Capital One Reports Fourth Quarter Earnings
Capital One Reports Fourth Quarter Earnings
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Investor Relations
Jeff Norris
+1-703-720-2455
Printer Friendly Version of the Financial Supplement (pdf format)
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MCLEAN, Va., Jan. 23 /PRNewswire-FirstCall/ -- Capital One Financial Corporation (NYSE: COF) today announced earnings for 2007 of $1.6 billion, or $3.97 per share (diluted). Earnings from continuing operations for the full year were $2.6 billion or $6.55 per share (diluted), versus the prior year's $2.4 billion, or $7.65 earnings per share (diluted). Net income for the fourth quarter of 2007 was $226.6 million, or $0.60 earnings per share (diluted). Fourth quarter 2007 earnings from continuing operations were $321.6 million, or $0.85 earnings per share (diluted) compared to $402.6 million, or $1.17 earnings per share (diluted) in the fourth quarter of 2006. These results are consistent with those reported by the company on January 10, 2008 and provide additional information regarding segment performance.
Earnings from continuing operations excludes the loss from discontinued operations related to the shutdown of GreenPoint Mortgage, announced in August 2007, of $0.25 per share (diluted) for the fourth quarter of 2007 and $2.58 per share (diluted) for full year 2007.
"As the economy has weakened, we have selectively pulled back loan growth and maintained appropriately conservative underwriting standards," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "We feel confident that our strong balance sheet, resilient businesses, and decisive actions will allow us to successfully navigate the cyclical economic weakness and we remain poised to generate above average returns on the other side of the cycle."
Total Company Results
- Managed loans held for investment at the end of 2007 were $151.4 billion, up $5.2 billion or 3.6 percent over the end of 2006. Increases during the year came primarily in the Auto and Global Financial Services portfolios. Managed loans increased from the third quarter of 2007 by $6.6 billion, or 4.6 percent, driven largely by seasonal growth in U.S. Card and Auto. The company expects managed loan growth in the low single digits in 2008.
- Total managed revenue was up 5.7 percent relative to the third quarter of 2007, driven largely by revenue margin expansion and seasonal loan growth in our U.S. Card portfolio. The company expects 2008 revenue growth to be in the low single digits.
- On a managed basis, the fourth quarter 2007 provision for loan losses was approximately $1.9 billion. This was comprised of approximately $1.3 billion in charge-offs and an allowance build of approximately $650 million. The allowance is driven by the loss outlook at year-end which reflects fourth quarter credit metrics and a recognition of the weakening trends in the U.S. economy as the company entered 2008.
- Fourth quarter operating expenses of $1.7 billion included approximately $140 million of legal liabilities and reserves. Full year 2007 operating expenses were $6.6 billion, leading to an efficiency ratio of 47 percent. The company expects its 2008 operating expenses to be at least $200 million below 2007, leading to an efficiency ratio in the mid-forty percent range for 2008.
- Total deposits of $83.0 billion at the end of the fourth quarter of 2007 were essentially flat with the previous quarter.
"The company ended 2007 with a year-end ratio of tangible common equity (TCE) to tangible managed assets of 5.8 percent. In the current environment we intend, through internal capital generation, to manage toward the high end or above our target range of 5.5 - 6.0 percent," said Gary L. Perlin, Capital One's Chief Financial Officer. "We will maintain our strong liquidity position and continue to take actions to sustain profitability through the cycle."
Segment Results
National Lending Segment
- Profits for the National Lending segment were up $59.8 million as compared to the fourth quarter of 2006, driven by increased profits in U.S. Card and Global Financial Services.
- The managed charge-off rate for the National Lending segment in the fourth quarter of 2007 was 4.73 percent versus 3.96 percent in the third quarter of 2007 and 3.63 percent in the fourth quarter of 2006. The delinquency rate of 5.17 percent for National Lending increased from 4.70 percent at the end of the third quarter and 4.09 percent as of December 31, 2006. Credit metrics have risen year over year due to credit normalization, secondary effects of changes to pricing and fee policies in U.S. Card, and deterioration in the company's U.S. consumer loan portfolio due to weakening in the U.S. economy.
- U.S. Card reported record net income for 2007 of $2.1 billion, versus $1.8 billion in 2006. Fourth quarter net income was $521.9 million, a 54.8 percent increase, year over year as revenue growth and expense reductions more than offset increased charge-offs and allowance build.
- Revenues increased 27.2 percent from the fourth quarter of 2006 largely as a result of pricing changes implemented in some of the company's products after completion of the card holder system conversion.
- Non-interest expenses decreased 6.1 percent to $3.3 billion in 2007 from $3.5 billion in 2006. Non-interest expenses in the fourth quarter of 2007 were relatively flat compared to the third quarter of 2007.
- Managed loans at the end of 2007 were $52.1 billion, a decline of 2.9 percent from the end of 2006, and an increase of 5.1 percent from the end of the third quarter of 2007. The year over year decline was a result of a reduction in the marketing of teaser rate offers in the prime market and a $600.0 million portfolio sale in the first quarter of 2007. The increase in managed loans relative to the third quarter was due primarily to seasonality.
- Charge-offs rose in the fourth quarter of 2007 to 5.40 percent from 3.82 percent in the fourth quarter of 2006, and delinquencies rose to 4.95 percent from 3.74 percent. The increases resulted from continued normalization of consumer credit, pull-back from the prime revolver market throughout the year, impacts of U.S. Card's pricing and fee policy changes made in the second and third quarters, and economic weakening evidenced in recently released economic indicators. In addition, credit metrics in the fourth quarter of 2007 reflect expected seasonal patterns on a sequential quarter basis. The company expects the U.S. Card managed charge-off rate to be in the mid-6 percent range in the first half of 2008.
- Auto Finance reported a net loss for 2007 of $33.8 million, versus net income of $233.5 million in 2006. In the fourth quarter of 2007, Auto posted a net loss of $112.4 million, primarily due to the effects of credit worsening.
