Capital One Reports Fourth Quarter Earnings
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MCLEAN, Va., Jan. 23 /PRNewswire-FirstCall/ -- Capital One Financial Corporation (NYSE: COF) today announced earnings for 2007 of $1.6 billion, or $3.97 per share (diluted). Earnings from continuing operations for the full year were $2.6 billion or $6.55 per share (diluted), versus the prior year's $2.4 billion, or $7.65 earnings per share (diluted). Net income for the fourth quarter of 2007 was $226.6 million, or $0.60 earnings per share (diluted). Fourth quarter 2007 earnings from continuing operations were $321.6 million, or $0.85 earnings per share (diluted) compared to $402.6 million, or $1.17 earnings per share (diluted) in the fourth quarter of 2006. These results are consistent with those reported by the company on January 10, 2008 and provide additional information regarding segment performance.
Earnings from continuing operations excludes the loss from discontinued operations related to the shutdown of GreenPoint Mortgage, announced in August 2007, of $0.25 per share (diluted) for the fourth quarter of 2007 and $2.58 per share (diluted) for full year 2007.
"As the economy has weakened, we have selectively pulled back loan growth and maintained appropriately conservative underwriting standards," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "We feel confident that our strong balance sheet, resilient businesses, and decisive actions will allow us to successfully navigate the cyclical economic weakness and we remain poised to generate above average returns on the other side of the cycle."
Total Company Results
- Managed loans held for investment at the end of 2007 were $151.4 billion, up $5.2 billion or 3.6 percent over the end of 2006. Increases during the year came primarily in the Auto and Global Financial Services portfolios. Managed loans increased from the third quarter of 2007 by $6.6 billion, or 4.6 percent, driven largely by seasonal growth in U.S. Card and Auto. The company expects managed loan growth in the low single digits in 2008.
- Total managed revenue was up 5.7 percent relative to the third quarter of 2007, driven largely by revenue margin expansion and seasonal loan growth in our U.S. Card portfolio. The company expects 2008 revenue growth to be in the low single digits.
- On a managed basis, the fourth quarter 2007 provision for loan losses was approximately $1.9 billion. This was comprised of approximately $1.3 billion in charge-offs and an allowance build of approximately $650 million. The allowance is driven by the loss outlook at year-end which reflects fourth quarter credit metrics and a recognition of the weakening trends in the U.S. economy as the company entered 2008.
- Fourth quarter operating expenses of $1.7 billion included approximately $140 million of legal liabilities and reserves. Full year 2007 operating expenses were $6.6 billion, leading to an efficiency ratio of 47 percent. The company expects its 2008 operating expenses to be at least $200 million below 2007, leading to an efficiency ratio in the mid-forty percent range for 2008.
- Total deposits of $83.0 billion at the end of the fourth quarter of 2007 were essentially flat with the previous quarter.
"The company ended 2007 with a year-end ratio of tangible common equity (TCE) to tangible managed assets of 5.8 percent. In the current environment we intend, through internal capital generation, to manage toward the high end or above our target range of 5.5 - 6.0 percent," said Gary L. Perlin, Capital One's Chief Financial Officer. "We will maintain our strong liquidity position and continue to take actions to sustain profitability through the cycle."
Segment Results
National Lending Segment
- Profits for the National Lending segment were up $59.8 million as compared to the fourth quarter of 2006, driven by increased profits in U.S. Card and Global Financial Services.
- The managed charge-off rate for the National Lending segment in the fourth quarter of 2007 was 4.73 percent versus 3.96 percent in the third quarter of 2007 and 3.63 percent in the fourth quarter of 2006. The delinquency rate of 5.17 percent for National Lending increased from 4.70 percent at the end of the third quarter and 4.09 percent as of December 31, 2006. Credit metrics have risen year over year due to credit normalization, secondary effects of changes to pricing and fee policies in U.S. Card, and deterioration in the company's U.S. consumer loan portfolio due to weakening in the U.S. economy.
- U.S. Card reported record net income for 2007 of $2.1 billion, versus $1.8 billion in 2006. Fourth quarter net income was $521.9 million, a 54.8 percent increase, year over year as revenue growth and expense reductions more than offset increased charge-offs and allowance build.
- Revenues increased 27.2 percent from the fourth quarter of 2006 largely as a result of pricing changes implemented in some of the company's products after completion of the card holder system conversion.
- Non-interest expenses decreased 6.1 percent to $3.3 billion in 2007 from $3.5 billion in 2006. Non-interest expenses in the fourth quarter of 2007 were relatively flat compared to the third quarter of 2007.
- Managed loans at the end of 2007 were $52.1 billion, a decline of 2.9 percent from the end of 2006, and an increase of 5.1 percent from the end of the third quarter of 2007. The year over year decline was a result of a reduction in the marketing of teaser rate offers in the prime market and a $600.0 million portfolio sale in the first quarter of 2007. The increase in managed loans relative to the third quarter was due primarily to seasonality.
- Charge-offs rose in the fourth quarter of 2007 to 5.40 percent from 3.82 percent in the fourth quarter of 2006, and delinquencies rose to 4.95 percent from 3.74 percent. The increases resulted from continued normalization of consumer credit, pull-back from the prime revolver market throughout the year, impacts of U.S. Card's pricing and fee policy changes made in the second and third quarters, and economic weakening evidenced in recently released economic indicators. In addition, credit metrics in the fourth quarter of 2007 reflect expected seasonal patterns on a sequential quarter basis. The company expects the U.S. Card managed charge-off rate to be in the mid-6 percent range in the first half of 2008.
