Capital One Reports Third Quarter Earnings
Capital One Reports Third Quarter Earnings
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Affirms earnings guidance of approximately $5.00 per share in 2007
MCLEAN, Va., Oct. 18 /PRNewswire-FirstCall/ -- Capital One Financial Corporation (NYSE: COF) today announced a net loss for the third quarter of 2007 of $81.6 million, or $0.21 per share (diluted). Earnings were $2.09 per share (diluted) excluding the loss from discontinued operations of $898.0 million related to the shutdown of GreenPoint Mortgage announced in August 2007. This compares to net income of $587.8 million, or $1.89 per share (diluted), for the third quarter of 2006, and income from continuing operations of $767.6 million, or $1.93 per share (diluted), for the second quarter of 2007. Additionally, the company continues to expect earnings for 2007 of approximately $5.00 per share (diluted).
"Capital One remains focused on driving revenue growth, reducing costs, and effectively deploying capital to generate strong returns for our investors," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "Our businesses are generating robust revenue margins, even as we continue to take a cautious approach to underwriting and managing credit risk in the current environment."
Highlights of the quarter:
-- Announced the shutdown of GreenPoint Mortgage, which is largely
complete. When the company announced the shutdown, it estimated total
after-tax charges to be $860 million, whereas the total charges in the
third quarter of 2007 was $883 million due primarily to increased
valuation adjustments. The company expects to incur approximately $23
million of additional after-tax charges associated with GreenPoint
Mortgage in the fourth quarter of 2007 and into early 2008.
-- Executed $477.5 million of open market share repurchases in the
quarter, and completed the $1.5 billion Accelerated Share Repurchase
program that was launched in April. The company expects to complete the
$3.0 billion share repurchase program in the fourth quarter with
additional repurchases of $772.5 million.
-- Successfully executed $3.8 billion in funding transactions despite
difficult capital market conditions.
-- Company-wide cost initiative and bank integration programs remain on
track.
"Earnings from continuing operations in the third quarter grew 6.4 percent over the second quarter of 2007 driven by increased revenues which more than offset increased credit costs in the quarter," said Gary L. Perlin, Capital One's Chief Financial Officer. "We also realized significant operating leverage. Continued cost discipline and capital management will be two key drivers of future shareholder returns."
Total Company Results
-- Total deposits at the end of the third quarter of $83.3 billion were
down $2.3 billion from the second quarter of 2007 primarily as a result
of the intended run-off of high cost brokered and public deposits.
-- Managed loans held for investment from continuing operations increased
from the previous quarter by $1.3 billion driven largely by the growth
in Global Financial Services.
-- Total managed revenue is up 8.0 percent relative to the second quarter
of 2007 driven largely by revenue margin expansion in our U.S. Card
sub-segment. The company expects 2008 revenue growth to be in-line or
slightly higher than asset growth.
-- Provision expense was up quarter over quarter and year over year, in
anticipation of higher charge-offs over the next twelve months,
primarily in U.S. Card and Auto Finance. The provision increase
related to continuing operations of $124.2 million is net of a $91.4
million release in allowance associated with the integration of bank
allowance methodologies. Without this methodology change, the allowance
would have increased $215.6 million due primarily to a build in the
National Lending segment.
-- Operating expenses declined $35.2 million relative to the second
quarter of 2007 driven by continued efficiency gains across the
businesses. Looking forward, the company expects its operating
efficiency ratio to be in the mid-forty percent range for the full year
2008.
Segment Results
Local Banking Segment highlights relative to Q2 2007
-- Net income of $192.3 million was up $47.5 million over the second
quarter due primarily to a third quarter release in reserves that
resulted from aligning the Banking segment's allowance methodologies
with the company's methodology.
-- Loans held for investment were essentially flat relative to the second
quarter of 2007 at $42.2 billion. Total Bank deposits declined $1.1
billion to $73.4 billion.
-- Credit at the Bank remained strong and stable, with the net charge-off
rate at 19 basis points and non-performing loans at 27 basis points.
-- Integration efforts continue to be on track.
National Lending Segment
Following are highlights from the National Lending Segment, followed by highlights from each of the sub-segments of National Lending: U.S. Card, Global Financial Services (GFS), and Auto Finance. Mortgage Finance information is now included in Discontinued Operations.
-- Profits for the National Lending segment were up 11.8 percent as
compared to the third quarter of 2006, driven by increased profits in
U.S. Card and GFS.
-- The managed charge-off rate for the National Lending segment increased
71 basis points to 3.96 percent in the third quarter of 2007 from 3.25
percent in the third quarter of 2006 due to normalization of credit
year over year and as a result of a mix shift in U.S. Card and credit
worsening in Auto Finance. The delinquency rate of 4.70 percent for
National Lending increased from 3.70 percent as of September 30, 2006.
U.S. Card highlights relative to Q3 2006
-- U.S. Card reported net income of $560.8 million, a 21.5 percent
increase, year over year, driven by growth in revenue and reductions in
non-interest expenses.
-- Revenue increased 13.2 percent from the third quarter of 2006 largely
as a result of pricing changes implemented in some of the company's
products after completion of the card holder system conversion. This
increase was partially offset by an increase in provision expense
resulting from increased credit costs in the quarter and an allowance
build for expected future credit losses.
-- Non-interest expenses declined 9.3 percent as the business began to
leverage its new infrastructure to streamline processes and reduce
costs as a part of the broader corporate cost initiative.
-- Managed loans declined from the third quarter of 2006 by 3.0 percent,
or $1.6 billion to $49.6 billion at September 30, 2007, resulting
from the continued low levels of marketing of teaser rate offers in the
prime market and a $600.0 million portfolio sale in the first quarter
of 2007.
-- Charge-offs rose in the third quarter of 2007 to 4.13 percent from 3.39
percent in the third quarter of 2006, and delinquencies rose to 4.46
percent from 3.53 percent. The increases resulted primarily from
continued normalization of consumer credit and the mix effects of the
company's decline in prime revolver loans. Given current loan growth
and delinquency trends, the company expects the U.S. Card charge-off
rate to be around 5.25 percent in the fourth quarter.