- Increases in charge-off and delinquency rates were a result of expected seasonal patterns, credit normalization and weakening in the U.S. economy. While the company increased its pricing and tightened credit standards in the fourth quarter of 2007, the reduction in competitive intensity allowed the company to originate $3.6 billion of high quality loans, up 11.5 percent, compared to the third quarter of 2007.
- Tightened underwriting and increased prices implemented in the fourth quarter have resulted in better credit profiles and higher pricing on the portfolio. An intended effect of the tightened underwriting has been to reduce the amount of originations. In 2008, the company expects to further reduce originations and focus its dealer prime business on a much smaller network of dealers.
- On January 1, 2008, the company moved Capital One Auto Finance Company ("COAF"), a previously wholly owned finance company subsidiary of Capital One Financial Corporation to become a direct operating subsidiary of Capital One, N.A., a wholly owned banking subsidiary. This legal entity restructuring enhances the holding company's liquidity profile and COAF's funding flexibility.
- GFS reported net income for 2007 of $299.4 million, versus $273.9 million in 2006. Fourth quarter 2007 net income was $23.3 million, a $21.2 million increase over last year's fourth quarter driven by higher revenue margin and lower operating expenses offset by higher provision expense. The reduction in net income relative to the prior quarter was primarily driven by an increase in provision expense.
- Managed loans grew 8.6 percent, to $29.3 billion during 2007 with growth from North American businesses more than offsetting a modest decline in loans in the UK.
- Strong credit results in the Canadian credit card business and stable and improving credit performance in the UK muted worsening credit trends in the domestic GFS businesses for 2007.
- Net income of $111.8 million in the fourth quarter of 2007 was down $78.8 million over the third quarter, due primarily to the third quarter including a release in reserves that resulted from aligning the Banking segment's allowance methodologies with the company's methodology.
- Loans held for investment grew $1.7 billion from the third quarter of 2007 to $44.0 billion primarily from the addition of GreenPoint Mortgage loans and increased commercial loan production. Total Bank deposits grew $305.2 million to $73.3 billion.
- The charge-off rate was 28 basis points in the fourth quarter of 2007 compared to 19 basis points in the third quarter, and non-performing loans were 41 basis points at December 31, 2007 compared to 27 basis points at September 30, 2007. While losses remain at very low levels, during the quarter the Bank experienced charge-off increases in its Consumer Real Estate portfolio and Unsecured Lending.
- Integration efforts continue to be on track with the brand conversion and deposit platform conversion scheduled for the first quarter.
U.S. Card highlights
Auto Finance highlights
Global Financial Services (GFS) highlights
Local Banking Segment highlights
The company generates earnings from its managed loan portfolio, which includes both on-balance sheet loans and securitized (off-balance sheet) loans. For this reason, the company believes managed financial measures to be useful to stakeholders. In compliance with Regulation G of the Securities and Exchange Commission, the company is providing a numerical reconciliation of managed financial measures to comparable measures calculated on a reported basis using generally accepted accounting principles (GAAP). Please see the schedule titled "Reconciliation to GAAP Financial Measures" attached to this release for more information.
Forward looking statements
The company cautions that its current expectations in this release, in the presentation slides available on the company's website and in its Form 8-K dated January 23, 2008, for 2008 revenue growth, managed growth, operating efficiencies, operating expense reductions, the expected managed charge-off rate for U.S. Card for the first half of 2008, and estimated loss levels for the twelve months ending December 31, 2008 underlying its provision expenses in the fourth quarter of 2007, and the company's plans, objectives, expectations, and intentions, are forward-looking statements and actual results could differ materially from current expectations due to a number of factors, including: general economic and business conditions in the U.S. and or the UK, including conditions affecting employment levels, interest rates, consumer income, spending, and savings that may affect consumer bankruptcies, defaults, charge-offs and deposit activity; changes in the credit environment in the U.S. and or the UK; continued intense competition from numerous providers of products and services that compete with Capital One's businesses; changes in our aggregate accounts and balances, and the growth rate and composition thereof; the company's ability to execute on its strategic and operational plans; the risk that the company's acquired businesses will not be integrated successfully and that the cost savings and other synergies from such acquisitions may not be fully realized; the risk that the benefits of the company's restructuring initiative, including cost savings and other benefits, may not be fully realized; the success of the company's marketing efforts; general conditions in the wholesale funding markets; and general market conditions in the mortgage industry. A discussion of these and other factors can be found in Capital One's annual report and other reports filed with the Securities and Exchange Commission, including, but not limited to, Capital One's report on Form 10-K for the fiscal year ended December 31, 2006, and reports on Form 10-Q and 10-Q/A for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007.
About Capital One
Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries collectively had $83.0 billion in deposits and $151.4 billion in managed loans outstanding as of December 31, 2007. Headquartered in McLean, VA, Capital One has 742 locations in New York, New Jersey, Connecticut, Texas and Louisiana. It is a diversified financial services company whose principal subsidiaries, Capital One, N.A., Capital One Bank, and Capital One Auto Finance, Inc., offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.
