Capital One Reports Second Quarter 2010 Net Income of $608 million, or $1.33 Per Share (diluted), Up from a Loss of $(0.66) in the Second Quarter of 2009
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Revenues of $3.9 billion were up $727 million, or 22.9 percent, as compared to same quarter a year ago
Operating Earnings of $812 million increased $583 million, more than doubling as compared to same quarter a year ago
Domestic Card charge-off rate improved almost 100 basis points in the quarter to 9.49 percent; delinquencies were down 51 basis points
MCLEAN, Va., July 22, 2010 /PRNewswire via COMTEX/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the second quarter of 2010 of $608 million, or $1.33 per common share (diluted), versus first quarter 2010 net income of $636 million, or $1.40 per common share (diluted). This compares with a loss in the second quarter of 2009 of $(277) million, or $(0.66) per share (diluted). Income from continuing operations of $812 million increased $92 million, or 12.8 percent, from $720 million in the first quarter of 2010 and $583 million, or 255 percent, from $229 million in the second quarter of 2009.
"Capital One has demonstrated considerable resilience throughout the recession and the ongoing legislative and regulatory changes reshaping the financial services industry," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "While economic and regulatory uncertainty remains, those same forces are creating attractive opportunities for Capital One. We continue to be well positioned to take advantage of emerging opportunities and deliver significant shareholder value over the long-term."
Total Company Results
- Total revenue in the second quarter of 2010 declined $385 million, or 9.0 percent, from the first quarter of 2010 to $3.9 billion as average loans declined 4.5 percent with no offsetting increase in margin. Non-interest income decreased $254 million in the second quarter, or 23.9 percent, relative to the prior quarter, due to the absence of one-time benefits experienced in the first quarter and an expected decline in overlimit fees in the Domestic Card business. Net interest income decreased $131 million, or 4.1 percent.
- Net interest margin was stable at 7.09 percent, driven by a 7 basis point decrease in the cost of funds, partially offset by a 5 basis point decrease in loan yields.
- Provision expense decreased $755 million from the prior quarter, or 51.1 percent, driven by lower charge-offs and a reduction in allowance balance of $1.0 billion. Charge-offs and delinquencies improved across our consumer businesses, with the exception of an expected seasonal up-tick in auto delinquencies. Commercial Banking charge-offs and non-performing asset rates improved in the quarter.
- The continued improvement in credit drove allowance releases in all of the company's businesses in the second quarter, totaling $1.0 billion for the company. This compares to an allowance release of $566 million in the first quarter of 2010. The Card segment released $665 million, with the majority of that coming from the Domestic Card sub-segment. Better than expected loss performance in the portfolio and a lower level of delinquencies were the primary drivers of the second quarter allowance release. In addition, the $1.9 billion of lower period-end loans require lower allowance, all else being equal. The allowance as a percentage of outstanding loans was 5.35 percent at the end of the second quarter of 2010 as compared with 6.0 percent at the end of the prior quarter.
- Period-end total assets decreased by $3.2 billion, or 1.6 percent, from the first quarter of 2010 to $197.5 billion at the end of the second quarter of 2010, with $3.0 billion of the decline coming from loans held for investment. Expected run-off continues in our Installment Loan portfolio in Domestic Card, our Mortgage portfolio in Consumer Banking, and our Small Ticket CRE portfolio in Commercial Banking. Loans held for investment at June 30, 2010 were $127.1 billion, a decline of 2.3 percent from the prior quarter.
- Average total deposits during the quarter were $118.5 billion, an increase of $1.0 billion, or 0.8 percent, over the prior quarter. Period-end total deposits decreased by $0.5 billion, or 0.4 percent, to $117.3 billion.
- The cost of funds decreased to 1.69 percent in the second quarter from 1.76 percent in the prior quarter.
- Non-interest expenses of $2.0 billion increased $153 million in the second quarter of 2010 from the prior quarter, driven primarily by one-time expenses and infrastructure expenses, as well as an increase in marketing.
- The company's TCE ratio increased to 6.1 percent, up 60 basis points from the first quarter 2010 ratio of 5.5 percent. The Tier 1 risk-based capital ratio of 9.9 percent increased 30 basis points relative to the ratio of 9.6 percent in the prior quarter. The recent enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act may have an impact on the Tier 1 treatment of the company's approximately $3.5 billion of trust preferred securities and provides for a phase-in period expected to begin in 2013. Given the potential change in capital treatment of these securities, the company anticipates that it will determine whether to exercise its rights to redeem its trust preferred securities at or near the beginning of the phase-in period. The company looks forward to receiving clarity on these issues through rule-making and other regulatory action.
"Capital One posted strong bottom-line results in the quarter, as the ongoing improvement in credit performance drove a material reduction in provision expense," said Gary L. Perlin, Capital One's Chief Financial Officer. "Taking into account our improved capital ratios and historically high allowance for loan losses, our total risk-bearing capacity is now greater than it was at any point during the financial crisis, even as we're past the peak in credit losses."
Segment Results
The company reports the results of its business through three operating segments: Credit Card, Commercial Banking, and Consumer Banking. Please refer to the Financial Supplement for additional details.
Credit Card Highlights
For more lending information and statistics on the segment results, please refer to the Financial Supplement.
- Revenues relative to the prior quarter:
- Domestic Card - declined $188.0 million, or 7.6 percent
- International Card - declined $7.0 million, or 2.0 percent
- Period-end loans in the Domestic Card segment were $54.6 billion in the second quarter, a decline of $1.6 billion, or 2.9 percent, from the prior quarter as the Installment Loan portfolio continued to run off. International credit card loans declined in the quarter by $309 million, or 4.1 percent, to $7.3 billion.
- As expected, revenue margin in the Domestic Card sub-segment declined in the quarter. Revenue margin fell 48 basis points to 16.61 percent in the second quarter from 17.09 percent in the prior quarter. The company expects quarterly Domestic Card revenue margin to decline over the next several quarters to around 15 percent by the end of 2010 or early 2011.
- Non-interest expense increased $88 million, or 9.6 percent, in the second quarter primarily due to higher marketing expense in Domestic Card and tax accruals in International Card.
- Domestic Card provision expense decreased $421 million in the second quarter, or 38.4 percent, relative to the prior quarter. The lower provision expense resulted from both lower charge-offs and an allowance release in the quarter.
- Net charge-off rates relative to the prior quarter:
- Domestic Card - improved 99 basis points to 9.49 percent from 10.48 percent
- International Card - improved 45 basis points to 8.38 percent from 8.83 percent
- Delinquency rates relative to the prior quarter:
- Domestic Card - improved 51 basis points to 4.79 percent from 5.30 percent
- International Card - improved 36 basis points to 6.03 percent from 6.39 percent
- Purchase volumes in Domestic Card increased $2.6 billion, or 11.0 percent, relative to the prior quarter.
Commercial Banking Highlights
For more lending information and statistics on the segment results, please refer to the Financial Supplement.
The Commercial Banking segment consists of commercial and multi-family real-estate, middle market lending, and specialty lending, which are summarized under Commercial Lending, and Small Ticket Commercial Real Estate.
- Commercial Banking reported net income improved to $77 million in the second quarter compared to a net loss in of $49 million in the first quarter, largely as a result of improving credit.
- Total revenue increased $25 million, or 7.1 percent, during the quarter to $379 million.
- Period-end loans in Commercial Banking were $29.6 billion, essentially even with the prior quarter.
- Average deposits increased by $312 million, or 1.4 percent, to $22.2 billion during the second quarter, while the deposit interest expense rate improved 5 basis points to 67 basis points.
- Provision expense decreased $176 million relative to the prior quarter as a result of lower charge-offs and an allowance release in the quarter.