-- Delinquencies increased 105 basis points from the sequential quarter
primarily due to normal seasonality, the company's change to a 25 day
grace period, changes in the company's pricing and fee policies, and
mix effects of the decline in prime revolver loan balances. These
delinquency trends are consistent with the expected rise in card
charge-offs in the fourth quarter.
Global Financial Services (GFS) highlights relative to Q3 2006
-- Net income rose 10.5 percent from the third quarter of 2006, to $118.4
million. Net income growth resulted from strong growth in revenues
partially offset by higher provision expense.
-- Managed loans as of September 30, 2007 grew 7.6 percent, to $28.6
billion relative to September 30, 2006, with growth from North American
businesses more than offsetting a modest decline in loans in the UK.
About half of the dollar growth resulted from stronger Canadian and UK
currencies versus the third quarter of 2006.
-- Risk metrics were up modestly from the third quarter of 2006 as
expected normalization continues in the U.S. Credit in the UK remains
stable.
Auto Finance highlights relative to Q3 2006
-- Auto Finance posted a net loss of $3.8 million in the quarter. A 5.8
percent increase in revenues was more than offset by a 51.7 percent
increase in provision.
-- Charge-off and delinquencies increases were a result of continued
consumer credit normalization from historically low levels in the third
quarter of 2006, continued elevated losses, and delinquencies in recent
Dealer Prime vintages, and industry-wide increases in loan-to-value
ratios and extended loan terms in subprime.
-- Originations in the third quarter of $3.2 billion were up 2.9 percent
compared to the year ago third quarter.
-- Managed loans of $24.3 billion as of September 30, 2007 were up 15.0
percent relative to the third quarter of 2006 from ongoing originations
as well as the addition of loans from the North Fork portfolio.
The company generates earnings from its managed loan portfolio, which includes both on-balance sheet loans and securitized (off-balance sheet) loans. For this reason, the company believes managed financial measures to be useful to stakeholders. In compliance with Regulation G of the Securities and Exchange Commission, the company is providing a numerical reconciliation of managed financial measures to comparable measures calculated on a reported basis using generally accepted accounting principles (GAAP). Please see the schedule titled "Reconciliation to GAAP Financial Measures" attached to this release for more information.
Forward looking statements
The company cautions that its current expectations in this release, in the presentation slides available on the company's website and in its Form 8-K dated October 18, 2007 for 2007 earnings, loan and deposit growth, revenue growth, return on equity, projected charge-offs for the fourth quarter of 2007 and for 2008, credit trends, dividends, operating efficiencies and ongoing cost reductions, including future financial and operating results, and the company's plans, objectives, expectations, and intentions, are forward-looking statements and actual results could differ materially from current expectations due to a number of factors, including: the risk that the company's acquired businesses will not be integrated successfully and that the cost savings and other synergies from such acquisitions may not be fully realized; continued intense competition from numerous providers of products and services which compete with Capital One's businesses; changes in our aggregate accounts and balances, and the growth rate and composition thereof; the risk that the benefits of the company's restructuring initiative, including cost savings and other benefits, may not be fully realized; the success of the company's marketing efforts; general economic conditions affecting interest rates and consumer income, spending, and savings which may affect consumer bankruptcies, defaults, charge-offs and deposit activity; changes in the labor market; general secondary market conditions in the mortgage industry; changes in the credit environment in the U.S. and or the UK; and the company's ability to execute on its strategic and operational plans. A discussion of these and other factors can be found in Capital One's annual report and other reports filed with the Securities and Exchange Commission, including, but not limited to, Capital One's report on Form 10-K for the fiscal year ended December 31, 2006, and reports on Form 10-Q for the quarters ended March 31, 2007 and June 30, 2007.
About Capital One
Headquartered in McLean, Virginia, Capital One Financial Corporation (http://www.capitalone.com) is a financial holding company, with 732 locations in New York, New Jersey, Connecticut, Texas and Louisiana. Its principal subsidiaries, Capital One Bank, 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 $83.3 billion in deposits and $146.4 billion in managed loans outstanding as of September 30, 2007. Capital One, a Fortune 500 company, trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.