NOTE: Fourth quarter 2007 financial results, SEC Filings, and fourth quarter earnings conference call slides are accessible on Capital One's home page (www.capitalone.com). Choose "Investors" on the bottom of the home page to view and download the earnings press release, slides, and other financial information. Additionally, a webcast of today's 5:00 pm (ET) earnings conference call is accessible through the same link.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
REPORTED BASIS
(in millions, except per 2007 2007 2006
share data and as noted) Q4 Q3(13) Q4
Earnings (Reported Basis)
Net Interest Income $ 1,762.3 $ 1,624.5 $ 1,393.0
Non-Interest Income 2,158.3 (12) 2,149.7 1,671.5
Total Revenue (1) 3,920.6 3,774.2 3,064.5
Provision for Loan Losses 1,294.2 595.5 513.2
Marketing Expenses 358.2 332.7 395.4
Restructuring Expenses (2) 27.8 19.4 -
Operating Expenses 1,749.2 (3),(4) 1,582.2 (3) 1,567.3
Income Before Taxes 491.2 1,244.4 588.6
Tax Rate (5) 34.5 % 34.4 % 31.6 %
Income From Continuing
Operations, Net of Tax $ 321.6 $ 816.4 $ 402.6
Loss From Discontinued
Operations, Net of Tax (6) (95.0) (898.0) (11.9)
Net Income (Loss) $ 226.6 $ (81.6) $ 390.7
Common Share Statistics
Basic EPS:
Income From Continuing
Operations $ 0.85 $ 2.11 $ 1.20
Loss From Discontinued
Operations $ (0.25) $ (2.32) $ (0.04)
Net Income (Loss) $ 0.60 $ (0.21) $ 1.16
Diluted EPS:
Income From Continuing
Operations $ 0.85 $ 2.09 $ 1.17
Loss From Discontinued
Operations $ (0.25) $ (2.30) $ (0.03)
Net Income (Loss) $ 0.60 $ (0.21) $ 1.14
Dividends Per Share $ 0.03 $ 0.03 $ 0.03
Tangible Book Value Per Share
(period end) $ 29.02 $ 28.88 $ 27.95
Stock Price Per Share (period
end) $ 47.26 $ 66.43 $ 76.82
Total Market Capitalization
(period end) $ 17,613.8 $ 25,602.1 $31,488.5
Shares Outstanding (period
end) 372.7 385.4 409.9
Shares Used to Compute Basic
EPS 375.6 386.1 336.5
Shares Used to Compute
Diluted EPS 378.4 390.8 343.8
Reported Balance Sheet
Statistics (period average) (7)
Average Loans Held for
Investment $ 97,785 $ 91,745 $ 74,738
Average Earning Assets $ 127,242 $ 118,354 $ 97,849
Average Assets $ 150,926 $ 143,291 $ 111,440
Average Interest Bearing
Deposits $ 72,312 $ 73,555 $ 53,735
Total Average Deposits $ 84,051 $ 84,884 $ 60,382
Average Equity $ 24,733 $ 25,344 $ 18,311
Return on Average Assets
(ROA) 0.85 % 2.28 % 1.45 %
Return on Average Equity
(ROE) 5.20 % 12.89 % 8.79 %
Reported Balance Sheet
Statistics (period end) (7)
Loans Held for Investment $ 101,805 $ 93,789 $ 96,512
Total Assets $ 150,202 $ 143,884 $ 144,361
Interest Bearing Deposits $ 71,944 $ 72,503 $ 74,123
Total Deposits $ 82,990 $ 83,343 $ 85,771
Performance Statistics
(Reported) (7)
Net Interest Income Growth
(annualized) 34 % 22 % 30 %
Non Interest Income Growth
(annualized) 2 % 36 % (20)%
Revenue Growth (annualized) 16 % 30 % 1 %
Net Interest Margin 5.54 % 5.49 % 5.69 %
Revenue Margin 12.32 % 12.76 % 12.53 %
Risk Adjusted Margin (8) 10.28 % 11.13 % 10.72 %
Non Interest Expense as a %
of Average Loans Held for
Investment (annualized) 8.73 % 8.43 % 10.50 %
Efficiency Ratio (9) 53.75 % 50.74 % 64.05 %
Asset Quality Statistics
(Reported) (7)
Allowance $ 2,963 $2,237 $ 2,180
Allowance as a % of Reported
Loans Held for Investment 2.91 % 2.39 % 2.26 %
Net Charge-Offs $ 650 $ 480 $ 443
Net Charge-Off Rate 2.66 % 2.09 % 2.37 %
Full-time equivalent
employees (in thousands) 27.0 27.5 31.1
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
MANAGED BASIS (*)
2007 2007 2006
(in millions) Q4 Q3(13) Q4
Earnings (Managed Basis)
Net Interest Income $ 3,000.5 $ 2,803.4 $ 2,339.1
Non-Interest Income 1,566.2 (12) 1,518.0 1,210.3
Total Revenue (1) 4,566.7 4,321.4 3,549.4
Provision for Loan Losses 1,940.3 1,142.7 998.1
Marketing Expenses 358.2 332.7 395.4
Restructuring Expenses (2) 27.8 19.4 -
Operating Expenses 1,749.2 (3),(4) 1,582.2 (3) 1,567.3
Income Before Taxes 491.2 1,244.4 588.6
Tax Rate (5) 34.5 % 34.4% 31.6 %
Income From Continuing
Operations, Net of Tax $ 321.6 $ 816.4 $ 402.6
Loss From Discontinued
Operations, Net of Tax (6) (95.0) (898.0) (11.9)
Net Income (Loss) $ 226.6 $ (81.6) $ 390.7
Managed Balance Sheet
Statistics (period average) (7)
Average Loans Held for
Investment $ 148,362 $ 143,781 $ 123,902
Average Earning Assets $ 175,652 $ 168,238 $ 145,113
Average Assets $ 200,658 $ 194,528 $ 159,947
Return on Average Assets
(ROA) 0.64 % 1.68 % 1.01 %
Managed Balance Sheet
Statistics (period end) (7)
Loans Held for Investment $ 151,362 $ 144,769 $ 146,151
Total Assets $ 198,908 $ 194,019 $ 193,267
Tangible Assets(10) $ 185,428 $ 180,363 $ 179,487
Tangible Common Equity (11) $ 10,814 $ 11,131 $ 11,455
Tangible Common Equity to
Tangible Assets Ratio 5.83 % 6.17 % 6.38 %
% Off-Balance Sheet
Securitizations 33 % 35 % 34 %
Performance Statistics
(Managed) (7)
Net Interest Income Growth
(annualized) 28 % 29 % 22 %
Non Interest Income Growth
(annualized) 13 % 38 % (20)%
Revenue Growth (annualized) 23 % 32 % 6 %
Net Interest Margin 6.83 % 6.67 % 6.45 %
Revenue Margin 10.40 % 10.27 % 9.78 %
Risk Adjusted Margin (8) 7.45 % 7.83 % 7.23 %
Non Interest Expense as a %
of Average Loans Held for
Investment (annualized) 5.76 % 5.38 % 6.34 %
Efficiency Ratio (9) 46.15 % 44.31 % 55.30 %
Asset Quality Statistics
(Managed) (7)
Net Charge-Offs $ 1,296 $ 1,027 $ 927
Net Charge-Off Rate 3.49 % 2.86 % 2.99 %
(*) The information in this statistical summary reflects the adjustment to
add back the effect of securitization transactions qualifying as sales
under generally accepted accounting principles. See accompanying schedule
- "Reconciliation to GAAP Financial Measures."