- Charge-off rate relative to the prior quarter:
- Total Commercial Banking -1.21 percent, a decline of 16 basis points
- Commercial lending - 0.98 percent, a decline of 16 basis points
- Small ticket commercial real estate - 4.21 percent, a decline of 22 basis points
- Non-performing asset rate relative to the prior quarter:
- Total Commercial Banking - 2.20 percent, a decline of 44 basis points
- Commercial lending - 2.10 percent, a decline of 42 basis points
- Small ticket commercial real estate - 3.57 percent, a decline of 61 basis points
Consumer Banking highlights
For more lending information and statistics on the segment's results, please refer to the Financial Supplement.
- Total revenue decreased $115 million, or 9.5 percent, during the quarter to $1.1 billion.
- Provision expense decreased $162 million relative to the prior quarter as a result of lower charge-offs and a larger allowance release relative to the prior quarter.
- Period-end loans relative to the prior quarter:
- Auto - declined $225 million, or 1.3 percent, to $17.2 billion.
- Mortgage - declined $645 million, or 4.6 percent, to $13.3 billion. Mortgage loans continued to reflect expected run-off in the portfolio.
- Retail banking - declined $200 million, or 4.0 percent, to $4.8 billion.
- Auto loan originations increased 31.4 percent over the prior quarter to $1.8 billion in the second quarter.
- Average deposits in Consumer Banking increased $2.0 billion, or 2.6 percent, to $77.1 billion during the second quarter. Improving interest rates and disciplined pricing drove a 9 basis point decline in the deposit interest expense rate in the quarter.
- Net charge-off rates relative to the prior quarter:
- Auto - 2.09 percent, a decrease of 88 basis points
- Mortgage - 0.46 percent, an decrease of 48 basis points
- Retail banking - 2.11 percent, even with the prior quarter
TCE and related ratios, as used throughout this release, are non-GAAP financial measures. For additional information, see Exhibit 99.3 included in the company's current report on Form 8-K filed July 22, 2010.
Forward looking statements
The company cautions that its current expectations in this release dated July 22, 2010; and the company's plans, objectives, expectations, and intentions, are forward-looking statements. Actual results could differ materially from current expectations due to a number of factors, including: general economic conditions in the U.S., the UK, or the company's local markets, including conditions affecting consumer income, confidence, spending, and savings which may affect consumer bankruptcies, defaults, charge-offs, deposit activity, and interest rates; changes in the labor and employment market; changes in the credit environment; the company's ability to execute on its strategic and operational plans; competition from providers of products and services that compete with the company's businesses; increases or decreases in the company's aggregate accounts and balances, or the growth rate and/or composition thereof; changes in the reputation of or expectations regarding the financial services industry or the company with respect to practices, products or financial condition; financial, legal, regulatory (including the impact of the Dodd-Frank Act and the regulations to be promulgated thereunder), tax or accounting changes or actions, including with respect to any litigation matter involving the company; and the success of the company's marketing efforts in attracting or retaining customers. A discussion of these and other factors can be found in the company's annual report and other reports filed with the Securities and Exchange Commission, including, but not limited to, the company's report on Form 10-K for the fiscal year ended December 31, 2009 and report on Form 10-Q for the quarter ended March 31, 2010.
About Capital One
Capital One Financial Corporation (http://www.capitalone.com/) is a financial holding company whose subsidiaries, which include Capital One, N.A. and Capital One Bank (USA), N. A., had $117.3 billion in deposits and $197.5 billion in total assets outstanding as of June 30, 2010. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One, N.A. has approximately 1,000 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia, and the District of Columbia. 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: Second quarter 2010 financial results, SEC Filings, and 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 podcast and 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
GAAP BASIS *
2010 2010 2009
(in millions, except per
share data and as
noted) (unaudited) Q2 Q1 Q2
------------------------ --- --- ---
Earnings
Net Interest Income $3,097 $3,228 $1,945
(7)
Non-Interest Income (1) $807 (7) $1,061 (8) $1,232 (9)
---- ------ ------
Total Revenue (2) $3,904 $4,289 $3,177
Provision for Loan
Losses $723 $1,478 $934
Marketing Expenses $219 $180 $134
Restructuring Expenses
(3) $- $- $44
Operating Expenses (4) $1,781 $1,667 $1,744 (10)
------ ------ ------
Income Before Taxes $1,181 $964 $321
Effective Tax Rate 31.2% 25.3% 28.7%
Income From Continuing
Operations, Net of Tax $812 $720 $229
Loss From Discontinued
Operations, Net of Tax $(204) (7) $(84) (7) $(6)
----- ---- ---
Net Income $608 $636 $223
---- ---- ----
Net Income (Loss)
Available to Common
Shareholders (A) $608 $636 $(277) (11)
-------------------- ---- ---- -----
Common Share Statistics
Basic EPS: (B)
Income (Loss) From
Continuing Operations $1.79 $1.59 $(0.64)
Loss From Discontinued
Operations $(0.45) $(0.18) $(0.01)
------ ------ ------
Net Income (Loss) $1.34 $1.41 $(0.66)
Diluted EPS: (B)
Income (Loss) From
Continuing Operations $1.78 $1.58 $(0.64)
Loss From Discontinued
Operations $(0.45) $(0.18) $(0.01)
------ ------ ------
Net Income (Loss) $1.33 $1.40 $(0.66)
Dividends Per Common
Share $0.05 $0.05 $0.05
Tangible Book Value Per
Common Share (period
end) ( C ) $24.89 $22.86 $24.95
Stock Price Per Common
Share (period end) $40.30 $41.41 $21.88
Total Market
Capitalization (period
end) $18,228 $18,713 $9,826
Common Shares
Outstanding (period
end) 452.3 451.9 449.1
Shares Used to Compute
Basic EPS 452.1 451.0 421.9
Shares Used to Compute
Diluted EPS 456.4 455.4 421.9
---------------------- ----- ----- -----
Reported Balance Sheet
Statistics (period
average)
Average Loans Held for
Investment $128,203 $134,206 $104,682
Average Earning Assets $174,650 $181,881 $150,804
Total Average Assets $199,329 $207,207 $177,628
Average Interest Bearing
Deposits $104,163 $104,018 $107,033
Total Average Deposits $118,484 $117,530 $119,604
(12),
Average Equity $24,526 $23,681 $27,668 (13)
Return on Average Assets
(ROA) 1.63% 1.39% 0.52%
Return on Average Equity
(ROE) 13.24% 12.16% 3.31%
Return on Average
Tangible Common Equity
(D) 30.97% 29.98% 6.75%
----------------------- ----- ----- ----
Reported Balance Sheet
Statistics (period end)
Loans Held for
Investment $127,140 $130,115 $100,940
Total Assets (E) $197,479 $200,691 $171,948
Interest Bearing
Deposits $103,172 $104,013 $104,121
Total Deposits $117,331 $117,787 $116,725
Tangible Assets (E) (F) $183,468 $186,647 $157,782
Tangible Common Equity
(TCE) (E) (G) $11,259 $10,330 $11,204
Tangible Common Equity
to Tangible Assets
Ratio (E) (H) 6.14% 5.53% 7.10 % (12)
---------------------- ---- ---- ----
Performance Statistics
(Reported) Quarter over
Quarter