NOTE: Third quarter 2007 financial results, SEC Filings, and first 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
(in millions, except per 2007 2007 2006
share data and as noted) Q3 Q2 Q3
Earnings (Reported Basis)
Net Interest Income $1,624.5 $1,538.6 (2) $1,294.5
Non-Interest Income 2,149.7 1,971.9 1,761.4
Total Revenue (5) 3,774.2 3,510.5 3,055.9
Provision for Loan Losses 595.5 396.7 430.6
Marketing Expenses 332.7 326.1 368.5
Restructuring Expenses (4) 19.4 91.1 -
Operating Expenses 1,582.2 (3) 1,617.4 (3),(12) 1,358.1
Income Before Taxes 1,244.4 1,079.2 898.7
Tax Rate (7) 34.4 % 28.9 % 34.6 %
Income From Continuing
Operations, Net of Tax $816.4 $767.6 $587.8
(Loss) From Discontinued
Operations, Net of Tax (1) (898.0) (17.2) -
Net (Loss) Income $(81.6) $750.4 $587.8
Common Share Statistics
Basic EPS:
Income From Continuing
Operations $2.11 $1.96 $1.95
(Loss) From Discontinued
Operations $(2.32) $(0.04) $ -
Net (Loss) Income $(0.21) $1.92 $1.95
Diluted EPS:
Income From Continuing
Operations $2.09 $1.93 $1.89
(Loss) From Discontinued
Operations $(2.30) $(0.04) $ -
Net (Loss) Income $(0.21) $1.89 $1.89
Dividends Per Share $0.03 $0.03 $0.03
Tangible Book Value Per
Share (period end) $28.88 $29.11 $41.12
Stock Price Per Share
(period end) $66.43 $78.44 $78.66
Total Market Capitalization
(period end) $25,602.1 $30,701.4 $23,944.1
Shares Outstanding
(period end) 385.4 391.4 304.4
Shares Used to Compute
Basic EPS 386.1 390.8 301.6
Shares Used to Compute
Diluted EPS 390.8 397.5 310.4
Reported Balance Sheet
Statistics
(period average) (7)
Average Loans Held for
Investment $91,745 $91,145 $62,429
Average Earning Assets $117,694 $119,430 $81,437
Average Assets $143,291 $142,690 $92,295
Average Interest Bearing
Deposits $73,555 $75,218 $42,984
Total Average Deposits $84,884 $86,719 $47,196
Average Equity $25,344 $25,128 $16,310
Return on Average Assets
(ROA) 2.28 % 2.15 % 2.55 %
Return on Average Equity
(ROE) 12.89 % 12.22 % 14.42 %
Reported Balance Sheet
Statistics (period end) (7)
Loans Held for Investment $93,789 $90,930 $63,612
Total Assets $143,884 $141,917 $94,907
Interest Bearing Deposits $72,503 $74,444 $43,468
Total Deposits $83,343 $85,680 $47,613
Performance Statistics
(Reported)(7)
Net Interest Income Growth
(annualized) 22 % (16)% 33 %
Non Interest Income Growth
(annualized) 36 % 45 % 12 %
Revenue Growth (annualized) 30 % 16 % 20 %
Net Interest Margin 5.52 % 5.15 % 6.36 %
Revenue Margin 12.83 % 11.76 % 15.01 %
Risk Adjusted Margin (10) 11.20 % 10.41 % 13.20 %
Non Interest Expense as a %
of Average Loans Held for
Investment (annualized) 8.43 % 8.93 % 11.06 %
Efficiency Ratio (11) 50.74 % 55.36 % 56.50 %
Asset Quality Statistics
(Reported)(7)
Allowance $2,237 $2,113 $1,840
Allowance as a % of Reported
Loans Held for Investment 2.39 % 2.32 % 2.89 %
Net Charge-Offs $480 $401 $369
Net Charge-Off Rate 2.09 % 1.76 % (13) 2.36 %
Full-time equivalent
employees (in thousands) 27.5 29.5 21.1
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
MANAGED BASIS (*)
2007 2007 2006
(in millions) Q3 Q2 Q3
Earnings (Managed Basis)
Net Interest Income $2,803.4 $2,613.3 (2) $2,217.8
Non-Interest Income 1,518.0 1,387.5 1,275.4
Total Revenue(5) 4,321.4 4,000.8 3,493.2
Provision for Loan Losses 1,142.7 887.1 867.9
Marketing Expenses 332.7 326.1 368.5
Restructuring Expenses (4) 19.4 91.1 -
Operating Expenses 1,582.2 (3) 1,617.4 (3),(12) 1,358.1
Income Before Taxes 1,244.4 1,079.1 898.7
Tax Rate(6) 34.4 % 28.9 % 34.6 %
Income From Continuing
Operations, Net of Tax $816.4 $767.6 $587.8
(Loss) From Discontinued
Operations, Net of Tax (1) (898.0) (17.2) -
Net (Loss) Income $(81.6) $750.4 $587.8
Managed Balance Sheet
Statistics
(period average) (7)
Average Loans Held for
Investment $143,781 $142,616 $110,512
Average Earning Assets $167,578 $168,841 $127,742
Average Assets $194,528 $193,446 $139,833
Return on Average Assets
(ROA) 1.68 % 1.59 % 1.68 %
Managed Balance Sheet
Statistics (period end) (7)
Loans Held for Investment(8) $144,769 $143,498 $112,239
Total Assets $194,019 $193,682 $142,977
Tangible Assets(9) $180,363 $179,888 $138,817
Tangible Common Equity(8) $11,131 $11,393 $12,517
Tangible Common Equity to
Tangible Assets Ratio 6.17 % 6.33 % 9.02 %
% Off-Balance Sheet
Securitizations 35 % 37 % 43 %
Performance Statistics
(Managed)(7)
Net Interest Income Growth
(annualized) 29 % 2 % 14 %
Non Interest Income Growth
(annualized) 38 % 29 % 25 %
Revenue Growth (annualized) 32 % 11 % 18 %
Net Interest Margin 6.69 % 6.19 % 6.94 %
Revenue Margin 10.31 % 9.48 % 10.94 %
Risk Adjusted Margin (10) 7.86 % 7.37 % 8.41 %
Non Interest Expense as a %
of Average Loans Held for
Investment (annualized) 5.38 % 5.71 % 6.25 %
Efficiency Ratio (11) 44.31 % 48.58 % 49.43 %
Asset Quality Statistics
(Managed)(7)
Net Charge-Offs $1,027 $891 $806
Net Charge-Off Rate 2.86 % 2.50 % (13) 2.92 %
(*) The information in this statistical summary reflects the adjustment to
add back the effect of securitization transactions qualifying as sales
under generally accepted accounting principles. See accompanying
schedule - "Reconciliation to GAAP Financial Measures".
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY NOTES
(1) On August 20, 2007, the Company announced that it would cease
residential mortgage origination operations of its wholesale
mortgage banking unit, GreenPoint Mortgage which was acquired in Q4
2006. The results of the residential mortgage origination operations
are being reported as discontinued operations for each period
presented subsequent to the acquisition. The results of GreenPoint's
Mortgage Servicing Business are reported as continuing operations
for each period presented subsequent to the acquisition. The Company
recorded a loss from discontinued operations of $898.0 million
after-tax for Q3 2007. Approximately $646.0 million after-tax of
this loss resulted from the non-cash write-down of goodwill
associated with the acquisition of GreenPoint Mortgage as part of
the North Fork Bancorporation in December 2006. The remaining $252.0
million of after-tax loss includes approximately $177.8 million
after-tax valuation adjustments related to ongoing operations, $59.0
million in after-tax restructuring charges associated with severance
benefits and facilities closure, and $15.2 million in loss from
operations in the third quarter.
