Capital One Reports 2008 Net Loss of $.21 Per Common Share (Diluted), Including Goodwill Impairment; 2008 Earnings of $2.28 Per Common Share From Continuing Operations
Printer Friendly Version of the Press Release (pdf format)
Printer Friendly Version of the Financial Supplement (pdf format)
Printer Friendly Version of the Earnings Conference Call Presentation (pdf format)
Fourth quarter net loss of
MCLEAN, Va.,
Net income from continuing operations excludes the loss from discontinued operations related to the shutdown of GreenPoint Mortgage in
- The company added
$1.0 billion to allowance for loan losses in anticipation of increasing charge-offs in 2009. Allowance as a percent of reported loans increased 90 basis points in the fourth quarter of 2008 to 4.5 percent. - The company recognized an
$810.9 million non-cash impairment of goodwill in conjunction with its revised outlook for its Auto Finance business. - Total deposits at
December 31, 2008 were$108.6 billion , up 31.2 percent from the prior year and up 9.8 percent from the third quarter of 2008, with stable deposit margins. - Readily available liquidity increased to
$40 billion , up from$32 billion at the end of the third quarter. - Capital ratios remain strong -- tangible common equity to tangible managed assets, or "TCE ratio", of 5.57 percent; Tier 1 risk-based capital ratio of 13.6 percent.
"The economic downturn was the key driver of our fourth quarter and full year results, and we expect that the recession will continue to impact our results throughout 2009," said
Total Company Results
- The company added
$1.0 billion to allowance for loan losses in anticipation of increasing charge-offs in 2009. The fourth quarter allowance was built on the assumption that the U.S. unemployment rate will increase to 8.7 percent by the end of 2009 and that, on average; home prices in the U.S. will decline an additional 10 percent by the end of the year. The total allowance for loan losses is now$4.5 billion , which is consistent with an outlook for$8.6 billion in managed net charge-offs for the next twelve months through the fourth quarter of 2009, and brings the coverage ratio for reported loans up significantly to 4.5 percent at the end of the fourth quarter of 2008. - Total managed revenues of
$16.8 billion in 2008 were essentially even with 2007, while fourth quarter 2008 managed revenues were 6.3 percent lower as compared to the third quarter of 2008. - Total deposits at
December 31, 2008 were$108.6 billion , up 31.2 percent from the prior year and up 9.8 percent from the third quarter of 2008, with stable deposit margins. - Managed loans held for investment of
$146.9 billion atDecember 31, 2008 declined 0.3 percent, from the third quarter of 2008, and were down 2.9 percent fromDecember 31, 2007 . - Ongoing efficiency efforts lowered non-interest expense for continuing operations, excluding non-cash goodwill impairment, by
$676 million in 2008 versus 2007, which drove the efficiency ratio down from 47.30 percent in 2007 to 43.14 percent in 2008. - Tangible common equity to tangible managed assets or "TCE ratio" remains strong at 5.57 percent, and the Tier 1 risk-based capital ratio of 13.6 percent continues to be well above the regulatory minimum.
"We have built our allowance in anticipation of further degradation in the economy, grown readily available liquidity to record levels, and are maintaining healthy capital ratios that are resilient to a range of economic outcomes," said
Segment Results
Local Banking Segment highlights
Credit performance worsened in the quarter as the widening recession took hold in the company's local markets, impacting the
The expected addition of
- Local Banking reported a net loss for the fourth quarter of 2008 of
$6.5 million , down$94.7 million from net income of$88.2 million in the third quarter of 2008. Local Banking for 2008 was$224.6 million . - The net charge-off rate increased 44 basis points to 90 basis points in the fourth quarter of 2008 from 46 basis points in the third quarter of 2008, while non-performing loans as a percent of loans held for investment of 1.25 percent increased from 0.96 percent at the end of the third quarter of 2008.
- Loans held for investment of
$45.1 billion were up slightly relative to the third quarter of 2008, and up 2.5 percent over year end 2007. - Local Banking deposits increased
$3.9 billion , or 5 percent, from the third quarter of 2008 to$78.9 billion atDecember 31, 2008 , and increased$5.8 billion , or 8.0 percent, from year end 2007.
National Lending Segment highlights
The National Lending segment contains the results of the company's U.S. Card, Auto Finance and International Lending businesses. For details on each of these subsegments' results, please refer to the Financial Supplement.
Economic deterioration intensified during the fourth quarter, driving increasing delinquency and charge-off rates across all of our lending businesses. The fourth quarter charge-off rate in the U.S. Card business was 7.08%, in line with the expectations conveyed last quarter. The company now expects that the U.S. Card charge-off rate for the first quarter of 2009 will be around 8.1%, rather than the mid 7% range previously communicated. The change in outlook is primarily the result of declining balances and adverse credit performance of closed-end, unsecured loans that are included in the U.S. Card subsegment. Auto Finance delinquencies and charge-off rates increased in the quarter as a result of seasonality, economic worsening, declining loan balances, and the impact of sharply falling used car auction prices. Credit trends in the International business reflect increasing economic deterioration in the UK, and relative stability in the Canadian business.