Net Interest Income
Growth (5) (4)% 65% 8%
Non- Interest Income
Growth (5) (24)% (25)% 13%
Revenue Growth (5) (9)% 27% 10%
Net Interest Margin 7.09% 7.10% 5.16%
Revenue Margin 8.94% 9.43% 8.43%
Risk-Adjusted Margin (I) 5.01% 4.99% 5.46%
Non-Interest Expense as
a % of Average Loans
Held for Investment
(annualized) 6.24% 5.50% 7.34%
Efficiency Ratio (J) 51.23% 43.06% 59.11%
-------------------- ----- ----- -----
Asset Quality Statistics
(Reported) (6)
Allowance $6,799 $7,752 $4,482
Allowance as a % of
Reported Loans Held for
Investment 5.35% 5.96% 4.44%
Net Charge-Offs $1,717 $2,018 $1,117
Net Charge-Off Rate 5.36% 6.01% 4.28%
30+ day performing
delinquency rate 3.81% 4.22% 3.71%
---- ---- ----
Full-time equivalent
employees (in
thousands) 25.7 25.9 26.6
-------------------- ---- ---- ----
* Effective January 1, 2010, Capital One prospectively adopted two
new accounting standards that resulted in the consolidation of the
majority of the
Company's credit card securitization trusts. The adoption of these
new accounting standards resulted in the addition of approximately
$41.9 billion of assets,
consisting primarily of credit card loan receivables, and a reduction
of $2.9 billion in stockholders' equity as of January 1, 2010. As
the new accounting
standards were adopted prospectively, prior period results have not
been adjusted. See the accompanying schedule "Impact of Adopting
New Accounting
Guidance." While the adoption of these new accounting standards has a
significant impact on the comparability of the Company's GAAP
financial results
prior to and subsequent to adoption, the Company's reported GAAP
results after adoption are now comparable to the prior "managed"
results.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
MANAGED BASIS * (for 2009 data)
2010 2010 2009
(in millions, except
per share data and as
noted) (unaudited) Q2 Q1 Q2
---------------------- --- --- ---
Earnings
Net Interest Income $3,097 $3,228 $2,957
Non-Interest Income (7)
(1) $807 (7) $1,061 (8) $1,190 (9)
---- ------ ------
Total Revenue (2) $3,904 $4,289 $4,147
Provision for Loan and
Lease Losses $723 $1,478 $1,904
Marketing Expenses $219 $180 $134
Restructuring Expenses
(3) $- $- $44
Operating Expenses (4) $1,781 $1,667 $1,744 (10)
------ ------ ------
Income Before Taxes $1,181 $964 $321
Effective Tax Rate 31.2% 25.3% 28.7%
Income From Continuing
Operations, Net of
Tax $812 $720 $229
Loss From Discontinued
Operations, Net of
Tax $(204) (7) $(84) (7) $(6)
----- ---- ---
Net Income $608 $636 $223
---- ---- ----
Net Income (Loss)
Available to Common
Shareholders (A) $608 $636 $(277) (11)
-------------------- ---- ---- -----
Common Share
Statistics
Basic EPS: (B)
Income (Loss) From
Continuing Operations $1.79 $1.59 $(0.64)
Loss From Discontinued
Operations $(0.45) $(0.18) $(0.01)
------ ------ ------
Net Income (Loss) $1.34 $1.41 $(0.66)
Diluted EPS: (B)
Income (Loss) From
Continuing Operations $1.78 $1.58 $(0.64)
Loss From Discontinued
Operations $(0.45) $(0.18) $(0.01)
------ ------ ------
Net Income (Loss) $1.33 $1.40 $(0.66)
Dividends Per Common
Share $0.05 $0.05 $0.05
Tangible Book Value
Per Common Share
(period end) ( C ) $24.89 $22.86 $24.95
Stock Price Per Common
Share (period end) $40.30 $41.41 $21.88
Total Market
Capitalization
(period end) $18,228 $18,713 $9,826
Common Shares
Outstanding (period
end) 452.3 451.9 449.1
Shares Used to Compute
Basic EPS 452.1 451.0 421.9
Shares Used to Compute
Diluted EPS 456.4 455.4 421.9
---------------------- ----- ----- -----
Managed Balance Sheet
Statistics (period
average)
Average Loans Held for
Investment $128,203 $134,206 $148,013
Average Earning Assets $174,650 $181,881 $191,208
Total Average Assets $199,329 $207,207 $218,402
Average Interest
Bearing Deposits $104,163 $104,018 $107,033
Total Average Deposits $118,484 $117,530 $119,604
(12),
Average Equity $24,526 $23,681 $27,668 (13)
Return on Average
Assets (ROA) 1.63% 1.39% 0.42%
Return on Average
Equity (ROE) 13.24% 12.16% 3.31%
Return on Average
Tangible Common
Equity (D) 30.97% 29.98% 6.75%
----------------- ----- ----- ----
Managed Balance Sheet
Statistics (period
end)
Loans Held for
Investment $127,140 $130,115 $146,117
Total Assets (E) $197,479 $200,691 $214,178
Interest Bearing
Deposits $103,172 $104,013 $104,121
Total Deposits $117,331 $117,787 $116,725
Tangible Assets(E) (F) $183,468 $186,647 $200,012
Tangible Common Equity
(TCE) (E) (G) $11,259 $10,330 $11,204
Tangible Common Equity
to Tangible Assets
Ratio (E) (H) 6.14% 5.53% 5.60 % (12)
---------------------- ---- ---- ----
Performance Statistics
(Managed) Quarter
over Quarter
Net Interest Income
Growth (5) (4)% 2% 8%
Non-Interest Income
Growth (5) (24)% (12)% 21%
Revenue Growth (5) (9)% (2)% 11%
Net Interest Margin 7.09% 7.10% 6.19%
Revenue Margin 8.94% 9.43% 8.68%
Risk-Adjusted Margin
(I) 5.01% 4.99% 4.31%
Non-Interest Expense
as a % of Average
Loans Held for
Investment 6.24% 5.50% 5.19%
Efficiency Ratio (J) 51.23% 43.06% 45.29%
-------------------- ----- ----- -----
Asset Quality
Statistics (Managed)
(6)
Net Charge-Offs $1,717 $2,018 $2,087
Net Charge-Off Rate 5.36% 6.01% 5.64%
30+ day performing
delinquency rate 3.81% 4.22% 4.10%
------------------ ---- ---- ----
Full-time equivalent
employees (in
thousands) 25.7 25.9 26.6
-------------------- ---- ---- ----
*Prior to the adoption of the new consolidation accounting standards,
management evaluated the Company and each of its lines of business
results on a "managed" basis, which is a non-GAAP measure. With the
adoption of the new consolidation accounting standards, the
Company's
reported results are comparable to the "managed" basis, which reflect
the consolidation of the majority of the Company's credit card
securitization trusts. The accompanying Exhibit "Reconciliation to
GAAP Financial Measures" presents a reconciliation of the Company's
non-
GAAP "managed" results to its GAAP results for periods prior to
January 1, 2010. See the accompanying schedule "Impact of Adopting
New
Accounting Guidance" for additional information on the impact of new
accounting standards.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY NOTES
( 1 ) Includes the impact from the change in fair value of retained interests, including the interest-only strips, which totaled $17.4 million in Q2 2010, $(35.7) million in Q1 2010 and $(114.5) million in Q2 2009.
( 2 ) In accordance with the Company's finance charge and fee revenue recognition policy, amounts billed not included in revenue totaled: $261.2 million in Q2 2010, $354.4 million in Q1 2010 and $571.9 million in Q2 2009.
( 3 ) The Company completed its 2007 restructuring initiative during 2009.
( 4 ) Includes core deposit intangible amortization expense of $50.4 million in Q2 2010, $52.1 million in Q1 2010 and $57.2 million in Q2 2009, and integration costs of $22.4 million in Q2 2010, $16.7 million in Q1 2010 and $8.8 million in Q2 2009.
( 5 ) Prior period amounts have been reclassified to conform with the current period presentation and adjusted to reflect purchase accounting refinements related to the acquisition of Chevy Chase Bank, FSB ("CCB").
( 6 ) The denominator used in calculating the allowance as a % of Loans Held for Investment, Net Charge-off Rate and 30+ Day Performing Delinquency Rate include loans acquired as part of the CCB acquisition. The metrics excluding such loans are as follows.