(2) Includes a $17.4 million gain from the early extinguishment of Trust
Preferred Securities in Q2 2007 included as a component of Interest
expense.
(3) Includes core deposit intangible amortization expense of $52.4
million in Q3 2007 and $53.7 million in Q2 2007, and integration
costs of $30.3 million in Q3 2007 and $24.5 million in Q2 2007.
(4) During the second quarter of 2007, the Company announced a broad-
based initiative to reduce expenses and improve its competitive cost
position. As part of this initiative $19.4 million and $91.1 million
of restructuring charges were recognized as part of continuing
operations during Q3 2007 and Q2 2007, respectively.
(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: Q3 2007 - $310.5 million,
Q2 2007 - $236.3 million, and Q3 2006 - $226.3 million.
(6) Includes a $69.0 million benefit in Q2 2007 resulting from changes
in the Company's international tax position and tax benefits from
resolution of tax issues and miscellaneous tax adjustments in prior
periods as follows: Q1 2007 - $11.7 million, Q4 2006 - $28.8 million
and Q3 2006 - $18.7 million.
(7) Based on continuing operations. Average equity and return on equity
are based on the Company's stockholder's equity.
(8) Includes stockholders' equity and preferred interests less
intangible assets and related deferred tax liability. Tangible
Common Equity on a reported and managed basis is the same.
(9) Tangible assets include managed assets less intangible assets.
(10) Risk adjusted margin is total revenue less net charge-offs as a
percentage of average earning assets.
(11) Efficiency ratio is Non-interest expense less restructuring expense
divided by total revenue.
(12) Includes a charge of $39.8 million as a result of the accelerated
vesting of equity awards made in connection with the transition of
the management team for Capital One's Banking business following the
North Fork acquisition in Q4 2006.
(13) Managed and reported net charge-off rate for Q2 2007 was positively
impacted 11 and 17 basis points, respectively, due to the
implementation of a change in customer statement generation from 30
to 25 days grace. The change did not have a material impact on Net
Provision for Q2 2007.
CAPITAL ONE FINANCIAL CORPORATION (COF)
SEGMENT FINANCIAL & STATISTICAL SUMMARY FOR CONTINUING OPERATIONS
MANAGED BASIS (1)
2007 2007 2006
(in thousands) Q3 Q2 Q3
Local Banking:
Interest Income $1,746,683 $1,724,239 $719,207
Interest Expense 1,161,758 1,139,774 461,009
Net interest income $584,925 $584,465 $258,198
Non-interest income 195,204 210,581 115,526
Provision for loan losses (58,285) 23,929 5,495
Other non-interest expenses 543,390 548,462 297,080
Income tax provision 102,693 77,821 24,902
Net income $192,331 $144,834 $46,247
Loans Held for Investment $42,233,665 $41,919,645 $13,326,088
Average Loans Held for
Investment $41,992,618 $42,110,537 $13,171,414
Core Deposits (2) $63,118,580 $63,828,306 $26,997,345
Total Deposits $73,419,558 $74,482,705 $35,163,849
Loans Held for Investment
Yield 7.13% 7.03% 8.02%
Net Interest Margin -
Loans (3) 1.79% 1.88% 3.30%
Net Interest Margin -
Deposits (4) 2.09% 2.01% 1.62%
Efficiency Ratio (6) 69.65% 68.98% 79.49%
Net charge-off rate 0.19% 0.19% 0.48%
Non Performing Loans $112,794 $80,781 $79,042
Non Performing Loans as a %
of Loans Held for
Investment 0.27% 0.19% 0.59%
Non-Interest Expenses as a
% of Average Loans Held
for Investment 5.18% 5.21% 9.02%
Number of Active ATMs 1,282 1,253 623
Number of locations 732 724 342
National Lending:
Interest Income $3,511,878 $3,261,042 $3,078,097
Interest Expense 1,232,115 1,197,106 1,089,279
Net interest income $2,279,763 $2,063,936 $1,988,818
Non-interest income 1,312,146 1,177,139 1,213,924
Provision for loan losses 1,196,087 869,149 862,375
Other non-interest expenses 1,367,607 1,366,282 1,411,882
Income tax provision 352,847 346,547 324,366
Net income $675,368 $659,097 $604,119
Loans Held for Investment $102,556,271 $101,590,039 $98,909,970
Average Loans Held for
Investment $101,805,584 $100,520,138 $97,309,087
Core Deposits(2) $470 $1,124 $137,602
Total Deposits $2,295,131 $2,411,435 $2,461,941
Loans Held for Investment
Yield 13.77% 12.95% 12.63%
Net Interest Margin 8.96% 8.21% 8.18%
Revenue Margin 14.11% 12.90% 13.17%
Risk Adjusted Margin 10.15% 9.43% 9.92%
Non-Interest Expenses as a
% of Average Loans Held
for Investment 5.37% 5.44% 5.80%
Efficiency Ratio (6) 38.07% 42.16% 44.08%
Net charge-off rate 3.96% 3.47% (5) 3.25%
Delinquency Rate (30+ days) 4.70% 3.89% 3.70%
Number of Loan Accounts
(000s) 48,473 48,536 49,176
Other:
Net interest income $(61,250) $(35,056) $(29,194)
Non-interest income 10,639 (249) (54,041)
Provision for loan losses 5,023 (5,981) 27
Restructuring expenses 19,354 91,074 -
Other non-interest expenses 3,870 28,717 17,667
Income tax benefit (27,530) (112,796) (38,402)
Net loss $(51,328) $(36,319) $(62,527)
Loans Held for Investment $(21,375) $(11,928) $2,488
Core Deposits (2) $5,967,308 $6,937,760 $7,301,435
Total Deposits $7,628,125 $8,786,315 $9,987,360
Total:
Interest Income $4,646,430 $4,380,376 $3,595,874
Interest Expense 1,842,992 1,767,031 1,378,052
Net interest income $2,803,438 $2,613,345 $2,217,822
Non-interest income 1,517,989 1,387,471 1,275,409
Provision for loan losses 1,142,825 887,097 867,897
Restructuring expenses 19,354 91,074 -
Other non-interest expenses 1,914,867 1,943,461 1,726,629
Income tax provision 428,010 311,572 310,866
Income From Continuing
Operations, Net of Tax $816,371 $767,612 $587,839
Loans Held for Investment $144,768,561 $143,497,756 $112,238,546
Core Deposits (2) $69,086,358 $70,767,190 $34,436,382
Total Deposits $83,342,814 $85,680,455 $47,613,150
(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." On August 20,
2007, the Company announced that it would cease residential mortgage
origination operations of its wholesale mortgage banking unit,
GreenPoint Mortgage. The results of the residential mortgage
origination operations are reported as discontinued operations and
excluded from the segment results presented. The results of
GreenPoint's Mortgage Servicing Business are reported as continuing
operations for each period presented and included in Local Banking
results for 2007.
