, 2006, two balances on the Balance Sheet have been adjusted. Interest- bearing deposits at other banks and Non-interest bearing deposits have been revised, as well as the related metrics impacted by the decrease in earning assets. This adjustment, reflected in the Form 10-Q, increased reported and managed return on assets, net interest margin, revenue margin and net interest spread. CAPITAL ONE FINANCIAL CORPORATION (COF) IMPACT OF NORTH FORK BANCORPORATION (NFB) ACQUISITION Q4 2006 (in millions, except per share Adjust- COF w/out data and as noted) COF NFB (1) ments(2) NFB Earnings (Reported Basis) Total Revenue $3,068.4 $160.1 $(61.0) $2,969.3 Provision for Loan Losses 513.2 3.5 - 509.7 Total Non-interest Expense 1,986.2 98.9 3.9 1,883.4 Net Income $390.7 $37.5 $(42.8) $396.0 Common Share Statistics Diluted EPS $1.14 $1.28 Shares Used to Compute Diluted EPS 343.8 309.7 Reported Balance Sheet Statistics (period end) Liquidity Portfolio (3) $27,967 $13,554 $14 $14,399 Loans Held for Investment $96,512 $31,741 $64,771 Less: Allowance for loan losses $(2,180) $(222) $(1,958) Net Loans Held for Investment $94,332 $31,519 $62,813 Goodwill $13,635 $9,714 $3,921 Core deposit intangible $1,318 $938 $380 Total Assets $149,996 $58,744 $347 $90,905 Deposits (4) $85,771 $38,544 $47,227 Debt (5) $33,982 $4,878 $5,528 $23,576 Return on Average Assets (ROA) (period avg.) ROA (Reported) 1.37 % 1.69 % ROA (Managed) 0.96 % 1.11 % Managed Balance Sheet Statistics (period end) Loans Held for Investment $146,151 $31,741 $114,410 Revenue & Expense Statistics Revenue Margin (Reported) 12.35 % 14.16 % Revenue Margin (Managed) 9.69 % 10.54 % Asset Quality Statistics Delinquency Rate (30+ days) (Reported) 2.74 % 3.77 % Delinquency Rate (30+ days) (Managed) 3.02 % 3.68 % Net Charge-Off Rate (Reported) 2.37 % 2.72 % Net Charge-Off Rate (Managed) 2.99 % 3.25 % 2006 (in millions, except per share Adjust- COF w/out data and as noted) COF NFB (1) ments(2) NFB Earnings (Reported Basis) Total Revenue $12,096.4 $160.1 $(104.4) $12,040.7 Provision for Loan Losses 1,476.4 3.5 - $1,472.9 Total Non-interest Expense 6,967.2 98.9 4.9 $6,863.4 Net Income $2,414.5 $37.5 $(72.2) $2,449.2 Common Share Statistics Diluted EPS $7.62 $7.94 Shares Used to Compute Diluted EPS 317.0 308.4 Reported Balance Sheet Statistics (period end) Liquidity Portfolio (3) $27,967 $13,554 $14 $14,399 Loans Held for Investment $96,512 $31,741 $64,771 Less: Allowance for loan losses $(2,180) $(222) $(1,958) Net Loans Held for Investment $94,332 $31,519 $62,813 Goodwill $13,635 $9,714 $3,921 Core deposit intangible $1,318 $938 $380 Total Assets $149,996 $58,744 $347 $90,905 Deposits (4) $85,771 $38,544 $47,227 Debt (5) $33,982 $4,878 $5,528 $23,576 Return on Average Assets (ROA) (period avg.) ROA (Reported) 2.51 % 2.69 % ROA (Managed) 1.69 % 1.77 % Managed Balance Sheet Statistics (period end) Loans Held for Investment $146,151 $31,741 $114,410 Revenue & Expense Statistics Revenue Margin (Reported) 14.31 % 14.94 % Revenue Margin (Managed) 10.63 % 10.91 % Asset Quality Statistics Delinquency Rate (30+ days) (Reported) 2.74 % 3.77 % Delinquency Rate (30+ days) (Managed) 3.02 % 3.68 % Net Charge-Off Rate (Reported) 2.21 % 2.30 % Net Charge-Off Rate (Managed) 2.84 % 2.90 % (1) Includes the stand alone assets and liabilities of North Fork as of December 31, 2006, and the stand alone income and expenses of North Fork for the period December 1, 2006 through December 31, 2006. These results include the impact of core deposit amortization and exclude the gain on sale of mortgage loans that were marked to market as a result of the acquisition. (2) Income statement adjustments