Q2 2010 Q1 2010 Q2 2009
------- ------- -------
CCB period end acquired loan portfolio (in
millions)(unaudited) $6,381 $6,799 $8,644
CCB average acquired loan portfolio (in
millions)(unaudited) $6,541 $7,037 $8,499
Allowance as a % of loans held for
investment, excluding CCB 5.63% 6.29% 4.86%
Net charge-off rate (GAAP), excluding CCB 5.64% 6.35% 4.65%
Net charge-off rate (Managed), excluding
CCB 5.64% 6.35% 5.98%
30+ day performing delinquency rate (GAAP),
excluding CCB 4.01% 4.46% 4.06%
30+ day performing delinquency rate
(Managed), excluding CCB 4.01% 4.46% 4.36%
( 7 ) During Q2 and Q1 2010, the Company recorded charges of $403.6 million and $224.4 million, respectively, related to representation and warranty matters. A portion of this expense is included in Discontinued Operations and the remainder is included in Non-Interest Income.
( 8 ) During Q1 2010, certain mortgage trusts were deconsolidated based on the sale of interest-only bonds associated with the trusts. The net effect of the deconsolidation resulted in $128 million of income which is included in non-interest income.
( 9 ) In Q2 2009, the Company elected to convert and sell 404,508 shares of MasterCard class B common stock, which resulted in a gain of $65.5 million that is included in non-interest income.
( 10 ) Includes the FDIC Special Assessment of $80.5 million.
( 11 ) Includes the impact from dividends of $38.0 million on preferred shares and from the accretion of $461.7 million of the discount on preferred shares. With the repayment of the preferred shares to the U.S. Treasury as described in note 13 below, the recognition of the remaining accretion was accelerated to Q2 2009 and accounted for as a dividend. Subsequent to this transaction, there is no difference between net income (loss) and net income (loss) available to common shareholders.
( 12 ) Includes the impact of the issuance of 56,000,000 common shares at $27.75 per share on May 14, 2009.
( 13 ) Average equity includes the impact of the Company's participation in the U.S. Treasury's Capital Purchase Program. On June 17, 2009, the Company repurchased from the U.S. Treasury for approximately $3.57 billion all 3,555,199 preferred shares issued in Q4 2008, including accrued dividends. The warrants to purchase common shares were sold by the U.S. Treasury on December 11, 2009 at a price of $11.75 per warrant. The sale by the U.S. Treasury had no impact on the Company's equity. The warrants remain outstanding and are included in paid-in capital on the balance sheet.
STATISTICS / METRIC CALCULATIONS
( A ) Consists of net income (loss) less dividends on preferred shares.
( B ) Calculated based on net income (loss) available to common shareholders.
( C ) Calculated based on tangible common equity divided by common shares outstanding.
( D ) Calculated based on income from continuing operations divided by average tangible common equity, which is a non-GAAP measure. See page 4, Reconciliation To GAAP Financial Measures, for a reconciliation of average equity to average tangible common equity.
( E ) Calculated based on continuing operations, except for Average Equity and Return on Average Equity (ROE), which are based on average stockholders' equity.
( F ) Consists of reported or managed assets less intangible assets and is a non-GAAP measure. See page 4, Reconciliation To GAAP Financial Measures, for a reconciliation of this measure to the reported common equity ratio.
( G ) Consists of stockholders' equity less preferred shares and intangible assets and the related deferred tax liabilities.
( H ) Tangible Common Equity to Tangible Assets Ratio ("TCE Ratio") is a non-GAAP measure. See page 4, Reconciliation To GAAP Financial Measures, for a reconciliation of this measure to the reported common equity ratio.
( I ) Calculated based on total revenue less net charge-offs divided by average earning assets, expressed as a percentage.
( J ) Calculated based on non-interest expense less restructuring expense divided by total revenue.
CAPITAL ONE FINANCIAL CORPORATION
Reconciliation to GAAP Financial Measures
(dollars in millions)(unaudited)
The table below presents a reconciliation of tangible common equity
and tangible assets, which are the components used to reconcile the
non-GAAP tangible
common equity "TCE" ratio to the comparable GAAP measure. The
Company believes the non-GAAP TCE ratio is an important measure for
investors to use
in assessing the Company's capital strength. This measure may not be
comparable to similarly titled measures used by other companies.
2010 2010 2009
Q2 Q1 Q2
--- --- ---
Reconciliation of Average Equity to
Average Tangible Common Equity
Average Equity $24,526 $23,681 $27,668
Less: Preferred Stock - - 41
Less: Average Intangible Assets (1) (14,039) (14,075) (14,129)
Average Tangible Common Equity $10,487 $9,606 $13,580
======= ====== =======
Reconciliation of Period End Equity to
Tangible Common Equity
Stockholders' Equity $25,270 $24,374 $25,332
Less: Preferred Stock - - 38
Less: Intangible Assets (1) (14,011) (14,044) (14,166)
Period End Tangible Common Equity $11,259 $10,330 $11,204
======= ======= =======
Reconciliation of Period End Assets to
Tangible Assets
Total Assets $197,489 $200,707 $171,994
Less: Discontinued Operations Assets (10) (16) (46)
--- --- ---
Total Assets- Continuing Operations 197,479 200,691 171,948
Less: Intangible Assets (1) (14,011) (14,044) (14,166)
Period End Tangible Assets $183,468 $186,647 $157,782
======== ======== ========
TCE ratio (2) 6.14% 5.53% 7.10%
Reconciliation of Period End Assets to
Tangible Assets on a Managed Basis (for
2009) *
Total Assets $197,489 $200,707 $171,994
Securitization Adjustment (3) - - 42,230
--- --- ------
Total Assets on a Managed Basis 197,489 200,707 214,224
Less: Assets-Discontinued Operations (10) (16) (46)
--- --- ---
Total Assets- Continuing Operations 197,479 200,691 214,178
Less: Intangible Assets (1) (14,011) (14,044) (14,166)
Period End Tangible Assets $183,468 $186,647 $200,012
======== ======== ========
TCE ratio (2) 6.14% 5.53% 5.60%
(1) Includes impact from related deferred taxes.
(2) Calculated based on tangible common equity divided by tangible assets.
(3) Adjustments to our GAAP results to reflect loans that have been
securitized and sold as though the loans remained on our
consolidated balance sheet.
* In addition to analyzing the Company's results on a reported basis,
management previously evaluated Capital One's results on a "managed"
basis, which
consisted of non-GAAP financial measures. Capital One's managed
results reflected the Company's reported results, adjusted to
reflect the consolidation of
the majority of the Company's credit securitization trusts. Because
of the January 1, 2010, adoption of the new consolidation accounting
standards, the
Company's consolidated reported results subsequent to January 1, 2010
are comparable to its "managed" results. The accompanying Exhibit
"Reconciliation
to GAAP Financial Measures" presents a reconciliation of the
Company's non-GAAP "managed" results to its GAAP results for
periods prior to January 1,
2010.
Capital One Financial Corporation
Impact of Adopting New Accounting Guidance
Consolidation of VIEs
Opening Ending
Balance VIE Balance
Sheet Consolidation Sheet
(dollars in January 1, December 31,
millions)(unaudited) 2010 Impact 2009
--------------------- ----------- ------ -------------
Assets:
Cash and due
from banks $12,683 $3,998 $8,685
Loans held for
investment 138,184 47,565 90,619
Allowance for
loan and lease
losses (8,391) (4,264) (3) (4,127)
------ ------ ------
Net loans held
for investment 129,793 43,301 86,492
Accounts
receivable from
securitizations 166 (7,463) 7,629
Other assets 68,869 (1) 2,029 66,840
------ ----- ------
Total assets 211,511 41,865 169,646
------- ------ -------
Liabilities:
Securitization
liability 48,300 44,346 3,954
Other
liabilities 139,561 458 139,103
------- --- -------
Total
liabilities 187,861 44,804 143,057
Stockholders'
equity 23,650 (2,939) (3) 26,589
------ ------ ------
Total
liabilities and
stockholders'
equity $211,511 $41,865 $169,646
-------- ------- --------
Allocation of
the Allowance
by Segment
(dollars in
millions) January 1, Consolidation December 31,
(unaudited) 2010 Impact 2009
----------- ----------- -------------- -------------
Domestic credit
card $5,590 $3,663 (3) $1,927
International
credit card 727 528 199
Total credit
card 6,317 4,191 2,126
----- ----- -----
Commercial and
multi-family
real estate 471 - 471
Middle market 131 - 131
Specialty
lending 90 - 90
Total commercial
lending 692 - 692
--- --- ---
Small ticket
commercial real
estate 93 - 93
Total commercial
banking 785 - 785
--- --- ---
Automobile 665 - 665
Mortgage (inc
all new CCB
originations) 248 73 (2) 175
Other retail 236 - 236
Total consumer
banking 1,149 73 1,076
----- --- -----
Other 140 - 140
--- --- ---
Total company $8,391 $4,264 $4,127
------ ------ ------
(1) Included within the "Other assets" line item is a deferred tax
asset of $3.9 billion, of which $1.6 billion related to the January
1, 2010, adoption of the new consolidation accounting standards.
