Capital One Reports Second Quarter Earnings
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Affirms EPS Guidance for 2006; Banking Integration Remains on Track
MCLEAN, Va., July 20 /PRNewswire-FirstCall/ -- Capital One Financial Corporation (NYSE: COF) today announced that its earnings for the second quarter of 2006 were $552.6 million, or $1.78 per share (diluted), compared with $531.1 million, or $2.03 per share (diluted), for the second quarter of 2005, and $883.3 million, or $2.86 per share (diluted), for the first quarter of 2006.
"Our businesses continued to post strong results in terms of loan growth and profitability in the second quarter, and credit performed well in all of our businesses with exception of the UK, which continued to operate in a challenging credit environment," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "We're pleased with the solid results delivered by our banking segment and with the substantial progress on our integration. With the addition of North Fork, expected in the fourth quarter, we will have multiple growth platforms that will further enhance our ability to deliver long-term shareholder value."
The managed charge-off rate for the company decreased to 2.75 percent in the second quarter of 2006 from 4.10 percent in the second quarter of 2005 and rose modestly from 2.65 percent in the previous quarter. The company increased its allowance for loan losses by $90.0 million in the second quarter of 2006, driven largely by higher loan balances in the quarter and continued credit quality deterioration in the U.K. The managed delinquency rate (30+ days) decreased to 3.05 percent as of June 30, 2006 from 3.49 percent as of the end of June 30, 2005 and increased from 2.92 percent as of March 31, 2006.
As a result of the worsening credit environment in the UK, the company built incremental reserves of $42.9 million and took a write down of $36.4 million in expected servicing income from its UK securitizations. Together these UK-related actions impacted the company's second quarter earnings per share by approximately 16 cents.
Managed loans at June 30, 2006 were $108.4 billion, up $25.5 billion, or 31 percent, from June 30, 2005. This includes organic growth as well as $16.3 billion of loans acquired with the acquisition of Hibernia in November 2005. Managed loans increased $4.5 billion, or four percent, from the previous quarter driven primarily by growth in our North American businesses. The company expects that managed loans will grow at a rate of between seven and nine percent during 2006, excluding the loan growth that will come with the acquisition of North Fork.
Second quarter marketing expenses increased $79.7 million to $356.7 million from $277.0 million in the second quarter of 2005, and increased $32.9 million from the first quarter of 2006 expense of $323.8 million. Annualized operating expenses as a percentage of average managed loans decreased to 4.99 percent in the second quarter of 2006 from 5.13 percent in the second quarter of 2005 but increased from 4.78 percent in the previous quarter. Excluding the impact of the North Fork transaction, operating expenses in the second half of 2006 are expected to be approximately $200 million higher than in the first half of the year, as the company continues to make important business infrastructure investments to include the upgrade of its card holder systems and the cost associated with the opening of new bank branches.
"We are affirming our earnings guidance of between $7.40 and $7.80 per share (diluted) for 2006, taking into account earnings to date and including the expected close of the North Fork acquisition early in the fourth quarter," said Gary L. Perlin, Capital One's Chief Financial Officer. "While we are affirming this guidance based on current market conditions, market conditions on the day of close and the resultant impact on purchase accounting adjustments, in addition to the timing of the close, create significant uncertainty about the impact that North Fork will have on our reported results."
Capital One's managed revenue margin decreased to 10.77 percent in the second quarter of 2006 from 12.65 percent in the second quarter of 2005, primarily due to the addition of Hibernia's loan portfolio. The company's managed revenue margin was 11.30 percent in the first quarter of 2006. The company continues to expect stability in its annual return on managed assets, as lower revenue margins on higher credit quality loans are offset by reductions in provision and also by reductions in operating and marketing expenses as a percent of assets. The expectation for reported return on assets in 2006 is subject to uncertainties from the timing and accounting impacts of the North Fork transaction.
Segment results
The US Card segment's net income in the second quarter of 2006 was $421.8 million, compared with $432.4 million in the second quarter of 2005, and $602.8 million in the first quarter of 2006. Overall performance in the segment was driven principally by strong credit and solid loan growth. The business experienced compression in net interest margin due to a decline in past due fees which accompanied strong credit performance. Managed loans at June 30, 2006 were $48.7 billion, up $2.3 billion, or 5.0 percent, from June 30, 2005, and up $1.6 billion, or 3.4 percent from the prior quarter. The managed charge-off rate decreased to 3.29 percent in the second quarter of 2006 from 4.90 percent in the second quarter of 2005 but increased from 2.93 percent in the previous quarter. We expect credit card charge-offs to begin to return to more normal levels late in the year as the effects of the bankruptcy filing spike dissipate.
Results in the Auto Finance segment this quarter reflect continued growth in originations and strong credit. Net income in the second quarter of 2006 was $95.1 million, compared with $96.1 million in the second quarter of 2005, and $69.4 million in the first quarter of 2006. Auto loan originations during the quarter were $3.1 billion, up $473.6 million, or 18.0 percent, from the prior year's second quarter, and up $166.9 million, or 5.7 percent from the first quarter 2006. The managed charge-off rate decreased to 1.54 percent in the second quarter of 2006 from 1.74 percent in the second quarter of 2005 and 2.35 percent in the previous quarter.