National Lending managed loans did not grow in the fourth quarter, and declined modestly as compared to the prior year. Fourth quarter loan growth in the U.S. Card business was weaker than usual as a result of weak holiday spending. Managed loans in the International business declined by more than
The decisions made over the course of the last year to scale back origination volume in the Auto business have led to a reduced estimate of the fair value of the Auto business, and, in turn, recognition that the business can no longer support the full carrying value of goodwill. As a result, the business recorded a
- Despite significant credit pressures, the U.S. Card business delivered
$1.0 billion in net income for the year, the International businesses remained profitable for the full year 2008, with net income of$67.9 million . As a result of the non-cash goodwill write-down, the Auto Finance business reported a net loss of$958.9 million . In total, the National Lending segment reported net income of$110.0 million . - National Lending segment revenues of
$3.3 billion were down$92.9 million , or 2.7 percent, in the fourth quarter of 2008 compared to the third quarter of 2008, and down$474.8 million , or 12.5 percent, relative to the fourth quarter of 2007. For the full year 2008, revenues of$13.7 billion were essentially flat compared to 2007. - The delinquency rate was 5.93 percent as of
December 31, 2008 , an increase of 50 basis points from 5.43 percent as ofSeptember 30, 2008 . - The managed net charge-off rate for the National Lending segment increased 81 basis points in the fourth quarter of 2008 to 6.66 percent from 5.85 percent in the third quarter of 2008. The company expects the U.S. Card charge-off rate to be around 8.1 percent for the first quarter of 2009.
- Loans held for investment of
$101.1 billion were essentially flat relative to the third quarter of 2008 and down 5.0 percent relative to year end 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
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
About Capital One
NOTE: Fourth quarter 2008 financial results, SEC Filings, and 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 podcast and webcast of today's
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
REPORTED BASIS
(in millions, except per 2008 2008 2007
share data and as noted) Q4 Q3 Q4
Earnings (Reported Basis)
Net Interest Income $1,802.4 $1,806.6 $1,762.3
Non-Interest Income 1,368.3 (2) 1,696.9 (2) 2,158.3 (6)
Total Revenue (1) 3,170.7 3,503.5 3,920.6
Provision for Loan Losses 2,098.9 1,093.9 1,294.2
Marketing Expenses 264.9 267.4 358.2
Restructuring Expenses 52.8 15.3 27.8
Goodwill Impairment Charge 810.9 (8) - -
Operating Expenses (3) 1,629.3 1,527.5 1,749.2 (4)
Income (Loss) Before Taxes (1,686.1) 599.4 491.2
Tax Rate 17.2 % 35.6 % 34.5 %
Income (Loss) From Continuing
Operations, Net of Tax $(1,396.3) $385.8 $321.6
Loss From Discontinued
Operations, Net of Tax (5) (25.2) (11.7) (95.0)
Net Income (Loss) $(1,421.5) $374.1 $226.6
Net Income (Loss)
Available to Common
Shareholders (F) $(1,454.3) $374.1 $226.6
Common Share Statistics
Basic EPS: (G)
Income (Loss) From
Continuing Operations $(3.67) $1.03 $0.85
Loss From Discontinued
Operations $(0.07) $(0.03) $(0.25)
Net Income (Loss) $(3.74) $1.00 $0.60
Diluted EPS: (G)
Income (Loss) From
Continuing Operations $(3.67) $1.03 $0.85
Loss From Discontinued
Operations $(0.07) $(0.03) $(0.25)
Net Income (Loss) $(3.74) $1.00 $0.60
Dividends Per Common Share $0.375 $0.375 $0.03
Tangible Book Value Per
Common Share (period end) $28.24 $31.63 $29.00
Stock Price Per Common
Share (period end) $31.89 $51.00 $47.26
Total Market Capitalization
(period end) $12,411.6 $19,833.9 $17,623.3
Common Shares Outstanding
(period end) 389.2 388.9 372.9
Shares Used to Compute
Basic EPS 389.0 372.9 375.6
Shares Used to Compute
Diluted EPS 389.0 374.3 378.4
Reported Balance Sheet Statistics
(period average) (A)
Average Loans Held for
Investment $99,335 $98,778 $97,785
Average Earning Assets $137,799 $133,277 $127,242
Average Assets $161,976 $156,958 $150,926
Average Interest Bearing
Deposits $93,144 $84,655 $72,074
Total Average Deposits $104,093 $95,328 $83,813
Average Equity $26,658 (10) $25,046 $24,733
Return on Average Assets (ROA) (3.45)% 0.98 % 0.85 %
Return on Average Equity (ROE) (20.95)% 6.16 % 5.20 %
Reported Balance Sheet Statistics
(period end) (A)
Loans Held for Investment $101,018 $97,965 $101,805
Total Assets $165,945 $154,783 $150,202
Interest Bearing Deposits $97,327 $88,248 $71,715
Total Deposits $108,621 $98,913 $82,761
Performance Statistics
(Reported) (A)
Net Interest Income Growth
(annualized) (1)% 18 % 34 %
Non Interest Income Growth
(annualized) (77)% 18 % 2 %
Revenue Growth (annualized) (38)% 18 % 16 %
Net Interest Margin 5.23 % 5.42 % 5.54 %
Revenue Margin 9.20 % 10.51 % 12.32 %
Risk Adjusted Margin (B) 6.17 % 7.90 % 10.28 %
Non Interest Expense as a
% of Average Loans Held
for Investment (annualized) 7.84 % (9) 7.33 % 8.73 %
Efficiency Ratio (C) 59.74 % (9) 51.23 % 53.75 %
Asset Quality Statistics