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY NOTES
(1) In accordance with the Company's finance charge and fee revenue
recognition policy, the amounts billed to customers but not recognized
as revenue were as follows: Q4 2007 - $379.4 million, Q3 2007 - $310.5
million and Q4 2006 - $248.3 million.
(2) During the second quarter of 2007, the Company announced a broad-based
initiative to reduce expenses and improve its competitive cost
position. As part of this initiative $27.8 million and $19.4 million
of restructuring charges were recognized as part of continuing
operations during Q4 2007 and Q3 2007, respectively.
(3) Includes core deposit intangible amortization expense of $51.1 million
in Q4 2007 and $52.4 million in Q3 2007, and integration costs of
$28.6 million in Q4 2007 and $30.3 million in Q3 2007.
(4) The Company recognized a pre-tax charge in the fourth quarter of
approximately $80 million for liabilities in connection with the Visa
antitrust lawsuit settlement with American Express. Additionally, the
company has initiated a legal reserve of approximately $60 million
for estimated possible damages in connection with other pending Visa
litigation, reflecting Capital One's share of such potential damages
as a Visa member.
(5) Includes miscellaneous tax adjustments of $28.8 million in Q4 2006.
(6) In Q3 2007, the Company shutdown the mortgage origination operations
of its wholesale mortgage banking unit, GreenPoint Mortgage, realizing
an after-tax loss of $898.0 million. The results of the mortgage
origination operation of GreenPoint have been accounted for as a
discontinued operation and have been removed from the Company's
results of continuing operations for all periods presented. The
results of GreenPoint's mortgage servicing business are reported in
continuing operations for all periods presented. Effective Q4 2007,
GreenPoint's held for investment commercial and consumer loan
portfolio results are included in continuing operations.
(7) Based on continuing operations. Average equity and return on equity
are based on the Company's stockholder's equity.
(8) Risk adjusted margin is total revenue less net charge-offs as a
percentage of average earning assets.
(9) Efficiency ratio is Non-interest expense less restructuring expense
divided by total revenue.
(10) Tangible assets include managed assets less intangible assets.
(11) Includes stockholders' equity and preferred interests less
intangible assets and related deferred tax liability. Tangible
Common Equity on a reported and managed basis is the same.
(12) During the fourth quarter 2007, the Company completed the sale of its
interest in a relationship agreement to develop and market consumer
credit products in the Spanish Market and recorded a gain related to
this sale of approximately $30 million in non-interest income.
(13) Certain prior period amounts have been reclassified to conform with
current period presentation.
CAPITAL ONE FINANCIAL CORPORATION (COF)
SEGMENT FINANCIAL & STATISTICAL SUMMARY FOR CONTINUING OPERATIONS
MANAGED BASIS (1)
2007 2007 2006
(in thousands) Q4 Q3 (7) Q4
Local Banking: (3)
Interest Income $ 1,702,252 $ 1,744,038 $ 721,102
Interest Expense 1,119,738 1,161,758 476,523
Net interest income $ 582,514 $ 582,280 $ 244,579
Non-interest income 192,342 195,204 112,021
Provision for loan losses 42,665 (58,285) (21,549)
Other non-interest expenses 561,812 543,390 307,810
Income tax provision 58,610 101,783 24,619
Net income $ 111,769 $ 190,596 $ 45,720
Loans Held for Investment $ 43,972,795 $ 42,233,665 $ 12,145,533
Average Loans Held for
Investment $ 43,128,767 $ 41,992,618 $ 13,330,876
Core Deposits(2) $ 63,206,923 $ 62,712,373 $ 27,071,324
Total Deposits $ 73,318,570 $ 73,013,351 $ 35,334,610
Loans Held for Investment
Yield 7.02% 7.13% 7.98%
Net Interest Margin - Loans
(4) 1.87% 1.79% 3.21%
Net Interest Margin - Deposits
(5) 2.04% 2.08% 1.50%
Efficiency Ratio (6) 72.51% 69.89% 86.32%
Net charge-off rate 0.28% 0.19% 0.40%
Non Performing Loans $ 178,385 $ 112,794 $ 57,824
Non Performing Loans as a % of
Loans Held for Investment 0.41% 0.27% 0.48%
Non-Interest Expenses as a %
of Average Loans Held for
Investment 5.21% 5.18% 9.24%
Number of Active ATMs 1,288 1,282 661
Number of locations 742 732 358
National Lending:
Interest Income $ 3,675,528 $ 3,511,878 $ 3,182,013
Interest Expense 1,235,080 1,232,115 1,163,106
Net interest income $ 2,440,448 $ 2,279,763 $ 2,018,907
Non-interest income 1,384,315 1,312,146 1,105,240
Provision for loan losses 1,777,327 1,196,087 1,010,837
Other non-interest expenses 1,389,840 1,367,607 1,534,523
Income tax provision 224,802 352,847 205,768
Net income $ 432,794 $ 675,368 $ 373,019
Loans Held for Investment $ 106,508,443 $102,556,271 $102,359,180
Average Loans Held for
Investment $ 104,321,485 $101,805,584 $ 99,881,480
Core Deposits(2) $ 1,599 $ 470 $ 6,061
Total Deposits $ 2,050,861 $ 2,295,131 $ 2,383,902
Loans Held for Investment
Yield 14.07% 13.77% 12.72%
Net Interest Margin 9.36% 8.96% 8.09%
Revenue Margin 14.67% 14.11% 12.51%
Risk Adjusted Margin 9.94% 10.15% 8.88%
Non-Interest Expenses as a %
of Average Loans Held for
Investment 5.33% 5.37% 6.15%
Efficiency Ratio (6) 36.34% 38.07% 49.12%
Net charge-off rate 4.73% 3.96% 3.63%
Delinquency Rate (30+ days) 5.17% 4.70% 4.09%
Number of Loan Accounts (000s) 48,537 48,473 49,374
Other: (3
Net interest income $ (22,449) $ (58,605) $ 75,586
Non-interest income (10,425) 10,639 (6,915)
Provision for loan losses 120,376 5,023 8,840
Restructuring expenses 27,809 19,354 -
Other non-interest expenses 155,746 3,870 120,353
Income tax benefit (113,854) (26,620) (44,395)
Net loss $ (222,951) $ (49,593) $ (16,127)
