Capital One Reports Second Quarter Earnings
Capital One Reports Second Quarter Earnings
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Affirms earnings guidance of $7.00 to $7.40 per share
MCLEAN, Va., July 19 /PRNewswire-FirstCall/ -- Capital One Financial Corporation (NYSE: COF) today announced earnings for the second quarter of 2007 of $750.4 million, or $1.89 per share (diluted), compared with $552.6 million, or $1.78 per share (diluted), for the second quarter of 2006, and $675.1 million, or $1.62 per share (diluted), for the first quarter of 2007. Additionally, the company affirmed earnings guidance for 2007 of $7.00 to $7.40 per share (diluted) with current expectations towards the lower end of the range.
"Capital One's performance in the second quarter reflects our focus on revenue growth, operating leverage, the bank integration, and capital management," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "Despite the current headwinds in financial services, Capital One continues to execute against our strategy of national lending and local banking, which positions us to generate strong and sustainable returns."
Earnings in the quarter were reduced by several non-operating items:
-- $101.1 million pre-tax, or $0.16 earnings per share, in
restructuring charges;
-- $79.2 million pre-tax, or $0.13, earnings per share, in integration
expenses and core deposit intangible amortization;
-- $39.8 million pre-tax, or $0.06, earnings per share, in accelerated
vesting of restricted stock related to the transition to new
management in our Banking business.
Partially offsetting these charges were two items that increased quarterly earnings:
-- $69.0 million in lower than normal taxes incurred in the quarter
related to changes in our international tax position,
-- $17.4 million pre-tax, or $0.03 earnings per share, from the
calling of trust preferred notes associated with North Fork and
Hibernia.
Additional highlights:
-- The company executed $1.75 billion of share repurchases in the
quarter, including the $1.50 billion Accelerated Share Repurchase
program.
-- A company-wide restructuring program was initiated that is expected
to reduce 2009 operating expenses by $700.0 million.
"We're maintaining our earnings guidance of $7.00-$7.40 per share for 2007," said Gary L. Perlin, Capital One's Chief Financial Officer. "The full- year impact of the non-operating items in the second quarter of 2007, coupled with the decision to complete the $3.0 billion in previously announced share repurchases in 2007, moves our expectations towards the lower end of the range."
The company expects to incur approximately $200 million of restructuring charges in 2007, including the $101 million recognized in the second quarter of 2007.
Business trends for Capital One for the second quarter of 2007 that are expected to continue through the year include declining balances year over year with expanding revenue margin in U.S. Card and elevated loss levels in Auto Finance's prime business. The company also assumes that the following current market conditions remain unchanged:
-- continued pressure in secondary mortgage market pricing,
-- labor markets and the yield curve remain at current levels,
-- continued U.S. consumer credit normalization, and
-- stable UK consumer credit.
Total Company Highlights
-- Total managed revenue is up 2.7 percent relative to the first
quarter of 2007 driven largely by revenue margin expansion in our
U.S. Card sub-segment.
-- Provision expense was up quarter over quarter and year over year,
driven by the normalization of charge-offs. The increase in
provision from the first quarter of 2007 to the second quarter of
2007 was driven by a $28.8 million increase in provision expense in
our U.S. Card business.
Segment Results
Local Banking Segment highlights relative to Q1 2007
-- Net income of $132.5 million was flat relative to the previous
quarter.
-- Loans increased moderately from the first quarter of 2007 to $41.9
billion. Commercial and small business loans grew from the first
quarter of 2007. This was partially offset by the decline in the
mortgage portfolio.
-- Total bank deposits were stable at $74.5 billion, reflecting
expected seasonality in public deposits offset by growth in
commercial deposits.
-- Integration efforts continue and the company expects to achieve its
projected synergies.
-- The company announced in a July 9, 2007 press release, the
transition to a new bank leadership team on August 6, 2007. The
new team will be headed by Lynn Pike, who will assume the role of
Bank President, Mike Slocum, who will join the company from
Wachovia Corporation as EVP of Commercial Lending, and Carolyn
Drexel, EVP, who will expand her scope to include all of our branch
banking and private banking operations.
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), Auto Finance, and Mortgage Banking.
-- Profits for the National Lending segment were up 9.9 percent as
compared to the first quarter of 2007, driven by increased profits
in U.S. Card, GFS, and Mortgage Banking.
-- The managed charge-off rate for the National Lending segment
increased to 3.45 percent in the second quarter of 2007 from 3.07
percent in the second quarter of 2006 reflecting continued consumer
credit normalization. The rate would have been 3.61 percent without
the one-time impact in the second quarter of 2007 from a policy
change in U.S. Card. The delinquency rate of 3.86 percent for
National Lending increased from 3.44 percent as of June 30, 2006
reflecting expected consumer credit normalization.