(Reported) (A)
Allowance $4,524 $3,520 $2,963
Allowance as a % of Reported
Loans Held for Investment 4.48 % 3.59 % 2.91 %
Net Charge-Offs $1,045 $872 $650
Net Charge-Off Rate 4.21 % 3.53 % 2.66 %
Delinquency Rate (30+ days) 4.37 % 3.85 % 3.66 %
Full-time equivalent
employees (in thousands) 23.7 23.5 27.0
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
MANAGED BASIS (*)
2008 2008 2007
(in millions) Q4 Q3 Q4
Earnings (Managed Basis)
Net Interest Income $2,767.9 $2,889.3 $3,000.5
Non-Interest Income 1,183.2 (2) 1,325.6 (2) 1,566.2 (6)
Total Revenue (1) 3,951.1 4,214.9 4,566.7
Provision for Loan Losses 2,879.3 1,805.3 1,940.3
Marketing Expenses 264.9 267.4 358.2
Restructuring Expenses 52.8 15.3 27.8
Goodwill Impairment Charge 810.9 (8) - -
Operating Expenses (3) 1,629.3 1,527.5 1,749.2 (4)
Income (Loss) Before Taxes (1,686.1) 599.4 491.2
Tax Rate 17.2 % 35.6 % 34.5 %
Income (Loss) From Continuing
Operations, Net of Tax $(1,396.3) $385.8 $321.6
Loss From Discontinued
Operations, Net of Tax (5) (25.2) (11.7) (95.0)
Net Income (Loss) $(1,421.5) $374.1 $226.6
Net Income (Loss) Available
to Common Shareholders (F) $(1,454.3) $374.1 $226.6
Managed Balance Sheet Statistics
(period average) (A)
Average Loans Held for
Investment $146,586 $147,247 $148,362
Average Earning Assets $182,660 $179,753 $175,652
Average Assets $207,240 $204,694 $200,658
Return on Average Assets
(ROA) (2.70)% 0.75 % 0.64 %
Managed Balance Sheet Statistics
(period end) (A)
Loans Held for Investment $146,937 $147,346 $151,362
Total Assets $209,907 $203,452 $198,908
Tangible Assets (D) $197,404 $190,141 $185,428
Tangible Common Equity (E) $10,990 $12,301 $10,814
Tangible Common Equity to
Tangible Assets Ratio 5.57 % 6.47 % (7) 5.83 %
% Off-Balance Sheet
Securitizations 31 % 34 % 33 %
Performance Statistics
(Managed) (A)
Net Interest Income Growth
(annualized) (17)% 15 % 28 %
Non Interest Income Growth
(annualized) (43)% 7 % 13 %
Revenue Growth (annualized) (25)% 12 % 23 %
Net Interest Margin 6.06 % 6.43 % 6.83 %
Revenue Margin 8.65 % 9.38 % 10.40 %
Risk Adjusted Margin (B) 4.65 % 5.86 % 7.45 %
Non Interest Expense as a % of
Average Loans Held for
Investment (annualized) 5.31 % (9) 4.92 % 5.76 %
Efficiency Ratio (C) 47.94 % (9) 42.58 % 46.15 %
Asset Quality Statistics
(Managed) (A)
Net Charge-Offs $1,826 $1,583 $1,296
Net Charge-Off Rate 4.98 % 4.30 % 3.49 %
Delinquency Rate (30+ days) 4.49 % 3.99 % 3.87 %
(*) 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 2008 - $591.0 million, Q3 2008 - $445.7
million and Q4 2007 - $379.4 million.
(2) Includes the impact from the decrease in fair value of the
interest-only strips of $131.0 million in Q4 2008 and $66.7 million in
Q3 2008.
(3) Includes core deposit intangible amortization expense of $46.0 million
in Q4 2008, $47.3 million in Q3 2008 and $51.1 million in Q4 2007 and
integration costs of $3.2 million in Q4 2008, $10.3 million in Q3 2008
and $28.6 million in Q4 2007.
(4) In Q4 2007, the Company recognized a pre-tax charge of approximately
$140 million for liabilities in connection with the Visa antitrust
lawsuit settlement with American Express and estimated possible
damages in connection with other pending Visa litigation. In Q1 2008,
the Company, in connection with the Visa initial public offering
(IPO), reversed approximately $91 million of these legal liabilities.
(5) 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.
(6) 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.
(7) The Q3 2008 TCE ratio reflects the issuance of 15,527,000 shares on
September 30, 2008 at $49 per share.
(8) In Q4 2008 the Company recorded impairment of goodwill in its Auto
Finance sub-segment of $810.9 million .
(9) Excludes the impact of the goodwill impairment of $810.9 million .
(10) Average equity includes the impact of the Company's participation in
the U.S. Treasury's Capital Purchase Program. The Company issued
3,555,199 preferred shares and 12,657,960 warrants to purchase common
shares, while receiving proceeds of $3.56 billion . The allocated fair
value for the preferred shares and the warrants to purchase common
shares was $3.06 billion and $491.5 million , respectively. The
warrants to purchase common shares are included in paid-in capital on
the balance sheet.
STATISTICS / METRIC DEFINITIONS
(A) Based on continuing operations. Average equity and return on equity
are based on the Company's stockholders' equity.
(B) Risk adjusted margin equals total revenue less net charge-offs as a
percentage of average earning assets.
(C) Efficiency ratio equals non-interest expense less restructuring
expense divided by total revenue.
(D) Tangible assets include managed assets less intangible assets.
(E) Includes stockholders' equity less preferred shares less intangible
assets and related deferred tax liabilities. Tangible Common Equity on
a reported and managed basis is the same.
(F) Net income (loss) available to common shareholders equals net income
(loss) less dividends on preferred shares.
(G) Earnings per share is based on net income (loss) available to common
shareholders.