(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) Interest Income - funds transfer pricing charges divided by average
managed loans
(4) Interest Expense - funds transfer pricing credits divided by average
retail deposits
(5) Net charge-off rate for Q2 2007 was positively impacted by 16 basis
points due to the implementation of a change in customer statement
generation from 30 to 25 days grace. This change did not have a
material impact on the provision for the quarter.
(6) Efficiency ratio is Non-Interest Expenses divided by total Managed
Revenue
CAPITAL ONE FINANCIAL CORPORATION (COF)
NATIONAL LENDING SUBSEGMENT FINANCIAL & STATISTICAL SUMMARY
FOR CONTINUING OPERATIONS
MANAGED BASIS (1)
2007 2007 2006
(in thousands) Q3 Q2 Q3
US Card:
Interest Income $1,953,967 $1,779,670 $1,734,459
Interest Expense 596,767 590,236 554,708
Net interest income $1,357,200 $1,189,434 $1,179,751
Non-interest income 975,502 842,428 881,304
Provision for loan losses 662,428 402,589 451,782
Non-interest expenses 815,470 808,769 899,062
Income tax provision 294,053 282,253 248,574
Net income $560,751 $538,251 $461,637
Loans Held for Investment $49,573,279 $50,032,530 $51,127,654
Average Loans Held for
Investment $49,682,666 $49,573,957 $50,131,562
Loans Held for Investment
Yield 15.73% 14.36% 13.84%
Net Interest Margin 10.93% 9.60% 9.41%
Revenue Margin 18.78% 16.39% 16.45%
Risk Adjusted Margin 14.65% 12.66% 13.05%
Non-Interest Expenses as a
Percentage of Average Loans
Held for Investment 6.57% 6.53% 7.17%
Efficiency Ratio (2) 34.96% 39.80% 43.62%
Net charge-off rate 4.13% 3.73% (5) 3.39%
Delinquency Rate (30+ days) 4.46% 3.41% 3.53%
Purchase Volume (3) $21,522,104 $21,781,462 $21,450,024
Number of Loan Accounts (000s) 36,504 36,608 37,483
Auto Finance:
Interest Income $661,471 $651,821 $575,376
Interest Expense 283,949 277,783 227,053
Net interest income $377,522 $374,038 $348,323
Non-interest income 13,514 23,273 21,181
Provision for loan losses 244,537 182,278 161,145
Non-interest expenses 152,275 157,044 154,014
Income tax provision (1,987) 19,948 19,021
Net (loss) income $(3,789) $38,041 $35,324
Loans Held for Investment $24,335,242 $24,067,760 $21,158,797
Average Loans Held for
Investment $24,170,047 $23,898,070 $20,812,533
Loans Held for Investment
Yield 10.95% 10.91% 11.06%
Net Interest Margin 6.25% 6.26% 6.69%
Revenue Margin 6.47% 6.65% 7.10%
Risk Adjusted Margin 2.91% 4.30% 4.76%
Non-Interest Expenses as a %
of Average Loans Held for
Investment 2.52% 2.63% 2.96%
Efficiency Ratio (2) 38.94% 39.53% 41.68%
Net charge-off rate 3.56% 2.35% 2.34%
Delinquency Rate (30+ days) 7.15% 6.00% 5.18%
Auto Loan Originations $3,248,747 $2,992,427 $3,158,481
Number of Loan Accounts (000s) 1,731 1,771 1,558
Global Financial Services:
Interest Income $896,440 $829,551 $768,262
Interest Expense 351,399 329,087 307,518
Net interest income $545,041 $500,464 $460,744
Non-interest income 323,130 311,438 311,439
Provision for loan losses 289,122 284,282 249,448
Non-interest expenses 399,862 400,469 358,806
Income tax provision 60,781 44,346 56,771
Net income $118,406 $82,805 $107,158
Loans Held for Investment $28,647,750 $27,489,749 $26,623,519
Average Loans Held for
Investment $27,952,871 $27,048,111 $26,364,992
Loans Held for Investment
Yield (4) 12.72% 12.16% 11.58%
Net Interest Margin 7.80% 7.40% 6.99%
Revenue Margin 12.42% 12.01% 11.72%
Risk Adjusted Margin 8.42% 8.03% 8.02%
Non-Interest Expenses as a %
of Average Loans Held for
Investment 5.72% 5.92% 5.44%
Efficiency Ratio (2) 46.06% 49.32% 46.47%
Net charge-off rate 4.00% 3.98% 3.70%
Delinquency Rate (30+ days) 3.02% 2.93% 2.86%
Number of Loan Accounts (000s) 10,238 10,157 10,135
(1) The information in this statistical summary reflects the adjustment to
add back the effect of securitization transactions qualifying as sales
under generally accepted accounting principles. See accompanying
schedule - "Reconciliation to GAAP Financial Measures."