(2) $73 million of the reduction in the allowance for the first
quarter is associated with the deconsolidation of certain mortgage
trusts. This reduction in the allowance is recorded in non-interest
income.
(3) An adjustment for $34 million to retained earnings and the
allowance for loan and lease losses was made in the second quarter
for the impact of impairment on consolidated loans accounted for
troubled debt restructurings. These adjustments are not reflected in
the above table.
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in millions, except per share data)(unaudited)
Three Months Ended Six Months Ended
June March June June June
30, 31, 30, 30, 30,
2010 2010 2009 (1) 2010 2009 (1)
---- ---- ------- ---- -------
Interest Income:
Loans held for
investment, including
past-due fees $3,476 $3,658 $2,237 $7,134 $4,428
Investment securities 342 349 412 691 808
Other 17 23 68 40 131
--- --- --- --- ---
Total interest income 3,835 4,030 2,717 7,865 5,367
Interest Expense:
Deposits 368 399 560 767 1,187
Securitized debt 212 242 74 454 165
Senior and subordinated
notes 72 68 57 140 115
Other borrowings 86 93 81 179 162
--- --- --- --- ---
Total interest expense 738 802 772 1,540 1,629
--- --- --- ----- -----
Net interest income 3,097 3,228 1,945 6,325 3,738
Provision for loan and
lease losses 723 1,478 934 2,201 2,213
--- ----- --- ----- -----
Net interest income
after provision for
loan and lease losses 2,374 1,750 1,011 4,124 1,525
Non-Interest Income:
Servicing and
securitizations 21 (36) 363 (15) 816
Service charges and
other customer-related
fees 496 585 492 1,081 998
Interchange 333 311 126 644 267
Net other-than-
temporary impairment
losses recognized in
earnings(2) (26) (31) (10) (57) (10)
Other (17) 232 261 215 251
--- --- --- --- ---
Total non-interest
income 807 1,061 1,232 1,868 2,322
Non-Interest Expense:
Salaries and associate
benefits 650 646 634 1,296 1,188
Marketing 219 180 134 399 297
Communications and data
processing 164 169 195 333 394
Supplies and equipment 129 124 128 253 247
Occupancy 117 120 115 237 215
Restructuring expense
(3) - - 43 - 61
Other 721 608 673 1,329 1,265
--- --- --- ----- -----
Total non-interest
expense 2,000 1,847 1,922 3,847 3,667
----- ----- ----- ----- -----
Income from continuing
operations before
income taxes 1,181 964 321 2,145 180
Income tax provision 369 244 92 613 34
--- --- --- --- ---
Income from continuing
operations, net of tax 812 720 229 1,532 146
Loss from discontinued
operations, net of tax (204) (84) (6) (288) (31)
Net income $608 $636 $223 $1,244 $115
Preferred stock
dividends - - (500) - (564)
--- --- ---- --- ----
Net income (loss)
available to common
shareholders $608 $636 $(277) $1,244 $(449)
==== ==== ===== ====== =====
Basic earnings per
common share:
Income (loss) from
continuing operations $1.79 $1.59 $(0.64) $3.38 $(1.03)
Loss from discontinued
operations (0.45) (0.18) (0.01) (0.63) (0.07)
Net Income (loss) per
common share $1.34 $1.41 $(0.66) $2.75 $(1.11)
===== ===== ====== ===== ======
Diluted earnings per
common share:
Income (loss) from
continuing operations $1.78 $1.58 $(0.64) $3.36 $(1.03)
Loss from discontinued
operations (0.45) (0.18) (0.01) (0.63) (0.07)
Net Income (loss) per
common share $1.33 $1.40 $(0.66) $2.73 $(1.11)
===== ===== ====== ===== ======
Dividends paid per
common share $0.05 $0.05 $0.05 $0.10 $0.43
===== ===== ===== ===== =====
(1) Certain prior period amounts have been revised to conform to the
current period presentation.
(2) For the three and six months ended June 30, 2010, the Company
recorded other-than-temporary impairment losses of $26.2 million
and $57.4 million, respectively. Additional unrealized losses of
$119.7 million on these securities was recognized in other
comprehensive income as a component of stockholders' equity at June
30, 2010.
(3) The Company completed its 2007 restructuring initiative during 2009.
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in millions)(unaudited)
As of As of As of
December
June 30 31 June 30
2010 2009 (1) 2009 (1)
---- ------- -------
Assets:
Cash and due from banks $2,668 $3,100 $2,432
Federal funds sold and repurchase
agreements 384 542 604
Interest-bearing deposits at other banks 2,147 5,043 1,166
----- ----- -----
Cash and cash equivalents 5,199 8,685 4,202
Restricted cash for securitization
investors 3,446 501 570
Securities available for sale 39,424 38,830 37,667
Securities held to maturity - 80 88
Loans held for sale 249 268 320
Loans held for investment 71,491 75,097 81,838
Restricted loans for securitization
investors 55,649 15,522 19,102
Less: Allowance for loan and lease
losses (6,799) (4,127) (4,482)
------ ------ ------
Net loans held for investment 120,341 86,492 96,458
Accounts receivable from securitizations 206 7,128 5,220
Premises and equipment, net 2,730 2,736 2,827
Interest receivable 1,077 936 951
Goodwill 13,588 13,596 13,568
Other 11,229 10,394 10,123
------ ------ ------
Total assets $197,489 $169,646 $171,994
======== ======== ========
Liabilities:
Non-interest-bearing deposits $14,159 $13,439 $12,604
Interest-bearing deposits 103,172 102,370 104,121
Senior and subordinated notes 9,424 9,045 10,092
Other borrowings 5,585 8,015 7,990
Securitized debt obligations 33,009 3,954 5,270
Interest payable 543 509 660
Other 6,327 5,725 5,925
----- ----- -----
Total liabilities 172,219 143,057 146,662
Stockholders' Equity:
Preferred stock - - -
Common stock 5 5 5
Paid-in capital, net 19,029 18,955 18,891
Retained earnings and accumulated other
comprehensive income 9,436 10,809 9,605
Less: Treasury stock, at cost (3,200) (3,180) (3,169)
------ ------ ------
Total stockholders' equity 25,270 26,589 25,332
------ ------ ------
Total liabilities and stockholders'
equity $197,489 $169,646 $171,994
======== ======== ========
(1) Certain prior period amounts have been revised to conform to the
current period presentation.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates (1)
(dollars in millions)(unaudited)
Quarter Ended 06/30/10
----------------------
GAAP Basis Average Income/ Yield/
Balance Expense Rate
------- ------- ----
Interest-earning assets:
Loans held for investment $128,203 $3,476 10.85%
Investment securities (2) 39,022 342 3.51%
Other 7,425 17 0.92%
----- --- ----
Total interest-earning assets $174,650 $3,835 8.78%
======== ====== ====
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $11,601 $10 0.34%
Money market deposit accounts 42,127 99 0.94%
Savings accounts 21,017 44 0.84%
Other consumer time deposits 20,744 150 2.89%
Public fund CD's of $100,000 or
more 240 1 1.67%
CD's of $100,000 or more 7,601 63 3.32%