Results in the Global Financial Services segment reflect strong performance in its North American businesses offset by continuing challenges in the UK. Net income in the second quarter of 2006 was $51.2 million, compared with $26.7 million in the second quarter of 2005, and $113.5 million in the first quarter of 2006. Managed loans at June 30, 2006 were $25.9 billion, up $3.9 billion, or 17.6 percent, from the prior year's second quarter, and up $2.2 billion, or nine percent from the first quarter of 2006. The managed charge-off rate increased to 3.90 percent in the second quarter of 2006 from 3.89 percent in the second quarter of 2005 and from 3.63 percent in the previous quarter.
The Banking segment delivered solid results, with net income in the second quarter of 2006 of $43.3 million. Total deposits at the end of the quarter were $35.3 billion, down slightly from $35.4 billion at the end of the first quarter of 2006. The company opened seven new branches in the quarter and remains on track to open 40 new branches in 2006. Integration progressed smoothly during the quarter, and the company continues to expect integration costs and synergies to be greater than original estimates.
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 on its Form 8-K dated July 20, 2006 for second quarter earnings, return on assets, loan growth rates, operating costs, charge-off rates, branch growth, integration costs and synergies, and the benefits of the business combination transaction involving Capital One and North Fork, including future financial and operating results, and the company's plans, objectives, expectations and intentions are forward- looking statements and actual results could differ materially from current expectations due to a number of factors, including: the ability to obtain regulatory approvals of the proposed acquisition of North Fork on the proposed terms and schedule; the failure of Capital One or North Fork stockholders to approve the transaction; the exact timing of the close of the North Fork transaction and the magnitude of market-driven purchase accounting adjustments related to the close; the risk that the company's acquired businesses will not be integrated successfully and that the cost savings and other synergies from such acquisitions may not be fully realized; continued intense competition from numerous providers of products and services which compete with Capital One's businesses; changes in our aggregate accounts and balances, and the growth rate and composition thereof; the success of the company's marketing efforts; general economic conditions affecting interest rates and consumer income, spending, and savings which may affect consumer bankruptcies, defaults, and charge-offs and deposit activity; the long-term impact of the Gulf Coast hurricanes on the impacted regions, including the amount of property and credit losses, the amount of investment, and the pace and magnitude of economic recovery in the region. A discussion of these and other factors can be found in Capital One's annual report and other reports filed with the Securities and Exchange Commission, including, but not limited to, Capital One's report on Form 10-K for the fiscal year ended December 31, 2005.
Additional Information About the Capital One - North Fork Transaction
In connection with the proposed merger of Capital One and North Fork Bancorporation, Inc., Capital One filed with the Securities and Exchange Commission (the "SEC") a Registration Statement on Form S-4 that included a joint proxy statement of Capital One and North Fork that also constitutes a prospectus of Capital One. Capital One and North Fork mailed the definitive joint proxy statement/prospectus to their respective stockholders on or about July 14, 2006. Investors and security holders are urged to read the definitive joint proxy statement/prospectus regarding the proposed merger because it contains important information. You may obtain a free copy of the definitive joint proxy statement/prospectus and other related documents filed by Capital One and North Fork with the SEC at the SEC's website at http://www.sec.gov. The definitive joint proxy statement/prospectus and the other documents may also be obtained for free by accessing Capital One's website at http://www.capitalone.com under the heading "Investors" and then under the heading "SEC & Regulatory Filings" or by accessing North Fork's website at http://www.northforkbank.com under the tab "Investor Relations" and then under the heading "SEC Filings."
Participants in the Capital One - North Fork Transaction
Capital One, North Fork and their respective directors, executive officers and certain other members of management and employees may be soliciting proxies from stockholders in favor of the merger. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the stockholders in connection with the proposed merger will be set forth in the joint proxy statement/prospectus when it is filed with the SEC. You can find information about Capital One's executive officers and directors in Capital One's definitive proxy statement filed with the SEC on March 23, 2006. You can find information about North Fork's executive officers and directors in their Form 10-K/A filed with the SEC on April 28, 2006. You can obtain free copies of these documents from the Capital One or North Fork using the contact information above.
About Capital One
Headquartered in McLean, Virginia, Capital One Financial Corporation (http://www.capitalone.com) is a financial holding company, with more than 324 locations in Texas and Louisiana. Its principal subsidiaries, Capital One Bank, Capital One, F.S.B., Capital One Auto Finance, Inc., and Capital One, N.A., offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One's subsidiaries collectively had $47.2 billion in deposits and $108.4 billion in managed loans outstanding as of June 30, 2006. Capital One, a Fortune 500 company, trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 500 index.