U.S. Card highlights relative to Q2 2006
-- U.S. Card reported net income of $538.3 million, a 27.6 percent
increase, year over year, driven by growth in revenue and
reductions in non-interest expenses.
-- Revenue increased 5.6 percent from the second quarter of 2006
largely as a result of pricing changes implemented in some of our
products after completion of the card holder system conversion.
-- Non-interest expenses declined 6.1 percent as a result of the
completion of the company's investment in infrastructure, and the
ability to leverage the infrastructure to improve costs.
Additionally, marketing expense declined modestly relative to last
year's second quarter.
-- Loans grew a modest 2.7 percent from the year ago quarter to $50.0
billion, resulting from a reduction in marketing of prime customers
and teaser rate offers, and a $600.0 million portfolio sale in the
first quarter of 2007.
-- Charge-offs and delinquencies rose from the second quarter of 2006.
The increases resulted primarily from continued normalization of
consumer credit, partially offset by the transition to a new
customer billing policy. Looking forward, the company expects U.S.
Card charge-offs to stabilize around five percent at the end of
2007.
Global Financial Services (GFS) highlights relative to Q2 2006
-- Net income rose 61.9 percent from the second quarter of 2006, to
$82.8 million. Increases in revenue and expenses resulted from
growth in managed loans and originations. The provision expense
declined based on relatively stable charge-offs and a more stable
outlook for UK credit.
-- Managed loans grew 6.0 percent, to $27.5 billion, with growth from
North American businesses more than offsetting a modest decline in
loans in the UK.
-- Risk metrics were up modestly from the second quarter of 2006 as
expected normalization continues in the U.S. and credit in the UK
stabilizes.
Auto Finance highlights relative to Q2 2006
-- Net income of $38.0 million was down 60.0 percent from last year as
a result of:
-- Net interest margin declines, largely as a result of the
higher mix of prime loans as compared to the second quarter
of last year,
-- An increase in provision expense of $107.6 million from an
unusually low second quarter 2006.
-- Charge-off and delinquencies increased from record low levels in
the second quarter of 2006 due to continued consumer credit
normalization, elevated losses and delinquencies in recent Dealer
Prime vintages, and industry-wide risk expansion in 2006.
-- Managed loans of $24.1 billion were up 17.1 percent relative to the
second quarter of 2006 from ongoing originations as well as the
addition of loans from the North Fork portfolio.
Mortgage Banking highlights relative to Q1 2007
-- Profits of $2.6 million reflected continued industry pressure on
originations and gain on sale margins.
-- In the second quarter of 2007, the company had a lower reserve
build for reps and warranties and positive mortgage servicing
rights valuation adjustments.
-- Non-interest expenses were down $3.5 million, or 4.0 percent,
relative to the first quarter as the business announced branch and
facility consolidations and continued aggressive expense
management.
-- The business originated $5.5 billion in loans during the quarter,
down 44.4 percent from second quarter of 2006 originations and down
19.1 percent from the first quarter of 2007.
The company generates earnings from its managed loan portfolio, which includes both on-balance sheet loans and securitized (off-balance sheet) loans. For this reason, the company believes managed financial measures to be useful to stakeholders. In compliance with Regulation G of the Securities and Exchange Commission, the company is providing a numerical reconciliation of managed financial measures to comparable measures calculated on a reported basis using generally accepted accounting principles (GAAP). Please see the schedule titled "Reconciliation to GAAP Financial Measures" attached to this release for more information.
Forward looking statements
The company cautions that its current expectations in this release, in the presentation slides available on the company's website and in its Form 8-K dated July 19, 2007 for 2007 earnings, the interest rate environment, charge- off rates, mortgage market trends, 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 economic and 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 report on Form 10-Q for the quarter ended March 31, 2007.