Foreign time deposits 833 1 0.48%
--- --- ----
Total interest-bearing deposits $104,163 $368 1.41%
Senior and subordinated notes 8,760 72 3.29%
Other borrowings 6,375 86 5.40%
Securitization liability 35,248 212 2.41%
------ --- ----
Total interest-bearing
liabilities $154,546 $738 1.91%
======== ==== ====
Net interest spread 6.87%
====
Interest income to average
interest-earning assets 8.78%
Interest expense to average
interest-earning assets 1.69%
Net interest margin 7.09%
====
Managed Basis *
Interest-earning assets:
Loans held for investment $128,203 $3,476 10.85%
Investment securities (2) $39,022 $342 3.51%
Other $7,425 $17 0.92%
------ --- ----
Total interest-earning assets $174,650 $3,835 8.78%
======== ====== ====
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $11,601 $10 0.34%
Money market deposit accounts $42,127 $99 0.94%
Savings accounts $21,017 $44 0.84%
Other consumer time deposits $20,744 $150 2.89%
Public fund CD's of $100,000 or
more $240 $1 1.67%
CD's of $100,000 or more $7,601 $63 3.32%
Foreign time deposits $833 $1 0.48%
---- --- ----
Total interest-bearing deposits $104,163 $368 1.41%
Senior and subordinated notes $8,760 72 3.29%
Other borrowings $6,375 86 5.40%
Securitization liability $35,248 212 2.41%
------- --- ----
Total interest-bearing
liabilities $154,546 $738 1.91%
======== ==== ====
Net interest spread 6.87%
====
Interest income to average
interest-earning assets 8.78%
Interest expense to average
interest-earning assets 1.69%
Net interest margin 7.09%
====
Quarter Ended 3/31/10
---------------------
GAAP Basis Average Income/ Yield/
Balance Expense Rate
------- ------- ----
Interest-earning assets:
Loans held for investment $134,206 $3,658 10.90%
Investment securities (2) 38,087 349 3.67%
Other 9,588 23 0.96%
----- --- ----
Total interest-earning assets $181,881 $4,030 8.86%
======== ====== ====
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $12,276 $16 0.52%
Money market deposit accounts 39,364 96 0.98%
Savings accounts 18,627 41 0.88%
Other consumer time deposits 24,253 174 2.87%
Public fund CD's of $100,000 or
more 400 2 2.00%
CD's of $100,000 or more 8,180 68 3.33%
Foreign time deposits 918 2 0.87%
--- --- ----
Total interest-bearing deposits $104,018 $399 1.53%
Senior and subordinated notes 8,757 68 3.11%
Other borrowings 7,431 93 5.01%
Securitization liability 43,764 242 2.21%
------ --- ----
Total interest-bearing
liabilities $163,970 $802 1.96%
======== ==== ====
Net interest spread 6.90%
====
Interest income to average
interest-earning assets 8.86%
Interest expense to average
interest-earning assets 1.76%
Net interest margin 7.10%
====
Managed Basis *
Interest-earning assets:
Loans held for investment $134,206 $3,658 10.90%
Investment securities (2) 38,087 349 3.67%
Other 9,588 23 0.96%
----- --- ----
Total interest-earning assets $181,881 $4,030 8.86%
======== ====== ====
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $12,276 $16 0.52%
Money market deposit accounts 39,364 96 0.98%
Savings accounts 18,627 41 0.88%
Other consumer time deposits 24,253 174 2.87%
Public fund CD's of $100,000 or
more 400 2 2.00%
CD's of $100,000 or more 8,180 68 3.33%
Foreign time deposits 918 2 0.87%
--- --- ----
Total interest-bearing deposits $104,018 $399 1.53%
Senior and subordinated notes 8,757 68 3.11%
Other borrowings 7,431 93 5.01%
Securitization liability 43,764 242 2.21%
------ --- ----
Total interest-bearing
liabilities $163,970 $802 1.96%
======== ==== ====
Net interest spread 6.90%
====
Interest income to average
interest-earning assets 8.86%
Interest expense to average
interest-earning assets 1.76%
Net interest margin 7.10%
====
Quarter Ended 06/30/09
(3)
-----------------------
GAAP Basis Average Income/ Yield/
Balance Expense Rate
------- ------- ----
Interest-earning assets:
Loans held for investment $104,682 $2,237 8.55%
Investment securities (2) 37,499 412 4.39%
Other 8,623 68 3.15%
----- --- ----
Total interest-earning assets $150,804 $2,717 7.21%
======== ====== ====
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $10,915 $15 0.55%
Money market deposit accounts 35,751 104 1.16%
Savings accounts 9,931 13 0.52%
Other consumer time deposits 35,834 305 3.40%
Public fund CD's of $100,000 or
more 1,117 3 1.07%
CD's of $100,000 or more 11,098 108 3.89%
Foreign time deposits 2,387 12 2.01%
----- --- ----
Total interest-bearing deposits $107,033 $560 2.09%
Senior and subordinated notes 8,323 57 2.74%
Other borrowings 10,399 81 3.12%
Securitization liability 5,876 74 5.04%
----- --- ----
Total interest-bearing
liabilities $131,631 $772 2.35%
======== ==== ====
Net interest spread 4.86%
====
Interest income to average
interest-earning assets 7.21%
Interest expense to average
interest-earning assets 2.05%
Net interest margin 5.16%
====
Managed Basis *
Interest-earning assets:
Loans held for investment $148,013 $3,568 9.64%
Investment securities (2) 37,499 412 4.39%
Other 5,696 17 1.19%
----- --- ----
Total interest-earning assets $191,208 $3,997 8.36%
======== ====== ====
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $10,915 $15 0.55%
Money market deposit accounts 35,751 104 1.16%
Savings accounts 9,931 13 0.52%
Other consumer time deposits 35,834 305 3.40%
Public fund CD's of $100,000 or
more 1,117 3 1.07%
CD's of $100,000 or more 11,098 108 3.89%
Foreign time deposits 2,387 12 2.01%
----- --- ----
Total interest-bearing deposits $107,033 $560 2.09%
Senior and subordinated notes 8,323 57 2.74%
Other borrowings 10,399 81 3.12%
Securitization liability 46,682 342 2.93%
------ --- ----
Total interest-bearing
liabilities $172,437 $1,040 2.41%
======== ====== ====
Net interest spread 5.95%
====
Interest income to average
interest-earning assets 8.36%
Interest expense to average
interest-earning assets 2.17%
Net interest margin 6.19%
====
(1) Reflects amounts based on continuing operations.
(2) Consists of available-for-sale and held-to-maturity securities.
(3) Certain prior period amounts have been revised to conform to the
current period presentation.
* Prior to the adoption of the new consolidation accounting
standards, management evaluated the Company and each of its lines of
business results on a "managed" basis. With
the adoption of the new consolidation accounting standards, the
Company's reported results are comparable to the "managed" basis
which now reflect the consolidation of the
majority of the Company's credit card securitization trusts. The
accompanying Exhibit "Reconciliation to GAAP Financial Measures"
presents a reconciliation of the Company's
non-GAAP "managed" results to its reported results for periods prior
to January 1, 2010.