- Auto Finance reported a net loss for 2007 of $33.8 million, versus net income of $233.5 million in 2006. In the fourth quarter of 2007, Auto posted a net loss of $112.4 million, primarily due to the effects of credit worsening.
- Increases in charge-off and delinquency rates were a result of expected seasonal patterns, credit normalization and weakening in the U.S. economy. While the company increased its pricing and tightened credit standards in the fourth quarter of 2007, the reduction in competitive intensity allowed the company to originate $3.6 billion of high quality loans, up 11.5 percent, compared to the third quarter of 2007.
- Tightened underwriting and increased prices implemented in the fourth quarter have resulted in better credit profiles and higher pricing on the portfolio. An intended effect of the tightened underwriting has been to reduce the amount of originations. In 2008, the company expects to further reduce originations and focus its dealer prime business on a much smaller network of dealers.
- On January 1, 2008, the company moved Capital One Auto Finance Company ("COAF"), a previously wholly owned finance company subsidiary of Capital One Financial Corporation to become a direct operating subsidiary of Capital One, N.A., a wholly owned banking subsidiary. This legal entity restructuring enhances the holding company's liquidity profile and COAF's funding flexibility.
- GFS reported net income for 2007 of $299.4 million, versus $273.9 million in 2006. Fourth quarter 2007 net income was $23.3 million, a $21.2 million increase over last year's fourth quarter driven by higher revenue margin and lower operating expenses offset by higher provision expense. The reduction in net income relative to the prior quarter was primarily driven by an increase in provision expense.
- Managed loans grew 8.6 percent, to $29.3 billion during 2007 with growth from North American businesses more than offsetting a modest decline in loans in the UK.
- Strong credit results in the Canadian credit card business and stable and improving credit performance in the UK muted worsening credit trends in the domestic GFS businesses for 2007.
- Net income of $111.8 million in the fourth quarter of 2007 was down $78.8 million over the third quarter, due primarily to the third quarter including a release in reserves that resulted from aligning the Banking segment's allowance methodologies with the company's methodology.
- Loans held for investment grew $1.7 billion from the third quarter of 2007 to $44.0 billion primarily from the addition of GreenPoint Mortgage loans and increased commercial loan production. Total Bank deposits grew $305.2 million to $73.3 billion.
- The charge-off rate was 28 basis points in the fourth quarter of 2007 compared to 19 basis points in the third quarter, and non-performing loans were 41 basis points at December 31, 2007 compared to 27 basis points at September 30, 2007. While losses remain at very low levels, during the quarter the Bank experienced charge-off increases in its Consumer Real Estate portfolio and Unsecured Lending.
- Integration efforts continue to be on track with the brand conversion and deposit platform conversion scheduled for the first quarter.
U.S. Card highlights
Auto Finance highlights
Global Financial Services (GFS) highlights
Local Banking Segment highlights
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 23, 2008, for 2008 revenue growth, managed growth, operating efficiencies, operating expense reductions, the expected managed charge-off rate for U.S. Card for the first half of 2008, and estimated loss levels for the twelve months ending December 31, 2008 underlying its provision expenses in the fourth quarter of 2007, 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: general economic and business conditions in the U.S. and or the UK, including conditions affecting employment levels, interest rates, consumer income, spending, and savings that may affect consumer bankruptcies, defaults, charge-offs and deposit activity; changes in the credit environment in the U.S. and or the UK; continued intense competition from numerous providers of products and services that compete with Capital One's businesses; changes in our aggregate accounts and balances, and the growth rate and composition thereof; the company's ability to execute on its strategic and operational plans; 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; the risk that the benefits of the company's restructuring initiative, including cost savings and other benefits, may not be fully realized; the success of the company's marketing efforts; general conditions in the wholesale funding markets; and general market conditions in the mortgage industry. 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, 2006, and reports on Form 10-Q and 10-Q/A for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007.
About Capital One
Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries collectively had $83.0 billion in deposits and $151.4 billion in managed loans outstanding as of December 31, 2007. Headquartered in McLean, VA, Capital One has 742 locations in New York, New Jersey, Connecticut, Texas and Louisiana. It is a diversified financial services company whose principal subsidiaries, Capital One, N.A., Capital One Bank, and Capital One Auto Finance, Inc., offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.