include interest expense on debt issued partially offset by income on the related liquidity portfolio, swaption expense, and North Fork integration charges. Balance sheet adjustments include assets and liabilities held by the parent of North Fork at acquisition and additional debt incurred to finance the acquisition. (3) Includes federal funds sold and resale agreements, interest-bearing deposits at other banks, securities available for sale and mortgage loans held for sale. (4) Includes non-interest bearing and interest-bearing deposits. (5) Includes senior and subordinated notes and other borrowings. CAPITAL ONE FINANCIAL CORPORATION (COF) SEGMENT FINANCIAL & STATISTICAL SUMMARY - MANAGED BASIS (1) 2006 2006 2005 (in thousands) Q4 Q3 Q4 Segment Statistics US Card: Interest Income 1,795,345 1,734,459 1,665,450 Interest Expense 600,821 554,708 481,656 Net interest income $1,194,524 $1,179,751 $1,183,794 Non-interest income 795,881 881,304 844,286 Provision for loan losses 554,698 451,782 767,103 Non-interest expenses 916,963 899,062 892,521 Income tax provision (benefit) 181,561 248,574 131,415 Net income (loss) $337,183 $461,637 $237,041 Loans Held for Investment $53,623,680 $51,127,654 $49,463,522 Average loans Held for Investment $51,686,135 $50,131,562 $46,857,527 Loan Yield 13.89% 13.84% 14.22% Net charge-off rate 3.82% 3.39% 5.70% Delinquency Rate (30+ days) 3.74% 3.53% 3.44% Core Deposits (5) -- 131,772 N/A Total Deposits -- 131,772 N/A Purchase Volume (2) $22,782,451 $21,450,024 $21,209,357 Number of Accounts (000s) 37,630 37,483 37,645 Auto Finance: Interest Income 610,381 591,711 465,124 Interest Expense 242,311 227,053 151,100 Net interest income $368,070 $364,658 $314,024 Non-interest income (2,970) 4,846 (1,358) Provision for loan losses 151,171 161,145 161,651 Non-interest expenses 162,022 154,014 138,412 Income tax provision (benefit) 18,167 19,021 4,512 Net income (loss) $33,740 $35,324 $8,091 Loans Held for Investment $21,751,827 $21,158,797 $16,372,019 Average loans Held for Investment $21,498,205 $20,812,533 $16,095,793 Loan Yield 11.36% 11.37% 11.56% Net charge-off rate 2.85% 2.34% 3.32% Delinquency Rate (30+ days) 6.35% 5.18% 5.71% Core Deposits (5) 6,061 5,818 N/A Total Deposits 6,061 5,818 N/A Auto Loan Originations (3) $3,078,877 $3,158,481 $2,563,372 Number of Accounts (000s) 1,589 1,558 1,438 Global Financial Services: Interest Income 793,400 768,262 681,624 Interest Expense 319,974 307,518 249,289 Net interest income $473,426 $460,744 $432,335 Non-interest income 295,216 311,439 250,349 Provision for loan losses 304,968 249,448 263,664 Non-interest expenses 455,538 358,806 410,670 Income tax provision (benefit) 6,040 56,771 1,299 Net income (loss) $2,096 $107,158 $7,051 Loans Held for Investment $26,983,673 $26,623,519 $23,386,490 Average loans Held for Investment $26,697,140 $26,364,992 $23,129,203 Loan Yield (4) 11.80% 11.58% 11.74% Net charge-off rate 3.89% 3.70% 4.33% Delinquency Rate (30+ days) 2.97% 2.86% 2.83% Core Deposits (5) -- 12 N/A Total Deposits 2,377,841 2,324,351 N/A Number of Accounts (000s) 10,155 10,135 9,928 (1) The information in this statistical summary reflects the adjustment to add back the effect of securitization transactions qualifying as sales under generally accepted accounting principles. See accompanying schedule -- "Reconciliation to GAAP Financial Measures." (2) Includes all purchase transactions net of returns and excludes cash advance transactions. (3) Includes all organic auto loan originations and excludes auto loans added through acquisitions. (4) Excludes "GFS - Home Loans Originations" and "GFS - Settlement Services" from Other