(2) Efficiency ration is non-Interest Expenses divided by total Managed
Revenue
(3) Includes all purchase transactions net of returns and excludes cash
advance transactions.
(4) Excludes "GFS - Home Loans Originations" and "GFS - Settlement
Services" from Other Interest Income.
(5) Net charge-off rate for Q2 2007 was positively impacted by 31 basis
points due to the implementation of a change in customer statement
generation from 30 to 25 days grace. This change did not have a
material impact on the provision for the quarter.
CAPITAL ONE FINANCIAL CORPORATION
Reconciliation to GAAP Financial Measures
For the Three Months Ended September 30, 2007
(dollars in thousands) (unaudited)
The Company's consolidated financial statements prepared in accordance
with generally accepted accounting principles ("GAAP") are referred to as
its "reported" financial statements. Loans included in securitization
transactions which qualified as sales under GAAP have been removed from
the Company's "reported" balance sheet. However, servicing fees, finance
charges, and other fees, net of charge-offs, and interest paid to
investors of securitizations are recognized as servicing and
securitizations income on the "reported" income statement.
The Company's "managed" consolidated financial statements reflect
adjustments made related to effects of securitization transactions
qualifying as sales under GAAP. The Company generates earnings from its
"managed" loan portfolio which includes both the on-balance sheet loans
and off-balance sheet loans. The Company's "managed" income statement
takes the components of the servicing and securitizations income generated
from the securitized portfolio and distributes the revenue and expense to
appropriate income statement line items from which it originated. For
this reason the Company believes the "managed" consolidated financial
statements and related managed metrics to be useful to stakeholders.
Total
Total Reported Adjustments(1) Managed(2)
Income Statement Measures (3)
Net interest income $1,624,474 $1,178,964 $2,803,438
Non-interest income 2,149,662 $(631,673) 1,517,989
Total revenue 3,774,136 $547,291 4,321,427
Provision for loan losses 595,534 $547,291 1,142,825
Net charge-offs $480,065 $547,291 $1,027,356
Balance Sheet Measures
Loans Held for Investment $95,405,217 $50,980,053 $146,385,270
Total assets $147,154,835 $50,135,190 $197,290,025
Average loans Held for Investment $92,450,865 $52,036,422 $144,487,287
Average earning assets $121,169,771 $49,884,042 $171,053,813
Average total assets $147,884,578 $51,237,294 $199,121,872
Delinquencies $3,077,211 $2,020,368 $5,097,579
(1) Income statement adjustments reclassify the net of finance charges of
$1,659.5 million, past-due fees of $262.7 million, other interest
income of $(42.7) million and interest expense of $700.5 million; and
net charge-offs of $547.3 million from Non-interest income to Net
interest income and Provision for loan losses, respectively.
(2) The managed loan portfolio does not include auto loans which have been
sold in whole loan sale transactions where the Company has retained
servicing rights.
(3) Based on continuing operations.
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands) (unaudited)
As of As of As of
September 30 June 30 September 30
2007 2007 (1) 2006 (1)
Assets:
Cash and due from banks $1,819,121 $2,354,393 $1,461,132
Federal funds sold and resale
agreements 1,922,735 3,940,269 3,340,809
Interest-bearing deposits at
other banks 703,805 753,160 797,708
Cash and cash equivalents 4,445,661 7,047,822 5,599,649
Securities available for sale 19,959,247 20,203,381 13,631,409
Mortgage loans held for sale 1,454,457 2,732,044 311,169
Loans held for investment 95,405,217 91,617,353 63,612,169
Less: Allowance for loan and
lease losses (2,320,000) (2,120,000) (1,840,000)
Net loans held for investment 93,085,217 89,497,353 61,772,169
Accounts receivable from
securitizations 6,905,859 5,481,686 5,617,113
Premises and equipment, net 2,268,034 2,260,928 1,532,006
Interest receivable 793,693 768,617 529,104
Goodwill 12,952,838 13,612,005 3,964,177
Other 5,289,829 4,334,121 1,949,950
Total assets $147,154,835 $145,937,957 $94,906,746
Liabilities:
Non-interest-bearing deposits $10,840,189 $11,236,110 $4,145,173
Interest-bearing deposits 72,502,625 74,444,345 43,467,977
Senior and subordinated notes 10,784,182 9,222,506 8,701,794
Other borrowings 22,722,519 20,681,289 17,619,817
Interest payable 552,674 543,805 387,000
Other 4,965,794 4,623,241 3,908,008
Total liabilities 122,367,983 120,751,296 78,229,769
Stockholders' Equity:
Common stock 4,183 4,174 3,065
Paid-in capital, net 15,768,525 15,682,009 7,237,785
Retained earnings and cumulative
other comprehensive income 11,395,226 11,386,625 9,551,504
Less: Treasury stock, at cost (2,381,082) (1,886,147) (115,377)
Total stockholders' equity 24,786,852 25,186,661 16,676,977
Total liabilities and
stockholders' equity $147,154,835 $145,937,957 $94,906,746
(1) Certain prior period amounts have been reclassified to conform to the
current period presentation.