Loans Held for Investment $ 881,179 $ (21,375) $31,646,555
Core Deposits(2) $ 6,107,779 $ 6,373,515 $42,819,710
Total Deposits $ 7,621,031 $ 8,034,332 $48,052,380
Total:
Interest Income $ 4,863,246 $ 4,646,431 $ 3,901,560
Interest Expense 1,862,733 1,842,993 1,562,488
Net interest income $ 3,000,513 $ 2,803,438 $ 2,339,072
Non-interest income 1,566,232 1,517,989 1,210,346
Provision for loan losses 1,940,368 1,142,825 998,128
Restructuring expenses 27,809 19,354 -
Other non-interest expenses 2,107,398 1,914,867 1,962,686
Income tax provision 169,558 428,010 185,992
Net Income $ 321,612 $ 816,371 $ 402,612
Loans Held for Investment $151,362,417 $144,768,561 $146,151,268
Core Deposits(2) $ 69,316,301 $ 69,086,358 $ 69,897,095
Total Deposits $ 82,990,462 $ 83,342,814 $ 85,770,892
(1) The information in this statistical summary reflects the adjustment to
add back the effect of securitization transactions qualifying as sales
under generally accepted accounting principles. See accompanying
schedule - "Reconciliation to GAAP Financial Measures." In Q3 2007,
the Company shutdown the mortgage origination operations of its
wholesale mortgage banking unit, GreenPoint Mortgage. The results of
the mortgage origination operation of GreenPoint have been accounted
for as a discontinued operation and have been removed from the
Company's results of continuing operations for all periods presented.
The results of GreenPoint's mortgage servicing business are reported
in continuing operations for all periods presented.
Effective Q4 2007, GreenPoint's held for investment commercial and
consumer loan portfolio results are included in continuing
operations.
(2) Includes domestic non-interest bearing deposits, NOW accounts, money
market deposit accounts, savings accounts, certificates of deposit of
less than $100,000 and other consumer time deposits.
(3) Results of the North Fork acquisition were included in the Other
category for Q4 2006.
(4) Net Interest Margin - Loans is interest income - loans divided by
average managed loans.
(5) Net Interest Margin - Deposits is interest expense - deposits divided
by average retail deposits.
(6) Efficiency Ratio is non-interest expenses divided by total managed
revenue.
(7) Certain prior period amounts have been reclassified to conform with
current period presentation.
CAPITAL ONE FINANCIAL CORPORATION (COF)
NATIONAL LENDING SUBSEGMENT FINANCIAL & STATISTICAL SUMMARY FOR CONTINUING
OPERATIONS
MANAGED BASIS (1)
2007 2007 2006
(in thousands) Q4 Q3 Q4
US Card:
Interest Income $ 2,058,920 $ 1,953,967 $ 1,795,345
Interest Expense 574,714 596,767 600,821
Net interest income $ 1,484,206 $ 1,357,200 $ 1,194,524
Non-interest income 1,046,823 975,502 795,881
Provision for loan losses 913,113 662,428 554,698
Non-interest expenses 822,317 815,470 916,963
Income tax provision 273,686 294,053 181,561
Net income $ 521,913 $ 560,751 $ 337,183
Loans Held for Investment $ 52,078,847 $ 49,573,279 $ 53,623,680
Average Loans Held for
Investment $ 50,276,568 $ 49,682,666 $ 51,686,135
Loans Held for Investment Yield 16.38% 15.73% 13.89%
Net Interest Margin 11.81% 10.93% 9.24%
Revenue Margin 20.14% 18.78% 15.40%
Risk Adjusted Margin 14.74% 14.65% 11.58%
Non-Interest Expenses as a % of
Average Loans Held for
Investment 6.54% 6.57% 7.10%
Efficiency Ratio (2) 32.49% 34.96% 46.07%
Net charge-off rate 5.40% 4.13% 3.82%
Delinquency Rate (30+ days) 4.95% 4.46% 3.74%
Purchase Volume (3) $ 22,909,274 $ 21,522,104 $22,782,451
Number of Loan Accounts (000s) 36,450 36,504 37,630
Auto Finance:
Interest Income $ 687,389 $ 661,471 $ 593,268
Interest Expense 300,133 283,949 242,311
Net interest income $ 387,256 $ 377,522 $ 350,957
Non-interest income 14,888 13,514 14,143
Provision for loan losses 429,247 244,537 151,171
Non-interest expenses 144,301 152,275 162,022
Income tax provision (58,963) (1,987) 18,167
Net (loss) income $ (112,441) $ (3,789) $ 33,740
Loans Held for Investment $ 25,128,352 $ 24,335,242 $21,751,827
Average Loans Held for
Investment $ 24,920,380 $ 24,170,047 $21,498,205
Loans Held for Investment Yield 11.03% 10.95% 11.04%
Net Interest Margin 6.22% 6.25% 6.53%
Revenue Margin 6.45% 6.47% 6.79%
Risk Adjusted Margin 2.46% 2.91% 3.94%
Non-Interest Expenses as a % of
Average Loans Held for
Investment 2.32% 2.52% 3.01%
Efficiency Ratio (2) 35.88% 38.94% 44.38%
Net charge-off rate 4.00% 3.56% 2.85%
Delinquency Rate (30+ days) 7.84% 7.15% 6.35%
Auto Loan Originations $ 3,623,491 $ 3,248,747 $ 3,078,877
Number of Loan Accounts (000s) 1,771 1,731 1,589
Global Financial Services:
Interest Income $ 929,219 $ 896,440 $ 793,400
Interest Expense 360,233 351,399 319,974
Net interest income $ 568,986 $ 545,041 $ 473,426
Non-interest income 322,604 323,130 295,216
Provision for loan losses 434,967 289,122 304,968
Non-interest expenses 423,222 399,862 455,538
Income tax provision 10,079 60,781 6,040
Net income $ 23,322 $ 118,406 $ 2,096
Loans Held for Investment $ 29,301,244 $28,647,750 $26,983,673
Average Loans Held for
Investment $ 29,124,537 $27,952,871 $26,697,140
Loans Held for Investment Yield
(4) 12.69% 12.72% 11.80%
Net Interest Margin 7.81% 7.80% 7.09%
Revenue Margin 12.25% 12.42% 11.52%
Risk Adjusted Margin 8.05% 8.42% 7.63%
Non-Interest Expenses as a % of
Average Loans Held for
Investment 5.81% 5.72% 6.83%
Efficiency Ratio (2) 47.47% 46.06% 59.27%
Net charge-off rate 4.19% 4.00% 3.89%
Delinquency Rate (30+ days) 3.29% 3.02% 2.97%
Number of Loan Accounts (000s) 10,316 10,238 10,155
(1) The information in this statistical summary reflects the adjustment to
add back the effect of securitization transactions qualifying as sales
under generally accepted accounting principles. See accompanying
schedule - "Reconciliation to GAAP Financial Measures."