CAPITAL ONE FINANCIAL CORPORATION (COF)
SEGMENT FINANCIAL & STATISTICAL SUMMARY FOR CONTINUING OPERATIONS
MANAGED BASIS (1)
2008 2008 2007
(in thousands) Q4 Q3 Q4 (6)
Local Banking:
Interest Income $1,512,139 $1,519,217 $1,707,377
Interest Expense 869,723 895,481 1,122,841
Net interest income $642,416 $623,736 $584,536
Non-interest income 189,814 215,701 206,002
Provision for loan losses 214,154 81,052 42,665
Other non-interest expenses 628,110 622,697 589,943
Income tax provision (3,512) 47,491 54,328
Net income (loss) $(6,522) $88,197 $103,602
Loans Held for Investment $45,082,981 $44,662,818 $43,972,795
Average Loans Held for
Investment $44,810,117 $44,319,475 $43,128,767
Core Deposits (2) $67,546,102 $64,386,336 $62,977,637
Total Deposits $78,938,391 $75,045,812 $73,089,284
Loans Held for Investment
Yield 6.08% 6.25% 7.02%
Net Interest Margin -
Loans (3) 2.11% 1.98% 1.87%
Net Interest Margin -
Deposits (4) 2.12% 2.18% 2.05%
Efficiency Ratio (5) 75.47% 74.18% 74.63%
Net charge-off rate 0.90% 0.46% 0.29%
Non Performing Loans $565,791 $430,211 $178,385
Foreclosed Assets 63,970 41,290 14,058
Non Performing Assets (9) $629,761 $471,501 $192,443
Non Performing Loans as a
% of Loans Held for
Investment 1.25% 0.96% 0.41%
Non Performing Asset Rate (9) 1.40% 1.06% 0.44%
Non-Interest Expenses as a
% of Average Loans Held
for Investment 5.61% 5.62% 5.47%
Number of Active ATMs 1,311 1,310 1,288
Number of Locations 738 739 742
National Lending (8):
Interest Income $3,104,769 $3,251,446 $3,670,404
Interest Expense 921,542 1,019,911 1,231,978
Net interest income $2,183,227 $2,231,535 $2,438,426
Non-interest income 1,151,066 1,195,622 1,370,655
Provision for loan losses 2,602,101 1,678,513 1,777,327
Goodwill impairment charge 810,876 (10) - -
Other non-interest expenses 1,201,764 1,176,396 1,361,709
Income tax provision (169,060) 200,626 229,084
Net income (loss) $(1,111,388) $371,622 $440,961
Loans Held for Investment $101,147,134 $101,922,850 $106,508,443
Average Loans Held for
Investment $101,038,849 $102,142,752 $104,321,485
Core Deposits (2) $2,219 $2,171 $1,599
Total Deposits $1,459,131 $1,650,507 $2,050,861
Loans Held for Investment
Yield 12.29% 12.73% 14.07%
Net Interest Margin 8.64% 8.74% 9.35%
Revenue Margin 13.20% 13.42% 14.61%
Risk Adjusted Margin 6.54% 7.57% 9.88%
Non-Interest Expenses as a
% of Average Loans Held
for Investment 4.76% (11) 4.61% 5.22%
Efficiency Ratio (5) 36.04% (11) 34.33% 35.75%
Net charge-off rate 6.66% 5.85% 4.73%
Delinquency Rate (30+ days) 5.93% 5.43% 5.17%
Number of Loan Accounts (000s) 44,816 45,314 48,537
Other:
Net interest income $(57,763) $34,059 $(22,449)
Non-interest income (157,700) (85,764) (10,425)
Provision for loan losses 63,043 45,705 120,376
Restructuring expenses 52,839 15,306 27,809
Other non-interest expenses 64,354 (4,193) 155,746
Income tax provision
(benefit) (117,284) (34,493) (113,854)
Net income (loss) $(278,415) $(74,030) $(222,951)
Loans Held for Investment $706,639 $760,078 $881,179
Core Deposits (2) $27,067,784 $20,800,890 $6,107,779
Total Deposits $28,223,267 $22,216,655 $7,621,031
Total:
Interest Income $4,205,821 $4,346,261 $4,863,246
Interest Expense 1,437,941 1,456,931 1,862,733
Net interest income $2,767,880 $2,889,330 $3,000,513
Non-interest income 1,183,180 1,325,559 1,566,232
Provision for loan losses 2,879,298 1,805,270 1,940,368
Restructuring expenses 52,839 15,306 27,809
Goodwill impairment charge 810,876 - -
Other non-interest expenses 1,894,228 1,794,900 2,107,398
Income tax provision (289,856) 213,624 169,558
Net income (loss) $(1,396,325) $385,789 $321,612
Loans Held for Investment $146,936,754 $147,345,746 $151,362,417
Core Deposits (2) $94,616,105 $85,189,397 $69,087,015
Total Deposits $108,620,789 $98,912,974 $82,761,176
CAPITAL ONE FINANCIAL CORPORATION (COF)
LOCAL BANKING SEGMENT FINANCIAL & STATISTICAL INFORMATION
2008 2008 2007
(in thousands) Q4 Q3 Q4
Loans Held for Investment:
Commercial Lending
Commercial and Multi-Family
Real Estate $13,382,909 $13,043,369 $12,414,263
Middle Market 10,081,823 9,768,420 8,288,476
Small Ticket Commercial Real
Estate 2,609,123 2,695,570 2,948,402
Specialty Lending 3,547,287 3,634,212 3,396,100
Total Commercial Lending $29,621,142 $29,141,571 $27,047,241
Small Business Lending $4,747,783 $4,580,299 $4,612,500
Consumer Lending
Mortgages $7,187,805 $7,402,290 $8,513,216
Branch Based Home Equity &
Other Consumer 3,773,397 3,782,342 4,095,228
Total Consumer Lending $10,961,202 $11,184,632 $12,608,444
Other $(247,146) $(243,684) $(295,390)
Total Loans Held for Investment $45,082,981 $44,662,818 $43,972,795