NOTE: Fourth quarter 2007 financial results, SEC Filings, and fourth quarter earnings conference call slides are accessible on Capital One's home page (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 (in millions, except per 2007 2007 2006 share data and as noted) Q4 Q3(13) Q4 Earnings (Reported Basis) Net Interest Income $ 1,762.3 $ 1,624.5 $ 1,393.0 Non-Interest Income 2,158.3 (12) 2,149.7 1,671.5 Total Revenue (1) 3,920.6 3,774.2 3,064.5 Provision for Loan Losses 1,294.2 595.5 513.2 Marketing Expenses 358.2 332.7 395.4 Restructuring Expenses (2) 27.8 19.4 - Operating Expenses 1,749.2 (3),(4) 1,582.2 (3) 1,567.3 Income Before Taxes 491.2 1,244.4 588.6 Tax Rate (5) 34.5 % 34.4 % 31.6 % Income From Continuing Operations, Net of Tax $ 321.6 $ 816.4 $ 402.6 Loss From Discontinued Operations, Net of Tax (6) (95.0) (898.0) (11.9) Net Income (Loss) $ 226.6 $ (81.6) $ 390.7 Common Share Statistics Basic EPS: Income From Continuing Operations $ 0.85 $ 2.11 $ 1.20 Loss From Discontinued Operations $ (0.25) $ (2.32) $ (0.04) Net Income (Loss) $ 0.60 $ (0.21) $ 1.16 Diluted EPS: Income From Continuing Operations $ 0.85 $ 2.09 $ 1.17 Loss From Discontinued Operations $ (0.25) $ (2.30) $ (0.03) Net Income (Loss) $ 0.60 $ (0.21) $ 1.14 Dividends Per Share $ 0.03 $ 0.03 $ 0.03 Tangible Book Value Per Share (period end) $ 29.02 $ 28.88 $ 27.95 Stock Price Per Share (period end) $ 47.26 $ 66.43 $ 76.82 Total Market Capitalization (period end) $ 17,613.8 $ 25,602.1 $31,488.5 Shares Outstanding (period end) 372.7 385.4 409.9 Shares Used to Compute Basic EPS 375.6 386.1 336.5 Shares Used to Compute Diluted EPS 378.4 390.8 343.8 Reported Balance Sheet Statistics (period average) (7) Average Loans Held for Investment $ 97,785 $ 91,745 $ 74,738 Average Earning Assets $ 127,242 $ 118,354 $ 97,849 Average Assets $ 150,926 $ 143,291 $ 111,440 Average Interest Bearing Deposits $ 72,312 $ 73,555 $ 53,735 Total Average Deposits $ 84,051 $ 84,884 $ 60,382 Average Equity $ 24,733 $ 25,344 $ 18,311 Return on Average Assets (ROA) 0.85 % 2.28 % 1.45 % Return on Average Equity (ROE) 5.20 % 12.89 % 8.79 % Reported Balance Sheet Statistics (period end) (7) Loans Held for Investment $ 101,805 $ 93,789 $ 96,512 Total Assets $ 150,202 $ 143,884 $ 144,361 Interest Bearing Deposits $ 71,944 $ 72,503 $ 74,123 Total Deposits $ 82,990 $ 83,343 $ 85,771 Performance Statistics (Reported) (7) Net Interest Income Growth (annualized) 34 % 22 % 30 % Non Interest Income Growth (annualized) 2 % 36 % (20)% Revenue Growth (annualized) 16 % 30 % 1 % Net Interest Margin 5.54 % 5.49 % 5.69 % Revenue Margin 12.32 % 12.76 % 12.53 % Risk Adjusted Margin (8) 10.28 % 11.13 % 10.72 % Non Interest Expense as a % of Average Loans Held for Investment (annualized) 8.73 % 8.43 % 10.50 % Efficiency Ratio (9) 53.75 % 50.74 % 64.05 % Asset Quality Statistics (Reported) (7) Allowance $ 2,963 $2,237 $ 2,180 Allowance as a % of Reported Loans Held for Investment 2.91 % 2.39 % 2.26 % Net Charge-Offs $ 650 $ 480 $ 443 Net Charge-Off Rate 2.66 % 2.09 % 2.37 % Full-time equivalent employees (in thousands) 27.0 27.5 31.1 CAPITAL ONE FINANCIAL CORPORATION (COF) FINANCIAL & STATISTICAL SUMMARY MANAGED BASIS (*) 2007 2007 2006 (in millions) Q4 Q3(13) Q4 Earnings (Managed Basis) Net Interest Income $ 3,000.5 $ 2,803.4 $ 2,339.1 Non-Interest Income 1,566.2 (12) 1,518.0 1,210.3 Total Revenue (1) 4,566.7 4,321.4 3,549.4 Provision for Loan Losses 1,940.3 1,142.7 998.1 Marketing Expenses 358.2 332.7 395.4 Restructuring Expenses (2) 27.8 19.4 - Operating Expenses 1,749.2 (3),(4) 1,582.2 (3) 1,567.3 Income Before Taxes 491.2 1,244.4 588.6 Tax Rate (5) 34.5 % 34.4% 31.6 % Income From Continuing Operations, Net of Tax $ 321.6 $ 816.4 $ 402.6 Loss From Discontinued Operations, Net of Tax (6) (95.0) (898.0) (11.9) Net Income (Loss) $ 226.6 $ (81.6) $ 390.7 Managed Balance Sheet Statistics (period average) (7) Average Loans Held for Investment $ 148,362 $ 143,781 $ 123,902 Average Earning Assets $ 175,652 $ 168,238 $ 145,113 Average Assets $ 200,658 $ 194,528 $ 159,947 Return on Average Assets (ROA) 0.64 % 1.68 % 1.01 % Managed Balance Sheet Statistics (period end) (7) Loans Held for Investment $ 151,362 $ 144,769 $ 146,151 Total Assets $ 198,908 $ 194,019 $ 193,267 Tangible Assets(10) $ 185,428 $ 180,363 $ 179,487 Tangible Common Equity (11) $ 10,814 $ 11,131 $ 11,455 Tangible Common Equity to Tangible Assets Ratio 5.83 % 6.17 % 6.38 % % Off-Balance Sheet Securitizations 33 % 35 % 34 % Performance Statistics (Managed) (7) Net Interest Income Growth (annualized) 28 % 29 % 22 % Non Interest Income Growth (annualized) 13 % 38 % (20)% Revenue Growth (annualized) 23 % 32 % 6 % Net Interest Margin 6.83 % 6.67 % 6.45 % Revenue Margin 10.40 % 10.27 % 9.78 % Risk Adjusted Margin (8) 7.45 % 7.83 % 7.23 % Non Interest Expense as a % of Average Loans Held for Investment (annualized) 