Interest Income. (5) Includes domestic non-interest bearing deposits, NOW accounts, money market deposit accounts, savings accounts, certificates of deposit of less than $100,000 and other consumer time deposits. CAPITAL ONE FINANCIAL CORPORATION (COF) SEGMENT FINANCIAL & STATISTICAL SUMMARY - MANAGED BASIS (1) CONTINUED 2006 2006 2005 (in thousands) Q4 Q3 Q4 Segment Statistics Banking: Interest Income 721,102 719,207 Interest Expense 476,523 461,009 Net interest income $244,579 $258,198 Non-interest income 112,021 115,526 Provision for loan losses (21,549) 5,495 Non-interest expenses 307,810 297,080 Income tax provision (benefit) 24,619 24,902 Net income (loss) $45,720 $46,247 Loans Held for Investment $12,145,533 $13,326,088 Average loans Held for Investment $13,330,876 $13,171,414 Loan Yield 7.98% 8.02% Net charge-off rate 0.40% 0.48% Delinquency Rate (30+ days) 0.31% 0.36% Core Deposits(2) 27,071,324 26,997,345 Total Deposits 35,334,610 35,163,849 Number of Active ATMs 661 623 Number of locations(3) 358 342 Other:(4) Net interest income $66,657 $(45,529) $145,043 Non-interest income 5,906 (37,706) 150,153 Provision for loan losses 8,840 27 (10,631) Non-interest expenses 143,855 17,667 247,583 Income tax provision (benefit) (52,121) (38,402) 30,109 Net income (loss) $(28,011) $(62,527) $28,135 Loans Held for Investment $31,646,555 $2,488 $16,305,460 Core Deposits (2) 42,819,710 7,301,435 N/A Total Deposits 48,052,380 9,987,360 N/A Total: Interest Income $3,931,054 $3,595,874 $3,175,960 Interest Expense $1,583,798 1,378,052 1,100,764 Net interest income $2,347,256 $2,217,822 $2,075,196 Non-interest income 1,206,054 1,275,409 1,243,430 Provision for loan losses 998,128 867,897 1,181,787 Non-interest expenses 1,986,188 1,726,629 1,689,186 Income tax provision (benefit) 178,266 310,866 167,335 Net income (loss) $390,728 $587,839 $280,318 Loans Held for Investment $146,151,268 $112,238,546 $105,527,491 Core Deposits (2) 69,897,095 34,436,382 N/A Total Deposits 85,770,892 47,613,150 N/A (1) The information in this statistical summary reflects the adjustment to add back the effect of securitization transactions qualifying as sales under generally accepted accounting principles. See accompanying schedule -- "Reconciliation to GAAP Financial Measures." (2) Includes domestic non-interest bearing deposits, NOW accounts, money market deposit accounts, savings accounts, certificates of deposit of less than $100,000 and other consumer time deposits. (3) Q4: Number of locations includes 344 branches and 14 other customer centers and excludes 7 branches that remain closed due to hurricane damage. Q3: Number of locations includes 329 branches and 13 other customer centers and excludes 7 branches that remain closed due to hurricane damage. Q2: Number of locations includes 312 branches and 13 other customer centers and excludes 16 branches that remain closed due to hurricane damage. Q1: Number of locations includes 303 branches and 14 other customer centers and excludes 18 branches that remain closed due to hurricane damage. (4) Q4 2005 includes the acquisition of Hibernia and Q4 2006 includes the acquisition of North Fork. CAPITAL ONE FINANCIAL CORPORATION Reconciliation to GAAP Financial Measures For the Three Months Ended December 31, 2006 (dollars in thousands)(unaudited) The Company's consolidated financial statements prepared in accordance with generally accepted accounting principles ("GAAP") are referred to as its "reported" financial statements. Loans included in securitization transactions which qualified as sales under GAAP have been removed from the Company's "reported" balance sheet. However, servicing