Non Performing Asset Rates (9):
Commercial Lending
Commercial and Multi-Family
Real Estate 1.20% 1.06% 0.24%
Middle Market 0.43% 0.26% 0.41%
Small Ticket Commercial Real
Estate 6.67% 4.49% 0.54%
Specialty Lending 1.05% 0.38% 0.18%
Total Commercial Lending 1.40% 1.03% 0.32%
Small Business Lending 1.79% 1.14% 1.06%
Consumer Lending
Mortgages 1.55% 1.41% 0.54%
Branch Based Home Equity &
Other Consumer 0.46% 0.40% 0.30%
Total Consumer Lending 1.18% 1.07% 0.46%
Total Non Performing Asset Rate 1.40% 1.06% 0.44%
Net Charge Off Rates:
Commercial Lending
Commercial and Multi-Family
Real Estate 1.15% 0.14% 0.02%
Middle Market 0.48% 0.15% 0.12%
Small Ticket Commercial Real
Estate 0.90% 0.10% 0.21%
Specialty Lending 0.47% 0.26% 0.15%
Total Commercial Lending 0.82% 0.16% 0.09%
Small Business Lending 1.12% 1.17% 0.63%
Consumer Lending
Mortgages 0.48% 0.50% 0.19%
Branch Based Home Equity &
Other Consumer 1.34% 1.01% 1.04%
Total Consumer Lending 0.78% 0.67% 0.46%
Total Net Charge Off Rate 0.90% 0.46% 0.29%
CAPITAL ONE FINANCIAL CORPORATION (COF)
NATIONAL LENDING SUB-SEGMENT FINANCIAL & STATISTICAL SUMMARY FOR
CONTINUING OPERATIONS
MANAGED BASIS (1), (8)
2008 2008 2007
(in thousands) Q4 Q3 Q4 (6)
US Card:
Interest Income $2,179,456 $2,240,896 $2,548,929
Interest Expense 570,751 624,858 780,985
Net interest income $1,608,705 $1,616,038 $1,767,944
Non-interest income 1,018,689 1,027,918 1,163,795
Provision for loan losses 2,000,928 1,240,580 1,195,469
Non-interest expenses 896,572 872,588 976,118
Income tax provision (94,537) 185,775 261,492
Net income (loss) $(175,569) $345,013 $498,660
Loans Held for Investment $70,944,581 $69,361,743 $69,723,169
Average Loans Held for
Investment $69,643,290 $68,581,983 $67,727,632
Loans Held for Investment
Yield 12.52% 13.07% 15.05%
Net Interest Margin 9.24% 9.43% 10.44%
Revenue Margin 15.09% 15.42% 17.31%
Risk Adjusted Margin 8.01% 9.29% 12.47%
Non-Interest Expenses as a %
of Average Loans Held for
Investment 5.15% 5.09% 5.76%
Efficiency Ratio (5) 34.12% 33.00% 33.29%
Net charge-off rate 7.08% 6.13% 4.84%
Delinquency Rate (30+ days) 4.78% 4.20% 4.28%
Purchase Volume (7) $25,217,781 $26,536,070 $28,230,725
Number of Loan Accounts
(000s) 37,436 37,916 41,044
Auto Finance:
Interest Income $622,244 $635,305 $687,389
Interest Expense 255,501 265,804 300,133
Net interest income $366,743 $369,501 $387,256
Non-interest income 12,846 14,607 14,888
Provision for loan losses 437,572 244,078 429,247
Goodwill impairment charge 810,876 (10) - -
Non-interest expenses 127,075 117,677 144,301
Income tax (benefit) provision (71,290) 7,824 (58,963)
Net income (loss) $(924,644) $14,529 $(112,441)
Loans Held for Investment $21,481,911 $22,306,394 $25,128,352
Average Loans Held for
Investment $21,954,587 $22,857,540 $24,920,380
Loans Held for Investment
Yield 11.34% 11.12% 11.03%
Net Interest Margin 6.68% 6.47% 6.22%
Revenue Margin 6.92% 6.72% 6.45%
Risk Adjusted Margin 1.24% 1.73% 2.46%
Non-Interest Expenses as a %
of Average Loans Held for
Investment 2.32% (11) 2.06% 2.32%
Efficiency Ratio (5) 33.48% (11) 30.64% 35.88%
Net charge-off rate 5.67% 5.00% 4.00%
Delinquency Rate (30+ days) 9.91% 9.32% 7.84%
Auto Loan Originations $1,476,136 $1,444,291 $3,623,491
Number of Loan Accounts (000s) 1,634 1,665 1,771
International:
Interest Income $303,069 $375,245 $434,086
Interest Expense 95,290 129,249 150,860
Net interest income $207,779 $245,996 $283,226
Non-interest income 119,531 153,097 191,972
Provision for loan losses 163,601 193,855 152,611
Non-interest expenses 178,117 186,131 241,290
Income tax provision (3,233) 7,027 26,555
Net income (loss) $(11,175) $12,080 $54,742
Loans Held for Investment $8,720,642 $10,254,713 $11,656,922
Average Loans Held for
Investment $9,440,972 $10,703,229 $11,673,473
Loans Held for Investment
Yield 12.84% 14.02% 14.87%
Net Interest Margin 8.80% 9.19% 9.70%
Revenue Margin 13.87% 14.91% 16.28%
Risk Adjusted Margin 8.02% 9.01% 10.67%
Non-Interest Expenses as a %
of Average Loans Held for
Investment 7.55% 6.96% 8.27%
Efficiency Ratio (5) 54.42% 46.64% 50.78%
Net charge-off rate 5.84% 5.90% 5.61%
Delinquency Rate (30+ days) 5.51% 5.24% 4.79%
Purchase Volume (7) $2,346,969 $2,857,975 $2,966,350
Number of Loan Accounts (000s) 5,747 5,733 5,722
CAPITAL ONE FINANCIAL CORPORATION (COF)
SEGMENT AND NATIONAL LENDING SUB-SEGMENT
FINANCIAL & STATISTICAL SUMMARY FOR CONTINUING OPERATIONS NOTES
(1) The information in this financial and 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) Net Interest Margin - Loans equals net interest income earned on loans
divided by average managed loans.