5.76 % 5.38 % 6.34 % Efficiency Ratio (9) 46.15 % 44.31 % 55.30 % Asset Quality Statistics (Managed) (7) Net Charge-Offs $ 1,296 $ 1,027 $ 927 Net Charge-Off Rate 3.49 % 2.86 % 2.99 % (*) 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) 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 2007 - $379.4 million, Q3 2007 - $310.5 million and Q4 2006 - $248.3 million. (2) During the second quarter of 2007, the Company announced a broad-based initiative to reduce expenses and improve its competitive cost position. As part of this initiative $27.8 million and $19.4 million of restructuring charges were recognized as part of continuing operations during Q4 2007 and Q3 2007, respectively. (3) Includes core deposit intangible amortization expense of $51.1 million in Q4 2007 and $52.4 million in Q3 2007, and integration costs of $28.6 million in Q4 2007 and $30.3 million in Q3 2007. (4) The Company recognized a pre-tax charge in the fourth quarter of approximately $80 million for liabilities in connection with the Visa antitrust lawsuit settlement with American Express. Additionally, the company has initiated a legal reserve of approximately $60 million for estimated possible damages in connection with other pending Visa litigation, reflecting Capital One's share of such potential damages as a Visa member. (5) Includes miscellaneous tax adjustments of $28.8 million in Q4 2006. (6) In Q3 2007, the Company shutdown the mortgage origination operations of its wholesale mortgage banking unit, GreenPoint Mortgage, realizing an after-tax loss of $898.0 million. The results of the mortgage origination operation of GreenPoint have been accounted for as a discontinued operation and have been removed from the Company's results of continuing operations for all periods presented. The results of GreenPoint's mortgage servicing business are reported in continuing operations for all periods presented. Effective Q4 2007, GreenPoint's held for investment commercial and consumer loan portfolio results are included in continuing operations. (7) Based on continuing operations. Average equity and return on equity are based on the Company's stockholder's equity. (8) Risk adjusted margin is total revenue less net charge-offs as a percentage of average earning assets. (9) Efficiency ratio is Non-interest expense less restructuring expense divided by total revenue. (10) Tangible assets include managed assets less intangible assets. (11) Includes stockholders' equity and preferred interests less intangible assets and related deferred tax liability. Tangible Common Equity on a reported and managed basis is the same. (12) During the fourth quarter 2007, the Company completed the sale of its interest in a relationship agreement to develop and market consumer credit products in the Spanish Market and recorded a gain related to this sale of approximately $30 million in non-interest income. (13) Certain prior period amounts have been reclassified to conform with current period presentation. CAPITAL ONE FINANCIAL CORPORATION (COF) SEGMENT FINANCIAL & STATISTICAL SUMMARY FOR CONTINUING OPERATIONS MANAGED BASIS (1) 2007 2007 2006 (in thousands) Q4 Q3 (7) Q4 Local Banking: (3) Interest Income $ 1,702,252 $ 1,744,038 $ 721,102 Interest Expense 1,119,738 1,161,758 476,523 Net interest income $ 582,514 $ 582,280 $ 244,579 Non-interest income 192,342 195,204 112,021 Provision for loan losses 42,665 (58,285) (21,549) Other non-interest expenses 561,812 543,390 307,810 Income tax provision 58,610 101,783 24,619 Net income $ 111,769 $ 190,596 $ 45,720 Loans Held for Investment $ 43,972,795 $ 42,233,665 $ 12,145,533 Average Loans Held for Investment $ 43,128,767 $ 41,992,618 $ 13,330,876 Core Deposits(2) $ 63,206,923 $ 62,712,373 $ 27,071,324 Total Deposits $ 73,318,570 $ 73,013,351 $ 35,334,610 Loans Held for Investment Yield 7.02% 7.13% 7.98% Net Interest Margin - Loans (4) 1.87% 1.79% 3.21% Net Interest Margin - Deposits (5) 2.04% 2.08% 1.50% Efficiency Ratio (6) 72.51% 69.89% 86.32% Net charge-off rate 0.28% 0.19% 0.40% Non Performing Loans $ 178,385 $ 112,794 $ 57,824 Non Performing Loans as a % of Loans Held for Investment 0.41% 0.27% 0.48% Non-Interest Expenses as a % of Average Loans Held for Investment 5.21% 5.18% 9.24% Number of Active ATMs 1,288 1,282 661 Number of locations 742 732 358 National Lending: Interest Income $ 3,675,528 $ 3,511,878 $ 3,182,013 Interest Expense 1,235,080 1,232,115 1,163,106 Net interest income $ 2,440,448 $ 2,279,763 $ 2,018,907 Non-interest income 1,384,315 1,312,146 1,105,240 Provision for loan losses 1,777,327 1,196,087 1,010,837 Other non-interest expenses 1,389,840 1,367,607 1,534,523 Income tax provision 224,802 352,847 205,768 Net income $ 432,794 $ 675,368 $ 373,019 Loans Held for Investment $ 106,508,443 $102,556,271 $102,359,180 Average Loans Held for Investment $ 104,321,485 $101,805,584 $ 99,881,480 Core Deposits(2) $ 1,599 $ 470 $ 6,061 Total Deposits $ 2,050,861 $ 2,295,131 $ 2,383,902 Loans Held for Investment Yield 14.07% 13.77% 12.72% Net Interest Margin 9.36% 8.96% 8.09% Revenue Margin 14.67% 14.11% 12.51% Risk Adjusted Margin 9.94% 10.15% 8.88% Non-Interest Expenses as a % of Average Loans Held for Investment 5.33% 5.37% 6.15% Efficiency Ratio (6) 36.34% 38.07% 49.12% Net charge-off rate 4.73% 3.96% 3.63% Delinquency Rate (30+ days) 5.17% 4.70% 4.09% Number of Loan Accounts (000s) 48,537 48,473 49,374 Other: (3 Net interest income $ (22,449) $ (58,605) $ 75,586 Non-interest income (10,425) 10,639 (6,915) Provision for loan losses 120,376 5,023 8,840 Restructuring expenses 27,809 19,354 - Other non-interest expenses 155,746 3,870 120,353 Income tax benefit (113,854) (26,620) (44,395) Net loss $ (222,951) $ (49,593) $ (16,127) Loans Held for Investment $ 881,179 $ (21,375) $31,646,555 Core Deposits(2) $ 6,107,779 $ 6,373,515 $42,819,710 Total Deposits $ 7,621,031 $ 8,034,332 $48,052,380 Total: Interest Income $ 4,863,246 $ 4,646,431 $ 3,901,560 Interest Expense 1,862,733 1,842,993 1,562,488 Net interest income $ 3,000,513 $ 2,803,438 $ 2,339,072 Non-interest income 1,566,232 1,517,989 1,210,346 Provision for loan losses 1,940,368 1,142,825 998,128 Restructuring expenses 27,809 19,354 - Other non-interest expenses 2,107,398 1,914,867 1,962,686 Income tax provision 169,558 428,010 185,992 Net Income $ 321,612 $ 816,371 $ 402,612 Loans Held for Investment $151,362,417 $144,768,561 $146,151,268 Core Deposits(2) $ 69,316,301 $ 69,086,358 $ 69,897,095 Total Deposits $ 82,990,462 $ 83,342,814 $ 85,770,892 (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." In Q3 2007, the Company shutdown the mortgage origination operations of its wholesale mortgage banking unit, GreenPoint Mortgage. The results of the mortgage origination operation of GreenPoint have been accounted for as a discontinued operation and have been removed from the Company's results of continuing operations for all periods presented. The results of GreenPoint's mortgage servicing business are reported in continuing operations for all periods presented. Effective Q4 2007, GreenPoint's held for investment commercial and consumer loan portfolio results are included in continuing operations. (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) Results of the North Fork acquisition were included in the Other category for Q4 2006. (4) Net Interest Margin - Loans is interest income - loans divided by average managed loans. (5) Net Interest Margin - Deposits is interest expense - deposits divided by average retail deposits. (6) Efficiency Ratio is non-interest expenses divided by total managed revenue. (7) Certain prior period amounts have been reclassified to conform with current period presentation. CAPITAL ONE FINANCIAL CORPORATION (COF) NATIONAL LENDING SUBSEGMENT FINANCIAL & STATISTICAL SUMMARY FOR CONTINUING OPERATIONS MANAGED BASIS (1) 2007 2007 2006 (in thousands) Q4 Q3 Q4 US Card: Interest Income $ 2,058,920 $ 1,953,967 $ 1,795,345 Interest Expense 574,714 596,767 600,821 Net interest income $ 1,484,206 $ 1,357,200 $ 1,194,524 Non-interest income 1,046,823 975,502 795,881 Provision for loan losses 913,113 662,428 554,698 Non-interest expenses 822,317 815,470 916,963 Income tax provision 273,686 294,053 181,561 Net income $ 521,913 $ 560,751 $ 337,183 Loans Held for Investment $ 52,078,847 $ 49,573,279 $ 53,623,680 Average Loans Held for Investment $ 50,276,568 $ 49,682,666 $ 51,686,135 Loans Held for Investment Yield 16.38% 15.73% 13.89% Net Interest Margin 11.81% 10.93% 9.24% Revenue Margin 20.14% 18.78% 15.40% Risk Adjusted Margin 14.74% 14.65% 11.58% Non-Interest Expenses as a % of Average Loans Held for Investment 6.54% 6.57% 7.10% Efficiency Ratio (2) 32.49% 34.96% 46.07% Net charge-off rate 5.40% 4.13% 3.82% Delinquency Rate (30+ days) 4.95% 4.46% 3.74% Purchase Volume (3) $ 22,909,274 $ 21,522,104 $22,782,451 Number of Loan Accounts (000s) 36,450 36,504 37,630 Auto Finance: Interest Income $ 687,389 $ 661,471 $ 593,268 Interest Expense 300,133 283,949 242,311 Net interest income $ 387,256 $ 377,522 $ 350,957 Non-interest income 14,888 13,514 14,143 Provision for loan losses 429,247 244,537 151,171 Non-interest expenses 144,301 152,275 162,022 Income tax provision (58,963) (1,987) 18,167 Net (loss) income $ (112,441) $ (3,789) $ 33,740 Loans Held for Investment $ 25,128,352 $ 24,335,242 $21,751,827 Average Loans Held for Investment $ 24,920,380 $ 24,170,047 $21,498,205 Loans Held for Investment Yield 11.03% 10.95% 11.04% Net Interest Margin 6.22% 6.25% 6.53% Revenue Margin 6.45% 6.47% 6.79% Risk Adjusted Margin 2.46% 2.91% 3.94% Non-Interest Expenses as a % of Average Loans Held for Investment 2.32% 2.52% 3.01% Efficiency Ratio (2) 35.88% 38.94% 44.38% Net charge-off rate 4.00% 