NOTE: Second quarter 2006 financial results, SEC Filings, and second quarter earnings conference call slides are accessible on Capital One's home page (http://www.capitalone.com). Choose "Investors" on the bottom of the home page to view and download the earnings press release, slides, and other financial information. Additionally, a webcast of today's 5:00 pm (ET) earnings conference call is accessible through the same link.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY REPORTED BASIS
2006 2006 2005
(in millions, except per share
data and as noted) Q2 Q1 Q2
Earnings (Reported Basis)
Net Interest Income $ 1,197.1 $ 1,206.9 $ 872.5
Non-Interest Income 1,709.9 (3) 1,858.3 1,582.0
Total Revenue(5) 2,907.0 3,065.2 (4) 2,454.5
Provision for Loan Losses 362.4 170.3 (4) 291.6
Marketing Expenses 356.7 323.8 277.0
Operating Expenses 1,324.2 1,249.7 1,058.6
Income Before Taxes 863.7 1,321.4 827.3
Tax Rate 36.0 % 33.2 % 35.8 %
Net Income $ 552.6 $ 883.3 $ 531.1
Common Share Statistics
Basic EPS $ 1.84 $ 2.95 $ 2.10
Diluted EPS $ 1.78 $ 2.86 $ 2.03
Dividends Per Share $ 0.03 $ 0.03 $ 0.03
Book Value Per Share (period end) $ 52.31 $ 50.06 $ 39.51
Stock Price Per Share (period end) $ 85.45 $ 80.52 $ 80.01
Total Market Capitalization
(period end) $25,968.3 $24,397.6 $21,082.6
Shares Outstanding (period end) 303.9 303.0 263.5
Shares Used to Compute Basic EPS 300.8 299.3 252.6
Shares Used to Compute Diluted EPS 310.0 309.1 261.7
Reported Balance Sheet
Statistics (period avg.)
Average Loans $ 58,833 $ 58,142 $ 38,237
Average Earning Assets $ 79,026 $ 78,148 $ 51,694
Average Assets $ 89,644 $ 88,895 $ 56,963
Average Interest Bearing
Deposits $ 42,797 $ 43,357 $ 26,391
Average Non-Interest Bearing
Deposits $ 4,412 $ 4,514 $ 80
Average Equity $ 15,581 $ 14,612 $ 8,925
Return on Average Assets (ROA) 2.47 % 3.97 % 3.73 %
Return on Average Equity (ROE) 14.19 % 24.18 % 23.80 %
Reported Balance Sheet
Statistics (period end)
Loans $ 60,603 $ 58,119 $ 38,611
Total Assets $ 89,530 $ 89,273 $ 56,996
Loan growth $ 2,484 $ (1,729) $ 652
% Loan Growth Y Over Y 57 % 53 % 12 %
Revenue & Expense Statistics
(Reported)
Net Interest Income Growth
(annualized) (3)% 66 % 6 %
Non Interest Income Growth
(annualized) (32)% 46 % 17 %
Revenue Growth (annualized) (21)% 54 % 13 %
Net Interest Margin 6.06 % 6.18 % 6.75 %
Revenue Margin 14.71 % 15.69 % 18.99 %
Risk Adjusted Margin(7) 13.22 % 14.15 % 16.49 %
Operating Expense as a % of
Revenues 45.55 % 40.77 % 43.13 %
Operating Expense as a % of Avg
Loans (annualized) 9.00 % 8.60 % 11.07 %
Asset Quality Statistics (Reported)
Allowance $ 1,765 $ 1,675 $ 1,405
30+ Day Delinquencies $ 1,772 $ 1,559 $ 1,400
Net Charge-Offs $ 296 $ 301 $ 324
Allowance as a % of Reported Loans 2.91 % 2.88 % 3.64 %
Delinquency Rate (30+ days) 2.92 % 2.68 % 3.62 %
Net Charge-Off Rate 2.01 % 2.07 % 3.39 %
(1) Includes a $15.6 million write-down for retained interests and a $28.5
million build in the allowance for loan losses related to the impact
of the Gulf Coast Hurricanes. This also includes a $48.0 million
write-down for retained interests and a $27.0 million build in the
allowance related to the spike in bankruptcies experienced immediately
before The Bankruptcy Abuse Prevention and Consumer Protection Act of
2005 became effective in October 2005.
(2) Includes a $34 million gain from the sale of previously purchased
charged-off loan portfolios.
(3) Includes a $20.5 million gain as a result of the MasterCard, Inc.
initial public offering and a loss of $20.8 million related to the
derivative entered into in April 2006 to mitigate certain exposures we
face as a result of our expected acquisition of North Fork.
(4) Includes the impact of the sale of charged-off loans resulting in a
$76.8 million increase to various revenue line items, the majority of
which was recorded to other non-interest income and a $7.0 million
reduction to the provision for loan losses through an increase in
recoveries for the sale of charged-off loans originated by the Company
and not securitized.
(5) 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: Q2 2006 - $215.0, Q1 2006 - $170.9, Q4
2005 - $227.9, Q3 2005 - $255.6 and Q2 2005 - $259.8.
(6) Includes a $28.2 million impairment charge related to our insurance
business in Global Financial Services and a $20.6 million prepayment
penalty for the refinancing of the McLean Headquarters facility.