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data) (unaudited)
Three Months Ended
September 30 June 30(1) September 30(1)
2007 2007 2006
Interest Income:
Loans held for investment, including
past-due fees $2,381,096 $2,255,573 $1,814,803
Securities available for sale 252,550 237,978 151,616
Other 133,321 145,135 98,652
Total interest income 2,766,967 2,638,686 2,065,071
Interest Expense:
Deposits 740,091 749,603 442,571
Senior and subordinated notes 144,643 134,061 96,300
Other borrowings 257,759 216,441 231,685
Total interest expense 1,142,493 1,100,105 770,556
Net interest income 1,624,474 1,538,581 1,294,515
Provision for loan and lease losses 595,534 396,713 430,566
Net interest income after provision
for loan and lease losses 1,028,940 1,141,868 863,949
Non-Interest Income:
Servicing and securitizations 1,354,303 1,226,896 1,071,091
Service charges and other
customer-related fees 522,374 482,979 459,125
Mortgage banking operations 52,661 68,365 44,520
Interchange 103,799 125,979 150,474
Other 116,525 67,632 36,175
Total non-interest income 2,149,662 1,971,851 1,761,385
Non-Interest Expense:
Salaries and associate benefits 627,358 667,904 554,504
Marketing 332,693 326,067 368,498
Communications and data processing 194,551 192,620 183,020
Supplies and equipment 134,639 116,434 111,625
Occupancy 77,597 75,843 49,710
Restructuring expense 19,354 91,074 -
Other 548,029 564,593 459,272
Total non-interest expense 1,934,221 2,034,535 1,726,629
Income from continuing operations
before income taxes 1,244,381 1,079,184 898,705
Income taxes 428,010 311,572 310,866
Income from continuing operations,
net of tax 816,371 767,612 587,839
(Loss) from discontinued operations,
net of tax (898,029) (17,240) -
Net (loss) income $(81,658) $750,372 $587,839
Basic earnings per share
Net income from continuing operations $2.11 $1.96 $1.95
Net (loss) from discontinued
operations (2.32) (0.04) -
Net (loss) income $(0.21) $1.92 $1.95
Diluted earnings per share
Net income from continuing operations $2.09 $1.93 $1.89
Net (loss) from discontinued
operations (2.30) (0.04) -
Net (loss) income $(0.21) $1.89 $1.89
Dividends paid per share $0.03 $0.03 $0.03
(in thousands, except per share data) (unaudited)
Nine Months Ended
September 30 September 30 (1)
2007 2006
Interest Income:
Loans held for investment, including
past-due fees $6,963,349 $5,044,362
Securities available for sale 694,608 483,078
Other 460,005 313,370
Total interest income 8,117,962 5,840,810
Interest Expense:
Deposits 2,220,177 1,262,412
Senior and subordinated notes 417,250 275,361
Other borrowings 712,937 604,563
Total interest expense 3,350,364 2,142,336
Net interest income 4,767,598 3,698,474
Provision for loan and lease losses 1,342,292 963,281
Net interest income after provision
for loan and lease losses 3,425,306 2,735,193
Non-Interest Income:
Servicing and securitizations 3,569,281 3,250,201
Service charges and other
customer-related fees 1,484,820 1,308,254
Mortgage banking operations 172,476 118,378
Interchange 347,889 401,503
Other 321,417 251,213
Total non-interest income 5,895,883 5,329,549
Non-Interest Expense:
Salaries and associate benefits 1,970,433 1,607,113
Marketing 989,654 1,048,964
Communications and data processing 569,405 524,958
Supplies and equipment 384,971 322,837
Occupancy 230,835 151,840
Restructuring expense 110,428 -
Other 1,687,077 1,325,293
Total non-interest expense 5,942,803 4,981,005
Income from continuing operations
before income taxes 3,378,386 3,083,737
Income taxes 1,108,279 1,059,972
Income from continuing operations,
net of tax 2,270,107 2,023,765
(Loss) from discontinued operations,
net of tax (2) (926,343) -
Net (loss) income $1,343,764 $2,023,765
Basic earnings per share
Net income from continuing operations $5.74 $6.73
Net (loss) from discontinued
operations (2.34) -
Net (loss) income $3.40 $6.73
Diluted earnings per share
Net income from continuing operations $5.66 $6.53
Net (loss) from discontinued
operations (2.31) -
Net (loss) income $3.35 $6.53
Dividends paid per share $0.08 $0.08
(1) Certain prior period amounts have been reclassified to conform to the
current period presentation.
(2) On August 20, 2007, the Company announced that it would cease
residential mortgage origination operations of its wholesale mortgage
banking unit, GreenPoint Mortgage, which was acquired in Q4 2006. The
results of the residential mortgage origination operations are being
reported as discontinued operations for each period presented
subsequent to the acquisition.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands) (unaudited)
Reported Quarter Ended 9/30/07
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment 91,744,846 2,381,096 10.38%
Securities available for sale 20,041,177 252,550 5.04%
Other 5,908,249 133,321 9.03%
Total earning assets (2) $117,694,272 $2,766,967 9.40%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $4,759,665 $34,030 2.86%
Money market deposit accounts 28,696,735 294,873 4.11%
Savings accounts 8,345,638 37,474 1.80%
Other Consumer Time Deposits 17,203,453 194,256 4.52%
Public Fund CD's of $100,000 or
more 1,884,767 23,092 4.90%
CD's of $100,000 or more 8,673,860 103,296 4.76%
Foreign time deposits 3,991,056 53,070 5.32%
Total Interest-bearing deposits $73,555,174 $740,091 4.02%
Senior and subordinated notes 9,811,821 144,643 5.90%
Other borrowings 18,892,876 257,759 5.46%
Total interest-bearing liabilities $102,259,871 $1,142,493 4.47%
Net interest spread 4.93%
Interest income to average
earning assets 9.40%
Interest expense to average
earning assets 3.88%
Net interest margin 5.52%
(dollars in thousands) (unaudited)
Reported Quarter Ended 6/30/07 (1)
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment 91,144,738 2,255,573 9.90%
Securities available for sale 19,144,926 237,978 4.97%
Other 9,140,405 145,135 6.35%
Total earning assets (2) $119,430,069 $2,638,686 8.84%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $5,115,994 $36,764 2.87%
Money market deposit accounts 27,612,189 276,038 4.00%
Savings accounts 8,409,684 36,294 1.73%
Other Consumer Time Deposits 18,494,150 217,700 4.71%
Public Fund CD's of $100,000 or
more 1,981,883 24,290 4.90%
CD's of $100,000 or more 9,609,949 107,491 4.47%
Foreign time deposits 3,994,639 51,026 5.11%
Total Interest-bearing deposits $75,218,488 $749,603 3.99%
Senior and subordinated notes 9,336,130 134,061 5.74%
Other borrowings 17,124,784 216,441 5.06%
Total interest-bearing liabilities $101,679,402 $1,100,105 4.33%
Net interest spread 4.51%
Interest income to average
earning assets 8.84%
Interest expense to average
earning assets 3.69%
Net interest margin 5.15%
(dollars in thousands) (unaudited)
Reported Quarter Ended 9/30/06 (1)
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment 62,428,789 1,814,803 11.63%
Securities available for sale 14,259,073 151,616 4.25%
Other 4,749,636 98,652 8.31%
Total earning assets (2) $81,437,498 $2,065,071 10.14%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $619,460 $4,816 3.11%
Money market deposit accounts 11,237,206 103,073 3.67%
Savings accounts 3,911,765 28,604 2.92%
Other Consumer Time Deposits 14,325,784 153,881 4.30%
Public Fund CD's of $100,000 or
more 1,022,465 13,046 5.10%
CD's of $100,000 or more 8,302,487 95,229 4.59%
Foreign time deposits 3,564,708 43,922 4.93%
Total Interest-bearing deposits $42,983,875 $442,571 4.12%
Senior and subordinated notes 6,544,768 96,300 5.89%
Other borrowings 18,010,737 231,685 5.15%
Total interest-bearing liabilities $67,539,380 $770,556 4.56%
Net interest spread 5.58%
Interest income to average
earning assets 10.14%
Interest expense to average
earning assets 3.78%
Net interest margin 6.36%
(1) Prior period amounts have been reclassified to conform with current
period presentation.