3.56% 2.85% Delinquency Rate (30+ days) 7.84% 7.15% 6.35% Auto Loan Originations $ 3,623,491 $ 3,248,747 $ 3,078,877 Number of Loan Accounts (000s) 1,771 1,731 1,589 Global Financial Services: Interest Income $ 929,219 $ 896,440 $ 793,400 Interest Expense 360,233 351,399 319,974 Net interest income $ 568,986 $ 545,041 $ 473,426 Non-interest income 322,604 323,130 295,216 Provision for loan losses 434,967 289,122 304,968 Non-interest expenses 423,222 399,862 455,538 Income tax provision 10,079 60,781 6,040 Net income $ 23,322 $ 118,406 $ 2,096 Loans Held for Investment $ 29,301,244 $28,647,750 $26,983,673 Average Loans Held for Investment $ 29,124,537 $27,952,871 $26,697,140 Loans Held for Investment Yield (4) 12.69% 12.72% 11.80% Net Interest Margin 7.81% 7.80% 7.09% Revenue Margin 12.25% 12.42% 11.52% Risk Adjusted Margin 8.05% 8.42% 7.63% Non-Interest Expenses as a % of Average Loans Held for Investment 5.81% 5.72% 6.83% Efficiency Ratio (2) 47.47% 46.06% 59.27% Net charge-off rate 4.19% 4.00% 3.89% Delinquency Rate (30+ days) 3.29% 3.02% 2.97% Number of Loan Accounts (000s) 10,316 10,238 10,155 (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) Efficiency ratio is non-Interest Expenses divided by total Managed Revenue. (3) Includes all purchase transactions net of returns and excludes cash advance transactions. (4) Excludes "GFS - Home Loans Originations" and "GFS - Settlement Services" from Other Interest Income. CAPITAL ONE FINANCIAL CORPORATION Reconciliation to GAAP Financial Measures For the Three Months Ended December 31, 2007 (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 Reported Adjustments(1) Total Managed(2) Income Statement Measures(3) Net interest income $ 1,762,247 $ 1,238,266 $ 3,000,513 Non-interest income 2,158,340 (592,108) 1,566,232 Total revenue 3,920,587 646,158 4,566,745 Provision for loan losses 1,294,210 646,158 1,940,368 Net charge-offs $ 650,018 $646,158 $ 1,296,176 Balance Sheet Measures Loans Held for Investment $ 101,805,027 $ 49,557,390 $ 151,362,417 Total assets $ 150,590,369 $ 48,706,677 $ 199,297,046 Average loans Held for Investment $ 97,784,813 $ 50,577,525 $ 148,362,338 Average earning assets $ 127,553,955 $ 48,409,256 $ 175,963,211 Average total assets $ 151,517,794 $ 49,732,018 $ 201,249,812 Delinquencies $ 3,721,444 $ 2,142,353 $ 5,863,797 (1) Income statement adjustments reclassify the net of finance charges of $1,648.6 million, past-due fees of $301.1 million, other interest income of $(46.7) million and interest expense of $664.8 million; and net charge-offs of $646.2 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. (3) Based on continuing operations. CAPITAL ONE FINANCIAL CORPORATION Consolidated Balance Sheets (in thousands)(unaudited) As of As of As of December 31 September 30 December 31 2007 2007 2006 (1) Assets: Cash and due from banks $ 2,377,287 $ 1,819,121 $ 2,817,519 Federal funds sold and resale agreements 1,766,762 1,922,735 1,099,156 Interest-bearing deposits at other banks 677,360 703,805 743,821 Cash and cash equivalents 4,821,409 4,445,661 4,660,496 Securities available for sale 19,781,587 19,959,247 15,246,887 Mortgage loans held for sale 315,863 1,454,457 10,435,295 Loans held for investment 101,805,027 95,405,217 96,512,139 Less: Allowance for loan and lease losses (2,963,000) (2,320,000) (2,180,000) Net loans held for investment 98,842,027 93,085,217 94,332,139 Accounts receivable from securitizations 4,717,879 6,905,859 4,589,235 Premises and equipment, net 2,299,603 2,268,034 2,203,280 Interest receivable 839,317 793,693 816,426 Goodwill 12,830,740 12,952,838 13,635,435 Other 6,141,944 5,289,829 3,820,092 Total assets $ 150,590,369 $147,154,835 $ 149,739,285 Liabilities: Non-interest-bearing deposits $ 11,046,549 $ 10,840,189 $ 11,648,070 Interest-bearing deposits 71,943,913 72,502,625 74,122,822 Senior and subordinated notes 10,712,706 10,784,182 9,725,470 Other borrowings 26,583,683 22,722,519 24,257,007 Interest payable 631,609 552,674 574,763 Other 5,377,797 4,965,794 4,175,947 Total liabilities 126,296,257 122,367,983 124,504,079 Stockholders' Equity: Common stock 4,192 4,183 4,122 Paid-in capital, net 15,860,490 15,768,525 15,333,137 Retained earnings and cumulative other comprehensive income 11,582,816 11,395,226 10,026,364 Less: Treasury stock, at cost (3,153,386) (2,381,082) (128,417) Total stockholders' equity 24,294,112 24,786,852 25,235,206 Total liabilities and stockholders' equity $ 150,590,369 $ 147,154,835 $ 149,739,285 (1) Certain prior period amounts have been reclassified to conform to the current period presentation. CAPITAL ONE FINANCIAL CORPORATION Consolidated Statements of Income (in thousands, except per share data)(unaudited) Three Months Ended Year Ended Dec. 31 Sept. 30 Dec. 31 (1) Dec. 31 Dec. 31 (1) 2007 2007 2006 2007 2006 Interest Income: Loans held for investment, including