(7) Risk adjusted margin is total revenue less net charge-offs as a
percentage of average earning assets.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY MANAGED BASIS(1)
2006 2006 2005
(in millions) Q2 Q1 Q2
Earnings (Managed Basis)
Net Interest Income $ 2,140.8 $ 2,235.0 $ 1,830.3
Non-Interest Income 1,199.4 (4) 1,222.2 1,144.8
Total Revenue(6) 3,340.2 3,457.2 (5) 2,975.1
Provision for Loan Losses 795.6 562.3 (5) 812.2
Marketing Expenses 356.7 323.8 277.0
Operating Expenses 1,324.2 1,249.7 1,058.6
Income Before Taxes 863.7 1,321.4 827.3
Tax Rate 36.0 % 33.2 % 35.8 %
Net Income $ 552.6 $ 883.3 $ 531.1
Managed Balance Sheet Statistics
(period avg.)
Average Loans $ 106,090 $ 104,610 $ 82,472
Average Earning Assets $ 124,067 $ 122,403 $ 94,075
Average Assets $ 136,351 $ 134,797 $ 100,640
Return on Average Assets (ROA) 1.62 % 2.62 % 2.11 %
Managed Balance Sheet Statistics
(period end)
Loans $ 108,433 $ 103,907 $ 82,951
Total Assets $ 136,819 $ 134,530 $ 100,757
Loan Growth $ 4,526 $ (1,620) $ 1,359
% Loan Growth Y over Y 31 % 27 % 13 %
Tangible Assets (8) $ 132,527 $ 130,211 $ 100,017
Tangible Capital (9) $ 12,094 $ 11,016 $ 9,771
Tangible Capital to Tangible
Assets Ratio 9.13 % 8.46 % 9.77 %
% Off-Balance Sheet Securitizations 44 % 44 % 53 %
Revenue & Expense Statistics
(Managed)
Net Interest Income Growth
(annualized) (17)% 31 % 3 %
Non Interest Income Growth
(annualized) (7)% (7)% 27 %
Revenue Growth (annualized) (14)% 17 % 12 %
Net Interest Margin 6.90 % 7.30 % 7.78 %
Revenue Margin 10.77 % 11.30 % 12.65 %
Risk Adjusted Margin(10) 8.42 % 9.03 % 9.06 %
Operating Expense as a % of Revenues 39.64 % 36.15 % 35.58 %
Operating Expense as a % of Avg
Loans (annualized) 4.99 % 4.78 % 5.13 %
Asset Quality Statistics (Managed)
30+ Day Delinquencies $ 3,306 $ 3,039 $ 2,893
Net Charge-Offs $ 729 $ 693 $ 845
Delinquency Rate (30+ days) 3.05 % 2.92 % 3.49 %
Net Charge-Off Rate 2.75 % 2.65 % 4.10 %
(1) The information in this statistical summary reflects the adjustment
to add back the effect of securitization transactions qualifying as
sales under generally accepted accounting principles. See
accompanying schedule -- "Reconciliation to GAAP Financial Measures."
(2) Includes a $15.6 million write-down for retained interests and a
$28.5 million build in the allowance for loan losses related to the
impact of the Gulf Coast Hurricanes. This also includes a $48.0
million write-down for retained interests and a $27.0 million build
in the allowance related to the spike in bankruptcies experienced
immediately before The Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005 became effective in October 2005.
(3) Includes a $34 million gain from the sale of previously purchased
charged-off loan portfolios.
(4) Includes a $20.5 million gain as a result of the MasterCard, Inc.
initial public offering and a loss of $20.8 million related to the
derivative entered into in April 2006 to mitigate certain exposures
we face as a result of our expected acquisition of North Fork.
(5) Includes the impact of the sale of charged-off loans resulting in a
$66.4 million increase to various revenue line items, the majority of
which was recorded to other non-interest income and a $17.4 million
reduction to the provision for loan losses through an increase in
recoveries for the sale of charged-off loans originated by the
Company.
(6) 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: Q2 2006 - $215.0, Q1 2006 -
$170.9, Q4 2005 - $227.9, Q3 2005 - $255.6, and Q2 2005 - $259.8.
(7) Includes a $28.2 million impairment charge related to our insurance
business in Global Financial Services and a $20.6 million prepayment
penalty for the refinancing of the McLean Headquarters facility.
(8) Includes managed assets less intangible assets.
(9) Includes stockholders' equity and preferred interests less intangible
assets. Tangible Capital on a reported and managed basis is the
same.
(10) Risk adjusted margin is total revenue less net charge-offs as a
percentage of average earning assets.