fees, finance charges, and other fees, net of charge-offs, and interest paid to investors of securitizations are recognized as servicing and securitizations income on the "reported" income statement. The Company's "managed" consolidated financial statements reflect adjustments made related to effects of securitization transactions qualifying as sales under GAAP. The Company generates earnings from its "managed" loan portfolio which includes both the on-balance sheet loans and off-balance sheet loans. The Company's "managed" income statement takes the components of the servicing and securitizations income generated from the securitized portfolio and distributes the revenue and expense to appropriate income statement line items from which it originated. For this reason the Company believes the "managed" consolidated financial statements and related managed metrics to be useful to stakeholders. Total Total Reported Adjustments(1) Managed(2) Income Statement Measures Net interest income $1,401,156 $946,100 $2,347,256 Non-interest income $1,667,183 $(461,129) $1,206,054 Total revenue $3,068,339 $484,971 $3,553,310 Provision for loan losses $513,157 $484,971 $998,128 Net charge-offs $442,521 $484,971 $927,492 Balance Sheet Measures Loans Held for Investment $96,512,139 $49,639,129 $146,151,268 Total assets $149,995,737 $48,905,780 $198,901,517 Average loans Held for Investment $74,737,753 $49,164,207 $123,901,960 Average earning assets $99,415,904 $47,264,449 $146,680,353 Average total assets $113,889,864 $48,506,384 $162,396,248 Delinquencies $2,648,403 $1,765,642 $4,414,045 (1) Income statement adjustments reclassify the net of finance charges of $1,422.4 million, past-due fees of $216.1 million, and interest expense of $692.4 million; and net charge-offs of $485.0 million from Non-interest income to Net interest income and Provision for loan losses, respectively. (2) The managed loan portfolio does not include auto loans which have been sold in whole loan sale transactions where the Company has retained servicing rights. CAPITAL ONE FINANCIAL CORPORATION Consolidated Balance Sheets (in thousands)(unaudited) As of As of As of December 31 September 30 December 31 2006 2006 2005 Assets: Cash and due from banks $2,817,519 $1,461,132 $2,022,175 Federal funds sold and resale agreements 1,099,156 3,340,809 1,305,537 Interest-bearing deposits at other banks 743,821 797,708 743,555 Cash and cash equivalents 4,660,496 5,599,649 4,071,267 Securities available for sale 15,688,770 13,960,709 14,350,249 Mortgage loans held for sale 10,435,295 311,169 197,444 Loans held for investment 96,512,139 63,612,169 59,847,681 Less: Allowance for loan losses (2,180,000) (1,840,000) (1,790,000) Net loans 94,332,139 61,772,169 58,057,681 Accounts receivable from securitizations 4,589,235 5,617,113 4,904,547 Premises and equipment, net 2,203,280 1,532,006 1,191,406 Interest receivable 816,426 529,104 563,542 Goodwill 13,635,435 3,964,177 3,906,399 Other 3,634,661 1,620,650 1,458,876 Total assets $149,995,737 $94,906,746 $88,701,411 Liabilities: Non-interest-bearing deposits $11,648,070 $4,145,173 $4,841,171 Interest-bearing deposits 74,122,822 43,467,977 43,092,096 Senior and subordinated notes 9,725,470 8,701,794 6,743,979 Other borrowings 24,257,007 17,619,817 15,534,161 Interest payable 574,763 387,000 371,681 Other 4,432,399 3,908,008 3,989,409 Total liabilities 124,760,531 78,229,769 74,572,497 Stockholders' Equity: Common stock 4,122 3,065 3,028 Paid-in capital, net 15,333,137 7,237,785 6,848,544 Retained earnings and cumulative other comprehensive income 10,026,364 9,551,504 7,384,144 Less: Treasury stock, at cost (128,417) (115,377) (106,802) Total stockholders' equity 25,235,206 16,676,977 14,128,914 Total liabilities and stockholders' equity $149,995,737 $94,906,746 $88,701,411 CAPITAL ONE FINANCIAL CORPORATION Consolidated Statements of Income (in thousands, except per share data)(unaudited) Three Months Ended December 31 September 30 December 31 2006 2006 (1) 2005 (1) Interest Income: Loans held for investment, including past-due fees $2,002,111 $1,814,803 $1,408,545 Securities available for sale 186,480 160,198 119,189 Mortgage loans held for sale 55,896 6,354 8,799 Other 108,932 83,716 97,565 Total interest income 2,353,419 2,065,071 1,634,098 Interest Expense: Deposits 552,385 442,571 344,063 Senior and subordinated notes 136,282 96,300 103,836 Other borrowings 263,596 231,685 149,200 Total interest expense 952,263 770,556 597,099 Net interest income 1,401,156 1,294,515 1,036,999 Provision for loan losses 513,157 430,566 565,674 Net interest income after provision for loan losses 887,999 863,949 471,325 Non-Interest Income: Servicing and securitizations 959,436 1,071,091 1,021,415 Service charges and other customer- related fees 462,086 459,125 376,223 Mortgage banking operations 54,232 45,775 118,255 Interchange 147,571 150,474 133,234 Other 43,858 34,920 16,387 Total non-interest income 1,667,183 1,761,385 1,665,514 Non-Interest Expense: Salaries and associate benefits 632,355 554,504 459,788 Marketing 395,671 368,498 447,437 Communications and data processing 188,481 183,020 154,936 Supplies and equipment 137,843 111,625 98,761 Occupancy 66,425 49,710 54,554 Other 565,413 459,272 473,710 Total non-interest expense 1,986,188 1,726,629 1,689,186 Income before income taxes 568,994 898,705 447,653 Income taxes 178,266 310,866 167,335 Net income $390,728 $587,839 $280,318 Basic earnings per share $1.16 $1.95 $1.01 Diluted earnings per share $1.14 $1.89 $0.97 Dividends paid per share $0.03 $0.03 $0.03 Year Ended December 31 December 31 2006 2005 (1) Interest Income: Loans held for investment, including past-due fees $7,046,473 $5,010,839 Securities available for sale 679,582 388,576 Mortgage loans held for sale 71,063 8,799 Other 397,111 318,667 Total interest income 8,194,229 5,726,881 Interest Expense: Deposits 1,814,797 1,173,137 Senior and subordinated notes 411,643 421,218 Other borrowings 868,159 452,284 Total interest expense 3,094,599 2,046,639 Net interest income 5,099,630 3,680,242 Provision for loan losses 1,476,438 1,491,072 Net interest income after provision for loan losses 3,623,192 2,189,170 Non-Interest Income: Servicing and securitizations 4,209,637 3,945,183 Service charges and other customer- related fees 1,770,340 1,493,690 Mortgage banking operations 173,320 142,894 Interchange 549,074 514,196 Other 294,361 262,142 Total non-interest income 6,996,732 6,358,105 Non-Interest Expense: Salaries and associate benefits 2,239,468 1,749,738 Marketing 1,444,635 1,379,938 Communications and data processing 713,439 580,992 Supplies and equipment 460,680 355,734 Occupancy 218,265 152,090 Other 1,890,706 1,499,781 Total non-interest expense 6,967,193 5,718,273 Income before income taxes 3,652,731 2,829,002 Income taxes 1,238,238 1,019,855 Net income $2,414,493 $1,809,147 Basic earnings per share $7.80 $6.98 Diluted earnings per share $7.62 $6.73 Dividends paid per share $0.11 $0.11 (1) Certain prior period amounts have been reclassified to conform to the current period presentation. CAPITAL ONE FINANCIAL CORPORATION Statements of Average Balances, Income and Expense, Yields and Rates (dollars in thousands)(unaudited) Reported Quarter Ended 12/31/06 Average Income/ Yield/ Balance Expense Rate