(2) Average balances, income and expenses, yields and rates are based on
continuing operations.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands) (unaudited)
Managed (1) Quarter Ended 9/30/07
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment 143,781,268 4,324,272 12.03%
Securities available for sale 20,041,177 252,550 5.04%
Other 3,755,869 69,610 7.41%
Total earning assets (3) $167,578,314 $4,646,432 11.09%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $4,759,665 $34,030 2.86%
Money market deposit accounts 28,696,735 294,873 4.11%
Savings accounts 8,345,638 37,474 1.80%
Other Consumer Time Deposits 17,203,453 194,256 4.52%
Public Fund CD's of $100,000 or
more 1,884,767 23,092 4.90%
CD's of $100,000 or more 8,673,860 103,296 4.76%
Foreign time deposits 3,991,056 53,070 5.32%
Total Interest-bearing deposits $73,555,174 $740,091 4.02%
Senior and subordinated notes 9,811,821 144,643 5.90%
Other borrowings 18,892,876 257,759 5.46%
Securitization liability 51,320,446 700,501 5.46%
Total interest-bearing liabilities $153,580,317 $1,842,994 4.80%
Net interest spread 6.29%
Interest income to average
earning assets 11.09%
Interest expense to average
earning assets 4.40%
Net interest margin 6.69%
(dollars in thousands) (unaudited)
Managed (1) Quarter Ended 6/30/07 (2)
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment 142,616,011 4,055,689 11.38%
Securities available for sale 19,144,926 237,978 4.97%
Other 7,080,441 86,709 4.90%
Total earning assets (3) $168,841,378 $4,380,376 10.38%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $5,115,994 $36,764 2.87%
Money market deposit accounts 27,612,189 276,038 4.00%
Savings accounts 8,409,684 36,294 1.73%
Other Consumer Time Deposits 18,494,150 217,700 4.71%
Public Fund CD's of $100,000 or
more 1,981,883 24,290 4.90%
CD's of $100,000 or more 9,609,949 107,491 4.47%
Foreign time deposits 3,994,639 51,026 5.11%
Total Interest-bearing deposits $75,218,488 $749,603 3.99%
Senior and subordinated notes 9,336,130 134,061 5.74%
Other borrowings 17,124,784 216,441 5.06%
Securitization liability 50,841,894 666,926 5.25%
Total interest-bearing liabilities $152,521,296 $1,767,031 4.63%
Net interest spread 5.75%
Interest income to average
earning assets 10.38%
Interest expense to average
earning assets 4.19%
Net interest margin 6.19%
(dollars in thousands) (unaudited)
Managed (1) Quarter Ended 9/30/06 (2)
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment 110,512,266 3,401,130 12.31%
Securities available for sale 14,259,073 151,616 4.25%
Other 2,970,236 43,128 5.81%
Total earning assets (3) $127,741,575 $3,595,874 11.26%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $619,460 $4,816 3.11%
Money market deposit accounts 11,237,206 103,073 3.67%
Savings accounts 3,911,765 28,604 2.92%
Other Consumer Time Deposits 14,325,784 153,881 4.30%
Public Fund CD's of $100,000 or
more 1,022,465 13,046 5.10%
CD's of $100,000 or more 8,302,487 95,229 4.59%
Foreign time deposits 3,564,708 43,922 4.93%
Total Interest-bearing deposits $42,983,875 $442,571 4.12%
Senior and subordinated notes 6,544,768 96,300 5.89%
Other borrowings 18,010,737 231,672 5.15%
Securitization liability 47,648,021 607,510 5.10%
Total interest-bearing liabilities $115,187,401 $1,378,053 4.79%
Net interest spread 6.47%
Interest income to average
earning assets 11.26%
Interest expense to average
earning assets 4.32%
Net interest margin 6.94%
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans.
(2) Prior period amounts have been reclassified to conform with current
period presentation.
(3) Average balances, income and expenses, yields and rates are based on
continuing operations.
SOURCE Capital One Financial Corporation
-0- 10/18/2007
/CONTACT: Investor Relations, Jeff Norris, +1-703-720-2455; Media
Relations, Tatiana Stead, +1-703-720-2352, or Julie Rakes, +1-804-284-5800,
all of Capital One Financial Corporation/
/Web site: http://www.capitalone.com /
(COF)
CO: Capital One Financial Corporation
ST: Virginia
IN: FIN
SU: ERN CCA
AD-CS
-- NETH066 --
1601 10/18/2007 16:23 EDT http://www.prnewswire.com