CAPITAL ONE FINANCIAL CORPORATION (COF)
SEGMENT FINANCIAL & STATISTICAL SUMMARY - MANAGED BASIS(1)
2006 2006 2005
(in thousands) Q2 Q1 Q2
Segment Statistics
US Card:
Interest Income 1,628,144 1,714,559 1,596,247
Interest Expense 507,722 493,458 444,555
Net interest income $ 1,120,422 $ 1,221,101 $ 1,151,692
Non-interest income 803,083 775,413 846,720
Provision for loan losses 413,701 224,438 539,211
Non-interest expenses 860,874 844,729 794,012
Income tax provision (benefit) 227,125 324,573 232,816
Net income (loss) $ 421,805 $ 602,774 $ 432,373
Loans receivable $48,736,483 $47,142,650 $46,408,912
Average loans $47,856,045 $48,217,926 $46,504,945
Loan Yield 13.61% 14.22% 13.73%
Net charge-off rate 3.29% 2.93% 4.90%
Delinquency Rate (30+ days) 3.30% 3.31% 3.60%
Purchase Volume (2) $20,878,732 $18,015,669 $17,946,667
Number of Accounts (000s) 37,199 37,258 37,760
Auto Finance:
Interest Income 563,734 536,657 401,991
Interest Expense 207,497 187,827 116,247
Net interest income $ 356,237 $ 348,830 $ 285,744
Non-interest income 13,839 391 6,964
Provision for loan losses 74,714 107,805 20,330
Non-interest expenses 149,115 134,655 124,584
Income tax provision (benefit) 51,186 37,366 51,728
Net income (loss) $ 95,061 $ 69,395 $ 96,066
Loans receivable $20,558,455 $19,848,190 $14,520,216
Average loans $20,187,631 $19,440,128 $13,993,998
Loan Yield 11.17% 11.04% 11.49%
Net charge-off rate 1.54% 2.35% 1.74%
Delinquency Rate (30+ days) 4.55% 3.57% 4.09%
Auto Loan Originations (3) $ 3,107,409 $ 2,940,540 $ 2,633,857
Number of Accounts (000s) 1,525 1,480 1,124
Global Financial Services:
Interest Income 725,256 692,246 642,481
Interest Expense 279,804 253,997 230,656
Net interest income $ 445,452 $ 438,249 $ 411,825
Non-interest income 297,080 283,352 265,499
Provision for loan losses 296,614 217,365 256,766
Non-interest expenses 365,149 330,172 378,278
Income tax provision (benefit) 29,614 60,520 15,621
Net income (loss) $ 51,155 $ 113,544 $ 26,659
Loans receivable $25,935,716 $23,732,515 $22,053,145
Average loans $24,910,879 $23,668,326 $21,971,839
Loan Yield 11.58% 11.64% 11.67%
Net charge-off rate 3.90% 3.63% 3.89%
Delinquency Rate (30+ days) 2.82% 2.90% 2.93%
Number of Accounts (000s) 10,130 10,013 9,639
(1) The information in this statistical summary reflects the adjustment to
add back the effect of securitization transactions qualifying as sales
under generally accepted accounting principles. See accompanying
schedule -- "Reconciliation to GAAP Financial Measures."
(2) Includes all purchase transactions net of returns and excludes cash
advance transactions.
(3) Includes all organic auto loan originations and excludes auto loans
added through acquisitions.
CAPITAL ONE FINANCIAL CORPORATION (COF)
SEGMENT FINANCIAL & STATISTICAL SUMMARY - MANAGED BASIS(1) CONTINUED
2006 2006 2005
(in thousands) Q2 Q1 Q2
Segment Statistics
Banking:
Interest Income 682,679 650,985
Interest Expense 433,451 406,061
Net interest income $ 249,228 $ 244,924
Non-interest income 114,039 104,485
Provision for loan losses 6,632 9,821
Non-interest expenses 289,996 272,987
Income tax provision (benefit) 23,324 23,310
Net income (loss) $ 43,315 $ 43,291
Loans receivable $ 13,189,112 $ 13,169,792
Average loans $ 13,115,534 $ 13,283,515
Loan Yield 7.63% 7.38%
Net charge-off rate 0.45% 0.38%
Delinquency Rate (30+ days) 0.38% 0.75%
Core Deposits(2) 27,857,265 27,996,290
Total Deposits 35,281,970 35,396,221
Number of ATMs 705 669
Number of locations(3) 324 316
Other:
Net interest income $ (30,510) $ (18,134) $ (18,959)
Non-interest income (28,709) 58,553 25,577
Provision for loan losses 3,950 2,877 (4,144)
Non-interest expenses 15,763 (9,064) 38,743
Income tax provision (benefit) (20,183) (7,729) (4,001)
Net income (loss) $ (58,749) $ 54,335 $ (23,980)
Loans receivable $ 13,673 $ 13,629 $ (30,921)
Total:
Interest Income $ 3,414,411 $ 3,436,829 $ 2,766,118
Interest Expense 1,273,582 1,201,859 935,816
Net interest income $ 2,140,829 $ 2,234,970 $ 1,830,302
Non-interest income 1,199,332 1,222,194 1,144,760
Provision for loan losses 795,611 562,306 812,163
Non-interest expenses 1,680,897 1,573,479 1,335,617
Income tax provision (benefit) 311,066 438,040 296,164
Net income (loss) $ 552,587 $ 883,339 $ 531,118
Loans receivable $108,433,439 $103,906,776 $82,951,352
(1) The information in this statistical summary reflects the adjustment to
add back the effect of securitization transactions qualifying as sales
under generally accepted accounting principles. See accompanying
schedule -- "Reconciliation to GAAP Financial Measures."