Earning assets: Mortgage loans held for sale $3,480,664 $55,896 6.42% Loans held for investment 74,737,753 2,002,111 10.72% Securities available for sale 15,248,950 186,480 4.89% Other 5,948,537 108,932 7.32% Total earning assets $99,415,904 $2,353,419 9.47% Interest-bearing liabilities: Interest-bearing deposits NOW accounts 2,094,623 $14,546 2.78% Money market deposit accounts 15,762,255 149,831 3.80% Savings accounts 5,425,790 31,386 2.31% Other Consumer Time Deposits 16,656,731 190,489 4.57% Public Fund CD's of $100,000 or more 1,281,768 16,636 5.19% CD's of $100,000 or more 8,682,658 101,535 4.68% Foreign time deposits 3,831,401 47,962 5.01% Total Interest-bearing deposits $53,735,226 $552,385 4.11% Senior and subordinated notes 9,034,696 136,282 6.03% Other borrowings 20,555,748 263,596 5.13% Total interest-bearing liabilities $83,325,670 $952,263 4.57% Net interest spread 4.90% Interest income to average earning assets 9.47% Interest expense to average earning assets 3.83% Net interest margin 5.64% Reported Quarter Ended 9/30/06 (1) Average Income/ Yield/ Balance Expense Rate Earning assets: Mortgage loans held for sale $294,574 $6,354 8.63% Loans held for investment 62,428,789 1,814,803 11.63% Securities available for sale 14,587,307 160,198 4.39% Other 4,000,827 83,716 8.37% Total earning assets $81,311,497 $2,065,071 10.16% Interest-bearing liabilities: Interest-bearing deposits NOW accounts $619,460 $4,816 3.11% Money market deposit accounts 11,237,206 103,073 3.67% Savings accounts 3,911,765 28,604 2.92% Other Consumer Time Deposits 14,325,784 153,881 4.30% Public Fund CD's of $100,000 or more 1,022,465 13,046 5.10% CD's of $100,000 or more 8,302,487 95,229 4.59% Foreign time deposits 3,564,708 43,922 4.93% Total Interest-bearing deposits $42,983,875 $442,571 4.12% Senior and subordinated notes 6,544,768 96,300 5.89% Other borrowings 18,010,737 231,685 5.15% Total interest-bearing liabilities $67,539,380 $770,556 4.56% Net interest spread 5.64% Interest income to average earning assets 10.16% Interest expense to average earning assets 3.79% Net interest margin 6.37% Reported Quarter Ended 12/31/05 (1) Average Income/ Yield/ Balance Expense Rate Earning assets: Mortgage loans held for sale $156,376 $8,799 22.51% Loans held for investment 48,700,689 1,408,545 11.57% Securities available for sale 11,683,013 119,189 4.08% Other 6,240,217 97,565 6.25% Total earning assets $66,780,295 $1,634,098 9.79% Interest-bearing liabilities: Interest-bearing deposits NOW accounts $253,473 $1,293 2.04% Money market deposit accounts 6,871,855 51,037 2.97% Savings accounts 1,621,793 9,079 2.24% Other Consumer Time Deposits 12,973,630 135,914 4.19% Public Fund CD's of $100,000 or more 494,702 4,823 3.90% CD's of $100,000 or more 9,595,516 106,145 4.42% Foreign time deposits 2,926,965 35,772 4.89% Total Interest-bearing deposits $34,737,934 $344,063 3.96% Senior and subordinated notes 6,707,285 103,836 6.19% Other borrowings 13,703,303 149,200 4.36% Total interest-bearing liabilities $55,148,522 $597,099 4.33% Net interest spread 5.46% Interest income to average earning assets 9.79% Interest expense to average earning assets 3.58% Net interest margin 6.21% (1) Prior quarter data has been updated to reclass for Mortgage Loans Held for Sale. CAPITAL ONE FINANCIAL CORPORATION Statements of Average Balances, Income and Expense, Yields and Rates (dollars in thousands)(unaudited) Managed (1) Quarter Ended 12/31/06 Average Income/ Yield/ Balance Expense Rate Earning assets: Mortgage loans held for sale $3,480,664 $55,896 6.42% Loans held for investment 123,901,960 3,640,588 11.75% Securities available for sale 15,248,950 