(4) Net Interest Margin - Deposits equals net interest income earned on
deposits divided by average deposits.
(5) Efficiency Ratio equals non-interest expenses divided by total managed
revenue.
(6) Certain prior period amounts have been reclassified to conform with
current period presentation.
(7) Includes all purchase transactions net of returns and excludes cash
advance transactions.
(8) In Q1 2008 the Company reorganized its National Lending sub-segments
from U.S. Card, Auto Finance and Global Financial Services to U.S.
Card and Other National Lending. The U.S. Card sub-segment contains
the results of the Company's domestic credit card business, small
business lending and the installment loan business. The Other National
Lending subsegment contains the results of the Company's auto finance
business and the Company's international lending businesses.
Components of the Other National Lending sub-segment are separately
disclosed. Segment and sub-segment results have been restated for all
periods presented.
(9) Non performing assets is comprised of non performing loans and
foreclosed assets. The non performing asset rate equals non performing
assets divided by the sum of loans held for investment plus foreclosed
assets.
(10) In Q4 2008 the Company recorded impairment of goodwill in its Auto
Finance sub-segment of $810.9 million .
(11) Excludes the impact of the goodwill impairment of $810.9 million
recorded in the Auto Finance component of National Lending.
CAPITAL ONE FINANCIAL CORPORATION
Reconciliation to GAAP Financial Measures
For the Three Months Ended December 31, 2008
(dollars in thousands)(unaudited)
The Company's consolidated financial statements prepared in accordance with generally accepted accounting principles ("GAAP") are referred to as its "reported" financial statements. Loans included in securitization transactions which qualified as sales under GAAP have been removed from the Company's "reported" balance sheet. However, servicing fees, finance charges, and other fees, net of charge-offs, and interest paid to investors of securitizations are recognized as servicing and securitizations income on the "reported" income statement.
The Company's "managed" consolidated financial statements reflect adjustments made related to effects of securitization transactions qualifying as sales under GAAP. The Company generates earnings from its "managed" loan portfolio which includes both the on-balance sheet loans and off-balance sheet loans. The Company's "managed" income statement takes the components of the servicing and securitizations income generated from the securitized portfolio and distributes the revenue and expense to appropriate income statement line items from which it originated. For this reason the Company believes the "managed" consolidated financial statements and related managed metrics to be useful to stakeholders.
Total Total
Reported Adjustments (1) Managed (2)
Income Statement Measures (3)
Net interest income $1,802,397 $965,483 $2,767,880
Non-interest income 1,368,286 (185,106) 1,183,180
Total revenue 3,170,683 780,377 3,951,060
Provision for loan and lease
losses 2,098,921 780,377 2,879,298
Net charge-offs $1,045,912 $780,377 $1,826,289
Balance Sheet Measures
Loans held for investment $101,017,771 $45,918,983 $146,936,754
Total assets $165,980,505 $43,961,156 $209,941,661
Average loans held for
investment $99,334,890 $47,251,262 $146,586,152
Average earning assets $137,818,202 $44,861,288 $182,679,490
Average total assets $162,035,538 $45,264,163 $207,299,701
Delinquencies $4,417,823 $2,178,400 $6,596,223
(1) Income statement adjustments reclassify the net of finance charges of
$1,285.1 million , past-due fees of $200.1 million , other interest
income of $(48.2) million and interest expense of $471.5 million ; and
net charge-offs of $780.4 million from non-interest income to net
interest income and provision for loan and lease 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
Dec 31 Sept 30 Dec 31
2008 2008 2007
Assets:
Cash and due from banks $2,047,839 $3,511,558 $2,377,287
Federal funds sold and resale
agreements 636,752 1,435,521 1,766,762
Interest-bearing deposits at
other banks 4,806,752 673,662 677,360
Cash and cash equivalents 7,491,343 5,620,741 4,821,409
Securities available for sale 31,003,271 26,969,471 19,781,587
Mortgage loans held for sale 68,462 98,900 315,863
Loans held for investment 101,017,771 97,965,351 101,805,027
Less: Allowance for loan
and lease losses (4,523,960) (3,519,610) (2,963,000)
Net loans held for investment 96,493,811 94,445,741 98,842,027
Accounts receivable from
securitizations 6,342,754 4,980,823 4,717,879
Premises and equipment, net 2,313,106 2,305,286 2,299,603
Interest receivable 827,909 750,717 839,317
Goodwill 12,022,577 12,815,642 12,830,740
Other 9,417,272 6,815,792 6,141,944
Total assets $165,980,505 $154,803,113 $150,590,369
Liabilities:
Non-interest-bearing deposits $11,293,852 $10,665,286 $11,046,549
Interest-bearing deposits 97,326,937 88,247,688 71,714,627
Senior and subordinated notes 8,308,843 8,278,856 10,712,706
Other borrowings 14,869,648 15,962,072 26,812,969
Interest payable 676,398 508,091 631,609
Other 6,892,394 5,529,580 5,377,797