(2) Efficiency ratio is non-Interest Expenses divided by total Managed
Revenue.
(3) Includes all purchase transactions net of returns and excludes cash
advance transactions.
(4) Excludes "GFS - Home Loans Originations" and "GFS - Settlement
Services" from Other Interest Income.
CAPITAL ONE FINANCIAL CORPORATION
Reconciliation to GAAP Financial Measures
For the Three Months Ended December 31, 2007
(dollars in thousands)(unaudited)
The Company's consolidated financial statements prepared in accordance
with generally accepted accounting principles ("GAAP") are referred to as
its "reported" financial statements. Loans included in securitization
transactions which qualified as sales under GAAP have been removed from
the Company's "reported" balance sheet. However, servicing fees, finance
charges, and other fees, net of charge-offs, and interest paid to
investors of securitizations are recognized as servicing and
securitizations income on the "reported" income statement.
The Company's "managed" consolidated financial statements reflect
adjustments made related to effects of securitization transactions
qualifying as sales under GAAP. The Company generates earnings from its
"managed" loan portfolio which includes both the on-balance sheet loans
and off-balance sheet loans. The Company's "managed" income statement
takes the components of the servicing and securitizations income generated
from the securitized portfolio and distributes the revenue and expense to
appropriate income statement line items from which it originated. For
this reason the Company believes the "managed" consolidated financial
statements and related managed metrics to be useful to stakeholders.
Total Reported Adjustments(1) Total Managed(2)
Income Statement Measures(3)
Net interest income $ 1,762,247 $ 1,238,266 $ 3,000,513
Non-interest income 2,158,340 (592,108) 1,566,232
Total revenue 3,920,587 646,158 4,566,745
Provision for loan losses 1,294,210 646,158 1,940,368
Net charge-offs $ 650,018 $646,158 $ 1,296,176
Balance Sheet Measures
Loans Held for Investment $ 101,805,027 $ 49,557,390 $ 151,362,417
Total assets $ 150,590,369 $ 48,706,677 $ 199,297,046
Average loans Held for
Investment $ 97,784,813 $ 50,577,525 $ 148,362,338
Average earning assets $ 127,553,955 $ 48,409,256 $ 175,963,211
Average total assets $ 151,517,794 $ 49,732,018 $ 201,249,812
Delinquencies $ 3,721,444 $ 2,142,353 $ 5,863,797
(1) Income statement adjustments reclassify the net of finance charges of
$1,648.6 million, past-due fees of $301.1 million, other interest
income of $(46.7) million and interest expense of $664.8 million; and
net charge-offs of $646.2 million from Non-interest income to Net
interest income and Provision for loan losses, respectively.
(2) The managed loan portfolio does not include auto loans which have been
sold in whole loan sale transactions where the Company has retained
servicing rights.
(3) Based on continuing operations.
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
As of As of As of
December 31 September 30 December 31
2007 2007 2006 (1)
Assets:
Cash and due from banks $ 2,377,287 $ 1,819,121 $ 2,817,519
Federal funds sold and
resale agreements 1,766,762 1,922,735 1,099,156
Interest-bearing deposits
at other banks 677,360 703,805 743,821
Cash and cash equivalents 4,821,409 4,445,661 4,660,496
Securities available
for sale 19,781,587 19,959,247 15,246,887
Mortgage loans held
for sale 315,863 1,454,457 10,435,295
Loans held for investment 101,805,027 95,405,217 96,512,139
Less: Allowance for
loan and lease losses (2,963,000) (2,320,000) (2,180,000)
Net loans held for
investment 98,842,027 93,085,217 94,332,139
Accounts receivable
from securitizations 4,717,879 6,905,859 4,589,235
Premises and equipment, net 2,299,603 2,268,034 2,203,280
Interest receivable 839,317 793,693 816,426
Goodwill 12,830,740 12,952,838 13,635,435
Other 6,141,944 5,289,829 3,820,092
Total assets $ 150,590,369 $147,154,835 $ 149,739,285
Liabilities:
Non-interest-bearing
deposits $ 11,046,549 $ 10,840,189 $ 11,648,070
Interest-bearing deposits 71,943,913 72,502,625 74,122,822
Senior and subordinated
notes 10,712,706 10,784,182 9,725,470
Other borrowings 26,583,683 22,722,519 24,257,007
Interest payable 631,609 552,674 574,763
Other 5,377,797 4,965,794 4,175,947
Total liabilities 126,296,257 122,367,983 124,504,079
Stockholders' Equity:
Common stock 4,192 4,183 4,122
Paid-in capital, net 15,860,490 15,768,525 15,333,137
Retained earnings and
cumulative other
comprehensive income 11,582,816 11,395,226 10,026,364
Less: Treasury stock,
at cost (3,153,386) (2,381,082) (128,417)
Total stockholders'
equity 24,294,112 24,786,852 25,235,206
Total liabilities and
stockholders' equity $ 150,590,369 $ 147,154,835 $ 149,739,285
(1) Certain prior period amounts have been reclassified to conform to the
current period presentation.