About Capital One
Headquartered in McLean, Virginia, Capital One Financial Corporation (http://www.capitalone.com) is a financial holding company, with 725 locations in New York, New Jersey, Connecticut, Texas and Louisiana. Its principal subsidiaries, Capital One Bank, Capital One Auto Finance, Inc., Capital One, N.A., and North Fork Bank offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One's subsidiaries collectively had $85.7 billion in deposits and $144.2 billion in managed loans outstanding as of June 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: Second 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 share 2007 2007 2006
data and as noted) Q2 Q1 Q2
Earnings (Reported Basis)
Net Interest Income $1,560.1 (2) $1,622.8 $1,197.1
Non-Interest Income 2,006.2 1,810.5 (3) 1,709.9 (5)
Total Revenue(6) 3,566.3 3,433.3 2,907.0
Provision for Loan Losses 401.0 350.0 362.4
Marketing Expenses 326.7 331.5 356.7
Restructuring Expenses 101.1 (1) - -
Operating Expenses 1,685.1 (4),(12) 1,713.9 (4) 1,324.2
Income Before Taxes 1,052.4 1,037.9 863.7
Tax Rate(7) 28.7 % 35.0 % 36.0 %
Net Income $750.4 $675.1 $552.6
Common Share Statistics
Basic EPS $1.92 $1.65 $1.84
Diluted EPS $1.89 $1.62 $1.78
Dividends Per Share $0.03 $0.03 $0.03
Tangible Book Value Per Share
(period end) $27.45 $28.18 $38.68
Stock Price Per Share (period
end) $78.44 $75.46 $85.45
Total Market Capitalization
(period end) $30,701.4 $31,112.2 $25,968.3
Shares Outstanding (period
end) 391.4 412.3 303.9
Shares Used to Compute Basic
EPS 390.8 408.7 300.8
Shares Used to Compute Diluted
EPS 397.5 415.5 310.0
Reported Balance Sheet
Statistics (period average)
Average Loans Held for
Investment $91,620 $93,466 $58,833
Average Earning Assets $123,209 $124,811 $79,266
Average Assets $147,758 $148,657 $89,644
Average Interest Bearing
Deposits $75,218 $74,867 $42,797
Total Average Deposits $86,719 $86,237 $47,209
Average Equity $25,128 $25,610 $15,581
Return on Average Assets (ROA) 2.03 % 1.82 % 2.47 %
Return on Average Equity (ROE) 11.95 % 10.54 % 14.19 %
Reported Balance Sheet
Statistics (period end)
Loans Held for Investment $91,617 $90,869 $60,603
Total Assets $145,938 $148,699 $89,530
Interest Bearing Deposits $74,444 $76,306 $42,699
Total Deposits $85,680 $87,664 $47,187
Performance Statistics
(Reported)
Net Interest Income Growth
(annualized) (15)% 63 % (3)%
Non Interest Income Growth
(annualized) 43 % 34 % (32)%
Revenue Growth (annualized) 15 % 48 % (21)%
Net Interest Margin 5.06 % 5.20 % 6.04 %
Revenue Margin 11.58 % 11.00 % 14.67 %
Risk Adjusted Margin (10) 10.28 % 9.63 % 13.18 %
Non Interest Expense as a % of
Average Loans Held for
Investment (annualized) 9.22 % 8.75 % 11.43 %
Efficiency Ratio (11) 56.41 % 59.58 % 57.82 %
Asset Quality Statistics
(Reported)
Allowance $2,120 $2,105 $1,765
Allowance as a % of Reported
Loans Held for Investment 2.31 % 2.32 % 2.91 %
Net Charge-Offs $401 $430 $296
Net Charge-Off Rate 1.75 % (13) 1.84 % 2.01 %
Full-time equivalent employees
(in thousands) 29.5 30.8 21.4
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
MANAGED BASIS (*)
2007 2007 2006
(in millions) Q2 Q1 Q2
Earnings (Managed Basis)
Net Interest Income $2,634.9 (2) $2,620.8 $2,140.8
Non-Interest Income 1,421.8 1,330.2 (3) 1,199.4 (5)
Total Revenue(6) 4,056.7 3,951.0 3,340.2
Provision for Loan Losses 891.4 867.7 795.6
Marketing Expenses 326.7 331.5 356.7
Restructuring Expenses 101.1 (1) - -
Operating Expenses 1,685.1 (4),(12) 1,713.9 (4) 1,324.2
Income Before Taxes 1,052.4 1,037.9 863.7
Tax Rate(7) 28.7 % 35.0 % 36.0 %
Net Income $750.4 $675.1 $552.6
Managed Balance Sheet
Statistics (period average)
Average Loans Held for
Investment $143,091 $144,113 $106,090
Average Earning Assets $172,621 $173,403 $124,307
Average Assets $198,515 $198,561 $136,351
Return on Average Assets (ROA) 1.51 % 1.36 % 1.62 %
Managed Balance Sheet
Statistics (period end)
Loans Held for Investment $144,186 $142,005 $108,433
Total Assets $197,703 $199,118 $136,819
Tangible Assets (9) $183,259 $184,717 $132,676
Tangible Common Equity (8) $10,743 $11,620 $11,754
Tangible Common Equity to
Tangible Assets Ratio 5.86 % 6.29 % 8.86 %
% Off-Balance Sheet
Securitizations 36 % 36 % 44 %
Performance Statistics
(Managed)
Net Interest Income Growth
(annualized) 2 % 47 % (17)%
Non Interest Income Growth
(annualized) 28 % 41 % (7)%
Revenue Growth (annualized) 11 % 45 % (14)%
Net Interest Margin 6.11 % 6.05 % 6.89 %
Revenue Margin 9.40 % 9.11 % 10.75 %
Risk Adjusted Margin (10) 7.34 % 6.93 % 8.40 %
Non Interest Expense as a % of
Average Loans Held for
Investment (annualized) 5.91 % 5.68 % 6.34 %
Efficiency Ratio (11) 49.59 % 51.77 % 50.32 %
Asset Quality Statistics
(Managed)
Net Charge-Offs $891 $947 $729
Net Charge-Off Rate 2.49 % (13) 2.63 % 2.75 %
(*) 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) 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 $101.1 MM of restructuring
charges were recognized during Q2 2007.