(2) Includes domestic non-interest bearing deposits, NOW accounts, money
market deposit accounts, savings accounts, certificates of deposit of
less than $100,000 and other consumer time deposits.
(3) Q2: Number of locations includes 311 branches and 13 other customer
centers and excludes 16 branches that remain closed due to hurricane
damage. Q1: Number of locations includes 302 branches and 14 other
customer centers and excludes 18 branches that remain closed due to
hurricane damage.
CAPITAL ONE FINANCIAL CORPORATION
Reconciliation to GAAP Financial Measures
For the Three Months Ended June 30, 2006
(dollars in thousands)(unaudited)
The Company's consolidated financial statements prepared in accordance with generally accepted accounting principles ("GAAP") are referred to as its "reported" financial statements. Loans included in securitization transactions which qualified as sales under GAAP have been removed from the Company's "reported" balance sheet. However, servicing fees, finance charges, and other fees, net of charge-offs, and interest paid to investors of securitizations are recognized as servicing and securitizations income on the "reported" income statement.
The Company's "managed" consolidated financial statements reflect
adjustments made related to effects of securitization transactions qualifying
as sales under GAAP. The Company generates earnings from its "managed" loan
portfolio which includes both the on-balance sheet loans and off-balance sheet
loans. The Company's "managed" income statement takes the components of the
servicing and securitizations income generated from the securitized portfolio
and distributes the revenue and expense to appropriate income statement line
items from which it originated. For this reason the Company believes the
"managed" consolidated financial statements and related managed metrics to be
useful to stakeholders.
Total Total
Reported Adjustments(1) Managed(2)
Income Statement Measures
Net interest income $ 1,197,082 $ 943,747 $ 2,140,829
Non-interest income $ 1,709,913 $ (510,581) $ 1,199,332
Total revenue $ 2,906,995 $ 433,166 $ 3,340,161
Provision for loan losses $ 362,445 $ 433,166 $ 795,611
Net charge-offs $ 295,844 $ 433,166 $ 729,010
Balance Sheet Measures
Loans $ 60,602,803 $ 47,830,636 $ 108,433,439
Total assets $ 89,530,186 $ 47,288,672 $ 136,818,858
Average loans $ 58,833,376 $ 47,256,518 $ 106,089,894
Average earning assets $ 79,025,701 $ 45,041,097 $ 124,066,798
Average total assets $ 89,643,629 $ 46,707,317 $ 136,350,946
Delinquencies $ 1,772,191 $ 1,534,202 $ 3,306,393
(1) Income statement adjustments reclassify the net of finance charges of
$1,341.8 million, past-due fees of $237.1 million, other interest
income of $(61.6) million and interest expense of $573.5 million; and
net charge-offs of $433.2 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.
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
June 30 March 31 June 30
2006 2006 2005
Assets:
Cash and due from banks $ 1,388,384 $ 1,434,804 $ 581,267
Federal funds sold and resale
agreements 339,613 2,763,746 1,283,015
Interest-bearing deposits at
other banks 870,049 1,099,025 721,806
Cash and cash equivalents 2,598,046 5,297,575 2,586,088
Securities available for sale 15,292,446 14,659,166 9,522,515
Loans 60,602,803 58,118,659 38,610,787
Less: Allowance for loan losses (1,765,000) (1,675,000) (1,405,000)
Net loans 58,837,803 56,443,659 37,205,787
Accounts receivable from
securitizations 4,818,512 5,293,392 4,890,933
Premises and equipment, net 1,467,922 1,387,302 782,372
Interest receivable 526,267 512,136 274,547
Goodwill 3,933,621 3,941,128 739,889
Other 2,055,569 1,738,721 993,836
Total assets $89,530,186 $89,273,079 $56,995,967
Liabilities:
Non-interest-bearing deposits $ 4,487,837 $ 4,476,351 $ 80,822
Interest-bearing deposits 42,698,976 43,303,134 26,521,031
Senior and subordinated notes 5,490,690 5,726,109 6,692,311
Other borrowings 16,836,398 16,544,698 9,692,941
Interest payable 349,091 353,882 252,677
Other 3,770,131 3,699,659 3,344,404
Total liabilities 73,633,123 74,103,833 46,584,186
Stockholders' Equity:
Common stock 3,060 3,051 2,650
Paid-in capital, net 7,151,376 7,032,073 3,783,074
Retained earnings and cumulative
other comprehensive income 8,857,963 8,245,186 6,695,753
Less: Treasury stock, at cost (115,336) (111,064) (69,696)
Total stockholders' equity 15,897,063 15,169,246 10,411,781
Total liabilities and
stockholders' equity $89,530,186 $89,273,079 $56,995,967
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
Three Months Ended
June 30 March 31 June 30(1)
2006 2006 2005
Interest Income:
Loans, including past-due fees $1,616,937 $1,612,622 $1,190,098
Securities available for sale 167,804 165,100 91,245
Other 112,416 100,860 70,557
Total interest income 1,897,157 1,878,582 1,351,900
Interest Expense:
Deposits 416,232 403,609 279,438
Senior and subordinated notes 84,707 94,354 104,593
Other borrowings 199,136 173,742 95,366
Total interest expense 700,075 671,705 479,397
Net interest income 1,197,082 1,206,877 872,503
Provision for loan losses 362,445 170,270 291,600
Net interest income after provision
for loan losses 834,637 1,036,607 580,903
Non-Interest Income:
Servicing and securitizations 1,025,506 1,153,604 996,043
Service charges and other customer-
related fees 413,398 435,731 360,410
Interchange 131,538 119,491 132,068
Other 139,471 149,425 93,475
Total non-interest income 1,709,913 1,858,251 1,581,996
Non-Interest Expense:
Salaries and associate benefits 536,465 516,144 442,101
Marketing 356,695 323,771 277,034
Communications and data processing 172,734 169,204 138,916
Supplies and equipment 113,028 98,184 83,661
Occupancy 52,753 49,377 40,209
Other 449,222 416,799 353,696
Total non-interest expense 1,680,897 1,573,479 1,335,617
Income before income taxes 863,653 1,321,379 827,282
Income taxes 311,066 438,040 296,164
Net income $ 552,587 $ 883,339 $ 531,118
Basic earnings per share $ 1.84 $ 2.95 $ 2.10
Diluted earnings per share $ 1.78 $ 2.86 $ 2.03
Dividends paid per share $ 0.03 $ 0.03 $ 0.03
Six Months Ended
June 30 June 30 (1)
2006 2005
Interest Income:
Loans, including past-due fees $3,229,559 $2,374,134
Securities available for sale 332,904 181,409
Other 213,276 132,625
Total interest income 3,775,739 2,688,168
Interest Expense:
Deposits 819,841 543,463
Senior and subordinated notes 179,061 219,073
Other borrowings 372,878 192,608
Total interest expense 1,371,780 955,144
Net interest income 2,403,959 1,733,024
Provision for loan losses 532,715 551,231
Net interest income after provision for loan
losses 1,871,244 1,181,793
Non-Interest Income:
Servicing and securitizations 2,179,110 1,929,980
Service charges and other customer-related fees 849,129 761,596
Interchange 251,029 255,508
Other 288,896 150,891
Total non-interest income 3,568,164 3,097,975
Non-Interest Expense:
Salaries and associate benefits 1,052,609 875,602
Marketing 680,466 588,793
Communications and data processing 341,938 281,735
Supplies and equipment 211,212 170,107
Occupancy 102,130 58,110
Other 866,021 689,102
Total non-interest expense 3,254,376 2,663,449
Income before income taxes 2,185,032 1,616,319
Income taxes 749,106 578,639
Net income $1,435,926 $1,037,680
Basic earnings per share $ 4.79 $ 4.18
Diluted earnings per share $ 4.64 $ 4.02
Dividends paid per share $ 0.05 $ 0.05
(1) Certain prior period amounts have been reclassified to conform to the
current period presentation.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Managed (1) Quarter Ended 6/30/06
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $106,089,894 $ 3,195,827 12.05%
Securities available for sale 14,364,402 167,804 4.67%
Other 3,612,502 50,780 5.62%
Total earning assets $124,066,798 $ 3,414,411 11.01%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ 597,406 $ 4,052 2.71%
Money market deposit accounts 11,093,056 89,076 3.21%
Savings accounts 3,919,465 26,237 2.68%
Other Consumer Time Deposits 13,980,892 145,401 4.16%
Public Fund CD's of $100,000
or more 971,511 11,332 4.67%
CD's of $100,000 or more 8,878,461 100,094 4.51%
Foreign time deposits 3,355,924 40,040 4.77%
Total Interest-bearing deposits $ 42,796,715 $ 416,232 3.89%
Senior and subordinated notes 5,576,041 84,707 6.08%
Other borrowings 16,928,273 199,136 4.71%
Securitization liability 46,827,712 573,507 4.90%
Total interest-bearing liabilities $112,128,741 $ 1,273,582 4.54%
Net interest spread 6.47%
Interest income to average
earning assets 11.01%
Interest expense to average
earning assets 4.11%
Net interest margin 6.90%
Managed (1) Quarter Ended 3/31/06
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $104,610,200 $ 3,232,530 12.36%
Securities available for sale 15,045,469 165,100 4.39%
Other 2,746,833 39,199 5.71%
Total earning assets $122,402,502 $ 3,436,829 11.23%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ 572,181 $ 3,328 2.33%
Money market deposit accounts 10,716,774 76,038 2.84%
Savings accounts 3,719,994 23,181 2.49%
Other Consumer Time Deposits 14,647,708 149,393 4.08%
Public Fund CD's of $100,000
or more 964,181 10,295 4.27%
CD's of $100,000 or more 9,407,892 102,714 4.37%
Foreign time deposits 3,327,788 38,660 4.65%
Total Interest-bearing deposits $ 43,356,518 $ 403,609 3.72%