past-due fees $2,536,779 $2,381,096 $2,002,111 $9,500,128 $7,046,473 Securities available for sale 256,364 252,550 185,424 950,972 676,712 Other 167,051 133,321 136,390 627,056 441,550 Total interest income 2,960,194 2,766,967 2,323,925 11,078,156 8,164,735 Interest Expense: Deposits 686,174 740,091 552,385 2,906,351 1,814,797 Senior and subordinated notes 159,878 144,643 136,282 577,128 411,643 Other borrowings 351,895 257,759 242,286 1,064,832 846,849 Total interest expense 1,197,947 1,142,493 930,953 4,548,311 3,073,289 Net interest income 1,762,247 1,624,474 1,392,972 6,529,845 5,091,446 Provision for loan and lease losses 1,294,210 595,534 513,157 2,636,502 1,476,438 Net interest income after provision for loan and lease losses 468,037 1,028,940 879,815 3,893,343 3,615,008 Non-Interest Income: Servicing and securitizations 1,271,396 1,354,303 959,436 4,840,677 4,209,637 Service charges and other customer-related fees 573,034 522,374 462,086 2,057,854 1,770,340 Mortgage servicing and other (5,700) 52,661 58,805 166,776 177,893 Interchange 152,595 103,799 147,571 500,484 549,074 Other 167,015 116,525 43,577 488,432 294,080 Total non- interest income 2,158,340 2,149,662 1,671,475 8,054,223 7,001,024 Non-Interest Expense: Salaries and associate benefits 622,101 627,358 617,563 2,592,534 2,224,676 Marketing 358,182 332,693 395,360 1,347,836 1,444,324 Communications and data processing 189,415 194,551 187,043 758,820 712,001 Supplies and equipment 146,267 134,639 137,582 531,238 460,419 Occupancy 91,675 77,597 63,796 322,510 215,636 Restructuring expense 27,809 19,354 - 138,237 - Other 699,758 548,029 561,342 2,386,835 1,886,635 Total non- interest expense 2,135,207 1,934,221 1,962,686 8,078,010 6,943,691 Income from continuing operations before income taxes 491,170 1,244,381 588,604 3,869,556 3,672,341 Income taxes 169,558 428,010 185,992 1,277,837 1,245,964 Income from continuing operations, net of tax 321,612 816,371 402,612 2,591,719 2,426,377 Loss from discontinued operations, net of tax(2) (95,044) (898,029) (11,884) (1,021,387) (11,884) Net income (loss) $226,568 $(81,658) $390,728 $1,570,332 $2,414,493 Basic earnings per share Income from continuing operations $0.85 $2.11 $1.20 $6.64 $7.84 Loss from discontinued operations (0.25) (2.32) (0.04) (2.62) (0.04) Net income (loss) $0.60 $(0.21) $1.16 $4.02 $7.80 Diluted earnings per share Income from continuing operations $0.85 $2.09 $1.17 $6.55 $7.65 Loss from discontinued operations (0.25) (2.30) (0.03) (2.58) (0.03) Net income (loss) $0.60 $(0.21) $1.14 $3.97 $7.62 Dividends paid per share $0.03 $0.03 $0.03 $0.11 $0.11 (1) Certain prior period amounts have been reclassified to conform to the current period presentation. (2) Certain prior period amounts have been reclassified to conform to the current period presentation. In Q3 2007, the Company shutdown the mortgage origination operations of its wholesale mortgage banking unit, GreenPoint Mortgage, realizing an after-tax loss of $898.0 million. The results of the mortgage origination operation of GreenPoint have been accounted for as a discontinued operation and have been removed from the Company's results of continuing operations for all periods presented. CAPITAL ONE FINANCIAL CORPORATION Statements of Average Balances, Income and Expense, Yields and Rates (dollars in thousands)(unaudited) Reported Quarter Ended 12/31/07 Average Income/ Yield/ Balance Expense Rate Earning assets: Loans held for investment 97,784,813 2,536,779 10.38% Securities available for sale 20,102,440 256,364 5.10% Other 9,355,161 167,051 7.14% Total earning assets (2) $ 127,242,414 $ 2,960,194 9.31% Interest-bearing liabilities: Interest-bearing deposits NOW accounts $ 4,674,490 $ 30,443 2.61% Money market deposit accounts 28,983,602 270,943 3.74% Savings accounts 8,172,510 32,520 1.59% Other Consumer Time Deposits 16,374,958 183,570 4.48% Public Fund CD's of $100,000 or more 1,902,442 23,126 4.86% CD's of $100,000 or more 8,335,941 97,335 4.67% Foreign time deposits 3,868,444 48,237 4.99% Total Interest-bearing deposits $ 72,312,387 $ 686,174 3.80% Senior and subordinated notes 10,682,635 159,878 5.99% Other borrowings 26,433,200 351,895 5.33% Total interest-bearing liabilities(2) $ 109,428,222 $ 1,197,947 4.38% Net interest spread 4.93% Interest income to average earning assets 9.31% Interest expense to average earning assets 3.77% Net interest margin 5.54% Reported Quarter Ended 9/30/07 (1) Average Income/ Yield/ Balance Expense Rate Earning assets: Loans held for investment 91,744,846 2,381,096 10.38% Securities available for sale 20,041,177 252,550 5.04% Other 6,568,358 133,321 8.12% Total earning assets (2) $ 118,354,381 $ 2,766,967 9.35% Interest-bearing liabilities: Interest-bearing deposits NOW accounts $ 4,759,665 $ 34,030 2.86% Money market deposit accounts 28,696,735 294,873 4.11% Savings