(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 a $46.2 million gain resulting from the sale of a 7% stake
in the privately held company, DealerTrack Holding Inc., a leading
provider of on-demand software and data solutions for the automotive
retail industry.
(4) Includes core deposit intangible amortization expense of
$53.7 million in Q2 2007 and $55.0 million in Q1 2007, and
integration costs of $25.5 million in Q2 2007 and $15.1 million in
Q1 2007.
(5) Includes a $20.5 million gain in Q2 2006 as a result of the
MasterCard, Inc. initial public offering and losses of $20.8 million
in Q2 2006 related to the derivative entered into in April 2006 to
mitigate certain exposures we faced as a result of our acquisition
of North Fork.
(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 2007 -- $236.3, Q1 2007 --
$213.6, and Q2 2006 -- $215.0.
(7) 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 in prior periods as follows: Q1 2007 --
$11.7 million, Q2 2006 -- $10.7 million.
(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) Includes managed assets less intangible assets.
(10) Risk adjusted margin is total revenue less net charge-offs as a
percentage of average earning assets.
(11) 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 the quarter.
CAPITAL ONE FINANCIAL CORPORATION (COF)
SEGMENT FINANCIAL & STATISTICAL SUMMARY
MANAGED BASIS (1)
2007 2007 2006
(in thousands) Q2 Q1 Q2
Local Banking: (3)
Interest Income $1,724,239 $1,740,132 $682,679
Interest Expense 1,139,774 1,166,563 433,451
Net interest income $584,465 $573,569 $249,228
Non-interest income 174,691 186,873 114,039
Provision for loan losses 23,929 23,776 6,632
Other non-interest expenses 533,297 539,064 289,996
Income tax provision 69,464 67,975 23,324
Net income $132,466 $129,627 $43,315
Loans Held for Investment $41,919,645 $41,642,594 $13,189,112
Average Loans Held for
Investment $42,110,537 $41,846,678 $13,115,534
Core Deposits(2) $63,828,306 $62,962,395 $27,857,265
Total Deposits $74,482,705 $74,509,054 $35,281,970
Loans Held for Investment
Yield 7.03% 6.99% 7.63%
Net Interest Margin -
Loans (4) 1.88% 1.91% 3.18%
Net Interest Margin -
Deposits (5) 2.01% 1.98% 1.59%
Efficiency Ratio 70.25% 70.89% 79.83%
Net charge-off rate 0.19% 0.15% 0.45%
Non Performing Loans $80,781 $80,162 $90,508
Non Performing Loans as a %
of Loans Held for
Investment 0.19% 0.19% 0.69%
Non-Interest Expenses to
Loans Held for Investment 5.07% 5.15% 8.84%
Number of Active ATMS 1,253 1,236 586
Number of locations 724 723 325
National Lending:
Interest Income $3,335,417 $3,330,300 $2,901,131
Interest Expense 1,249,968 1,241,685 995,023
Net interest income $2,085,449 $2,088,615 $1,906,108
Non-interest income 1,247,343 1,187,922 1,130,005
Provision for loan losses 873,471 849,216 785,029
Other non-interest expenses 1,449,697 1,509,057 1,375,138
Income tax provision 347,916 316,285 307,925
Net income $661,708 $601,979 $568,021
Loans Held for Investment $102,277,827 $100,371,532 $95,230,654
Average Loans Held for
Investment $100,995,167 $102,276,581 $92,954,555
Core Deposits(2) $1,124 $3,212 $138,984
Total Deposits $2,411,435 $2,409,291 $2,434,679
Loans Held for Investment
Yield 13.03% 12.70% 12.47%
Net Interest Margin 8.26% 8.17% 8.20%
Revenue Margin 13.20% 12.81% 13.06%
Risk Adjusted Margin 9.75% 9.17% 9.99%
Non-Interest Expenses to
Loans Held for Investment 5.74% 5.90% 5.92%
Efficiency Ratio 43.50% 46.06% 45.29%
Net charge-off rate 3.45% (6) 3.65% 3.07%
Delinquency Rate (30+ days) 3.86% 3.63% 3.44%
Number of Loan Accounts (000s) 48,548 48,668 48,854
Other: (3)
Net interest income $(35,056) $(41,427) $(14,507)
Non-interest income (249) (44,564) (44,712)
Provision for loan losses (5,981) (5,330) 3,950
Restructuring expenses 101,142 - -
Other non-interest expenses 28,717 (2,720) 15,763
Income tax benefit (115,381) (21,385) (20,183)
Net loss $(43,802) $(56,556) $(58,749)
Loans Held for Investment $(11,928) $(9,084) $13,673
Core Deposits(2) $6,937,760 $7,532,854 $5,889,261
Total Deposits $8,786,315 $10,745,405 $9,470,164
Total:
Interest Income $4,454,751 $4,435,367 $3,414,411