CAPITAL ONE FINANCIAL CORPORATION (COF)
LENDING INFORMATION AND STATISTICS
MANAGED BASIS (1)
2010 2010 2009
(Dollars in millions)
(unaudited) Q2 Q1 Q2
--------------------- --- --- ---
Period end loans held for
investment
Domestic credit card $54,628 $56,228 $64,760
International credit card 7,269 7,578 8,639
Total Credit Card $61,897 $63,806 $73,399
------- ------- -------
Commercial and multifamily
real estate $13,580 $13,618 $14,225
Middle market 10,203 10,310 10,219
Specialty lending 3,815 3,619 3,228
----- ----- -----
Total Commercial Lending $27,598 $27,547 $27,672
Small-ticket commercial
real estate 1,977 2,065 2,503
----- ----- -----
Total Commercial Banking $29,575 $29,612 $30,175
------- ------- -------
Automobile $17,221 $17,446 $19,902
Mortgages 13,322 13,967 16,579
Retail banking 4,770 4,970 5,367
Total Consumer Banking $35,313 $36,383 $41,848
------- ------- -------
Other loans (2) $470 $464 $695
---- ---- ----
Total $127,255 $130,265 $146,117
======== ======== ========
Average loans held for
investment
Domestic credit card $55,252 $58,108 $65,862
International credit card 7,427 7,814 8,328
Total Credit Card $62,679 $65,922 $74,190
------- ------- -------
Commercial and multifamily
real estate $13,543 $13,716 $14,122
Middle market 10,276 10,324 10,429
Specialty lending 3,654 3,609 3,472
----- ----- -----
Total Commercial Lending $27,473 $27,649 $28,023
Small-ticket commercial
real estate 2,060 2,074 2,542
----- ----- -----
Total Commercial Banking $29,533 $29,723 $30,565
------- ------- -------
Automobile $17,276 $17,769 $20,303
Mortgages 13,573 15,434 16,707
Retail banking 4,811 5,042 5,712
Total Consumer Banking $35,660 $38,245 $42,722
------- ------- -------
Other loans (2) $464 $489 $536
---- ---- ----
Total $128,336 $134,379 $148,013
======== ======== ========
Net charge-off rates
Domestic credit card 9.49% 10.48% 9.23%
International credit card 8.38% 8.83% 9.32%
Total Credit Card 9.36% 10.29% 9.24%
---- ----- ----
Commercial and multifamily
real estate (3) 1.17% 1.45% 0.92%
Middle market (3) 0.78% 0.82% 0.58%
Specialty lending 0.87% 0.90% 0.99%
---- ---- ----
Total Commercial Lending
(3) 0.98% 1.14% 0.80%
Small-ticket commercial
real estate 4.21% 4.43% 1.86%
---- ---- ----
Total Commercial Banking
(3) 1.21% 1.37% 0.89%
---- ---- ----
Automobile 2.09% 2.97% 3.65%
Mortgages (3) 0.46% 0.94% 0.43%
Retail banking (3) 2.11% 2.11% 2.42%
Total Consumer Banking (3) 1.47% 2.03% 2.23%
---- ---- ----
Other loans 27.95% 18.82% 37.00%
----- ----- -----
Total 5.36% 6.02% 5.64%
==== ==== ====
30+ day performing
delinquency rate
Domestic credit card 4.79% 5.30% 4.77%
International credit card 6.03% 6.39% 6.69%
Total Credit Card 4.94% 5.43% 4.99%
---- ---- ----
Automobile 7.74% 7.58% 8.89%
Mortgages (3) 0.68% 0.93% 0.97%
Retail banking (3) 0.87% 1.02% 0.91%
Total Consumer Banking (3) 4.15% 4.13% 4.73%
==== ==== ====
Nonperforming asset rates
(5) (6)
Commercial and multifamily
real estate (3) 2.82% 3.65% 2.15%
Middle market (3) 1.20% 1.15% 1.15%
Specialty lending 1.94% 2.18% 2.11%
---- ---- ----
Total Commercial Lending
(3) 2.10% 2.52% 1.78%
Small-ticket commercial
real estate 3.57% 4.18% 10.08%
---- ---- -----
Total Commercial Banking
(3) 2.20% 2.64% 2.47%
---- ---- ----
Automobile (4) 0.56% 0.55% 0.78%
Mortgages (3) 3.78% 3.17% 1.51%
Retail banking (3) 2.25% 2.07% 1.88%
Total Consumer Banking (3) 2.00% 1.76% 1.21%
==== ==== ====
CAPITAL ONE FINANCIAL CORPORATION (COF)
CREDIT CARD SEGMENT FINANCIAL & STATISTICAL SUMMARY FOR CONTINUING
OPERATIONS
MANAGED BASIS (1)
2010 2010 2009
(Dollars in millions) (unaudited) Q2 Q1 Q2
--------------------------------- --- --- ---
Credit Card:
------------
Earnings
Interest income $2,232 $2,453 $2,283
Interest expense 255 340 486
--- --- ---
Net interest income $1,977 $2,113 $1,797
Non-interest income 659 718 898
--- --- ---
Total revenue $2,636 $2,831 $2,695
Provision for loan and lease losses 765 1,175 1,520
Non-interest expense 1,002 914 910
----- --- ---
Income before taxes 869 742 265
Income tax provision 301 253 92
--- --- ---
Net income $568 $489 $173
==== ==== ====
Selected Metrics
Period end loans held for investment $61,897 $63,806 $73,399
Average loans held for investment $62,679 $65,922 $74,190
Loans held for investment yield 14.24% 14.88% 12.31%
Revenue margin 16.82% 17.18% 14.53%
Net charge-off rate 9.36% 10.29% 9.24%
30+ day performing delinquency rate 4.94% 5.43% 4.99%
Purchase volume (7) $26,570 $23,924 $25,747
Domestic Card Sub-segment
Earnings
Net interest income $1,735 $1,865 $1,586
Non-interest income 560 618 795
--- --- ---
Total revenue $2,295 $2,483 $2,381
Provision for loan and lease losses 675 1,096 1,336
Non-interest expense 869 809 788
--- --- ---
Income before taxes 751 578 257
Income tax provision 268 206 90
--- --- ---
Net income $483 $372 $167
==== ==== ====
Selected Metrics
Period end loans held for investment $54,628 $56,228 $64,760
Average loans held for investment $55,252 $58,108 $65,862
Loans held for investment yield 13.98% 14.78% 12.17%
Revenue margin 16.61% 17.09% 14.46%
Net charge-off rate 9.49% 10.48% 9.23%
30+ day performing delinquency rate 4.79% 5.30% 4.77%
Purchase volume (7) $24,513 $21,988 $23,611
International Card Sub-segment
Earnings
Net interest income $242 $248 $211
Non-interest income 99 100 103
--- --- ---
Total revenue $341 $348 $314
Provision for loan and lease losses 90 79 184
Non-interest expense 133 105 122
--- --- ---
Income before taxes 118 164 8
Income tax provision 33 47 2
--- --- ---
Net income $85 $117 $6
=== ==== ===
Selected Metrics
Period end loans held for investment $7,269 $7,578 $8,639
Average loans held for investment $7,427 $7,814 $8,328
Loans held for investment yield 16.21% 15.66% 13.40%
Revenue margin 18.37% 17.81% 15.08%
Net charge-off rate 8.38% 8.83% 9.32%
30+ day performing delinquency rate 6.03% 6.39% 6.69%
Purchase volume (7) $2,057 $1,936 $2,136
CAPITAL ONE FINANCIAL CORPORATION (COF)
COMMERCIAL BANKING SEGMENT FINANCIAL & STATISTICAL SUMMARY FOR
CONTINUING OPERATIONS
MANAGED BASIS (1)
2010 2010 2009
(Dollars in millions) (unaudited) Q2 Q1 Q2
--------------------------------- --- --- ---
Commercial Banking:
-------------------
Earnings
Net interest income $319 $312 $279
Non-interest income 60 42 49
--- --- ---
Total revenue $379 $354 $328
Provision for loan and lease losses 62 238 122
Non-interest expense 198 192 156
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Income (loss) before taxes 119 (76) 50
Income tax provision (benefit) 42 (27) 17
--- --- ---
Net income (loss) $77 $(49) $33
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Selected Metrics
Period end loans held for investment $29,575 $29,612 $30,175
Average loans held for investment $29,533 $29,723 $30,565
Loans held for investment yield 4.94% 5.03% 5.01%
Period end deposits $21,527 $21,605 $16,897
Average deposits $22,171 $21,859 $17,021
Deposit interest expense rate 0.67% 0.72% 0.77%
Core deposit intangible amortization $14 $14 $10