186,480 4.89% Other 4,048,779 48,089 4.75% Total earning assets $146,680,353 $3,931,053 10.72% Interest-bearing liabilities: Interest-bearing deposits NOW accounts $2,094,623 $14,546 2.78% Money market deposit accounts 15,762,255 149,831 3.80% Savings accounts 5,425,790 31,386 2.31% Other Consumer Time Deposits 16,656,731 190,489 4.57% Public Fund CD's of $100,000 or more 1,281,768 16,636 5.19% CD's of $100,000 or more 8,682,658 101,535 4.68% Foreign time deposits 3,831,401 47,962 5.01% Total Interest-bearing deposits $53,735,226 $552,385 4.11% Senior and subordinated notes 9,034,696 136,282 6.03% Other borrowings 20,555,748 263,609 5.13% Securitization liability 48,603,831 631,521 5.20% Total interest-bearing liabilities $131,929,501 $1,583,797 4.80% Net interest spread 5.92% Interest income to average earning assets 10.72% Interest expense to average earning assets 4.32% Net interest margin 6.40% Managed (1) Quarter Ended 9/30/06 (2) Average Income/ Yield/ Balance Expense Rate Earning assets: Mortgage loans held for sale $294,574 $6,354 8.63% Loans held for investment 110,512,266 3,401,130 12.31% Securities available for sale 14,587,307 160,198 4.39% Other 2,221,427 28,192 5.08% Total earning assets $127,615,574 $3,595,874 11.27% Interest-bearing liabilities: Interest-bearing deposits NOW accounts $619,460 $4,816 3.11% Money market deposit accounts 11,237,206 103,073 3.67% Savings accounts 3,911,765 28,604 2.92% Other Consumer Time Deposits 14,325,784 153,881 4.30% Public Fund CD's of $100,000 or more 1,022,465 13,046 5.10% CD's of $100,000 or more 8,302,487 95,229 4.59% Foreign time deposits 3,564,708 43,922 4.93% Total Interest-bearing deposits $42,983,875 $442,571 4.12% Senior and subordinated notes 6,544,768 96,300 5.89% Other borrowings 18,010,737 231,672 5.15% Securitization liability 47,648,021 607,510 5.10% Total interest-bearing liabilities $115,187,401 $1,378,053 4.79% Net interest spread 6.49% Interest income to average earning assets 11.27% Interest expense to average earning assets 4.32% Net interest margin 6.95% Managed (1) Quarter Ended 12/31/05 (2) Average Income/ Yield/ Balance Expense Rate Earning assets: Mortgage loans held for sale $156,376 $8,799 22.51% Loans held for investment 94,241,240 3,001,361 12.74% Securities available for sale 11,683,013 119,189 4.08% Other 4,171,939 46,611 4.47% Total earning assets $110,252,568 $3,175,960 11.52% Interest-bearing liabilities: Interest-bearing deposits NOW accounts $253,473 $1,293 2.04% Money market deposit accounts 6,871,855 51,037 2.97% Savings accounts 1,621,793 9,079 2.24% Other Consumer Time Deposits 12,973,630 135,914 4.19% Public Fund CD's of $100,000 or more 494,702 4,823 3.90% CD's of $100,000 or more 9,595,516 106,145 4.42% Foreign time deposits 2,926,965 35,772 4.89% Total Interest-bearing deposits $34,737,934 $344,063 3.96% Senior and subordinated notes 6,707,285 103,836 6.19% Other borrowings 13,703,303 149,200 4.36% Securitization liability 45,085,090 503,665 4.47% Total interest-bearing liabilities $100,233,612 $1,100,764 4.39% Net interest spread 7.13% Interest income to average earning assets 11.52% Interest expense to average earning assets 3.99% Net interest margin 7.53% (1) The information in this table reflects the adjustment to add back the effect of securitized loans. (2) Prior quarter data has been updated to reclass for Mortgage Loans Held for Sale.
SOURCE
Capital One Financial Corporation
CONTACT:
Investor Relations: Mike Rowen, +1-703-720-2455, or Media
Relations: Tatiana Stead, +1-703-720-2352, or Julie Rakes +1-804-284-5800, all
of Capital One Financial Corporation
Web site: http://www.capitalone.com