Interest Expense 1,819,893 1,814,610 1,273,582
Net interest income $2,634,858 $2,620,757 $2,140,829
Non-interest income 1,421,785 1,330,231 1,199,332
Provision for loan losses 891,419 867,662 795,611
Restructuring expenses 101,142 - -
Other non-interest expenses 2,011,711 2,045,401 1,680,897
Income tax provision 301,999 362,875 311,066
Net income $750,372 $675,050 $552,587
Loans Held for Investment $144,185,544 $142,005,042 $108,433,439
Core Deposits(2) $70,767,190 $70,498,461 $33,885,510
Total Deposits $85,680,455 $87,663,750 $47,186,813
(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) Results of the North Fork acquisition were included in the Other
category for Q4 2006.
(4) Interest Income - funds transfer pricing charges divided by average
managed loans
(5) Interest Expense - funds transfer pricing credits divided by average
retail deposits
(6) 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 Net Provision for the quarter.
CAPITAL ONE FINANCIAL CORPORATION (COF)
NATIONAL LENDING SUBSEGMENT FINANCIAL & STATISTICAL SUMMARY
MANAGED BASIS (1)
2007 2007 2006
(in thousands) Q2 Q1 Q2
US Card:
Interest Income $1,779,670 $1,813,846 $1,628,144
Interest Expense 590,236 602,505 507,722
Net interest income $1,189,434 $1,211,341 $1,120,422
Non-interest income 842,428 778,606 803,083
Provision for loan losses 402,589 373,836 413,701
Non-interest expenses 808,769 861,020 860,874
Income tax provision 282,253 259,751 227,125
Net income $538,251 $495,340 $421,805
Loans Held for Investment $50,032,530 $49,681,559 $48,736,483
Average Loans Held for
Investment $49,573,957 $51,878,104 $47,856,045
Loans Held for Investment
Yield 14.36% 13.99% 13.61%
Net Interest Margin 9.60% 9.34% 9.36%
Revenue Margin 16.39% 15.34% 16.08%
Risk Adjusted Margin 12.66% 11.35% 12.79%
Non-Interest Expenses to Loans
Held for Investment 6.53% 6.64% 7.20%
Efficiency Ratio (2) 39.80% 43.27% 44.76%
Net charge-off rate 3.73% (5) 3.99% 3.29%
Delinquency Rate (30+ days) 3.41% 3.48% 3.30%
Purchase Volume (3) $21,781,462 $19,346,812 $20,878,732
Number of Loan Accounts (000s) 36,608 36,758 37,199
Auto Finance:
Interest Income $651,821 $637,609 $547,731
Interest Expense 277,783 265,556 207,497
Net interest income $374,038 $372,053 $340,234
Non-interest income 23,273 60,586 29,842
Provision for loan losses 182,278 200,058 74,714
Non-interest expenses 157,044 164,948 149,115
Income tax provision 19,948 23,266 51,186
Net income $38,041 $44,367 $95,061
Loans Held for Investment $24,067,760 $23,930,547 $20,558,455
Average Loans Held for
Investment $23,898,070 $23,597,675 $20,187,631
Loans Held for Investment
Yield 10.91% 10.81% 10.85%
Net Interest Margin 6.26% 6.31% 6.74%
Revenue Margin 6.65% 7.33% 7.33%
Risk Adjusted Margin 4.30% 5.04% 5.79%
Non-Interest Expenses to Loans
Held for Investment 2.63% 2.80% 2.95%
Efficiency Ratio (2) 39.53% 38.13% 40.29%
Net charge-off rate 2.35% 2.29% 1.54%
Delinquency Rate (30+ days) 6.00% 4.64% 4.55%
Auto Loan Originations $2,992,427 $3,311,868 $3,107,409
Number of Loan Accounts (000s) 1,771 1,762 1,525
Global Financial Services:
Interest Income $829,551 $803,141 $725,256
Interest Expense 329,087 316,223 279,804
Net interest income $500,464 $486,918 $445,452
Non-interest income 311,438 299,307 297,080
Provision for loan losses 284,282 275,322 296,614
Non-interest expenses 400,469 396,201 365,149
Income tax provision 44,346 39,860 29,614
Net income $82,805 $74,842 $51,155
Loans Held for Investment $27,489,749 $26,759,426 $25,935,716
Average Loans Held for
Investment $27,048,111 $26,800,802 $24,910,879
Loans Held for Investment
Yield (4) 12.16% 11.88% 11.58%
Net Interest Margin 7.40% 7.27% 7.15%
Revenue Margin 12.01% 11.73% 11.92%
Risk Adjusted Margin 8.03% 7.55% 8.02%
Non-Interest Expenses to Loans
Held for Investment 5.92% 5.91% 5.86%
Efficiency Ratio (2) 49.32% 50.39% 49.18%
Net charge-off rate 3.98% 4.18% 3.90%
Delinquency Rate (30+ days) 2.93% 2.99% 2.82%
Number of Loan Accounts (000s) 10,157 10,148 10,130
(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) 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 Net Provision for the quarter.