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
Three Months Ended Year Ended
Dec. 31 Sept. 30 Dec. 31 (1) Dec. 31 Dec. 31 (1)
2007 2007 2006 2007 2006
Interest Income:
Loans held for
investment,
including
past-due fees $2,536,779 $2,381,096 $2,002,111 $9,500,128 $7,046,473
Securities
available for
sale 256,364 252,550 185,424 950,972 676,712
Other 167,051 133,321 136,390 627,056 441,550
Total interest
income 2,960,194 2,766,967 2,323,925 11,078,156 8,164,735
Interest
Expense:
Deposits 686,174 740,091 552,385 2,906,351 1,814,797
Senior and
subordinated
notes 159,878 144,643 136,282 577,128 411,643
Other borrowings 351,895 257,759 242,286 1,064,832 846,849
Total interest
expense 1,197,947 1,142,493 930,953 4,548,311 3,073,289
Net interest
income 1,762,247 1,624,474 1,392,972 6,529,845 5,091,446
Provision for
loan and lease
losses 1,294,210 595,534 513,157 2,636,502 1,476,438
Net interest
income after
provision for
loan and lease
losses 468,037 1,028,940 879,815 3,893,343 3,615,008
Non-Interest
Income:
Servicing and
securitizations 1,271,396 1,354,303 959,436 4,840,677 4,209,637
Service charges
and other
customer-related
fees 573,034 522,374 462,086 2,057,854 1,770,340
Mortgage servicing
and other (5,700) 52,661 58,805 166,776 177,893
Interchange 152,595 103,799 147,571 500,484 549,074
Other 167,015 116,525 43,577 488,432 294,080
Total non-
interest
income 2,158,340 2,149,662 1,671,475 8,054,223 7,001,024
Non-Interest
Expense:
Salaries and
associate
benefits 622,101 627,358 617,563 2,592,534 2,224,676
Marketing 358,182 332,693 395,360 1,347,836 1,444,324
Communications
and data
processing 189,415 194,551 187,043 758,820 712,001
Supplies and
equipment 146,267 134,639 137,582 531,238 460,419
Occupancy 91,675 77,597 63,796 322,510 215,636
Restructuring
expense 27,809 19,354 - 138,237 -
Other 699,758 548,029 561,342 2,386,835 1,886,635
Total non-
interest
expense 2,135,207 1,934,221 1,962,686 8,078,010 6,943,691
Income from
continuing
operations
before income
taxes 491,170 1,244,381 588,604 3,869,556 3,672,341
Income taxes 169,558 428,010 185,992 1,277,837 1,245,964
Income from
continuing
operations, net
of tax 321,612 816,371 402,612 2,591,719 2,426,377
Loss from
discontinued
operations, net
of tax(2) (95,044) (898,029) (11,884) (1,021,387) (11,884)
Net income (loss) $226,568 $(81,658) $390,728 $1,570,332 $2,414,493
Basic earnings
per share
Income from
continuing
operations $0.85 $2.11 $1.20 $6.64 $7.84
Loss from
discontinued
operations (0.25) (2.32) (0.04) (2.62) (0.04)
Net income (loss) $0.60 $(0.21) $1.16 $4.02 $7.80
Diluted earnings
per share
Income from
continuing
operations $0.85 $2.09 $1.17 $6.55 $7.65
Loss from
discontinued
operations (0.25) (2.30) (0.03) (2.58) (0.03)
Net income (loss) $0.60 $(0.21) $1.14 $3.97 $7.62
Dividends paid
per share $0.03 $0.03 $0.03 $0.11 $0.11
(1) Certain prior period amounts have been reclassified to conform to the
current period presentation.
(2) Certain prior period amounts have been reclassified to conform to the
current period presentation. In Q3 2007, the Company shutdown the
mortgage origination operations of its wholesale mortgage banking
unit, GreenPoint Mortgage, realizing an after-tax loss of $898.0
million. The results of the mortgage origination operation of
GreenPoint have been accounted for as a discontinued operation and
have been removed from the Company's results of continuing operations
for all periods presented.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Reported Quarter Ended 12/31/07
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment 97,784,813 2,536,779 10.38%
Securities available
for sale 20,102,440 256,364 5.10%
Other 9,355,161 167,051 7.14%
Total earning assets (2) $ 127,242,414 $ 2,960,194 9.31%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ 4,674,490 $ 30,443 2.61%
Money market deposit
accounts 28,983,602 270,943 3.74%
Savings accounts 8,172,510 32,520 1.59%
Other Consumer Time
Deposits 16,374,958 183,570 4.48%
Public Fund CD's of
$100,000 or more 1,902,442 23,126 4.86%
CD's of $100,000 or more 8,335,941 97,335 4.67%
Foreign time deposits 3,868,444 48,237 4.99%
Total Interest-bearing
deposits $ 72,312,387 $ 686,174 3.80%
Senior and subordinated
notes 10,682,635 159,878 5.99%
Other borrowings 26,433,200 351,895 5.33%
Total interest-bearing
liabilities(2) $ 109,428,222 $ 1,197,947 4.38%
Net interest spread 4.93%
Interest income to average
earning assets 9.31%
Interest expense to
average earning assets 3.77%
Net interest margin 5.54%
Reported Quarter Ended 9/30/07 (1)
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment 91,744,846 2,381,096 10.38%
Securities available
for sale 20,041,177 252,550 5.04%
Other 6,568,358 133,321 8.12%
Total earning assets (2) $ 118,354,381 $ 2,766,967 9.35%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ 4,759,665 $ 34,030 2.86%
Money market deposit
accounts 28,696,735 294,873 4.11%
Savings accounts 8,345,638 37,474 1.80%
Other Consumer Time
Deposits 17,203,453 194,256 4.52%
Public Fund CD's
of $100,000 or more 1,884,767 23,092 4.90%
CD's of $100,000 or more 8,673,860 103,296 4.76%
Foreign time deposits 3,991,056 53,070 5.32%
Total Interest-bearing
deposits $ 73,555,174 $ 740,091 4.02%