Net charge-off rate (3) 1.21% 1.37% 0.89%
Nonperforming loans as a percentage of loans
held for investment (3) 2.04% 2.48% 2.33%
Nonperforming asset rate (3) 2.20% 2.64% 2.47%
CAPITAL ONE FINANCIAL CORPORATION (COF)
CONSUMER BANKING SEGMENT FINANCIAL & STATISTICAL SUMMARY FOR
CONTINUING OPERATIONS
MANAGED BASIS (1)
2010 2010 2009
(Dollars in millions) (unaudited) Q2 Q1 Q2
--------------------------------- --- --- ---
Consumer Banking:
-----------------
Earnings
Net interest income $935 $896 $826
Non-interest income 162 316 226
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Total revenue $1,097 $1,212 $1,052
Provision for loan and lease losses (112) 50 202
Non-interest expenses 735 688 725
--- --- ---
Income (loss) before taxes 474 474 125
Income tax provision (benefit) 169 169 44
--- --- ---
Net income (loss) $305 $305 $81
==== ==== ===
Selected Metrics
Period end loans held for investment $35,313 $36,383 $41,848
Average loans held for investment $35,660 $38,245 $42,722
Loans held for investment yield 8.99% 8.96% 8.69%
Auto loan originations 1,765 1,343 1,342
Period end deposits $77,407 $76,883 $73,883
Average deposits $77,082 $75,115 $74,321
Deposit interest expense rate 1.18% 1.27% 1.76%
Core deposit intangible amortization $36 $38 $47
Net charge-off rate (3) 1.47% 2.03% 2.23%
Nonperforming loans as a percentage of
loans held 1.82% 1.62% 1.08%
for investment (3) (4)
Nonperforming asset rate (3) (4) 2.00% 1.76% 1.21%
30+ day performing delinquency rate (3)
(4) 4.15% 4.13% 4.73%
Period end loans serviced for others $23,730 $26,778 $31,492
CAPITAL ONE FINANCIAL CORPORATION (COF)
OTHER AND TOTAL SEGMENT FINANCIAL & STATISTICAL SUMMARY FOR
CONTINUING OPERATIONS
MANAGED BASIS (1)
2010 2010 2009
(Dollars in millions) (unaudited) Q2 Q1 Q2
--------------------------------- --- --- ---
Other:
------
Earnings
Net interest income (expense) $(132) $(91) $55
Non-interest income (expense) (74) (14) 17
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Total revenue $(206) $(105) $72
Provision for loan and lease losses 10 18 60
Restructuring expenses (8) - - 43
Non-interest expense 65 53 88
--- --- ---
Income (loss) before taxes (281) (176) (119)
Income tax benefit (143) (151) (61)
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Net income (loss) $(138) $(25) $(58)
===== ==== ====
Selected Metrics
Period end loans held for investment
(2) $470 $464 $695
Average loans held for investment
(2) $464 $489 $536
Period end deposits $18,397 $19,299 $25,945
Average deposits $19,231 $20,556 $28,262
Total:
------
Earnings
Net interest income $3,099 $3,230 $2,957
Non-interest income 807 1,062 1,190
--- ----- -----
Total revenue $3,906 $4,292 $4,147
Provision for loan and lease losses 725 1,481 1,904
Restructuring expenses (8) - - 43
Non-interest expense 2,000 1,847 1,879
----- ----- -----
Income before taxes 1,181 964 321
Income tax provision 369 244 92
--- ---
Net income $812 $720 $229
==== ==== ====
Selected Metrics
Period end loans held for investment $127,255 $130,265 $146,117
Average loans held for investment $128,336 $134,379 $148,013
Period end deposits $117,331 $117,787 $116,725
Average deposits $118,484 $117,530 $119,604
CAPITAL ONE FINANCIAL CORPORATION (COF)
LOAN DISCLOSURES AND SEGMENT
FINANCIAL & STATISTICAL SUMMARY FOR CONTINUING OPERATIONS NOTES
( 1 ) Prior to the adoption of the new consolidation accounting standards, management evaluated the Company and each of its lines of business results on a "managed" basis, which is a non-GAAP measure. With the adoption of the new consolidation accounting standards, the Company's reported results are comparable to the "managed" basis, which now reflect the consolidation of the majority of the Company's credit card securitization trusts. However, the Company's total segment results differs from its reported consolidated results because our segment results include the loans underlying one of our securitization trusts that remains unconsolidated. The outstanding balance of the loans in this off-balance sheet trust are reflected in our segment results as $114.8 million as of June 30, 2010. The accompanying Exhibit "Reconciliation to GAAP Financial Measures" presents a reconciliation of the Company's non-GAAP "managed" results to its GAAP results for periods prior to January 1, 2010.
( 2 ) Other loans held for investment includes unamortized premiums and discounts on loans acquired as part of North Fork and Hibernia acquisitions.
( 3 ) The denominator used in calculating the allowance as a % of Loans Held for Investment, Net Charge-off Rate and 30+ Day Performing Delinquency Rate include loans acquired as part of the Chevy Chase Bank, FSB ("CCB") acquisition. The metrics excluding such loans are as follows.
Q2 2010 Q1 2010 Q2 2009
------- ------- -------
CCB period end acquired loan portfolio (in
millions)(unaudited) $6,381 $6,799 $8,644
CCB average acquired loan portfolio (in
millions)(unaudited) $6,541 $7,037 $8,499
Net charge-off rate
Commercial and Multifamily Real Estate 1.19% 1.48% 0.95%
Middle Market 0.82% 0.87% 0.61%
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Total Commercial Lending 1.01% 1.48% 0.83%
---- ---- ----
Total Commercial Banking 1.24% 1.41% 0.92%
Mortgage 0.77% 1.02% 0.77%
Retail Banking 2.23% 2.22% 2.56%
---- ---- ----
Total Consumer Banking 1.76% 2.28% 2.72%
30+ day performing delinquency rate
Mortgage 1.14% 1.58% 1.76%
Retail Banking 0.91% 1.07% 0.96%
---- ---- ----
Total Consumer Banking 4.93% 4.95% 5.61%
Nonperforming asset rate
Commercial and Multifamily Real Estate 2.90% 3.71% 2.25%
Middle Market 1.25% 1.23% 1.21%
---- ---- ----
Total Commercial Lending 2.16% 2.60% 1.85%
---- ---- ----
Total Commercial Banking 2.26% 2.72% 2.54%
Mortgage 6.30% 5.36% 2.73%
Retail Banking 2.37% 2.17% 1.88%
---- ---- ----
Total Consumer Banking 2.38% 2.11% 1.47%
Nonperforming loans as a percentage of loans
held for investment
Commercial Banking 2.09% 2.55% 2.41%
Consumer Banking 2.16% 1.93% 1.32%
( 4 ) Includes nonaccrual consumer auto loans 90+ days past due.
( 5 ) Nonperforming assets consist of nonperforming loans and real estate owned ("REO") and foreclosed assets. The nonperforming asset ratios are calculated based on nonperforming assets for each segment divided by the combined total of loans held for investment, REO and foreclosed assets for the segment.
( 6 ) The Company's policy is not to classify delinquent credit card loans as nonperforming as permitted by regulatory guidance. Instead, we continue to accrue finance charges and fees on credit card loans until the loan is charged off, typically when the account becomes 180 days past due. Billed finance charges and fees considered uncollectible are not recognized in income.
( 7 ) Includes all purchase transactions net of returns. Excludes cash advance transactions.
( 8 ) The Company completed its 2007 restructuring initiative during 2009.
SOURCE: Capital One Financial Corporation