CAPITAL ONE FINANCIAL CORPORATION (COF)
NATIONAL LENDING SUBSEGMENT FINANCIAL & STATISTICAL SUMMARY
MANAGED BASIS (1)
2007 2007 2006
(in thousands) Q2 Q1 Q2
Mortgage Banking: (3)
Interest Income $74,375 $75,704
Interest Expense 52,862 57,401
Net interest income $21,513 $18,303
Non-interest income 70,204 49,423
Provision for loan losses 4,322 -
Non-interest expenses 83,415 86,888
Income tax provision (benefit) 1,369 (6,592)
Net income (loss) $2,611 $(12,570)
Loans Held for Investment $687,788 $-
Average Loans Held for
Investment $475,029 $-
Net Gain on Sale Margin (4) 56 bps 51 bps
Efficiency Ratio (2) 91% 128%
Mortgage Loan Originations $5,499,306 $6,795,468
(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) Non-Interest Expenses divided by total Managed Revenue
(3) Results of the North Fork acquisition were included in the Other
category for Q4 2006
(4) Gain on Sale Margin is net of repurchases and lower of cost or market
adjustments
CAPITAL ONE FINANCIAL CORPORATION
Reconciliation to GAAP Financial Measures
For the Three Months Ended June 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
Net interest income $1,560,094 $1,074,764 $2,634,858
Non-interest income $2,006,165 $(584,380) $1,421,785
Total revenue $3,566,259 $490,384 $4,056,643
Provision for loan losses $401,035 $490,384 $891,419
Net charge-offs $400,814 $490,384 $891,198
Balance Sheet Measures
Loans Held for Investment $91,617,353 $52,568,191 $144,185,544
Total assets $145,937,957 $51,765,199 $197,703,156
Average loans Held
for Investment $91,619,955 $51,471,273 $143,091,228
Average earning assets $123,209,216 $49,411,309 $172,620,525
Average total assets $147,758,243 $50,756,562 $198,514,805
Delinquencies $2,387,155 $1,742,239 $4,129,394
(1) Income statement adjustments reclassify the net of finance charges of
$1,564.3 million, past-due fees of $221.7 million, other interest
income of $(44.3) million and interest expense of $666.9 million; and
net charge-offs of $490.4 million from Non-interest income to Net
interest income and Provision for loan losses, respectively.
(2) The managed loan portfolio does not include auto loans which have been
sold in whole loan sale transactions where the Company has retained
servicing rights.