Senior and subordinated notes 6,097,711 94,354 6.19%
Other borrowings 16,074,344 173,742 4.32%
Securitization liability 46,018,001 530,154 4.61%
Total interest-bearing liabilities $111,546,574 $ 1,201,859 4.31%
Net interest spread 6.92%
Interest income to average
earning assets 11.23%
Interest expense to average
earning assets 3.93%
Net interest margin 7.30%
Managed (1) Quarter Ended 6/30/05
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $82,471,828 $ 2,652,370 12.86%
Securities available for sale 9,592,645 91,245 3.80%
Other 2,010,296 22,503 4.48%
Total earning assets $94,074,769 $ 2,766,118 11.76%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ - $ -
Money market deposit accounts 2,967,145 23,160 3.12%
Savings accounts - -
Other Consumer Time Deposits 9,849,495 103,044 4.18%
Public Fund CD's of $100,000
or more 73,908 530 2.87%
CD's of $100,000 or more 10,864,437 118,360 4.36%
Foreign time deposits 2,636,248 34,344 5.21%
Total Interest-bearing deposits $26,391,233 $ 279,438 4.24%
Senior and subordinated notes 6,987,888 104,593 5.99%
Other borrowings 10,838,955 95,366 3.52%
Securitization liability 43,810,547 456,419 4.17%
Total interest-bearing liabilities $88,028,623 $ 935,816 4.25%
Net interest spread 7.51%
Interest income to average
earning assets 11.76%
Interest expense to average
earning assets 3.98%
Net interest margin 7.78%
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Reported Quarter Ended 6/30/06
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $58,833,376 $ 1,616,937 10.99%
Securities available for sale 14,364,402 167,804 4.67%
Other 5,827,923 112,416 7.72%
Total earning assets $79,025,701 $ 1,897,157 9.60%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ 597,406 $ 4,052 2.71%
Money market deposit accounts 11,093,056 89,076 3.21%
Savings accounts 3,919,465 26,237 2.68%
Other Consumer Time Deposits 13,980,892 145,401 4.16%
Public Fund CD's of $100,000
or more 971,511 11,332 4.67%
CD's of $100,000 or more 8,878,461 100,094 4.51%
Foreign time deposits 3,355,924 40,040 4.77%
Total Interest-bearing deposits $42,796,715 $ 416,232 3.89%
Senior and subordinated notes 5,576,041 84,707 6.08%
Other borrowings 16,928,273 199,136 4.71%
Total interest-bearing liabilities $65,301,029 $ 700,075 4.29%
Net interest spread 5.31%
Interest income to average
earning assets 9.60%
Interest expense to average
earning assets 3.54%
Net interest margin 6.06%
Reported Quarter Ended 3/31/06
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $58,142,418 $ 1,612,622 11.09%
Securities available for sale 15,045,469 165,100 4.39%
Other 4,959,597 100,860 8.13%
Total earning assets $78,147,484 $ 1,878,582 9.62%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ 572,181 $ 3,328 2.33%
Money market deposit accounts 10,716,774 76,038 2.84%
Savings accounts 3,719,994 23,181 2.49%
Other Consumer Time Deposits 14,647,708 149,393 4.08%
Public Fund CD's of $100,000
or more 964,181 10,295 4.27%
CD's of $100,000 or more 9,407,892 102,714 4.37%
Foreign time deposits 3,327,788 38,660 4.65%
Total Interest-bearing deposits $43,356,518 $ 403,609 3.72%
Senior and subordinated notes 6,097,711 94,354 6.19%
Other borrowings 16,074,344 173,742 4.32%
Total interest-bearing liabilities $65,528,573 $ 671,705 4.10%
Net interest spread 5.52%
Interest income to average
earning assets 9.62%
Interest expense to average
earning assets 3.44%
Net interest margin 6.18%
Reported Quarter Ended 6/30/05
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans $38,237,463 $ 1,190,098 12.45%
Securities available for sale 9,592,645 91,245 3.80%
Other 3,863,822 70,557 7.30%
Total earning assets $51,693,930 $ 1,351,900 10.46%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ - $ -
Money market deposit accounts 2,967,145 23,160 3.12%
Savings accounts - -
Other Consumer Time Deposits 9,849,495 103,044 4.18%
Public Fund CD's of $100,000
or more 73,908 530 2.87%
CD's of $100,000 or more 10,864,437 118,360 4.36%
Foreign time deposits 2,636,248 34,344 5.21%
Total Interest-bearing deposits $26,391,233 $ 279,438 4.24%
Senior and subordinated notes 6,987,888 104,593 5.99%
Other borrowings 10,838,955 95,366 3.52%
Total interest-bearing liabilities $44,218,076 $ 479,397 4.34%
Net interest spread 6.12%
Interest income to average
earning assets 10.46%
Interest expense to average
earning assets 3.71%
Net interest margin 6.75%
SOURCE Capital One Financial Corporation
CONTACT: Investor Relations: Mike Rowen, +1-703-720-2455, or Media
Relations: Tatiana Stead, +1-703-720-2352, Julie Rakes, +1-804-284-5800, all
of Capital One Financial Corporation
Web site: http://www.capitalone.com
(COF)