Senior and subordinated
notes 9,811,821 144,643 5.90%
Other borrowings 18,892,876 257,759 5.46%
Total interest-bearing
liabilities(2) $ 102,259,871 $ 1,142,493 4.47%
Net interest spread 4.88%
Interest income to average
earning assets 9.35%
Interest expense to average
earning assets 3.86%
Net interest margin 5.49%
Reported Quarter Ended 12/31/06 (1)
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment 74,737,753 2,002,111 10.72%
Securities available
for sale 15,090,001 185,424 4.92%
Other 8,020,811 136,390 6.80%
Total earning assets (2) $ 97,848,565 $ 2,323,925 9.50%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ 2,094,623 $ 14,546 2.78%
Money market deposit
accounts 15,762,255 149,831 3.80%
Savings accounts 5,425,790 31,386 2.31%
Other Consumer Time
Deposits 16,656,731 190,489 4.57%
Public Fund CD's
of $100,000 or more 1,281,768 16,636 5.19%
CD's of $100,000 or more 8,682,658 101,535 4.68%
Foreign time deposits 3,831,401 47,962 5.01%
Total Interest-bearing
deposits $ 53,735,226 $ 552,385 4.11%
Senior and subordinated
notes 9,034,696 136,282 6.03%
Other borrowings 18,891,606 242,286 5.13%
Total interest-bearing
liabilities(2) $ 81,661,528 $ 930,953 4.56%
Net interest spread 4.94%
Interest income to average
earning assets 9.50%
Interest expense to average
earning assets 3.81%
Net interest margin 5.69%
(1) Prior period amounts have been reclassified to conform with current
period presentation.
(2) Average balances, income and expenses, yields and rates are based on
continuing operations.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Managed (1) Quarter Ended 12/31/07
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment 148,362,338 4,512,219 12.17%
Securities available
for sale 20,102,440 256,364 5.10%
Other 7,186,892 94,663 5.27%
Total earning assets (3) $ 175,651,670 $ 4,863,246 11.07%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ 4,674,490 $ 30,443 2.61%
Money market deposit
accounts 28,983,602 270,943 3.74%
Savings accounts 8,172,510 32,520 1.59%
Other Consumer Time
Deposits 16,374,958 183,570 4.48%
Public Fund CD's
of $100,000 or more 1,902,442 23,126 4.86%
CD's of $100,000 or more 8,335,941 97,335 4.67%
Foreign time deposits 3,868,444 48,237 4.99%
Total Interest-bearing
deposits $ 72,312,387 $ 686,174 3.80%
Senior and subordinated
notes 10,682,635 159,878 5.99%
Other borrowings 26,433,200 351,895 5.33%
Securitization liability 49,847,555 664,786 5.33%
Total interest-bearing
liabilities(3) $ 159,275,777 $ 1,862,733 4.68%
Net interest spread 6.39%
Interest income to average
earning assets 11.07%
Interest expense to average
earning assets 4.24%
Net interest margin 6.83%
Managed (1) Quarter Ended 9/30/07 (2)
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment 143,781,268 4,324,272 12.03%
Securities available
for sale 20,041,177 252,550 5.04%
Other 4,415,978 69,610 6.31%
Total earning assets (3) $ 168,238,423 $ 4,646,432 11.05%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ 4,759,665 $ 34,030 2.86%
Money market deposit
accounts 28,696,735 294,873 4.11%
Savings accounts 8,345,638 37,474 1.80%
Other Consumer Time
Deposits 17,203,453 194,256 4.52%
Public Fund CD's
of $100,000 or more 1,884,767 23,092 4.90%
CD's of $100,000 or more 8,673,860 103,296 4.76%
Foreign time deposits 3,991,056 53,070 5.32%
Total Interest-bearing
deposits $ 73,555,174 $ 740,091 4.02%
Senior and subordinated
notes 9,811,821 144,643 5.90%
Other borrowings 18,892,876 257,759 5.46%
Securitization liability 51,320,446 700,501 5.46%
Total interest-bearing
liabilities(3) $ 153,580,317 $ 1,842,994 4.80%
Net interest spread 6.25%
Interest income to average
earning assets 11.05%
Interest expense to average
earning assets 4.38%
Net interest margin 6.67%
Managed (1) Quarter Ended 12/31/06 (2)
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment 123,901,960 3,640,588 11.75%
Securities available
for sale 15,090,001 185,424 4.92%
Other 6,121,053 75,547 4.94%
Total earning assets (3) $ 145,113,014 $ 3,901,559 10.76%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $ 2,094,623 $ 14,546 2.78%
Money market deposit
accounts 15,762,255 149,831 3.80%
Savings accounts 5,425,790 31,386 2.31%
Other Consumer Time
Deposits 16,656,731 190,489 4.57%
Public Fund CD's
of $100,000 or more 1,281,768 16,636 5.19%
CD's of $100,000 or more 8,682,658 101,535 4.68%
Foreign time deposits 3,831,401 47,962 5.01%
Total Interest-bearing
deposits $ 53,735,226 $ 552,385 4.11%
Senior and subordinated
notes 9,034,696 136,282 6.03%
Other borrowings 18,891,606 242,299 5.13%
Securitization liability 48,603,831 631,521 5.20%
Total interest-bearing
liabilities(3) $ 130,265,359 $ 1,562,487 4.80%
Net interest spread 5.96%
Interest income to average
earning assets 10.76%
Interest expense to average
earning assets 4.31%
Net interest margin 6.45%
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans.
(2) Prior period amounts have been reclassified to conform with current
period presentation.
(3) Average balances, income and expenses, yields and rates are based on
continuing operations.
CONTACT: Investor Relations
Jeff Norris
+1-703-720-2455
Media
Relations
Tatiana Stead
+1-703-720-2352
Julie Rakes
+1-804-284-5800
All of Capital One Financial Corporation