Total liabilities 139,368,072 129,191,573 126,296,257
Stockholders' Equity:
Preferred stock 3,096,466 - -
Common stock 4,384 4,383 4,192
Paid-in capital, net 17,278,102 16,752,078 15,860,490
Retained earnings and
cumulative other
comprehensive income 9,399,368 12,020,490 11,582,816
Less: Treasury stock, at cost (3,165,887) (3,165,411) (3,153,386)
Total stockholders' equity 26,612,433 25,611,540 24,294,112
Total liabilities and
stockholders' equity $165,980,505 $154,803,113 $150,590,369
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
Three Months Ended
Dec 31 Sept 30 Dec 31
2008 2008 2007
Interest Income:
Loans held for investment, including
past-due fees $2,306,796 $2,347,480 $2,536,779
Securities available for sale 367,902 317,274 256,364
Other 94,123 107,042 167,051
Total interest income 2,768,821 2,771,796 2,960,194
Interest Expense:
Deposits 684,756 624,319 686,174
Senior and subordinated notes 92,519 96,568 159,878
Other borrowings 189,149 244,264 351,895
Total interest expense 966,424 965,151 1,197,947
Net interest income 1,802,397 1,806,645 1,762,247
Provision for loan and lease losses 2,098,921 1,093,917 1,294,210
Net interest income (loss) after
provision for loan and lease losses (296,524) 712,728 468,037
Non-Interest Income:
Servicing and securitizations 590,948 875,718 1,271,396
Service charges and other customer-
related fees 557,331 576,762 573,034
Mortgage servicing and other 14,048 39,183 (5,700)
Interchange 129,409 148,076 152,595
Other 76,550 57,152 167,015
Total non-interest income 1,368,286 1,696,891 2,158,340
Non-Interest Expense:
Salaries and associate benefits 574,199 571,686 622,101
Marketing 264,943 267,372 358,182
Communications and data processing 196,924 176,720 189,415
Supplies and equipment 130,038 126,781 146,267
Occupancy 112,492 96,483 91,675
Restructuring expense 52,839 15,306 27,809
Goodwill impairment charge 810,876 - -
Other 615,632 555,858 699,758
Total non-interest expense 2,757,943 1,810,206 2,135,207
Income (loss) from continuing
operations before Income taxes (1,686,181) 599,413 491,170
Income taxes (289,856) 213,624 169,558
Income (loss) from continuing
operations, net of tax (1,396,325) 385,789 321,612
Loss from discontinued operations,
net of tax (1) (25,221) (11,650) (95,044)
Net income (loss) $(1,421,546) $374,139 $226,568
Net income (loss) available to
common shareholders $(1,454,269) $374,139 $226,568
Basic earnings per common share
Income (loss) from continuing operations $(3.67) $1.03 $0.85
Loss from discontinued operations (0.07) (0.03) (0.25)
Net Income (loss) per common share $(3.74) $1.00 $0.60
Diluted earnings per common share
Income (loss) from continuing operations $(3.67) $1.03 $0.85
Loss from discontinued operations (0.07) (0.03) (0.25)
Net Income (loss) per common share $(3.74) $1.00 $0.60
Dividends paid per common share $0.375 $0.375 $0.03
Year Ended
Dec 31 Dec 31
2008 2007
Interest Income:
Loans held for investment, including
past-due fees $9,460,378 $9,500,128
Securities available for sale 1,224,012 950,972
Other 427,609 627,056
Total interest income 11,111,999 11,078,156
Interest Expense:
Deposits 2,512,040 2,906,351
Senior and subordinated notes 444,854 577,128
Other borrowings 1,006,390 1,064,832
Total interest expense 3,963,284 4,548,311
Net interest income 7,148,715 6,529,845
Provision for loan and lease losses 5,101,040 2,636,502
Net interest income (loss) after
provision for loan and lease losses 2,047,675 3,893,343
Non-Interest Income:
Servicing and securitizations 3,384,468 4,840,677
Service charges and other customer-
related fees 2,232,363 2,057,854
Mortgage servicing and other 105,038 166,776
Interchange 562,117 500,484
Other 459,985 488,432
Total non-interest income 6,743,971 8,054,223
Non-Interest Expense:
Salaries and associate benefits 2,335,737 2,592,534
Marketing 1,118,208 1,347,836
Communications and data processing 755,989 758,820
Supplies and equipment 519,687 531,238
Occupancy 377,192 322,510
Restructuring expense 134,464 138,237
Goodwill impairment charge 810,876 -
Other 2,157,874 2,386,835
Total non-interest expense 8,210,027 8,078,010
Income (loss) from continuing
operations before Income taxes 581,619 3,869,556
Income taxes 497,102 1,277,837
Income (loss) from continuing
operations, net of tax 84,517 2,591,719
Loss from discontinued operations,
net of tax (1) (130,515) (1,021,387)
Net income (loss) $(45,998) $1,570,332
Net income (loss) available to common
shareholders $(78,721) $1,570,332
Basic earnings per common share
Income (loss) from continuing operations $0.14 $6.64
Loss from discontinued operations (0.35) (2.62)
Net Income (loss) per common share $(0.21) $4.02
Diluted earnings per common share
Income (loss) from continuing operations $0.14 $6.55
Loss from discontinued operations (0.35) (2.58)
Net Income (loss) per common share $(0.21) $3.97
Dividends paid per common share $1.50 $0.11
(1) 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.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates (1)
(dollars in thousands)(unaudited)
Reported Quarter Ended 12/31/08
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment $99,334,890 $2,306,796 9.29%
Securities available for sale 28,961,247 367,902 5.08%
Other 9,502,781 94,123 3.96%