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
As of As of As of
June 30 March 31 June 30
2007 2007 2006 (1)
Assets:
Cash and due from banks $2,354,393 $2,286,913 $1,388,384
Federal funds sold and resale
agreements 3,940,269 8,293,338 339,613
Interest-bearing deposits at
other banks 753,160 844,907 870,049
Cash and cash equivalents 7,047,822 11,425,158 2,598,046
Securities available for sale 20,407,932 17,657,734 15,185,000
Mortgage loans held for sale 2,732,044 4,738,765 312,999
Loans held for investment 91,617,353 90,869,496 60,602,803
Less: Allowance for loan and
lease losses (2,120,000) (2,105,000) (1,765,000)
Net loans held for investment 89,497,353 88,764,496 58,837,803
Accounts receivable from
securitizations 5,481,686 5,371,385 4,818,512
Premises and equipment, net 2,260,928 2,258,861 1,467,922
Interest receivable 768,617 720,511 526,267
Goodwill 13,612,005 13,619,445 3,933,621
Other 4,129,570 4,142,250 1,850,016
Total assets $145,937,957 $148,698,605 $89,530,186
Liabilities:
Non-interest-bearing deposits $11,236,110 $11,357,736 $4,487,837
Interest-bearing deposits 74,444,345 76,306,014 42,698,976
Senior and subordinated notes 9,222,506 9,436,021 5,490,690
Other borrowings 20,681,289 20,244,842 16,836,398
Interest payable 543,805 540,160 349,091
Other 4,623,241 4,793,062 3,770,131
Total liabilities 120,751,296 122,677,835 73,633,123
Stockholders' Equity:
Common stock 4,174 4,146 3,060
Paid-in capital, net 15,682,009 15,465,341 7,151,376
Retained earnings and cumulative
other comprehensive income 11,386,625 10,684,768 8,857,963
Less: Treasury stock, at cost (1,886,147) (133,485) (115,336)
Total stockholders' equity 25,186,661 26,020,770 15,897,063
Total liabilities and
stockholders' equity $145,937,957 $148,698,605 $89,530,186
(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
June 30 March 31 June 30
2007 2007 2006
Interest Income:
Loans held for investment, including
past-due fees $2,266,898 $2,326,680 $1,616,937
Securities available for sale 237,978 204,080 167,352
Mortgage loans held for sale 71,149 144,759 4,714
Other 137,036 112,494 108,154
Total interest income 2,713,061 2,788,013 1,897,157
Interest Expense:
Deposits 749,603 730,483 416,232
Senior and subordinated notes 134,061 138,546 84,707
Other borrowings 269,303 296,138 199,136
Total interest expense 1,152,967 1,165,167 700,075
Net interest income 1,560,094 1,622,846 1,197,082
Provision for loan and lease losses 401,035 350,045 362,445
Net interest income after provision
for loan and lease losses 1,159,059 1,272,801 834,637
Non-Interest Income:
Servicing and securitizations 1,226,896 988,082 1,025,506
Service charges and other customer-
related fees 482,979 479,467 413,398
Mortgage banking operations 102,855 86,543 41,973
Interchange 125,979 118,111 131,538
Other 67,456 138,322 97,498
Total non-interest income 2,006,165 1,810,525 1,709,913
Non-Interest Expense:
Salaries and associate benefits 708,827 724,259 536,465
Marketing 326,718 331,549 356,695
Communications and data processing 196,172 185,988 172,734
Supplies and equipment 116,043 134,602 113,028
Occupancy 89,500 85,845 52,753
Restructuring expense 101,142 - -
Other 574,451 583,158 449,222
Total non-interest expense 2,112,853 2,045,401 1,680,897
Income before income taxes 1,052,371 1,037,925 863,653
Income taxes 301,999 362,875 311,066
Net income $750,372 $675,050 $552,587
Basic earnings per share $1.92 $1.65 $1.84
Diluted earnings per share $1.89 $1.62 $1.78
Dividends paid per share $0.03 $0.03 $0.03
(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)
Six Months Ended (1)
June 30 June 30
2007 2006
Interest Income:
Loans held for investment, including
past-due fees $4,593,578 $3,229,559
Securities available for sale 442,058 331,462
Mortgage loans held for sale 215,908 8,813
Other 249,530 205,905
Total interest income 5,501,074 3,775,739
Interest Expense:
Deposits 1,480,086 819,841
Senior and subordinated notes 272,607 179,061
Other borrowings 565,441 372,878
Total interest expense 2,318,134 1,371,780
Net interest income 3,182,940 2,403,959
Provision for loan and lease losses 751,080 532,715
Net interest income after provision
for loan and lease losses 2,431,860 1,871,244
Non-Interest Income:
Servicing and securitizations 2,214,978 2,179,110
Service charges and other customer-related
fees 962,446 849,129
Mortgage banking operations 189,398 73,859
Interchange 244,090 251,029
Other 205,778 215,037
Total non-interest income 3,816,690 3,568,164
Non-Interest Expense:
Salaries and associate benefits 1,433,086 1,052,609
Marketing 658,267 680,466
Communications and data processing 382,160 341,938
Supplies and equipment 250,645 211,212
Occupancy 175,345 102,130
Restructuring expense 101,142 -
Other 1,157,609 866,021
Total non-interest expense 4,158,254 3,254,376
Income before income taxes $2,090,296 $2,185,032
Income taxes 664,874 749,106
Net income 1,425,422 1,435,926
Basic earnings per share $3.57 $4.79
Diluted earnings per share $3.51 $4.64
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)
Reported Quarter Ended 6/30/07
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Mortgage loans held for sale $3,898,065 71,149 7.30%
Loans held for investment 91,619,955 2,266,898 9.90%