accounts 8,345,638 37,474 1.80% Other Consumer Time Deposits 17,203,453 194,256 4.52% Public Fund CD's of $100,000 or more 1,884,767 23,092 4.90% CD's of $100,000 or more 8,673,860 103,296 4.76% Foreign time deposits 3,991,056 53,070 5.32% Total Interest-bearing deposits $ 73,555,174 $ 740,091 4.02% Senior and subordinated notes 9,811,821 144,643 5.90% Other borrowings 18,892,876 257,759 5.46% Total interest-bearing liabilities(2) $ 102,259,871 $ 1,142,493 4.47% Net interest spread 4.88% Interest income to average earning assets 9.35% Interest expense to average earning assets 3.86% Net interest margin 5.49% Reported Quarter Ended 12/31/06 (1) Average Income/ Yield/ Balance Expense Rate Earning assets: Loans held for investment 74,737,753 2,002,111 10.72% Securities available for sale 15,090,001 185,424 4.92% Other 8,020,811 136,390 6.80% Total earning assets (2) $ 97,848,565 $ 2,323,925 9.50% 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 18,891,606 242,286 5.13% Total interest-bearing liabilities(2) $ 81,661,528 $ 930,953 4.56% Net interest spread 4.94% Interest income to average earning assets 9.50% Interest expense to average earning assets 3.81% Net interest margin 5.69% (1) Prior period amounts have been reclassified to conform with current period presentation. (2) Average balances, income and expenses, yields and rates are based on continuing operations. CAPITAL ONE FINANCIAL CORPORATION Statements of Average Balances, Income and Expense, Yields and Rates (dollars in thousands)(unaudited) Managed (1) Quarter Ended 12/31/07 Average Income/ Yield/ Balance Expense Rate Earning assets: Loans held for investment 148,362,338 4,512,219 12.17% Securities available for sale 20,102,440 256,364 5.10% Other 7,186,892 94,663 5.27% Total earning assets (3) $ 175,651,670 $ 4,863,246 11.07% Interest-bearing liabilities: Interest-bearing deposits NOW accounts $ 4,674,490 $ 30,443 2.61% Money market deposit accounts 28,983,602 270,943 3.74% Savings accounts 8,172,510 32,520 1.59% Other Consumer Time Deposits 16,374,958 183,570 4.48% Public Fund CD's of $100,000 or more 1,902,442 23,126 4.86% CD's of $100,000 or more 8,335,941 97,335 4.67% Foreign time deposits 3,868,444 48,237 4.99% Total Interest-bearing deposits $ 72,312,387 $ 686,174 3.80% Senior and subordinated notes 10,682,635 159,878 5.99% Other borrowings 26,433,200 351,895 5.33% Securitization liability 49,847,555 664,786 5.33% Total interest-bearing liabilities(3) $ 159,275,777 $ 1,862,733 4.68% Net interest spread 6.39% Interest income to average earning assets 11.07% Interest expense to average earning assets 4.24% Net interest margin 6.83% Managed (1) Quarter Ended 9/30/07 (2) Average Income/ Yield/ Balance Expense Rate Earning assets: Loans held for investment 143,781,268 4,324,272 12.03% Securities available for sale 20,041,177 252,550 5.04% Other 4,415,978 69,610 6.31% Total earning assets (3) $ 168,238,423 $ 4,646,432 11.05% Interest-bearing liabilities: Interest-bearing deposits NOW accounts $ 4,759,665 $ 34,030 2.86% Money market deposit accounts 28,696,735 294,873 4.11% Savings accounts 8,345,638 37,474 1.80% Other Consumer Time Deposits 17,203,453 194,256 4.52% Public Fund CD's of $100,000 or more 1,884,767 23,092 4.90% CD's of $100,000 or more 8,673,860 103,296 4.76% Foreign time deposits 3,991,056 53,070 5.32% Total Interest-bearing deposits $ 73,555,174 $ 740,091 4.02% Senior and subordinated notes 9,811,821 144,643 5.90% Other borrowings 18,892,876 257,759 5.46% Securitization liability 51,320,446 700,501 5.46% Total interest-bearing liabilities(3) $ 153,580,317 $ 1,842,994 4.80% Net interest spread 6.25% Interest income to average earning assets 11.05% Interest expense to average earning assets 4.38% Net interest margin 6.67% Managed (1) Quarter Ended 12/31/06 (2) Average Income/ Yield/ Balance Expense Rate Earning assets: Loans held for investment 123,901,960 3,640,588 11.75% Securities available for sale 15,090,001 185,424 4.92% Other 6,121,053 75,547 4.94% Total earning assets (3) $ 145,113,014 $ 3,901,559 10.76% 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 18,891,606 242,299 5.13% Securitization liability 48,603,831 631,521 5.20% Total interest-bearing liabilities(3) $ 130,265,359 $ 1,562,487 4.80% Net interest spread 5.96% Interest income to average earning assets 10.76% Interest expense to average earning assets 4.31% Net interest margin 6.45% (1) The information in this table reflects the adjustment to add back the effect of securitized loans. (2) Prior period amounts have been reclassified to conform with current period presentation. (3) Average balances, income and expenses, yields and rates are based on continuing operations.CONTACT:
Investor Relations
Jeff Norris
+1-703-720-2455
Media
Relations
Tatiana Stead
+1-703-720-2352
Julie Rakes
+1-804-284-5800
All of Capital One Financial Corporation