Total earning assets $137,798,918 $2,768,821 8.04%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $9,874,696 $28,460 1.15%
Money market deposit accounts 28,556,264 171,891 2.41%
Savings accounts 7,275,816 11,774 0.65%
Other consumer time deposits 33,712,504 337,651 4.01%
Public fund CD's of $100,000
or more 1,213,364 7,323 2.41%
CD's of $100,000 or more 9,508,463 104,134 4.38%
Foreign time deposits 3,002,402 23,523 3.13%
Total interest-bearing deposits $93,143,509 $684,756 2.94%
Senior and subordinated notes 8,034,423 92,519 4.61%
Other borrowings 16,428,096 189,149 4.61%
Total interest-bearing liabilities $117,606,028 $966,424 3.29%
Net interest spread 4.75%
Interest income to average earning assets 8.04%
Interest expense to average earning assets 2.81%
Net interest margin 5.23%
Reported Quarter Ended 9/30/08
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment $98,778,393 $2,347,480 9.51%
Securities available for sale 25,780,669 317,274 4.92%
Other 8,717,921 107,042 4.91%
Total earning assets $133,276,983 $2,771,796 8.32%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $9,292,819 $30,263 1.30%
Money market deposit accounts 26,914,607 187,740 2.79%
Savings accounts 7,759,024 16,243 0.84%
Other consumer time deposits 26,733,531 262,101 3.92%
Public fund CD's of $100,000
or more 1,305,438 8,233 2.52%
CD's of $100,000 or more 9,084,740 89,192 3.93%
Foreign time deposits 3,564,449 30,547 3.43%
Total interest-bearing deposits $84,654,608 $624,319 2.95%
Senior and subordinated notes 8,282,536 96,568 4.66%
Other borrowings 22,368,976 244,264 4.37%
Total interest-bearing liabilities $115,306,120 $965,151 3.35%
Net interest spread 4.97%
Interest income to average earning assets 8.32%
Interest expense to average earning assets 2.90%
Net interest margin 5.42%
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 $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 28,745,701 270,943 3.77%
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 $72,074,486 $686,174 3.81%
Senior and subordinated notes 10,682,635 159,878 5.99%
Other borrowings 26,671,101 351,895 5.28%
Total interest-bearing liabilities $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%
(1) 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 (2)
(dollars in thousands)(unaudited)
Managed (1) Quarter Ended 12/31/08
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment $146,586,152 $3,808,363 10.39%
Securities available for sale 28,961,247 367,902 5.08%
Other 7,112,807 29,558 1.66%
Total earning assets $182,660,206 $4,205,823 9.21%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $9,874,696 $28,460 1.15%
Money market deposit accounts 28,556,264 171,891 2.41%
Savings accounts 7,275,816 11,774 0.65%
Other consumer time deposits 33,712,504 337,651 4.01%
Public fund CD's of $100,000
or more 1,213,364 7,323 2.41%
CD's of $100,000 or more 9,508,463 104,134 4.38%
Foreign time deposits 3,002,402 23,523 3.13%
Total interest-bearing deposits $93,143,509 $684,756 2.94%
Senior and subordinated notes 8,034,423 92,519 4.61%
Other borrowings 16,428,096 189,149 4.61%
Securitization liability 45,610,272 471,517 4.14%
Total interest-bearing liabilities $163,216,300 $1,437,941 3.52%
Net interest spread 5.69%
Interest income to average earning assets 9.21%
Interest expense to average earning assets 3.15%
Net interest margin 6.06%
Managed (1) Quarter Ended 9/30/08
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Loans held for investment $147,247,398 $3,974,375 10.80%
Securities available for sale 25,780,669 317,274 4.92%
Other 6,724,730 54,612 3.25%
Total earning assets $179,752,797 $4,346,261 9.67%
Interest-bearing liabilities:
Interest-bearing deposits
NOW accounts $9,292,819 $30,263 1.30%
Money market deposit accounts 26,914,607 187,740 2.79%
Savings accounts 7,759,024 16,243 0.84%
Other consumer time deposits 26,733,531 262,101 3.92%
Public fund CD's of $100,000
or more 1,305,438 8,233 2.52%
CD's of $100,000 or more 9,084,740 89,192 3.93%
Foreign time deposits 3,564,449 30,547 3.43%
Total interest-bearing deposits $84,654,608 $624,319 2.95%
Senior and subordinated notes 8,282,536 96,568 4.66%
Other borrowings 22,368,976 244,264 4.37%
Securitization liability 48,069,177 491,780 4.09%
Total interest-bearing liabilities $163,375,297 $1,456,931 3.57%
Net interest spread 6.10%
Interest income to average earning assets 9.67%
Interest expense to average earning assets 3.24%
Net interest margin 6.43%
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 $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 28,745,701 270,943 3.77%
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 $72,074,486 $686,174 3.81%
Senior and subordinated notes 10,682,635 159,878 5.99%
Other borrowings 26,671,101 351,895 5.28%
Securitization liability 49,847,555 664,786 5.33%
Total interest-bearing liabilities $159,275,777 $1,862,733 4.68%
Net interest spread 6.40%
Interest income to average earning assets 11.07%
Interest expense to average earning assets 4.24%
Net interest margin 6.83%
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans.
(2) Average balances, income and expenses, yields and rates are based on
continuing operations.
SOURCE
/CONTACT: Investor Relations,
Dietz
/Web site: http://www.capitalone.com
(COF)