Securities available for sale 19,349,938 237,978 4.92%
Other 8,341,258 137,036 6.57%
Total earning assets $123,209,216 $2,713,061 8.81%
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 20,940,640 269,303 5.14%
Total interest-bearing liabilities $105,495,258 $1,152,967 4.37%
Net interest spread 4.44%
Interest income to average earning
assets 8.81%
Interest expense to average earning
assets 3.75%
Net interest margin 5.06%
(1) Prior period amounts have been reclassified to conform with current
period presentation.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Reported Quarter Ended 3/31/07
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Mortgage loans held for sale $9,115,298 $144,759 6.35%
Loans held for investment 93,465,873 2,326,680 9.96%
Securities available for sale 16,598,686 204,080 4.92%
Other 5,631,573 112,494 7.99%
Total earning assets $124,811,430 $2,788,013 8.93%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $5,066,120 $35,414 2.80%
Money market deposit accounts 25,486,826 249,654 3.92%
Savings accounts 8,384,994 35,529 1.69%
Other Consumer Time Deposits 19,599,576 213,051 4.35%
Public Fund CD's of $100,000 or
more 2,038,785 24,897 4.88%
CD's of $100,000 or more 10,339,958 122,618 4.74%
Foreign time deposits 3,950,808 49,320 4.99%
Total Interest-bearing deposits $74,867,067 $730,483 3.90%
Senior and subordinated notes 9,517,209 138,546 5.82%
Other borrowings 21,820,513 296,138 5.43%
Total interest-bearing liabilities $106,204,789 $1,165,167 4.39%
Net interest spread 4.54%
Interest income to average earning
assets 8.93%
Interest expense to average earning
assets 3.73%
Net interest margin 5.20%
(1) Prior period amounts have been reclassified to conform with current
period presentation.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Reported Quarter Ended 6/30/06 (1)
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Mortgage loans held for sale $240,245 $4,714 7.85%
Loans held for investment $58,833,376 1,616,937 10.99%
Securities available for sale 14,256,956 167,352 4.70%
Other 5,935,369 108,154 7.29%
Total earning assets $79,265,946 $1,897,157 9.57%
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 5.28%
Interest income to average earning
assets 9.57%
Interest expense to average earning
assets 3.53%
Net interest margin 6.04%
(1) Prior period amounts have been reclassified to conform with 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 6/30/07
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Mortgage loans held for sale $3,898,065 $71,149 7.30%
Loans held for investment 143,091,228 4,067,014 11.37%
Securities available for sale 19,349,938 237,978 4.92%
Other 6,281,294 78,610 5.01%
Total earning assets $172,620,525 $4,454,751 10.32%
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 20,940,640 269,303 5.14%
Securitization liability 50,841,894 666,926 5.25%
Total interest-bearing liabilities $156,337,152 $1,819,893 4.66%
Net interest spread 5.67%
Interest income to average earning
assets 10.32%
Interest expense to average earning
assets 4.21%
Net interest margin 6.11%
(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.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Managed (1) Quarter Ended 3/31/07
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Mortgage loans held for sale $9,115,298 $144,759 6.35%
Loans held for investment 144,112,789 4,035,997 11.20%
Securities available for sale 16,598,686 204,080 4.92%
Other 3,576,010 50,531 5.65%
Total earning assets $173,402,783 $4,435,367 10.23%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $5,066,120 $35,414 2.80%
Money market deposit accounts 25,486,826 249,654 3.92%
Savings accounts 8,384,994 35,529 1.69%
Other Consumer Time Deposits 19,599,576 213,051 4.35%
Public Fund CD's of $100,000 or
more 2,038,785 24,897 4.88%
CD's of $100,000 or more 10,339,958 122,618 4.74%
Foreign time deposits 3,950,808 49,320 4.99%
Total Interest-bearing deposits $74,867,067 $730,483 3.90%
Senior and subordinated notes 9,517,209 138,546 5.82%
Other borrowings 21,820,513 296,138 5.43%
Securitization liability 49,999,873 649,443 5.20%
Total interest-bearing liabilities $156,204,662 $1,814,610 4.65%
Net interest spread 5.58%
Interest income to average earning
assets 10.23%
Interest expense to average earning
assets 4.18%
Net interest margin 6.05%
(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.
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 (2)
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Mortgage loans held for sale $240,245 $4,714 7.85%
Loans held for investment $106,089,894 $3,195,827 12.05%
Securities available for sale 14,256,956 167,352 4.70%
Other 3,719,948 46,518 5.00%
Total earning assets $124,307,043 $3,414,411 10.99%
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 6.45%
Interest income to average earning
assets 10.99%
Interest expense to average earning
assets 4.10%
Net interest margin 6.89%
(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.
SOURCE Capital One Financial Corporation
CONTACT: Investor Relations: Jeff Norris, +1-703-720-2455, or Media
Relations: Tatiana Stead, +1-703-720-2352, or Julie Rakes, +1-804-284-5800,
all of Capital One Financial Corporation
Web site: http://www.capitalone.com
(COF)